Commissioner of the Australian Federal Police v Arora - [2019] WASC 40

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE -v- ARORA [2019] WASC 40
CORAM:   ALLANSON J
HEARD:   10 & 11 APRIL 2017, 17 DECEMBER 2018
DELIVERED          :   20 FEBRUARY 2019
FILE NO/S:   CIV 1794 of 2016
BETWEEN:   COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE
Plaintiff
AND
RUBY ARORA
First Defendant
NOGENDER PAL ARORA
Second Defendant

Catchwords:

Proceeds of Crime Act 2002 (Cth) - Exclusion application - Whether property ceases to be proceeds or instrument of an offence - Whether interest 'acquired by a third party' - Whether circumstances 'arose a reasonable suspicion' - Turns on own facts

Legislation:

Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), s 142
Criminal Code 1995 (Cth), s 5
Proceeds of Crime Act 2002 (Cth), s 29, s 31, s 330, s 338

Result:

Application dismissed

Representation:

Counsel:

Plaintiff	:	G Cleary - 10 & 11 April 2017, S D Fishbourne - 17 December 2018
First Defendant	:	E W L Greaves
Second Defendant	:	E W L Greaves

Solicitors:

Plaintiff	:	Australian Federal Police - Proceeds of Crime Litigation
First Defendant	:	Kingdom Legal
Second Defendant	:	Kingdom Legal

Case(s) referred to in decision(s):

Citigroup Pty Limited v National Australia Bank Limited [2012] NSWCA 381
Commissioner of the Australian Federal Police v Kalimuthu [No 3] [2017] WASC 108
Lordianto v Commissioner of the Australian Federal Police [2018] NSWCA 199

ALLANSON J:

In July 2016, I made orders under s 19 of the Proceeds of Crime Act 2002 (Cth), imposing restraints under the Act on a property in the suburb of Tapping.
Ruby Arora and her husband, Nogender Arora (together the respondents), were joined to the proceedings and applied for orders pursuant to s 29 of the Act, excluding the property from restraint.[1]
[1] Although applicants for the exclusion application, the Aroras are the respondents to the main application and it appears ultimately less confusing to refer to them as the respondents, and the applicant in the main application as the Commissioner.
The Commissioner opposed the application on seven grounds. In substance, the Commissioner asserted that the Tapping property is wholly or partly the proceeds of or an instrument of offences that are both serious offences and indictable offences and that it has not ceased to be 'tainted property'.[2]
[2] See definition of 'tainted property' in Proceeds of Crime Act 2002 s 338.
These are my reasons for dismissing the exclusion application.

The application for exclusion

The application was heard at about the same time as Commissioner of the Australian Federal Police v Kalimuthu [No 3] [2017] WASC 108. My decision in Kalimuthu was published on 19 April 2017. The Commissioner immediately appealed. I delayed finalising reasons in this matter until the resolution of the appeal.
The appeal in Kalimuthu was heard in February 2018; on 30 October 2018 the Court of Appeal upheld the appeal. On 11 September 2018, the New South Wales Court of Appeal delivered judgement in Lordianto v Commissioner of the Australian Federal Police [2018] NSWCA 199, addressing the same provisions of the Act and the same questions of construction.
On 17 December 2018, the parties appeared again before me so that they might have the opportunity of making further submissions based upon the law as it had been stated in the decisions of the courts of appeal. Counsel for the applicants accepted that I should apply the law as stated by the majority in Lordianto. Neither party wished to make further submissions.
I was told that applications would be made for special leave to appeal in the High Court. There is, however, no reason for further delay. The law has been clarified.

The evidence

Evidence at the hearing was on affidavit, with some cross‑examination.
The applicants relied on the following evidence:
(1) affidavits of the applicant Nogender Pal Arora, sworn 21 September 2016, 20 October 2016, and 10 April 2017;
(2)affidavits of the applicant Ruby Arora, sworn 21 September 2016, 20 October 2016, and 10 April 2017;
(3)affidavits of Surichi Sahni, sworn 22 September 2016 and 7 April 2017;
(4)affidavits of Virendar Pal Arora, sworn 21 September 2016 and 10 April 2017;
(5) affidavits of Suraksha, sworn 21 September 2016 and 10 April 2017;
(6)an affidavit of Tanima Arora, sworn 21 September 2016;
(7) an affidavit of Sandeep Rawal, sworn 22 September 2016;
(8) affidavits of Dawn Reena Alfreds,[3] sworn 28 September 2016, 21 October 2016 and 15 November 2016;
(9)an affidavit of Surender Kumar Chawla, sworn 28 September 2016;[4]
(10)an affidavit of Thareena (Neha) Sethi, sworn 29 September 2016; and
(11)an affidavit of Rohitashva Chakraborty sworn 21 October 2016.
[3] The solicitor for the respondents.
[4] The affidavit was in Hindi and translated in an affidavit of Varun Sud, sworn 7 October 2016.
The applicants also relied on an affidavit of Murray James Smith, sworn 16 November 2016.
The respondent relied on two affidavits of Stuart Maxwell McDonald, sworn 11 May 2016 and 16 December 2016.
The parties handed up a statement of agreed facts dated 3 March 2017.
Both applicants were required for cross‑examination. Counsel for the respondent also cross‑examined Ms Suruchi Sahni (Ms Arora's sister).

