Lordianto v Commissioner of the Australian Federal Police

[2018] NSWCA 199

Court of Appeal

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:	Lordianto v Commissioner of the Australian Federal Police [2018] NSWCA 199
Hearing dates:	22, 23 March 2018
Decision date:	11 September 2018
Before:	Beazley P and Payne JA at [1]; McColl JA at [166]
Decision:	Appeal dismissed with costs.
Catchwords:	CRIME – proceeds of crime – whether primary judge erred in declining to make exclusion order in respect of appellants’ interests in bank accounts in their names – whether appellants acquired an “interest” in “property” each time a deposit was made into their bank accounts within the meaning of Proceeds of Crime Act 2002 (Cth) – whether appellants were a “third party” under Proceeds of Crime Act, s 330(4)(a) – whether appellants acquired their interests in the bank accounts for sufficient consideration – whether circumstances would have aroused a reasonable suspicion that appellants’ interests in the bank accounts were proceeds of an offence
Legislation Cited:	Acts Interpretation Act 1901 (Cth), s 15AA Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), ss 43, 142 Crimes Legislation Amendment (Serious and Organised Crime) Act 2010 (Cth) Criminal Code (Cth), s 400.9 Criminal Law (Detention and Interrogation) Act 1995 (Tas) Proceeds of Crime Act 2002 (Cth), ss 5, 29, 31, 77, 78, 329, 330, 336, 338 Retail Shop Leases Act 1994 (Qld) Trade Practices Act 1974 (Cth)
Cases Cited:	Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27; [2009] HCA 41 Allianz Australia Insurance Ltd v GSF Australia Pty Ltd (2005) 221 CLR 568; [2005] HCA 26 Australian Competition and Consumer Commission v Yazaki Corporation [2018] FCAFC 73 Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 Certain Lloyd’s Underwriters v Cross (2012) 248 CLR 378; [2012] HCA 56 CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; [1997] HCA 2 Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389; [1996] HCA 36 Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280; [1993] FCA 456 Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390; [1955] HCA 27 Commissioner of the Australian Federal Police v Fernandez [2017] NSWSC 1197 Commissioner of the Australian Federal Police v Fitzroy All Pty Ltd (2015) 299 FLR 439; [2015] WASC 320 Commissioner of the Australian Federal Police v Hart (2018) 351 ALR 1; [2018] HCA 1 Commissioner of the Australian Federal Police v Jieying Sun [2017] NSWSC 1476 Commissioner of the Australian Federal Police v Kalimuthu [No 3] [2017] WASC 108 Commissioner of the Australian Federal Police v Pham [2015] NSWSC 1383 Commissioner of the Australian Federal Police v Tjongosutiono (2018) 329 FLR 103; [2018] NSWSC 48 Croton v The Queen (1967) 117 CLR 326; [1967] HCA 48 Davies v Collins [1945] 1 All ER 247 Director of Public Prosecutions (Vic) v Le (2007) 15 VR 352; [2007] VSCA 18 Director of Public Prosecutions (Vic) v Le (2007) 232 CLR 562; [2007] HCA 52 Esso Australia Pty Ltd v Australian Workers’ Union [2017] HCA 54; (2017) 92 ALJR 106 Farkas v R [2014] NSWCCA 141; (2014) 243 A Crim R 388 Gibb v The Commissioner of Taxation of the Commonwealth of Australia (1966) 118 CLR 628; [1966] HCA 74 Grygiel v Baine (No 2) [2005] NSWCA 434 He Kaw Teh v The Queen (1985) 157 CLR 523; [1985] HCA 43 N Joachimson v Swiss Bank Corporation [1921] 3 KB 110 Kelly v R (2004) 218 CLR 216; [2004] HCA 12 Lacey v Attorney-General for the State of Queensland (2011) 242 CLR 573; [2011] HCA 10 Lee v Director of Public Prosecutions (Cth) (2009) 75 NSWLR 581; [2009] NSWCA 347 Mekpine Pty Ltd v Moreton Bay Regional Council [2016] 1 Qd R 148; (2014) 206 LGERA 120; [2014] QCA 317 Military Rehabilitation and Compensation Commission v May [2016] HCA 19; (2016) 90 ALJR 626 Moreton Bay Regional Council v Mekpine Pty Ltd (2016) 256 CLR 437; [2016] HCA 7 National Australia Bank Ltd v Norman (2009) 180 FCR 243; [2009] FCAFC 152 Ostrowski v Palmer (2004) 218 CLR 493; [2004] HCA 30 Parsons v The Queen (1999) 195 CLR 619; [1999] HCA 1 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 R v Independent Broad-Based Anti-Corruption Commissioner (2016) 256 CLR 459; [2016] HCA 8 R v Turnbull (1943) 44 SR (NSW) 108 Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq) (2003) 59 NSWLR 361; [2003] NSWSC 1008 Russell v Scott (1936) 55 CLR 440; [1936] HCA 34 Saba v Plumb [2018] NSWCA 60 Sherras v De Rutzen [1895] 1 QB 918 Shields v New South Wales Crime Commission (2007) 177 A Crim R 130; [2007] NSWCA 309 Studman v Commonwealth Director of Public Prosecutions (2007) 177 A Crim R 34; [2007] NSWCA 285 SZTAL v Minister for Immigration and Border Protection (2017) 347 ALR 405; [2017] HCA 34 Taylor v The Owners – Strata Plan No 11564 (2014) 253 CLR 531; [2014] HCA 9 Tolhurst v Associated Portland Cement Manufacturers [1903] AC 414 Yanner v Eaton (1999) 201 CLR 351; [1999] HCA 53
Texts Cited:	Australian Law Reform Commission, Confiscation That Counts – A Review of the Proceeds of Crime Act 1987, Report No 87, (1999) House of Representatives, Revised Explanatory Memorandum to the Proceeds of Crime Bill 2002 (Cth) Macquarie Dictionary (6th ed, 2013) Mark Hapgood QC (ed), Paget’s Law of Banking (13th ed, 2007, LexisNexis) Pearce and Geddes, Statutory Interpretation in Australia (8th edition, 2014, LexisNexis)
Category:	Principal judgment
Parties:	Sanko Lordianto (First Appellant) Indriana Koernia (Second Appellant) Commissioner of the Australian Federal Police (Respondent)
Representation:	Counsel: I D Temby QC; T P Mitchell (Appellants) A R Moses SC; L T Livingston; D Tang (Respondent)   Solicitors: Lincolns Lawyers and Consultants (Appellants) Commissioner of the Australian Federal Police, Criminal Assets Litigation (Respondent)
File Number(s):	2017/300289
Decision under appeal	Court or tribunal: Supreme Court Jurisdiction: Common Law Citation: Commissioner of the Australian Federal Police v Lordianto [2017] NSWSC 1196 Date of Decision: 7 September 2017 Before: Simpson J File Number(s): 2016/197077

