Commissioner of the Australian Federal Police v Kalimuthu
[2017] WASCA 92
•9 MAY 2017
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE -v- KALIMUTHU [2017] WASCA 92
CORAM: BUSS P
MITCHELL JA
HEARD: 3 MAY 2017
DELIVERED : 3 MAY 2017
PUBLISHED : 9 MAY 2017
FILE NO/S: CACV 51 of 2017
BETWEEN: COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE
Appellant
AND
GANESH KALIMUTHU
First RespondentMACQUELENE PATRICIA MICHAEL DASS
Second Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :ALLANSON J
Citation :COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE -v- KALIMUTHU [No 3] [2017] WASC 108
File No :CIV 2440 of 2014
Catchwords:
Practice and procedure - Application for stay of orders pending determination of appeal - Orders excluding respondents' interest in property from application of restraining order made under the Proceeds of Crime Act 2002 - Whether grant of the stay is necessary to preserve the subject matter and integrity of the appeal - Where the subject matter of the appeal is funds which could easily be transferred out of the country or dissipated - Whether respondents would be prejudiced by grant of a stay - Whether an order requiring the respondents' solicitor not to deal with the funds should be made instead of a grant of a stay - Whether the respondents should be allowed to use the restrained funds for legal expenses if a stay is granted
Legislation:
Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), s 43, s 142(1)
Mutual Assistance in Criminal Matters Act 1987 (Cth), s 32, s 33
Proceeds of Crime Act 2002 (Cth), s 19, s 24(2)(ca), s 31, s 330(4)(a), s 338
Result:
Application for a stay granted
Category: B
Representation:
Counsel:
Appellant: Mr P Bevilacqua
First Respondent : Mr S Vandongen SC & Mr E Greaves
Second Respondent : Mr S Vandongen SC & Mr E Greaves
Solicitors:
Appellant: Australian Federal Police - Proceeds of Crime Litigation
First Respondent : Putt Legal
Second Respondent : Putt Legal
Case(s) referred to in judgment(s):
Allen v Perpetual Trustees [2011] WASCA 187
Commissioner of the Australian Federal Police v Courtenay Investments Ltd [2013] WASC 396
Eastland Technology Australia Pty Ltd & Ors v Whisson & Ors [2003] WASCA 307; (2003) 28 WAR 308
Indoor Holdings Pty Ltd v Bennett [2010] WASC 242
REASONS OF THE COURT: At the conclusion of the hearing of the appellant's application for a stay of orders made by the primary judge until the determination of this appeal, we made the following orders:
1.Orders 1 and 2 made by Allanson J on 19 April 2017 in Supreme Court proceedings CIV 2440 of 2014 are stayed until 4.00 pm on the date on which this court delivers its judgment determining the appeal or until further order.
2.The appellant must file and serve by 4.00 pm on 8 May 2017 an undertaking as to damages in the usual form in relation to the period of the stay granted under order 1 of these orders.
3.If the appellant does not file and serve the undertaking as to damages by 4.00 pm on 8 May 2017 the stay granted under order 1 of these orders is discharged.
4.The costs of the appellant's application in the appeal dated 28 April 2017 are costs in the cause of the appeal.
What follows are our reasons for making those orders.
Background
Between 11 August 2014 and 13 October 2014, a total of $2,466,936.47 was paid into three Australian bank accounts held by the respondents. Most of the deposits into those bank accounts were of amounts less than $10,000. That is the threshold amount at which such a transaction is required to be reported under s 43 of the Anti‑Money Laundering and Counter‑Terrorism Financing Act 2006 (Cth) (Anti‑Money Laundering Act).
Section 142(1) of the Anti-Money Laundering Act creates an offence where a person is, or causes another person to become, a party to two or more non-reportable transactions and, having regard to certain matters:
it would be reasonable to conclude that the first person conducted, or caused the transactions to be conducted, in that manner or form for the sole or dominant purpose of ensuring, or attempting to ensure, that the money or property involved in the transactions was transferred in a manner and form that would not give rise to a threshold transaction that would have been required to have been reported under section 43.
That offence is an indictable offence and a serious offence as defined in s 338 of the Proceeds of Crime Act 2002 (Cth).
On 20 October 2014, the primary judge made a restraining order pursuant to s 19 of the Proceeds of Crime Act. It was ordered that the respondents' three bank accounts, including all money standing to the credit of the accounts, must not be disposed of or otherwise dealt with except as specified by the orders. The orders provided for the Official Trustee to take custody and control of the property, pursuant to s 38 of the Proceeds of Crime Act.
Subsequently, the respondents applied under s 31 of the Proceeds of Crime Act to exclude their interest in the property from the restraining order.
In essence the respondents, who are residents of Malaysia, contended that they wanted to transfer to Australia cash instalments they legitimately received from the sale of scrap metal. One of the respondents, Mr Ganesh, gave Malaysian Ringgit cash to a money changer in Malaysia, who was to arrange for the payment of the Australian dollar equivalent into the accounts. The respondents contended that they were not a party to any 'structuring' offence against s 142(1) of the Anti‑Money Laundering Act.
