Commissioner of the Australian Federal Police v Zhao & Anor

[2014] HCATrans 202

[2014] HCATrans 202

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M65 of 2014

B e t w e e n -

COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE

Applicant

and

QING ZHAO

First Respondent

XING JIN

Second Respondent

Application for special leave to appeal

FRENCH CJ
BELL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 12 SEPTEMBER 2014, AT 9.30 AM

Copyright in the High Court of Australia

MR D.J. NEAL, SC:   I appear on behalf of the Commissioner in this matter with my learned friend, MR P. KULEVSKI, if your Honours please.  (instructed by Australian Federal Police – Proceeds of Crime Litigation)

MR T.D. BEST:   Please the Court, your Honours, I appear on behalf of the respondents.  (instructed by Chiodo & Madafferi)

FRENCH CJ:   Yes, Mr Neal.

MR NEAL:   Your Honours, we say that the fundamental question raised in this appeal is the proper test for the granting of a stay in rem forfeiture proceedings under the Commonwealth Proceeds of Crime Act.  We say that same question arises in circumstances in State and Territory jurisdictions where there are similar legislative provisions.

We say that there is a sharp divergence between the approach to that question adopted in the court below, which followed the decision of the Queensland Court of Appeal in Jo and the decision of the New South Wales Court of Appeal in what I will refer to as Lee (2009), which criticised Jo and said that the approach to the legislation there it could not agree with.  We say that the Jo test, or the test adopted by the court below, was wrong in that it essentially says that where there is a substantial overlap of subject matter between the criminal and the civil proceedings, there will almost always be a risk that evidence given will cause a real risk to the administration of justice, and therefore a stay must be granted.

We say by contrast to that, and following the decision of this Court in what I will call Lee (No 1) – that, of course, is a decision in relation to compulsory examinations – that the proper approach is to apply the same test that the Court in Lee (No 1) applied, namely to first question whether the respondent to the forfeiture proceedings has shown a real risk to the administration of justice and, if so, the court should then ask itself is it possible to impose conditions on the civil proceedings which will diminish or remove that risk.  We say that test can be found, among other places, in the judgment in Lee (No 1) in the joint judgment of Justices Gageler and Keane, paragraphs [335] and [339] to [340].

FRENCH CJ:   Now, where do you say the Court of Appeal found a conflict between Lee (No 1) and Lee (No 2), because that is 3b in your grounds of ‑ ‑ ‑

MR NEAL:   Yes, your Honour.  We say that arises in the course of the reasons of the court below ‑ ‑ ‑

FRENCH CJ:   Can you pinpoint the text?

MR NEAL:   Yes, your Honour.  The real nub of it emerges in paragraph 58 of the judgment below, and also at 67 – perhaps if we go to paragraph 50 first.  Your Honours will see, starting at paragraph 43, the court deals with the decision in Lee (No 1), and having dealt with that, it then comes to Lee (No 2) ‑ ‑ ‑

FRENCH CJ:   Does the court identify any difference of principle underlying the two decisions as distinct from difference in the statutory settings?

MR NEAL:   The court below appears to find that Lee (No 2) prevents the application of conditions in situations where the subject matter of the two proceedings overlap.  We say that that is the incorrect approach, and we say it is very clear from Lee (No 1) that mere overlap of the subject matter is not sufficient for the granting of a stay.

FRENCH CJ:   I am just concerned with your ground 3b.  You say that:

the Court below erred when:

b.It found that there was a conflict between the decisions of this Court in . . . (Lee (No 1)) and . . . (Lee (No 2)) –

and I am just asking you to pinpoint where the Court of Appeal actually said that.

MR NEAL:   If I can take you then to paragraph 50, your Honour:

More recently, however, the High Court has spoken unanimously in Lee v The Queen in terms which imply that, where the subject matter of forfeiture proceedings is substantially the same as the subject matter of criminal proceedings, unless the forfeiture proceedings are stayed until completion of the criminal proceedings, the Crown may be advantaged in a manner which fundamentally alters its position vis-à-vis the accused and therefore renders the trial of the criminal proceedings unfair.

