JR Mokbel Pty Ltd v Director of Public Prosecutions

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

No. 1466 of 2006

IN THE MATTER of the Confiscation Act 1997
- and –
IN THE MATTER of an alleged offender, Milad Mokbel

BETWEEN

JR MOKBEL PTY LTD ACN 074 841 688 and Renate Lisa MOKBEL	Applicants
V
THE DIRECTOR OF PUBLIC PROSECUTIONS for Victoria, Milad MOKBEL and John LINDHOLM (in his capacity as trustee of the property at 9-11 Downs Street, Brunswick)	Respondents

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JUDGE:	HARGRAVE J
WHERE HELD:	Melbourne
DATES OF HEARING:	16 and 17 April 2007
DATE OF JUDGMENT:	3 May 2007
CASE MAY BE CITED AS:	JR Mokbel Pty Ltd v Director of Public Prosecutions
MEDIUM NEUTRAL CITATION:	[2007] VSC 119

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Criminal Law – Confiscation of property – Restraining order – Variation – Extent of Court’s power to vary and impose conditions in absence of exclusion application – Confiscation Act 1997 (Vic) ss. 22, 26.

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APPEARANCES:	Counsel	Solicitors
For the Applicants JR Mokbel Pty Ltd and Renate Lisa Mokbel	Mr C Juebner	Lewenberg & Lewenberg
For the First Respondent Director of Public Prosecutions	Mr T Gyorffy and Mr T Mclean	Angela Cannon, Solicitor for Public Prosecutions
For the Second Respondent John Lindholm	No appearance

HIS HONOUR:

I Facts

In August 2001, following extensive police investigations, Antonios Mokbel (known as Tony Mokbel) was arrested and charged with drug trafficking offences under the Customs Act 1901 (Cth) and the Drugs, Poisons and Controlled Substances Act 1981 (Vic). On the same day, police executed a search warrant at residential premises situate at 9-11 Downs Street, Brunswick (“the property”). The property is the residence of the family of Tony Mokbel’s brother, Milad Mokbel, his wife Renate Mokbel and their children. During the search of the property on that day, police opened an air conditioning vent and located a shoebox containing $66,550 in cash. Milad Mokbel was interviewed in relation to the cash in the shoebox. He refused to answer questions and was subsequently charged with possessing proceeds of crime, trafficking in a drug of dependence of not less than a commercial quantity, possession of a drug of dependence and conspiring to traffic in a drug of dependence.

Enquiries made by the police at this time revealed that the property was registered in the name of JR Mokbel Pty Ltd (“the company”) and was subject to a mortgage to the National Australia Bank. Renate Mokbel is and was at all relevant times the sole director of and shareholder in the company. When questioned by police in 2001, Renate Mokbel stated that the mortgage to the National Australia Bank was serviced with gambling money which Milad Mokbel won from either horse racing or at the casino.

An application was made to the County Court of Victoria for an order that all dealings in the property, and also another property owned by the company, be restrained under s. 18 of the Confiscation Act 1977 (Vic). That application was successful. On 20 December 2001 a judge of the County Court made the restraining orders sought. Renate Mokbel was made aware of these restraining orders at the time.

Subsequently, the charges against Milad Mokbel were withdrawn due to insufficient evidence. Accordingly, pursuant to s. 27(3)(a) of the Confiscation Act, the restraining order made by the County Court ceased to have any force.

The charges against Tony Mokbel were not withdrawn. He was remanded in custody for a time and then granted bail in September 2002. Renate Mokbel was not a surety for that bail at this time.

On 26 November 2004, after a committal hearing, Tony Mokbel was granted bail on strict conditions, including a surety in the amount of $1 million. On that day, Tony Mokbel signed an Undertaking for Bail Appearance at Trial and Renate Mokbel, as surety, also signed the undertaking. By her undertaking, Renate Mokbel undertook to pay to the Court the amount of $1 million in the event that Tony Mokbel failed to comply with his bail undertaking. The undertaking signed by Mrs Mokbel did not include any provision for the deposit of any cash or other security. The undertaking includes the following statement:
Deposit/other Security $0.00.
Also on 26 November 2004, Mrs Mokbel swore an Affidavit of Justification by Surety to Undertaking, in the following terms:

I, MOKBEL, RENATE
11 DOWNS ST, BRUNSWICK, VIC 3056
SELF EMPLOYED
make oath and say:
1.That I am a person who has attained the age of 18 years and not under any disability at law.
2.That I am, after payment of all my just debts and liabilities, well and truly worth in real or personal property or both not less than the amount of $1 000 000.00

3. That my real estate consists of DWELLING HOUSE
11 DOWNS STREET, BRUNSWICK, VIC 3056

4. That my real estate is not encumbered except by $120,000
Value of equity $1 140 000.00

5. That my personal property consists of
6. That I am not a surety in any other matter.

The property was not provided as security for Tony Mokbel’s bail undertaking. The only security was the personal undertaking of Renate Mokbel to pay $1 million to the Court in the event that Tony Mokbel breached his bail undertaking. The references to the property in Mrs Mokbel’s affidavit were by way of proof that she was “well and truly worth in real or personal property or both not less than the amount of $1,000,000”.

In fact, Mrs Mokbel did not own the property and never has. That part of the property which comprises 11 Downs Street had been acquired by the company in 1997. The existing residence was demolished and a new home was then constructed at 11 Downs Street. In 1999 the company purchased the adjoining property at 9 Downs Street. This was vacant land. Mrs Mokbel did not contribute any money to the purchase price or the cost of constructing the new home. Nor did she contribute any money towards repaying principal or interest to the mortgagee.

The property is and was at all relevant times registered in the name of the company in its capacity as trustee of a discretionary trust called the JR Mokbel Family Trust. From the inception of that trust, Milad Mokbel had been the Appointor under the terms of the trust deed, with the power to remove the company as trustee and appoint a different trustee. Renate Mokbel is one of a large number of potential beneficiaries of the discretionary trust. She has no legal or beneficial interest in the trust property.

On 29 November 2005, Gillard J extended Tony Mokbel’s bail conditions with one surety in the sum of $1 million. Renate Mokbel continued to act as surety and signed an undertaking in respect of Tony Mokbel’s bail at this time.

On 13 February 2006, Tony Mokbel’s trial in relation to the charges against him commenced.

Tony Mokbel appeared at his trial, as required by his bail undertaking, until Friday 17 March 2006. On that morning, the Crown Prosecutor informed the Court that the Crown wished to apply later that day for an order revoking Tony Mokbel’s bail. After hearing submissions, the trial judge, Gillard J, ruled that Tony Mokbel’s bail would be revoked at the end of counsel’s addresses. At that time, it was anticipated that addresses would conclude on the following Tuesday, 21 March 2006.

On the morning of Monday 20 March 2006, Tony Mokbel failed to appear for the continuance of the trial in relation to the charges against him. He has not been seen since, and has thus breached his bail undertaking.

In the meantime, the police had renewed their interest in Milad Mokbel. In October 2005, investigators from the Purana Taskforce commenced an investigation codenamed “operation POSSE” into the manufacture and trafficking of illegal drugs of dependence by Milad Mokbel and an associate who I will call “Witness A”. As a result of these investigations, which included surveillance of Witness A between 19 and 22 April 2006, Witness A was arrested on 22 April 2006 in possession of chemicals, glassware and other equipment used to manufacture methylamphetamine. Following his arrest, Witness A agreed to assist police.

Acting under instructions given in writing pursuant to s. 51 of the Drugs, Poisons and Controlled Substances Act 1981, Witness A requested Milad Mokbel to supply him with methylamphetamine. Milad Mokbel offered to purchase five pounds of methylamphetamine from Witness A for $35,000 per pound. Arrangements were made for Witness A to deliver the drugs to Milad Mokbel at the property at 6pm on 25 April 2006. Witness A attended the property at this time and delivered a package containing 2.5kg of white powder to Milad Mokbel. In return, Milad Mokbel handed Witness A a bag containing $89,000 cash. Mrs Mokbel was not present at this time. Shortly after this exchange, police arrived at the property and arrested Milad Mokbel. A subsequent search of the property revealed the package containing 2.5kg of white powder in the laundry at the property. Alongside this package was a commercial set of electronic scales, a box of gloves and a quantity of zip-lock plastic bags each containing an amount of white powder. A further search of the property located $20,000 in cash wrapped in plastic bags secreted in a dining room heating vent, and two certificates of valuation relating to male wrist watches valued at $22,000 and $21,000 respectively. When asked, Milad Mokbel was unwilling to disclose the location of these watches to the police investigators.

As a result of these events, Milad Mokbel was charged with trafficking in a drug of dependence in a quantity that is not less than a large commercial quantity, knowingly dealing with the proceeds of crime, intending to conceal the proceeds of crime and other charges.

The following day, 26 April 2006, Gillard J delivered judgment upon applications by the Crown for declarations that the bail granted to Tony Mokbel be forfeited and for orders that the amount undertaken by Mrs Mokbel as surety be paid to the Court forthwith.[1] Gillard J declared the bail of Tony Mokbel to be forfeited and ordered that:

(1)Renate Mokbel pay the amount of $1 million to the Supreme Court within 31 days.
(2)In default of payment by Renate Mokbel, the amount be obtained by seizing and selling her property.
(3)In default of seizure and sale of Renate Mokbel’s property, in whole or in part, Renate Mokbel be imprisoned for a period of two years.

[1]R v Mokbel and Mokbel [2006] VSC 158.

