Commissioner of the Australian Federal Police v Dong Hua International Investments Pty Ltd
[2015] VSC 748
•18 December 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2013 04149
| COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE | Applicant |
| v | |
| DONG HUA INTERNATIONAL INVESTMENTS PTY LTD | First Respondent |
| and | |
| YU HONG ZHOU | Second Respondent |
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JUDGE: | T FORREST J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 16 November 2015 |
DATE OF JUDGMENT: | 18 December 2015 |
CASE MAY BE CITED AS: | Commissioner of the Australian Federal Police v Dong Hua International Investments Pty Ltd & anor |
MEDIUM NEUTRAL CITATION: | [2015] VSC 748 |
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PROCEEDS OF CRIME – Applications for examination orders – Application to vacate trial date - delay – exercise of a broad discretion - Proceeds of Crime Act 2002 (Cth) ss 180, 180A, 180B.
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APPEARANCES: | Counsel | Solicitors |
| For the Commissioner of Australian Federal Police | Mr S. McGregor | Australian Federal Police |
| For Dong Hua Investments & Yuhong Zhou | Mr T. Mitchell | Lincolns Lawyers & Consultants |
| For Heng Jie Zhang | Mr C. Juebner | Tony Hargreaves & Partners |
HIS HONOUR:
Introduction
The Commissioner of the Australian Federal Police (Commissioner) has applied for examination orders pursuant to s 180, s 180A and s 180B of the Proceeds of Crime Act 2002 (Cth) (Act). A trial date has been set down for the hearing of the substantive applications in this matter, commencing 23 February 2016 for three days. The Commissioner seeks that this trial date be vacated.
On 14 August 2013, two properties were restrained by Williams J pursuant to s 19 of the Act: 2A Highland Avenue, Oakleigh East (Oakleigh property) registered in the name of Dong Hua International Trading Pty Ltd (Dong Hua) and 3215/220 Spencer Street, Melbourne (Spencer Street property) registered in the name of Yuhong Zhou.
The application for restraining orders was made on the suspicion that the restrained property was the proceeds, and an instrument, of the following offences:
(a) dealing with property worth $100,000 or more that is reasonably suspected of being proceeds of crime, contrary to s 400.9(1) of the Criminal Code[1]; and
(b) conspiracy to cause a loss to the Commonwealth contrary to s 135(4) of the Criminal Code.[2]
[1]Criminal Code Act 1995 (Cth), Schedule (The Criminal Code).
[2]Affidavit of Dean Barnes sworn 16 October 2015.
The Commissioner has applied for forfeiture of the properties. Ms Zhou and Dong Hua have applied for exclusion from the forfeiture order (s 31; s 74), revocation of the restraining order (s 42) and compensation (s 78). The revocation applications have been abandoned and the hearing of the other various applications is set down for 23 February 2016.
The Commissioner now seeks examination orders under Part 3-1 of the Act. Six individuals are sought to be examined. They are:
(a) Yuhong Zhou;
(b) Yijang Shen (a director of the corporate entity which owns Dong Hua);
(c) Heng Jie Zhang;
(d) Ren Yang Ping;
(e) Xiao Wei Shen; and
(f) Zhiheng Zhou.
Heng Jie Zhang (the third named examinee) was represented on this application,[3] as were Yuhong Zhou and Yijiang Shen. The remaining proposed examinees were not represented. Yuhong Zhou and Yijiang Shen are a married couple. For the purpose of determining this examination order application, I shall refer to these proposed examinees collectively as ‘the respondents’.
[3]Mr Juebner, who appeared on behalf of Mr Zhang, announced that although Mr Zhang was represented at the hearing, Mr Zhang disputes this Court’s jurisdiction to compel him to attend an examination.
I shall set out a short summary of the Commissioner’s allegations.
