Commissioner of the Australian Federal Police v Kalimuthu [No 2]
[2018] WASCA 192
•30 OCTOBER 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE -v- KALIMUTHU [No 2] [2018] WASCA 192
CORAM: BUSS P
MURPHY JA
BEECH JA
HEARD: 9 FEBRUARY 2018
DATE OF FINAL
SUBMISSIONS : 9 OCTOBER 2018
DELIVERED : 30 OCTOBER 2018
FILE NO/S: CACV 51 of 2017
BETWEEN: COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE
Appellant
AND
GANESH KALIMUTHU
First Respondent
MACQUELENE 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 Number : CIV 2440 of 2014
Catchwords:
Crime - Proceeds of crime - Proper construction of the Proceeds of Crime Act 2002 (Cth) (POC Act) - Where the primary judge made a restraining order under s 19 of the POC Act in relation to three Australian bank accounts in the name of one or other of the respondents - Where the respondents applied under s 31 of the POC Act for an order that their interests in the property the subject of the restraining order be excluded from that order - Whether the primary judge erred in law in finding that the respondents were 'third parties' for the purposes of s 330(4)(a) of the POC Act - Whether the primary judge erred in law in finding that 'sufficient consideration' had been provided by the respondents for the purposes of s 330(4)(a) of the POC Act - Whether the primary judge erred in law in finding that the circumstances in which the property was acquired would not have aroused a 'reasonable suspicion' that the property was the proceeds of an offence, further or alternatively the instrument of an offence, within s 330(4)(a) of the POC Act
Practice and procedure - Primary judge made orders under s 29 and s 39(1)(e)(i) of the POC Act - Whether primary judge's orders interlocutory or final - Appeal under s 58(1)(b) of the Supreme Court Act 1935 (WA) - Whether leave to appeal required
Legislation:
Anti-Money Laundering and Counter Terrorism Financing Act 2006 (Cth), s 43, s 142
Commonwealth Constitution, s 77(iii)
Criminal Code (Cth), s 9.3, s 400.9(1)
Judiciary Act 1903 (Cth), s 39A
Proceeds of Crime Act 2002 (Cth), s 5, s 19, s 29, s 31, s 38, s 39, s 49, s 51, s 66, s 73, s 80, s 314, s 315, s 317, s 322, s 329, s 330, s 336, s 338
Supreme Court Act 1935 (WA), s 7, s 58(1)(b), s 60(1)(f)
Result:
Appeal allowed
Category: A
Representation:
Counsel:
| Appellant | : | Mr A R Moses SC & Mr K Anderson |
| First Respondent | : | Mr S Vandongen SC & Mr E W Greaves |
| Second Respondent | : | Mr S Vandongen SC & Mr E W Greaves |
| Applicants for leave to intervene | : | Mr G Nash QC |
Solicitors:
| Appellant | : | Criminal Assets Litigation, Australian Federal Police |
| First Respondent | : | Putt Legal |
| Second Respondent | : | Putt Legal |
| Applicants for leave to intervene | : | Access Law |
Case(s) referred to in decision(s):
ALDI Foods Pty Ltd v Shop, Distributive & Allied Employees Association [2017] HCA 53; (2017) 92 ALJR 33
Allianz Australia Insurance Ltd v GSF Australia Pty Ltd [2005] HCA 26; (2005) 221 CLR 568
Allina Pty Ltd v Federal Commissioner of Taxation (1991) 28 FCR 203
Alphapharm Pty Ltd v H Lundbeck A/S [2014] HCA 42; (2014) 254 CLR 247
Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485
Australian Unity Property Ltd v City of Busselton [2018] WASCA 38
Burswood Management Ltd v Attorney‑General (Cth) (1990) 23 FCR 144
Carr v Finance Corporation of Australia Ltd (No 1) [1981] HCA 20; (1981) 147 CLR 246
Chen v Director of Public Prosecutions (Cth) [2011] NSWCCA 205; (2011) 83 NSWLR 224
CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; (1997) 187 CLR 384
Cini v Commissioner of the Australian Federal Police [2016] VSCA 227; (2016) 312 FLR 432
Citigroup Pty Ltd v National Australia Bank Ltd [2012] NSWCA 381; (2012) 82 NSWLR 391
Coco v The Queen [1994] HCA 15; (1994) 179 CLR 427
Colonial Bank v Whinney (1885) 30 Ch D 261
Colonial Bank v Whinney (1886) 11 App Cas 426
Commissioner for Railways (NSW) v Agalianos [1955] HCA 27; (1955) 92 CLR 390
Commissioner of the Australian Federal Police v Fernandez [2017] NSWSC 1197
Commissioner of the Australian Federal Police v Fernandez [2018] NSWCA 198
Commissioner of the Australian Federal Police v Fitzroy All Pty Ltd [2015] WASC 320
Commissioner of the Australian Federal Police v Gwe [2018] NSWSC 992
Commissioner of the Australian Federal Police v Hart [2016] QCA 215; (2016) 314 FLR 1
Commissioner of the Australian Federal Police v Hart [2018] HCA 1; (2018) 92 ALJR 154
Commissioner of the Australian Federal Police v Kalimuthu [2017] WASCA 92
Commissioner of the Australian Federal Police v Kalimuthu [No 3] [2017] WASC 108
Commissioner of the Australian Federal Police v Lordianto [2017] NSWSC 1196; (2017) 324 FLR 237
Commissioner of the Australian Federal Police v Pham [2015] NSWSC 1383
Commissioner of the Australian Federal Police v Sun [2017] NSWSC 1476
Commissioner of the Australian Federal Police v Tjongosutiono [2018] NSWSC 48; (2018) 329 FLR 103
Commissioner of the Australian Federal Police v Zhang [2016] VSCA 171; (2016) 312 FLR 17
Commissioner of the Australian Federal Police v Zhao [2015] HCA 5; (2015) 255 CLR 46
Commonwealth v Hospital Contribution Fund of Australia [1982] HCA 13; (1982) 150 CLR 49
Cooper Brooks (Wollongong) Pty Ltd v Commissioner of Taxation [1981] HCA 26; (1981) 147 CLR 297
Croton v The Queen [1967] HCA 48; (1967) 117 CLR 326
Daniels v Anderson (1995) 37 NSWLR 438
Director General of Department of Transport v McKenzie [2016] WASCA 147; (2016) 77 MVR 306
Director of Public Prosecutions (Cth) v Kamal [2011] WASCA 55; (2011) 248 FLR 64
Director of Public Prosecutions (Vic) v Le [2007] HCA 52; (2007) 232 CLR 562
Director of Public Prosecutions (Vic) v Le [2007] VSCA 18; (2007) 15 VR 352
Electrolux Home Products Pty Ltd v Australian Workers' Union [2004] HCA 40; (2004) 221 CLR 309
Esso Australia Pty Ltd v Australian Workers' Union [2017] HCA 54; (2017) 92 ALJR 106
European Bank Ltd v Citibank Ltd (2004) 60 NSWLR 153
Ex parte Bucknell [1936] HCA 67; (1936) 56 CLR 221
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 250 CLR 503
Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
Grant v The Queen [1981] HCA 32; (1981) 147 CLR 503
Hall v Nominal Defendant [1966] HCA 36; (1966) 117 CLR 423
Harris v Caladine [1991] HCA 9; (1991) 172 CLR 84
Heng‑Shen Lin v The Queen [2015] NSWCCA 204; (2015) 297 FLR 457
Herne v Street [2008] HCA 36; (2008) 235 CLR 125
Independent Commission Against Corruption v Cunneen [2015] HCA 14; (2015) 256 CLR 1
Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896
Joachimson v Swiss Bank Corporation [1921] 3 KB 110
Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216
Kotsis v Kotsis [1970] HCA 61; (1970) 122 CLR 69
Le Mesurier v Connor [1929] HCA 41; (1929) 42 CLR 481
Lee v Director of Public Prosecutions (Cth) [2009] NSWCA 347; (2009) 75 NSWLR 581
Legal Services Board v Gillespie‑Jones [2013] HCA 35; (2013) 249 CLR 493
Lewis Securities (in liq) v Carter [2018] NSWCA 118; (2018) 355 ALR 703
Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548
Lordianto v Commissioner of the Australian Federal Police [2018] NSWCA 199
Loxton v Moir [1914] HCA 89; (1914) 18 CLR 360
Macleod v Australian Securities and Investments Commission [2002] HCA 37; (2002) 211 CLR 287
Mohammadi v Bethune [2018] WASCA 98
Momcilovic v The Queen [2011] HCA 34; (2011) 245 CLR 1
National Australia Bank Ltd v Norman [2009] FCAFC 152; (2009) 180 FCR 243
Network Ten Pty Ltd v TCN Channel Nine Pty Ltd [2004] HCA 14; (2004) 218 CLR 273
Niemann v Electronic Industries Ltd [1978] VR 431
Ostrowski v Palmer [2004] HCA 30; (2004) 218 CLR 493
Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2006] FCAFC 40; (2006) 149 FCR 395
Parsons v The Queen [1999] HCA 1; (1999) 195 CLR 619
Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355
R v Falzon [2018] HCA 29; (2018) 357 ALR 394
R v Independent Broad-based Anti-corruption Commissioner [2016] HCA 8; (2016) 256 CLR 459
R v Murray and Cormie [1916] HCA 58; (1916) 22 CLR 437
R v Preddy [1996] AC 815
R v Waya [2013] 1 AC 294
R v Wilkinson [1999] 1 NZLR 403
Re Calder; Ex parte Lee [2007] WASCA 161; (2007) 34 WAR 289
Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq) [2003] NSWSC 1008; (2003) 59 NSWLR 361
Robinson Helicopter Co Inc v McDermott [2016] HCA 22; (2016) 90 ALJR 679
Russell v Scott [1936] HCA 34; (1936) 55 CLR 440
Scaffidi v Chief Executive Officer, Department of Local Government and Communities [2017] WASCA 222; (2017) 52 WAR 368
Studman v Director of Public Prosecutions (Cth) [2007] NSWCA 285; (2007) 177 A Crim R 34
Sutherland re; French Caledonia Travel Services Pty Ltd (in liq) [2003] NSWSC 1008; (2003) 59 NSWLR 361
SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; (2017) 91 ALJR 936
Taylor v The Owners - Strata Plan No 11564 [2014] HCA 9; (2014) 253 CLR 531
Torkington v Magee [1902] 2 KB 427
Torkington v Magee [1903] 1 KB 644
Turner v George Weston Foods Ltd t/as Tip Top Bakeries (Newcastle) [2007] NSWCA 67
Voulis v Kozary [1975] HCA 44; (1975) 180 CLR 177
Western Authority Planning Commission v Southregal Pty Ltd [2017] HCA 7; (2017) 259 CLR 106
Westralian Farmers Co-operative Ltd v Southern Meat Packers Ltd [1981] WAR 241
White v Shortall [2006] NSWSC 1379; (2006) 68 NSWLR 650
Yanner v Eaton [1999] HCA 53, 69; (1999) 201 CLR 351
Young v Queensland Trustees Ltd [1956] HCA 51; (1956) 99 CLR 560
TABLE OF CONTENTS
BUSS P:
The relevant statutory framework
Relevant extrinsic material
The primary judge's relevant findings of fact and relevant reasoning in relation to the three Australian bank accounts
The type of money laundering known as 'cuckoo smurfing'
The grounds of appeal
Ground 1: the primary judge's relevant findings
Ground 1: the appellant's submissions
Ground 1: the respondents' submissions
Ground 1: decisions of other courts in relation to the meaning and application of the term 'third party' in s 330(4)(a) of the POC Act
Ground 1: its merits
Ground 2: the primary judge's findings
Ground 2: the appellant's submissions
Ground 2: the respondents' submissions
Ground 2: decisions of other courts in relation to the meaning and application of the term 'sufficient consideration' in the context of s 330(4)(a) of the POC Act
Ground 2: its merits
Grounds 3 and 4: the primary judge's findings
Grounds 3 and 4: the appellant's submissions
Grounds 3 and 4: the respondents' submissions
Grounds 3 and 4: decisions of other courts in relation to the meaning and application of the expression 'in circumstances that would not arouse a reasonable suspicion' in the context of s 330(4)(a) of the POC Act
Grounds 3 and 4: their merits
Does the appellant require leave to appeal?