HEADNOTE

[This headnote is not to be read as part of the judgment]

The appellants are Indonesian citizens and permanent residents of Australia. From time to time, they transferred large sums of money from Indonesia to Australia using “money changers” in Indonesia. The money changers directed the appellants to pay the money to be transferred into nominated Indonesian accounts. Between October 2013 and August 2015, a large number of cash deposits under $10,000 were made into the appellants’ Commonwealth Bank accounts amounting in total to the sum paid into the Indonesian accounts. This mode of deposits was part of a process of money laundering known as “cuckoo smurfing”. It was not suggested that the appellants were complicit in this activity.

On 28 June 2016, a restraining order was made pursuant to the Proceeds of Crime Act 2002 (Cth), s 19, in respect of the funds standing to the credit of five of the appellants’ Commonwealth Bank accounts, on the basis that there were reasonable grounds to suspect that the funds were either the proceeds or an instrument of money laundering and structuring offences.

The appellants accepted that the funds were proceeds of an offence. However, they sought an order excluding their interests in the bank accounts from the restraining order, on the basis that, pursuant to the Proceeds of Crime Act, s 330(4)(a), their interests had ceased to be proceeds of an offence because they were acquired by the appellants as third parties for sufficient consideration without the appellants knowing, and in circumstances that would not arouse a reasonable suspicion, that their interests were proceeds of an offence. The primary judge dismissed the appellant’s application, finding that s 330(4)(a) was not satisfied.

