Commissioner of the Australian Federal Police v Lee (No 2)

[2016] NSWSC 1131

Supreme Court

New South Wales

Medium Neutral Citation:	Commissioner of the Australian Federal Police v Lee (No 2) [2016] NSWSC 1131
Hearing dates:	9 August 2016
Date of orders:	09 August 2016
Decision date:	09 August 2016
Jurisdiction:	Common Law
Before:	Campbell J
Decision:	(1)  The defendants are to file all evidence in support of their s 31 exclusion application by 4 October 2016. (2)  Should the defendants elect not to proceed with the s 31 application, they are to notify the plaintiff on or before 4 October  2016. (3)  List for directions before Common Law Case Management Registrar at 9 am on 11 October 2016 to confirm compliance with these orders, make directions for the filing of plaintiff's evidence in response and fix a date for the hearing of the s 31 application. (4)  Set aside the costs order pronounced on 1 July 2016 (order 3). (5)  The costs of the parties before me are costs in the cause.
Catchwords:	PROCEEDS OF CRIME – Applications for exclusion from restraining orders – Applications for forfeiture orders – whether forfeiture applications should be determining before the applications for exclusion from the restraining orders INTERPRETATION – construction of instruments – federal legislation – application of Victorian Court of Appeal authority which contradicts New South Wales Court of Appeal obiter
Legislation Cited:	Proceeds of Crime Act 2002 (Cth), ss 19, 29, 49, 77
Cases Cited:	Autodesk Inc v Dyason (No 2) [1993] HCA 6; 176 CLR 300; Commissioner of the Australian Federal Police v Vo [2015] NSWSC 1523; Commissioner for Australian Federal Police v Zhang (Ruling No 1) [2015] VSC 390; 298 FLR 128; Commissioner for Australian Federal Police v Zhang [2016] VSCA 171; Elliott v R [2007] HCA 51; 234 CLR 38; Farah Constructions Pty Limited v Say-Dee Pty Limited [2007] HCA 22; 230 CLR 89; Lee v Director of Public Prosecutions (Cth) [2009] NSWCA 347; 75 NSWLR 581
Category:	Procedural and other rulings
Parties:	Commissioner of the Australian Federal Police (Plaintiff) Fatt Wai Lee, Saw Hoon Loh and Kai Wen Lee (Defendants)
Representation:	Counsel: S Clemmett (Plaintiff) C Juebner (Defendants) Solicitors: Australian Federal Police (Plaintiff) Lawcorp Lawyers (Defendants)
File Number(s):	2015/136406

Ex Tempore judgment (REVISED)

1. I am dealing with an application to re-open a decision I made on 1 July 2016.

2. The proceedings are brought by the Commissioner of the Australian Federal Police under the Proceeds of Crime Act 2002 (Cth) seeking, by way of principal relief, forfeiture orders under s 49 of that Act.

3. My previous decision has the median neutral citation [2016] NSWSC 915. I will not re-ventilate the issues traversed and dealt with in that judgment. I re-iterate for the purpose of this judgment, however, that on 7 May 2015, Harrison J made restraining orders under s 19 of the Act in respect of thirteen separate bank accounts in which the defendants had an interest. In accordance with the usual procedures under the Act, those orders were made in the absence of other interested parties, including the defendants.

4. It is necessary also to re-iterate that by notice of motion filed on 5 June 2015, those parties sought, inter alia, the following:

1. An order excluding their interest in the property from the restraining orders under s 29 of the Act (the s 31 application);

2. An order excluding their interest in the property from the forfeiture orders under s 49 of the Act (the s 74 application);

3. Compensation under s 77 of the Act.

5. The issue that I was called upon to determine in my prior decision related to the management of the case: simply, in which order should the parties file evidence relating to the various competing applications.

6. At the time my decision was made, the decision of T Forrest J in Commissioner for Australian Federal Police v Zhang (Ruling No 1) [2015] VSC 390; 298 FLR 128 was strongly to the effect that, relying on what I regarded as an exemplification of the legality principle, the proper interpretation of the Act was that the application of the Commissioner for forfeiture should be determined in advance of other applications. It is notable that that ruling was made at a hearing where all applications were listed for hearing, rather than a directions hearing dealing with pre-trial preparation. As it transpired, I did not adopt the approach propounded by his Honour. See [19]-[21] of my decision.