The application for leave to intervene in the appeal
Conclusion
MURPHY & BEECH JJA:
Introduction
The Proceeds of Crime Act
The objects and scheme of the Act
Restraining orders
Forfeiture orders
General principles of construction
Introductory observations
The relevant 'property'
The property as proceeds of an offence
Ground 1: the proper construction of 'third party' in s 330(4)
The proper construction of 'third party': the competing constructions
The decision of the NSW Court of Appeal in Lordianto
Introductory general observations as to s 329 and s 330
Section 329 and s 330: 'important concepts'
Section 329 and s 330: operation
Considerations favouring the Commissioner's construction
The dissenting reasons of McColl JA in Lordianto
Legislative history and extrinsic material
The 1987 Act
Law Reform Report
The secondary materials to the Bill for the POC Act
The headings to s 45(6) and s 259
Legislative history and extrinsic material: conclusions
Consequences of the respondents' construction
Consequences of the Commissioner's construction
The proper construction of 'third party': conclusion
Ground 2
Ground 3
Ground 4
Other matters
Conclusion
BUSS P:
This appeal by the Commissioner of the Australian Federal Police is concerned with the proper construction and application of various provisions of the Proceeds of Crime Act 2002 (Cth) (the POC Act).
Between 11 August 2014 and 13 October 2014, a total of $2,466,936.47 was deposited into three Australian bank accounts in the name of one or other of the respondents. Most of the deposits were of amounts less than $10,000, that being the threshold amount at which a transaction is required to be reported under s 43 of the Anti‑Money Laundering and Counter‑Terrorism Financing Act 2006 (Cth) (the Anti‑Money Laundering Act).
The relevant provisions of the POC Act and the Anti-Money Laundering Act, for the purposes of the substantive issues in this appeal, are those in force between 11 August 2014 and 13 October 2014.
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.
By s 43 of the Anti‑Money Laundering Act, reporting entities, which include banks, are required to report a threshold transaction to the Australian Transaction Reports and Analysis Centre within 10 business days after the date of the transaction.
Section 400.9(1) of the Criminal Code (Cth) provides, relevantly, that it is an offence to deal with money in circumstances where it is reasonable to suspect that the money is proceeds of crime and, at the time of the dealing, the value of the money was $100,000 or more.
Each of the offence created by s 142(1) of the Anti‑Money Laundering Act and the offence created by s 400.9(1) of the Criminal Code is an 'indictable offence' and a 'serious offence' as defined in s 338 of the POC Act.
On 20 October 2014, Allanson J (the primary judge) made a restraining order, on the application of the appellant, pursuant to s 19 of the POC Act on the basis that there were reasonable grounds to believe that the property described in the application was the proceeds of crime or an instrument of a serious offence or both. The appellant, in the application for the restraining order, relied upon two offences, namely the offence created by s 142(1) of the Anti‑Money Laundering Act and the offence created by s 400.9(1) of the Criminal Code. His Honour ordered that the three Australian bank accounts in the name of one or other of the respondents, including all funds standing to the credit of the accounts, must not be disposed of or otherwise dealt with except as specified in the orders. His Honour also ordered that the Official Trustee take custody and control of the property pursuant to s 38 of the POC Act.
By a chamber summons filed on 15 June 2016 and amended on 27 March 2017, the respondents applied, pursuant to s 31 of the POC Act, for an order that their interests in the property the subject of the restraining order made on 20 October 2014 be excluded from that order.
The appellant, in opposition to the respondents' exclusion application, relied solely upon the offence created by s 142(1) of the Anti‑Money Laundering Act.
The respondents are residents of Malaysia. They contended, in essence, on their application that they wanted to transfer to Australia amounts of Malaysian Ringgit cash that they had received legitimately in Malaysia from the sale of recycled scrap metal. The first respondent, Mr Ganesh, gave the Malaysian Ringgit cash to an acquaintance, Muhammad Zamri Bin Baharudin (Mr Zamri), a money changer in Malaysia. Mr Ganesh and Mr Zamri agreed that Mr Zamri would arrange for a 'good company' to send the money to Australia. The Malaysian Ringgit cash was given to a Malaysian money remitter, Shahul Hameed Basha (Mr Hameed), who arranged for the Australian Dollar equivalent of the Malaysian Ringgit cash to be deposited into the three Australian bank accounts. On a number of occasions, Mr Ganesh gave Malaysian Ringgit cash to Mr Zamri. Mr Zamri then gave the Malaysian Ringgit cash to Mr Hameed with instructions to deposit the Australian Dollar equivalent into the three Australian bank accounts. The respondents asserted that they were not a party to any offence against s 142(1) of the Anti‑Money Laundering Act.
On 19 April 2017, the primary judge granted the respondents' application. His Honour ordered that all of the respondents' interests in the property restrained 'be and are hereby excluded from restraint'. His Honour also directed the Official Trustee, pursuant to s 39(1)(e)(i) of the POC Act, forthwith to pay the funds held by him, pursuant to the restraining order made on 20 October 2014, to a specified bank account in the name of the respondents' solicitors.
The appellant has appealed against his Honour's order that all of the respondents' interests in the property restrained, pursuant to the restraining order, 'be and are hereby excluded from restraint' and, also, against other ancillary or related orders made by his Honour.
On 28 April 2017, the appellant made an application in the appeal for a stay of the orders made by the primary judge until the determination of the appeal. On 3 May 2017, Mitchell JA and I ordered, relevantly, that orders 1 and 2 made by the primary judge on 19 April 2017 be stayed until 4.00 pm on the date on which this court delivers its judgment determining the appeal or further order. See Commissioner of the Australian Federal Police v Kalimuthu.[1]
[1] Commissioner of the Australian Federal Police v Kalimuthu [2017] WASCA 92.
After this court heard the appeal and reserved its judgment, the Court of Appeal of New South Wales delivered judgment in Commissioner of the Australian Federal Police v Fernandez[2] and Lordianto v Commissioner of the Australian Federal Police.[3] At the request of the solicitors for the respondents, this court received supplementary written submissions from the appellant and the respondents in relation to the impact of the Court of Appeal of New South Wales' judgments on the issues to be decided in this appeal.
[2] Commissioner of the Australian Federal Police v Fernandez [2018] NSWCA 198.
[3] Lordianto v Commissioner of the Australian Federal Police [2018] NSWCA 199.
When the appellant began this appeal he stated in his notice of appeal that leave to appeal was necessary. On 10 May 2017, Mitchell JA referred the appellant's application for leave to the hearing of the appeal. If leave to appeal is required (an issue which I will deal with later in these reasons), I would grant it. Leave should be granted because there is merit in the appeal and it is in the interests of justice, both generally and in the particular case, to grant leave.
I would allow the appeal. My reasons are as follows.
The relevant statutory framework
At the material time, the relevant provisions of the POC Act were as follows.
The long title of the POC Act states that it is an Act to provide for confiscation of the proceeds of crime, and for other purposes.
Section 5 specifies the principal objects of the Act. By s 5(a), those objects include:
to deprive persons of the proceeds of offences, the instruments of offences, and benefits derived from offences, against the laws of the Commonwealth or the non-governing Territories.
Section 6 provides:
This Act establishes a scheme to confiscate the proceeds of crime. It does this by:
(a)setting out in Chapter 2 processes by which confiscation can occur; and
(b)setting out in Chapter 3 ways in which Commonwealth law enforcement agencies can obtain information relevant to these processes; and
(c)setting out in Chapter 4 related administrative matters.
It concludes with miscellaneous provisions and with definitions and other interpretive material.
Part 2-1 is headed 'Restraining orders' and comprises s 16 to s 45A. The general effect of pt 2-1, as explained in s 16, is that restraining orders can be made against property, in relation to certain offences, on grounds that relate to possible forfeiture or confiscation orders relating to those offences. There is not always a requirement that a person has been convicted of such an offence.
Section 19 is concerned with the making of restraining orders in relation to property that is suspected of being, relevantly, the proceeds of an indictable offence or an instrument of a serious offence. Section 19 provides, relevantly:
When a restraining order must be made
(1)A court with proceeds jurisdiction must order that:
(a)property must not be disposed of or otherwise dealt with by any person; or
(b)property must not be disposed of or otherwise dealt with by any person except in the manner and circumstances specified in the order;
if:
(c)a proceeds of crime authority applies for the order; and
(d)there are reasonable grounds to suspect that the property is:
(i)the proceeds of a terrorism offence or any other indictable offence, a foreign indictable offence or an indictable offence of Commonwealth concern (whether or not the identity of the person who committed the offence is known); or
(ii)an instrument of a serious offence; and
(e)the application for the order is supported by an affidavit of an authorised officer stating that the authorised officer suspects that:
(i)in any case ‑ the property is proceeds of the offence; or
(ii)if the offence to which the order relates is a serious offence ‑ the property is an instrument of the offence;
and including the grounds on which the authorised officer holds the suspicion; and
(f)the court is satisfied that the authorised officer who made the affidavit holds the suspicion stated in the affidavit on reasonable grounds.
Property that a restraining order may cover
(2)The order must specify, as property that must not be disposed of or otherwise dealt with, the property specified in the application for the order, to the extent that the court is satisfied that there are reasonable grounds to suspect that that property is:
(a)in any case ‑ proceeds of the offence; or
(b)if the offence to which the order relates is a serious offence ‑ an instrument of the offence.
…
Restraining order need not be based on commission of a particular offence
(4)The reasonable grounds referred to in paragraph (1)(d) need not be based on a finding as to the commission of a particular offence.
Risk of property being disposed of etc.
(5)The court must make a restraining order even if there is no risk of the property being disposed of or otherwise dealt with.
Section 29(1) provides, relevantly, that the court to which an application for a restraining order under s 19 was made must, when the order is made or at a later time, exclude a specified interest in property from the order if:
(a)an application is made under s 31; and
(b)the court is satisfied that the relevant reason under s 29(2) or s 29(3) for excluding the interest from the order exists.
By s 29(2)(d), the reasons for excluding a specified interest in property from a restraining order are, in the case of a restraining order under s 19, that the interest is neither:
(i)in any case ‑ proceeds of an indictable offence, a foreign indictable offence or an indictable offence of Commonwealth concern; nor
(ii)if an offence to which the order relates is a serious offence ‑ an instrument of any serious offence.
A Note to s 29(2)(d) states:
Note:One of the circumstances in which property ceases to be proceeds of an offence or unlawful activity involves acquisition of the property by an innocent third party for sufficient consideration: see paragraph 330(4)(a).
By s 29(3), relevantly, if the offence to which a restraining order relates is a serious offence that is an offence against s 142 of the Anti‑Money Laundering Act, a further reason for excluding a specified interest in property from the order is that each of the following requirements is met:
(a)there are no reasonable grounds to suspect that the interest is proceeds of the offence, or any of the offences;
(b)there is a suspect in relation to the order, but he or she has not been convicted of, or charged with, the offence, or any of the offences;
(c)the conduct in question was not for the purpose of, in preparation for, or in contemplation of, any other indictable offence, any State indictable offence or any foreign indictable offence;
(d)the interest could not have been covered by a restraining order if none of the offences had been serious offences.
Section 31(1) provides, relevantly, that a person may apply for an order under s 29 if a restraining order that covers property in which the person claims an interest has been made. The balance of s 31 contains other provisions with respect to an application made or to be made under s 31(1).
Part 2‑2 is headed 'Forfeiture orders' and comprises s 46 to s 90.
