Commissioner of the Australian Federal Police v Huang
[2016] WASC 5
•8 JANUARY 2016
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE -v- HUANG [2016] WASC 5
CORAM: KENNETH MARTIN J
HEARD: 15 DECEMBER 2015
DELIVERED : 8 JANUARY 2016
FILE NO/S: CIV 1012 of 2013
BETWEEN: COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE
Plaintiff
AND
LI CHUN HUANG
First RespondentMICHAEL QUOC LY
Second RespondentBELLOMO ENTERPRISES PTY LTD
Third Respondent
Catchwords:
Property - Proceeds of crime legislation - Forfeiture - Exclusion application - Real property - Bank accounts - Whether fraud committed in obtaining loans to purchase properties - Whether offence committed by failing to fully declare all sources of income in tax returns - Whether court satisfied that property at risk was lawfully acquired and not the proceeds of a criminal offence - Onus on applicant
Legislation:
Proceeds of Crime Act 2002 (Cth)
Result:
Application to exclude property from forfeiture, allowed in part over real property, but not over credit sums in bank accounts
Category: B
Representation:
Counsel:
Plaintiff: Mr G D Cobby
First Respondent : No appearance
Second Respondent : Mr S K Shepherd
Third Respondent : No appearance
Solicitors:
Plaintiff: Australian Federal Police - Proceeds of Crime Litigation
First Respondent : No appearance
Second Respondent : Frichot & Frichot
Third Respondent : No appearance
Case(s) referred to in judgment(s):
The State of Western Australia v Lee [2014] WASCSR 255
KENNETH MARTIN J:
Overview
This is an urgent application by the second respondent, Mr Michael Quoc Hong Ly, to invoke in his favour the benefit of s 94(1) of the Proceeds of Crime Act 2002 (Cth) (POCA).
The second respondent invokes s 94(1) in an attempt to interrupt and to exclude from automatic forfeiture to the Commonwealth three items of property that are currently affected by a restraining order issued under the POCA on 9 September 2013 by Registrar Whitbread in this court. The application is opposed by the Commissioner of the Australian Federal Police (the Commissioner).
I note, at the outset, that it is imperative that this decision be delivered before what will otherwise be an automatic forfeiture of the property which looms on 16 January 2016, under provisions of the POCA.
I begin by setting out a history of these proceedings, the grounds of the second respondent and of the Commissioner in making and opposing (respectively) the application for exclusion of property at risk of forfeiture, and the underlying facts and chronologies for those items of property.
For clarity, I generally refer to the second respondent as the second respondent, so as to avoid potential confusion with his father, Mr Vo Ly.
History of these proceedings
AFP's originating motion of 8 January 2013
On 8 January 2013, the Commissioner filed an originating motion for restraining orders pursuant to s 17 and s 19 POCA that would apply to property held by Ms Huang (the first respondent), Mr Michael Quoc Hong Ly (the second respondent) and Bellomo Enterprises Pty Ltd (the third respondent).
The action against the first respondent (Ms Huang) has no bearing on the application by the second respondent to exclude property from forfeiture. Ms Huang did not participate in the proceedings before me regarding the second respondent's application. I also note that the action against the third respondent was discontinued on 15 May 2013, by order of McKechnie J.
The originating motion of 8 January 2013 was supported by an affidavit of a federal agent, Mr Clifford, sworn 8 January 2013.
Mr Clifford stated that he suspected that the second respondent had committed a Commonwealth indictable offence, namely an attempt to possess commercial quantities of a border controlled drug, methamphetamine, reasonably suspected of having been unlawfully imported contrary to s 307.8 of the Criminal Code (Cth).
On 9 January 2013, Federal Police arrested the second respondent in relation to that offence and executed a search warrant at the second respondent's parents' house in Stirling (where the second respondent then resided). They seized certain items, including two amounts of cash ($13,500 and $10,000), as well as other items.
Mr Clifford's affidavit also included, as attachment CMC‑14, a copy of the record of certificate of title for a property at 48 Hainsworth Avenue in Girrawheen, Western Australia (the Girrawheen property), showing that:
(a)a Mr Michael Quoc Hong Ly was the (only) registered proprietor;
(b)the second respondent has been the registered proprietor since June 2005; and
(c)there was an encumbrance against the land in the form of a mortgage, registered 15 June 2005, to Westpac Banking Corporation (Westpac).
The Commissioner's originating motion also sought (inter alia) an order that, pursuant to s 180 POCA, the second respondent be examined about his affairs, including the nature and location of any property.
Restraining order of 10 January 2013
As regards the property held by the second respondent, on 10 January 2013, McKechnie J issued a restraining order, pursuant to s 17 POCA. Although the restraining order applied to all property held by the second respondent, the terms of the restraining order specifically identified the Girrawheen property as property owned by the second respondent to which the restraining order applied.
McKechnie J also ordered that the second respondent be examined about his affairs, including the nature and location of any property. That compulsory examination of the second respondent under pt 3‑1 POCA was held on 4 June 2013 in the Perth Registry of the Administrative Appeals Tribunal before Deputy President S D Hotop.
Restraining order of 9 September 2013
On 9 September 2013 Registrar Whitbread, by consent of the parties, issued orders restraining all property of the second respondent, on the same terms as the order of 10 January 2013. The new restraining order was required because:
(a)on 14 August 2013, the charges against Ms Huang and the second respondent upon which the previous (8 and 10 January 2013, respectively) restraining orders were grounded were discontinued and new charges were laid, and
(b)pursuant to s 45 POCA, the subsisting 10 January 2013 restraining order was to cease to have effect, on 11 September 2013.
Conviction and sentencing of the second respondent - 2014
The charge against the second respondent was dealt with on indictment. This led to a trial by jury in the Supreme Court of Western Australia between 5 May and 3 July 2014 before Corboy J.
On 3 July 2014, the second respondent was convicted by a jury after trial of the offence that between on or about 19 October 2012 and 9 January 2013, at Perth in Western Australia and other places, he entered into an agreement with other persons, namely Chung Yin Tam, Lee Hoang Duong and diverse others, and an offence was committed in accordance with the agreement, namely, the importation of a substance, the substance being a border controlled drug, namely, methamphetamine, and the amount imported being a commercial quantity contrary to s 11.2A(1) and s 307.1 Criminal Code (Cth).
On 17 October 2014, Corboy J sentenced the second respondent to 14 years' imprisonment with a non-parole period of 9 years 6 months: see The State of Western Australia v Lee [2014] WASCSR 255. In sentencing the second respondent Corboy J made a number of findings of fact. His Honour noted that the search of the second respondent's bedroom at his parents' house located clipseal bags, including clipseal bags holding a crystalline substance, cash, and a document that appeared to be a 'tick' list and scales [17] and said further that:
… I accept the submission made by the Crown prosecutor at the trial that the items found in your bedroom on the evening of 9 January 2013 indicated that you were involved in drug trafficking to some extent (using the term 'trafficking' as defined by s 302.1 of the Criminal Code [Cth]). You are not to be punished for that as you have not been charged with trafficking. However, the fact that you were found with drug paraphernalia reinforces the conclusion that I have reached that you were to derive a benefit from the importation [58].
The second respondent's chamber summons ‑ filed 23 March 2015
On 23 March 2015, the second respondent filed a chamber summons seeking exclusion of some property from forfeiture, pursuant to s 94 POCA and an order to extend the time before property was forfeited pursuant to s 93 POCA.
The summons also sought orders that all property of the second respondent subject to the restraining order of 9 September 2013 be excluded from forfeiture and that the period before which forfeiture occurred be extended to 20 January 2016.
That chamber summons was supported by an affidavit of Mr Zagami, sworn 15 April 2015. In his affidavit, Mr Zagami said, inter alia:
1.the property of the second respondent that was covered by the restraining order included the Girrawheen property and funds held in two Commonwealth Bank accounts;
2.on or around 11 November 2014, the second respondent's legal representatives had received, from the AFP, a Notice of Date of Statutory Forfeiture pursuant to s 92A POCA (the forfeiture notice); and
3.the forfeiture notice was subsequently served on the second respondent on 18 November 2014.
