Lordianto & Anor v Commissioner of the Australian Federal Police; Kalimuthu & Anor v The Commissioner of the Australian Federal Police

[2019] HCATrans 151

[2019] HCATrans 151

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S110 of 2019

B e t w e e n -

SANKO LORDIANTO

First Appellant

INDRIANA KOERNIA

Second Appellant

and

COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE

Respondent

Office of the Registry
  Perth  No P17 of 2019

B e t w e e n -

GANESH KALIMUTHU

First Appellant

MACQUELENE PATRICIA MICHAEL DASS

Second Appellant

and

THE COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE

Respondent

KIEFEL CJ
BELL J
KEANE J
GORDON J
EDELMAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 8 AUGUST 2019, AT 10.00 AM

(Continued from 7/8/19)

Copyright in the High Court of Australia

____________________

KIEFEL CJ:   Yes, Mr Walker.

MR WALKER:   May it please the Court.  Your Honours, the only other matter that I wanted briefly to refer to with respect to the first propositions about third party was to remind your Honours of the example we sought to construct in our written submissions whereby, on the construction held against us, the victim who sells shares at what is ex hypothesi an unfair undervalue to an insider trader thereby of course loses the proceeds of that sale which have been derived of course from the offence.  Because the essence of insider trading is the purchase, in such an example, on the reasoning against us you could never be a third party. 

In our submission, it is unaccountable how the evident purpose of the whole scheme seeking to prevent people enjoying the fruits of crime and the necessary element to render it a tolerable proposition with respect to what I will call strangers to offending – namely, for the purpose we attribute to paragraph 330(4)(a) ‑ it is unaccountable how, against that background, that example would produce that extraordinary outcome.  It adds, in our submission, to the constructional force of the preferable reading which we urge on this Court.

I do not want to say much more than has already been said or written in relation to proposition 6 about sufficient consideration.  In particular your Honours appreciate the force in what might be called the commercial context which is called up by the statute of the illustrative conduct of our clients whereby when there had been what can be called an “overpayment” into the Australian account there was a prompt adjustment back to the remitter to whom the money had been given in Indonesia in order to cause, that is as consideration for, the deposits in aggregate in Australia.

So I come to the last part of our argument starting with proposition 7 in our outline, the no reasonable suspicion proposition.  Could I remind your Honours of the salient features of the facts, the evidence, to which we have given detailed reference in our written submissions.

The first is it was not suggested, nor was it found, that there was anything, to use Justice Simpson’s words, “untoward” in Indonesia, by which I mean resort to these remittance businesses was not shown to be irregular or illegal and proceeding to arrange what I will call an exchange transaction in order to transfer financial worth, metaphorically, from Indonesia to Australia was not in the slightest degree suggested to be understood as or in fact to be an offence of any kind in Indonesia and to remind your Honours receiving deposits into bank accounts in Australia is not in itself, of course, an offence.

GORDON J:   Does that sit with paragraphs 114 and 116, dealing with the knowledge question?

MR WALKER:   Of the ‑ ‑ ‑

GORDON J:   Of the female.

MR WALKER:   I am sorry, your Honour has asked me about – which paragraphs in the first instance decision, your Honour is asking about?

GORDON J:   I think it is 114 and 116.

MR WALKER:   Your Honour is, I think, asking about the findings at first instance on pages 38 and 39 of the core appeal book?

GORDON J:   I am.  Yes, I am, thank you.

MR WALKER:   Yes, I think the answer to your Honour’s question is yes.  The recitation in paragraph 114 is, in our submission, not of anything irregular in Indonesia at all.  The reference to indirect evidence extracted above:

that in Indonesian law the threshold above which payments are to be reported is 500 million Indonesian rupiah ‑

really goes nowhere at all, not least because the reference to the evidence extracted above is to a question asked by counsel to which there was not an answer.  There is no evidence of any breach at all.

If the suggestion at 114 is that there is some kind of Indonesian equivalence of a structuring offence, then your Honours appreciate that there being a reporting threshold does not of itself create a structuring offence at all.  You have to add that.  Once you put the threshold in your legislative choice is and now do I have an offence for people who, by pattern of conduct, seek to evade the evident intent of the reporting.   There was nothing of that kind at all.

Justice Gordon has asked me about paragraph 116 on page 39 of the trial reasons.  It is, of course, the case.  One can see the imposing lists of the deposits which, in aggregate, created the required transfer of wealth from Indonesia to Australia.  The second‑last sentence of 116 is an acceptance.  The next sentence:

That also is unconvincing.

Her Honour does not find that the witness was lying about never thinking this odd or unusual and certainly is not finding that it is not true that she never questioned her contacts in the CBA.  The evidence is quite incapable of supporting any such approach, particularly bearing in mind that her Honour expressly said that she would not be founding findings on this witness cross‑examined through an interpreter based on demeanour.  It was the inherent plausibility of the matter, to use her Honour’s expression, upon which her Honour proceeded. 

So, one has the narrative which includes my client referring to the somewhat jocular comment of the CBA employee concerning the so‑called crowded bank statement.  That of course is a very significant matter.  The bank that of course knows sooner and more comprehensively than the customer about the pattern of conduct never raised with her anything untoward about it at all.  Quite plainly from the evidence, my client was accepted by the trial judge for the proposition that she did not know about a structuring offence in Australia.  Indeed, the premise of a structuring offence, which is a separate reporting threshold requirement on the bank, was also not shown to have been understood to exist by my clients.

EDELMAN J:   What do you say would have been necessary to satisfy or to fail to satisfy the reasonable suspicion requirement?

MR WALKER: In particular in relation to the specified section 142 offence – and I should confine my answer to that rather than trying to be abstract for all cases – one will need to show that there was knowledge of matters which included the existence of a reporting requirement, evasion of which was also an offence by way of so‑called structuring.

It would need to be knowledge sufficiently specific to have in particular the element of a requirement of reporting because without a requirement of reporting it is nonsensical to posit nefarious knowledge of criminal evasion of it, a requirement of reporting and also an offence of structuring, by whatever word that might be understood, of behaving in such a way as to evade the reporting.  Those are the two things.

They could be known.  It would be sufficient for failure by the applicant for the exclusion order.  It would be sufficient for them to fail if the Court were to find, after considering the evidence on that issue on which the applicant bears the onus, that he/she or they knew that there was a reporting requirement and knew that behaviour patterned to evade the reporting requirement was an offence.

BELL J:   Why necessary to have knowledge of what you describe as a reporting requirement as distinct from the sort of analysis one sees in the joint reasons at paragraph 162 and following on page 107 of the combined appeal book?  Their Honours there note that your clients:

were financially sophisticated and used to transferring large sums of money across national borders, as well as dealing with currency controls and a myriad of national disclosure requirements.

Their Honours inferred that:

Financially sophisticated international investors may be taken to know that many national requirements –

of whatever nature, as I understand their reasoning, are directed broadly to the avoidance of money laundering.  Now, quite how one proscribes an offence of money laundering is, on one view, neither here nor there ‑ the circumstances that their Honours are identifying, together with the circumstance that these financially sophisticated people dealing with large sums of money chose to go to an Indonesian money changer who was offering a better rate than any commercial institution in Indonesia.

MR WALKER:   Their Honours refer to the appellants as financially sophisticated.  However, the only evidence that goes to that concerns for the husband what I will call his obviously considerable success in business that that will supply sophistication.  But he was not the person who was conducting these transactions.  That is the first thing.

GORDON J:   He, because the wife was doing it?