Section 49 is concerned with the making of forfeiture orders in relation to property that is suspected of being, relevantly, the proceeds of an indictable offence or an instrument of a serious offence. Section 49 provides:
(1)A court with proceeds jurisdiction must make an order that property specified in the order is forfeited to the Commonwealth if:
(a)the responsible authority for a restraining order under section 19 that covers the property applies for an order under this subsection; and
(b)the restraining order has been in force for at least 6 months; and
(c)the court is satisfied that one or more of the following applies:
(i)the property is proceeds of one or more indictable offences;
(ii)the property is proceeds of one or more foreign indictable offences;
(iii)the property is proceeds of one or more indictable offences of Commonwealth concern;
(iv)the property is an instrument of one or more serious offences; and
(e)the court is satisfied that the authority has taken reasonable steps to identify and notify persons with an interest in the property.
(2)A finding of the court for the purposes of paragraph (1)(c):
(a)need not be based on a finding that a particular person committed any offence; and
(b)need not be based on a finding as to the commission of a particular offence, and can be based on a finding that some offence or other of a kind referred to in paragraph (1)(c) was committed.
(3)Paragraph (1)(c) does not apply if the court is satisfied that:
(a)no application has been made under Division 3 of Part 2-1 for the property to be excluded from the restraining order; or
(b)any such application that has been made has been withdrawn.
Refusal to make a forfeiture order
(4)Despite subsection (1), the court may refuse to make an order under that subsection relating to property that the court is satisfied:
(a)is an instrument of a serious offence other than a terrorism offence; and
(b)is not proceeds of an offence;
if the court is satisfied that it is not in the public interest to make the order.
Section 51 provides, relevantly, that the fact that a person has been acquitted of an offence with which the person has been charged does not affect the court's power to make a forfeiture order under s 49 in relation to the offence.
By s 66, property specified in a forfeiture order vests absolutely in the Commonwealth at the time the order is made.
Section 73 provides that a court that has made a forfeiture order or that is hearing or is to hear an application for a forfeiture order must make an order excluding a specified interest in property from forfeiture in the circumstances specified in s 73.
Section 80 provides, relevantly, that a forfeiture order made under s 49 against a person in relation to an offence is not affected if:
(a)having been charged with the offence, the person is acquitted; or
(b)the person is convicted of the offence and the conviction is subsequently quashed.
Part 2‑3 is headed 'Forfeiture on conviction of a serious offence' and comprises s 91 to s 114. Part 2‑3 provides, amongst other things, that if a person is convicted of a serious offence, property that is subject to a restraining order relating to the offence is forfeited to the Commonwealth unless the property is excluded from forfeiture.
Section 315(1) states that proceedings on an application for, relevantly, a restraining order are not criminal proceedings. Section 315(2) states:
Except in relation to an offence under this Act:
(a)the rules of construction applicable only in relation to the criminal law do not apply in the interpretation of this Act; and
(b)the rules of evidence applicable in civil proceedings apply, and those applicable only in criminal proceedings do not apply, to proceedings under this Act.
By s 317(1), the applicant in any proceedings under the Act bears the onus of proving the matters necessary to establish the grounds for making the order applied for. By s 317(2), subject to s 52 and s 118 (which are not relevant in this appeal), any question of fact to be decided by a court on an application under the Act is to be decided on the balance of probabilities.
Chapter 6 is headed 'Interpreting this Act' and comprises s 329 to s 338. Part 6‑1 is headed 'Meaning of some important concepts' and comprises s 329 to s 337B. Part 6‑2 is headed 'Dictionary' and comprises s 338.
Section 329 is concerned with the meaning of 'proceeds' and 'instrument'. Section 329 provides:
(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.
(2)Property is an instrument of an offence if:
(a)the property is used in, or in connection with, the commission of an offence; or
(b)the property is intended to be used in, or in connection with, the commission of an 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 330 is concerned with when property becomes, remains and ceases to be proceeds or an instrument. Section 330 provides, relevantly:
(1)Property becomes proceeds of an offence if:
(a)the property is wholly or partly derived or realised from a disposal or other dealing with proceeds of the offence; or
(b)wholly or partly acquired using proceeds of the offence;
including because of a previous application of this section.
(2)Property becomes an instrument of an offence if it is
(a)wholly or partly derived or realised from the disposal or other dealing with an instrument of the offence; or
(b)wholly or partly acquired using an instrument of the offence;
including because of a previous application of this section.
(3)Property remains proceeds of an offence or an instrument of an offence even if:
(a)it is credited to an account; or
(b)it is disposed of or otherwise dealt with.
(4)Property only ceases to be proceeds of an offence or an instrument of an offence:
(a)if it is acquired by a third party for sufficient consideration without the third party knowing, and in circumstances that would not arouse a reasonable suspicion, that the property was proceeds of an offence or an instrument of an offence (as the case requires); or
…
(6)Property becomes, remains or ceases to be proceeds of an unlawful activity, or an instrument of an unlawful activity, if the property becomes, remains or ceases to be proceeds of the offence, or an instrument of the offence, constituted by the act or omission that constitutes the unlawful activity.
Section 336 elaborates upon the meaning of 'derived'. Section 336 provides:
A reference to a person having derived proceeds, a benefit, literary proceeds or wealth includes a reference to:
(a)the person; or
(b)another person at the request or direction of the first person;
having derived the proceeds, benefit, literary proceeds or wealth directly or indirectly.
Section 338 contains numerous definitions. It provides, relevantly, that in the Act, unless the contrary intention appears:
account means any facility or arrangement through which a financial institution accepts deposits or allows withdrawals and includes:
(a)a facility or arrangement for:
(i)a fixed term deposit; or
(ii)a safety deposit box; and
(b)a credit card account; and
(c)a loan account (other than a credit card account); and
(d)an account held in the form of units in:
(i)a cash management trust; or
(ii)a trust of a kind prescribed by the regulations; and
(e)a closed account.
To avoid doubt, it is immaterial whether:
(f)an account has a nil balance; or
(g)any transactions have been allowed in relation to an account.
…
instrument has the meaning given by sections 329 and 330.
interest, in relation to property or a thing, means:
(a)a legal or equitable estate or interest in the property or thing; or
(b)a right, power or privilege in connection with the property or thing;
whether present or future and whether vested or contingent.
…
proceeds has the meaning given by sections 329 and 330.
…
property means real or personal property of every description, whether situated in Australia or elsewhere and whether tangible or intangible, and includes an interest in any such real or personal property.
…
sufficient consideration: an acquisition or disposal of property is for sufficient consideration if it is for a consideration that is sufficient and that reflects the value of the property, having regard solely to commercial considerations.
Relevant extrinsic material
The term 'third party' (in s 330(4)(a)) and the term 'innocent third party' (in the Note to s 29) appear to have been derived from the report of the Australian Law Reform Commission, Confiscation that Counts - A Review of the Proceeds of Crime Act 1987, Report 87 (1999). The report states, relevantly:
[12.3]It is clear from the various provisions dealing with the rights of third parties in both the POC Act [1987] and the Customs Act, Part XIII, Division 3 that it was not the intention of the legislature that there be any adverse impact on truly innocent third parties with bona fide interests in property. That said, the provisions providing relief for innocent third parties are extremely complex, although no more so than the confiscatory provisions from which they are intended to offer such relief.
…
[12.80]In his submission, the DPP states that, in the experience of his office, the rights of innocent third parties are adequately protected under the current provisions … the submission says that
'… the DPP would have no difficulty with additional provisions being enacted if that was considered necessary. However, any additional provisions will need to be carefully worded to ensure that they do not simply give [defendants], and their associates, additional opportunities to delay the operation of the Act.'
[12.82]These submissions, as reinforced in face to face discussions, add significant weight to the Commission's own analysis and concerns that, whether in respect of third party interests at large, or in relation to interests of creditor encumbrancees, it is imperative that the legislation be framed in such a way as to eliminate, or reduce to the extent practicable, the scope for third parties to obtain relief from restraining and forfeiture orders, and from the charging of property to satisfy pecuniary penalty orders, where the third party interest is acquired otherwise than from a bona fide and at arms length transaction.
…
Recommendation 53
•The POC Act should prescribe a uniform set of matters in respect of which a third party must satisfy the court when seeking exclusion of the third party's interest other than an encumbrance
…
-from a restraining order or forfeiture under the new non‑conviction based regime
•The matters on which the third party should be required to satisfy the court are that
-the third party was not involved in the conduct to which the restraining or forfeiture order applies
-that the third party's interest is not subject to the effective control of the defendant and
-where the interest was acquired directly or indirectly from the defendant, the third party acquired the interest bona fide and for valuation consideration. (footnotes omitted)
The Revised Explanatory Memorandum to the Proceeds of Crime Bill 2002 (Cth) stated:
General Outline
…
The Bill replicates the safeguards for innocent third parties, dependents and people with an interest in property which exist in the current legislation. It also provides ample opportunity for suspects to demonstrate the lawful derivation of their property both at the freezing and confiscation stages. It represents a balanced and fair approach to ensuring that crime, particularly organised crime and financing of terrorist activity, does not pay.
…
Clause 330 When property becomes, remains and ceases to be proceeds or an instrument
This clause establishes that money or other property which is 'proceeds of an offence' or an 'instrument of an offence' does not lose its nature as such merely because it is exchanged for another item or is otherwise dealt with (for example by the sale of property which is proceeds or an instrument, or by placing cash which is proceeds into a bank account, or using cash which is proceeds to purchase property). This prevents a person from transforming property which is proceeds or an instrument into 'clean' property just by changing its nature.
…
Subclause 330(3) establishes that when the proceeds or an instrument of an offence is used to acquire other property not only does the original property retain its nature as proceeds or an instrument, the property acquired with the proceeds takes on that nature, and itself becomes the proceeds or an instrument of an offence.
Subclause 330(4) protects the rights of innocent third parties who acquire the proceeds or instrument of an offence in certain circumstances.
An example of how subclauses 330(1) - (4) would work is set out below:
•If A defrauds the Commonwealth of $200,000, that money is the proceeds of an offence
•If A then purchases a house entirely with those proceeds, the house becomes the proceeds of an offence, and the money continues to be the proceeds of an offence.
•However, if the seller of the house has acquired the money for sufficient consideration (that is, the house was sold for its value), and the seller does not know, and there is nothing that would cause him or her to suspect that, at the time of sale, that the money was the proceeds of an offence, that money then ceases to be the proceeds of an offence.
•A person who receives the proceeds of an offence as a gift (and therefore does not supply any consideration for the property) will be liable to forfeit that property, whether or not they are aware of the property's origin. (emphasis added)
The primary judge's relevant findings of fact and relevant reasoning in relation to the three Australian bank accounts
The primary judge made the following findings of fact in relation to the three Australian bank accounts.
As to the first account:
(a)On 11 August 2014, Mr Ganesh opened an account (ANZ Account No***8452) at the Canning Vale branch of the ANZ bank. He used his Malaysian passport as identification. The account was opened with a deposit of $5,000 cash.
(b)On 13 August 2014, six deposits totalling $50,000 cash were made.
(c)Between 13 August 2014 and 30 September 2014 the credit balance increased to $737,413.73. There was a small credit for interest. Otherwise, the increased balance was attributable to 96 deposits of amounts between $1,000 cash and $9,500 cash.
(d)On more than one occasion there were multiple deposits on the same day.
(e)There were no withdrawals, other than small amounts for withholding tax, before the balance was transferred to the Australian Financial Security Authority pursuant to the court's orders.
As to the second account:
(a)On 11 August 2014, Mr Ganesh opened an account (CBA Account No***8576) at the Canning Vale branch of the Commonwealth Bank of Australia. He used his Malaysian passport as identification. The account was opened with a deposit of $5,000 cash.
(b)On 13 August 2014, eight deposits totalling $150,000 cash were made. Three of those deposits were reportable transactions.