The forfeiture notice, which was attached to Mr Zagami's affidavit, advised the second respondent that the items of property set out in the schedule to the notice (which included the items stated in Mr Zagami's affidavit) would be forfeited to the Commonwealth under pt 2 and pt 3 POCA on 20 April 2015, unless a court order excluding the property from forfeiture was obtained or a court order extending the period before which forfeiture occurs was obtained.
Section 92 POCA provides that, where a person has been convicted of a 'serious offence', property of that person which is subject to a restraining order made under the POCA is automatically forfeited to the Commonwealth after a six‑month period that commences on the 'conviction day'. Sections 331 and 333, read together, provide that the 'conviction day' for the second respondent's offence was the day on which a court passed sentence for the offence (ie, 17 October 2014). It was not contended that the second respondent's conviction did not meet the definition of a 'serious offence' as defined under s 338 POCA. Clearly, it does.
On 16 April 2015, Allanson J issued orders, by consent of the parties that, pursuant to s 93(1) POCA, the period before which forfeiture of the second respondent's property subject to the restraining order dated 9 September 2013 in these proceedings be extended. That date was subsequently amended to 16 January 2016 by me, on 25 November 2015.
Programming orders for the hearing of the second respondent's application to exclude property from forfeiture were made by me on 15 June 2015 and on 20 July 2015 and by Tottle J on 23 September 2015 and on 22 October 2015.
Evidence was ordered to be by affidavit pursuant to O 81F r 8 of the Rules of the Supreme Court 1971 (WA), which provides that evidence in support of or opposing an application under the POCA is to be by affidavit unless the court orders otherwise. On 22 October 2015, Tottle J ordered the second respondent be made available for cross-examination on his affidavit evidence.
On 25 November 2015, a hearing of the second respondent's application was adjourned until 15 December 2015. This was to allow for the Commissioner to comply with notice requirements under s 318B POCA. Section 318B deals with circumstances in which a party will apply to admit into evidence specified statements made at an examination such as the second respondent's examination on 4 June 2013.
On 27 November 2015, the Commissioner filed a notice pursuant to s 318B that set out specified statements by the second respondent from the examination on 4 June 2013 that it would apply to have admitted into evidence. There was further objection on the basis that this was not specific enough. In the end I did not need to rule on that issue.
Hearing of the application - 15 December 2015
Affidavit evidence relied upon by the parties and accepted into evidence at the hearing before me on 15 December 2015 comprised affidavits of:
(a)Mr Michael Quoc Hong Ly filed on 22 July 2015 (accepted as Exhibit A) and on 14 October 2015 (Exhibit B);
(b)Mr Vo Ly, the second respondent's father, filed on 14 December 2015 (Exhibit C); and
(c)Mr James Harrison, an AFP agent, filed on 19 August 2015 (1st Affidavit) subject to several excisions (Exhibit D), on 25 November 2015 (3rd Affidavit) (Exhibit E), on 10 December 2015 (4th Affidavit) (Exhibit F), and on 15 December 2015 (5th Affidavit) (Exhibit G).
Several paragraphs and attachments to Mr Harrison's affidavit of 19 August 2015 were excised based on objections raised by counsel for the second respondent.
Both Mr Michael Ly and his father, Mr Vo Ly, were cross-examined on their affidavit evidence at the hearing. Mr Vo Ly's oral evidence was given through a Cantonese-speaking interpreter.
Also accepted into evidence (as Exhibit H), after cross‑examination of Mr Michael Ly, were nine pages of an attachment (JTH‑13) to Mr Harrison's affidavit of 19 August 2015 that had been excised when that affidavit was received into evidence. Those pages comprise a personal finance application to Westpac made by Mr Michael Ly and his sister Lyn Mei Ling Ly.
In the end, counsel for the Commissioner did not seek to have any of the statements made by Mr Michael Ly in his examination on 4 June 2013 admitted into evidence. Hence, I did not need to rule on the s 318B non-compliance objection.
In addition to the oral submissions by counsel at the hearing, both parties filed notices of their grounds for making or contesting the application to exclude property from forfeiture and written submissions. Documents filed on the second respondent's behalf included a notice of grounds for exclusion of property from forfeiture filed 30 September 2015 and three sets of written submissions, filed 3 September 2015, 24 November 2015 and 14 December 2015. Documents filed by the Commissioner included a notice of grounds for contesting the application filed 2 October 2015 and then an amended notice of those grounds filed 5 October 2015, and written submissions filed 14 September 2015.
At the end of the hearing across 15 December 2015, I reserved my decision.
Grounds for making and opposing the application
Property that the second respondent seeks to exclude from forfeiture
In his notice of grounds for exclusion of property from forfeiture filed 30 September 2015, the second respondent identifies three items of property he seeks to have excluded from forfeiture:
(a)the Girrawheen property;
(b)the Commonwealth Bank NetBank Saver account number XXX (the NetBank Saver account); and
(c)the Commonwealth Bank Streamline account number XXX (the Streamline account).
The purchase and subsequent sale of another property - a property at 35 Eversham Drive, Ellenbrook (the Ellenbrook property) - also presents as a potentially relevant issue, since it is said, and I accept on the evidence, that proceeds from the sale of that property became at least a portion of funds paid into the Streamline and NetBank Saver accounts.
I infer from the forfeiture notice that there may be other restrained properties held by the second respondent that may also be subject to forfeiture on 16 January 2016; however, the second respondent's application did not appear to seek to exclude them from forfeiture.
The second respondent's grounds
In his notice of grounds for exclusion of property from forfeiture, the second respondent asserted that his interests in the Girrawheen property and the two Commonwealth Bank accounts:
(a)are neither the proceeds of unlawful activity, nor an instrument of unlawful activity; and
(b)were lawfully acquired.
As regards the Girrawheen property, the second respondent asserts that his interest in that property is as a registered proprietor of the land, subject to the registered mortgage interest of Westpac securing its loan, and that his ownership interest as registered proprietor was lawfully acquired by the transfer of the Girrawheen property in or around 2005.
The Commissioner's grounds
The Commissioner asserted that the second respondent had failed to establish that the three items of property the second respondent sought to exclude from forfeiture did not comprise the proceeds of unlawful activity nor were they an instrument of unlawful activity, and that they had been lawfully acquired.
As regards the Girrawheen property, the Commissioner asserted that the second respondent had failed to adduce sufficient evidence to establish that it is more likely than not that:
1.the second respondent did not obtain a loan of $141,897, the proceeds of which were paid in partial satisfaction of the purchase price for the Girrawheen property, by making false statements (about the level of his assets) in his application for that loan;
2.the second respondent did not use, indirectly or otherwise, taxable income which he failed to declare to the Australian Tax Office (ATO) and pay all applicable tax thereon or the proceeds of another offence to make repayments in respect of that loan;
3.an amount of $33,079.38 paid in partial satisfaction of the purchase price for the Girrawheen property was not wholly or partially derived from the commission of an offence (Mr Vo Ly's evidence is relevant to that issue only).
As regards the two Commonwealth bank accounts, the Commissioner asserted that the second respondent had failed to adduce any evidence as to:
(a)the basis on which he and his sister, Lyn Mei Ling Ly, had obtained a loan of $130,500 from Westpac in May 2006, the proceeds of which the second respondent asserts were used to acquire the Ellenbrook property; or
(b)who made the repayments in respect of that loan or how those repayments were made.
The Commissioner further asserted that the second respondent had failed to adduce sufficient evidence to establish it was more likely than not that:
1.Lyn Mei Ling Ly and he did not obtain the loan of $130,500 from Westpac in May 2006 by making false statements in their application for that loan;
2.Lyn Mei Ling Ly and he did not obtain a loan, initially in an amount of $144,527 and increasing thereafter, the proceeds of which were applied on 19 December 2008 to discharge the loan of $130,500 from Westpac obtained in May 2006 and subsequently to pay the costs of developing the Ellenbrook property, by each of them making false statements in their application for that loan;
3.the second respondent did not use, indirectly or otherwise, taxable income which he failed to declare to the ATO, and pay all applicable tax thereon or the proceeds of another offence in order to make repayments in respect of each of the loans referred to above;
4.the credit balance in the Streamline account comprises part of the proceeds of the sale of the Ellenbrook property, and not the proceeds of the commission of an offence;
5.Lyn Mei Ling Ly has or had any entitlement to the proceeds of the sale of the Ellenbrook property, there being no evidence of her having made any contribution to the costs of acquiring that property.