At the time Gillard J made these orders, Gillard J stated:
The Court has power to give time to pay and it seems appropriate in the circumstances, bearing in mind that the surety’s assets comprise her residential property, that she be given time to pay the amount. According to the Affidavit of Justification by the surety, she has real estate consisting of a dwelling house at 11 Downs Street, Brunswick, and it has a value in excess of $1 million. The evidence attached to that affidavit reveals that the property is registered in the name of a company called J.R. Mokbel Pty Ltd. The surety is the sole director and shareholder of that company.[2]
[2]Ibid, [42].
This statement by Gillard J indicates that, at this time, his Honour intended to provide an opportunity for Mrs Mokbel to exercise her power as a director of the company to sell the property and thus raise the $1 million required to meet her surety obligation.

Also on 26 April 2006, senior counsel for Mrs Mokbel informed the Court that an application would be made under s. 6(4) of the Crown Proceedings Act 1958 (Vic) for an order to vary or rescind the orders made by Gillard J that day. Section 6(4) of the Crown Proceedings Act 1958 gives the Court power to vary or rescind any order that a surety comply with a bail undertaking “on the ground that it would be unjust to require him to pay the amount undertaken to be paid having regard to all the circumstances of the case”.

The next event is critical to the application which I must determine. On 1 May 2006, the Director of Public Prosecutions (“the Director”) applied ex parte to this Court for, and was granted, an interim restraining order under s. 18 of the Confiscation Act. The interim restraining order restrained all dealings with a number of assets, including the property or any interest in the property, until the final hearing and determination of the application for a restraining order or until further order. The further hearing of the application for a restraining order was adjourned to 15 May 2006. Mrs Mokbel acknowledged receipt of the restraining order. She gave it to her solicitors, Chiodo Madafferi.

On 15 May 2006, a final restraining order was made by this Court. All dealings with the property, or any interest in the property, remained restrained until further order.

On 9 June 2006, the company and Mrs Mokbel made an application under s. 20 of the Confiscation Act for the exclusion of the property from the restraining order. On 14 June 2006, Mr Chiodo, as solicitor for the company and Mrs Mokbel, consented to an order that their exclusion application be adjourned to a date to be fixed after the determination of the criminal charges against Milad Mokbel.

In the meantime, on 16 May 2006, Mrs Mokbel applied to this Court under s. 6(4) of the Crown Proceedings Act for an order varying or rescinding the orders made by Gillard J on 26 April 2006. On 26 May 2006, Gillard J made orders staying the execution of his orders made on 26 April 2006 until the hearing and determination of Mrs Mokbel’s application under s. 6(4) of the Crown Proceedings Act. This application was then heard by Gillard J in August and September 2006.

Mrs Mokbel gave evidence before Gillard J on the hearing of her application. That evidence included evidence to the effect that the only assets owned by her were those detailed in her affidavit in support of the application. Mrs Mokbel was cross-examined at length in relation to this evidence, on 1 and 2 August 2006.

After the completion of cross-examination of Mrs Mokbel, the Victoria Police obtained a search warrant for premises in Parkdale. The premises are owned by Mrs Mokbel’s uncle. Upon execution of the search warrant, the police found, concealed in PVC pipes and buried in the backyard of the premises, the sum of $336,750 in cash together with a large number of items of jewellery. Included in the items of jewellery were the two men’s wrist watches which are the subject of the valuation certificates found at the property on 25 April 2006 when Milad Mokbel was arrested.

Evidence of the search of the Parkdale premises was given at the resumed hearing before Gillard J in September 2006. An application was made to further cross-examine Mrs Mokbel about the cash and jewellery recovered during that search. Evidence was placed before Gillard J that Mrs Mokbel’s uncle had informed police that Milad Mokbel had asked him to look after the cash and Mrs Mokbel had asked him to look after the jewellery. Gillard J refused the application to further cross-examine Mrs Mokbel. However, Gillard J said he would provide an opportunity to Mrs Mokbel to give further evidence and explain why she had not disclosed her interest in the jewellery in her evidence. Counsel for Mrs Mokbel informed Gillard J that this invitation was not accepted.

On 20 September 2006, a judge of this Court made a restraining order in respect of the cash and jewellery recovered from the Parkdale premises. Subsequently, Milad Mokbel has made application under s. 20 for exclusion orders in respect of the cash, the two men’s watches and other items of jewellery on the ground that he claims an interest in that property. Mrs Mokbel has made application to exclude a 17 page list of the jewellery items, on grounds that they are her personal property which was lawfully acquired.

On 14 December 2006, Gillard J delivered judgment on Mrs Mokbel’s application under s. 6(4) of the Crown Proceedings Act. He dismissed the application and ordered that the stay of his orders made on 26 April 2006 be lifted.[3]
[3]Mokbel v DPP (Vic) and DPP (Cth) [2006] VSC 487.

On 15 December 2006, Mrs Mokbel filed an appeal in respect of the dismissal by Gillard J of her application under s. 6(4) of the Crown Proceedings Act. Since that time, Mrs Mokbel has made two applications to the Court of Appeal for orders staying the operation of the orders made by Gillard J on 26 April and 14 December 2006. The first application was heard by the Court of Appeal on 2 February 2007. Nettle JA, with whom Kellam AJA agreed, accepted that there was an arguable ground of appeal, based upon the restraining order over the property constituting a material change of circumstances after Mrs Mokbel entered into her surety undertaking.[4] However, Nettle JA was not persuaded that there was a real risk, as the evidence then stood, that the appeal would be rendered nugatory if no stay was granted. This was because the evidence before the Court of Appeal did not establish that Mrs Mokbel was unable to fund the payment of the surety from a source other than the property.[5] Notwithstanding this conclusion, which resulted in the application for a stay being dismissed, Nettle JA stated:

So to conclude is not necessarily to foreclose the possibility of a further application for stay if based upon more adequate material. An application for stay is an interlocutory application and the fact that it is refused does not of itself dictate that another application based on new material would be refused. But speaking for myself and without the benefit of detailed submissions on the matter, I doubt that any such further application would succeed unless supported by an affidavit as to the applicant’s financial position sworn by the applicant herself and explaining clearly and in detail why the applicant cannot pay the surety. In my view, such an affidavit would also need to be supported by duly authenticated financial statements, tax returns, correspondence and such other documents as in one’s experience are commonplace to provide in support of applications for stay of a sequestration order in bankruptcy or a winding-up order in the corporations jurisdiction. I think too that absent good reason to conclude to the contrary, one might expect to see an affidavit sworn by the applicant’s husband as to the assets of the trust and what he is prepared to be done with them in order to satisfy the surety, and that the respondents should be accorded leave to engage in limited cross-examination in order to test the veracity of any such evidence.[6]

[4]Mokbel v DPP, unreported, Court of Appeal, 2 February 2007, [15]-[17].

[5]Ibid, [20]-[25].

[6]Ibid, [26].

On 15 March 2007, Mrs Mokbel was arrested and taken into custody pursuant to the orders of Gillard J made on 26 April 2006. She has remained in custody ever since.

Prior to her arrest, Mrs Mokbel had made a second application for a stay. It was due to be heard by the Court of Appeal on 16 March 2007. Because of her arrest, the hearing commenced in the afternoon of 15 March 2007 and was completed on 16 March. Further affidavit material had been filed on behalf of Mr Mokbel in support of the second application for a stay. However, Chernov and Eames JJA were not satisfied that the further evidence filed on behalf of Mrs Mokbel satisfied the requirements specified by Nettle JA at the hearing of the first stay application.[7]
[7]Mokbel v DPP, unreported, Court of Appeal, 16 March 2007, [7].

On the second stay application, counsel for Mrs Mokbel also relied upon the fact that steps had been taken to re‑agitate the exclusion application in respect of the property. In circumstances where the Court was not provided with any material upon which it could assess the prospects of success of the exclusion application, Chernov and Eames JJA did not consider that this intention to re‑agitate the exclusion application justified the making of a stay.[8]
[8]Ibid, [10]-[11].

Accordingly, the second stay application was dismissed. However, Chernov and Eames JJA concluded:

This does not necessarily preclude [Mrs Mokbel] from making further applications, but it should be plain enough by now that, unless such a further application is supported by the kind of evidence that has been described by Nettle JA, it is likely to fail.[9]

[9]Ibid, [13].

The application by Mrs Mokbel and the company to exclude the property from the operation of the restraining order was the subject of an application in the Practice Court on 21 March 2007. Notwithstanding the earlier stay which had been ordered by consent pending the hearing and determination of the criminal charges against Milad Mokbel, the Court ordered that the exclusion application be referred to the Listing Master to be fixed for trial with such priority as she considered appropriate. The Listing Master has yet to deal with the matter, and is awaiting the determination of this application before considering the matter further. At this time, no affidavit material has been filed in support of the exclusion application.