(c)Between 11 August 2014 and 9 October 2014 the credit balance increased to $974,520.21. An amount of $38.21 comprised interest. During that period, there were nine deposits of amounts in excess of the reporting threshold of $10,000 and 94 deposits of amounts less than $10,000. The majority of the transactions occurred in New South Wales. There were also transactions in Victoria and Western Australia.
(d)There were multiple deposits on the same day.
(e)There were no withdrawals, other than small amounts for withholding tax, before the balance was transferred to the Australian Financial Security Authority pursuant to the court's orders.
As to the third account:
(a)On 25 September 2014, the second respondent, who is also known as Mrs Ganesh, opened an account (ANZ Account No ***5167) at the Canning Vale branch of the ANZ Bank. She used her Malaysian passport as identification. The account was opened with a deposit of $5,000 cash.
(b)On 30 September 2014, 11 deposits totalling $93,250 cash were made. Each deposit was for an amount less than $9,300.
(c)On 1 October 2014, 11 deposits totalling in excess of $100,000 were made. Each deposit was for an amount equal to or greater than $9,000, but less than $10,000.
(d)Between 25 September 2014 and 13 October 2014 the credit balance increased to $755,002.53. An amount of $2.53 comprised interest. Otherwise, there were 90 deposits of amounts between $1,000 and $9,950, with many of the deposits being in excess of $9,000, but less than $10,000.
(e)Numerous deposits were made on the same day.
(f)There were no withdrawals before the balance was transferred to the Australian Financial Security Authority pursuant to the court's orders.
Mr Ganesh and Mrs Ganesh used the address of Ramesh Kalimuthu, who is Mr Ganesh's brother, for the purposes of the accounts.
The primary judge said that '[t]he relevant interest held by the respondents [was] as the account holders of savings accounts, with credit balances, in two Australian banks' [104]. There was 'a single continuing contract' giving rise to the debt between Mr Ganesh or Mrs Ganesh, as the case may be, and the bank, 'as opposed to a series of contracts made on each deposit' [105]. The 'interest held by the respondents is property, within the definition in s 338, either as a chose in action against the bank or as a right, power or privilege in connection with that property' [106].
His Honour appears to have been satisfied that the manner in which the money was deposited into the bank accounts involved the commission of a 'structuring' offence, contrary to s 142(1) of the Anti‑Money Laundering Act.
The primary judge said that:
(a)the effect of s 330(3) of the POC Act was that 'the cash that was deposited into the respondents' accounts ‑ and anything derived or realised from a disposal or other dealing with it ‑ [remained] proceeds of or an instrument of an offence unless it [ceased] to have that character by operation of s 330(4)' [107];
(b)'[t]he respondents' interest [was] derived from a dealing with the cash, and, subject to s 330(4), [took] its character as proceeds or an instrument of the offence' [107]; and
(c)'[t]he respondents' interest [was] also derived from the commission of the structuring offence, and [was] proceeds of that offence' [108].
His Honour then observed:
Subject to s 330(4)(a), if the additional deposits were made in the commission of an offence under s 142, Mr Ganesh's rights in relation to the additional balance are derived from the commission of that offence and are proceeds of that offence. Those rights would also be properly characterised as rights derived from a dealing with an instrument of the offence (the deposited cash), or acquired using an instrument. Under s 330(2) the newly acquired rights would be an instrument of the offence [109].
The primary judge referred to the principle of legality. His Honour said that, in construing s 330(4)(a), 'there is a principle that … common law rights, including rights of property, will not be taken by a court to have been displaced by legislation save where the intention to do so is "expressed with irresistible clearness"' [110].
His Honour granted the respondents' application because his Honour was satisfied that the property had ceased to be 'proceeds of an offence' or 'an instrument of an offence' under s 330(4)(a) of the POC Act.
Section 330(4)(a) provides that property ceases to be proceeds of an offence or an instrument of an offence:
[I]f 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 was of the view that the requirements of s 330(4)(a) were satisfied in that:
(a)the relevant respondent 'acquired' property when deposits were made into his or her account [116];
(b)the relevant respondent was a 'third party' who had 'acquired' property 'through [the] transaction' entered into between Mr Ganesh and Mr Zamri [121];
(c)the relevant respondent gave 'sufficient consideration' for the property when he or she paid Malaysian Ringgit cash to the Malaysian money changer (that is, Mr Zamri) for the transfer of the Australian Dollar equivalent to the relevant account [124]; and
(d)a 'reasonable suspicion' would not be aroused in the 'circumstances' known to the relevant respondent [129] ‑ [138].
The type of money laundering known as 'cuckoo smurfing'
At the hearing before the primary judge, the respondents relied upon the evidence of Murray Smith, a former officer of the Australian Federal Police who had very substantial experience, as a Federal agent, in serious and organised crime including drug trafficking and money laundering activities.
Mr Smith gave evidence of a type of money laundering, which has been used in Australia and elsewhere, known as 'cuckoo smurfing'. His Honour summarised Mr Smith's evidence as to the nature of 'cuckoo smurfing':
In short, it relies on identifying a person offshore who wishes to transfer funds to a bank account in Australia using a money remitter. The remitter withholds amounts corresponding to the amount of money he has been told is to be laundered in Australia. The customer's bank account details are provided to people in Australia. A team of depositors in Australia deposits cash into the bank account, generally at a series of bank branches and below the threshold for reporting transactions involving physical currency. The account holder sees deposits that match the amounts they intended to remit. Because the amounts of each deposit are below the threshold, there is generally no record that could enable regulatory agencies to intervene [71].
The grounds of appeal
The appellant relies on four grounds of appeal.
Ground 1 alleges that the primary judge erred in law in finding that the respondents were 'third parties' for the purposes of s 330(4)(a) of the POC Act.
The particulars of ground 1 state that the respondents were not third parties in respect of the relevant property, namely the choses in action in respect of their bank accounts, because the respondents were not wholly removed from that property at the time of the relevant criminal conduct and, further or alternatively, because the respondents had had significant involvement in the events and arrangements associated with the relevant criminal conduct.
Ground 2 alleges that his Honour erred in law in finding that 'sufficient consideration' had been provided by the respondents for the purposes of s 330(4)(a) of the POC Act.
The particulars of ground 2 state that given that the respondents' case was that only the first deposit in each relevant bank account had been made by them and that all other deposits had been made by 'the cuckoo smurfers', who were unknown to and unauthorised by them, the respondents gave no consideration for the property they sought to exclude, namely the funds standing to the credit of the bank accounts which had been deposited by 'the cuckoo smurfers'.
Ground 3 alleges that his Honour erred in law and in fact in finding that, at the time of the deposits, Mr Ganesh was not aware of the multiple locations at which the transactions took place or that deposits were made in different States, by failing to take into account admissions Mr Ganesh had made during an interview with Federal agents on 3 November 2014.
Ground 4 alleges that his Honour erred in law in finding that the circumstances in which the property was acquired would not have aroused a 'reasonable suspicion' that the property was the proceeds of an offence, further or alternatively the instrument of an offence, within s 330(4)(a) of the POC Act.
The particulars of ground 4 state that the regularity, pattern and unusual circumstances of the numerous small deposits into the bank accounts (which were observed by the respondents) meant that there were circumstances that would arouse a 'reasonable suspicion' that the property acquired (assuming, for the purposes of ground 4, that any property was acquired by the respondents) was the proceeds of an offence, further or alternatively the instrument of an offence, contrary to s 142(1) of the Anti‑Money Laundering Act.
Ground 1: the primary judge's relevant findings
The primary judge noted that the term 'third party', in s 330(4)(a) of the POC Act, is not defined.
His Honour rejected the appellant's submission that Mr Ganesh and Mrs Ganesh could not be regarded as a 'third party' because 'an element of the offence [under s 142(1) of the Anti‑Money Laundering Act was] a transaction into his [or her] bank account' [117]. His Honour was satisfied that the term 'third party' does not 'simply refer to someone [who is] not a party to the offence' [118].
The primary judge was satisfied that the respondents were 'third parties', within s 330(4)(a), in their acquisition of the relevant property. His Honour gave three reasons, by reference to Mr Ganesh, for that conclusion.
First, Mr Ganesh was not in a legal relationship (for example, as a director, partner or fiduciary) with anyone involved in the transaction 'that would make this a transaction between related parties' [119].
Secondly, Mr Ganesh had 'no interest in the Australian physical currency, or any property derived from it, before the cash was deposited into his account'. If he had rights, they were contractual rights against the remitter 'who was obliged to perform the agreement and give the agreed consideration for the Malaysian Ringgit he had provided' [120].
Thirdly, Mr Ganesh's position was relevantly 'no different from that of a person who sells property to a stranger and is paid by direct debit into his bank account'. His position was analogous to that of 'a seller of Malaysian Ringgit who is to be paid by the deposit of a corresponding amount of Australian currency into his account in Australia'. The existing contractual relationship between Mr Ganesh and the bank did not alter the position that Mr Ganesh was a 'third party' acquiring property through that transaction [121].
Ground 1: the appellant's submissions
Counsel for the appellant submitted that the term 'third party' in s 330(4)(a) of the POC Act refers to a person who is 'wholly removed' from the relevant property when the criminal conduct constituting the 'offence' referred to in that provision occurs. Section 330(4)(a) operates to protect the position of a subsequent purchaser in good faith of the previously tainted property, but does not operate to protect a person who acquires the relevant property pursuant to a transaction that is itself tainted by criminality (irrespective of whether that person was aware of the criminality).
Alternatively, counsel submitted that the term 'third party' in s 330(4)(a) refers to a person with 'no significant involvement in the events or arrangements leading to the relevant criminal conduct'.
It was submitted that, on either of those approaches, the respondents were not 'third parties' for the purposes of s 330(4)(a).
The respondents were not wholly removed from the relevant property (being the chose in action in respect of each account created by the structured deposits) when the relevant criminal conduct (being the making of the structured deposits) occurred. Indeed, the respondents were the recipients of that property at that time.
Alternatively, the respondents had a significant involvement in the relevant events and arrangements leading to the making of the structured deposits, especially through Mr Ganesh's dealings with Mr Zamri in Malaysia and the ongoing monitoring by Mr Ganesh of the respondents' Australian bank accounts.
Ground 1: the respondents' submissions
Counsel for the respondents relied upon the principle of legality in all of his submissions as to the proper construction of the POC Act. It was asserted that the principle of legality favoured a construction of relevant provisions of the POC Act, if one was available, which avoided or minimised the encroachment of those provisions upon rights of property.
It was submitted on behalf of the respondents that the term 'third party' in s 330(4)(a) of the POC Act carries with it 'a connotation of innocence'. However, counsel emphasised that an examination of the term 'third party' in isolation from its context is apt to mislead. The correct focus must be upon 'the overall concept rolled up in s 330(4)(a)'. In particular, it was submitted that a person who:
(a)acquires property;
(b)for sufficient consideration;
(c)without knowing that the property is proceeds/an instrument; and
(d)in circumstances that would not arouse a reasonable suspicion that the property is proceeds/an instrument,
is a 'third party' for the purposes of s 330(4)(a).
According to counsel, the term 'third party' in s 330(4)(a) is intended 'to link the focus of the questions about knowledge onto the acquirer of the property'.
It was argued that the term 'third party' is 'a label' used to describe a scenario of a bona fide purchaser for value without notice, involving the third party acquisition of transferred property.