MR WALKER:   Yes.  Used to transferring large sums of money in a number of different ways:  from Singapore, the evidence was, always through the bank et cetera.  That in itself led to no exploration in the evidence as to whether that had produced in them any knowledge of what I am going to call reporting requirements.  Unless there are reporting requirements there cannot be structure in the evasion of offences.

BELL J:   Is it necessary that there be more than the reasonable suspicion that they are the proceeds, directly or indirectly, of the commission of an offence or being used as an instrument, directly or indirectly? 

MR WALKER:   Your Honour will, of course, be aware of the case moving away from the subsection 31(6) specification, so yes, the answer is.  There has to be knowledge or circumstances from which there would be reasonable suspicion with respect to the specified case, not with respect to the general plethora of regulation about money.  It is, of course, notorious that money is highly regulated by all national systems, but that does not even begin to supply the question whether this pattern of deposits by others, by strangers with whom she has no dealings, whether that would have either shown knowledge – no one I think pretends that there has been demonstrated to be knowledge on the part of my clients and they swear, and are not disbelieved, that they did not know that these laws existed.  This is a case about no reasonable suspicion upon which we bore the onus.

BELL J:   As I understand the majority analysis, their Honours ‑ ‑ ‑

MR WALKER:   It is the whole court actually.  Justice McColl joins in it.

BELL J:   Yes, indeed.  Their Honours considered the circumstances gave rise to an inference of conduct amounting to what they described as money laundering in their joint reasons, as distinct from an understanding of the particular elements of the anti‑money laundering offence under the provisions of the statute.  Is that right?

MR WALKER:   Yes, I think, with great respect, that is a fair paraphrase.

BELL J:   That, you say, went outside the terms of the case as it was understood?

MR WALKER:   Yes, and also is not supported by the evidence.  Can I try to explain that?

BELL J:   Yes.

MR WALKER:   If I may, I will go back to the way in which the trial judge put it, because that is taken up ‑ ‑ ‑

GORDON J:   Before you do that, Mr Walker, can I just clarify what you just put to Justice Bell?  My note is that it had to be knowledge or circumstances from which reasonable suspicion of a particular case could be drawn.

MR WALKER:   Yes.

GORDON J:   That is your submission?

MR WALKER:   Yes, and that, of course, simply comes from the terms of the provision ‑ ‑ ‑

GORDON J:   I accept that.  I had misunderstood your earlier submissions to be requiring some element of knowledge, so I am just making sure that I understood what your submission was.

MR WALKER:   And I apologise, I have used the word “knowledge” about two different aspects.  Can I explain?

GORDON J:   Correct.

MR WALKER:   The knowledge I am talking about is the knowledge captured by the word “circumstances”, “in the circumstances”, and in light of the approach taken in the decision of Le to which we make reference in written submissions will require that you know enough about the state of the law from which a reasonable suspicion of the property being proceeds or instrument can be spelled out.  That is different from the knowledge that it is proceeds or instrument which, of course, will be enough to destroy any application of 400(3)(a).

KIEFEL CJ:   Mr Walker, are you saying that there has to be some knowledge of the particular law in question, the particular offence in question?

MR WALKER:   Yes.  That is why 31(6) says you have to specify the grounds.  They specify two but they persist only in one.  We are talking about, to use a paraphrase, an innocent third party.  So we are talking about somebody who is not themselves an offender.

KIEFEL CJ:   But we are talking about reasonable suspicion.

MR WALKER:   Yes.

KIEFEL CJ:   Not knowledge or mens rea in relation to the particular offence.

MR WALKER:   That is reasonable suspicion ‑ ‑ ‑

KIEFEL CJ:   Reasonable suspicion suggests some knowledge of some offence more generally, does it not, something untoward?

MR WALKER:   No.  That would be the remarkable proposition that because we all know that there are lots of laws about lots of things that at any given time somebody with whom you may be dealing may well have committed some offence which is ‑ ‑ ‑

KIEFEL CJ:   But is not the statute creating by this something which puts you on inquiry, in effect.  It says “There is something untoward here.  There happened to be 400 cash deposits of under $10,000.  I wonder what that could be.  I might make an inquiry just to make sure about that,” but in the absence of an inquiry you are left with a suspicion that you are not pursuing here.

MR WALKER:   Inquiry of whom?  They have no links with the people who have come and gone to make the deposits.  They do have dealings with the banks.  They talk about this very thing, the crowded statement, and nothing is raised at all to suggest that there is indeed anything untoward.  There is obviously nothing in itself wrong or untoward about receiving money in your account when you expect to do so.

KIEFEL CJ:   When you have given a lump sum.

MR WALKER:   No, but, your Honour, the business of these remittance businesses does not proceed only by a lump sum.  One of the ways in which they operate is that there are, as it were, people to be aggregated who wish to transfer financial worth internationally and it is, if you like, an aggregating exercise which explains why my client, who enjoys adding up, would make sure that these deposits, which had been accomplished before she learns about them, to make sure that they aggregate what she had required to be transferred from Indonesia to Australia.  Of course, the word “transfer” is being used figuratively.  There is no physical transfer of anything.

BELL J:    Do I understand that your contention as to the error of the Court of Appeal was that their Honours failed to appreciate that in the way the case was put by the responsible authority for the purposes of discharge of the obligation under 31(6), it was put as one of reasonable suspicion that the property was the proceeds of the structuring offence and that in particularising its case in that way, or the ground upon which it objected to your exclusion application, it did not admit of reason that in all the circumstances it would have been obvious to persons such as your clients that this arrangement was likely to be one involving money laundering contrary to the laws of Australia even if they did not understand the particular reporting requirement.  Is that your contention?

MR WALKER:   Yes.  Your Honour uses the expression “money laundering”.

BELL J:   I use that because it is the expression used in the joint reasons at paragraph 162 ‑ ‑ ‑

MR WALKER:   Yes, yes.

BELL J:   ‑ ‑ ‑ where their Honours are inferentially reasoning that financially sophisticated people might well understand that the requirements in terms of international currency transfers reflect a concern about a money laundering.

MR WALKER:   Yes, but money laundering is, with respect, far too generic to be the appropriate conclusion of an analysis.  There may be observations about it along the way.  But, as a conclusion for the analysis about whether or not 330(4)(a)’s onus on us to rebut the existence of circumstances from which reasonable suspicion would arise, et cetera, is focused upon whether there was 142 offence being committed of which our enhanced interest against the bank was the product – the process.

BELL J:   Does that flow from the way the case against you was particularised?

MR WALKER:   Yes, it does, it does.  There were two offences raised.  Only one is persisted with.

BELL J:   Yes.

MR WALKER:   And money laundering, as your Honours appreciate, is a generic expression found in the statute’s title to describe a wide range of activities which are proscribed or sought to be prevented, or punished, in a wide range of ways.

BELL J:   I understand that.  What I am seeking to get to is the error that you identify which is not necessarily, as I apprehend it, that you need establish that the Court erred in concluding – or in the conclusion – that financially sophisticated persons such as your clients might be on notice that in some way these transactions suggested a money‑laundering purpose.  You make a narrower point.  Is that right?

MR WALKER:   Yes, and it comes about because of the concepts that you find in the critical wording of 330(4)(a):

circumstances that would not arouse a reasonable suspicion, that the property was proceeds of an offence or an instrument of an offence –

So ‑ ‑ ‑

BELL J:   Putting aside a pleading ‑ ‑ ‑

MR WALKER:   It is not a reasonable suspicion that something funny must be going on.

BELL J:   Putting aside a pleading point – which I appreciate is a discrete question ‑ ‑ ‑

MR WALKER:   Yes.