On 26 March 2007, the company and Mrs Mokbel filed Notice of Application to be made under s. 26 of the Confiscation Act for further orders. This is the application which I must determine. The s. 26 application seeks the following relief:

Pursuant to section 26(1) of the Confiscation Act 1997, the Restraining Order made by the Honourable Justice Kellam on 15 May 2006 be varied as follows:
1.That JR Mokbel Pty Ltd be permitted to sell the property situated at 9‑11 Downs Street, Brunswick in the State of Victoria more particularly described in Certificate of Title Volume 08489 Folio 471 and Volume 05681 Folio 164 (Property) subject to a compliance with the following provisions:
(a)A copy of the contract for the sale of the Property be provided to the Department of Justice, Asset Confiscation Operations, Enforcement Management at Level 20, 121 Exhibition Street, Melbourne (“ACO”) within 5 days of execution;
(b)At least 5 days prior to the date of settlement of the sale of the Property, ACO be given notice of the time and place of settlement of the sale;
(c)At least 5 days prior to the date of settlement of the sale of the Property, ACO be provided with a copy of the Statement of Adjustments and the Settlement Statement;
(d)At least 5 days prior to the date of settlement of the sale of the Property, ACO be provided with an itemised schedule of the costs, charges and expenses referred to in paragraph 1(e)(i) of this Order;
(e)Upon the completion of the sale of the Property, the proceeds of sale be disbursed in the following order:-
(i)in payment of all costs, charges and expenses properly incurred incidental to the sale;
(ii)in payment of the monies which are due and owing to National Australia Bank Limited pursuant to its registered mortgage over the Property;
(iii)in payment of the sum of up to $1 million to the proper officer of the Supreme Court of Victoria in accordance with order (a) made by the Honourable Justice Gillard on 26 April 2006;
(iv)the residue (if any) to the ACO to be held on trust for JR Mokbel Pty Ltd pending the final determination of this matter or further order.

The s. 26 application includes a statement of grounds, as follows:

5.The Grounds on which this application will be made are as follows:
(a)On 26 November 2006, Renate Lisa Mokbel (Renate) signed an Undertaking of Bail for Appearance at Trial (Undertaking) in respect of bail granted to her brother in law, Antonios Sajih Mokbel (Tony).
(b)At the time that Renate signed the Undertaking, she also swore an Affidavit of Justification (Affidavit) in which she deposed to owning the Property and the fact that the Property had equity of $1,140,000.
(c)Renate signed the Undertaking and swore the Affidavit believing that she had put up the Property as security for Tony.
(d)On or about 19 March 2006, Tony absconded.
(e)On 26 April 2006, the Honourable Justice Gillard ordered that bail be forfeited and ordered Renate to pay $1 million to the proper officer of the Supreme Court of Victoria.
(f)On 1 May 2006 and before the Property could be sold to raise the $1 million, the Honourable Justice Hargrave made an interim restraining order over, amongst other things, the Property on the basis of the charging of Milad Mokbel of certain offences. Milad Mokbel is Renate’s husband.
(g)On 15 May 2006, the Honourable Justice Kellam made a permanent restraining order over, amongst other things, the Property.
(h)Because of the restraining order, JR Mokbel Pty Ltd cannot sell the Property.
(i)Because JR Mokbel Pty Ltd cannot sell the Property, Renate is unable to pay the $1 million to the proper officer of the Supreme Court in accordance with the order of the Honourable Justice Gillard.
(j)On 15 March 2007, Renate was taken into custody because she has been unable to raise the $1 million with which to pay the proper officer of the Supreme Court.
(k)In the circumstances, justice requires that JR Mokbel Pty Ltd be permitted to sell the Property and apply the proceeds of sale to pay the $1 million to the proper officer of the Supreme Court so that Renate can be released from custody.

Mrs Mokbel and the company relied upon a number of affidavits in support of their application under s. 26 of the Confiscation Act. Amongst other things, Mrs Mokbel deposed to the following matters:

(1)If the application to vary the restraining order is successful, Mrs Mokbel will abandon her appeal against the orders made by Gillard J on 26 April and 14 December 2006. Mrs Mokbel swore:
I am not trying to avoid my obligation to pay the $1 million. I am merely seeking this Honourable Court’s permission to satisfy that obligation as originally contemplated by me, namely by selling the Downs Street property.
(2)At the time Mrs Mokbel became surety for Tony Mokbel, she had not contemplated that the property might later be restrained under the Confiscation Act regime, as had happened previously in 2001. This evidence was not challenged in cross-examination.
(3)At the time Mrs Mokbel entered into the undertaking, she was aware that the property was owned by the company but believed that the property could be used by her in any manner she saw fit. This belief was reinforced by the discussions she had with her husband, to the effect that the property could be sold to meet her surety obligation in the event that it was called upon. She understood that she was “putting the property on the line for Tony”.
(4)In circumstances where both she and her husband are in prison, Mrs Mokbel is very concerned about her children. One child has serious medical conditions and the others are obviously suffering. In this regard, Mrs Mokbel swore that “it is impossible for me to put into words the complete devastation that I feel at being separated from my children.
(5)Mrs Mokbel presently has no income. Further, in addition to the evidence previously placed before the Court of Appeal, Mrs Mokbel has provided substantial further verification of her inability to raise the $1 million required to satisfy her surety undertaking, otherwise than by accessing the company’s equity in the property. Mrs Mokbel was not cross-examined about her evidence in this regard. However, there is no evidence from her husband Milad Mokbel as to his financial resources and capacity to assist Mrs Mokbel to pay the $1 million required to satisfy her surety undertaking. Further, although Mrs Mokbel has sworn that she has asked external lenders and members of her immediate and extended family to lend her money to assist her in paying her surety obligation, Mrs Mokbel has not sworn that she has asked her husband Milad Mokbel to lend her money for this purpose.
(6)Mrs Mokbel has now given evidence concerning the jewellery and cash recovered from the Parkdale premises in early September 2006. In her affidavit material, Mrs Mokbel stated that she deposited the jewellery for safekeeping with her mother in approximately 2003 or 2004. Subsequently, following a burglary at the next door premises, her mother suggested that the jewellery be kept elsewhere. At this time, she asked her uncle to store the jewellery for her. She swore that less than 50 per cent of the total value of the jewellery was hers and that she did not know that her uncle had stored it in PVC pipes and buried it in the ground at the Parkdale premises. In cross-examination, the only reason which Mrs Mokbel gave for placing the jewellery with her mother, and then her uncle, was “because it was getting messed up, jewellery would end up from one room to the next, earrings had been missing”. Mrs Mokbel denied any knowledge about the cash buried by her uncle at the Parkdale premises.

Milad Mokbel swore an affidavit in support of the application. He was not cross-examined. Relevantly, Milad Mokbel swore that:

(1) He asked his wife to become surety for his brother Tony.
(2)He asked her to become surety because she was the person who, to his mind, controlled the property as sole director of the company and the person who signed all of its paperwork.
(3)He discussed the matter with his wife, and it was understood by them that the property was at risk if Tony Mokbel absconded.
(4)He was unaware of his powers as appointor under the discretionary trust deed until the issues were raised before Gillard J in the application under s. 6(4) of the Crown Proceedings Act. In this regard, he swore:
In any event, since I asked Renate to be the surety, I would never have prevented a sale of the property to raise the $1 million needed for the surety.

(5)To put his position beyond doubt, he has signed documents resigning as Appointor and Guardian under the discretionary trust deed and appointed Renate Mokbel as appointor/guardian in his place.[10]

[10]This conduct by Milad Mokbel may have constituted a breach of the restraining order, because Milad Mokbel has dealt with his interest in the property (constituted by his control over the property prior to his resignation). It is unnecessary to consider this matter further in the context of the current application.

In his affidavit, Milad Mokbel does not disclose any information as to his financial position or as to his capacity to assist Mrs Mokbel to pay the amount of her surety obligation.

A number of affidavits were filed on behalf of the DPP in opposition to the application. No objection was taken to the admissibility of any part of these affidavits. The following affidavits were relied upon:

(1)James Coghlan, a detective sergeant of police attached to the Purana Taskforce. Detective Sergeant Coghlan was personally involved in the investigations of Milad Mokbel and Witness A to which I have referred and attended at the property on 25 April 2006 when Milad Mokbel was arrested. Further, he set out aspects of the material chronology and summarised material aspects of other affidavit material upon which the DPP relies in opposition to the application.
(2)Witness A, who is presently serving a term of imprisonment in relation to convictions for drug offences. He was arrested at the property with Milad Mokbel and subsequently signed a number of witness statements detailing dealings with Milad Mokbel and Tony Mokbel in relation to the manufacture of methylamphetamine. He also gave evidence of some involvement of Renate Mokbel in connection with these dealings. The only cross-examination of Witness A related to his motive to tell lies about Milad Mokbel’s involvement in the drug trade, and about Renate Mokbel’s knowledge and involvement of his activities, because of deep-seated hatred of Milad Mokbel arising from Milad Mokbel “ripping him off” in relation to drug deals over the years.
(3)Witness A’s brother, who I will call Witness D. Witness D is also serving a term of imprisonment for drug offences. He assisted Witness A to manufacture the methylamphetamine which was the subject of his brother’s dealings with Milad and Tony Mokbel. Although he left the dealings with Milad and Tony Mokbel to his brother, Witness D met with Milad Mokbel in 2002 and discussed the manufacturing process for methylamphetamine with him. Later, he witnessed a conversation between Milad Mokbel and his brother in which Milad Mokbel was “frantic wanting speed because his supplier of chemicals was wanting his share of the speed we were making.” Witness D was not cross-examined.
(4)Another convicted drug trafficker, who I will call Witness B. Witness B gave evidence of a history of involvement with Milad Mokbel in the trafficking in illegal drugs dating back to 1992 or 1993 in relation to cannabis and from 1996 in relation to amphetamines. He was not cross-examined about this.
(5)The girlfriend of Witness A, who I will call Witness C. Witness C gave evidence relating to her knowledge of drug dealings by Witness A and Milad Mokbel and as to a specific request by Witness A to collect money at the property from Renate Mokbel in respect of a drug dealing.
(6)Dale Flynn, a detective acting senior sergeant attached to the Purana Taskforce. Sergeant Flynn is a policeman with 19 years experience, including the past nine years investigating large scale drug trafficking criminal networks. He was present at the property on 25 April 2006 when Milad Mokbel and Witness A were arrested. Further, he gave evidence of having read the statements attached to the affidavits of Witness A, his brother Witness D and Witness B. Based upon those statements, he estimates that, in the period 1992 to 2006, Milad Mokbel was involved in dealings with an estimated wholesale value exceeding $13 million. In making this estimate, Sergeant Flynn noted that Witness D’s estimates of the quantity of drugs manufactured for Milad Mokbel were lower than those of his brother Witness A, and adopted the lower estimates. He is unable to estimate the amount of profits made by Milad Mokbel from those activities. He was not cross-examined.
(7)Paul Byrden, a forensic accountant employed by Victoria Police. Mr Byrden gave evidence concerning his investigations in relation to the financial affairs of the Milad and Renate Mokbel family in the period 1 January 2000 to 25 April 2006. Subject to the limitations upon his inquiries which are stated in his affidavit, Mr Byrden concluded that during this period Milad and Renate Mokbel, and associated entities including the company:
(a)received $2,219,531;
(b)spent $2,083,600;
(c)received $1,852,745 from sources that cannot be identified. This sum is the total received of $2,219,531 less $300,000 loan funds, $66,500 cash, being the repayment of the cash confiscated from Milad Mokbel at the property in 2001, and $236;
(d)had gross taxable incomes of modest amounts, totalling $423,051 in the six year period to 30 June 2005;
(e)“would not have been in a position to make payments totalling $2,083,600 over the period 1 January 2000 to 25 April 2006 as funds from identified sources totalled $366,786 made up of loans of $300,000, refund of funds by Police of $66,550 and other inflows of $236. Their disclosed taxable income would not account for this shortfall.”