Counsel referred to the following scenario to demonstrate what was, in his submission, a flaw in the primary construction of the term 'third party' advanced by the appellant:
The difficulty … is demonstrated by reference to a scenario where a drug dealer buys a car using money that is the proceeds of his drug dealing activity. The drug dealer electronically transfers payment to the [vendor's] bank account. In doing so the drug dealer commits a fresh money laundering offence against s 400.9 Criminal Code (Cth). The [vendor's] bank account is not … wholly removed from the money laundering offence. The bank account in that scenario has been used in a very similar manner to that which arises in the cuckoo smurfing cases. Further in that scenario the money is already the proceeds of crime (drug dealing) long before the property is purchased. And by operation of s 330(3)(a) the vendor's account clearly becomes proceeds. It also becomes proceeds and/or an instrument of the s 400.9 offence. Thus the vendor of the car will not have the protection of the public interest discretion in s 49(4) [of the POC Act] ‑ that only applies to instrument cases. The vendor stands or falls under s 330(4)(a). The vendor is protected on the construction advanced [on behalf of the respondents]. That is a powerful reason to prefer it. (original emphasis)
According to counsel, a further reason to prefer the construction advanced on behalf of the respondents is that if the primary construction of the term 'third party' advanced by the appellant is correct (namely, that s 330(4)(a) can apply only to a purchaser of previously tainted, that is to say already existing, property), then s 330(4)(a) can never apply to a bank account because 'a new chose in action is created each time a transaction occurs on an account that changes the balance'.
Counsel submitted that, in any event, on the primary construction of the term 'third party' advanced by the appellant:
(a)the respondents were 'wholly removed' from the banknotes deposited into their accounts by the cuckoo smurfers; and
(b)there was no evidence or suggestion that the respondents knew the identity of the people involved in remitting the funds to the credit of the bank accounts, including the depositors.
It was also submitted that, in any event, on the alternative construction of the term 'third party' advanced by the appellant:
(a)the respondents had 'no significant involvement in the events or arrangements leading to the relevant criminal conduct'; and
(b)the relevant criminal conduct was 'the structuring, not the depositing'.
Ground 1: decisions of other courts in relation to the meaning and application of the term 'third party' in s 330(4)(a) of the POC Act
The meaning of the term 'third party', in s 330(4)(a) of the POC Act, has been considered by single judges in Commissioner of the Australian Federal Police v Lordianto;[4] Commissioner of the Australian Federal Police v Fernandez;[5] Commissioner of the Australian Federal Police v Sun;[6] Commissioner of the Australian Federal Police v Tjongosutiono;[7] and Commissioner of the Australian Federal Police v Gwe.[8]
[4] Commissioner of the Australian Federal Police v Lordianto [2017] NSWSC 1196; (2017) 324 FLR 237.
[5] Commissioner of the Australian Federal Police v Fernandez [2017] NSWSC 1197.
[6] Commissioner of the Australian Federal Police v Sun [2017] NSWSC 1476.
[7] Commissioner of the Australian Federal Police v Tjongosutiono [2018] NSWSC 48; (2018) 329 FLR 103.
[8] Commissioner of the Australian Federal Police v Gwe [2018] NSWSC 992.
In Lordianto at first instance, the applicants made an application under s 29 of the POC Act to exclude certain interests in property, namely choses in action represented by funds standing to the credit of their bank accounts, from a restraining order. The applicants claimed that they were innocent victims of a money laundering scheme. By the scheme, the applicants' legitimate transactions overseas had been subverted. The deposits to their accounts, which were equal in monetary value to the amounts given to the launderers to be transferred, were sourced from proceeds of criminal activity and not from the applicants' own funds. The applicants asserted that they had 'acquired' interests in the right to payment of the tainted deposits as 'third parties', within s 330(4)(a).
The applicants in Lordianto submitted that the term 'third party', in s 330(4)(a), refers to a person other than a party to the criminal conduct which caused the property to become tainted [98]. The structuring offences in question were transactions between the depositor and the bank and, accordingly, the applicants were, relevantly, 'third parties' [99]. Simpson J noted that a similar submission had been put to the primary judge in the present case (that is, in Commissioner of the Australian Federal Police v Kalimuthu [No 3] [2017] WASC 108) and rejected by him [99]. Her Honour rejected the applicants' submission as to the proper construction of the term 'third party' [105].
Simpson J held that a person is not a 'third party', within s 330(4)(a), 'only because he or she has no connection with the offence that causes the property to be tainted' [101]. Her Honour went on to state that 'third party', within s 330(4)(a), refers to a party by whom property has been acquired, but who was wholly removed from the property when the tainting conduct occurred [104]. The term 'third party' does not refer to an owner of property who was wholly removed from the conduct that tainted the property [104]. In particular, her Honour said:
The ordinary meaning of the words 'third party' and the ascertainable legislative intention of the provision, dictate that a 'third party' within s 330(4)(a) is a party who is, at the time of the criminal conduct, wholly removed from the property constituting the proceeds or instrument; it is not an owner of property who is wholly removed from the criminality that causes the property to be tainted [104].
Simpson J decided that the applicants were not 'third parties', within s 330(4)(a). They were the holders of the account into which the structured deposits were made. They were not 'wholly removed' from the relevant property when the criminal conduct occurred, even if they were not aware of the criminal conduct itself. As the account holders, the applicants were the recipients of the relevant property when the criminal conduct occurred.
In Fernandez, judgment was published on the same date as Lordianto. Simpson J was also the primary judge in Fernandez.
The defendant in Fernandez was an Indonesian citizen. In 2010, shortly after he arrived in Australia, the defendant opened two Australian bank accounts. In late 2013, before he returned to Indonesia, the defendant opened a third Australian bank account. In May 2015, in Indonesia, the defendant's father gave him about AUD$500,000 to be deposited in an Australian bank account. The defendant opened a term deposit account with an Australian bank into which he proposed to deposit the money. The defendant or a member of his family contacted a money changer in Jakarta in order to transfer the money from Indonesia to Australia. The defendant's family had previously had business dealings with the money changer. On 11 dates in May, June and July 2015, the defendant's father, through the money changer, purchased Australian Dollars to be deposited into one of the defendant's Australian bank accounts. Each amount was about AUD$40,000. Sometimes the defendant deposited Indonesian Rupiah cash with the money changer to be transferred to one of his Australian accounts. The defendant checked his Australian accounts to ensure that the funds had been deposited. On some occasions, he noticed that the equivalent of the full amount paid to the money changer had been deposited. On other occasions, only partial amounts had been deposited. His father assured him that the money changer could be trusted and that the full amount would be transferred. The defendant found that, despite being made up of several partial amounts, the correct total amount was always deposited in his Australian bank accounts. Simpson J was satisfied that one of the defendant's Australian bank accounts was used in structuring transactions (that is, deposits structured so as to avoid the statutory reporting requirements) and was, consequently, an instrument of a structuring offence or offences [47]. Her Honour noted that the Commissioner did not assert that the defendant made the deposits himself, nor that he was involved in the transactions [48]. The defendant appeared to be an innocent victim of a sophisticated criminal organisation [48].
Simpson J said that, '[f]or the reasons [she] gave in Lordianto', a person claiming the benefit of s 330(4)(a) 'must establish that he or she is a third party to the property dealing ‑ that is, that he or she has acquired the interest in the property subsequent to the commission of the offence or offences that caused it to be tainted' [59]. The person is 'a third party in the ownership of the property' [59]. The defendant was not a 'third party', within s 330(4)(a), because there had been no relevant acquisition of property [59].
In Sun, funds were transferred from China to Australia. The transfer was effected by arrangements under which:
(a)foreign currency was provided by or on behalf of the holder of an Australian bank account (the account holder) to other persons in China (not being a bank or recognised financial institution); and
(b)separate and distinct amounts of Australian Dollar cash were deposited into the account holder's Australian bank account.
Wilson J said that s 330(4)(a) seeks to protect persons in a category referred to in the explanatory memorandum to the Proceeds of Crime Bill 2002 (Cth) as an 'innocent third party' [124]. Her Honour then said:
It is difficult to see how either [the account holder] or her father have a sufficient degree of distance from transactions connected with the movement of the relevant funds to be a third party; each has a significant role in the events, and one which I am not able to conclude is necessarily innocent [124].
Wilson J was not satisfied that the account holder was a 'third party', having regard to the involvement of the account holder and her father in the arrangements for the transfer of the funds between China and Australia [123].
In Lordianto and Fernandez, Simpson J focused on the connection between the account holder, on the one hand, and the property, on the other, when the criminal conduct occurred. By contrast, in Sun, Wilson J focused on the connection between the account holder, on the one hand, and the transactions giving rise to the criminal conduct, on the other.
In Tjongosutiono, the applicant received hundreds of 'structured' deposits (which avoided the statutory reporting requirements) in numerous bank accounts in his name by means of a 'cuckoo smurfing' money laundering scheme. The Commissioner alleged that the property was the proceeds or an instrument of the offence created by s 142(1) of the Anti‑Money Laundering Act and, also, involved dealing with money reasonably suspected of being the proceeds of crime (with a value at the time of dealing of $100,000 or more), contrary to s 400.9(1) of the Criminal Code. The applicant claimed that he had not been actively engaged in criminal activity, and that he did not know that the deposits made into his accounts comprised hundreds of deposits small enough to avoid the statutory reporting requirements.
N Adams J said that the concept of a 'third party' is usually someone at arm's length [168]. Her Honour reviewed the primary judge's decision in the present case, the judgments of Simpson J in Lordianto and Fernandez and Wilson J's decision in Sun. N Adams J concluded that she was unable to adopt the reasoning of the primary judge in the present case in relation to the meaning of the term 'third party' in s 330(4)(a) [176]. Her Honour explained:
It seems to me that, in order to be a third party, the property must be acquired after the funds become either the proceeds or an instrument of an offence …
I have had regard to the context in which the words 'third party' appear in s 330(4)(a) of the Act. I am not satisfied that a third party to a transaction extends to include a person who is a party to part of the transaction in question. The situation may be different if the structured deposits had been made into somebody else's account and then transferred to the applicant's account after the offence was complete. I am satisfied that a 'third party' in the context of s 330(4)(a) of the Act is someone who becomes involved with the property for the first time after it has become the proceeds or an instrument of an offence [176] ‑ [177]. (original emphasis)
In Tjongosutiono, the applicant was involved in the first step of the process in Jakarta and was also involved in the final step in Australia when the deposits were made [176]. N Adams J was not satisfied that the applicant was a 'third party', within s 330(4)(a), because he did not become involved with the property for the first time after it had become proceeds of an offence or an instrument of an offence [178].
In Gwe, the defendants/applicants sought an order pursuant to s 29 and s 31 of the POC Act that various items of property, including funds standing to their credit in accounts with Westpac Banking Corporation in Sydney, be excluded from the operation of a restraining order.
Rothman J observed that the defendants/applicants had to establish that each of them was a 'third party' to the property dealing; that is, that each had acquired the interest in the property after the commission of the offences that caused the property to be tainted and that each was, in that sense, 'a third party to the commission of the offences' [127]. His Honour approved and applied the reasoning of Simpson J in Lordianto in relation to the meaning of the term 'third party' in s 330(4)(a):
I accept the analysis on this issue of Simpson J in Lordianto, but, it seems, not the summary thereof in Fernandez. The 'third party' must be a third party to the commission of the offences that caused the property or interest in property to be tainted.
With respect to Simpson J her analysis at [101] of Lordianto is adopted. Her Honour's view of a 'third party' is informed by her Honour's analysis of the definition of 'property', without consideration of an interest (as broadly defined) being a right 'in connection with' property. Nevertheless, the result is the same.
A third party to the criminal conduct is a person to whom the property passes (or by whom the property is acquired, including an interest, as broadly defined, in the property) and was not a person involved or connected with the offence that caused the property to be tainted [127] ‑ [129].
Rothman J found that, on the evidence in Gwe, the defendants/applicants, whom the Commissioner did not allege were involved in the commission of the offences, acquired the property in question (if they acquired a right in connection with the funds) after the property was tainted [129].
The meaning of the term 'third party', in s 330(4)(a) of the POC Act, has also been considered by the Court of Appeal of New South Wales in Lordianto.