7. However, I did say the following(at [18]):

“I am not satisfied that the consideration that the scheme of the Act requires that generally a person asserting an innocent interest in restrained property will need to take affirmative steps to vindicate that interest, in all cases requires that an exclusion application (or compensation application) ought always be determined first and in advance of the forfeiture application.”

I observed that a compensation application can probably only be determined after a forfeiture application, but not necessarily.

8. I then decided, for reasons I expressed at [28] – [30], that the Commissioner should file the evidence relied upon for principle relief in advance of any further evidence by the defendants. In making that decision, I was influenced by a number of factors, which I will not rehearse, but including the consideration that the resolution or determination, after a contest, of a s 31 application will not necessarily resolve the whole proceedings.

9. I directed that the parties bring in short minutes of order giving effect to my reasons in seven days, granting liberty to apply if agreement could not be reached. From the affidavit of the defendant’s solicitor, Ms Danijela Luzaic, sworn 8 August 2016, I am satisfied that unsuccessful efforts were made by the parties to arrive at an agreement.

10. In what might be regarded as an example of legal and forensic serendipity, in the meantime, the Victorian Court of Appeal handed down its unanimous decision on appeal from a decision of T Forrest J (Commissioner for Australian Federal Police v Zhang [2016] VSCA 171). Their Honours were, with respect, firmly of the view that on its proper construction, considering the scheme of the Act as a whole, a s 31 application was required to be dealt with prior to, and separately from, forfeiture applications by the Commissioner. At [80] – [82], their Honours said the following:

“In our view, the judge was led into error by the submissions of Zhang and Shen. The judge dealt with the issue of the sequence of the applications upon the basis that it was open to hear and determine the forfeiture applications before hearing and determining the s 31 exclusion applications. Properly construed, the Act does not permit exclusion applications made under s 31 of the Act to be heard after the hearing and determination of forfeiture applications.

Under the Act, Zhang and Shen were either required to pursue the s 31 exclusion applications before the forfeiture applications were determined, or to withdraw the s 31 exclusion applications. The Act does not allow for s 31 exclusion applications to be kept on foot, with the consequence that s 49(3) is deprived of any operation, without determination.

The judge’s error had the effect of permitting Zhang and Shen to require the Commissioner to prove one of the matters set out in s 49(1)(c) of the Act by simply maintaining on foot an application that would never be heard. In other words, Ruling No 1 deprived the Commissioner of an opportunity significantly to add to the evidentiary material upon which the forfeiture applications were to be heard. It is not to the point that the Commissioner might now be unable to say with any precision what change he could have made to the evidentiary foundations upon which he was entitled to have his forfeiture applications decided.[58]  As is often the case in matters of this kind, the details of the sources from which particular property might have been acquired is always more likely to be in the hands of those who claim an interest in the property than a responsible authority (in this case, the Commissioner).”

And at [84], the court said:

“Finally, on the question of sequence, it is necessary to consider the logic underlying the Act. As forfeiture orders are made under s 49 over restrained property, the first step for the court must be to identify the scope of the restraining order. Where a s 31 application has been made, this requires the court to identify what property remains within the scope of the restraining order after a s 31 application has been heard and determined. It is that remaining scope which identifies the property to be forfeited. It follows that an exclusion application must be determined before the court considers whether the property should be forfeited pursuant to s 49(1)(c).”

11. It is quite clear that the passage I have quoted constitutes the ratio decidendi of what is a unanimous decision of the Victorian Court of Appeal. It is a well‑established principle of the modern law of judicial precedent that:

“Intermediate appellate courts and trial judges in Australia should not depart from decisions in intermediate appellate courts for another jurisdiction on the interpretation of Commonwealth legislation or uniform national legislation unless they are convinced that the interpretation is plainly wrong and, since there is a Common Law of Australia rather than of each Australian jurisdiction, the same principle applies in relation to non-statutory law” (Farah Constructions Pty Limited v Say-Dee Pty Limited [2007] HCA 22; 230 CLR 89 at 151-2, [135]).