BELL J:   ‑ ‑ ‑ why would one not understand that it sufficed for the reasonable suspicion to be of the commission ‑ that this was the proceeds of the commission of an offence. 

MR WALKER:   Of something.  I understand why your Honour asked me that, with respect, but we do rely upon (a) 31(6) and this Court’s approach in Hart, to which we have referred in written submissions.

BELL J:   Yes, yes.

MR WALKER:   It is not just any offence.  After all, there are many offences which might explain the history of why there is lots of cash being used – I mean, ranging from illegal bookmaking through to armed robbery. 

It has never been the case that you have to undertake the impossible task of rebutting the possibility of any of them having occurred in the circumstances.  That is why it is so significant that 31(6) stipulates how the Commissioner may contest and in this case in proper form there were specified the, what I will call predicate offences, two of them, one falls away, the left of that one so that the question under 330(4)(a) is whether we have shown that in the circumstances there would not have been aroused a reasonable suspicion that the property was proceeds of the structuring offence because that is the one that has been specified, not some other offence, the structuring offence. 

Now, that being so, that is, in a sense a pleading point but it is a pleading point in a very substantive way.  It is the way in which fairness and practicality governs the conduct of the case and consideration as to whether an onus has been discharged.  As soon as one has a specified offence, and you need a specified offence, as soon as you have a specified offence then one asks the question about the circumstances and whether they are such as would arouse a reasonable suspicion.  We are told by the case law, Le, we are told that you ask that including by reference to what the person in question knows and the question “what the person in question knows” raises is, of course, what they do not know.

KIEFEL CJ:   Is this to invert the matter a little, having regard to the onus of proof?  The requirement is that your clients had to discharge the onus that they - that there was not aroused in the circumstances a reasonable suspicion that the moneys were proceeds of an offence.  The fact that the Commissioner identifies sections to which the offence under the relevant Act relates does not feed into the onus that you have to discharge which is a wider one, is it not?

MR WALKER:   No.  We would respectfully submit that it would be totally unworkable – impossible, if there was a need to review all imaginable or all actually available offences which, in theory, could have produced process.

KIEFEL CJ:   No, I am not suggesting that.  As I said earlier, why would not one read subsection (4) to say that the circumstances relating to these numerous cash deposits, your clients would have to discharge an onus to say that that did not arouse a reasonable suspicion that some kind of offence was being committed?

MR WALKER:   The purpose, with respect, of 31(6) and this Court’s admonition in Hart is so as to protect us from the impossible task of dealing with every possible kind of offence that might be an explanation of these multifarious deposits and they would include, as I say, drug dealing, armed robbery.  They are not just financial offences – any way in which bits of cash ‑ ‑ ‑

GORDON J:   But is that not what ‑ ‑ ‑

MR WALKER:   I am so sorry, your Honour.

GORDON J:   That is all right, I interrupted.

MR WALKER:   No, not at all, your Honour.

GORDON J:   To take this pleading point that has now labelled I think is difficult.  If one takes the whole of what is set out in the applicant’s further materials in response to what the responsible authority put forward, what follows are pleadings which say, to pick up the Chief Justice’s point, “Listen, you haven’t demonstrated that you legitimately obtained this property.  You haven’t demonstrated that it’s not proceeds, that it’s not falling within the relevant exclusions to give rise to a removal from the order that’s made under section 19 and then ultimately under sections 29 and 30”.  So, for my part, it seems that, yes, they have identified one or two offences, but in terms of onus the question is regardless of the knowledge of the law, is it not?

MR WALKER:   No, it is not regardless of that.

GORDON J:   Well, that is the question.  The question is, assuming for the moment – this is to answer your question do you have to know and go through and knock off all the possible potential criminal – no.  The question is, posed by 330(4), are there facts and circumstances in these circumstances ‑ ‑ ‑

MR WALKER:   Yes, in this case.

GORDON J:   ‑ ‑ ‑ that arouse suspicion that the property is either the proceeds of an offence or an instrument of an offence.  What the Full Court did is to say, “Listen, I’ve got someone who’s splitting up large amounts of money and depositing it hundreds ‑ ‑ ‑

MR WALKER:   No, she is not doing that at all.  Others are doing it.  I am so sorry, your Honour.

GORDON J:   And she knows about it and she is not - itself, that fact, together with another fact that the Full Court relies upon in 162 and 163, sufficient in the circumstances to make someone say, “That’s a bit odd, isn’t it?  Hang on a minute.  Why am I transmitting four and a half million and it’s coming in in all these dribs and drabs?”

MR WALKER:   I am getting it – I am getting what I want ‑ ‑ ‑

GORDON J:   But why is it coming in in all these dribs and drabs over an extended period?  That is the problem, is it not?

MR WALKER:   No.  I understand, with respect, why your Honour asked me that question, but our argument is no, that does not amount to circumstances that would arouse a reasonable suspicion that the property was proceeds of a structuring offence, that is, I mean by way of contrast was proceeds of some kind of anterior offending by which cash became available in that kind of amount. 

It is the structuring offence that the question is being asked about and, in our submission, where it is clear that there was no knowledge of a structuring offence existing, there being no knowledge of a reporting requirement existing, then the circumstances which include that state of knowledge or lack of knowledge by my clients are circumstances in which it is straightforward to say well, these are not circumstances - given your lack of knowledge, these are not circumstances that would arouse reasonable suspicion that the this money was proceeds of a structuring offence.  That is first point. 

The second point is, to take up what Justice Gordon has referred to in the majority reasons, if I could just go back to those and pick it up at page 106 of the book at paragraph 160 where their Honours note in our argument below concerning the inadequacy of the conclusion framed in terms of:

“a reasonable suspicion that something untoward had occurred” - 

The statute calls for more than that.  It is a reasonable suspicion that the property is proceeds et cetera of an offence which is then specified.  Then their Honours explain how that non‑statutory language nonetheless does not display error, and they explain it by reference to:  a person does not have to know that the act said to constitute the offence with which the person is charged was forbidden by law would immediately have gone to a discourse which is entirely inappropriate. 

We are not accused persons and this is not the application of the criminal law where, for societal reasons of course, we do not have a defence saying, “I have never read the Criminal Code and I did not know that that was a crime”.  We are not charged ‑ ‑ ‑

GORDON J:   Is not that fixed at 161 – explained?

MR WALKER:   No.  The expression “analogy” will not help, with respect. 

GORDON J:   Well, it is not an analogy.  They are applying that concept by analogy to a statutory provision.  In other words, they are taking it not as what, in a sense – they are not treating in 160, are they, Justice Simpson as having done that directly in this context?

MR WALKER:   No, that is right, but the last sentence of 161 is why I say, no, it is not fixed because in the last sentence of 161 that conclusion is wrong, bearing in mind that what we have to rebut is the existence of circumstances that would arouse a reasonable suspicion that the property is the proceeds of an offence, not that the property has been put into my account in odd circumstances, but a reasonable suspicion that it is the proceeds of an offence. 

It is of the essence, bearing in mind the purpose of this whole statute, that we are talking about the existence of a crime, not unexplained or a behaviour but crime.  As an innocent third party you will not be able to save your property if you cannot show that the circumstances were such that they would not have aroused a reasonable suspicion that the property was tainted by a criminal history.

EDELMAN J:   Does this ground essentially come down then to a complaint that the Court of Appeal erred in both fact and in law and that the factual error was the failure to find a lack of sufficient knowledge of a reporting requirement or the reporting offence ‑ ‑ ‑

MR WALKER:   Yes.

EDELMAN J:   ‑ ‑ ‑ and that the legal error was the failure to find that, as a matter of law, that would have been sufficient to prove a lack of reasonable suspicion?