In Lordianto, Beazley P and Payne JA held that a 'third party' in s 330(4)(a) is a person who, at the time of the criminal conduct, is 'wholly removed from the property constituting the proceeds or instrument'; that is, 'a person with no involvement in the transaction by which property first becomes proceeds of an offence or an instrument of an offence' [115]. The person must acquire the property after it becomes proceeds of an offence or an instrument of an offence. The fact that s 330(4)(a) governs when property ceases to be proceeds of an offence necessitates that the property was previously proceeds of an offence [116]. Beazley P and Payne JA concluded that Simpson J (the primary judge in Lordianto) was correct to conclude that neither of the applicants (who were the appellants in the appeal) was a 'third party' for the purposes of s 330(4)(a) [117].
Beazley P and Payne JA observed that:
(a)the POC Act focusses upon transactions rather than involvement in criminal conduct because the Act is designed to prevent property which is proceeds of an offence or an instrument of offence being made 'clean' other than by the strict operation of the exclusion provisions [94];
(b)the exclusion provisions, including s 29, operate in limited circumstances and on strict conditions:
Simply to focus on involvement in criminal conduct as a condition of exclusion as a third party would be to permit a person to transform property which is proceeds of an offence or an instrument of an offence into 'clean' property just by selling it to a person who was not involved in the particular crime by which the property became proceeds of an offence or an instrument of an offence, even if that person was integrally involved in the transaction through which the property constituting the proceeds or instrument came into existence [95];
(c)the intention of the POC Act is 'to provide a broad intrusion upon private property rights with the avowed aim of forfeiting property which constitutes proceeds of an offence, as very broadly defined, or an instrument of an offence, as very broadly defined … subject to strictly confined exclusions and some limited provisions designed to ameliorate the harsh application of the Act' [93];
(d)the applicants' contention that 'at the same instant and as a result of the same physical acts by which the property became the proceeds of crime, it also ceased to be the proceeds of crime' should be rejected [116] (original emphasis); and
(e)the primary judge's construction of the term 'third party' (which their Honours held was correct) gave the term work to do in s 330(4)(a), whereas the applicants' construction, which merely required that a 'third party' not be involved in the commission of the offence, did not [111].
In Lordianto, McColl JA dissented on this issue, but not in the result of the appeal. Her Honour concluded that the term 'third party', in circumstances where proceeds are sought to be laundered through the purchase of goods or deposits into a bank account, means a person who is not 'intentionally complicit in the laundering activity' [227]. In particular, her Honour said:
[I]n each case when the holder of the account into which the funds are credited or the vendor of the property cannot be said to be a 'party' to the s 330(3) transaction in the sense of being intentionally complicit in the laundering activity, or to put it another way stands at arms' length to the transaction, he or she is, in my view, relevantly a 'third party' for the purposes of s 330(4). Subsection 330(4)(a), in my view, is clearly intended to give such recipients (who would be 'innocent third parties' as referred to in the Note to s 29) an opportunity to have such property excluded from a restraining order [227].
McColl JA examined the interrelationship between s 29 and s 330. Her Honour noted that s 330 appears in ch 6, which is headed 'Interpreting this Act', and that s 29 is a substantive provision in pt 2 ‑ 1, which is headed 'Restraining orders'. Section 29(2)(d) provides that the reasons for excluding a specified interest in property from a restraining order under s 19 is that, relevantly, the interest is neither proceeds of an offence nor an instrument of an offence. Her Honour said:
While s 329 does not directly answer the question s 29 poses, it establishes the base point: whether the property in question 'is' such proceeds or 'instrument' in the first place. Only when that question has been resolved can the s 29 question, whether the applicants' 'interest' in that property 'is' or 'is neither' one or the other, be determined. In this case the 'is' question was treated as sufficiently answered by the appellants' concession as to the characterisation to which I have referred.
Section 330 is critical to the operation of s 329. Section 330(1) and (2) explain how property first 'becomes', that is to say can be so characterised that an authorised officer can 'suspect' it 'is', proceeds or an instrument of an offence in the s 19 sense, and a court can be satisfied for the purposes of s 19(1)(f) that the authorised officer holds that suspicion on reasonable grounds and thus be subject to a restraining order. Section 330(3) explains that when there is a transaction referred to in that provision in relation to proceeds or an instrument of an offence (s 330(3) transaction), it 'remains' so characterised. Section 330(4) explains when property which 'is' either proceeds or an instrument of an offence 'ceases' being so characterised.
The parties' submissions tended to focus on s 330(4) as if it were a substantive enactment, or, at least functioned independently of the surrounding provisions. That is not the case.
…
While it is apparent that Pt 6 ‑ 1 of [the POC Act] was intended to be an aid to the meaning of 'important concepts' which appear in [the POC Act] … one cannot readily insert, for example, s 330(4)(a), into every provision of [the POC Act] in which the question whether property 'is' the proceeds or instrument of an offence arises, and then construe that provision.
While that unwieldy exercise is not readily attractive, its grammatical impracticality does not detract, in my view, from a characterisation of Pt 6 ‑ 1 by analogy with the principles applied to the characterisation of definition provisions as an aid to the construction of provisions (including s 29) to which the state of 'being' of the relevant property is relevant. That is, not least, because of the clear statement in s 6 of [the POC Act] concerning material which appears after Ch 2 ‑ 4, relevantly for present purposes in Ch 6, as being 'other interpretive material'. That makes it clear that Pt 6 ‑ 1 does not set out substantive enactments, but, as its title also indicates, explains the meaning of some important concepts to be used when applying the substantive provisions of [the POC Act], in this case, relevantly, s 29.
Thus … it is apparent that the legislature intended that when the 'concepts' reflecting the characterisation of property referred to in s 330 are found in the substantive parts of [the POC Act], they are to be understood as complementing s 329 and, ultimately, assisting in the application of a provision in which the 'is' question arises, in this case, the application for a s 29 exclusion order.
What explanation s 330 affords an applicant for a s 29 exclusion order must be determined in the context that it is apparent from the terms of s 29 itself, that the circumstances in which an exclusion order might be granted are limited and the conditions strict ([Commissioner ofAustralian Federal Police v Hart [2018] HCA 1; (2018) 92 ALJR 154] at [66] per Gordon J). Consistently with that interpretation of s 29, s 329 casts a wide net, a matter I address later in these reasons.
Accordingly, in order to succeed on the exclusion application, the appellants had to establish on the balance of probabilities within the meaning of [the POC Act], s 29 that their interest in the Restrained Property 'is' not an 'instrument of any serious offence'. Their concession that the Restrained Property had that characteristic when the restraining order was made, did not, extend to a concession that the Restrained Property had that characteristic in their hands. Their essential submission was that even if the credits to their various bank accounts remained proceeds or an instrument of an offence, on their acquisition of their interests in the Restrained Property, it ceased to be so characterised [198] ‑ [200], [204] ‑ [208].
McColl JA emphasised, in arriving at her conclusion, that s 330(4) operates as a 'carve out' to s 330(3). Her Honour explained:
Section 330 is complementary to s 329. It establishes a continuum, as I have said, intended to facilitate the determination, for the purposes of the confiscation scheme, as to when property 'becomes' proceeds or an instrument of an offence, when it 'remains' so characterised and, ultimately, when it 'ceases' being so characterised.
Each sub-section in s 330 looks to a different, or potentially different, 'activity' which has taken place in relation to 'property' to determine whether, having regard to that activity, specified property, in substance, 'is' proceeds or an instrument of an offence within the meaning of s 329, and, in turn, within the meaning of a substantive provision of [the POC Act] to which that concept is relevant.
Contextually and importantly, in my view, for the purposes of understanding the ambit of s 330(4), s 330(3) specifies the circumstances in which property 'remains' proceeds or an instrument of an offence, 'even if' one of the activities there referred to occurs. Those activities are that property which is proceeds or an instrument of an offence is credited to an account, as in this case (s 330(3)(a)), or disposed of or otherwise dealt with (s 330(3)(b)).
The use of the expression 'even if' in s 330(3) underscores the strictness of the approach, already indicated by the language of s 29 ([Commissioner of Australian Federal Police v Hart [2018] HCA; (2018) 92 ALJR 154] at [66]) to be taken to determining whether property 'is' proceeds or an instrument of an offence. The expression 'even if' also indicates a legislative recognition that, in the ordinary course, it might otherwise be thought that a transaction of the sort referred to in s 300(3) might have the effect of depriving it of its character as proceeds or an instrument of an offence. Accordingly, s 330(3) ensures that it remains so characterised.
However, there is a necessary interaction between s 330(3) and s 330(4). As the appellants submitted, every acquisition of property that is the proceeds of an offence involves a dealing with the proceeds of crime for the purposes of Pt 10.2 of the Criminal Code … and is a 'serious offence' within s 338 of [the POC Act]. That proposition applies to each of the transactions s 330(3) contemplates.
The clear intent of s 330(3), taken with the wide definition of whether property 'is' either 'proceeds' or an 'instrument', in my view, is that property remains so characterised, notwithstanding that it has been dealt with in a manner contemplated by s 330 whether once, or on repeated occasions. Section 330 is intended to have a never-ending effect. As long as the property can be characterised at some stage as having been proceeds or an instrument of an offence, it 'remains' so characterised no matter how many s 330(3) transactions it passes through. There is never a temporal disjunction, to use the Commissioner's expression, which can disassociate a subsequent purchaser or acquirer from a transaction which constitutes an element of an offence. Each s 330(3) transaction involves such a dealing, leading to the property remaining tainted.
Each sub-paragraph of s 330(4) deals with what would, prima facie, be a s 330(3) transaction. Subsection 330(4) clearly contemplates, in my view, that property which 'remains' the proceeds or an instrument of an offence within s 330 by reason of a s 330(3) transaction may, notwithstanding that transaction, cease to be such proceeds or an instrument of an offence, albeit 'only' in the circumstances for which s 330(4) provides. The use of the term 'only' emphasises the strictness of the approach to be taken to determining whether property has lost its character as proceeds or an instrument of an offence.
Section 330(4) thus creates what can be described as a carve out. In other words, it has the effect that the characterisation as proceeds or an instrument of an offence [which] s 330(3) ensures property the subject of a s 330(3) transaction retains, 'ceases' if any sub-paragraph of s 330(4) applies. It is the legislature's attempt to achieve the balanced and fair approach to the operation of [the POC Act] spoken of in the Revised Explanatory Memorandum.
A clear example of the inter relationship between s 330(3) and s 330(4)(a), as the appellants submitted, would be a cuckoo smurfer disposing of monies which are the proceeds or an instrument of an offence to buy something, whether real or personal property (a s 330(3)(b) dealing), from a stranger to any of the activities by virtue of which the property 'is' proceeds or an instrument of an offence (property transaction).
Applying s 330(3), the purchase money, being proceeds or an instrument of an offence, 'remains' tainted in the stranger's hands. However, the Commissioner accepted that the stranger/recipient of the purchase money could rely on s 330(4)(a) because the purchase money (property) was already 'proceeds' before the stranger acquired it and, accordingly, the stranger was not a 'party' to the conduct which caused the property to be proceeds in the first place.
In my view, the Commissioner's submissions concerning the necessity for a temporal disjunction fail to grapple with the effect of the continuing operation of s 330(3) on property the subject of a s 330(3) transaction in the context of s 330(4)(a) third-party status. As I have said, there is never a temporal disjunction [215] ‑ [225].
The Commissioner's alternative construction is that 'third party' refers to 'a party with no significant involvement in the events or arrangements leading to the relevant criminal conduct'.[183] This alternative construction involves a broad, evaluative, fact‑sensitive assessment in order to determine whether an applicant is a 'third party'. Such an approach seems to us to have no foothold in the text of the statutory provision.
[183] Appellant's submissions [24]; appeal ts 23.
For the reasons we have given, on balance, we prefer the respondents' construction to the Commissioner's primary construction. However, as we have said, we are bound to apply the construction adopted by the majority in Lordianto, unless we are satisfied that it is plainly wrong. We are not so satisfied. As already explained, there are powerful considerations in favour of both of the competing constructions.