On appeal, the principal issues were as follows:

1.   Whether the appellants acquired an “interest” in “property” each time a deposit was made into their bank accounts within the meaning of the Proceeds of Crime Act (Ground 1);

2.   Whether the appellants were a “third party” under the Proceeds of Crime Act, s 330(4)(a) (Ground 2);

3.   Whether the appellants acquired their interests in the bank accounts for sufficient consideration (Ground 3); and

4.   Whether the circumstances would have aroused a reasonable suspicion on the part of the appellants that their interests were proceeds of an offence (Ground 4).

The Court held, dismissing the appeal:

In relation to Ground 1

Per Beazley P and Payne JA (McColl JA agreeing)

(i)   The appellants possessed “property” within the meaning of the Proceeds of Crime Act, namely a chose in action in respect of each of their bank accounts enforceable against the Commonwealth Bank constituted by the right to compel the bank upon demand to pay an amount equivalent to the amount standing to the credit of each of their accounts. The appellants’ right to demand payment was an “interest” in relation to the property. Accordingly, the appellants acquired an “interest” in “property” each time a deposit was made into their bank accounts: [47]-[82].

N Joachimson v Swiss Bank Corporation [1921] 3 KB 110; Russell v Scott (1936) 55 CLR 440; [1936] HCA 34; Croton v The Queen (1967) 117 CLR 326; [1967] HCA 48; CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; [1997] HCA 2; Yanner v Eaton (1999) 201 CLR 351; [1999] HCA 53; Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq) (2003) 59 NSWLR 361; [2003] NSWSC 1008; Director of Public Prosecutions (Vic) v Le (2007) 232 CLR 562; [2007] HCA 52; Shields v New South Wales Crime Commission (2007) 177 A Crim R 130; [2007] NSWCA 309; Studman v Commonwealth Director of Public Prosecutions (2007) 177 A Crim R 34; [2007] NSWCA 285; National Australia Bank Ltd v Norman (2009) 180 FCR 243; [2009] FCAFC 152; Taylor v The Owners – Strata Plan No 11564 (2014) 253 CLR 531; [2014] HCA 9; Commissioner of the Australian Federal Police v Fitzroy All Pty Ltd (2015) 299 FLR 439; [2015] WASC 320; Commissioner of the Australian Federal Police v Pham [2015] NSWSC 1383; Commissioner of the Australian Federal Police v Tjongosutiono (2018) 329 FLR 103; [2018] NSWSC 48 considered.

Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280; [1993] FCA 456; Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389; [1996] HCA 36; R v Brown [1996] AC 543; Parsons v The Queen (1999) 195 CLR 619; [1999] HCA 1; Commissioner of the Australian Federal Police v Kalimuthu [No 3] [2017] WASC 108 referred to.

In relation to Ground 2

Per Beazley P and Payne JA

(ii)   A “third party” is a person who, at the time of the criminal conduct, is wholly removed from the property constituting the proceeds of an offence. The person must acquire the property after it becomes proceeds of an offence. Accordingly, the appellants were not a “third party”: [89]-[117].

Commissioner of the Australian Federal Police v Kalimuthu [No 3] [2017] WASC 108; Commissioner of the Australian Federal Police v Hart (2018) 351 ALR 1; [2018] HCA 1; Commissioner of the Australian Federal Police v Tjongosutiono (2018) 329 FLR 103; [2018] NSWSC 48 considered.

Per McColl JA (dissenting)

(iii) Any construction of s 330(4)(a) of the Proceeds of Crime Act 2002 (Cth) (POCA) must be consistent with the language and purpose of all the provisions of the POCA, and reflect the hierarchy of the provisions to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme: [210].

Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 applied.

(iv) The clear intent of s 330(3) of the POCA is that property remains characterised as the proceeds or an instrument of an offence, notwithstanding that it has been dealt with in a manner contemplated by s 330 whether once, or on repeated occasions. There is never a temporal disjunction which can disassociate a subsequent purchaser or acquirer from a transaction which constitutes an element of an offence: [217], [220].