MR WALKER:   That is right.  Yes, your Honour, because, as we argued at both levels below and here, the evidence that my clients did not know of the reporting requirements and, if you like, a fortiori did not know about the structuring offence built upon those reporting requirements, is all one way.  There is no finding that they knew of the existence of any such requirements. 

There was an attempt, your Honours may recall, by the cross‑examiner to produce an inference of knowledge from their frequent traveller experience of answering the Customs question:  are you carrying more than $10,000 currency?  The court below rejected that as casting any light on the matter.  But it was an understandable attempt because knowledge of the existence of such offences – you do not have to know the number, you just have to know – “I understand it is a crime in Australia to walk around with more than $5 in your pocket,” or whatever the offence in question.

GORDON J:   Can I finish off that knowledge bit for the last time.  Is that not then answered, or what is the response to the opening line of 162, which deals with this idea of this idea of knowledge where the Court of Appeal agree with Justice Simpson but they are unconvinced about the wife’s knowledge, which ties back to what Justice Simpson had said ‑ “Listen, I am unconvinced about the lack of knowledge in relation to her breaking up the deposits into amounts of less than 500 rupiah and also her knowledge in terms of structuring and money laundering,” which is what it is directed at, “that she is receiving under 10,000 deposits, numerous of them, in Australia”.

MR WALKER:   Yes.  The first thing is receiving small deposits is not in itself an offence.  That is really important that it be understood.  It is the pattern.  Your Honours know how the structuring transaction offence works.  It is retrospective; you look back at a pattern.  It is not committed obviously by the first deposit or probably even by the second deposit.  You look at a pattern.  The individual acts of depositing money, no one suggests that that in itself is such as to give arouse a reasonable suspicion that an offence is being committed.  That is the first thing.

The second thing is without a circumstance including some degree of knowledge – in answer to Justice Edelman’s questions on that matter – that it is a crime, not untoward.  It is a crime in Australia to bank in that fashion, as the smurfs were doing.  Then, in our submission, there are not circumstances that exist from which there would be aroused for the person in those circumstances a reasonable suspicion that there had been an offence committed of which the property in question then became proceeds.

EDELMAN J:   But the devil is in the detail of that statement though, is it not?

MR WALKER:   Yes.

EDELMAN J:   Because it is a question of what level of generality do you need to have the knowledge.  I think you have accepted that at one extreme you do not need to know the number of the provision or the precise words of the provision.

MR WALKER:   I would offer the proposition that you need to know it is a crime.  This is the essence of both the overall statute as has to do with the connection of property with crime, not with odd behaviour or something weird or something calling for explanation but connection with crime.

EDELMAN J:   Why would it not be sufficient to know that it could be a crime?  In other words, the investors could not possibly know what the intention is of ‑ ‑ ‑

MR WALKER:   The smurfs.

EDELMAN J:   The smurfs or the parties behind the smurfs.  So why could it not be sufficient that they know that this type of conduct could be a crime?

MR WALKER:   Not could be a crime ‑ with respect, that is ambiguous.
Not could be a crime in the sense that maybe this national Parliament has done something about it – maybe not – but could be a crime in the sense that it is a crime to do such things and this could have happened in these cases.  I accept that use of the expression “could have been”.

EDELMAN J:   Is that not really what is ‑ ‑ ‑

MR WALKER:   You need to know there is a law which may have been contravened by this conduct.

EDELMAN J:   Is that not really what paragraph 162 is saying?

MR WALKER:   No, because it relies entirely, the necessary inquiry, as to it being a crime to structure.

BELL J:   On that note, if I can just bring you back, Mr Walker, to the question of how this matter was put against you by the Commissioner below, if you go the appellant’s book of further materials at page 24, in paragraph 37 of the Commissioner’s submissions it is put ‑ ‑ ‑

MR WALKER:   It is the supplementary book, yes, your Honour.

BELL J:   Let me see.  I am not sure whether - I am looking at it electronically.

MR WALKER:   Just for the record, it is the appellant’s supplementary book of further materials, page 24.

BELL J:   Very well.  If you go to paragraph 37, the Commissioner appeared to be arguing in the Court of Appeal that it was open to find at least the arousal of a reasonable suspicion that the property was the proceeds or an instrument of a structuring offence or a money‑laundering offence.

MR WALKER:   Yes, and that went nowhere, the money‑laundering offence.  There is no contention in this Court. The Court of Appeal did not deal with that at all.  All they dealt with was an instrument of a structuring offence.

BELL J:   But the matter that I am raising with you in terms of the case that you were seeking to meet, on one view the Court of Appeal considered the level of knowledge or the level of the suspicion was at the level of an awareness that some form of money‑laundering offence contrary to the laws of Australia was the likely explanation for the otherwise surprising arrangements in relation to these very large number of deposits of relatively small sums.

MR WALKER:   Your Honour, with respect, that is a fair summary of a mode of reasoning that we attack.

BELL J:   Yes.  Now, I am wanting to know the basis - you say the answer is that paragraph 37 involves the Commissioner pitching his case on two bases and that one was abandoned?

MR WALKER:   Well, no, the Court of Appeal ran – found only one.  They did not attend to the other.  There is no contention here and that is why, no doubt, section 400.9 does not find a place in the written argument in this Court.  We have raised it because it is in the 31(6) notice and as your Honour points out there was that argument. 

One of the striking things is that the way in which the reasoning against us includes the emphasis on what I will call the untoward or odd aspects of the depositing is very much redolent of the structuring offence because I do stress there is nothing criminal about depositing money in any amount in a bank account.  It is only when it is done in this patterned fashion because there is the reporting requirement which is thereby evaded. 

BELL J:   I understand that, Mr Walker. 

MR WALKER:   I appreciate your Honour does.

BELL J:   The other way of viewing the matter, subject to the argument that you raise concerning the way it was pleaded and developed, is that the Court of Appeal was reasoning sophisticated individuals such as your clients would understand that countries have various ways of attacking the phenomenon described as money laundering and prohibiting that conduct and that it sufficed for the purpose of putting you on notice of the case that you were meeting that it was necessary for you to positively establish on the balance that you did not have a reasonable suspicion that the property was the proceeds of an offence without the requirement to show knowledge of the elements of a particular money‑laundering offence.

MR WALKER:   I am certainly not going so far as to talk about knowledge of elements but that it is a crime to pattern deposits in such a way as to evade a reporting requirement by reference to the amounts of deposits, that would be necessary to be shown to be within the knowledge of a person if the onus was reversed and it was for the Commissioner to show that the circumstances were such as to arouse a reasonable suspicion.  Indeed, as your Honours know, at first instance, Justice Simpson said, had the onus been the other way around, it could have been a bit difficult.  Then she correctly says, but it is the other way, the onus is on us. 

KEANE J:   Mr Walker, having regard to paragraph 126 ‑ ‑ ‑

MR WALKER:   Yes.

KEANE J:   ‑ ‑ ‑ of Justice Simpson’s judgment, page 41, her Honour says:

the bank statements demonstrate a pattern of activity that would arouse a reasonable suspicion in any reasonable person.

Her Honour then refers to other circumstances that would arouse a suspicion, not going on to say a suspicion about the offending but just a suspicion that something untoward is happening.  Her Honour then says, as you say:

I could not be satisfied that such a person would have had a reasonable suspicion that the funds in their accounts were the proceeds of an offence, or that their accounts had been used as instruments of an offence.  But that is not the question.

MR WALKER:   Yes.