The Commissioner's written submissions were that, in effect, the second respondent had failed to show that it was more likely than not that the second respondent:
1.did not engage in fraud, contrary to s 409(1) of the Criminal Code (WA), in making false statements in his loan application; and
2.had not done anything with the intention of dishonestly causing a loss to a Commonwealth entity, contrary to s 135.1(3) Criminal Code (Cth), by preparing and lodging false tax returns.
Evidence regarding second respondent's assessable annual income
By his first affidavit, the second respondent said that from 1 June 2002 to about January 2006 he was employed as a computer technician by CDM Australia, with a salary of $28,000 per annum. He was then employed as a factory hand by Western Australian Speciality Alloys Pty Ltd. He says that since 2005 he has worked as a computer technician, factory hand and a furniture assembler.
He says that he has lived at his parents' home in Stirling and at the Girrawheen property (about two years after its purchase in mid-2005 he says he moved back to live with his parents and from then, rented out his Girrawheen property, deriving rental income from then).
As attachment MQL5 to his first affidavit, the second respondent included summary statements from property management companies showing net income arising from rental of the Girrawheen property for six years, covering a period between July 2007 to June 2013. The nett rental income on the summary statements presents as the rent received minus various expenses (eg, property maintenance, management fees).
July 2007-June 2008
$12,397
July 2008-June 2009
n/a
July 2009-June 2010
$13,803
July 2010-June 2011
$15,375
July 2011-June 2012
$14,865
July 2012-June 2013
$15,281
For the period July 2008 to June 2009, only monthly rental income statements were provided ‑ however, the incomings and outgoings appear broadly similar to those for the preceding and following years.
This rental income would be assessable income, as the second respondent seemed to accept when under cross‑examination.
As attachment MQL1 to his first affidavit, the second respondent included notices of assessment from the ATO for nine years covering a period, in effect, from 1 July 2004 to 30 June 2013. All of the notices were issued on 1 November 2012 except for the 2012 and 2013 tax years, which issued on 24 June 2013 and 8 May 2014, respectively. This indicates that the second respondent filed tax returns for the tax years 2005 to 2011, at a time well after they were due. The tax returns themselves were not provided, although the second respondent included in the attachment MQL1 copies of 'Tax Return Worksheets' for the tax years ending 30 June 2005, 30 June 2006 and 30 June 2007. It was not said why such worksheets were not provided for the other years in which the second respondent provided copies of the ATO notices of assessment.
The taxable income of the second respondent as is indicated on those notices of assessment was as follows:
| Year ending 30 June 2005 | $26,661 |
| Year ending 30 June 2006 | $18,925 |
| Year ending 30 June 2007 | $11,253 |
| Year ending 30 June 2008 | $22,690 |
| Year ending 30 June 2009 | $16,858 |
| Year ending 30 June 2010 | $21,034 |
| Year ending 30 June 2011 | $4,995 |
| Year ending 30 June 2012 | $2,942 |
| Year ending 30 June 2013 | $4,872 |
Nowhere does the second respondent undertake any mathematical verification or considered explanation as to the sources and amounts of his assessable income for the tax years 2008 (ie the tax year ending 30 June 2008) onwards, or the nature and amount of any allowable deductions, including expenses he might have been able to claim, for those years.
In that context, it is also notable that the evidence adduced by the second respondent presents as being very selective: eg bank statements only after 1 August 2009; ATO notices of assessment for the tax years 2008 onwards but with no accompanying explanation as to how the second respondent's taxable income was determined for those years; and a copy of the loan application form for the initial 2005 Girrawheen mortgage but no copies of the loan application forms for his subsequent loan applications.
The difficulty for the second respondent is that, as we will see, the evidence he has adduced ‑ when assessed along with the evidence that the Commissioner has adduced ‑ is not sufficient to support, on the balance of probabilities, the drawing of the inferences that the second respondent has contended for (namely that his interest in certain property items was not the proceeds of unlawful activity and was lawfully acquired), in regards to his interests in some items of property that he seeks to exclude from forfeiture.
At the conclusion of the hearing of the application on 15 December 2015, counsel for the Commissioner handed up an aide memoire which attempted to summarise the second respondent's disclosed income and expenditure for a period from 1 July 2004 to 2 December 2009. I allowed responsive written comments to the document to be provided on behalf of the second respondent, who had objected to the document on various grounds and made several alternative submissions as to income and expenditure.
The aide memoires of the Commissioner attempts, by making some assumptions under an exercise I would have expected of the second respondent, but never received, to arithmetically compare and reconcile his legitimate sources of income across this period (ie, his employee nett income, rental income from Hainsworth Avenue once it was rented, and at times when received, a Newstart allowance) against his recurrent legitimate financial commitments. Those commitments were chiefly the second respondent's:
(a)loan repayments to Westpac made across this period, involving
(i)for the Girrawheen property, an average repayment of $223.50 per week from 28 June 2005, rising to an average repayment of $12,200 per annum from 1 July 2007, and
(ii)for the Ellenbrook property, an average repayment of $255.69 per week from 28 August 2006, rising to an average repayment that varied somewhere between $318.62 per week to about $425 per week for the period between January 2008 and June 2010); and
(b)regular credit card repayments.
In the end, I have accepted both documents, in effect as opposing submissions, rather than as admissible documentary evidence.
As regards the second respondent's credit card payments, I accept that submission of the Commissioner that the credit card payments made by the second respondent for the period between January 2008 and June 2010, calculated as an average weekly payment, amounted to a liability of between $117 to $318 per week. That conclusion is supported by the information in attachment JTH-11 of Mr Harrison's affidavit of 19 August 2016, which was accepted into evidence as part of Exhibit D and which contained copies of the bank statements for a Commonwealth Bank MasterCard credit card, held in the second respondent's name, for the period between 7 January 2008 and 8 February 2012, as well as the debit payments seen in the second respondent's Streamline account.
Evidence regarding the restrained property and the Ellenbrook property
The Girrawheen property
Evidence regarding the purchase of the Girrawheen property and Mr (Michael) Ly's living and financial arrangements in relation to that property after its purchase present from the second respondent's affidavit filed 22 July 2015 and from his father's affidavit filed 14 December 2015. In his affidavit of 22 July 2015, the second respondent said:
…
13.I purchased the house at 48 Hainsworth Avenue, Girrawheen in mid-2005.
14.At the time, I was living with my parents at 46 Woodhall Street, Stirling.
15.The purchase price of the property was $175,000.00. I paid a deposit of $1,000.00.
16.The house at 48 Hainsworth Avenue, Girrawheen was the first home I owned. I applied for and obtained a first home owner's grant in the sum of $7,000.00.
17.I attach to this affidavit, marked 'MQL2', a true copy of the settlement statement prepared by Blaze Conveyancing Pty Ltd for the purchase of the Girrawheen property.
18.In order to purchase the Girrawheen property, I applied for a loan in the sum of $136,000.00 from Challenge Bank, then a division of Westpac Banking Corporation. I signed the loan application on 20 April 2005. My application was successful.
19.I attach to this affidavit, marked 'MQL3', true copies of my personal finance application and a loan offer received from Challenge Bank dated 7 April 2005 for the sum of $136,000.00.
20.At settlement, Challenge Bank Limited provided funds in the sum of $141,897.00.
21.At settlement of the purchase of the property, I was required to provide a further amount in the sum of $33,079.38. This amount was provided to me by my parents as a gift to help me buy my first home.
22.My parents provided the sum from their savings.
23.At settlement of the purchase, Westpac paid the sum of $136,827.37. Bank fees of $1103 were deducted. The remainder of the loan ($5,069.63) was paid to me by bank cheque on about 15 June 2005.
24.I lived in the Girrawheen property for two years after I bought it. During that time, I was working as a computer technician. I was paying interest on the mortgage from my salary.