It then goes on to interpret the decision in Lee (No 2) as in some way adopting a test which says once the subject matter of the two proceedings substantially overlaps, then it is not possible to impose conditions such as the non‑disclosure conditions which were applied in Lee (No 2).  We say that Lee (No 2) does not stand for such a proposition.  We say that Lee (No 2) says that conditions may be applied to diminish or remove the risk, and that Lee (No 2) is not saying at all that the mere fact that the subject matter overlaps means that you cannot go on then to apply conditions. 

Indeed, the sensible reading of Lee (No 2), we would say, is that if the risk to do with the administration of justice arises, conditions may be applied to mitigate that, and if those conditions are breached, then the consequences will flow because the proceedings will be tainted, as they did in Lee (No 2).  The Court of Appeal below seems to be saying, well, what Lee (No 2) was saying was where there is an overlap, you cannot use conditions because you cannot enforce them.  We say that Lee (No 2) is actually saying you can apply conditions, and if they are breached the consequences will be that the decision will be overturned because the risk that had been identified and gave rise to the conditions in the first place has been breached.

BELL J:   Lee (No 2) was directed to consideration of the consequences of breach of condition.  It may be that the Court of Appeal’s analysis of which you complain depends upon Lee (No 2) at page 10, paragraph 32, in which there is reference to the statement that:

Our system of criminal justice reflects a balance struck between the power of the State to prosecute and the position of an individual –

and that broad statement of principle.  Your point is Lee (No 2) was addressing rather different considerations?

MR NEAL:   It is, your Honour.  The difficult balance that your Honour has directed us towards really is in the context of in rem criminal forfeiture proceedings – sorry, in rem civil proceedings – is to draw that balance, and we say that what the principles enunciated in Lee (No 1) have done has said that balance will be struck by considering first whether it is shown that there is a real risk to the administration of justice, and then second, are there conditions which can be imposed which would diminish or remove that risk.  We say that the clear statutory purpose of the scheme, as all of the courts to deal with it have said, is to impinge on those rights to some extent, but not to the extent that a real risk to the administration of justice will go unanswered.

When the Court of Appeal comes later in its judgment at paragraphs 61 to 63 to consider what steps are available to it, it regards itself as bound not to go to the question of conditions, but to say that the overlap of the subject matter will automatically, virtually, lead to a stay.  We say that is to frustrate the intention of the legislation.

FRENCH CJ:   The real complaint, if one looks at 3b – and I take it that the draft notice of appeal is simply that you say the court erred:

by holding that Lee (No 2) required it to stay the Commissioner’s and the respondents’ applications under the Act to prevent any further abrogation of the privilege against self-incrimination –

MR NEAL:   Yes.

FRENCH CJ:   In other words, you say simply it is a misconstruction or a misunderstanding of Lee (No 2)?

MR NEAL:   We do.

FRENCH CJ:   That is why I am concerned about not having distractions.  There may be argumentative discussion about the relationship between (No 1) and (No 2), but the essence is (No 2) is a unanimous reasoned decision of the Court, and the question is what it said.

MR NEAL:   Yes.  We say the Court of Appeal below is wrong in two respects.  Firstly, civil forfeiture proceedings do not remove the privilege against self‑incrimination or the right not to assist the prosecution; they remain.  There is a practical compulsion, we see that, but that is addressed by firstly referring to the purposes of this legislation which is to allow civil in rem proceedings to precede a criminal trial, and that the balance struck in Lee (No 1) is to say well then the court may consider, for example, non‑disclosure provisions, which was offered in the court below but rejected, in order to address that risk.  Lee (No 2) is not saying there never should have been conditions in that case because the subject matter overlapped; it is saying that there can be conditions, and that is the desired course, and if the conditions are breached, then the subsequent proceeding is tainted.  They do not say, look it was just inappropriate to have imposed conditions in the first place.