KEANE J:   Now, her Honour has referred to the circumstance that there is positive evidence that gives rise to – there is evidence that gives rise to a positive suspicion that something untoward is happening and then goes on to say:

But that is not the question –

I could not find that there had been proof that there was:

a reasonable suspicion that it was the proceeds . . . or an instrument of a serious offence.

MR WALKER:   That is right.

KEANE J:   Her Honour says that is not the question:

The applicants have not established that the property was acquired in circumstances that would not arouse a reasonable suspicion that it was the proceeds of an indictable offence, or an instrument of a serious offence. 

Her Honour is saying there are suspicious transactions, they are obviously suspicious, I could not be satisfied that suspicion of an offence had been proved ‑ ‑ ‑

MR WALKER:   Yes, yes.

KEANE J:   ‑ ‑ ‑ “But that is not the question.”  The question is whether, in these circumstances, that your clients have satisfied the onus, and her Honour was not satisfied.  In terms of the argument you are putting, I cannot see what is wrong with her Honour’s analysis. 

MR WALKER:   It is good in parts for our purposes.  We, obviously, embrace the proposition that there being – I will just use the neutral words – “something odd” about this pattern of deposits that one might then say, it would arouse something that might unkindly be called “a reasonable suspicion”.  With respect, Justice Keane, as you have pointed out, her Honour does not say a suspicion of what.

KEANE J:   No.

MR WALKER:   And, then goes on to say, and it would not be a suspicion of proceeds of an offence.

KEANE J:   That is right.

MR WALKER:   So, these are circumstances that do not support.  That is bereft of an onus question because, in our submission, when we come to discharge our onus, what we have to show is that it was not acquired in circumstances that would arouse.

KEANE J:   Her Honour is saying your case – the case of the evidence that she is accepting from your clients, does not go far enough ‑ does not go far enough to exclude the possibility referred to in the last four lines.

MR WALKER:   My proposition is that paragraph 126 and the corresponding paragraph 162, and following, in the majority reasons, leave out the necessary inquiry – what did this person know about the existence of the criminal quality of patterns of deposits to evade a reporting requirement – indeed, what did they know about a reporting requirement?

KEANE J:   The reversal of the onus serves the purpose of relieving your opponents of proving what your clients actually did know.

MR WALKER:   So, they got in the box and said they did not know.

KEANE J:   And, that was not accepted. 

MR WALKER:   Well, your Honour, there is this reference to the unconvincing nature of the evidence about knowledge of threshold reporting requirements, but there is no evidence, nor is there a finding, that she knew about them.  There is just no evidence.  And do not forget, the bank did not raise with her anything at all untoward or any other epithet being attached to it.  So this idea of evidence being unconvincing, it certainly does not go so far as saying, “Well, she did know about reporting requirements”. 

It is for those reasons, in our submission, that it then becomes significant that it is not enough simply to talk about knowledge about threshold reporting requirements; she would then also need to have knowledge that otherwise lawful conduct patterned in such a way as to evade those requirements is criminal, not just reprehensible or socially to be frowned on, as it might be in some countries.  Not all countries will have structuring offences.  They might just have reporting requirements.  Indeed, when one looks at the nature of these laws, one can pretty much see that offences like structuring transactions follow after contemplation of the possible inefficacy of reporting requirements. 

It is for those reasons, in our submission, that paragraph 162, like at first instance paragraph 126, lacks the necessary consideration of what the circumstances which are the critical – that is the critical word in this provision for present argument – include, which is no knowledge of that criminality.  That is knowledge at a general, if you like generic, level.  It will not be satisfied by referring to the many national requirements related broadly speaking to the detection and prevention of money laundering, which is the expression used by the majority.  Not only does that fall foul of what I will call the pleading point but that also, with respect, makes a completely unjustified and speculative stab at what people would appreciate about the likely existence of a structuring transaction offence, even if they knew of reporting requirements in a case where there is no evidence which would permit a finding that they knew of that.

Then at the end of paragraph 162 and going into paragraph 163 ‑ we have written about this, I can put it briefly in address ‑ the notion that there should have gone through my client’s mind the idea that the modestly advantageous rate, that is, the beneficial margin in favour of our clients for the costs by dint of an exchange rate compared with what I will call banks, the sophisticated financial institutions in Asia, that that should somehow have triggered thinking about, well, maybe there is anti‑money laundering costs that are not being met by the remitter, unlike the Hongkong and Shanghai Banking Corporation, and therefore there must be some crime

afoot.  Your Honours, that is completely speculative without any foundation in evidence and it is actually counterintuitive.

The costs of the anti‑laundering are the costs of the Commonwealth Bank in terms of reporting transactions.  They have got nothing to do with anybody remitting from abroad at all and there was simply no evidentiary basis or logical support for that understanding of the circumstances by their Honours.  It is for those reasons and as we have then set out in our written submissions that there was error in the Court of Appeal in not upholding the appeal to it in relation to no reasonable suspicion.  May it please the Court.

KIEFEL CJ:   Yes.  Thank you, Mr Walker.  Yes, Mr Dhanji.

MR DHANJI:   Your Honours, we would adopt what has been said on behalf of the appellants in the matter of Lordianto, noting that the cases are relevantly similar with respect to the first issue, that is the third party issue, the sufficient consideration issue, but in relation to the third issue, whilst there are some similarities there are certainly differences factually in terms of the background to the events and the position of the appellants in this case and significantly the findings of the primary judge in favour of the appellants in relation to that issue.

Your Honours, I apologise, there is obviously a significant amount of overlap and I will try and make our points proficiently.  If I can begin by starting with the proposition that we accept at once, as we must, that this is legislation with far‑reaching effect but we also, of course, make the point that it does not pursue its purposes at all costs but rather provides through mechanisms, of which section 29 is one, some prospect of amelioration of the otherwise far‑reaching implications of the Act. 

On our construction, in our submission, and if I can begin with third party, whilst the legislation remains far reaching, it operates in a coherent fashion to protect persons targeted by the operation of section 330(4).  But before one gets to – if I can turn then, firstly, to the third party issue – before one gets to 330(4)(a), in this case one goes through section 29 and your Honours appreciate there are other provisions such as 42, 73 and the like which provide for forms of exclusion but they are all restrictive in their nature - the application for exclusion or the operative clause in relation to the application was enlivened, firstly, by subsection (1) as a result of an application having been made in this case under section 31 and then required the court to be:

satisfied that the relevant reason under subsection (2) or (3) for excluding the interest . . . exists.

The issue here was raised by subsection (2), in particular subsection (2)(d).  If I can turn to that, it is at page 75 of the joint book of authorities, volume 1.  The restraining order here of course is under section 19.  The question posed in that paragraph directs attention to whether the interest is neither:

(i)in any case‑proceeds of an indictable offence, a foreign indictable offence or an indictable offence of Commonwealth concern –

We are here concerned with the first:

(ii)if an offence to which the order relates is a serious offence‑an instrument of any serious offence.

What we particularly draw attention to is that the provision is concerned with the “is” question, if I can put it that way; that is, purely present consideration of whether the interest is neither one of those things.  The note to the provision immediately below - that is part of the Act; it should be borne in mind, pursuant to section 13 of the Acts Interpretation Act – indicates:

One of the circumstances in which property ceases –

and suddenly we have the idea of “ceases” but in the context of this provision we are not interested so much in whether it ceases or became or remained but rather simply the “is” question:

to be proceeds of an offence or unlawful activity involves acquisition of the property by an innocent third party for sufficient consideration ‑

Attention is directed to paragraph 330(4)(a).  Your Honours will see there that a formulation of words is used:  “innocent third party for sufficient consideration”.  That appears to be being used as a form of shorthand.  What is dropped out of the note are the words “acquired without knowing and in circumstances that would not arouse a reasonable suspicion”.  So one immediately sees, at least in the note, and I appreciate it is not the operative provision by any means, but one does see in the note the idea that “third party” is being used in a sense as having a kind of descriptive quality.