12. In this case it is of interest that a clear statement of the Victorian Court of Appeal might be seen to be different from an observation made by the New South Wales Court of Appeal in Lee v Director of Public Prosecutions (Cth) [2009] NSWCA 347; 75 NSWLR 581 where a court, constituted by Basten JA, Macfarlan JA and Sackville AJA, said at [54] :

“It has been accepted in other cases that the applicant for an exclusion order bears the onus of proving the matters necessary to establish the grounds for making the order…However, what is less clear is whether it is sufficient for there to be an application for an exclusion order, which need not necessarily be determined, in order to place on the Director the obligation of satisfying the Court that the property is the proceeds of a relevant offence under s 49(1)(c).” If, as appears from the wording of the section, the application of the Director to satisfy the court under s 49(1)(c) that the property is the proceeds of an offence is engaged merely by making an exclusion application, which need not be determined, the legal burden of proof is not on the applicant but on the Director. (My emphasis.) (See my earlier judgment at [14].)

This statement was not part of the ratio in Lee which was concerned with whether proceedings under the Act should be stayed until, at least, a decision was made whether to prosecute for an offence reasonable suspicion for which founded the restraining order. The passage I have quoted , with respect, does not seem to have been considered dictum forming a necessary part of the reasoning process arrived at after having had the benefit of full and considered argument by counsel.

13. However that may be, I acknowledge that it is not for me to say whether a decision of the Court of Appeal is per incuriam, with respect. However, one possible difficulty is which statement I am bound to follow. As the statement of the New South Wales Court of Appeal was obiter and the passages I have quoted from the Victorian Court of Appeal's more recent decision is ratio, then I am bound to follow the Victorian Court of Appeal decision notwithstanding the consideration that I am a judge in the same judicial hierarchy directly below the New South Wales Court of Appeal.

14. Having regard to that analysis, I am of the view that I misapprehended the relevant law when I made my previous decision. In Autodesk Inc v Dyason (No 2) [1993] HCA 6; 176 CLR 301 at 303, Mason CJ dealt with the power of a court to reopen previous decisions. That case concerned the situation where orders had been pronounced but not entered. His Honour said:

“What must emerge, in order to enliven the exercise of the jurisdiction, is that the Court has apparently proceeded according to some misapprehension of the facts or the relevant law and that this misapprehension cannot be attributed solely to the neglect or default of the party seeking the rehearing. The purpose of the jurisdiction is not to provide a backdoor method by which unsuccessful litigants can seek to re-argue their cases.”

As I have already said, this is not a case where I have pronounced orders, let alone entered them, and I record, in any event that Mr Juebner of counsel, who appears for the defendants, does not rely in any way upon any manifestation of the finality principle. With respect, that stance is properly taken given that my decision concerned matters of practice and procedure and, even had I made orders or directions in relation to the future conduct of the proceedings, being interlocutory, they would have been susceptible to a second application seeking to have them reopened.

15. As Ms Clemmett of counsel, who appears for the plaintiff, has pointed out, the principle stated by Mason CJ, in his dissenting judgment, was accepted and applied by a unanimous High Court of Australia in Elliott v R [2007] HCA 51; 234 CLR 38 at [31]-[32]. I am satisfied that in a material way, in stating my previous reasons which I intended to be given effect to by orders agreed upon by the parties, I misapprehended the law and that it is appropriate for me to reopen my decision in the light of the new authority provided by the Victorian Court of Appeal.

16. Mr Juebner of counsel argues that in any event my decision should be no different. He argues that Zhang concerns the order in which applications must be dealt with; it does not concern or have anything to say about what case management orders ought to be made in a given case for the exchange of evidence in a case like this where principal relief and interlocutory relief of a competing nature is sought by the parties to the dispute. With respect, there is force in that argument. As I explained in my previous reasons, the considerations informing the proper decision as to case management were evenly poised.

17. On the other hand, Ms Clemmett has argued persuasively, given the Zhang decision and in particular the statement at [91], which I have not so far referred to, that substantial injustice would be occasioned to the Commissioner by the defendants being permitted to leave on foot the s 31 exclusion applications in circumstances where those applications can serve no purpose other than to deprive s 49(3) of the Act of operation, and that I should be persuaded that the interested persons should be put in a position, as the Act contemplates, where they must make a decision whether to proceed or not with the s 31 applications. Indeed, looking at it at a more prosaic level, given that s 31 applications must be determined in advance of s 49 applications, it would put the Commissioner at a disadvantage and involve the incurring of wasted costs if I did not make directions which required the s 31 application to be brought on for hearing before the Commissioner was required to put on the evidence which he ultimately relies upon.

18. I observe that requiring the defendants to proceed, if they decide to, with the s 31 applications and providing the Commissioner with an opportunity to derive evidence from that process by way of cross-examination or otherwise, seems to be a factor within the intended operation of the Act, according to the Victorian Court of Appeal's analysis. Whereas I remain concerned about the fragmentation of the proceedings that will result from that approach, it seems to me that this now the only correct approach, having regard to the decision of the Victorian Court of Appeal.