FRENCH CJ:   All right.  The other point, then, goes to the fact that one of the respondents to the application was not a party to the criminal proceedings in this.

MR NEAL:   Yes, that is right, your Honour, and not charged.  We say that the clear purpose of the legislation, that property is restrained under section 19 of the Proceeds of Crime Act.  That does not require, as a lot of this legislation – it does not require that anyone be convicted of any offence.  It simply requires that the allegation based on a reasonable suspicion that the property is the proceeds of crime.  She is not charged with any offence.  She offered no evidence whatsoever as to the risk to the administration of justice involving her, and she is the sole owner of the property.  We say that no evidence of risk and the purpose of section 19 and of the legislation generally is to allow the civil forfeiture proceedings to go ahead against her, and she showed no material and there is no reason why that that proceeding should have been stayed.

These points both go to wider considerations about the general operation of this legislation.  Your Honours will have seen in the expedition affidavit from Mr Gray that there are presently some 44 cases in the system Australia‑wide which will involve forfeiture proceedings where both criminal and civil matters are on foot and a larger number of cases more generally.

We say that in terms of the proper operation of the legislation, it is incumbent, with respect, on this Court to give an authoritative ruling as to what is the correct principle in which to approach these cases, and we say the correct principle are the principles expressed in Lee (No 1).  That not only does it apply to compulsory examinations, the subject matter of Lee (No 1) itself, but also to forfeiture proceedings.  That is the matter that is outstanding before the Court via this application; what is the correct approach to forfeiture proceedings as opposed to compulsory examinations, and especially so in relation to civil forfeiture proceedings.

It would be a very odd result, we would say, if, in considering whether someone would be subject to a compulsory examination which is ancillary to forfeiture proceedings, there was a test which said “is there a real risk and we may impose conditions”.  Therefore, the stay is denied; you immediately go to a forfeiture proceeding, but then because there is an overlap, the forfeiture proceeding goes no further.  That would seem to defy common sense.

In our summary of argument, we outline the reservations and the different approach outlined in the Court of Appeal in Lee (2009).  Of course, Lee (No 1) is a subsequent decision and we say imposes a more moderate standard than Lee (2009) did by applying the real risk to the administration of justice test and the use of conditions to control or diminish that, and only if those two conditions are not satisfied would a stay be granted.  We say that is essential to the proper functioning of this legislation which clearly does intend for civil proceedings to proceed in parallel with criminal proceedings and to enable them to be dealt with first when the circumstances suggest.

FRENCH CJ:   The trial itself is set down for August next year, is that right?

MR NEAL:   Yes, your Honour.

FRENCH CJ:   Yes, all right, thank you.  Is there any reason why we have got the words “in rem” ahead of “civil forfeiture”?

MR NEAL:   Your Honour, it is ‑ ‑ ‑

FRENCH CJ:   I do not want you to spend much time on it, but I just wondered why it is there.

MR NEAL:   Simply to denote, as this Court did in Emmerson, that there is a significant history of forfeiture proceedings in rem via Admiralty and the Exchequer division and other forfeiture proceedings, but the essentials turn on this statute, but it has the historical significance of this.  This is not unprecedented, and in those cases and including Emmerson, the Court pays special stress to the statutory purpose enunciated by the Parliament in relation to proceedings such as these which can be harsh and even draconic, as some of the cases say, but then emphasised that the statutory purpose is for Parliament to decide, and if it is expressed in the legislation, it is incumbent on the courts to give effect to that statutory purpose.

FRENCH CJ:   All right, thank you, Mr Neal.  Yes, Mr Best.

MR BEST:   Your Honours, there was the first initial question put to my learned friend about where did the Court of Appeal find a conflict between Lee (No 1) and (No 2).  Paragraph 53 – it is at page 41 of the application book, paragraph 53; this is in the Court of Appeal’s reasons under the heading “Is Lee No 2 applicable?”:

We do not consider that Lee No 2 can or should be distinguished on that basis.