(v) Subsection 330(4) has the effect that the characterisation as the proceeds or an instrument of an offence (s 330(3)) ensures property the subject of a s 330(3) transaction retains, “ceases” if any sub-paragraph of s 330(4) applies: [222].

(vi) When the holder of a bank account into which funds which are the proceeds of an offence are credited cannot be said to be a “party” to the s 330(3) transaction in the sense of being intentionally complicit in the laundering activity, or stands at arms’ length to the transaction, that person is a “third party” for the purposes of s 330(4): [227].

In relation to Ground 3

Per Beazley P and Payne JA (McColl JA agreeing)

(vii) The appellants did not acquire their interests in the bank accounts for sufficient consideration, as they did not provide consideration to the persons who made the deposits into their Commonwealth Bank accounts, who the appellants did not know and had no connection with, contractual or otherwise: [133]-[140].

In relation to Ground 4

Per Beazley P and Payne JA (McColl JA agreeing)

(viii) The conduct identified by the known circumstances would have aroused a reasonable suspicion on the part of the appellants, who were financially sophisticated international investors, that their interests in the bank accounts were proceeds of an offence. The appellants need not have known that the conduct constituted an offence: [154]-[163].

Sherras v De Rutzen [1895] 1 QB 918; R v Turnbull (1943) 44 SR (NSW) 108; He Kaw Teh v The Queen (1985) 157 CLR 523; [1985] HCA 43; Ostrowski v Palmer (2004) 218 CLR 493; [2004] HCA 30; Director of Public Prosecutions (Vic) v Le (2007) 232 CLR 562; [2007] HCA 52 considered.

Director of Public Prosecutions (Vic) v Le (2007) 15 VR 352; [2007] VSCA 18; Saba v Plumb [2018] NSWCA 60 referred to.

Judgment

1. BEAZLEY P and PAYNE JA: On 7 September 2017, Simpson J dismissed an application by Mr Sanko Lordianto and Ms Indriana Koernia in which they sought an order to exclude certain specified interests in property from a restraining order made on 28 June 2016 under the Proceeds of Crime Act 2002 (Cth), s 19: Commissioner of the Australian Federal Police v Lordianto [2017] NSWSC 1196. These reasons should be read together with the reasons in the related appeal, Commissioner of the Australian Federal Police v Fernandez [2018] NSWCA 198.

2. The subject of the restraining order was funds standing to the credit of five specified accounts held by the Commonwealth Bank of Australia (the Commonwealth Bank), identified as the First and Second Cash Investment Accounts and three Standard Term Deposit accounts in the name of either Ms Koernia or the joint names of the appellants. It is convenient for present purposes, although, as we explain later in these reasons, not legally accurate, to identify the restrained interests in property, which were also the subject of the exclusion application, as funds standing to the credit of the appellants’ bank accounts.

3. The restraining order was made on the basis that the court was satisfied that there were reasonable grounds to suspect that the funds in the appellants’ bank accounts were either the proceeds of an indictable offence or offences, or an instrument of a serious offence or offences: Proceeds of Crime Act, s 19. The alleged indictable or serious offence was an offence contrary to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), s 142 and/or the Criminal Code (Cth), s 400.9.

4. The Anti-Money Laundering and Counter-Terrorism Financing Act, s 142 provides that a person commits an offence if they cause another person to become a party to two or more non-reportable transactions and it would be reasonable to conclude that the person conducted the transactions in the manner or form in which they did for the sole or dominant purpose of ensuring that the money was transferred in such a way so as not to give rise to a “threshold transaction”, being a cash transaction of $10,000 or more, that would have had to have been reported under s 43. Under s 43, reporting entities, including banks, are required to report threshold transactions to the Australian Transaction Reports and Analysis Centre within 10 business days of the transaction occurring.

5. Further, it is an offence under the Criminal Code, s 400.9 to deal with money in circumstances where it is reasonable to suspect that the money is proceeds of crime and, at the time of the dealing, the value of the money was $100,000 or more.