When one goes to Chapter 6 on page 339, if I can start with section 329:

Meaning of proceeds and instrument

I will confine myself to “proceeds”.  It operates obviously as an analogue in the context of an instrument.

Property is proceeds of an offence if:

(a)it is wholly derived –

I will not read the remainder.  Your Honours have spent sufficient time with it.  We pause to make again simply the point that when one comes to the interpreting chapter, it begins with the section 329 proposition that provides for, again, the “is” question.  It provides for that “is” in the context of that property having been derived or realised directly or indirectly from the commission of an offence. 

One immediately sees that one could derive property indirectly through a series of transfers and it would be within section 329 in the category of “is”, that is, present.  But there is a sort of doubling up that happens when one goes to section 330, which can appropriately be described as setting out in a sense the way in which the tracing operation works and, as has been put in the case of Lordianto, one sees that there is this sort of proliferation or, in a sense, contagion of property step by step and it expands outwards, ever reaching, subject to the cessation aspect in subsection (4).

What is significant to note is that when one is looking at the provisions property becomes proceeds where it is, in subsection (1)(a):

(a)wholly or partly derived or realised from a disposal or other dealing with . . . 

(b)wholly or partly acquired using proceeds . . . including because of a previous application of this section.

So you have, in a sense, in the context of, for example, a bank account, property ‑ used in the sense that it is in the Act ‑ coming into existence as a result of, for example, a deposit in a bank account, so at the same time as it becomes one can also say that within section 329(1) that it is, skipping to (3) ‑ as I say, (2) deals with instrument and it operates as an analogue:

(3)      Property remains *proceeds of an offence . . . if:

(a)     it is credited to an *account; or

(b)     it is disposed of or otherwise dealt with.

So you see, to take paragraph (b), one has disposal of property yet it remains property and whilst it remains property, if one were to posit the situation where it is disposed of or otherwise dealt with to what might be broadly described as the bona fide third‑party purchaser for value without notice, it, within subsection (3)(b) would be disposed of and remain proceeds of crime, yet one would expect, in terms of a broad sense of how these provisions are supposed to operate, that at the same time that it remains proceeds of an offence it also ceases to be proceeds of an offence within subsection (4), and I will come to other issues with respect to that in a moment.

The point that I make, obviously enough, is that this language of becoming, remaining and ceasing is, in the context of this provision, not working in a kind of determinative faction such that one would look to those words to then find the entire meaning of the provision.

In a way it comes from the proposition and it comes through the reasons of her Honour Justice McColl and it comes through the joint reasons in the Court of Appeal in this matter that you need to look at section 330 from the perspective that it is definitional in nature.  So you do need to look at it on the basis that it does its work through provisions such as section 29 and you are looking to see, through 329 and 330, the way in which property is or is not proceeds of crime.

One can understand why the drafting fell into the language of “becomes, remains, ceases” and it is the point I made a moment ago, because you have this spreading, this proliferation, and that is, in a sense, a significant aspect of the way it works but it is not, kind of, the only aspect of the way it works and it is not all about – well, I withdraw that and put it this way.  Because you are concerned with the “is” question, the timing aspect is actually a kind of subsidiary part to that and you would not construe these provisions to make that timing aspect work in a way that would actually subvert the proper operation or the coherent operation of the provisions, if I could put it that way. 

So, if I come to that proposition in terms of the coherent operation of the provisions, the examples have already been given in terms of the vendor of shares, a transaction that occurs at some distance, I do not need to go back to that.  But one sees from those sorts of examples, and there are more, that what paragraph (a) must, in our submission, be doing is providing a description of a person who is not connected with the criminality that causes the property to be tainted and the danger in approaching this provision from a perspective that gives it a kind of force that it – or an operation that it is not intended to have stems from approaching it not like a definitional provision that is meant to make other sections work but almost like approaching it as if it is a criminal statute and you are looking for the elements and you do not, in our submission, take paragraph (a) and pull it apart in terms of elements, you read it as the entire provision. 

What one finds when one does that is that the third party aspect is simply a descriptor of what one has in a sense where there is a person who acquires what would otherwise be proceeds for sufficient consideration not knowing and in circumstances that would not arouse a reasonable suspicion that the property was proceeds.

To read it in some other way does not, in our submission, advance the purposes of the Act and that was, indeed, I think, reasonably plain from what has been put, it is a point made in the joint reasons in the Court of Appeal and that is at paragraph – sorry, core appeal book 178, paragraph 434.  I do not need to take your Honours to it.

The other point that might be made is that that idea of third party being a descriptor or, in a sense, a shorthand is reflected not only in the note to section 29, it is also reflected in other – or at least in the headings, to a couple of other provisions in the Act.  If I can take your Honours to section 45 and that appears at page – begins at page 90 in relation to cessation of restraining orders.  At page 92, the heading to subsection (6) refers to:

Restraining orders and instruments owned by third parties

Whilst those words do not then appear in that subsection, it is talking about, if one looks at paragraph (a):

a *restraining order covers property of a person who is not a suspect –

So it is talking about people removed from criminality.  There is a similar relationship to those words at page 274 in section 259.  I will just turn up 274.  Your Honours will see the heading there:

Return of seized property to third parties

Subsection (3), paragraph (c) – or paragraph (a):

(a)      the applicant is entitled . . . 

(b)the thing is not *tainted property in relation to the relevant offence; and

(c)the person in respect of whose suspected commission of, or conviction for, an offence the thing was seized has no *interest in the thing.

So again, it is getting at persons unconnected with the criminality.  I should say their Honours in the joint reasons below made reference to these headings as part of the extrinsic material.  That is the case in perhaps most States, certainly in New South Wales and in Western Australia, with respect to State legislation, but that is not the case with respect to the Commonwealth Acts or under the Acts Interpretation Act.  So that is part of the material and we see therefore through the Act references to “third party” in that context.

The situation in relation to dealing with those words, we would submit, is in a sense – it is not quite the same, but one does see it in a different context in a provision like the conspiracy provision in the Commonwealth Code, 11.5, and if I can take your Honours briefly to volume 3 of the joint appeal book ‑ ‑ ‑

BELL J:   Are you taking us to the Commonwealth Code?

MR DHANJI:   Not to the Commonwealth Code, no.

GORDON J:   So this is the core appeal book, being the substantive appeal book?

MR DHANJI:   No, sorry, your Honour, the joint book of authorities.

BELL J:   For those of us who are working electronically, can you tell us the authority or legislation you are taking us to?

MR DHANJI:   I can, your Honour, it is The Queen v LK, The Queen v RK.

BELL J:   Thank you.

EDELMAN J:   Tab 24.

MR DHANJI:   Tab 24 of book 3 of the joint book of authorities, and it is a small point but it is, in a sense, illustrative and your Honours may appreciate that section 11.5 of the Criminal Code provides for the offence of conspiracy.  The offence itself is set out at 1150 of the book – that is on page 202, paragraph 46.  It provides, in subsection (1):

A person who conspires with another person –

et cetera.  And, then, in subsection (2):

For the person to be guilty –

a number of requirements.  The issue was what, in a sense, work were, in particular, paragraphs (a) and (b) doing in the context of a provision that provided in subsection (1), an offence of conspiracy – a word which was familiar to criminal lawyers for some time.  At paragraph 133, in the joint reasons, what was said was this:

Paragraphs (a) and (b) of s 11.5(2) are epexegetical of what it is to “conspire” with another person to commit an offence within the meaning of s 11.5(1).