Mr Byrden was not cross-examined and no submission was made that his conclusions should not be accepted. In cross-examination, Mrs Mokbel accepted his evidence. Apart from a reference to the possibility of gambling by Milad Mokbel accounting for some of the receipts during this period, Mrs Mokbel could not explain where the unidentified money came from. She denied that she knew it was the proceeds of her husband’s drug trafficking.

The specific evidence which was relied upon by the Director to establish that Mrs Mokbel knew of the illegal drug dealings of her husband and, to some extent, was involved in those dealings was as follows:

(1)Witness A gave evidence that he would deliver illegal drugs to the property and, at times, Renate Mokbel would be there. At these times:
I’d say don’t touch it because it’s gear. She said just leave it on the table. She’d know not to go near it. There was times when I went there she’d hand me bags of cash. This is what Milad said to give to you. Course she knew.
(2)Witness B gave evidence that, on three or four occasions, he delivered money at the property, in payment for drugs purchased from Milad Mokbel, and gave it to Renate Mokbel. In cross-examination, Witness B agreed with the proposition that he told Renate Mokbel words to the effect “this is a loan repayment” because “those days we don’t tell the women anything, what the money’s for”.
(3)In late December 2003, Witness A had a conversation with Tony Mokbel in which Tony Mokbel said he would pay Witness A about $70,000, but because he was going on holidays he would get the money to Milad Mokbel who would then get the money to Witness A. About three days later, Witness A’s then partner, Witness C, received a telephone call from Renate Mokbel, asking her to come around for coffee. Later that day, Witness C gave a package to Witness A containing $34,000. Witness C told Witness A that Renate Mokbel had given her the package at the request of Milad Mokbel. In a later conversation between Witness A and Milad Mokbel, Milad Mokbel said that he had received $68,000 from Tony Mokbel but had deducted $34,000 for himself because his butcher shop was struggling.
(4)Witness C gave evidence that Witness A asked her to go to the property and collect some money from Renate Mokbel for him. Witness C then went to the property and collected a “clothing-type plastic bag, in a handbag” from Renate Mokbel. When Witness C returned home, she saw that the bag contained money, she thought of about $15,000 or $16,000, and recalls Witness A complaining because all of the money which was supposed to be there was not. Initially, in her affidavit material, Renate Mokbel denied this evidence. However, in cross-examination, Mrs Mokbel was not prepared to stand by this denial. Despite repeated opportunities to repeat her denial in cross-examination, Mrs Mokbel did not do so. She stated repeatedly “I don’t ever remember giving her money” or words to like effect. When Witness C gave evidence, she was not pressed in cross-examination about her evidence.

Mrs Mokbel swore an affidavit in response to the affidavits relied upon by the Director. In that affidavit, Mrs Mokbel denied that she had any involvement in, or knowledge of, her husband’s criminal activities.

There are a number of pieces of evidence which shed light on the circumstances in which the property was acquired and paid for:

(1)It appears from a National Australia Bank (“NAB”) credit memorandum dated 10 August 1998 that, at that date, the company owned 11 Downs Street, Brunswick and that another company, owned by an associate of Milad Mokbel, owned 9 Downs Street, Brunswick. The original plan was for a joint unit development of the two pieces of land. However, no council permit could be obtained. Accordingly, Milad Mokbel arranged for the construction of a large two storey residence at 11 Downs Street. At this time, Milad Mokbel was seeking finance to complete this construction. This finance was approved, and the existing loan of $103,000 from NAB was increased to $165,000.
(2)Further, Witness B gave evidence that the property at 9 Downs Street, Brunswick was previously owned by another participant in the illegal drug manufacturing and trafficking business. There was an accident during the drug manufacturing process and the buildings at 9 Downs Street, Brunswick were destroyed by fire.

(3)In November 1999, the company purchased the vacant land at 9 Downs Street, Brunswick. As a result, Milad Mokbel, on behalf of the company, made application to NAB for further finance. In an NAB credit memorandum dated 24 November 1999, it is stated:
Milad Mokbel, the driving force behind JR Mokbel Pty Ltd has been a branch customer for the last 3 years, after being introduced by existing branch customer Tony Mokbel, who is Milad’s older brother. The brothers however, have no common business interests or associations. Though Milad Mokbel basically runs the business, he has since relinquished his directorship and secretary role to his wife, Renate. We however, continue to have his personal guarantee on all facilities.
...
This submission seeks to approve a Residential Investment Home Loan in JR Mokbel Family Trust. Customer is purchasing the next door neighbour’s property for future consolidation, part subdivision to extend owner occupied yardage.
(4)Mrs Mokbel has exhibited to her affidavit sworn 28 March 2007 a number of financial statements for the JR Mokbel Family Trust. These statements record that, as at 30 June 2000, the company owed NAB approximately $270,000 in respect of the loans for the acquisition and development of the property.[11] These statements also reveal that, by 30 June 2005, the principal on these loans had been reduced by approximately $200,000, to $69,729.[12]
(5)For the five financial years ended, 30 June 2001 to 30 June 2005, Milad Mokbel and Renate Mokbel each disclosed taxable income of approximately $180,000. The evidence discloses that Mrs Mokbel paid a total of $40,196 tax in that period, leaving her with a net personal income of approximately $140,000. On the assumption that her husband’s tax rate was similar, they had a combined after tax income of approximately $280,000 during the period that the company reduced the principal owing to NAB in the sum of about $200,000. Obviously enough, there would have been interest commitments due to NAB during this period. This demonstrates that, even if it could be established that all of the after tax income was legitimately earned and was applied towards mortgage repayments, there was less than $80,000 left to fund all of the living expenses of the Milad and Renate Mokbel family for a five year period.

[11]$149,102 was owed in respect of 11 Downs Street, Brunswick. $117,984 was owed in respect of 9 Downs Street, Brunswick.

[12]The whole of the loan in respect of 11 Downs Street, Brunswick had been repaid by this time. $69,729 remained outstanding in respect of the loan for 9 Downs Street, Brunswick.

Under s. 132 of the Confiscation Act, the applicable standard of proof on an application under the Act is the balance of probabilities. On the evidence as a whole, I find as follows on the balance of probabilities.

First, I find that in the period from in or about 1993 until he was arrested on 25 April 2006, Milad Mokbel was systematically involved in trafficking in drugs of dependence in amounts not less than a commercial quantity. I accept the evidence given by Witnesses A, B, C and D in this regard. Indeed, it was not, with the exception of the attack on Witness A’s credit based upon his obvious dislike of Tony and Milad Mokbel, seriously challenged in cross-examination or submission. The evidence of these witnesses is of varying weight and includes hearsay statements admitted without objection. However, when taken as a whole, their evidence provides ample justification for this finding.

I observed Witness A closely whilst he gave evidence. Notwithstanding that he gave evidence from prison, via an audio-visual link to the Court, that link was of high quality and did not disadvantage my observation of him in any way.[13] Witness A gave direct and certain answers, without any hint of hesitation. I have no doubt that he has an intense dislike of Tony and Milad Mokbel and that, on his own evidence, there is good reason for this. I accept that Witness A downplayed the extent of his dislike for Tony and Milad Mokbel. Further, the evidence contained in his witness statements and records of interview annexed to his affidavit, when compared with statement made by his brother Witness D, discloses the possibility of some degree of exaggeration in his evidence concerning the quantities of drugs which were the subject of his dealings with Milad Mokbel.[14] However, with the exception of these matters, I accept the evidence of Witness A.
[13]In addition to the large visual screen in court, there was a separate screen on the bench.
[14]Whenever there was a conflict between their estimated quantities of drug dealings with Milad Mokbel, Sergeant Flynn’s estimate was based upon the lower figures given by Witness D.