6. The primary judge held that there had been no acquisition of property by the appellants at a time after the activity or transaction that caused the property to become tainted had occurred. However, her Honour considered that if, contrary to that view, the deposits into the appellants’ bank accounts involved an acquisition of property, the appellants were not a “third party” for the purposes of the Proceeds of Crime Act, s 330(4)(a), and that the appellants’ interests in the property were not acquired for sufficient consideration. Her Honour also held that the appellants had failed to establish that the property had been acquired in such a way as not to arouse a reasonable suspicion that it was either proceeds of an offence or an instrument of an offence. Her Honour noted that whether the property was proceeds of an offence or an instrument of an offence was not in issue. The issue was whether the property had ceased to be tainted.

7. The appellants sought leave to appeal from her Honour’s order dismissing their application for an exclusion order. The summons seeking leave to appeal was heard concurrently with the appeal. The Commissioner of the Australian Federal Police (the Commissioner) did not oppose the grant of leave. On the assumption that leave would be granted, the Commissioner submitted that the primary judge erred, as the appellants contended in grounds 1 and 2 of their notice of appeal, in holding that the appellants did not acquire property when deposits were made into their accounts, and that the primary judge should have held that each deposit into their accounts constituted an acquisition of property by them.

8. Leave to appeal should be granted. The legislatively-sanctioned restraint of private assets is an extraordinary measure such that there is a public interest in ensuring that the power is exercised in accordance with law. Further, as identified by the Commissioner, the central matter in issue is the proper construction of the Proceeds of Crime Act, s 330(4)(a), which stipulates when property ceases to be proceeds of an offence or an instrument of an offence. The Commissioner informed the Court that the proper construction of this provision has not been the subject of determination by the High Court or any Australian intermediate court of appeal.

9. On the appeal, the appellants accepted that, albeit, without their complicity, the deposits were made with a view to avoiding the reporting obligations that rest upon Australian banks. The appellants also accepted that that was sufficient evidence to conclude that the money deposited into their accounts was proceeds of crime within the meaning of the Proceeds of Crime Act and, it followed, the restraining order was properly made. However, Ms Koernia said that until the proceedings relating to the restraint of the funds standing to the credit of the appellants’ bank accounts commenced, she had no idea that “structuring” deposits constituted an offence or that it was a form of money laundering, or that international money transfers could involve money laundering.

Background facts

10. The appellants, who are husband and wife, are Indonesian citizens. They have both been granted permanent residency in Australia and spend time in Australia. Mr Lordianto comes from a wealthy Indonesian family who has business and investment interests in Indonesia. From time to time, the appellants transferred large sums of money to accounts held in their names by the Commonwealth Bank. As between the appellants, Ms Koernia had the responsibility of transferring money from Indonesia to Australia and managing their investments in Australia. Ms Koernia gave evidence that she arranged the transfer of money through money changers, who also provided remittance services, in Indonesia.

10. Ms Koernia gave evidence that she does not know how to use internet banking. She said that quarterly statements for the accounts the subject of the restraining order were posted by the Commonwealth Bank to the appellants’ address in Singapore. Ms Koernia also said that if she needed to check the balance of the accounts at any time, she would go into a Commonwealth Bank branch in Australia or telephone the Commonwealth Bank representatives with whom she dealt for information as to the account balance.

11. Between 22 October 2013 and 5 August 2015, Ms Koernia arranged for money to be transferred into the First and Second Cash Investment Accounts in a total amount of $4,500,000. In most cases, the deposits were made in amounts under $10,000. The method whereby this was done, known as “cuckoo smurfing”, is described more fully below.

12. Ms Koernia described the process by which she transferred money from Indonesia to Australia as follows. Before deciding which money changer to use, Ms Koernia would check the foreign currency exchange rate being offered by different banks and money changers in Indonesia so as to obtain the most competitive rate. Ms Koernia identified two money changers that she used, each of which, she said, represented themselves to be authorised money changers.