25.I attach to this affidavit, marked 'MQL4', a true copy of a statement ending 12 June 2015 from Westpac for my mortgage of the Girrawheen property.
26.In 2007, I returned home to live with my parents. I leased the Girrawheen property to tenants.
27.From that time, mortgage repayments to Westpac were paid out of the rental received from the tenants. I attach to this affidavit, marked 'MQL5', true copies of a bundle of owner statement/tax invoices received from the manager of the Girrawheen property originally known as the 'Professionals' and subsequently known as 'Challenge Real Estate' and a management authority for Challenge Real Estate.
28.I neither purchased the Girrawheen [sic] using the proceeds of crime nor have I maintained the mortgage payments from such sources.
As regards the purchase of the Girrawheen property, Mr Vo Ly (ie, the father) said in his affidavit that, in or around 2005, his son Michael spoke to him and told him that he wanted to buy a property on Hainsworth Avenue in Girrawheen. Mr Vo Ly said that he was pleased his son was beginning to look towards the future and that he wanted his son to purchase the property.
Mr Vo Ly said that Michael told him that he was going to approach a bank for a loan, that he was eligible for the First Home Owners Grant, and was going to put some of his own money towards the purchase. Further, he said that Michael told him that, even after the mortgage, the First Home Owners Grant and the contribution of some of his savings, there was going to be a shortfall of about $35,000.00 to be able to purchase and settle the property.
Mr Vo Ly said that as Michael was his 'only son and to help him purchase the property, [he] gifted him $35,000.00 towards the purchase of the property'. Mr Vo Ly went on to say that the $35,000 came from his savings, which included money from his superannuation and that he had saved while working, as well money from a 'lotto win' of $15,689 in 1995 and money that was given to his wife and him by their six daughters. As I indicate later, I will accept this evidence from Mr Vo Ly.
The Ellenbrook property
By his first affidavit, Mr Michael Ly said that in May 2006 the second respondent arranged with his sister, Ms Lyn Mei Ling Ly, to 'together' purchase a block of land in Ellenbrook. The two of them applied to Westpac for a loan of $130,500 to allow them to purchase the property.
A copy of that loan application was not included with the second respondent's first affidavit. The second respondent did include, as attachment MQL6 to his first affidavit, a copy of a letter from Westpac dated 1 April 2006 relating to the approval of a loan for $130,500 and citing as securities for that loan a 'new' mortgage over the Ellenbrook property and the 'existing' mortgage over the Girrawheen property.
It is not apparent to me what, if anything, the sister Lyn contributed (either in the form of a monetary contribution to the purchase price or in property offered as a security for the Westpac mortgage) to the purchase of the Ellenbrook property, other than to act as a co-applicant for a loan and then, subsequently, as a co-mortgagor.
The purchase of the Ellenbrook property was settled on 30 May 2006. A sum of $134,500 was paid out by Westpac (which included stamp duty, fees and disbursements).
The second respondent says that his sister Lyn has lived at all material times, in Brunei.
In 2007, the second respondent and his sister, Lyn, applied for a loan from Westpac to cover the cost of constructing a house on the unimproved block and to refinance the initial loan to purchase the block into a single, larger, loan. A copy of that loan application was not included with the second respondent's first affidavit.
The second respondent did include, as attachment MQL10 to his first affidavit, a copy of a loan offer from Westpac (dated to either 26 October 2007 or 9 November 2007) for a credit amount of $322,000 and citing as securities for that loan the 'existing' mortgage over the Ellenbrook property and the 'existing' mortgage over the Girrawheen property. The loan offer appears to have been accepted and a house subsequently constructed on the property.
The Ellenbrook property, including house and land, sold in October 2009 for a sale price of $455,000.
The Commonwealth Bank accounts
As attachment MQL13 to his first affidavit, the second respondent attached bank statements for:
(a)the Commonwealth Bank Streamline account covering a period from 1 August 2009 to 1 March 2013; and
(b)the Commonwealth Bank NetBank Saver account covering a period from 14 October 2010 to 1 March 2013.
The affidavit of Mr Harrison filed 25 November 2015 included as attachment JTH-18 copies of the bank statements for the second respondent's Streamline account for the period 2 January 2008 to 1 March 2013. The attachment was a replacement for the copies provided in an attachment (JTH-16) to Mr Harrison's affidavit of 19 August 2015, in which there had been a photocopying error.
The Streamline account
The opening balance for the Streamline account, as at 2 January 2008, was $18,213.42 and, as at 1 August 2009, was $7,679.35. The closing balance, as at 1 March 2013, was $8,732.38.
The second respondent did not include any statements for the Streamline account prior to 1 August 2009. This is unhelpful to the second respondent, given that the second respondent carries an onus of proving matters necessary for making the exclusion order he has applied for. No explanation for not providing bank statements earlier than 1 August 2009 is offered.
The fact that no statements at all are before me for the period prior to 2 January 2008 creates a level of uncertainty, as regards the origins of the credit funds ($18,213.42) due to the second respondent shown in that account as at 2 January 2008.
Further, as I will explain, there was no effort by the second respondent to explain the origin of 12 deposits that were made to his Streamline account of the transaction type 'NETBANK TFR' and bearing the descriptions 'MQHL 00XX' or 'Assembly MQHL 00XX', that commence with the deposit 'MQHL 0015' on 15 April 2008 and end with the deposit 'Assembly MQHL 0025' on 16 December 2009. These unexplained deposit amounts, total $54,313.70. The 12 deposits are as follows:
Description
Deposit amount
Date of deposit
MQHL 15
$9,076.85
15 April 2008
MQHL 16
$10,390.75
14 July 2008
MQHL 17
$4,036.15
13 August 2008
MQHL 18
$3,526.75
9 October 2008
MQHL 19
$9,746.70
30 January 2009
Assembly MQHL 20
$6,235.00
26 May 2009
Assembly MQHL 21
$2,542.50
26 June 2009
MQHL 22
$4,745.00
21 August 2009
Assembly MQHL 22
$70.00
07 September 2009
Assembly MQHL 23
$1,642.50
26 October 2009
Assembly MQHL 24
$954.00
10 November 2009
Assembly MQHL 25
$1,347.50
16 December 2009
TOTAL
$54,313.70
There are other deposits of the transaction type 'NETBANK TFR' in the Streamline account bank statements that are not numbered and which have a brief, non-numeric description - eg deposits described as 'deposit', 'pink' and 'pinky' in February 2008.
The total absence of Streamline account statements earlier than January 2008 contributes to the lingering uncertainty as to the manner in which the second respondent might have met his mortgage payments prior to January 2008. The uncertainty arises because, as I will explain, it is apparent from the post 2 January 2008 Streamline account statements that the second respondent consistently used funds available from his Streamline account to make monthly mortgage payments in respect of the Girrawheen and (for a period) the Ellenbrook property, during the period between 2 January 2008 and 1 March 2013.
Over the period between 2 January 2008 and 1 March 2013, three key features present as regards the use of the Streamline account by the second respondent:
1.The clear majority of transactions are scheduled or otherwise repetitive transactions, comprising:
(a)once-monthly direct debits to Westpac;
(b)a once-monthly credit from a property management company described as a monthly rental payment; and
(c)a once-monthly direct debit, apparently in respect of a Commonwealth credit card (or cards) (at various times).
2.With a few notable exceptions involving large withdrawals or deposits (such as the twelve sequentially numbered NetBank transfer deposits described as 'MQHL 00XX' or 'Assembly MQHL 00XX'), there are relatively few other transactions. Notably, there are few ATM or EFTPOS-type transactions.
3.The clear majority of the credit payments into the account are the monthly rental payments. However, some other credit deposits do present, notably:
(a)the twelve sequentially numbered NetBank transfer deposits;
(b)a few deposits from other parties (presumably third parties based on the transaction descriptions); and
(c)a deposit of $82,123.36 on 2 December 2009, said by the second respondent to be nett proceeds as a result of the sale of the Ellenbrook property (and which I accept).
As regards the deposit of $82,123.36, the second respondent said first, that this amount represented the nett proceeds of the sale of the property, and second, that he held half of those proceeds on behalf of his sister, Ms Lyn Mei Ling Ly, she being beneficially entitled to them. As we will see, I accept the first proposition, but not the second.