In accepting the evidence of Witnesses A, B C and D, I have taken into account the evidence as a whole and, in particular, the probabilities arising from the following evidence:

(1)The forensic accounting evidence given by Mr Byrden. The large inflows and outflows from the bank accounts of Milad Mokbel, Renate Mokbel and related entities are largely unexplained. This is consistent with Milad Mokbel being involved in large scale drug trafficking.
(2)The circumstances surrounding the arrest of Milad Mokbel on 25 April 2006 add to the probability that Witness A’s account of his prior dealings with Milad Mokbel is truthful.
(3)The evidence concerning the search of the Parkdale premises, and the subsequent application by Milad Mokbel under s. 20 of the Confiscation Act for exclusion orders in respect of the $336,750 cash, the two men’s watches and other jewellery items found buried at the Parkdale Premises. If these assets were legitimately acquired, there would be no reason to conceal them. I reject the suggestion by Mrs Mokbel that these assets were acquired from Milad Mokbel’s gambling activities.

Second, I find that the majority of the assets of Milad Mokbel, Renate Mokbel and associated entities, including the assets of the company in its capacity as trustee, were acquired from the proceeds of Milad Mokbel’s criminal activities. This finding is supported by the factors to which I have referred in reaching the first finding, as to the involvement of Milad Mokbel in illegal drug trafficking. As I have said, the only explanation which Mrs Mokbel gave for the large amounts flowing through bank accounts associated with her and her husband is that her husband was a lucky gambler. In the absence of any objective evidence to support this evidence, for example from bookmakers or casino operators, I reject it as incredible.

In this regard, no attempt was made to establish, by evidence or submission, that the property was acquired from legitimate sources. For example, no attempt was made to prove that all payments made to the NAB were funded from legitimately obtained income.

Third, I find that Mrs Mokbel knew at all relevant times that her husband was engaged in illegal drug trafficking and that the majority of the assets comprising her family’s wealth, including the assets of the company as trustee, were acquired from the proceeds of those criminal activities. In making these findings I have taken into account evidence as a whole and, in particular, the probabilities arising from the following matters:

(1)I accept Witness A’s evidence that he and Milad Mokbel conducted a number of drug deals at the property, that Mrs Mokbel was present on some of these occasions, that Witness A would tell Mrs Mokbel not to touch the package containing drugs “because it’s gear” and that sometimes Mrs Mokbel handed him cash as payment for drugs.
(2)I accept Witness B’s evidence that he delivered payments for drugs to Mrs Mokbel on three or four occasions. Witness B’s evidence that he would say to Mrs Mokbel at such times that “this is a loan repayment” must be considered in the context of other evidence, in particular the evidence of Witness A, which indicates that Mrs Mokbel knew of, and to some extent participated in, her husband’s illegal drug trafficking. The fact that such words may have been said by Witness B does not mean that Mrs Mokbel did not know the real purpose of the payments. I infer that she probably did.
(3)Witness C’s evidence of collecting money from Mrs Mokbel for Witness A in respect of drug deals between Tony Mokbel and Witness A. As I have said, in cross-examination, Mrs Mokbel did not adhere to her denial of Witness C’s evidence in this regard.
(4)Mrs Mokbel spent the bulk of her time in the company of her extended family and did not have much interaction with others. In cross-examination, Mrs Mokbel accepted that she was a close friend of Tony Mokbel’s partner Danielle Maguire, with whom she shared a business interest, and that she mixed regularly with her sisters-in-law and brothers-in-law. Apart from dinners with her husband’s friends and their partners, including Witnesses A and C, Mrs Mokbel acknowledged that she did not see a lot of other friends and did not have any close friends outside the family. However, Witness A and Witness C were viewed by Mrs Mokbel as friends, and they even stayed overnight at the property on occasions. Further, in April 2003, Witness A was arrested and remanded in prison for the manufacture of illegal drugs of dependence. Mrs Mokbel befriended Witness A’s partner, Witness C, during this period of imprisonment. When Witness A was granted bail, Mrs Mokbel continued to socialise with him and Witness C.
(5)Even if Mrs Mokbel had no actual knowledge of her husband’s involvement in illegal drug trafficking prior to 2001, which I do not accept, the arrest of her husband and her brother-in-law Tony Mokbel in 2001 must have caused her to question how the money to fund their living expenses and lifestyle, including the acquisition and development of the property, expensive jewellery and imported motor vehicles, had been and was being acquired. In this regard, the seizure of $66,500 in cash from Milad Mokbel on his arrest in 2001 is a relevant matter. Apart from lucky gambling, Mrs Mokbel has no explanation for why her husband had such a large sum of cash at the property.
(6)Finally, there is the conduct of Mrs Mokbel in placing her valuable collection of jewellery with her mother, and then with her uncle at the Parkdale premises. I do not accept Mrs Mokbel’s evidence that she placed the jewellery with her mother, and then her uncle, because she was concerned that the jewellery was “getting messed up” at her own home. There is nothing probable about that evidence. I find that Mrs Mokbel placed the jewellery outside of her own home in order to conceal it, and thus protect it from confiscation.

II Legal Context

The Confiscation Act repealed and replaced the Crimes (Confiscation of Profits) Act 1986 (Vic) which was seen to have major deficiencies. In the second reading speech for the Confiscation Bill, the Attorney-General stated:

The government has ... identified major deficiencies in the operation of the Crimes (Confiscation of Profits) Act 1986 which have weakened the effectiveness of the legislation in the fight against profit-motivated crime. Activities such as commercial drug trafficking can reap enormous profits for those involved at the expense of the broader community who pay the price in ruined lives. Large-scale fraud is another area of increasing concern to the community and the business sector in particular. As with drug trafficking, both the economic aspect and the criminal aspect of commercial crime need to be addressed in the justice process. Under the current legislative scheme, prosecuting authorities have faced significant problems in pursuing confiscation proceedings, with the result that the deterrent value of the legislation has been substantially reduced.
The reforms introduced by this bill will strengthen the effectiveness of assets confiscation in this state to ensure that crime does not pay.
The bill repeals the Crimes (Confiscation of Profits) Act 1986 and replaces it with a clearer, more effective assets confiscation scheme. The reforms are directed at these key objectives:
to improve the operation of existing provisions to enable law enforcement authorities to more readily identify, track and confiscate proceeds of crime, particularly in relation to serious crimes where large amounts of profit are generated;
to broaden the scope of the legislation so that it captures accumulations of wealth derived from long-term criminal activity and combats a broader range of profit-motivated crime. Confiscation procedures have traditionally been viewed as a weapon against drug trafficking and have focused on the fruits of individual offences.[15]

[15]Hansard, 13 November 1997, 1146.

The Attorney-General concluded the second reading speech in the following terms:

The changes being introduced recognise that drug trafficking and organised crime are serious threats to society. In order to combat profit motivated crime, the economic aspect of the crime must be addressed and the financial motivation for criminal activity must be targeted. The law must be able to deal with situations where persons have amassed substantial wealth over a period of time as a result of criminal activity and sophisticated criminal enterprises.
The reforms proposed are strong. However, given the serious consequences of this type of crime in our community, the response of the government is appropriate and timely.[16]

[16]Ibid, 1150.

The Confiscation Act reflects these purposes. Section 1 of the Confiscation Act provides:

1. Purposes
The purposes of this Act are—
(a)to provide for the forfeiture of the proceeds of certain offences, whatever the form into which they have been converted;
(b)to provide for the automatic forfeiture of restrained property of persons convicted of certain offences in certain circumstances;
(c)to provide for the forfeiture by the Supreme Court or the County Court of property restrained on suspicion that it is tainted property in relation to a Schedule 2 offence;
(d)to provide for the forfeiture of property used in connection with the commission of certain offences;
(e)to provide for the freezing of assets;
(f)to provide for the destruction or disposal of certain illegal goods;
(g)to provide for the effective enforcement of this Act and the management of seized and restrained assets;
...

The scheme of the Confiscation Act, insofar as relevant to this application, is straightforward. A restraining order may be made under s. 18 “in respect of property in which the defendant has an interest or which is tainted property.”[17] For the purposes of the Confiscation Act, a “defendant” means a person who has or will be charged with the relevant offence or a person who has been convicted of the offence.[18] “Interest” in property is widely defined, to include a right, power or privilege over, or in connection with, the relevant property.[19] “Tainted property” is defined in broad terms, to include any property which is used in, or in connection with, the commission of the relevant offence or which was derived or realised, or substantially derived or realised, from the commission of the relevant offence or from property used in connection with the offence.[20]
[17]Confiscation Act1997, s. 16(1).
[18]Confiscation Act 1997, s. 3.
[19]Ibid.
[20]Ibid.

The threshold for obtaining a restraining order is contained in s. 18. If the Court is satisfied that the defendant has been, or within the next 48 hours will be, charged with a relevant offence and considers that there are reasonable grounds for making the restraining order, the Court must make a restraining order. In considering whether there are reasonable grounds for the making of a restraining order, the Court is directed to have regard to the matters contained in the affidavit supporting the application and to any other sworn evidence. The affidavit supporting the application is required to set out any relevant matters and state the grounds on which the deponent believes that the defendant has an interest in the property, or that the property is tainted property, as the case may be.[21]
[21]Confiscation Act1997, s. 16(4).