13. Ms Koernia said that:

“When I have asked money remitters to transfer funds into Australian accounts, they have asked me to deposit the specified sum into a nominated account or accounts. After the money remitters have confirmed that the funds are in their nominated accounts, the remitter arranged for the funds to be transferred to the Australian account belonging to my husband and I.”

15. A couple of days after depositing money into the nominated Indonesian account, Ms Koernia would contact the Commonwealth Bank in Australia to check that money had been received into the appellants’ Commonwealth Bank accounts. She said that on each occasion, the Commonwealth Bank representative would tell her the current balance and list any recent deposits, so that she could tally them up. She said that on occasions, if there were too many transactions to add up easily, she would ask the bank to fax to her an account transaction listing. She said that she was always satisfied that the correct amount had been deposited into the nominated Commonwealth Bank account.

16. Ms Koernia said that she had never given any thought to the methods by which the money changers transferred the money and that it had never occurred to her that it might involve illegal activity. She said that at no stage did the Commonwealth Bank representatives tell her that there was anything wrong with money being paid into the appellants’ accounts by way of multiple deposits mostly under $10,000, even after reading out the list of deposits to her. The only occasion on which a remark had been made to her was when one bank representative said that her bank statement was “very crowded”, but the representative did not say that there was anything wrong with it.

17. From both the information given to her by bank representatives and from the bank statements, Ms Koernia was aware that numerous cash deposits in small amounts were being paid into the appellants’ Commonwealth Bank accounts. She said, however, that she did not know that the deposits were being made at a number of different branches across Australia. She also said that she did not make any enquiry of the money changers in Indonesia or of the Commonwealth Bank in Australia as to why deposits were being made in that way.

18. Ms Koernia said that she did not know the identity of the people who deposited money into the Commonwealth Bank accounts. She said she “had no contact with or knowledge of any transaction” interposed between her deposits into the nominated bank account in Indonesia, and the receipt of money into the Commonwealth Bank accounts in Australia.

19. In cross-examination, Ms Koernia denied that she suspected, from the fact that many small deposits were being made, that one possibility was that there was some form of unlawful activity involved. She also denied that she suspected that the making of a large number of deposits under $10,000 on a single day was unusual. She further denied that she suspected that one of the reasons for the deposits being made in that way was to avoid mandatory reporting requirements imposed on Australian banks. She also denied that she recognised that one possibility for the numerous low dollar amounts being deposited was to avoid Australian anti-money laundering laws. She disagreed that she had refrained from making any enquiries about the manner in which the deposits were being made so as not to confirm her suspicions of wrongdoing.

Details of the transactions

20. Of the $4,500,000 that was deposited into the appellants’ Commonwealth Bank accounts, a total of $2,786,062 was deposited by way of 390 cash deposits in sums of less than $10,000 over the period from 22 October 2013 to 5 August 2015. Multiple transactions were often made on the one day or over a short period of time. For example, between 23 and 31 October 2013, there were 77 cash deposits made into the appellants’ First Cash Investment Account in amounts under $10,000 from branches as widely located as Chinatown, Marrickville, Lakemba and Parramatta, to name a few of the branches in New South Wales. Deposits were also made at branches in Queensland, Victoria, South Australia and Western Australia. A similar pattern is reflected in the way in which the balance of the $2,786,062 was deposited.

21. The remainder of the money Ms Koernia deposited with the Indonesian money changers was deposited into the appellants’ Commonwealth Bank accounts in various amounts of over $10,000 at different branches across Australia. For example, on 24 October 2013, a cash deposit of $80,000 was made at the St James branch in New South Wales, on 29 November 2013, two cash cheques in the sum of $100,000 and $300,000 respectively were deposited at the Broadbeach branch in Queensland, and on 2 June 2015, $104,800 was deposited at the Innaloo branch in Western Australia.