The NetBank Saver account
The second respondent says he opened the NetBank Saver account in his name on 14 October 2010. The account was opened in a Commonwealth branch office in Stirling, South Australia. Why it was opened at that location was never explained.
A single transaction (aside from credits for interest) recorded for the account is the deposit of $40,000, on 9 November 2010, those funds being transferred from the second respondent's Streamline account. The second respondent says that those funds were his sister's share of the proceeds from the sale of the Ellenbrook property and are being held for her.
With the benefit of regular interest accruals, the closing balance of the NetBank Saver account, as at 1 March 2013, was $44,067.
The three items of property sought to be excluded by s 94(1) of the POCA
I have identified the land at Girrawheen held in the name of the second respondent. In addition are the credit amounts in the two CBA bank accounts.
It is convenient at this point to set out s 94(1) of the POCA, to see the legislative context for the second respondent's present exclusion from forfeiture application.
Section 94(1) of the POCA provides:
(1)The court that made a *restraining order referred to in paragraph 92(1)(b) must make an order excluding particular property from forfeiture under this Part if:
(a)a person (the applicant) has applied for an order under this section; and
(b)the court is satisfied that the applicant has an *interest in property covered by the restraining order; and
(d)a person has been convicted of a *serious offence to which the restraining order relates; and
(e)the court is satisfied that the applicant's interest in the property is neither *proceeds of *unlawful activity nor an *instrument of unlawful activity; and
(f)the court is satisfied that the applicant's interest in the property was lawfully acquired.
Relevantly, I am concerned as regards the three items of property at risk of forfeiture to the Commonwealth, with essentially the two satisfaction requirements for the court (upon which the second respondent accepts he carries an onus of proof on the balance of probabilities), arising under s 94(1)(e) and (f) seen above.
There are no live issues arising concerning non‑satisfaction by the second respondent of s 94(1)(a), (b) and (d), which are clearly met.
The essential question then is whether the second respondent has satisfied me that his interest in the three items of property is not the proceeds of unlawful activity and can satisfy me, as well, that his interest in the three items of property was 'lawfully acquired'.
The terms '*proceeds' and '*unlawful activity' are defined terms in the dictionary section (s 338) of the POCA. I also record that it is accepted that the mandatory requirements as regards the Commissioner and s 94(6) have been met.
Section 329 POCA provides that:
(1)Property is proceeds of an offence if:
(a)it is wholly derived or realised, whether directly or indirectly, from the commission of the offence; or
(b)it is partly derived or realised, whether directly or indirectly, from the commission of the offence;
whether the property is situated within or outside *Australia.
…
(3)Property can be proceeds of an offence or an instrument of an offence even if no person has been convicted of the offence.
(4)Proceeds or an instrument of an *unlawful activity means proceeds or an instrument of the offence constituted by the act or omission that constitutes the unlawful activity.
Section 338 provides that 'unlawful activity' means an act or omission that constitutes an offence against a law of the Commonwealth, a State or Territory, or a foreign country.
It is necessary to say a little more about the land and the amounts of money due to the second respondent in the two bank accounts as the subject matter of the present exclusion application.
The house and land at Hainsworth Avenue, Girrawheen
As seen from the chronology addressing the Girrawheen property, the second respondent has been, and remains, registered proprietor of this land since 2005.
The land is the subject of a first registered mortgage to Westpac which was also registered at the time the property was acquired in 2005. The mortgage secures the loan advanced by Westpac to the second respondent, the funds advanced being used to meet the substantial component of the purchase price paid by the second respondent in 2005 to acquire the Girrawheen land from its former owners.
No party suggests the first registered Westpac mortgage against the Girrawheen land is anything other than a fully efficacious and enforceable first registered security favouring Westpac as a first ranking statutory encumbrance against the land.
For the purposes of assessing the present exclusion from forfeiture application, it is necessary to appreciate in respect of this land that the second respondent's precise interest, as regards this real property, is an interest as the registered fee simple proprietor. It is an interest in real property he has held (and continues to hold) since 2005, when he acquired this interest from the former owners.
The credit balances in the two bank accounts with the Commonwealth Bank of Australia (CBA)
Both CBA bank accounts are held in the name of the second respondent. Both have credit balances of funds favouring the second respondent. The Streamline account has a credit balance in the order of $8,700. The NetBank Saver account has a balance in excess of $44,000.
The funds standing to the credit of the second respondent in the NetBank Saver account were transferred to that account from the Streamline account in November 2010.
The two CBA bank accounts, in legal terms, are choses in action of the second respondent. By that it is meant, essentially, that he enjoys a legal right as the account holder to require the CBA to pay him on demand the amount of funds standing to the credit of each account. Until that occurs, the bank is, in effect, at liberty to hold and enjoy the benefit of the funds and to deal with them as it thinks fit.
Choses in action have the character of 'personal' property rights. They stand in contrast to a property right in relation to land – which is characterised as an interest in 'real' property.
In relation to the funds in the NetBank Saver account, the core argument of the second respondent is, in effect, that he holds these funds for his sister, Lyn. So, in effect, he contends that he is a trustee of the funds for Lyn.
At all material times Lyn has been and remains a resident of Brunei, although it appears she visits Western Australia from time to time to see her family in Perth.
The second respondent's argument that all the funds presently standing to the credit of the CBA NetBank Saver account are held on trust for his sister arises from - he contends - anterior circumstances relating to the purchase and dealings up to sale with the Ellenbrook property. Specifically, he says that he and Lyn, as joint tenants, purchased a vacant block of land at Ellenbrook together in 2006 (with the benefit of an advance of funds from Westpac to enable them to purchase the Ellenbrook land). Subsequently, a house was caused to be constructed on the vacant land. A fresh Westpac loan for a greater amount was obtained in order to fund the new house construction costs (and repay the first Ellenbrook loan) from Westpac.
As seen from the chronology, the Ellenbrook property was eventually sold in October 2009 for a sale price of $455,000. At that time the secured loan from Westpac in relation to the Ellenbrook property was fully repaid. After paying out the loan to Westpac that was secured by mortgage, there was a residual sum remaining of about $82,000. That amount was paid into the second respondent's Streamline account on 2 December 2009.
Some 11 months after those funds entered the second respondent's Streamline account, he caused the transfer of $40,000 into a (newly-opened) NetBank Saver account, in his name. The NetBank Saver account has effectively remained inactive since then, save for accruing ongoing interest.
It appears that in the period during which two Westpac loans relating to the Ellenbrook property were obtained, first, to purchase the vacant block and then, in order to repay that loan and obtain greater funds to pay for the construction of a house on the Ellenbrook land, all the monthly loan repayments due to Westpac made in that period were met by the second respondent. So, notwithstanding the second respondent's sister, Lyn, was identified as joint tenant of the Ellenbrook property with her brother (the second respondent), and she was also a co‑mortgagor with him to secure the Ellenbrook loan repayments to Westpac, in fact, all loan repayments up to the point that the Ellenbrook property was sold off and the nett proceeds realised were actually made by the second respondent and never by his sister.
No evidence was given indicating that there has ever been an attempted financial reconciliation or reckoning as between the second respondent and his sister, Lyn, over what she might be said to owe her brother or vice versa concerning Ellenbrook, given that she has never contributed to any of the loan repayments made in respect of the Ellenbrook property. This has not at any time, even now, ever been attempted by the second respondent, as he confirmed during his cross-examination at the hearing of this application. Nevertheless, the second respondent contends that all the funds in the NetBank Saver account are beneficially funds of his sister and not of himself. His expressed rationale for that view is that his sister and he purchased the Ellenbrook land jointly and built the house with funds borrowed jointly from Westpac and, as such, she is, in effect, entitled to half the nett proceeds of sale with him, after all loans have been repaid (as has occurred in 2009).
The second respondent appears to accept that his sister, Lyn, owes him some money of an unascertained amount as a contribution to take account of the fact that all loan repayments in respect of Ellenbrook were met by him solely.