The offences

The Commissioner relies on two offences.
The first is under s 142 of the Anti-Money Laundering and Counter‑Terrorism Financing Act 2006 (Cth):
(1)A person (the first person) commits an offence if:
(a)the first person is, or causes another person to become, a party to 2 or more non reportable transactions; and
(b)having regard to:
(i)the manner and form in which the transactions were conducted, including the matters to which subsection (3) applies; and
(ii)any explanation made by the first person as to the manner or form in which the transactions were conducted;
it would be reasonable to conclude that the first person conducted, or caused the transactions to be conducted, in that manner or form for the sole or dominant purpose of ensuring, or attempting to ensure, that the money, digital currency or property involved in the transactions was transferred in a manner and form that would not give rise to a threshold transaction that would have been required to have been reported under section 43.
...
(3)This subsection applies to the following matters:
(a)the value of the money, digital currency or property involved in each transaction;
(b)the total value of the transactions;
(c)the period of time over which the transactions took place;
(d)the interval of time between any of the transactions;
(e)the locations at which the transactions took place.
Under s 43 of the Anti-Money Laundering and Counter-Terrorism Financing Act, a reporting entity, such as a bank, must report the provision of a designated service to a customer if the provision of that service involves a threshold transaction.[5] Relevantly, a threshold transaction means a transaction involving the transfer of physical currency, where the total amount of physical currency transferred is not less than $10,000: s 5.
[5] Under s 6, allowing a transaction to be conducted in relation to an account at a bank is a designated service.
The second offence on which the Commissioner relies is under s 400.9(1) of the Criminal Code 1995 (Cth):
A person commits an offence if:
(a)the person deals with money or other property; and
(b)it is reasonable to suspect that the money or property is proceeds of crime; and
(c)at the time of the dealing, the value of the money and other property is $100,000 or more.
Unlike the offences under the Anti-Money Laundering and Counter‑Terrorism Financing Act, where it is not known who committed the offences, any offence under s 400.9(1) of the Criminal Code can only have been committed by the respondents, or by one of them. In effect, the Commissioner's position on the application for exclusion is that the onus lies on the respondents to prove that they did not commit a serious offence that no one has seen fit to charge them with.

The purchase of the Tapping property

The property was purchased pursuant to a contract dated 23 July 2013, which settled on 15 August 2013. The purchase price in the contract was $575,000. The property is registered in the name of Ruby Arora.

The Commissioner's case

Although the Commissioner responds to this application, it is convenient to first set out the Commissioner's factual case.
The Commissioner relied on the affidavits of Federal Agent McDonald, and the evidence of his enquiries with the ANZ Bank and Bankwest about accounts in the name of the respondents, and accounts to which Mr Arora was a signatory. There were six such accounts:
(1)the respondents held a joint account with the ANZ Bank;
(2)two ANZ Bank accounts were opened for Mr Arora's parents (Virendar Pal Arora and Suraksha Suraksha);
(3)each of the respondents had an account at Bankwest; and
(4)an account was opened in the name of their daughter Tanima Arora.[6]
[6] Tanima Arora was then aged 16. In her affidavit in these proceedings, she said she knew nothing about the relevant deposits into and withdrawal from her account.
The joint account was opened on 11 April 2013.[7] On 4 June 2013, five deposits were made, each of $9,950. On 6 June 2013 there were a further six deposits of $9,950, a deposit of $9,850 and one of $9,900. The deposits of 6 June 2013 are recorded as having an effective date of 5 June 2013. After that, the balance was increased by transfer of funds rather than deposits. On 12 August 2013, $315,000 was withdrawn from the account.
[7] The statement for the account is in the first affidavit of Agent Stuart McDonald, SMM-10.
Ms Arora's account at Bankwest was opened on 2 July 2013. The first deposit was on 5 July 2013, a cash deposit of $8,500.[8] Between then and 5 August 2013, there were a further seven cash deposits of between $8,200 and $9,500.[9]
[8] See SMM‑13.
[9] The Bankwest statement records whether the deposit was in cash and where it was made.
The history of Mr Arora's Bankwest account is similar, with seven cash deposits of amounts between $8,500 and $9,400 between 5 July and 6 August 2013.[10]
[10] SMM‑14.
Tanima Arora's account accumulated $62,300 in deposits of between $8,000 and $9,500 in the same period.[11]
[11] SMM‑15.
The ANZ Bank accounts of Mr Arora's parents show a similar pattern of regular deposits of less than $10,000, which were almost immediately transferred to the joint account.[12]
[12] SMM‑9; SMM‑11.
As well as the amounts recorded as deposits, there were also amounts recorded as transfers, including $53,000 transferred into the joint account with the transferee recorded as Neha. Mr Arora said Neha is his sister's husband's cousin, and the transfers were repayment of money he had lent to her father.[13]
[13] ts 47.
The funds available through the various accounts were consolidated in the respondents' joint account, and Mr Arora's Bankwest account, before being transferred into the account of the settlement agent and used in the purchase of the Tapping property in the name of Ms Arora.