Cuckoo smurfing

22. It is convenient at this point to describe the process or system known as “cuckoo smurfing”. Evidence of this process was given by a former officer of the Australian Federal Police, whose report, after redaction, was admitted into evidence without objection and treated by the primary judge, at [53]-[54], as factual evidence. The process involves the following steps:

“a.   An international ‘Controller’ meets with an Australian crime syndicate head and agrees to launder a specific sum that is the proceeds of crime. The Controller receives a percentage of the criminal funds and is responsible for paying other money laundering syndicate members.

b.   The Controller instructs a complicit ‘Coordinator’, who is the proprietor of a money remittance business usually located in Singapore, Malaysia or Indonesia, to withhold customer remittances to Australia in an amount equalling the sum that the Controller has agreed to launder.

c.   The Coordinator instructs his employees, known as ‘Collectors’ in Australia to collect the criminal cash from the Australian syndicate. The Coordinator asks for the serial number of an Australian $5 note held by the Collector, and passes the number to the Controller.

d.   The Controller supplies the criminal syndicate head with the telephone number of the Collector and the serial number of the bank note held by him. The criminal syndicate head calls the Collector and arranges to meet to hand over the criminal cash.

e.   The meeting is conducted, the Collector provides the $5 note as identification and the criminal cash is handed to the Collector.

f.   The Collector confirms receipt of the criminal cash. The Coordinator provides the Collector with a list of bank account details and cash amounts originally obtained when customers requested the transfer of funds to Australia.

g.   The Collector attends a series of banks, making deposits of the criminal cash under the AUSTRAC reporting threshold (although this is not always the case) until all of the requested remittances have been satisfied.

Once the Coordinator has been informed that all of his customers’ remittances have been satisfied he can release the money originally supplied to him by the remitting customers to the criminal syndicate.”

23. The report concluded:

“The feature of this typology is that neither the criminal cash nor the innocent remittances are physically moved. As long as cash deposits in Australia are kept below the reporting threshold, there is no record, either electronic or physical, that could lead regulatory and enforcement agencies to intervene.”

Issues on the appeal

24. The overarching issue on the appeal was whether, pursuant to the Proceeds of Crime Act, s 330(4)(a), the appellants acquired an interest in property by reason of the money being deposited into their existing bank accounts, in contravention of the Anti-Money Laundering and Counter-Terrorism Finance Act, s 142, that simultaneously ceased to be proceeds of an offence as the interest was:

“… acquired by a third party for sufficient consideration … and in circumstances that would not arouse a reasonable suspicion, that the property was proceeds of an offence ...”

25. The particular issues raised by the notice of appeal were as follows:

1. Whether each deposit into the appellants’ bank accounts constituted an acquisition of an “interest” in “property” by them within the meaning of the Proceeds of Crime Act: appeal grounds 1 and 2.

2. Whether the appellants were a “third party” under the Proceeds of Crime Act, s 330(4)(a): appeal grounds 3, 4 and 5.

3. Whether the appellants’ interests in their bank accounts were acquired for sufficient consideration for the purposes of s 330(4)(a): appeal ground 6.

4. Whether the circumstances would have raised a reasonable suspicion on the part of the appellants that the property was proceeds of an offence or an instrument of an offence for the purposes of s 330(4)(a): appeal grounds 7 and 8.

5. Whether the primary judge denied the appellants procedural fairness by ordering costs against them without inviting submissions as to costs: appeal ground 9.

Relevant legislation

26. The Proceeds of Crime Act provides a comprehensive scheme for the restraint and forfeiture of proceeds of an offence or an instrument of an offence. It includes provisions whereby a person whose property is restrained may apply to have the property excluded from restraint and, in certain circumstances, for the payment of compensation. We have already referred to the operation of s 19 at [3] above. So far as is relevant to these proceedings, the Proceeds of Crime Act provides as follows:

“29   Excluding property from certain restraining orders

(1)   The court to which an application for a restraining order under section … 19 was made must, when the order is made or at a later time, exclude a specified interest in property from the order if:

(a)   an application is made under section … 31; and

(b)   the court is satisfied that the relevant reason under subsection (2) or (3) for excluding the interest from the order exists.

…

(2)   The reasons for excluding a specified interest in property from a restraining order are:

…

(d) for a restraining order under section 19—the interest is neither:

(i)   in any case—proceeds of an indictable offence …; nor

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

Note:   One of the circumstances in which property ceases to be proceeds of an offence or unlawful activity involves acquisition of the property by an innocent third party for sufficient consideration: see paragraph 330(4)(a).