The Oakleigh property
Dong Hua was registered as the owner of the Oakleigh property on 5 February 2009. The consideration stated on the transfer was $780,000. A loan of $400,000 was procured from the Commonwealth Bank of Australia (CBA). The Commissioner alleges that of the balance, $380,000, was contributed by Dong Hua or its associates. Yuhong Zhou is listed on the loan documentation as the first applicant, and Heng Jie Zhang the second. A loan account was opened on 7 May 2009. Until 23 September 2011 minimum monthly repayments were made on the loan. Over the next 10 weeks a series of large repayments were made which extinguished the debt. Insofar as the proposed examinees are concerned it is alleged:
(a) Yuhong Zhou applied for the loan and in 2010 became a director of Dong Hua.
(b) Heng Jie Zhang applied for the loan and was in 2008 a director and shareholder of Dong Hua.
(c) Yijiang Shen is married to Yuhong Zhou. He was a director and shareholder of Dong Hua.
The Spencer Street property
On 5 April, Yuhong Zhou became the registered owner of the Spencer Street property.
The purchase price was stated to be $561,000. Yijiang Shen and Yuhong Zhou accepted a loan offer of $364,000. $194,000 was contributed towards purchase not including stamp duty and legal costs.
Bank and casino accounts
Detective Senior Constable Amanda Glover of the Australian Federal Police deposes in her affidavit sworn 12 August 2013 that Yijiang Shen and Yuhong Zhou in 2013 held a joint CBA account. It is alleged that a total of nearly $3.6 million was credited to that account. Crown Casino accounts ‘reveal that (Yuhong Zhou) has received at total of $2,444,655 in cash from Crown Casino’, and has deposited $1,934,470 at Crown Casino. She has deposited nearly $1.5 million in cash in other CBA and Westpac accounts and has withdrawn just over $590,000 in cash from those banks. These transactions are far in excess of Yuhong Zhou’s declared income.
Ren Yang Ping, Xiao Wei Shen, Zhiheng Zhou.
These unrepresented proposed examinees have been nominated by Yuhong Zhou as assisting in the movement of funds to be used in the purchase of the Oakleigh property.[4]
[4]Affidavits of Yuhong Zhou sworn 5 December 2014, [23] and [24]; 23 May 2014,[30].
The Act
Sections 180, 180A and 180B of the Act provide:
180 Examination orders relating to restraining orders
(1)If a restraining order is in force, the court that made the restraining order, or any other court that could have made the restraining order, may make an order (an examination order) for the examination of any person, including:
(a)a person whose property is, or a person who has or claims an interest in property that is, the subject of the restraining order; or
(b) a person who is a suspect in relation to the restraining order; or
(c) the spouse or de facto partner of a person referred to in paragraph (a) or (b);
about the affairs of a person referred to in paragraph (a), (b) or (c).
(2)The examination order ceases to have effect if the restraining order to which it relates ceases to have effect.
180AExamination orders relating to applications for exclusion from forfeiture
(1)If an application for an order under section 73 or 94 for an interest in property to be excluded from forfeiture is made, the court to which the application is made may make an order (an examination order) for the examination of any person including:
(a) a person who has or claims an interest in the property; or
(b)the spouse or de facto partner of a person referred to in paragraph (a);
about the affairs of a person referred to in paragraph (a) or (b).
(2) The examination order ceases to have effect when:
(a) the application is withdrawn; or
(b) the court makes a decision on the application.
180B Examination orders relating to applications for compensation
(1)If an application for an order under section 77 or 94A (which deal with compensation) is made in relation to an interest in property that has been or may be forfeited, the court to which the application is made may make an order (an examination order ) for the examination of any person including:
(a) a person who has or claims an interest in the property; or
(b)the spouse or de facto partner of a person referred to in paragraph (a);
about the affairs of a person referred to in paragraph (a) or (b).
(2) The examination order ceases to have effect when:
(a) the application is withdrawn; or
(b) the court makes a decision on the application.