So, it is an example.  It is not, as I say, precisely the same.  But, one does see within legislation, this idea of giving, in a sense, some textual – a descriptive quality to concepts that are otherwise contained within the provision.  That is all the third party is doing here. 

KIEFEL CJ:   That might be a convenient time for a morning break.

AT 11.18 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.33 AM:

KIEFEL CJ:   Mr Dhanji, Mr Walker has dealt with the topic of third party at some length.  We would be assisted if you could summarise for us the additional points that you are going to make.

MR DHANJI:   I can do it very quickly, and that is this.

KIEFEL CJ:   Thank you.

MR DHANJI:   Your Honours will appreciate, in a sense, the construction problem arises because “third party” cannot mean third party in the sense of remove from any criminal offence and the reason for that is that one will never be a third party from an offence against section 400.9, the offence of dealing with proceeds of crime because as soon as you have proceeds of crime you are dealing with proceeds of crime and the definition of “dealing” in 400.2 means receiving ‑ ‑ ‑

BELL J:   I think that was the essence of Mr Walker’s argument.

MR DHANJI:   That is right and so the way in which that is sought to be avoided, as we understand it, by the respondent, is to say, well, it is not any offence.  It is this reliance on the idea of first offence and that then shifts the focus to this idea of “becomes”, “remains”, “ceases” but that gives those words work to do which they do not bear and were not intended to have and that is the point I made at the outset.

KIEFEL CJ:   Yes.

MR DHANJI:   Indeed, the result of this whole first offence problem is not only does it not deal with problems such as the purchaser of shares, it also creates what we would submit would be the somewhat farcical situation of a person in the position of the appellants before the court trying to prove that there was some anterior offence related to the moneys. 

So, in other words, if these appellants had gone along at first instance and been able to prove, as against the Commissioner of the AFP, that these offences – that money had come from drug supply or, indeed, part of the money had come from drug supply then the proceeds would have already been – the moneys would have already been proceeds and then you would have been able to say, well, they ceased to be proceeds because we had this anterior offending. 

Indeed, one could in the situation like this say well across the vast number of these transactions, given the various different locations, on the balance of probabilities one might even say, well, some of this might be drug money but it is a kind of – it devolves into this kind of absurd situation of trying to prove antecedent criminality.  It has nothing to do with the objectives of the Act as they are sought to be pursued, particularly in terms of the exclusion and subsection 4(a). 

The only other point that we would make in addition is that we would of course rely upon the extrinsic material.  I will not take your Honours to it.  We have provided the ‑ ‑ ‑

KIEFEL CJ:   I think it is dealt with comprehensively in your written submission.

MR DHANJI:   That is right and, indeed, was dealt with comprehensively in the joint reasons in the court below and that extrinsic material provides very substantial support.

KIEFEL CJ:   Do you need to deal with ground 2 or are you intending to proceed immediately to ground 3?

MR DHANJI:   I did have something to say about ground 2.  We obviously adopt what was said by his Honour the President in the court below, although his Honour did not find that Lordianto was plainly wrong.  If I can put it in simple terms, these were not gratuitous deposits turning up in the bank account.  That is an expression used at first instance by her Honour Justice Simpson in Lordianto.  That is at 115 of our core appeal book.  But rather this is ultimately, if I can use the expression “funds in an account” as a shorthand, that is there clearly as part of an exchange that resulted from the moneys given by the applicant, Mr Kalimuthu, to Mr Zamri.  If I can just very briefly take your Honours to page 187 of the core appeal book.  That is the joint reasons in the Court of Appeal. 

I think, your Honours, that I have sufficiently covered most of the other things we want to say.  I am content to rely upon our written submissions in relation to the other reasons of constructions that might favour this interpretation, being the interpretation that President Beazley and Justice Payne adopted below.

The final point that we make, your Honours, is that what is critical to the operation of the Act in these particular cases is that unlike the examples that I gave at the start of my submissions about third party where one had an asset of value, be it a house or a car, being transferred in a transaction where the transaction itself was lawful, one of the parties to the transaction may have been committing an offence, a dealing offence, but the transaction itself of selling the property from one person to another was lawful, is not this case because this is a case where it has been admitted since the start that the interest – that the property – the interest in the bank accounts that is the subject of the proceeding is a direct product of an offence against section 149, so 142 of the AML Act.

So, that property – one cannot say the interest in that bank account never became the proceeds of crime.  It clearly became the proceeds of crime at the point of posit by reason of the operation of – I know I am speaking loosely there – but at the point that the interest was created by reason of the operation of the AML Act.  And, that fact, the unlawfulness of the transaction, is sufficient, in my submission, to support the conclusion that was reached by the courts below.

I think ‑ to come back to two issues that I reserved earlier – your Honour Justice Gordon asked me, in the context of 119 of the Lordianto Case, what about Kalimuthu?  And, if I could just give your Honours some references.  The Kalimuthu applicants relied on cuckoo smurfing, recorded at paragraphs 69 to 71, on page 20 of the core appeal book, and they denied any connection with the depositors – which your Honours will see recorded in the Court of Appeal at 472 to 475 in the core appeal book at 188 to 189.  I think, your Honours, those are our submissions, unless there are any further questions.

KIEFEL CJ:   Thank you, Mr Solicitor.  Yes, Mr Walker.  Mr Walker, Mr Dhanji, you will appreciate, with the early start, the Court expects to rise at 4.00 pm.

MR WALKER:   I do not think Mr Dhanji will need half an hour and I will not need much more than five minutes.

KIEFEL CJ:   Good.

MR WALKER:   Your Honours, a couple of details, really, in relation to some of my friend’s more recent submissions.  We are not going to trace through examples.  With respect, they are part of an exercise to persuade, as it were, that things are not as bad as we painted them to be in terms of what I will call the efficacy of a scheme with an assumed purpose to it.  But we do need to point out two matters of detail which, I think, were left out. 

If you are talking about a Criminal Code dealing offence, it must be remembered that it is devised in such a way as to put an onus on a defendant, including a defendant who would be a bank.  It is not the case that the recipient of funds is not dealing – 400.2 of the Criminal Code – you deal if you receive, not just if you pay.  And, furthermore, the – I will call it the “reasonable grounds” or “reasonable suspicion” element of the offence in 400.9 is deemed to be satisfied, as it happens, by structuring transactions, leaving a bank with the subsection (5) onus to exclude any grounds for reasonable suspicion of criminal activity of any kind.

GORDON J:   Do you mean (5) or (3)?

MR WALKER:   No, I ‑ ‑ ‑

GORDON J:   Section 400.9(5).

MR WALKER:   Yes, so what I have just referred to is 400.2 and section 400.9(5).  Your Honours, on the example involving either the happy couple or the happy mother and son, it has to be remembered, with respect, that the statutory version supercharging, in a sense, controlling, in another sense, the tracing which can be seen from the provisions combined of 329 and 330 have, in particular, particular application for the examples that you are asked to consider.  Section 329(1), so:

Property is proceeds of an offence if –

it is wholly or partly derived, including indirectly from the commission of the offence.  In that initial provision you already have the staging of derivation and indirectly.  Of course, the money stolen and then used to buy a house in the hands of the hapless and unwitting vendor is exactly that, it is proceeds of an offence.  Section 330 makes it crystal clear that it keeps going, iteratively and indefinitely.  Section 330(1) and, in particular, paragraph (a) as well as paragraph (b), means that a disposal or other dealing with proceeds means that property becomes proceeds of an offence if it is wholly or partly derived from such a dealing, a disposal or other dealing with proceeds.  It goes on and on.  Then, attention, of course, needs to be drawn to section 330(3) by which:

Property remains proceeds . . . even if:

(a)it is credited to an account –

which is a form of dealing, of course, or if:

(b)it is disposed of or otherwise dealt with.