The respondents' case

The respondents previously lived in Delhi, India. They came to Perth for a short trip in April 2013, and opened a joint bank account with the ANZ Bank on that trip. They returned to Australia on 25 June 2013.
In Delhi, the respondents owned a shop from which they sold pickles and preserves. The shop was purchased with assistance from family members, some by loans but mostly from gifts and a few small loans from friends.
In 2012 the respondents decided to apply for permanent residency in Australia and were granted permanent residency for themselves and their children on 18 January 2013.
They then put the shop in Delhi on the market.
The respondents say that the Tapping property was purchased in part from the proceeds of the sale of the shop in Delhi, by a loan from a cousin, a loan from a friend, the repayment of money they had earlier lent to Suruchi Sahni, and funds that Mr Arora's sister's husband's cousin paid to them in exchange for funds in India.
The respondents say that a man in India, named Harbeer Singh, assisted them in transferring money from the sale of the shop in Delhi to Australia. Mr Singh was introduced to the applicants by a Ram Bhakt as someone who could help them. Mr Arora did not meet Mr Singh personally but spoke to him on the telephone.
Mr Arora testified that the purchaser of the shop in Delhi paid in cash, in a number of instalments of roughly AUD$40,000 to AUD$50,000. The total purchase price was approximately AUD$725,000. After the applicants had migrated to Australia, the instalments were delivered by the purchaser to Mr Singh. He would then call the respondents, advise them how much had been paid, and deposit that amount into their accounts in Australia.
Mr Arora said that before he left India, or shortly after he arrived in Australia, Mr Singh told him that he would deposit the funds into various accounts over time, because it was difficult to deposit large amounts into Australian accounts.[14] Mr Singh told him to open as many accounts as quickly as possible and that is what Mr Arora did. He opened accounts in the name of his wife, each of his parents and his daughter, at the ANZ Bank and at Bankwest.[15] In cross‑examination, Mr Arora agreed that he also opened accounts in the name of his mother-in-law and his father-in-law, and also in the name of a friend, Garj Hankaj. Those accounts, however, were opened after the respondents had bought the house in Tapping.[16] Mr Arora was the signatory for all of the accounts.
[14] First affidavit [40].
[15] First affidavit [41].
[16] ts 36.
Mr Arora said these were the first bank accounts he had held, and he had never been to a bank in India.[17]
[17] ts 24.
There were also some deposits into an account held by Mr Arora's sister. He was not a signatory to that account.[18]
[18] ts 50.
Mr Arora was not able to say exactly how much money was transferred to Australia.[19]
[19] ts 55.
Mr Arora testified that Mr Singh told him that he (Mr Singh) would arrange Australian associates, colleagues and friends to deposit Australian money into the accounts. Mr Arora said,
Harbeer did not tell me where the Australian money was coming from. I did not care and did not have any reason to ask. I wanted my money and that is what I eventually got. I did not give it any further thought.[20]
[20] First affidavit of Mr Arora [42].
In oral evidence, Mr Arora said:
one of my friends introduced me to Habir and he said, 'He's a nice person. I've been ‑ known him from last 10 to 12 years so he's trustworthy. You don't have to worry. He will take your Indian money and will give you the equivalent amount of Australian dollars'. I said, 'Okay. If I'm getting my money of the same value, why should I be thinking?'[21]
[21] ts 28.
Mr Arora said that Mr Singh was offering an exchange rate that varied, but was 1-2% better than the rates that Mr Arora saw published in a newspaper.[22]
[22] Third affidavit of Mr Arora [6] ‑ [7].
Ms Arora gave evidence and was generally consistent with her husband.
The respondents' evidence was corroborated in various details by the other witnesses.
Between their arrival in Australia and the purchase of the house, the respondents were contacted by the ANZ Bank. The bank expressed concern about the way the money was being transferred and may have frozen the accounts.[23] Mr Arora said that he went to a meeting at the bank, and explained that he had sold a property in India and that the purchaser was paying in instalments. The accounts were then unfrozen. Mr Arora was asked about those events in cross‑examination:
Did the bank tell you, the ANZ Bank tell you, in relation to that account that they were suspicious of the transactions?---No. They didn't tell me anything. They tell me that I - when I went to the bank, they told me that, 'You can't operate your accounts,' and I told them that, 'Why?' Because they said, 'We have closed it.' I said, 'Why? 'Because you are getting so much funds from outside,' and I told them that because I sold that property, so when my buyer is paying me, then only that money is getting deposited in my bank account. He - he said, 'That's fine.' I showed them the - my property papers also and they said, 'Okay. You can go.' That's it.[24]
[23] First affidavit of Mr Arora [49]; cross‑examination of Ms Arora, ts 63.
[24] ts 44.
The respondents account of this dealing with the bank is supported by a letter, dated 15 November 2016, which their solicitor obtained from the ANZ Bank.[25] The bank confirmed that a restraint was placed on the joint account between 5 June 2013 and 1 July 2013, but could not identify the reason for removing the restraint. The respondents were not in Australia for most of the period of the restraint, arriving only on 25 June 2013.
[25] Affidavit of Dawn Reena Alfreds, dated 15 November 2016, DA-4.
Mr Arora said he checked the balance in the accounts regularly by going to the bank and getting 'mini statements'. He was aware that some of the deposits were cash deposits but said that he was not suspicious because he was used to dealing in cash.[26] From statements he received from the banks, he was aware of the date and amount of each deposit;[27] for the Bankwest accounts, he may also have known the location of the deposit.
[26] First affidavit of Mr Arora [45].
[27] Third affidavit of Mr Arora [16].
Mr Arora transferred money between the accounts for the purpose of accumulating money in one account for payment to the settlement agent when the respondents bought the Tapping property.[28]
[28] ts 52 -53. It is convenient to speak of money in an account and the transfer of money between accounts, while recognising the nature of the rights between an account holder and the bank and that money is only 'notionally' in the customer's account: see Citigroup Pty Limited v National Australia Bank Limited [2012] NSWCA 381.

