Commissioner of the Australian Federal Police v Zheng
[2024] NSWSC 93
•05 February 2024
Supreme Court
New South Wales
Medium Neutral Citation: Commissioner of the Australian Federal Police v Zheng [2024] NSWSC 93 Hearing dates: 05 February 2024 Date of orders: 05 February 2024 Decision date: 05 February 2024 Jurisdiction: Common Law Before: Dhanji J Decision: 1. Orders 1 through to 37 of the proposed short minutes of order are made.
2. Matter adjourned for directions before the Registrar on 21 June 2024.
3. Parties are granted leave to restore the matter on 48 hours' notice.
4. The orders are entered forthwith.
Catchwords: CRIME – proceeds of crime – Commonwealth offences – restraining orders – ex parte hearing – orders made
Legislation Cited: Civil Procedure Act2005 (NSW)
Criminal Code Act 1995 (Cth)
Customs Act1901 (Cth)
Proceeds of Crimes Act 2002 (Cth)
Category: Procedural rulings Parties: Commissioner of the Australian Federal Police (Plaintiff)
Haosheng Zheng (First Defendant)
AndyZheng Pty Ltd (Second Defendant)
Fatty Catty Pty Ltd (Third Defendant)
Maroubra Tobacco Pty Ltd (Fourth Defendant)
Mascot Tobacco Pty Ltd (Fifth Defendant)
Yiyi Tobacconist Pty Ltd (Sixth Defendant)
Rainbow Tobacconist Pty Ltd (Seventh Defendant)
Bobo Tobacconist Pty Ltd (Eighth Defendant)
Redfern Tobacco Pty Ltd (Ninth Defendant)
The Old Place Pty Ltd (Tenth Defendant)
AZ trading International Pty Ltd (Eleventh Defendant)Representation: Solicitors:
Criminal Assets Litigation, Australian Federal Police (Plaintiff)
File Number(s): 2024/45964 Publication restriction: Nil
ex tempore JUDGMENT (rEVISED)
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HIS HONOUR: The plaintiff in this matter, the Commissioner of the Australian Federal Police, was given leave to file in Court his summons, which was made returnable immediately. That leave was granted in the absence of, and without notice to, the defendants.
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The plaintiff seeks orders pursuant to ss 18 and 19 of the Proceeds of Crimes Act 2002 (Cth) (“the Act”) restraining property of the first defendant and property the plaintiff suspects is subject to the effective control of the first defendant, or proceeds of an offence the first defendant is suspected of having committed. The plaintiff relies on the affidavit of Lachlan Alexander McLeod affirmed 2 February 2024. Section 319A of the Act makes provision for the hearing of an application such as the present in a closed court. Similar, although not identical, provision is made in s71 (a) and (b) of the Civil Procedure Act2005 (NSW).
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I was satisfied that the matter should be heard both ex parte and in closed court. My reason for being so satisfied is that there is an ongoing investigation with respect to suspected criminal activities of the first defendant. That ongoing investigation includes an intention to execute search warrants under the Customs Act1901 (Cth) tomorrow. Mr McLeod deposes in his affidavit a concern that if the Commissioner was required to give notice of the application, the presently covert criminal investigation would be jeopardised, and additionally, the first defendant may take steps to destroy evidence, dissipate funds, or otherwise divest himself of property or interests in property, including that sought to be restrained. I was satisfied that those concerns were well-founded.
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I turn then to the making of the restraining orders sought by the plaintiff. Section 18 of the Act provides:
18 Restraining orders—people suspected of committing serious offences
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 a person has committed a *serious offence; and
(e) any affidavit requirements in subsection (3) for the application have been met; and
(f) the court is satisfied that the *authorised officer who made the affidavit holds the suspicion or suspicions stated in the affidavit on reasonable grounds.
Note: A court can refuse to make a restraining order if the Commonwealth refuses to give an undertaking: see section 21.
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 any one or more of the following:
(a) all or specified property of the *suspect;
(aa) all or specified *bankruptcy property of the suspect;
(b) all property of the suspect other than specified property;
(ba) all bankruptcy property of the suspect other than specified bankruptcy property;
(c) specified property of another person (whether or not that other person’s identity is known) that is subject to the *effective control of the suspect;
(d) specified property of another person (whether or not that other person’s identity is known) that is:
(i) in any case—*proceeds of the offence; or
(ii) if the offence to which the order relates is a *serious offence—an *instrument of the offence.
Affidavit requirements
(3) The application for the order must be supported by an affidavit of an *authorised officer stating:
(a) that the authorised officer suspects that the *suspect committed the offence; and
(b) if the application is to restrain property of a person other than the suspect but not to restrain *bankruptcy property of the suspect—that the authorised officer suspects that:
(i) the property is subject to the *effective control of the suspect; or
(ii) in any case—the property is *proceeds of the offence; or
(iii) if the offence to which the order relates is a *serious offence—the property is an *instrument of the offence.