On 19 April 2017, the primary judge granted the respondents' application. The orders made at that time included an order that the respondents' interests in the property restrained by the restraining order 'be and are hereby excluded from restraint.' The court also directed the Official Trustee forthwith to pay the funds held by it pursuant to the restraining order into a nominated bank account held by the respondents' solicitors.
The primary judge's approach
The primary judge identified the relevant property as being the debt owed by the relevant bank to the relevant respondent in the amount standing to the credit of the relevant bank account from time to time [104] ‑ [105]. The primary judge appears to have been satisfied that the manner in which money was paid into the respondents' bank accounts involved the commission of a 'structuring' offence against s 142(1) of the Anti-Money Laundering Act. The primary judge found that the respondents' interest in the bank accounts was the proceeds of that structuring offence [108]. He found that the respondents' rights to the additional balance from 'deposits … made in the commission of an offence under s 142' were both 'proceeds of an offence' and an 'instrument of the offence' for the purposes of the Proceeds of Crime Act [109].
The primary judge granted the respondents' application on the basis that the property had ceased to be proceeds of an offence or an instrument of an offence under s 330(4)(a) of the Proceeds of Crime Act. Under s 330(4)(a), property ceases to be proceeds of an offence or an instrument of an offence:
if it is acquired by a third party for sufficient consideration without the third party knowing, and in circumstances that would not arouse a reasonable suspicion, that the property was proceeds of an offence or an instrument of an offence (as the case requires).
The primary judge found that these requirements were satisfied, in essence on the basis that:
1.the respondents acquired property when deposits were made into their account [116];
2.the respondents were third parties acquiring property through that transaction [121];
3.the respondents gave sufficient consideration for the property when they paid Malaysian Ringgit amounts to the Malaysian money changer for transfer of the Australian dollar equivalent to the accounts [124];
4.no reasonable suspicion would be aroused in the circumstances known to the respondents [129] - [138].
The appeal
On 28 April 2017, the appellant filed an appeal notice against the orders made by the primary judge on 19 April 2017. The appellant has also filed draft appeal grounds, which contend that the primary judge erred in law in finding that there was an 'acquisition of property', that the respondents were third parties and that the respondents provided 'sufficient consideration' for the purposes of s 330(4)(a) of the Proceeds of Crime Act. Alternatively, the appellant contends that the primary judge erred in law in finding the circumstances in which the property was acquired would not arouse a reasonable suspicion that the property was 'proceeds of an offence' or an 'instrument of the offence' within the meaning of s 330(4)(a) of the Proceeds of Crime Act.
Application for a stay
It is in this context that the appellant has applied for an order staying relevant orders made by the primary judge on 19 April 2017 until the determination of this appeal.
The principles governing the exercise of the court's discretion to stay the operation of an order pending the determination of an appeal against that order are well-established.[1] Those principles need not be repeated here.
[1] See Eastland Technology Australia Pty Ltd & Ors v Whisson & Ors [2003] WASCA 307; (2003) 28 WAR 308 [9] and Allen v Perpetual Trustees [2011] WASCA 187 [3].
In the present case, the grant of a stay is necessary to preserve the subject matter and integrity of the appeal, which would be rendered nugatory if the respondents were to transfer the funds out of Australia. An electronic transfer of the funds could be effected quickly and without notice to the appellant. There would be nothing unlawful or improper in the respondent's doing so in the absence of any restraint. There is no evidence that the respondents have any other relevant connection to Australia or hold other assets in Australia. Preserving the restraint on the respondents dealing with the property is necessary to preserve the subject matter and integrity of the appeal.
The respondents point to the capacity of Australia to request an appropriate authority to make arrangements for the enforcement of a restraining order, and certain other assistance, under s 32 and s 33 of the Mutual Assistance in Criminal Matters Act 1987 (Cth). However, there is no evidence as to the action which authorities in Malaysia, or such other country to which the funds may be sent, could or would take in response to such a request.
Having considered the primary judge's reasons, the appellant's draft grounds and the parties' submissions, we are satisfied that the appeal has, in the relevant sense, reasonable prospects of success. The respondents accept this to be the case for the purposes of the stay application.
We are also satisfied that the balance of convenience lies in favour of granting a stay.
An undertaking as to damages was given to the court by the Commonwealth as a condition of the restraining order made on 20 October 2014.