The issue

It is not in dispute in the present application that the Tapping property was wholly or partly acquired using the credit balances that resulted from the deposits of money into the ANZ Bank and Bankwest accounts. Subject to s 330(4) of the Proceeds of Crime Act, the rights acquired and held by the respondents (or one of them) as a result of those deposits were property within the meaning of the Act, and were the proceeds of or an instrument of an offence under s 142 of the Anti‑Money Laundering and Counter-Terrorism Financing Act.
The critical question on the application for exclusion is whether the respondents have proved that their interest in the bank accounts ceased to be the proceeds of an offence of an instrument of an offence. If property in the bank accounts had not ceased to be 'tainted property', property wholly or partly acquired using it was also the proceeds of or an instrument of an offence.
Under s 330(4) of the Proceeds of Crime Act:
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); …
A substantial part of the argument at hearing concerned the proper construction and application of s 330. As I said at the beginning of these reasons, the law I must apply is now settled by decisions of courts of appeal in Western Australia and New South Wales. These conclusions follow.
First, the respondents jointly possessed a chose in action in respect of their joint bank account enforceable against the ANZ Bank. They each possessed a chose in action in respect of their individual bank accounts enforceable against Bankwest. Each chose in action was constituted by the right to compel the bank upon demand to pay to, or at their direction, an amount equivalent to the amount standing to the credit of the account. Those choses in action are a species of intangible personal property within the definition of 'property' in the Proceeds of Crime Act s 338.