A restraining order must state the purpose for which the property is restrained.[22] In this case, the Court stated in the restraining order that the property was restrained for the purposes of satisfying any forfeiture order, automatic forfeiture or pecuniary penalty order which may be made against Milad Mokbel.
[22]Confiscation Act1997,s. 15(3).

Under s. 20, any person claiming an interest in restrained property may apply to the Court for an order excluding that property from the operation of the restraining order. Sections 21, 22 and 24 specify the grounds which must be established for the making of an exclusion order. The grounds differ according to the nature of the offence and the identity of the applicant for an exclusion order. The application which has been made by the company and Renate Mokbel for exclusion of the property from the operation of the restraining order in this case was made under s. 22, which applies to schedule 2 offences for the purposes of automatic forfeiture.

Under s. 22(a) the Court may make an exclusion order in respect of property if it is satisfied of three things:

(i)the property in which the applicant claims an interest was lawfully acquired by the applicant; and
(ii)the property is not tainted property; and
(iii)the property will not be required to satisfy any pecuniary penalty order or an order for restitution or compensation under the Sentencing Act 1991.

Under s. 22(b), where the application for an exclusion order is made by a person other than the defendant, such as in this case, the Court may make an exclusion order in respect of the property in the following circumstances:

(i)if the court is not satisfied that the property in which the applicant claims an interest is not tainted property but is satisfied that -
(A)the applicant was not, in any way, involved in the commission of the Schedule 2 offence; and
(B)where the applicant acquired the interest before the commission, or alleged commission, of the Schedule 2 offence, the applicant did not know that the defendant would use, or intended to use, the property in, or in connection with, the commission of the Schedule 2 offence; and
(C)where the applicant acquired the interest at the time of or after the commission, or alleged commission, of the Schedule 2 offence, the applicant acquired the interest without knowing, and in circumstances such as not to arouse a reasonable suspicion, that the property was tainted property; and
(D)the applicant’s interest in the property is not subject to the effective control of the defendant; and
(E)where the applicant acquired the interest from the defendant, directly or indirectly, that it was acquired for sufficient consideration; or

(ii)if the court is satisfied that the property is not tainted property and that -
(A)the applicant’s interest in the property is not subject to the effective control of the defendant; and
(B)where the applicant acquired the interest from the defendant, directly or indirectly, that it was acquired for sufficient consideration.

Section 35 provides that, where no exclusion order has been made under s. 22 in respect of restrained property, the restrained property is automatically forfeited to the State upon the expiration of 60 days after the making of the restraining order, or the defendant’s conviction for the Schedule 2 offence, whichever is the later.

Where property is forfeited under s. 35, a person (other than the defendant) who claims to have had an interest in the property immediately before it was forfeited may apply for an exclusion order under s. 52. The grounds upon which an exclusion order may be made under s. 52 mirror the grounds stated in s. 22.

Section 26 of the Confiscation Act gives the Court a discretion to make orders in relation to restrained property. Section 26(1) provides:

(1)the court may, when it makes a restraining order or at any later time, make such orders in relation to the property to which the restraining order relates as it considers just.

Section 26(2)(c) provides that an application for an order under s. 26(1) may be made by the owner of the property to which the restraining order relates or by any person who has an interest in that property. Accordingly, the company has sufficient standing to make this application. It is the owner of the property. As an object of a discretionary trust, Renate Mokbel does not have an interest in the property. However, s. 26(2)(e) provides that an application under s. 26(1) may be made by any other person who obtains the leave of the Court. I gave Renate Mokbel that leave during the course of the hearing.

Section 26(5) contains examples of the kinds of orders which a court may make under s. 26(1). It was submitted on behalf of the Director that these examples all relate to the power to make ancillary orders, whilst preserving the fundamental intention of the restraining order. It was submitted that the orders sought by the company and Mrs Mokbel in their s. 26 application were beyond the power of the Court under s. 26(1) and that, accordingly, the Court did not have power to entertain the application at all. Further, it was submitted that, in all the circumstances, the s. 26 application was an abuse of process and ought not be entertained on that basis. I turn to consider these submissions.

III Should the Court Entertain the Application?

It was submitted on behalf of the Director that the Court does not have power under s. 26(1) to entertain the application because, in substance, it is an application to fully release the property from the operation of the restraining order. In these circumstances, it was submitted that the application should properly be characterised as a de facto application for an exclusion order without any attempt to satisfy the conditions necessary for the making of such an order under s. 22 of the Confiscation Act. Alternatively, it was submitted that, in effect, the application was one to set aside the restraining order in relation to the property.

Further, it was submitted on behalf of the Director that, on its proper interpretation, s. 26(1) only permits the Court to make ancillary orders that give effect to the restraining order or minimise any hardship that might flow from a restraining order, while continuing to maintain the original purpose of the restraining order. In this regard, reliance was placed upon the examples given in s. 26(5) and upon cl. 26 of the Explanatory Memorandum for the Confiscation Bill. Clause 26 of the Explanatory Memorandum is in the following terms:

Clause 26enables the court to make further orders or variations to a restraining order at the time the restraining order is made or on any subsequent occasion that application is made to the court. This is a general power provided to enable a restraining order to be varied to be appropriate and effective in many different situations. It is not intended to provide a right of review. It provides flexibility in the operation of the restraining order in relation to particular property. For example, if a person’s car has been restrained, that person may apply for an order of the kind referred to in sub-clause (5)(a) to enable his or her boat to be restrained, instead of the car. If the court is satisfied that it is just to do so, the court may vary the restraining order accordingly. If such an order were made, the car would no longer be restrained and the person could then dispose of the car if desired. Such a variation may only be made if the property substituted continues to satisfy the purpose for which the property was initially restrained (e.g. to satisfy automatic forfeiture or a PPO). In determining this, the court would need to consider such things as the value of the property and the nature of the property which is already restrained (e.g. is it property which would only be used for unlawful purposes?). [23]

Counsel for the Director placed reliance upon the emphasised words.

[23]Confiscation Bill, Explanatory Memorandum, 14 November 1997 (emphasis added).

I do not accept the submissions made on behalf of the Director.

First, I do not accept the characterisation of the application as a de facto exclusion application, or as an application to set aside the restraining order, in respect of the property. The orders sought on the application, whilst extensive, are significantly different from orders which could be obtained on a successful exclusion application or by an order setting aside the restraining order in respect of the property. In either of those events, the company would be entitled to enjoy the property as it saw fit. For example, as the sole director of the company, Mrs Mokbel could decide that, in all the circumstances, she will serve out her period of imprisonment, however traumatic that may be, to enable the property to continue as the home of her children whilst she is in prison and for her to have a home to reside in upon her release from prison. Although it is unlikely that Mrs Mokbel would adopt such a course, having regard to the matters to which she has deposed, this would be her right in the event that the property was excluded from the restraining order.

The power of the Court to make an exclusion order, in circumstances where the specified conditions are satisfied, is an “all or nothing” power. It does not permit conditions to be attached to the exclusion.[24] The orders sought seek to impose conditions upon the proposed dealing with the property. Those conditions involve an obligation upon the company and Mrs Mokbel to sell the property, pay the amount due in respect of Mrs Mokbel’s surety obligation and account for any balance of the sale proceeds to the Department of Justice, to be held subject to the restraining order. Further, Mrs Mokbel will subject herself to a condition, or will give an undertaking, that she must abandon her appeal against the orders made by Gillard J on 26 April and 14 December 2006. The result which the company and Mrs Mokbel seek to achieve is substantially different from them obtaining an exclusion order in respect of the property, or an order setting aside the restraining order in respect of the property.
[24]DPP v Le [2007] VSC 18.

Second, I do not accept that the broad general words of s. 26(1) should be read down in the manner suggested on behalf of the Director. The position may be otherwise if the exclusion regime of the Confiscation Act did not require an all or nothing approach once the preconditions to the making of an exclusion order are established in the circumstances of a particular case. However, as I have said, that is not the case.

In Director of Public Prosecutions v Le[25] the Court of Appeal considered an application for exclusion from automatic forfeiture by the wife of a convicted drug trafficker. The property which was the subject of the restraining order was the jointly owned matrimonial home. The wife, as joint proprietor, applied for an exclusion order under s. 52(1) of the Confiscation Act. Section 52(1) is in similar terms to s. 22(b). The judge at first instance was satisfied that the preconditions for the making of an exclusion order were made out by the wife. The judge ordered that the whole of the property, including the husband’s joint interest, be excluded from automatic forfeiture under s. 35 of the Act.
[25][2007] VSCA 18.

On appeal, the Director submitted that the power to make an exclusion order should be read so as to exclude only “so much of the property as relates to the applicant’s interest.”[26] The majority judgment of the Court of Appeal was given by Maxwell P and Chernov JA. They rejected the submission of the Director and held that, where the preconditions for the making of an exclusion order are made out by the applicant, the whole of the property in which the applicant claims an interest must, not may, be excluded.[27] Maxwell P and Chernov JA recognised that this was an “all or nothing” approach to the power to make an exclusion order[28] and that this may lead to “very curious results”.[29] However, they were of the view that the words of the Act were clear and unambiguous and the Court was bound to give effect to the language used.[30] This reasoning was expressed to apply to s. 22 of the Confiscation Act.[31]
[26]Ibid, [49].
[27]Ibid, [16], [50].
[28]Ibid, [61].
[29]Ibid.
[30]Ibid, [61]-[62].
[31]Ibid, [51].