It is apparent that the combined effect of these sections is to cast a very wide net. The enabling text varies between the sections as a reflection of the stage at which the application is made, however all three sections create a broad discretion for the Court to make an order for the examination of anyone about the affairs of the nominated class of persons set out in ss (1) (a), (b) and (c) of each section.
Justice Dixon has made the following pertinent observations about s 180 of the Act:
Restraining orders are presently in force and this court may make an examination order. Four observations about the section are pertinent. First, the parties accepted, correctly, that the word ‘may’ shows legislative intent that whether such an order is made is in the discretion of the court. Second, any person may be the subject of an examination order, not just the persons specifically nominated in the subsection. Third, the examination order is dependent on the restraining order to which it relates and an examination order ceases to have effect if the related restraining order ceases to have effect. Fourth, although any person may be examined, the subject matter of the examination is the affairs of owners of restrained property, persons who claim or have an interest in the property, suspects, and the spouse or de facto partner of owners. [5]
[5]Commissioner of Australian Federal Police v Mah [2014] VSC 262, 12 (‘Mah’).
These observations apply equally to s 180A and s 180B with modifications to reflect the status of the application – whether it is made in relation to an exclusion application or compensation application.
‘Affairs’, ‘property’ and ‘interest’ are defined terms.[6] It suffices to observe that all are defined extraordinarily broadly.
[6]Proceeds of Crime Act 2002 (Cth) s 338.
Once an examination order is made, the process is controlled by an approved examiner.[7] The Commissioner, as the responsible authority, applies to an approved examiner who may give a person who is the subject of an examination order, an examination notice for that person’s examination. The approved examiner has a discretion whether to issue an examination notice, although the circumstances in which an examination notice may be given are constrained (by s 183).
[7]See Proceeds of Crime Act 2002 (Cth). s 183(4)
Examinees can be compelled to answer questions and can be punished for failing to attend or answer questions responsively. The privilege against self-incrimination or exposure to penalty has been ’expressly removed‘[8] although there is a form of ‘use immunity’ contained in s 198. There is no derivative use immunity.
[8]Mah [2014] VSC 262, [16].
The respondents’ arguments
I have observed that Ren Yang Ping, Xiao Wei Shen and Zhiheng Zhou did not appear and were not represented at the hearing of these applications. I understand all are living in China.
Mr Mitchell, who appeared for the respondents, in careful argument, submitted that I ought not exercise my discretion in favour of the Commissioner because:
(1)The structure of the Act requires forfeiture applications to be determined before any examinations take place.
(2)The trial date will necessarily have to be postponed if examination orders are made.
Mr Juebner adopted these submissions and also contended that the fact that most of the examinees were currently in China was decisive in favour of refusing the applications.
The applicant’s arguments
Mr McGregor, on behalf of the Commissioner, submitted that there was nothing in the Act which precluded examinations taking place before forfeiture applications are determined; the Act is intended to have extraterritorial reach and that my recent decision of Zhang[9] explained the lateness of this application.
[9]Commissioner of Australian Federal Police v Zhang(Ruling No 1) [2015] VSC 390 (‘Zhang’).
Analysis
I am not persuaded that the structure of the Act requires forfeiture applications to be determined before any examinations take place. In substance, the respondents argued that the expression unius est exclusio alterius principle of statutory construction ought apply. Because certain types of applications may not proceed until the Commissioner has had a reasonable opportunity to conduct examinations,[10] in the absence of this type of qualification applying to a forfeiture application, Parliament must have intended a different procedural scheme to apply. The argument then proceeds that I ought infer that Parliament intended to prohibit examinations being undertaken before forfeiture applications. To be fair to Mr Mitchell, in oral argument he did not put it quite so highly – ‘it is an indication from Parliament that (examinations) are certainly not seen as necessary (before forfeiture applications) and it is an indication from Parliament that your Honour would tend to exercise the discretion (against making an examination order)’[11].