19. It should be borne in mind that the s 31 applications are interlocutory in nature. Now that I am better informed by the decision of the Victorian Court of Appeal it seems to me that permitting a s 31 application to hang in the air, as it were, has about it at least a hint of an abuse of process if it is not to be proceeded with and its only purpose is to deprive the Commissioner of the procedural advances of s 49(3) and, as it were, to tease out from him evidence he may have available to him justifying forfeiture.

20. For these reasons, I think the proper order is one which requires the defendants to not only file their evidence in relation to the s 31 application but also to bring it forward for hearing as soon as they practicably can. Directions for the filing of evidence in the principal proceedings should abide the outcome of that application. It will be necessary, however, to bring the whole matter back before the Registrar for directions lest the defendants decide not to proceed under s 31.

21. For completeness, I should make reference to the passage in Zhang at [57] to [61], drawn to my attention by Mr Juebner, to the effect that dismissal of a s 31 application after a contest does not engage s 49(3). Those passages were largely based upon concessions made at the hearing of the appeal, and it may be that this question remains open. However, their Honours did record at [61]:

“It is no longer in contest that where an exclusion application has been made, but is dismissed, the Commissioner is nevertheless required to prove that the property he seeks to forfeit is the proceeds of an indictable offence, or an instrument of a serious offence, in accordance with s 49(1)(c).”

I take the reference to dismissal in this passage as a dismissal of a s 31 exclusion application after a hearing on the merits: cf Commissioner of the Australian Federal Police v Vo [2015] NSWSC 1523.

22. I order:

1. The defendants are to file all evidence in support of their s 31 exclusion application by 4 October 2016.

2. Should the defendants elect not to proceed with the s 31 application, they are to notify the plaintiff on or before 4 October 2016.

3. List for directions before Common Law Case Management Registrar at 9 am on 11 October 2016 to confirm compliance with these orders, make directions for the filing of plaintiff's evidence in response and fix a date for the hearing of the s 31 application.

23. I have heard counsel further on the question of costs. It is perhaps a little unfortunate that the parties have had to argue this point twice given that when it came before me on 31 May 2016 it was known that the leave application and appeal from T Forrest J's decision was to be heard concurrently by the Victorian Court of Appeal on 21 June 2016. The matter was obviously one of some importance, and it could have been predicted that the Victorian Court of Appeal would deal with it with expeditiously, as the event has demonstrated.

24. I am informed that an application was made that this matter be adjourned until the Court of Appeal's determination was handed down but that that application was refused. Proverbially, it is always easy to be wise after the event, and I will make no further comment. However, the decision I made on 1 July did not depend upon the reasons of T Forrest J in Zhang. Rather I followed the obiter dictum in the New South Wales Court of Appeal decision in DPP v Lee and applied to the case my understanding of the usual case management principles which govern in civil litigation in New South Wales. Although my impression at the time was the case called for an application of the “indulgence rule” in relation to costs, I granted leave to the parties to revisit the costs question if so advised. Mr Juebner would have taken up that application and, indeed, caused written submissions to be sent to my chambers within the time allowed by me. Events have rather overtaken the parties and, as I said during the course of argument, I think it appropriate now to deal with the matter compendiously.

25. It is true, as Ms Clemmett argues, that the event favours the Commissioner and that the general rule that costs follow the event would dictate that the Commissioner have his costs of the whole of the proceedings before me.

23. Having considered the whole of the argument carefully and given what that event depends upon is, I think, properly described as a development in the law in terms of the interpretation of the Act, which is contrary to the dictum in Lee upon which I originally acted, I am persuaded that the proper order is that the costs of the parties be costs in the cause.

24. In coming to this conclusion, I bear in mind that these are quintessentially interlocutory applications. The significance of them for the future conduct of the litigation will not be known until the case is finally decided. The order I have made, of course, will mean that the ultimately successful party will recover the costs of these hearings before me. Neither party took a stance or an attitude that was unreasonable; neither party took a stance or an attitude that was not available on the law as it was understood at the time of each hearing before me.

25. I make the following additional orders:

(4)       Set aside the costs order pronounced on 1 July 2016 (order 3).

(5)       The costs of the parties before me are costs in the cause.

**********

Decision last updated: 16 August 2016