In the course of rejecting the submissions made on behalf of the Director in DPP v Le, Maxwell P and Chernov JA considered the language of the Explanatory Memorandum for the Confiscation Bill. They noted that clauses 51 and 52 of the Explanatory Memorandum were directly inconsistent with the unambiguous words used in s. 52.[32] The Explanatory Memorandum clearly stated that cl. 52 of the Confiscation Bill was intended to provide for exclusion of the interest in the restrained property which was held by the applicant for an exclusion order. However, because the majority took the view that there was no ambiguity in the wording of s. 52 they held that the words of the statute must prevail.[33]
[32]Ibid, [58]-[60].
[33]Ibid, [60].

Counsel for the Director in this case informed the Court that the Director has sought leave to appeal against the decision in DPP v Le. Counsel referred to the dissenting judgment of Neave JA, and submitted that, if leave is granted, the appeal to the High Court has good prospects of success. However, in interpreting the Confiscation Act, a single judge is bound to accept the correctness of the majority decision in DPP v Le. The effect of that decision is that there is no discretion on a court considering an exclusion application. An exclusion application must be considered as an all or nothing application. If the preconditions for the exercise of the power are established, the Court is obliged to make an exclusion order in respect of the whole of the property in which the applicant for the exclusion order claims an interest. There is no power to impose conditions upon such an exclusion order.

The words used in s. 26(1) are not ambiguous. A broad and unfettered power is given to the Court to make such orders in relation to restrained property “as it considers just”. In conformity with the majority decision in DPP v Le, the unambiguous words of the statute must prevail over the wording of the Explanatory Memorandum.

An alternative submission was put on behalf of the Director in support of the argument that I should not entertain this application. It was submitted on behalf of the Director that this application is an abuse of process because an alternative procedure is available to Mrs Mokbel. It was submitted that in all the circumstances, the appropriate course was for Mrs Mokbel to make a further application to the Court of Appeal for a stay of the operation of the Orders made by Gillard J on 26 April 2006. It was submitted that Mrs Mokbel has now placed further evidence before the Court to satisfy the evidentiary requirements specified by Nettle JA on the hearing of the first stay application. Accordingly, it was submitted that there is a real prospect that the Court of Appeal will grant a stay of the operation of Gillard J’s orders, with the result that Mrs Mokbel would be released from custody pending the hearing and determination of the appeal.

I do not accept that there is any abuse of process involved in the making of this application. This application seeks different relief from that sought by the appeal. The appeal seeks to relieve Mrs Mokbel of her obligations as a surety. This application seeks orders which will enable Mrs Mokbel to comply with her obligations as a surety. Further, in the event that her appeal is dismissed, a temporary stay pending its determination will provide Mrs Mokbel with a mere deferral of her imprisonment for the balance of her two year sentence. Success on this application will enable Mrs Mokbel to avoid any further imprisonment.

I proceed to consider the application.

IV Exercise of Discretion

It was submitted on behalf of the company and Mrs Mokbel that it is just to make the orders sought because in all the circumstances of the case, it is unjust that Mrs Mokbel should remain in prison for two years. It was submitted that this injustice was established by the following matters, which should be considered in combination.

First, it was submitted that Mrs Mokbel agreed to be a surety for Tony Mokbel at the request of her husband Milad. At this time, Mrs Mokbel was the sole director and shareholder of the company. She obviously intended that the property owned by the company could be sold to fund payment of her bail undertaking in the event that Tony Mokbel absconded, as evidenced by the form of the Affidavit of Justification sworn by her. Further, at the time of agreeing to act as surety, Mrs Mokbel discussed the fact that she would need to access the equity in the property if the undertaking was called upon with her husband. At this time, her husband was the appointor under the discretionary trust. Milad Mokbel has sworn that he understood the property was at risk should Tony Mokbel abscond, that he was unaware of his powers as appointor under the JR Mokbel Family Trust and that he would never have prevented a sale of the property to raise the $1 million required to satisfy Mrs Mokbel’s surety obligation. He was not cross-examined about this. Accordingly, it was at all times contemplated by those in actual or prospective control of the company that the property would be available to satisfy Mrs Mokbel’s surety obligation if it was called upon. I accept that this is so.

Second, it was submitted that it is evident that Gillard J shared this contemplation. On 26 April 2006, when Gillard J ordered the bail of Tony Mokbel to be forfeited, and ordered Mrs Mokbel to pay the $1 million surety obligation, Gillard J contemplated that Mrs Mokbel would need to cause the company to sell the property in order to fund the payment.[34] I also accept this. However, this was before Gillard J had heard the evidence and submissions in respect of Mrs Mokbel’s application under s. 6(4) of the Crown Proceedings Act.
[34]DPP v Mokbel and Mokbel [2006] VSC 158, [42].

Third, it was submitted that, prior to the making of the restraining order over the property, Mrs Mokbel had the power to cause the company to sell the property so as to raise the $1 million required to satisfy her surety obligation. It is only the restraining order which prevents her from doing so. Accordingly, it is the restraining order which is the immediate cause of her imprisonment. I accept this.

Fourth, it was submitted that Mrs Mokbel should be believed when she says that she has no unrestrained assets from which she can pay the $1 million surety obligation. It was submitted that this evidence was inherently probable in circumstances where both Mr and Mrs Mokbel are presently in custody, there are three young children in the care of relatives, the children have been separated, Mrs Mokbel is concerned about the welfare of her children and, in particular a son who suffers from a serious medical condition, and Mrs Mokbel is understandably “completely devastated” by the situation. In these circumstances, it was submitted that I should accept her evidence that she personally does not have the required $1 million unless she is permitted to use the property to raise the money. I accept this evidence.

Fifth, it was submitted that there is no prospect of any money coming forward to enable Mrs Mokbel to satisfy her surety obligation. This submission was based on evidence given by Detective Sergeant Coghlan in cross-examination, to the effect that if $1 million was paid to the Prothonotary of the Court to satisfy Mrs Mokbel’s surety obligation, he would immediately suspect that this sum represented the proceeds of crime and would take steps to cause the Director to apply for a restraining order in respect of it. If the application for a restraining order was successful, this would prevent the money being used to satisfy Mrs Mokbel’s surety obligation. The Director accepts that such an application would be made. Although there was no submission directed at the precise basis of an application for a restraining order in these circumstances, I assume that the evidence of Detective Sergeant Coghlan relates to probable charges which would be laid under ss. 194 or 195 of the Crimes Act 1958 for dealing in the proceeds of crime, or with property which is reasonably suspected of being the proceeds of crime.

Sixth, it was submitted that the purpose of the restraining order is only to preserve the property pending the determination of the criminal charges against Milad Mokbel. If Milad Mokbel is acquitted of the charges against him, the restraining order will automatically be lifted.[35] However, this may not occur for many months, or years. In the meantime, Mrs Mokbel will have served the whole or a substantial part of a two sentence of imprisonment. This is unjust where Mrs Mokbel has not been charged on convicted with any offence. Her imprisonment is due to her failure to pay the amount of her surety obligation, which she wishes to pay. It is only the restraining order which prevents her from doing so.
[35]There was no reference in argument to the possibility of the Director making an application under s. 37(1) of the Confiscation Act for a civil forfeiture order, within the time specified in s. 37(3A).

Seventh, it was submitted that s. 17 of the Charter of Human Rights and Responsibilities Act 2006 (Vic) was relevant in circumstances where the family of Renate and Milad Mokbel, and their children, has been disrupted by the imprisonment of both parents, and the consequent need to separate the children so they can be cared for by relatives. Section 17 provides:

17. Protection of families and children
(1)Families are the fundamental group unit of society and are entitled to be protected by society and the State.
(2)Every child has the right, without discrimination, to such protection as is in his or her best interests and is needed by him or her by reason of being a child.

It was submitted that the present situation is offensive to the existence of the rights recognised by s. 17 and that this was a matter to take into account in the exercise of the Court’s discretion under s. 26(1) of the Confiscation Act.

Reliance was also placed upon s. 21(8) of the Charter, which provide:

(8)A person must not be imprisoned only because of his or her inability to perform a contractual obligation.

It was submitted that the surety obligation undertaken by Mrs Mokbel was akin to a contractual obligation.

Eighth, it was submitted that if the property had been in Mrs Mokbel’s personal name, and not owned by the company, the orders of Gillard J would have operated as an “encumbrance” over the property for the purposes of the Confiscation Act. It was submitted that paragraph 2 of the orders of Gillard J made on 26 April 2006 would operate as an “encumbrance” for the purposes of the Confiscation Act, because that order authorised the seizing and selling of the property to satisfy Mrs Mokbel’s surety obligation. This is within the wide definition of encumbrance for the purposes of the Confiscation Act, which is in the following terms:

“encumbrance” in relation to property, includes any interest, mortgage, charge, right, claim or demand which is or may be had, made or set up in, to, or in respect of the property.

It was submitted that s. 41 of the Confiscation Act recognises the continuance of encumbrances over restrained property. Accordingly, if the property had been in the name of Mrs Mokbel, it would have been subject to the encumbrance provided for in paragraph 2 of the 26 April 2006 orders of Gillard J. In these circumstances, it was submitted that it is only “for technical reasons, namely the ... property was and is registered to the trustee of the family trust and not to Renate Mokbel” that Mrs Mokbel is prevented from relying upon the property to satisfy her surety obligation. It was submitted that this is an unjust result, in circumstances where it is commonplace for families to keep valuable assets, such as the family home, in family trusts.