The affidavit must include the grounds on which the *authorised officer holds those suspicions.
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 *serious 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.
Later acquisitions of property
(6) The court may specify that a *restraining order covers property that is acquired by the *suspect after the court makes the order. Otherwise, no property that is acquired after a court makes a restraining order is covered by the order.
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As can be seen, s 18(1) provides that I must make the order if satisfied of the matters set out s 18(1)(c)-(f). A “proceeds of crime authority” is defined in the Dictionary to the Act to include the plaintiff, who has applied by summons for the various orders. Section 18(1)(c)is thus satisfied.
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A “serious offence” is defined in the Dictionary to the Act to include, (a), an indictable offence punishable by imprisonment for three or more years involving, as defined at subparagraph (iv):
“Unlawful conduct by a person that causes or is intended to cause a loss to the Commonwealth or another person of at least $10,000”.
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The affidavit of Mr McLeod sets out the matters leading to the making of this application. He suspects the first defendant of having committed an offence against s 135.1 of the Criminal Code Act 1995 (Cth), being an offence to intentionally cause a loss to the Commonwealth or obtain a gain from the Commonwealth. The maximum penalty in relation to that offence is ten years.
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The evidence in the affidavit establishes that the suspicion relates to the commission of such an offence against the Commissioner of Taxation in an amount of over $10,000. The result of those matters is that Mr McLeod suspects the first defendant of having committed a serious offence within the meaning of the Act.
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I am satisfied that there are reasonable grounds to suspect that the first defendant has committed such an offence. The basis for my satisfaction is contained in the evidence of Mr McLeod. That affidavit establishes to my satisfaction that on 14 March 2023 the first defendant was charged with an offence against s 400.9 of the Criminal Code. That charge was laid after police seized a total of $618,360 in cash from the first defendant at the Perth domestic airport terminal. Those moneys are, according to the plaintiff, reasonably suspected to be the proceeds of indictable crime dealt with by the first defendant and consequently founds an offence against s 400.9(1) of the Criminal Code.
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That evidence establishes that the first defendant had access to large amounts of cash. Further evidence establishes that the first defendant controls a number of retail tobacconist businesses in Sydney, Victoria and South Australia. The various businesses are owned by companies. In most cases the evidence is to the effect that the first defendant is the sole controlling mind. In some cases the evidence is to the effect that he is a controlling mind. The bases for those conclusions are that he is either sole director or the sole beneficial owner, through corporate shareholdings, the shareholder himself in a personal capacity, or a 50% beneficial owner through corporate shareholdings.
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Two of the defendant companies, against whom orders are sought restraining moneys in bank accounts, have lodged tax returns for their respective tobacco businesses for the 2020 and 2021 financial years, reporting a loss. The remaining companies, that is, the remaining defendants holding moneys in various accounts against which orders are sought, have not lodged any income tax returns or business activity statements for their respective business since their inception. Business in term deposit bank accounts held by the defendants show high value credit transactions and flow of funds that are indicative of show significant profits being derived from the tobacco businesses.
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Mr McLeod deposes, as is commonly known, that the use of cash is a common methodology utilised to facilitate tax evasion. In essence, the evidence is such that there are reasonable grounds to suspect that the first defendant has engaged in the serious offence to which I have referred, on the bases of his possession of that large amount of cash, together with his role in the various tobacco businesses conducted by him and the various corporate defendants. Those grounds are further solidified by the first defendant's statements to police when interviewed on his arrest in relation to the possession of the money at Perth domestic airport, in which he indicated that he did not use electronic transfers in relation to the funds due to "tax issues". Section 18(1)(d) is satisfied.
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I am separately satisfied that the affidavit requirements in s 18(3) have been met, with the result that s 18(1)(e) is satisfied. In that regard, I note that Mr McLeod has deposed that he is an authorised officer within the meaning of the Act. He has further stated that he suspects the first defendant committed the offence.
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I note that some of the properties sought to be restrained are held in the name of persons other than the first defendant. Mr McLeod sets out his suspicion that the property contained in Schs 1-4, that is, the property sought to be restrained, is under the “effective control’, as that term is defined in the Act, of the first defendant, and is the proceeds of a serious offence, an instrument of such an offence, or both. The affidavit further includes the grounds on which Mr McLeod holds those suspicions. Given those matters, as I have indicated, s 18(3) is satisfied, with the consequence that s 18(1)(e) is satisfied.
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Finally, having considered the affidavit of Mr McLeod, I am satisfied that his suspicions are held on reasonable grounds. Section 18(1)(f) is satisfied. It follows that I must make the orders as required by s 18(1).
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I turn then to the property sought to be restrained. There are reasonable grounds to suspect that the property in Schs 1-4 of the summons is either specified property of the first defendant or is specified property of a person but subject to the effective control of the first defendant. That is to say, that the property listed in those schedules is within s 18(2)(a) or (c) of the Act.