Second, in relation to the accounts that were not in the name of the respondents, I am satisfied that Mr Arora had property in those accounts. Property is defined in s 338 as including an interest in real or personal property of any description. Interest is also defined:
interest, in relation to property or a thing, means:
(a)a legal or equitable estate or interest in the property or thing; or
(b)a right, power or privilege in connection with the property or thing;
whether present or future and whether vested or contingent.
As the signatory, Mr Arora could direct the bank to pay or transfer funds. That is, he held a right, power or privilege in connection with the account and an interest in relation to property.
Further, when the balances of those accounts were transferred into the joint account or into Mr Arora's account, before payment to the settlement agent, the balance in those accounts was derived from the property in the other accounts and was tainted property.
Third, a 'third party' within s 330(4)(a) must be a person who is not a party to and has no involvement in the transaction by which the property first became the proceeds of an offence of an instrument of an offence. The respondents are not 'third parties' unless, at the time of the criminal conduct, they were wholly removed from the property constituting the proceeds of an offence or an instrument of an offence.[29]
[29] Lordianto [115].
Even an unwitting participant in a transaction based offence, such as the offence under s 142 of the Anti-Money Laundering and Counter‑Terrorism Financing Act, cannot be regarded as a third party. Mr Arora was not a third party to any of the transactions which contravened the Anti-Money Laundering and Counter-Terrorism Financing Act because he acquired property in those transactions. Ms Arora was not a third party to the deposits into the Bankwest account in her name or the joint account.
Fourth, as a matter of construction, there can be no 'sufficient consideration' unless it is provided for the acquisition of the property. The respondents (or Mr Arora) acquired an interest in property each time a cash deposit was made into the identified accounts. To show that they had acquired the property for 'sufficient consideration', the respondents need to prove that the money that was paid to Mr Singh in India somehow represented, through a series of intermediaries or transactions, consideration for the funds being deposited into their Australian accounts. It is not sufficient to rely on transactions entered into in India, by which Mr Singh was given funds, as those transactions do not identify the means by which the respondents acquired property in Australia.[30]
[30] Lordianto [133] ‑ [140].
The respondents cannot show that they acquired the property in the joint bank account as third parties for sufficient consideration. That conclusion applies to Mr Arora for all of the accounts because he acquired a property interest in all of them.
The Tapping property is tainted property if it was wholly or partly derived from a dealing with the proceeds of an offence, or was acquired using tainted property.[31] A substantial part of the purchase price was from the joint account. Even though Ms Arora was the sole registered proprietor of the Tapping property following its purchase, she is not properly regarded as a third party acquiring the property because of her involvement in the transaction by which the property in the joint account became tainted property.
[31] Proceeds of Crime Act s 330(1) and (2).
In the circumstances, the remaining element of 'reasonable suspicion' can make no difference to the result. I will, however, record my findings.
The Commissioner conceded in written submissions that the respondents did not know that the choses in action acquired by the transfer of funds in the various bank accounts was the proceeds of or an instrument of an offence.[32]
[32] Submissions, 11 April 2017 [42].
The question is
whether, having regard to what [the respondents] knew, the conduct identified by the known circumstances would arouse a reasonable suspicion that the property was proceeds of an offence or an instrument of an offence. The section does not require [the respondents] to have known that the conduct identified by the known circumstances constituted an offence.[33]
[33] Lordianto [161].
Mr Arora did not come across as financially sophisticated, and his evidence was that he had not used banks before coming to Australia. But he was sophisticated enough to open an account on his visit to Australia in April, and on his return to open multiple accounts in two different banks, making himself the signatory on all accounts. It is significant that he opened multiple accounts in different names. He also transferred funds between accounts, consolidating them in two accounts.
Mr Arora went into the banks to check balances. He also checked exchange rates. Mr Singh was taking no payment for his services.[34] Mr Arora was unaware whether Mr Singh was receiving commission.[35] But, to Mr Arora's knowledge, Mr Singh was offering him better than official rates
[34] ts 31.
[35] ts 31 ‑ 32.
Mr Arora was aware that some of the deposits were cash deposits.[36] From statements he received from the banks, he was aware of the date and amount of each deposit;[37] for the Bankwest accounts, he may also have known the location of the deposit.
[36] First affidavit of Mr Arora [45].
[37] Third affidavit of Mr Arora [16].
Mr Arora was aware that there were many deposits for sums less than $10,000 when, on his evidence, the instalments paid by the purchaser in India were for amounts AUD$40,000 to AUD$50,000.
What Mr Arora knew was enough to raise a reasonable suspicion that money was being laundered through the accounts.
Ms Arora knew less than her husband. She knew that the 'transfer' of money from India to Australia was being done by Mr Singh. She was 'probably' aware that her account and her daughter's account were receiving deposits of less than $10,000.
In my opinion, what Ms Arora knew was not enough to engender a reasonable suspicion that the money deposited into the accounts was the proceeds of or an instrument of an offence.

Conclusion

The application to exclude the restrained property from the restraining order must be dismissed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CG
Associate to the Honourable Justice Allanson
20 FEBRUARY 2019