This is the previous argument put by counsel for the Commissioner.  Then over the page at paragraph 54, that Lee (No 2) – and this is towards the end of the first sentence – effectively:

reinforced the importance of these principles.

Those principles being the fundamental principle; that is, that it is the burden on the prosecution to prove its case without any assistance whatsoever from the accused.  Lee (No 2) reinforced the importance of that principle, and that principle holds aside from whether or not the privilege against self‑incrimination is abrogated in the statute.

The Court of Appeal looked at the relevant Act, the Proceeds of Crime Act, saw that there was no having regard to the principle of legality and whether Parliament had clearly turned its mind to abrogating a principle such as the fundamental principle, saw that it had not, and had regard to it, and it applied its discretion.  So the Court of Appeal decision is a decision that reflects the proper exercise of discretion, and it should be contrasted with the decision of the County Court below, where error of fact was found, where there was error of law based on the House v The King test; that is, failure to exercise proper discretion, and not only that – so it was necessary for the Court of Appeal to revisit and re‑exercise the discretion.  We say it did so having regard to accepted and unchallenged principles; that is, it did not get the principles wrong.  It understood them ‑ ‑ ‑

FRENCH CJ:   The principle is fairly broadly stated, though, the underlying principle of the essential accusatorial and adversarial character of criminal proceedings.  What we are looking at here, are we not, is its application in an important subset, if you like; a particular class of proceedings affecting criminal proceedings ‑ ‑ ‑

MR BEST:   Yes, civil forfeiture proceedings.

FRENCH CJ:    ‑ ‑ ‑ which have not been directly examined before in any of these cases.

MR BEST:   No, that is right.  The High Court has not examined this particular subset of proceedings, as your Honour calls it.  But notwithstanding that, the same principles easily translate, they easily still apply, and focus is necessarily brought to bear on them that perhaps was not done previously.

Lee (No 2) reinforces the importance of those principles.  It reinforces the importance of the decision in X7, which dealt with the very same principles, and all of that aside, your Honours, there still remains the fact it is put by the Commissioner in this leave application that the fault of the Court of Appeal’s decision is it purely applied this mere overlap of subject matter test.  But when one reads the reasons of the Court of Appeal, that clearly was not the case.  It clearly had regard to all the facts and circumstances, and we come back to what Chief Justice Gibbs talked about in, I think it was Hammond v The Commonwealth; you look at the entire risk, the whole risk, and what are all the facts and circumstances of the particular case.  Coming back to the case for Mr Jin and his wife, Ms Zhao, there are particular facts and circumstances that the Court of Appeal had regard to ‑ ‑ ‑

BELL J:   How did the Court of Appeal deal with the circumstance that the property was owned by the first respondent and the first respondent was not the subject of pending proceedings?

MR BEST:   Yes.  The Court of Appeal, very early on in the appeal, termed the various applications that are before the Court under the Proceeds of Crime Act – so there are various applications brought by my clients to protect their property, to take positive steps to establish their personal interest in the property, and that is to exclude it from the restraining order; to protect their property from forfeiture.  Alternatively, there is the application brought by the Commissioner of the AFP for forfeiture of that property.  All of those applications, and I think there are probably about three or four separate applications, were all bundled together and they were all referred to as “the forfeiture proceedings”, not merely for ease of reference but because it was recognised by the Court of Appeal that all of these proceedings are necessarily interrelated.

BELL J:   Where do we find the Court of Appeal’s treatment of that question?

MR BEST:   Page 45 of the court book – sorry, page 46, paragraph 67:

in the interests of avoiding a multiplicity of proceedings, we propose to make the same orders in respect of Zhao’s matters and, although Jaks is not a party, also in Jaks’ matters.