So, there is an overt redundancy so as to achieve complete cover and that is how things multiply.  It is for those reasons - I do not want to repeat what I have said in‑chief - that we invite your Honours to see in this scheme a meaningful deployment of subsection (4)(a) as we have argued.

Your Honours, the next point concerns what has been called the pleading point.  Could I remind your Honours that the way in which the case was argued against us can be seen in the appellant’s book of further materials at page 8 and in paragraph 3.c.ii it was said that we have not established that we acquired the respective interests:

in circumstances that would not arouse a reasonable suspicion, that the property was proceeds . . . of the offences referred to in paragraphs 1(a) and (b) –

Those offences include the ones with which you are now familiar – 400.9 and 142.  So that was the way in which it was put and that means that the case is not a case where offences other than those two, which by attrition seem to have become one, but I do not need to worry about that, with respect to the expression “an offence” in the critical wording of 330(4)(a).

The last matter I want to put is this.  Rather than adopting descriptions of “objective” or “subjective” or “without justification” in the text omitting from the general expression “circumstances that matters within the knowledge” and therefore “matters not within the knowledge” of the person in question, we would invite the Court to note what the enacted content of the relevant suspicion is:

in circumstances that would not arouse a reasonable suspicion, that the property was proceeds of an offence or an instrument of an offence -

So that the suspicion has to be one which would be aroused or not, depending upon which onus is at work, concerning the criminal nature of what I am going to call the provenance of the property.  It is for those reasons that in answer to the arguments our friend has put concerning the usual putting to one side as “irrelevant” – his word – people’s knowledge or not of the criminal law, it is for the reasons that one sees in the content stipulated to describe the relevant suspicion that we say well, of course, it is conjured up by what Parliament has described as being the content of the relevant suspicion.

So one then comes back to the way in which, in light of that approach, one deals with the appreciation by Justice Simpson at first instance of the difference between a suspicion of something untoward and a suspicion of the criminal connection in the paragraph that has already been the subject of close attention; that is paragraph 126 at page 41 of the book.  There is where her Honour at line 20 first uses the word “suspicion” no description of an offence:

the bank statements demonstrate a pattern of activity that would arouse a reasonable suspicion in any reasonable person. 

But her Honour is quite designedly, as can be seen from what follows, not saying “suspicion of offending”.  It goes on:

Moreover, the manner . . . is such as would arouse a reasonable suspicion.

Again, not of criminal offending:

I am satisfied that the circumstance as a whole were such as to arouse, in a person in the position of the applicants, a reasonable suspicion that something untoward had occurred, or was occurring -

et cetera  Then her Honour turns in a way that, as I say, has been the subject of argument already, to her view after hearing the argument and considering the evidence, of what the circumstances – that is the subject matter of paragraph 126 – were such as to arouse.

First, she says that she could not be satisfied that such a person would have had a reasonable suspicion that the funds were the proceeds of an offence ‑ something untoward but not proceeds of an offence.  Then her Honour correctly but perhaps not very materially says that was not the question.  The Court of Appeal picked this up, as has already been noted.  Her Honour says that the applicants have not established a proposition, namely:

the property was acquired in circumstances that would not arouse a reasonable suspicion - 

This is, in our submission, a very neat little dichotomy.  The circumstances are either such as to arouse or such as that they would not arouse.  There is no equipoise in the middle, neither one nor the other.  The court does not say, “I am unable from the evidence to say one way or the other”.  The court says, “I can say from the evidence that I am not satisfied that the person would have had a reasonable suspicion”, it is not such as to arouse.  Onus does not matter.  That answers the question upon which we did have the onus. 

It is for those reasons, in our submission, that there is, both in our case and in the text of 330(4)(a), a designed and entirely appropriate concern with criminality as such, not just socially reprehensible oddities.  If it please the Court.

KIEFEL CJ:   Yes, Mr Dhanji.

MR DHANJI:  Thank you, your Honour.  Firstly, by way of some factual matters, can I point out that, certainly in our case, the issue was never about knowledge.  That is made clear at page 21 of the core appeal book.

KIEFEL CJ:   We appreciate that. 

MR DHANJI:   Insofar as it is said that the appellants relied on cuckoo smurfing, the appellants brought to the attention of the court, essentially, facts which established reasonably clearly that they were victims of cuckoo smurfing but it was always the appellants’ case that they received what they paid for, but had no involvement in the manner by which they were paid.  So it is not to the point to say that the appellants relied upon cuckoo smurfing – there was not so much reliance upon cuckoo smurfing but rather pointing out that they were victims of that practice.

The other point that was made was – it may have been made in relation to Lordianto and perhaps flowed into our case – but the point about the location of the deposits across various points.  The primary judge found in our case that the appellants did not know that the deposits were made in various locations.  That was the subject of complaint in the Court of Appeal in ground 3, which was dismissed.

Your Honours, then, if I can just say this in relation to the various examples that were given.  Your Honours also need to look to section 337, which is the effective control provision, which may have some work to do – not in all of the examples but certainly potentially at least in the first example of the husband that buys the house and enjoys the benefit of it – sorry, gifts the money to the wife and then enjoys the benefit of the house. 

It might also be said in relation to those examples that it is not altogether clear how the preferred construction advanced by the respondent would actually deal with the problems that are said to arise.  But I think the exchanges have well and truly dealt with those examples and I will not say more.

In relation to the reasonable suspicion point, can I make the point, your Honours, that against us it is said, and it has been said more than once, or suggested that we rely upon ignorance of the law in a sense of ignorance of 142, the offence that is said to have been committed.  I appreciate I have said this and no doubt your Honours are across it, but we do not need to go that far because 142 is a particular type of offence and it is a particular type of offence because it brings within it an element of having a particular purpose in acting in a particular way and the particular purpose is to defeat reporting requirements.  So inherent within the provision is the idea that it is being done for a particular purpose.

Now in the joint reasons in the Court of Appeal – this is at page 198 – their Honours concluded at 502:

In our view, Mr Ganesh has not established that he acquired the property (his rights against the bank after the deposits) in circumstances that would not arouse a reasonable suspicion that the deposits were the proceeds of an offence, involving an attempt to avoid the reporting of the deposit of large sums of cash into accounts.

That was based on earlier reasoning to the effect that he has not established that because it is absolutely irrelevant, his state of mind, with respect to both 142 and section 43 and we say the former cannot be right because a person in his position, that is someone who has no knowledge of section 43, would satisfy as he did, as the primary judge found, that he would not reasonably suspect. 

Now, we perhaps do not even need to go that far because before the Court of Appeal could make the finding that it made, certainly in the majority reasons, they would need to actually take the intermediate step.  That is our primary position, but there is a second position which is softer and that is they would still need to find that a reasonable person in the position of Mr Ganesh would have known that there is something in the nature of structuring offences.

He said he did not know.  That was accepted.  You would still need – even if you were to say well, that is not enough, you would still need to be able to say that a reasonable person in his position would know and there is no foundation for that.  Those are our submissions in reply.

KIEFEL CJ:   Thank you.  The Court reserves its decision in this matter and adjourns to 9.45 am tomorrow.

AT 3.42 PM THE MATTER WAS ADJOURNED