There is a suggestion in the evidence given under cross‑examination by the second respondent that he believes his sister on a visit to Australia had passed over an amount of $13,500 in cash to their mother. Their mother, in turn, was said by him to have passed on that cash to the second respondent, on the basis that it was some (incomplete) contribution by Lyn towards her unfulfilled obligations to contribute 50% towards the mortgage loan repayments.
The $13,500 cash was found in the second respondent's room at his parents' house in Stirling, when Federal Police executed a search warrant in January 2013 against those premises. Another amount of $10,000 in cash was also found in the second respondent's room at his parents' house: see ts 69 - 70, 73 - 74.
In effect then, the second respondent contends that he is a trustee of the funds in the NetBank Saver account ‑ that he caused to be transferred there, in effect, to isolate them for the benefit of his sister and albeit that the account is in his name and, for some unexplained reason, was opened with a South Australian branch of the Commonwealth Bank.
The state of the evidence is that there is no written trust documentation, either creating or evidencing an existence of some kind of trust arrangement as between the second respondent and his sister, Lyn.
Lyn has not sworn any affidavit adduced on this application supporting this version of events, or claiming or explaining her position as a beneficiary of such a trust, or claiming an entitlement as beneficiary to the funds in the NetBank Saver account.
At all material times from when the loan applications were made and loans obtained to first acquire the vacant Ellenbrook land and then borrow more money to erect a house upon the Ellenbrook land, Lyn looks to have been (and to remain) a resident of Brunei.
The second respondent, in evidence under cross-examination, sought to rationalise his more than curious five-year state of omission, in that he has never attempted a mathematical reconciliation in monetary terms towards what his sister, Lyn, still owes him, towards making a half contribution to the loan repayments for Ellenbrook (which he met entirely until the Ellenbrook property was sold in 2009) as against Lyn's suggested (by him) beneficial half‑interest in the Ellenbrook property and eventually in half the net residual proceeds after the repayment of all loans. Some weakish attempt was made to explain this on the basis that the brother/sister relationship in an ethnically Chinese family was why no rationalising of his sister's net entitlement, arithmetically, had ever been made by the second respondent. I found this explanation flimsy and unacceptable.
A net position has still not been calculated, although a suggestion is that even the contribution of $13,500 in cash received by the second respondent via his mother from Lyn would still see his sister owing more money to her brother in respect of the loan repayments which he made in the time before the Ellenbrook property was sold.
On my assessment of the evidence, I am not satisfied as to an existence of any beneficial entitlement of the second respondent's sister, Lyn, in any of the funds which ultimately found their way into the NetBank Saver account. All those funds should be treated as the second respondent's property both legally and beneficially.
Consequently, the funds standing to the credit of both accounts can be similarly evaluated on the basis of the legal and beneficial entitlement to those funds as that of the second respondent and nobody else.
The second respondent's unsatisfactory evidence under cross-examination during the application
For the purpose of determining his application under s 94(1), I received into evidence two sworn affidavits of the second respondent which respectively became Exhibits A and B. The affidavits were received into evidence on the basis that the second respondent would be available for cross‑examination. That process unfolded via a videolink to Acacia Prison on 15 December 2015.
In short summary, I assessed the second respondent to be an unreliable witness. I do not accept his evidence in areas of controversy, unless it is independently corroborated.
I drew the opposite conclusion in respect to the evidence of the second respondent's father, Mr Vo Ly, who gave evidence and was cross-examined with the assistance of an interpreter. His translated affidavit became Exhibit C. Mr Vo Ly's evidence was satisfactory.
I assessed the second respondent's evidence, as it was exposed by a close cross-examination, to be particularly unsatisfactory and unreliable in the following specific areas.
A. Ellenbrook property ‑ asserted beneficial interest of sister, Lyn
I have already mentioned the second respondent's implausible explanation about his failure since 2009 and, even as of now, to attempt some sort of mathematical reconciliation in the asserted position between himself and his sister, Lyn, and her suggested beneficial entitlement to the nett proceeds of the sale of the once jointly owned Ellenbrook property in 2009.
As indicated, I have rejected what is the second respondent's wholly unsupported evidence concerning his sister Lyn's asserted 50% beneficial interest in the nett funds realised on the sale of the Ellenbrook property and then deposited into the Streamline account. Eleven months later, some $40,000 was transferred by the second respondent into the newly-opened NetBank Saver account in the second respondent's name.
No effort has been made by the second respondent to try and show how the amount of $40,000 in funds as paid into that account in 2010 is derived as being a nett entitlement of his sister. No attempt has been made, for instance, to provide a reliable calculation of her entitlement, taking account of the fact she did not contribute at all to mortgage repayments on the Ellenbrook property, but may have given her mother $13,500 in cash as some contribution towards that obligation. Yet the flat amount of $40,000 is simply transferred out of the second respondent's Streamline account to the NetBank Saver account in the name of the second respondent in November 2010, some 11 months after the sale of the Ellenbrook property.
All that evidence from the second respondent, including his asserted in effect trusteeship of those funds as being held for his sister, is, on my assessment, unreliable and must be rejected.
B. Employment: CDM Australia and afterwards
The second respondent's evidence about the duration and timing of his past employment as a computer technician with the company CDM Australia was highly unsatisfactory. It was, in short, all over the place. It fluctuates in terms of whether it was a three‑year period or a four‑year period. It also fluctuates in terms of whether it commenced at around 2002 at a time just after the second respondent finished a year of study at Murdoch University, or whether the three or four‑year period of employment began in 2005 and ran on until 2007, or possibly beyond that.
The second respondent was always vague and hazy about when he was employed with CDM and the position seemed to fluctuate depending upon what question he was asked. I gained an impression that the second respondent did not really care greatly about giving an accurate answer to this line of enquiry, by seeming to suggest it was someone else's responsibility to investigate and to verify.
The issue of his paid employment with CDM directly bears upon his relatively modest levels of annual income. Yet he was somehow funding the repayment of secured loans in respect of the Girrawheen property (in what was more likely a two‑year period when he was living at Girrawheen, before he moved back home to live with his parents at their Stirling address). And at times he was making the monthly loan repayment on not only the Girrawheen property but also the monthly repayments on the Westpac loans in respect of the Ellenbrook property, to which monthly repayments his sister was never contributing.
The second respondent, after leaving CDM, then went into another line of work with a company Think Furniture Assembly, where he was a furniture assembler, in effect, doing contract work assembling Ikea furniture. For some periods after (or during) that the second respondent then said that he would be directly engaged by former customers of Think Furniture Assembly to assemble furniture on an ad hoc basis for cash.
At some point, the second respondent moved back home with his parents and rented out the Girrawheen property, where after it was managed and earned rent, which formed part of his assessable income for taxation purposes.
Although, as I have mentioned, the second respondent carries an onus of proving the matters necessary for making the exclusion order he has applied for, particularly here, that the assets currently standing at risk of forfeiture were lawfully acquired and were not proceeds of unlawful activity, no serious mathematical effort has been made by the second respondent to try and identify and reconcile the second respondent's income across these periods, as against his ostensibly heavy loan repayment outgoing commitments, including at times his making the monthly repayments falling due on two secured loans in respect of Girrawheen and Ellenbrook.
Further, no effort at all has been made by the second respondent to explain the origin of the funds in credit in the second respondent's Streamline account as at 2 January 2008 (or at 1 August 2009, on the evidence he adduced), or the origin of the 12 sequentially numbered NetBank transfer deposits described as 'MQHL 00XX' or 'Assembly MQHL 00XX'.
As regards those 12 deposits, I should not be left, as I am, to guess at their origin. Their origin was unexplained. Possible explanations for their origin include that they represented a payment to the second respondent of some kind of work done by him, perhaps on an invoice basis, given a sporadic timing of the payments (with payments generally at intervals of several months) and the differing deposit amounts involved.
It is also open to infer, as I would, that the payments are related to each other, as they are seen to progress sequentially from 'MQHL 15' to 'Assembly MQHL 25' and to all be described using the initials for the full name of the second respondent. I note that there are two deposits described in terms of 'MQHL 22', but the second deposit of $70 on 6 September 2009 would seem readily explained as a correction to the preceding (and larger payment) on 21 August 2009. Further, six of the transactions are described using the term 'Assembly'. I would infer furniture assembly work for which the second respondent is paid.