Jaks is a company that Mr Jin is a director of.  There is a vehicle that has been restrained.  So implicit in that is the recognition that all of these proceedings are interrelated, that any evidence given, for instance, if Ms Zhao’s civil forfeiture proceedings were to run first, that would necessarily require the very same evidence to be given; that is, without doubt, it would be put to Ms Zhao, “you own your Donvale property.  How did you acquire it?  Where did the proceeds come from?”  If she said “my husband gave me cash”, “What do you know of that cash?  Where did it come from?” and within a flash, we are dealing with the very same subject matter that Mr Jin will have to deal with and would be required to face if he is to present a case to the court that his assets were acquired with legitimate proceeds.  So they are all necessarily intertwined.  They are all interrelated, and on that basis, to hear one of them would go against the principle of avoiding the multiplicity of proceedings.  It is simply dealt, and that is how it was dealt.  There is nothing further I can say about that.

Your Honours, I mentioned that this is a case of the Court of Appeal exercising its proper discretion having regard to unchallenged principles.  We say the principles were not in issue, having regard to all of the facts and circumstances of the case and having regard to all the various rights that are available to an accused, coming back to what Chief Justice Gibbs said in Hammond v Commonwealth.

I mentioned that the Court of Appeal necessarily had to re‑exercise its discretion because the decision below by the County Court was plainly wrong.  There was error of fact.  There was error of law on the House v The King test.  Ultimately, it is an analysis of all the facts and circumstances, and the other relevant facts to this are the Court of Appeal identified that the same protagonist in both the civil proceedings and the criminal proceedings is the AFP, effectively.  It was cognisant of the facts in Lee (No 2) and what happened there, even when the court – not the court, even when the court ordered that the Commission should have a confidentiality or suppression order, notwithstanding that, the evidence still found its way across to the DPP.  What that shows is there is still a real risk, a real and substantial risk of interference with the criminal process, and as a fundamental principle that impacts upon the way the criminal trial works ‑ ‑ ‑

FRENCH CJ:   Ultimately, your answer to the application is it is settled principle applied in a particular context and with discretionary elements?

MR BEST:   That is it, your Honour.  Just on the distinction, the in rem distinction, we say, is not a useful distinction.  As I understand it, it comes from the fact that these proceedings are brought under section 19 and section 49 of the Proceeds of Crime Act as opposed to sections 18 and 19 of the two restraining provisions.  They are brought, as your Honours are probably aware, under different positions; 18 is focused on the conduct of the person, 19 is focused on the property itself, and then 47 and 49 correspond.

There was another appeal heard at the same time as this appeal.  It was brought under section 18 and section 47, heard at the same time, heard before the same Court of Appeal, same arguments.  That has not been appealed, and presumably, it has not been appealed because of this distinction that is made.  But we say it is not a useful distinction when one remembers that ultimately in analysing the restrained assets, one has to look at the conduct of the parties and the owners, and it becomes personal.  It becomes immediately apparent that the questions that will be put were “what did you do with the money, where did the money come from, how did you service your mortgage”, that sort of thing.  So it is not a useful distinction, but much is made of it in the application before this Court for special leave.  Your Honours, those are all the matters I wish to address.  If there is anything further, I can assist.

FRENCH CJ:   Thank you, Mr Best.  There will be a grant of special leave in this matter.  Mr Neal, would you estimate longer than a day?

MR NEAL:   I do not think so, your Honour.

FRENCH CJ:   You agree with that, Mr Best?

MR BEST:   Yes.

FRENCH CJ:   Yes.  Can I just mention, Mr Neal, that you might look at ground 3b, and consider whether the real question that you are seeking to

address there is simply whether the prior decisions of this Court required the Court of Appeal to take the course that it did, rather than trying to determine whether or not the Court of Appeal found conflict or not conflict.  It is a bit digging around the entrails and distracting, I suspect.

MR NEAL:   We will be very much assisted by your Honour’s indication, thank you.

FRENCH CJ:   The other thing is, I should indicate that it is likely that this matter will be set down for the December sittings, and there is a timetable which you have standard times for submissions.  Yes, all right, thank you.

MR NEAL:   If your Honours please.

AT 10.00 AM THE MATTER WAS CONCLUDED