[10]See for example – application for exclusion from restraining order: s 31(6) and s 32(b);
– application for exclusion from forfeiture area: ss 75(3) and 76;
– application for compensation order: ss 79(3) and 79A;
– application for exclusion from forfeiture on conviction: ss 94(5) and (6);
– application for compensation order after forfeiture on conviction: ss 94A(8) and (9);
– application for recovery of forfeited property: s 104(6) and (7).
[11]Transcript of proceedings, Commissioner of the Australian Federal Police v Dong Hua International Investments Pty Ltd (Supreme Court of Victoria, T Forrest J, S CI 2013 04149, 16 November 2015) 30 (‘Transcript’).
In my view, this contention is incorrect. Applications for:
(a) exclusion from a restraining order;
(b) exclusion from a forfeiture order;
(c) a compensation order;
(d) exclusion from forfeiture or conviction; and
(e) recovery of forfeited property;
are all applications brought by an interested party against the responsible authority (in this case the Commissioner). The relevant provisions that ensure the responsible authority has a reasonable opportunity to ‘conduct examinations in relation to the application’ do no more than allow the responsible authority sufficient time to apply for, and conduct, the relevant examination.
In contradistinction, an application for forfeiture is brought by the responsible authority itself. In Zhang,[12] I explained the operation of the Act in circumstances where the Commissioner sought to restrain property suspected to be the proceeds of crime. If, as in this case, restraining orders are made, sections 29 and 31 provide that a person may apply for exclusion from their interest in restrained property. Section 49(1)(c) of the Act requires that property restrained must be forfeited if the court is satisfied that it is ‘tainted’ in one or more of four ways. If, however, no application has been made for property to be excluded from the restraining order, or any such application has been withdrawn, then the Commissioner is relieved of having to prove that the property is ‘tainted’ within the meaning of s 49(1)(c).
[12]Zhang [2015] VSC 390, [10]-[19].
It follows that where the responsible authority is required to prove property to be tainted in order to succeed in its forfeiture application, the interested party must have sought exclusion from the restraining order. In that event, the responsible authority will already have had a reasonable opportunity to conduct examinations because it is specifically provided for in s 31(6) and s 32(b). Alternatively, if there is no exclusion application then there will be no need for examinations as the responsible authority is relieved of the burden imposed by s 49(1)(c). In my view, the only inference I can draw from Parliament’s failure to provide for a ‘reasonable opportunity’ for a responsible authority to conduct examinations before a forfeiture application is that Parliament concluded that the responsible authorities position in this regard was sufficiently protected by the other ‘reasonable opportunities’ presented to it on the contested pathway to forfeiture. Further, in my view, had Parliament intended to prohibit or discourage examinations before forfeiture hearings it would certainly have said so in unambiguous terms. I consider that there is nothing in the structure of the Act, or its text, that in any way impacts upon the discretion granted to make examination orders before a forfeiture application hearing.
Mr Mitchell further contended that a factor relevant to the exercise of my discretion was that if examinations were heard ‘prior to the hearing of a forfeiture application’ it would involve ‘the Court denying penalty privilege to an applicant where Parliament has not indicated that the privilege should be abrogated’.[13] Sections 196 and 197(2) operate to deny that penalty privilege. I consider that the text of these sections is unambiguous. If a Court were to make an examination order prior to the determination of the forfeiture application then the denial of penalty privilege to that witness was specifically contemplated by Parliament when it enacted those sections. Put another way, I consider Parliament has positively indicated that the privilege should be abrogated in all forms of Part 3-1 examinations.
[13]Respondents’ submissions, dated 13 November 2015 [14].