As regards the employment of the second respondent in 2008 and 2009, a Westpac loan application signed 14 November 2007 (found in the attachment JTH‑13 of the affidavit of Mr Harrison of 19 August 2015 and nine pages of which were accepted into evidence as Exhibit H after cross‑examination of the second respondent) presents the following employment information concerning the second respondent:
1.Under the heading 'Your Employment Details' on page 503, 'Think Furniture Assembly' is stated as the current employer of the second respondent and it is stated that the second respondent had been there from 8 November 2007.
2.Under the heading 'Income' on page 504, his base monthly income (nett) of the second respondent is said to be $4,975 and his annual gross income (before tax) is said to be $80,000.
On the basis of the information provided in that loan application, coupled with the second respondent's unsatisfactory evidence as to his employment, it is open to me to infer, as I do in the end, that the 12 sequentially numbered NetBank transfer deposits described as 'MQHL 00XX' or 'Assembly MQHL 00XX' between April 2008 and December 2009 represent payments made to him by Think Furniture Assembly. As noted, the second respondent offered no other, competing, inference for the origin of those deposits.
C. Meeting the monthly loan repayments to Westpac for Girrawheen and Ellenbrook.
The second respondent said emphatically whilst under cross‑examination that he was fully able to fund all his expenditures, including the loan repayments, from his income across these periods and effectively from funds standing to his credit in his CBA Streamline account. He did. But how? Again, there was no attempted mathematical verification or a reasoned and considered explanation on his part. There was just the assertion that he could and did meet these commitments. But looking at the annual income of the second respondent, merely in terms of the meagre amounts of annual taxable income as is indicated from his ATO notices of assessment and his own unsatisfactory evidence as to his income and place(s) and periods of employment, I find myself left very seriously doubtful of the proposition that the second respondent would have been able, on only that modest declared income stream (from either CDM or Think Furniture Assembly, or from doing cash furniture assembly jobs), to meet the monthly loan repayments on the Girrawheen and Ellenbrook loans. That is my assessment, even if his personal expenditure was highly frugal (eg, by living back at home supported by his parents) and even with an income rental stream from the Girrawheen property (once let). This is more than curious. There must have been more income for him to meet those monthly commitments as he did, or at least I am not satisfied that there was not more than he has declared to the ATO.
In addition to a lack of any attempted mathematical verification or considered explanation, the second respondent has also failed to provide any bank statements - for any account that he might have held - in the period prior to 1 August 2009. Such information would have been of assistance in assessing, inter alia, the income and expenditures of the second respondent. This is particularly so for the time period when the second respondent was meeting monthly loan repayments for both the Girrawheen and the Ellenbrook properties. That would cover a period from about mid-2006 until the sale of the Ellenbrook property.
I have had regard to the bank statements recovered by the Commissioner, for the period between January 2008 and July 2009 (which were accepted in evidence). But the fact that the second respondent has provided bank statements only for the period after 1 August 2009, and has not sought to explain why earlier bank statements are not provided, indicates something of an apparent reticence in the second respondent to be fully transparent about his true levels of income and how he managed to meet his regular and significant financial commitments.
Taking the financial year ending 30 June 2009 by way of example, the ATO notice of assessment states that the second respondent's taxable income was $16,858. Then, as regards rental income for the tax year ending in 30 June 2009, attachment MQL5 to the second respondent's affidavit filed 22 July 2015 contains eleven copies of a monthly 'Owner Statement/Tax Invoice', indicating monthly nett rental payments to the second respondent's Streamline account for the Girrawheen property. Those payments correspond with deposits in the name of the property company into the Streamline account, except to the extent that there appears to have been a twelfth payment of $974.05 on 28 November 2008, which would appear to cover rental payments for part of October and November 2008. Those 12 payments total $13,985.23, which is similar to the amounts of annual rental income seen in summary statements for the rental income for the Girrawheen property, for the years ending 30 June 2008 and 30 June 2010.
As regards rental income for the tax year ending in 30 June 2009, it would be reasonable to infer that payments from Think Furniture Assembly of 13 August 2008, 9 October 2008, 30 January 2009, 26 May 2009 and 26 June 2009, represent income that fell within (noting that the payment described as 'MQHL 16' was deposited on 14 July 2008) that tax year. Those five payments total to $26,087.10.
Together, the 12 rental payments and the five amounts from Think Furniture Assembly payments, total $40,072.33. Even if those payments were before tax and even allowing for some potential deductions from gross income, such as for interest payments on the Girrawheen property, it is still difficult to see how that amount could correspond with an indicated taxable income of only $16,858.00.
D. Evidence as to loan applications
I assessed the second respondent's answers under cross-examination in response to questions pointing out his clearly erroneous answers about his assets on loan applications signed by himself (and, in respect of the Ellenbrook loans, by his sister, Lyn) concerning the second respondent's assets as unthinking. The second respondent's evidence to explain what were pointed out to him as obvious errors in the listing of his assets (such as a car he did not own, jewellery he did not own and furniture he did not own) was to accept that those statements about assets were inaccurate. The tenor of the second respondent's response in seeking to explain those inaccurate statements about his misstated assets was to attempt to shift blame to his mortgage broker at the time for wrongly recording that information. In effect, the second respondent was saying that he had left everything to the mortgage broker, after a brief discussion. Later, he had simply signed the application the mortgage broker had prepared for him to sign without any care or attention to the content in the forms which had been filled in for him. That evidence demonstrates a cavalier attitude at best in those earlier times. The attitude has carried through to now, based on his evidence.
Nevertheless, despite the unsatisfactory nature of the second respondent's evidence, I am not left satisfied (even at the lower standard of the balance of probabilities) that it has been shown that the second respondent, by his actions in 2005, 2006 and 2007 in listing his assets when applying for loans from Westpac in respect of the Girrawheen and Ellenbrook properties, has acted with a sufficiently dishonest, recklessly indifferent or fraudulent intent, in a calculated way by seeking to deceive or mislead Westpac about an artificially inflated level of his assets at the times he (with his sister in respect of Ellenbrook) sought the loans between 2005 - 2007.
In short, I am not satisfied, as the Commissioner has submitted, that (even at the civil standard) the second respondent in 2005 and 2006 committed a criminal offence, by breaching s 409 of the Criminal Code (WA), by acting fraudulently in respect of his securing of the secured loans which enabled him to fund the acquisitions of the Girrawheen and Ellenbrook properties. The second respondent may have been lax and careless in signing what he said was put before him by his mortgage broker, without reviewing what he was signing - but that is not enough to meet the mental element needed to prove fraud in relation to these loans from Westpac.
Determinations: Girrawheen land
As I indicated, the second respondent's legal interest in this property is as a registered proprietor in fee simple. That is the interest in real property which he has held since the property was acquired in 2005 and which the second respondent continues to hold.
The registered first mortgage encumbrance against the Girrawheen land to Westpac secures repayment of the loan that was advanced to substantially fund the acquisition of the Girrawheen land in 2005. A secured encumbrance does not detract from the superior fee simple interest of the second respondent, as the registered proprietor of the land.
The misconduct of the second respondent, relating to the 'serious offence' drugs charge of which he was convicted in 2014, then sentenced to a period of 14 years' imprisonment with a non-parole period of 9 years 6 months (currently being served), does not relate or connect to the events of 2005, under which the second respondent obtained a loan from Westpac to assist his acquisition of his fee simple interest in the Girrawheen real property as a registered proprietor, as and when he did.
After 2005, how the second respondent found the funds to meet his monthly secured loan repayments in respect of the Girrawheen property, once it had been acquired, and across subsequent periods, is another question entirely. By then his interest as registered proprietor had been acquired. How he met the monthly repayments does not as a matter of law, bear upon the earlier temporal question concerning whether or not the Girrawheen land was lawfully acquired in 2005. Nor does it bear upon whether his interest as a registered proprietor in fee simple can be said to be the proceeds of unlawful activity. (It has not been suggested that the Girrawheen property was ever a potential instrument of unlawful 'activity', for the purposes of s 94(1)(e)).