On that construction, the respondents were not third parties. They obtained their interest at the time of, and by virtue of, the commission of the structuring offence and at the time of, and by virtue of, the transaction by which their property was tainted. See [351] above.
Consequently, ground 1 must be upheld.
Ground 2
Ground 2 challenges the primary judge's conclusion that the respondents acquired their property 'for sufficient consideration'. The judge explained his reason for this conclusion as follows:[184]
I am satisfied that Mr Ganesh has proved that the amount he paid, through Mr Zamri, was sufficient consideration for what he acquired. The fact that the Malaysian ringgit passed through the hands of one or more intermediaries does not affect that Mr Ganesh gave consideration to someone. While the Commissioner did not accept the respondents' interest had been acquired for sufficient consideration, he did not challenge that the Malaysian ringgit were exchanged for Australian dollars at a commercial rate. And the Commissioner did not challenge the evidence of Mr Ganesh and Mr Zamri that the money remitter was chosen because the rates offered were better than those offered by the banks.
[184] Primary reasons [124].
The term 'sufficient consideration' is defined in s 338 of the POC Act as follows:
an acquisition or disposal of property is for sufficient consideration if it is for a consideration that is sufficient and that reflects the value of the property, having regard solely to commercial considerations.
The parties' submissions as to ground 2 are set out in the reasons of Buss P at [196] - [203].
The meaning of 'consideration' and of 'sufficient consideration' in a statute will be influenced by, and must be discerned with reference to, the statutory context.[185]
[185] Director of Public Prosecutions (Vic) v Le [2007] HCA 52; (2007) 232 CLR 562 [107]; Scaffidi v Chief Executive Officer, Department of Local Government and Communities [2017] WASCA 222; (2017) 52 WAR 368 [132].
The statutory text establishes the following as to the meaning of 'sufficient consideration' in s 330(4)(a). First, the consideration must be of equivalent value to the property acquired by the third party; it must 'reflect the value of the property, having regard solely to commercial considerations'. Secondly, the consideration must be given in exchange for the property acquired, in that the property must be acquired 'for' sufficient consideration.
Consequently, in applying s 330(4)(a), the relevant acquisition of property must first be identified: from whom and by what transaction(s) was the property acquired? Secondly, within that framework, it must then be determined whether that property was acquired in exchange for the alleged consideration. Thirdly, if so, the value of the property and the consideration must be compared, having regard solely to commercial considerations. As will be seen, the respondents' case fails at the second step.
In the present case, the relevant property is the respondents' rights in relation to the increased balance of their accounts after the making of the structured deposits. It is important to notice that the respondents acquired this property from the unnamed persons who made the deposits.
Thus, in order to rely on s 330(4)(a), the respondents needed to prove that they gave sufficient consideration for the acquisition of their rights in relation to the increased balance of their accounts after the deposits. That required proof that they acquired those rights in exchange for what they relied on as the consideration. So, it was not enough to conclude, as the primary judge did,[186] that the respondents 'gave consideration to someone', without finding that the property was acquired 'for' - thus, in exchange for - that consideration. For reasons to be explained, no such finding could be made. In short, the respondents' lack of connection to the depositors, from whom the property was acquired, is a fatal obstacle to a conclusion that they acquired the property for sufficient consideration.
[186] Primary reasons [124].
The consideration relied on by the trial judge was the payment by the respondents to Mr Zamri, in Malaysia, of Malaysian ringgit of an equivalent value to the amounts subsequently deposited.[187] That is the consideration to which the respondents point on appeal.[188] The immediate obstacle to identifying the consideration in this manner is that the Malaysian ringgit were paid to Mr Zamri, and not to those who made the deposits. The respondents had no connection, including no contractual or agency relationship, with the unknown depositors. The respondents did not prove that the unknown persons who deposited the sums did so at the request of, and with the authority of, Mr Zamri.
[187] Primary reasons [124].
[188] Respondents' submissions [57], [62].
In these circumstances, the respondents did not prove that they acquired the increased bank balances following deposit in exchange for the Malaysian ringgit they gave to Mr Zamri.
A like conclusion was reached by the New South Wales Court of Appeal, for substantially similar reasons, in Lordianto. In Lordianto, the plurality, with whom McColl JA relevantly agreed, found that:
1.The relevant property, namely the account holder's rights in respect of the increased balance of the account, was acquired from the persons who made the deposits.[189]
2.The account holders relied upon the transactions entered into with, and payments made to, money changers in Indonesia.[190]
3.In order to prove that the account holders had acquired the relevant property for sufficient consideration, they had to prove that the money they paid in Indonesia to the money changers somehow represented, through a series of intermediaries or transactions, funds being deposited into their Australian bank accounts.[191]
4.The appellants had no agency or contractual relationship with the depositors. Nor was any contractual relationship shown between the Indonesian money changers, with whom the account holders had dealt, and the depositors in Australia.[192]
5.Given the absence of a proven connection between the transactions which the account holders entered into in Indonesia, and the deposit of money from unknown sources into the Australian bank accounts by strangers, the account holders failed to prove that they acquired their property for sufficient consideration.[193]
[189] Lordianto [137].
[190] Lordianto [135], [140].
[191] Lordianto [134].
[192] Lordianto [138].
[193] Lordianto [139], [140].
For the reasons already explained, in our view each of these conclusions is equally applicable to the present case.
For these reasons, we would uphold ground 2.
Ground 3
Ground 3 challenges the failure to make an adverse factual finding that relates only to the first respondent, Mr Ganesh.
By ground 3, the Commissioner contends that the judge erred in accepting Mr Ganesh's evidence that, at the time of the deposits, he was not aware of the multiple locations or that the deposits were made in different States. The underlying basis for the Commissioner's contention is that Mr Ganesh had made admissions to the contrary, in an interview with the federal police. The Commissioner alleged, in effect, that the judge erred:
(1)in law by not referring to the evidence of the admissions; and
(2)in fact in not accepting that evidence, and instead accepting Mr Ganesh's sworn testimony, given in the primary proceedings, that he was not aware of those matters at the relevant time.
The relevant part of the record of interview is set out in [250] of the reasons of Buss P. The most significant aspects of the record of interview, for present purposes, are as follows:[194]
[194] It is apparent from watching the interview that 'Ramesh Kalimuthu' is another person in the interview room at the time of the interview with Mr Ganesh.
F/A SAMS: different branches
F/A PERROT: banks, different banks, different everything
F/A SAMS: So they'll go, one in NSW, one in …
Ganesh KALIMUTHU: I saw this, list when I check it through … I thought that … Indistinct … amount of money is in.
F/A SAMS: Yeah
F/A PERROT: So that's, that's why
F/A SAMS: So you're, you're looking at it going as long as it's all there.
Ganesh KALIMUTHU: Yeah I see once I ask them, why … indistinct … always … indistinct … different one, two branch around the area … indistinct … no no no we don't have people there so we don't have time, they say.
F/A SAMS: So, cause they're, they're, by doing that they're making it a lot more difficult for themselves to put the money in, aren't they? Because [they've] got to travel from one branch to another branch and use different people
Ramesh KALIMUTHU: So, so they're travelling quite far in distance?
F/A SAMS: They might not go that far but they might, they might go [to] ten different branches in Sydney.
Ramesh KALIMUTHU: Go around, yes.
F/A PERROT: So it's much easier for them to go once ...
Ramesh KALIMUTHU: indistinct
F/A PERROT: But they don't so why do they do it? 20 times, 30 times they do it because they're trying to hide, the money from government, Australian government.
Ramesh KALIMUTHU: less than 10,000, huh
F/A PERROT: That's right.
Ramesh KALIMUTHU: less than 10,000
F/A PERROT: Yep, so … that's why we're holding onto the money because of that, not necessarily because where its … you've talked to us … thank you, thank you for coming in ... indistinct … explaining it to us it helps us a lot. Um … indistinct … check some of the facts, make sure it all lines up. (emphasis added)
The Commissioner contends that the statement by Mr Ganesh in the interview that he 'saw this, list when I check it through' is a reference to a bank statement on the desk in front of him, and that he was manoeuvring his hands in a manner which demonstrated the viewing and scrolling of images on a hand‑held device.
The broader evidentiary context in which the case was fought in the primary proceedings is outlined below.
Mr Ganesh's evidence, in his affidavit of 27 August 2016, said:[195]
I never saw any printed bank statements relating to the Australian bank accounts. I was not concerned with receiving printed statements, given that I had internet access to the accounts and was able to check the account balance at any time.
[195] Mr Ganesh's affidavit, par 141.
Mr Ganesh, in his affidavit, also said, in effect, that he had been shown two documents which he believed to be 'interim' statements in respect of the ANZ bank accounts. He annexed the statements. It is evident that neither document shows the locations at which deposits were made.[196]
[196] Mr Ganesh's affidavit, par 116.
Mr Ganesh also said in his affidavit that he had been shown a document that he believed to be a 'list of transactions' in respect of his account with the Commonwealth Bank. He annexed that document.[197] The annexed document is headed 'List of Transactions'. This document includes references to various bank branches in Sydney, alongside the monies shown as credited to the account.
[197] Mr Ganesh's affidavit, par 118.
Mr Ganesh said, in his affidavit, in relation to the Commonwealth bank document:[198]
I have been informed that most of the deposits were made in the form of cash at branches in Sydney. I have never been to Sydney and do not have any friends, family or business associates there.
[198] Mr Ganesh's affidavit, par 120(a).
Mr Ganesh was not cross‑examined on the basis that he had made, in the record of interview, an admission of the kind alleged in ground 3. There was, nevertheless, some cross‑examination on the general topic of Mr Ganesh's knowledge of the different branches, at which deposits were made. In that regard, in cross-examination of Mr Ganesh, the following exchange occurred:[199]
[COUNSEL FOR THE COMMISSIONER]: Did you notice deposits being made in places like Sydney?
[MR GANESH]: I came [indistinct].
[COUNSEL FOR THE COMMISSIONER]: Well, no sorry, I will ask that question again?
…
[COUNSEL FOR THE COMMISSIONER]: When you were looking on the - on your phone at the statements, did you notice amounts were being deposited in Sydney?
[MR GANESH]: I never noticed that. I watching the figures.
[COUNSEL FOR THE COMMISSIONER]: You didn't see that?
[MR GANESH]: I never noticed that. I was watching the figures.
[199] ts 158.
In re‑examination the following exchange occurred:[200]
[200] ts 224.
[COUNSEL FOR MR GANESH]: You were asked yesterday - transcript page 158 - about whether you saw any deposits being made to the bank accounts in Sydney.
…
[COUNSEL FOR MR GANESH]: Yes. You said you never saw that.
[MR GANESH]: I never saw that.
[COUNSEL FOR MR GANESH]: Did you ever see, on your phone, the location at which deposits were being made?
[MR GANESH]: No. No. No.
[COUNSEL FOR MR GANESH]: Did the phone show that?
[MR GANESH]: I don't understand, I just saw the (indistinct).
[COUNSEL FOR MR GANESH]: Maybe go through the interpreter. Did the Internet banking on your phone, did it show location - geographical location where the deposits were made?
[MR GANESH]: I never noticed that (indistinct) Smart phones.
[COUNSEL FOR MR GANESH]: So you're not sure whether it was on there?
[MR GANESH]: Yes.
In closing submissions, counsel for Mr Ganesh said:[201]
Mr Ganesh also gave evidence about not seeing the proper information being available to him. Two of these accounts are with the ANZ Bank. Their formal account statements do not disclose where the deposit was located. …
And it's accepted that the Commonwealth Bank statements which are produced at the same affidavits - this is a Commonwealth Bank statement in Mr Ganesh's name. It's described as a list of transactions. It's not a statement.
[201] ts 328 - 329.
The following exchange occurred between counsel for the Commissioner and the primary judge in the Commissioner's closing submissions:[202]
[202] ts 363.