At the hearing of the appeal, the respondents raised a concern as to whether the undertaking given by the Commonwealth in the primary proceedings, at a time when the appellant was the only party to those proceedings, would apply to loss which they might suffer. The undertaking was to pay to compensation to 'any party restrained or affected by the restraints imposed by this restraining order'. The respondents referred to two single judge decisions which suggested that an undertaking in this form may only relate to persons who were parties to the proceedings at the time the undertaking was given.[2] It is unnecessary for us to determine whether this is the correct position or whether it applies to the particular context of the present case where the undertaking, being given at a time when the appellant was the only party to the primary proceedings, would have been worthless if it did not extend to loss suffered by persons who were not parties to the proceedings at the time the undertaking was given. The appellant accepted that an undertaking in favour of the respondents was an appropriate price for a stay, and indicated that a further undertaking which clearly protected the respondents could be given in the appeal if required. In those circumstances, we considered it appropriate to make orders providing for the prompt filing of a further undertaking and the discharge of the stay if an undertaking is not provided. That would remove any doubt about the application of the undertaking to protect the respondents' position in the appeal.
[2] See Commissioner of the Australian Federal Police v Courtenay Investments Ltd [2013] WASC 396 [9] ‑ [13] and Indoor Holdings Pty Ltd v Bennett [2010] WASC 242 [32] ‑ [39].
The undertaking as to damages will operate, at least to a substantial extent, to alleviate prejudice which the grant of a stay may occasion the respondents if the appeal is ultimately unsuccessful. There is obviously no question of the Commonwealth's capacity to make any payment required by its undertaking.
The respondents have not adduced evidence of any particular prejudice which a stay would occasion them that could not be alleviated by the terms upon which a stay may be granted. The highest the evidence reaches is an affidavit by the respondents' solicitor deposing that Mr Ganesh has given instructions that:
1.he is (or rather companies which he controls are) engaged in a number of business activities which result in his 'cash flow position' being 'tighter at the moment than it would otherwise be';
2.he was not expecting to have to pay more legal fees;
3.because of other business commitments it would be 'difficult' for him to raise $200,000, which is his solicitor's 'best estimate of the cost of defending the appeal', in the next few months.
The respondents have not given any detailed evidence about the state of their income, expenses, assets or liabilities, or their capacity to raise further funds. Nor have they told their solicitor that they cannot raise the funds to defend the appeal, merely that it would be 'difficult' to do so in the next few months. This evidence does not establish, even on a hearsay basis, the existence of any actual prejudice if a stay were to be granted. The respondents did not seek an adjournment of the stay application to give them a further opportunity to adduce evidence as to their current financial position.
Further, the estimate of $200,000 significantly exceeds the amount which it can be anticipated will reasonably be required for the respondents' defence of the appeal. The hearing of the appeal will not require more than a day, the appeal is confined to alleged errors of law and the respondents' trial solicitors and junior counsel, who are familiar with the issues, have been engaged on the appeal. Senior counsel who appeared for the respondents on the stay application properly accepted that the estimate was more than would be reasonably required for the respondents to defend the appeal. There is no evidence as to the respondents' capacity to raise money to pay the legal expenses which they are actually likely to reasonably incur, which we anticipate would be very significantly less than the solicitors' 'best estimate'.
The respondents propose an alternative to a stay, which is that their solicitor (to whom the primary judge ordered the funds to be paid) will give an undertaking to the appellant not to deal with the funds other than to bank them in an interest bearing account which he controls and for the purpose of paying legal fees and disbursements properly payable in connection with or arising from this appeal or the primary proceedings. A further alternative which the respondents propose, if the court is minded to grant a stay, is to direct the Official Trustee to pay legal invoices which it considers to have been reasonably incurred by the respondents in the appeal.
The prejudice to which the respondents point arises from their inability to access the funds. While they remain unable to access the funds, the degree of prejudice to them is not altered according to whether the funds are held by their solicitor or the Official Trustee. The real question raised by the respondents' alternative proposals is whether they should be able to access the funds for the purposes of paying their legal expenses associated with the appeal and the primary proceedings.
If the funds properly remain subject to the restraining order, the respondents would have no right to apply to use the funds to meet their legal costs in connection with proceedings under the Proceeds of Crime Act: see s 24(2)(ca) of the Proceeds of Crime Act. Success in the appeal may involve the appellant establishing that, contrary to the primary judge's orders, the property should remain subject to the restraining order, and is therefore not properly used in payment of the respondents' legal expenses. The appellant and the Commonwealth would be likely to permanently lose access to funds dissipated in the payment of legal expenses if the appeal were to be allowed. In those circumstances, at least on the current state of the evidence as to the respondents' financial capacity, it is not appropriate to make an order providing for the funds to be used to pay legal expenses.
Further, if a stay were granted, then the restraining order would continue to operate and s 24(2)(ca) would preclude an order that the property be used for the payment of legal expenses, of the kind suggested by the respondents' second alternative. The respondents' second alternative proposition is not consistent with the terms of the Proceeds of Crime Act. As to the respondents' first alternative position, it would not be an appropriate exercise of the court's discretion to accept an undertaking in lieu of a stay, which we have concluded is otherwise appropriate, merely to circumvent the operation of s 24(2)(ca) of the Proceeds of Crime Act.
In all these circumstances, it is appropriate for this court to exercise its discretion to grant a stay of the primary judge's orders pending the determination of the appeal.
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