Attempts were made by the Commissioner to suggest that the Girrawheen land was not lawfully acquired in 2005 for the purposes of s 94(1)(f) of POCA, by reason of an asserted fraud by the second respondent by his overstating, deliberately or recklessly, the personal assets he had identified to Westpac in filling out his loan application form to Westpac - to obtain the loan that was used to fund a substantial component of the 2005 purchase price of the Girrawheen property.
But, as I indicated above in the context of examining the second respondent's evidence under cross-examination, in assessing the possible commission of a fraud offence (ie, an offence pursuant to s 409 of the Criminal Code (WA)) and, on the balance of probabilities, I am not left satisfied as to the mental element of a fraud offence. That is, I am not satisfied, on the balance of probabilities, that the second respondent acted with the 'intent to defraud, by deceit or any fraudulent means'.
Nor has it been suggested by anyone giving evidence for the mortgagee (Westpac), that it had been fraudulently deceived in advancing the loan funds to the second respondent in 2005. It holds a fully valid and effectual security.
I would accept the evidence of the second respondent's father, Mr Vo Ly, under his affidavit and in cross-examination on the application, that an amount of $35,000, which he says he gifted to his son to assist him with the Girrawheen property acquisition in 2005, was legitimate funds. I do not find those funds to be the proceeds of any unlawful activity, or to have been unlawfully acquired.
So, in all the circumstances, as regards the Girrawheen property, I am sufficiently persuaded by the second respondent that all requirements under s 94(1) POCA have been met by him, as regards the showing of his acquisition of his fee simple registered proprietor ownership interest in the Girrawheen property in 2005.
Consequently, by the terms of s 94(1), I must exclude the Girrawheen property from forfeiture. There is no exercise of judicial discretion in rendering that determination, given the mandatory terminology 'must', seen used in s 94(1) of the POCA.
Further Determinations: the credit amounts due to the second respondent in the CBA Streamline & NetBank Saver accounts
I have earlier concluded that the funds in the NetBank Saver account are beneficially those of the second respondent and that his sister, Lyn, holds no beneficial entitlement to them.
Consequently, the funds in both the accounts can be assessed on the same basis. Therefore, the same evaluative considerations govern the attempted exclusion of both accounts from forfeiture, as the (personal) property of the second respondent.
For the two accounts, the second respondent needs to satisfy me, by reference to s 94(1)(e) and (f), that his choses in action interest over the credit balances of the funds in these accounts are not the proceeds of unlawful activity and were lawfully acquired. He has not.
To the contrary, I am left, on the evidence adduced on this application, seriously troubled that the second respondent has used, indirectly or otherwise, what would be taxable income to him from Think Furniture Assembly (or another source), but which he has failed to declare to the ATO. Consequently, the second respondent has failed to pay all applicable income tax on funds he has received into the Streamline account and used in order to meet some monthly repayments in respect of one or more of the loans he owed, in relation to the Girrawheen and Ellenbrook properties. I am satisfied the payments from Think Furniture Assembly (or another source) and the Westpac loan repayments, were received into and made from (respectively) the second respondent's Streamline account.
I am left satisfied that it is more likely than not that the second respondent lodged a false tax return for one or more of the tax years ending 30 June 2008, 30 June 2009 or 30 June 2010, which significantly understated his assessable income, and thus can be seen to have committed an offence or offences, namely, that he acted with the intention of dishonestly causing a loss to a Commonwealth entity, contrary to s 135.1(3) Criminal Code (Cth).
I note that the ATO notices of assessment for those three years indicate that his liability for income tax (ie, the debit assessed on the second respondent) was due on 21 November 2008, 23 November 2009 and 22 November 2010 (for the 2008, 2009 and 2010 tax years, respectively). On that basis, it would appear ‑ for the purposes of the s 135.1 offence ‑ that the loss referred to in s 135.1(3) was realised by the relevant Commonwealth entity on one or more of 21 November 2008, 23 November 2009 or 22 November 2010.
By extension, it would also appear that - for the purposes of when the relevant property at risk of forfeiture (ie, the choses in action relating to the funds standing to a credit balance in the second respondent's Streamline account) became 'proceeds' of an offence - the property can be said to have been derived or realised, whether directly or indirectly, from a commission of an offence as of (one or more) of 21 November 2008, 23 November 2009 or 22 November 2010, as the second respondent's tax liabilities were due to the relevant Commonwealth entity on those dates. In a practical sense, the second respondent derived or realised the use of that portion of his taxable income when he failed to pay the applicable tax thereon as of those dates.
The second respondent's own evidence about the funds in these accounts is neither reliable, nor sufficient, to discharge his onus as regards proof towards the matters necessary for making the exclusion order he has applied for.
In particular, there is no explanation for how to reconcile his receipt of payments totalling $54,313.70 from Think Furniture Assembly (or another source) between April 2008 and December 2009, with the amounts of taxable income stated on the ATO notices of assessment for the tax years ending on 30 June 2008, 30 June 2009 and 30 June 2010.
The second respondent - having given evidence that he used the funds in his Streamline account to fund his loan repayments - needed here, as a consequence of his carrying the onus to prove that his choses in action interest over the credit balance of the account were not the proceeds of unlawful activity and were lawfully acquired, to provide the court with some better level of explanation, as to reliably explain a lawful origin for the funds standing to the credit of that account (including that they did not represent undeclared taxable income that the second respondent had failed to pay the applicable tax thereon). That was particularly so in a forensic situation where the Commissioner openly put in issue the amounts and sources of the second respondent's taxable income and had, as seen, directly asserted that the second respondent had not explained the credit balances of the Streamline account.
By my assessment, the funds in both accounts are, in part, some nett proceeds of the sale of the Ellenbrook property, which occurred in the last half of 2009 (after all secured loans in respect of Ellenbrook were repaid). Sale of the Ellenbrook property saw the second respondent's Streamline account augmented by a receipt of nett funds in the amount of about $82,000 on 2 December 2009.
No serious effort has been made on the part of the second respondent to arithmetically reconcile his asserted levels of income from all his employers, with the levels of his monthly loan repayments as he would have been making on always one, and at times two, secured loans. Such an explanation was required, in the circumstances, in order to discharge his onus, even allowing for a frugal level of expenditure upon his own needs, particularly after he moved home to live with his parents.
The result of the second respondent's gaining a benefit of that portion of his taxable income, upon which he failed to pay the applicable income tax thereon is that the level of the funds standing to the credit amount due to him in respect of the Streamline account, is higher than it would otherwise have been had he been meeting the income tax due on all his income receipts in these periods. The funds in a bank account such as the second respondent's Streamline account have been mixed and s 329(1) provides that property may be proceeds of an offence, if it is wholly or partly derived or realised from the commission of an offence.
Consequently, the second respondent has failed to satisfy me for the purposes of meeting s 94(1)(e) and/or (f) that his interest in the credit balances in both accounts (with the funds in the NetBank Saver account being moved from the Streamline account, by the direct transfer of $40,000 in 2010 by the second respondent, some 11 months after the Ellenbrook property had been sold, with its net proceeds realised and paid into the second respondent's Streamline account) was not the proceeds of unlawful activity and/or was lawfully acquired.
For the Ellenbrook property, the second respondent's ability to use a portion of his assessable income, upon which he had failed to pay all the applicable tax thereon, would cause the level of his nett residual equity in the Ellenbrook property to be higher than it otherwise might have been, had loan repayments been made (or, possibly, not been made) from an after tax income stream, once applicable income tax liabilities had been met. That bears upon my ultimate assessments concerning the residual funds realised after sale of the Ellenbrook land and as to the nett equity position funds as realised and paid into the second respondent's Streamline account.
Overall conclusions
Consequently, the second respondent's application for exclusion of items of property from forfeiture:
(a)is allowed, as regards his interest as a registered proprietor of the Girrawheen property, which will be excluded from forfeiture; and
(b)is refused, in respect of his interests in the funds standing to the credit of the two Commonwealth Bank accounts, namely, his Streamline account and his NetBank Saver account, which should be forfeited.
I will make orders accordingly, upon publication of these reasons. Beyond that, I will receive, after a 14‑day period for conferral, the parties' minutes in relation to further orders, if required, including as to costs.
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