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With respect to the property that is not specified property of the first defendant but said to be under his effective control, the suspicion of that fact is founded in the first defendant's connection to the various companies which hold that property. In short, the first defendant is suspected of being the sole controlling mind, or a controlling mind of each of the corporate defendants, as indicated previously, as a result of being either the sole director or the shareholder, sole beneficial owner or a 50% beneficial owner. Additionally, the first defendant is a signatory to each of the accounts held in the names of the corporate defendants, further adding to the reasonable inference that he is in effective control of those accounts.
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Mr McLeod further sets out his suspicion that the moneys contained in each of the accounts are proceeds of a serious offence and/or the instrument of such an offence within the meaning of s 18(2)(d) of the Act. The basis for that conclusion is Mr McLeod's analysis of business transactions of the accounts. That analysis establishes that the first defendant has control of the businesses which have engaged in high value transactions and exhibited significant growth in business income over the past two to five years, with the exception of one account. With respect to that account, it received high value credits, the source of which is unexplained. The business income for each of the accounts is grossly disproportionate to the declared taxable income for the associated company, and indeed most of the companies have not lodged tax returns for the relevant periods. That income appears to have been undeclared for tax purposes by the first defendant, contrary to the obligations of the first defendant, with the result of a significant tax loss to the Commonwealth.
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In addition to the cash seized on the first defendant's arrest, and the moneys in the various bank accounts, also sought to be seized is a Mercedes motor vehicle that is registered in the name of a corporate defendant with respect to which the first defendant is the sole director and shareholder. There are therefore reasonable grounds to suspect that property is property to which a restraining order may be made pursuant to s 18(2) of the Act.
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Restraining orders are also sought pursuant to s 19 of the Act. While the immediate effect of such an order is the same as an order against s 18 in restraining various items of property, different consequences follow with respect to the scheme for forfeiture under the Act.
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It is open to the plaintiff to seek restraining orders pursuant to both ss 18 and 19, and, having regard to those different schemes, I am of the view that it is appropriate that orders also be made under s 19. Section 19 provides:
19 Restraining orders—property suspected of being proceeds of indictable offences etc.
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.
Refusal to make a restraining order
(3) Despite subsection (1), the court may refuse to make a *restraining order in relation to an *indictable offence that is not a *serious offence if the court is satisfied that it is not in the public interest to make the order.
Note: A court can also refuse to make a restraining order if the Commonwealth refuses to give an undertaking: see section 21.
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.
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As can be seen, I must make a restraining order pursuant to s 19(1) if I am satisfied of the matters in s 19(1)(c)-(f). I am satisfied of those matters on the basis of the matters to which I have referred in expressing my views with respect to the application under s 18. I am also satisfied that there are reasonable grounds to suspect that the property set out in the schedules in relation to which the restraining orders are sought are either proceeds of the offence to which I have referred or an instrument of the offence. For completeness, I note that the Court may, pursuant to s 19(3), refuse to make an order under s 19 if satisfied that it is not in the public interest to make the order. I am not so satisfied.
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The result is that restraining orders should be made with respect to the property set out in Schs 1 and 4 of the plaintiff's summons pursuant to both ss 18 and 19 of the Act.
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The plaintiff also seeks orders that the property be placed under the custody or control of the Official Trustee pursuant to s 38 of the Act. Such an order is appropriate. It is also appropriate to make an order pursuant to s 39(1)(e) of the Act.
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The plaintiff further sought an order that the first defendant be directed to give a sworn statement within 28 days, setting out all of his or her interests in property and his liabilities pursuant to s 39(1)(ca). The plaintiff submitted that such an order should be made ex parte. In particular, it was submitted that it would be of significant assistance to the Commissioner if that statement were obtained sooner rather than later. There was expressed an interest in having the order made with a view to the time for the completion of the statement commencing.
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It was additionally noted that in the event that the first defendant sought to resist the order, an application could be made by the first defendant pursuant to s 39B of the Act to revoke the order. I can accept that it is desirable on the Commissioner's part to have the order sought and that in the event that the order is made, it could be revoked. However, it remains the case that it is the exception that orders are made affecting the rights or interests of persons on an ex parte basis. In my view, the Commissioner's interest in the statement and the first defendant's capacity to apply for a revocation do not warrant my hearing and making an application for such an order in his absence, and I decline to make an ex parte order to that effect. That, of course, does not prevent the plaintiff seeking such an order in due course with notice to the first defendant.
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I propose then, subject to that exception, to make the various orders sought. I note that the plaintiff has given the usual undertaking as to costs and damages. I make orders 1 through to 37 of the proposed short minutes of order. I make the additional orders at 39 to 41 of the proposed short minutes of order, adjourning the matter for directions before the Registrar on 21 June 2024 and granting the parties leave to restore the matter on 48 hours' notice, and that the orders be entered forthwith. I will sign a copy of those short minutes of order in the form in which I have indicated and have them placed on the court file.
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Decision last updated: 13 February 2024
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