The respondents cited a passage from my judgment in Zhang:
fundamental notions of fairness dictate that where the state seeks to seize property the state or its agent ought provide some evidentiary basis for that extraordinary interference with proprietary rights before the proprietor ought be called upon to answer anything at all[14]
as having an application to the timing of examination orders, which they argued should be deferred until after the Commissioner’s forfeiture application has been determined. The passage cited above was composed about a very specific set of circumstances. The Commissioner had not availed himself of the examination process but wished the respondents’ applications for exclusion[15] to be heard as part of a single hearing along with the forfeiture application itself. In those circumstances, and where the respondents had not been charged with or convicted of any criminal offence, I considered it procedurally fair to require the Commissioner to proceed first with the forfeiture application relying on whatever evidence he had at his disposal. At no stage did I say, or intend to say, that the Commissioner’s pre-hearing evidence gathering processes, including through examination orders, ought be circumscribed in any way. It follows that the ‘evidentiary basis’ that I referred to in the passage above may be supplemented by the product of Part 3.1 examinations that have been conducted before the forfeiture hearings.
[14]Respondents’ submissions, dated 13 November 2015 [15]; Zhang [2015] VSC 390, [39].
[15]From existing restraining orders and from any forfeiture order that may be made.
I am more concerned with practical implications of these applications. Five of the six proposed examinees are in China. The trial date is fixed for 23 February 2016. If I grant the applications for examination orders the trial date will certainly need to be vacated. I shall set out an abbreviated procedural history of the matter.
(a) On 14 August 2013, Williams J made ex parte restraining orders against the two properties.
(b) Shortly thereafter the Commissioner applied for a forfeiture order, and the respondents applied for exclusion from the restraining order.
(c) On 19 December 2013, Elliott J granted Dong Hua and Yuhong Zhou leave to file amended applications for exclusion and applications for compensation.
(d)
On 27 May 2014, the matter was set down for a hearing commencing
30 September 2014.
(e) On 23 September 2014, consent orders were made vacating the date. This was primarily due to the respondents asserting that they experienced difficulties in gathering evidence.
(f) The hearing was re-fixed for 11 February 2014.
(g) This hearing date was vacated by consent due to the Commissioner wishing to lead evidence from a forensic accountant, who would not have a report ready until April 2014.
(h) 18 months went by.
(i) A new trial date was fixed for 4-6 August 2015.
(j) By late June 2015, the Commissioner still had not received the forensic accountant’s report. Towards the end of July 2015, the Commissioner once more applied to vacate the trial date, supported by the affidavit of Dean Barnes, sworn 21 July 2015.
(k) On 22 July 2015, consent orders were made by Daly As J vacating the August trial dates. The matter was then listed for three days commencing on 23 February 2016.
(l) In November 2015, the Commissioner applied for the impugned examination orders and for the 23 February 2016 trial date to be vacated.
If I were to grant these applications it is entirely unclear to me as to whether and when the examinations of the five Chinese residents would occur. Even if the Act has extraterritorial reach, and a foreign non-party resident can be compelled to respond to compulsive Australian court process, there is no temporal certainty at all. As I have indicated I am asked to exercise a broad discretion that involves consideration of many factors, including delay. I have concluded that delay, in the context of the procedural history that I have outlined, is a decisive factor in the exercise of my discretion.
The Commissioner has been entitled to seek examination orders under s 180 of the Act for more than two years. He has not sought to do so until very recently. In the meantime the trial date has been vacated on three occasions, the last two of which were due to delay on the Commissioner’s part. On at least the last two occasions multiple days of court time were set aside. If I allow the application for the Chinese resident examination orders I will be compelled to vacate another block of court days. I am simply not prepared to delay this matter further.
Yuhong Zhou is in a different category. As I understand it, she currently resides in Melbourne. I have concluded that I ought make an examination order in respect of her. I am unsure whether it is logistically possible to carry out all the steps in the examination process (including transcription) before 23 February 2016, but I am satisfied the Commissioner should have the opportunity to do so. The parties should proceed on the basis that the hearing will commence on 23 February 2016 regardless of whether the Zhou examination has been conducted.
I will make an order for the examination of Yuhong Zhou pursuant to s 180 of the Act. It is unnecessary to make a s 180A order which examination would canvas the same material. A s 180B order is premature. I refuse the applications for examination orders insofar as the other five proposed witnesses are concerned, and I refuse the application to vacate the hearing date.
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