Ninth, it was submitted that it was unjust for Mrs Mokbel to remain in prison in circumstances where, from January 2006 the police knew that Mrs Mokbel did not personally own the property, that investigations were being undertaken in respect of the criminal activities of Milad Mokbel and that, accordingly, the property may be restrained under the Confiscation Act if charges were laid. It was submitted that, in these circumstances, there was an obligation upon the police to either raise their concern with Mrs Mokbel or to make application that Tony Mokbel’s bail be revoked.

Tenth, it was submitted that it is unjust for Mrs Mokbel to remain in prison because of the harsh conditions to which she is being subjected. In particular, reliance is placed upon the fact that, notwithstanding she has not been convicted of any offence, Mrs Mokbel has been placed in the maximum security unit of the prison. This involves Mrs Mokbel being “locked down” between 7pm and 8am daily in a solitary cell. Because Mrs Mokbel is in the maximum security unit, she cannot have her youngest child in prison with her. Further, the humiliating nature of the body searches to which she is subjected following visits from her children has caused Mrs Mokbel to only see her children once a week.

For the following reasons, I do not consider that it would be just to make the orders sought by the s. 26 application.

First, I do not consider it just, and it would be inconsistent with the general policy underlying the Confiscation Act, to make the orders sought in circumstances where the evidence as it presently stands justifies the inference that, to the knowledge of Mrs Mokbel, the majority of the assets of Milad Mokbel, Renate Mokbel and associated entities, including the assets of the company in its capacity as trustee, were acquired from the proceeds of Milad Mokbel’s criminal activities. This is especially so where the property is the most valuable asset of the family which has been disclosed. As I have said, the evidence is not complete because Milad Mokbel has not deposed to his assets.

Second, although Mrs Mokbel has sworn that she has asked external lenders and members of her immediate and extended family to lend her money to assist her in paying her surety obligation, Mrs Mokbel has not sworn that she has asked her husband Milad Mokbel to lend her money for this purpose. As I have said, Milad Mokbel has sworn an affidavit in support of the application, but has not deposed as to his assets and financial resources. In this regard, the mere fact that if Milad Mokbel attempted to pay $1 million to satisfy, or a lesser sum to assist in the satisfaction of, Mrs Mokbel’s surety obligation does not automatically mean that the Director will obtain a restraining order in respect of that money. Any application for a restraining order would need to be considered in the light of all of the circumstances and the evidence before the Court.

Third, it would be inconsistent with the purposes of the Confiscation Act to grant the company and Mrs Mokbel the relief which they seek. The principal purpose of the Confiscation Act is to provide for the forfeiture of the proceeds of, or property used in connection with the commission of, certain crimes (tainted property). In this case, it is alleged that the property is tainted property because the property was used by Milad Mokbel in, or in connection with, the commission of offences alleged against him. A restraining order has been made in respect of the property. The offences with which Milad Mokbel has been charged include an offence against s. 71 of the Drugs, Poisons and Controlled Substances Act 1981. That is a Schedule 2 offence within the meaning of the Confiscation Act. Accordingly, a conviction for that offence will result in the property being forfeited to the State under s. 35 of the Confiscation Act, unless an exclusion order is made in respect of the property. An exclusion order can be made prior to the hearing and determination of the criminal charges, under ss. 20 and 22, or after a conviction, under ss. 51 and 52.

The application by the company and Mrs Mokbel for an exclusion order under s. 20 has not been prosecuted. Although the stay of that application, which was granted by consent, has now been lifted by the Court to enable the application to proceed, the affidavit material in support of that application is not complete. The evidence of Witness A and Detective Sergeant Coghlan provides strong evidence that Milad Mokbel was using the property to traffic in commercial quantities of drugs of dependence. Accordingly, the Court hearing a s. 22 application is unlikely to be satisfied that the property is not tainted property. As a result, the company and Mrs Mokbel will need to satisfy all of the conditions for an exclusion order which are specified in s. 22(b)(A)-(E) of the Confiscation Act. No submission was made to me on behalf of the company and Mrs Mokbel that the evidence as it stood satisfied all of the provisions of s. 22(b) of the Confiscation Act.

For the reasons stated, I do not accept the submission that the combined operation of Gillard J's orders made on 26 April 2006 and of the restraining order will result in injustice to Mrs Mokbel, because it is possible that Milad Mokbel will be acquitted of the charges against him and the restraining order will then lapse. It would not be unjust to allow the Court’s orders to operate according to their terms. This is especially so where the Confiscation Act provides the remedy of an exclusion order. In circumstances where the evidence as it presently stands justifies the inference that the property was, directly or indirectly, acquired from the proceeds of criminal activity by Milad Mokbel, it is appropriate that the company should not be permitted to deal with the property unless it is able to satisfy the necessary conditions for the making of an exclusion order.

As to the other matters relied upon by the company and Mrs Mokbel, I make the following comments. Although I accept that the provisions of Part 2 of the Charter of Human Rights and Responsibilities Act 2006 may be relevant to the exercise of a discretion under s. 26 of the Confiscation Act, I do not accept that either s. 17 or s. 21(8) ought cause the Court, either alone or in combination with other matters, to exercise the discretion in the manner sought by the company and Mrs Mokbel.

As to s. 17 of the Charter, the important aims of preserving the family unit, and of protecting the best interests of children, do not involve a consideration of the family of Milad and Renate Mokbel, and their children, in the absence of the interests of families and children generally. The second reading speech for the Confiscation Bill, which I have quoted above, demonstrates that a principal aim of the Confiscation Act is to strike at the heart of illegal trafficking in drugs of dependence, by preventing drug traffickers (and therefore their families) from enjoying the profits of their crimes. The insidious effect of illegal drugs upon the family unit and, in particular, the best interests of children, are notorious. Giving effect to the Confiscation Act regime, which is designed to protect the community from these effects, is more important than the individual needs of the Mokbel family.

As to s. 21(8) of the Charter, the order that Mrs Mokbel be imprisoned became effective when her application under s. 6(4) of the Crown Proceedings Act was dismissed by Gillard J in December 2006. The appropriate forum to raise s. 21(8) of the Charter was on the hearing of that application. The appropriate forum to raise it now is in the Court of Appeal. Section 26 of the Confiscation Act is not an appropriate vehicle to consider this issue. In any event, I do not accept that Mrs Mokbel has been imprisoned only because of her inability to pay the amount of her surety obligation. Her imprisonment is due to the range of discretionary factors considered by Gillard J in rejecting her application under s. 6(4) of the Crown Proceedings Act, especially her failure to establish that she took all reasonable steps to ensure the attendance of Tony Mokbel throughout his trial and the fact that Gillard J did not accept that she was a genuine surety in the first place.

Further and in any event, the power to make a restraining order under s. 18 of the Confiscation Act, and the power to imprison a defaulting surety under s. 6(1) of the Crown Proceedings Act, are reasonable limits upon the human rights relied upon. Having regard to the policies underlying these legislative provisions, they can, to the extent that they may be inconsistent with ss. 17 or 21(8) of the Charter, be “demonstrably justified” within the meaning of s. 7(2) of the Charter.

I do not consider the fact that the property is owned by the company, and not Mrs Mokbel personally, is a mere technicality which the Court should ignore, with the result that the Court should treat the property as being in some way subject to a de facto encumbrance under paragraph 2 of the orders made by Gillard J on 26 April 2006. Further, paragraph 2 of the orders did not come into operation until after the expiration of the 31 day period specified in paragraph 1 of the orders. Accordingly, any notional encumbrance such as that contended for did not come into operation until after the making of the final restraining order on 15 May 2006.

I do not accept that the Director owed some duty to Mrs Mokbel, or was otherwise obliged, to apply to revoke Tony Mokbel's bail in circumstances where the police knew that Mrs Mokbel had referred to the property in her Affidavit of Justification, knew that the property was owned by the company, knew that the police were investigating Milad Mokbel's conduct and knew that there was a possibility of a restraining order being sought over the property. There was no suggestion in submissions that this information increased the risk that Tony Mokbel would abscond. As surety, it was Mrs Mokbel's obligation to take reasonable steps to ensure Tony Mokbel's appearance at his trial. Further, it was not suggested in submissions how the police ought to have notified Mrs Mokbel of these matters, in circumstances where an investigation into the conduct of her husband was continuing.

I accept that the conditions of Mrs Mokbel’s imprisonment are harsh. However, prison is a hard place. If there is anything unjust about the conditions to which Mrs Mokbel is being subjected in prison, an application under s. 26 of the Confiscation Act is not the appropriate vehicle to raise those issues.

In all the circumstances, I do not consider it would be just to make the orders sought. The application will be dismissed. The Court will make orders to expedite the hearing of the exclusion application if the company and Mrs Mokbel wish to continue with it.

I conclude with the following comments. It may be that the new evidence concerning Mrs Mokbel's assets, which has not been considered by the Court of Appeal, combined with the evidence of Detective Sergeant Coghlan that if an amount of $1,000,000 is produced to pay Mrs Mokbel's surety obligation the police will ask the Director to make an application that such sum be restrained under the Confiscation Act, will provide sufficient grounds for the Court of Appeal to grant Mrs Mokbel a stay pending the hearing and determination of her appeal against the orders of Gillard J made on 26 April and 14 December 2006. However, that is a matter for the Court of Appeal. Further, the situation in which Mrs Mokbel finds herself may provide grounds for an order that there be an expedited hearing of the charges against Milad Mokbel. That is a matter for the court in which those charges are to be tried.

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[2007] VSC 119

3 May 2007