[COUNSEL FOR THE COMMISSIONER]: I just wanted to refer your Honour to the record of interview at 55 minutes and 30 seconds, where the officers - and your Honour may recall, I think Officer Perrett and Officer Sams were explaining to Mr Ganesh the ins and outs of cuckoo smurfing, basically, and at one point Officer Sams holds his hand up and points in another direction and says how these lots of smaller deposits were being made in places, other places, like New South Wales.
And immediately, Mr Ganesh says, 'Yes', points to the statement, and said, 'Yes, I saw this when I was checking through'. And he points to the statement.
ALLANSON J: At that stage he got the statement.
[COUNSEL FOR THE COMMISSIONER]: Yes.
ALLANSON J: And he didn't have the statement at an earlier time, did he?
[COUNSEL FOR THE COMMISSIONER]: The officer was brandishing a document that was a statement. I just draw your Honour's attention to that portion.
ALLANSON J: Yes.
[COUNSEL FOR THE COMMISSIONER]: There is the statement made. They're being made in places like New South Wales and Mr Ganesh acknowledges that and said, 'Yes, I saw when I checked'.
ALLANSON J: I mean, I must say that I'm not sure that that's going to be entirely helpful just in the scheme of things because if you're transmitting money, or if you have organised for somebody to transmit money from Malaysia to Australia, one, whether it's going to be something within your knowledge, and secondly, whether it's going to be something that is of any concern to you as to whether the branch at which it's deposited is the branch at which you opened your account.
[COUNSEL FOR THE COMMISSIONER]: Well, that may be the case.
Unequivocal admissions made in certain circumstances may have an 'overwhelming persuasiveness' unless they can be explained in some convincing way: Voulis v Kozary.[203]
[203] Voulis v Kozary [1975] HCA 44; (1975) 180 CLR 177, 193. See also, generally, J D Heydon, Cross on Evidence (11th ed) [33420].
Voulis was a case in which the plaintiff, Voulis, and the defendants, Kozary and McCullum, met at a hotel and agreed that a lottery ticket should be purchased and that Voulis should buy it. Voulis bought the ticket. The ticket won a prize. Shortly afterwards, the three men went and did radio and television interviews discussing, in effect, that they had jointly won the price. Kozary and Voulis also went to see Kozary's bank manager shortly afterwards, and the bank manager recorded that the three men were to share in the prize. Subsequently, however, Kozary and McCullum denied that Voulis had a one-third interest in the ticket. Voulis sought a declaration that he was entitled to a one-third share in the ticket or other ancillary relief. The primary judge took an unfavourable view of Voulis as a witness, and declined to accept his evidence as to the course of events at the time of the purchase of the lottery ticket. Voulis ultimately successfully appealed to the High Court, relevantly on the basis that despite the special advantages enjoyed by the primary judge, the admissions by Kozary and McCullum showed that the primary judge erred in finding that he did not contribute to the purchase of the ticket and did not have a one-third interest in it.
In Voulis, Jacobs J said:[204]
This is one of those rare cases where, although the conclusion of the trial judge depended upon the view which he took of the plaintiff's credibility as a witness, nevertheless this Court should, in all the special circumstances of the case and on a weighing of the probabilities in relation to the facts in issue, differ from the conclusion reached at first instance.
…
The learned trial judge took an unfavourable view of the plaintiff as a witness. He declined to rely on the plaintiff as giving a truthful account of the course of events at the time when it was determined that a lottery ticket would be purchased. The direct evidence of that course of events which favoured the plaintiff came from the plaintiff alone and a contrary account was given by the surviving defendant, Kozary. If the matter there rested, it would be out of the question for an appeal court to interfere with the conclusion of the trial judge. But the matter does not rest there. … [T]he statements and conduct of both Kozary and McCullum after the drawing of the lottery were unequivocal admissions that the plaintiff did have an interest, that the ticket was shared between the three of them. The admissions, made in the circumstances in which they were made, have an overwhelming persuasiveness unless they can be explained in some convincing way. The statements and conduct were not merely on incidental aspects of the matter. They went to the core. They were not in any way inadvertent or casual or extracted from them in circumstances which might lessen their weight. They were not made in response to questions which suggested the answers which were given. Admissions so made must be given very great probative value.
[204] Voulis (192 - 193).
It may have been open to the primary judge to conclude that Mr Ganesh, by the words and conduct relied on by the Commissioner in ground 3, conveyed the impression in the interview that he had noticed that deposits were made into different branches. However, in our view, the judge was not bound to treat the evidence as a clear and unequivocal admission by Mr Ganesh. That is so for a number of reasons. First, having viewed the beginning of the interview, the relevant part relied on by the Commission and surrounding parts, it appears that Mr Ganesh had a less than complete command of English. Secondly, the recording does not pick up with great clarity the actual words used, and the lack of clarity is compounded by Mr Ganesh's accent. Thirdly, it is apparent from the recording that there is a document on the table at the time the interview takes place, but it is not clear that it is identified as the 'List of Transactions' document from the Commonwealth Bank of Australia. Fourthly, it is not clear that Mr Ganesh was referring to the time that the deposits were being made, as distinct from some later time. Fifthly, the difficulty in treating this particular evidence as evidence of an unequivocal admission tends to be confirmed by the facts that (1) the Commissioner did not open his case by reference to the asserted admission, (2) the Commissioner did not cross‑examine on the asserted admission, (3) the general topic of Mr Ganesh's knowledge of the different branches was only briefly referred to in cross‑examination by the Commissioner,[205] and (4) only fairly faint use was made of the evidence by the Commissioner in closing submissions.[206]
[205] See [486] above.
[206] See [488] above.
If, as is our opinion, the judge was not bound to conclude that there was an unequivocal admission by Mr Ganesh, it could not be said that the evidence referred to by the Commissioner demonstrates that the judge's finding is flawed by reference to incontrovertible facts or uncontested testimony, or is glaringly improbably or contrary to compelling inferences, or that the trial judge has failed to use or has palpably misused his advantage.[207]
[207] Robinson Helicopter Co Inc v McDermott [2016] HCA 22; (2016) 90 ALJR 679 [43]; Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 [28] - [29].
Further, insofar as the Commissioner contends by ground 3 that the judge overlooked the evidence of the interview, we are not persuaded that he did. The evidence was of limited compass, the judge's attention had been drawn to it in closing by counsel for the Commissioner, and the judge's exchange with counsel for the Commissioner indicated that his Honour appreciated that a point was being made about Mr Ganesh's knowledge, albeit not pressed with great conviction.
Accordingly, ground 3 should be dismissed.
Ground 4
A third party who invokes s 330(4)(a) of the POC Act must show that he or she acquired the property in question without 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. Thus, the third party must establish both that he or she acquired the property:
(a)without knowing that the property was proceeds of an offence or an instrument of an offence; and
(b)in circumstances that would not arouse a reasonable suspicion that the property was proceeds of an offence or an instrument of an offence.
Ground 4 concerns the second of these requirements. In that context, the question is whether the respondents established that a reasonable person in their circumstances, and knowing what they knew, would not have had the relevant suspicion aroused.[208] The section does not require the person to have known that the conduct identified by the known circumstances constituted an offence.[209]
[208] Director of Public Prosecutions (Vic) v Le [2007] HCA 52; (2007) 232 CLR 562 [1], [127] ‑ [128]; Lordianto [154].
[209] Lordianto [155] ‑ [161].
Mr Ganesh travelled to Australia and opened the first account with the ANZ Bank on 11 August 2014 and deposited $5,000 into it.[210] He opened the second account, with the Commonwealth Bank of Australia, on the same day and deposited $5,000 into that account. [211]
[210] Primary reasons [14].
[211] Primary reasons [19].
Mr Ganesh gave Mr Zamri amounts of between $65,000 and $500,000.[212] Mr Ganesh had view‑only access to the account statements of the Bank Accounts, meaning that he could 'check the accounts … but not make transactions'.[213] He checked the deposits that were being made.[214] Thus, he knew the amounts that were going in. He noticed that a lot of the deposits were being made in amounts of less than $10,000.[215] He asked Mr Zamri why the amounts he had given to Mr Zamri were not being deposited in one go.[216] The judge did not resolve the conflict, between the evidence of Mr Ganesh and the evidence of Mr Zamri, as to what Mr Zamri said in response to that inquiry.[217]
[212] Primary reasons [40].
[213] Primary reasons [38].
[214] Primary reasons [38].
[215] Primary reasons [41].
[216] Primary reasons [41], [51].
[217] See primary reasons [41] and [51].
The judge found that Mr Ganesh's failure to inquire further into why the funds were being deposited in small amounts was not because Mr Ganesh knew that deposits being structured in that way was indicative of money laundering.[218] That finding does not answer the second of the two questions to which [497] above refers. That question is whether Mr Ganesh had established that in his circumstances, and knowing what he knew, a suspicion that the property acquired was proceeds of an offence would not have been aroused in the mind of a reasonable person. The fact that Mr Ganesh did not, subjectively, know that this was the reason for structuring the deposits into small amounts, relative to the amounts he gave to Mr Zamri, does not address the objective inquiry. The relevant circumstances include, in this case, that Mr Ganesh opened, and held in his name, bank accounts in Australia.
[218] Primary reasons [138].
Mr Ganesh opened and held the bank accounts in question in Australia. Although he limited his operation of the accounts to 'view only' access after the initial deposits of $5,000, he nevertheless used his access to view the transactions in the accounts. He knew that the very large amounts of cash he provided to Mr Zamri, from time to time, were not leading to deposits in corresponding amounts, but rather to a number of deposits of considerably smaller amounts. He did not establish a cogent explanation for why this might be so. Further, Mr Ganesh knew that he was obtaining a better exchange rate than could be obtained through the use of a bank.[219] In our view, Mr Ganesh has not established that he acquired the property (his rights against the bank after the deposits) in circumstances that would not arouse a reasonable suspicion that the deposits were the proceeds of an offence, involving an attempt to avoid the reporting of the deposit of large sums of cash into accounts. Ground 4 as it relates to Mr Ganesh must be upheld.
[219] Primary reasons [124].
Although the Commissioner's submissions did not treat Mrs Ganesh (the second respondent) separately, Mr Ganesh's knowledge cannot be attributed to her. The judge observed that Mrs Ganesh's evidence was not challenged in cross‑examination. It was, relevantly, to the effect that:[220]
(1)Mr Ganesh told her that she should open a bank account in Australia;
(2)she and Mr Ganesh travelled to Perth between 25 and 28 September 2014;
(3)she opened the third bank account, with the ANZ Bank, in her name, on 25 September 2014; and
(4)she first saw a statement of that account in August 2016.
[220] Primary reasons [24], [56] - [62].
In Mrs Ganesh's circumstances, and knowing what she knew, no conclusion could be drawn that she acquired the property (her rights against the bank) in circumstances that would arouse a reasonable suspicion that the deposits were the proceeds of an offence, involving an attempt to avoid the reporting of the deposited large sums of cash into accounts. On the evidence before the primary judge, his Honour was correct to conclude that, insofar as she was a third party, she had established both of the requirements referred to in [497] above. Thus, ground 4 fails as it relates to Mrs Ganesh.
Other matters
While we are inclined to the view that the primary judge's orders, impugned by the appeal, are properly characterised as final, it is not necessary to decide this point. If, and insofar as, leave is required, it should be granted. The interests of justice favour the grant, in order that the erroneous outcome below be corrected and given the broader significance of the questions of construction and application of s 330(4)(a).
Buss P's reasons for dismissing the application for leave to intervene in the appeal[221] reflect our reasons for joining in that order.
[221] Reasons of Buss P [317].
Conclusion
We would allow the appeal and set aside the orders of the primary judge. Counsel should be heard as to the precise form of the orders and as to costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
LW
RESEARCH ASSOCIATE TO THE HONOURABLE JUSTICE BEECH31 OCTOBER 2018
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