…

31   Application to exclude property from a restraining order after restraining order has been made

(1) A person may apply for an order under section 29 … if a restraining order that covers property in which the person claims an interest has been made.

…

329   Meaning of proceeds and instrument

(1)   Property is proceeds of an offence if:

(a)   it is wholly derived or realised, whether directly or indirectly, from the commission of the offence; or

(b)   it is partly derived or realised, whether directly or indirectly, from the commission of the offence;

whether the property is situated within or outside Australia.

(2)   Property is an instrument of an offence if:

(a)   the property is used in, or in connection with, the commission of an offence; or

(b)   the property is intended to be used in, or in connection with, the commission of an offence;

whether the property is situated within or outside Australia.

(3)   Property can be proceeds of an offence or an instrument of an offence even if no person has been convicted of the offence.

(4)   Proceeds or an instrument of an unlawful activity means proceeds or an instrument of the offence constituted by the act or omission that constitutes the unlawful activity.

330   When property becomes, remains and ceases to be proceeds or an instrument

(1)   Property becomes proceeds of an offence if it is:

(a)   wholly or partly derived or realised from a disposal or other dealing with proceeds of the offence; or

(b)   wholly or partly acquired using proceeds of the offence;

including because of a previous application of this section.

(2)   Property becomes an instrument of an offence if it is:

(a)   wholly or partly derived or realised from the disposal or other dealing with an instrument of the offence; or

(b)   wholly or partly acquired using an instrument of the offence;

including because of a previous application of this section.

(3)   Property remains proceeds of an offence or an instrument of an offence even if:

(a)   it is credited to an account; or

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

(4)   Property only ceases to be proceeds of an offence or an instrument of an offence:

(a)   if it is acquired by a third party for sufficient consideration without the third party knowing, and in circumstances that would not arouse a reasonable suspicion, that the property was proceeds of an offence or an instrument of an offence (as the case requires) …

…

336   Meaning of derived

A reference to a person having derived proceeds ... or wealth includes a reference to:

(a)   the person; or

(b)   another person at the request or direction of the first person;

having derived the proceeds ... or wealth directly or indirectly.

…

338   Dictionary

In this Act, unless the contrary intention appears:

…

account means any facility or arrangement through which a financial institution accepts deposits or allows withdrawals and includes:

(a)   a facility or arrangement for:

(i)   a fixed term deposit; or

(ii)   a safety deposit box; and

(b)   a credit card account; and

(c)   a loan account (other than a credit card account); and

(d)   an account held in the form of units in:

(i)   a cash management trust; or

(ii)   a trust of a kind prescribed by the regulations; and

(e)   a closed account.

To avoid doubt, it is immaterial whether:

(f)   an account has a nil balance; or

(g)   any transactions have been allowed in relation to an account.

…

sufficient consideration: an acquisition or disposal of property is for sufficient consideration if it is for a consideration that is sufficient and that reflects the value of the property, having regard solely to commercial considerations.”

Principles of statutory construction

27. The Court is concerned in this case with the construction of specific provisions of the Proceeds of Crime Act, in particular, s 330(4)(a).

28. The relevant principles of statutory construction were not in contest. In Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28, the plurality stated, at [69], that the:

“… primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute.”

29. Their Honours referred to Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390; [1955] HCA 27, in which Dixon CJ stated that:

“… the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed.”

30. In Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27; [2009] HCA 41, the plurality explained, at [47], that:

“This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.” (citations omitted)

See also Certain Lloyd’s Underwriters v Cross (2012) 248 CLR 378; [2012] HCA 56.

31. In assessing the “purpose” of a statute, the Court must look to its text and structure. As the plurality emphasised in Lacey v Attorney-General for the State of Queensland (2011) 242 CLR 573; [2011] HCA 10:

“The purpose of a statute is not something which exists outside the statute. It resides in its text and structure, albeit it may be identified by reference to common law and statutory rules of construction.”

32. Most recently, in SZTAL v Minister for Immigration and Border Protection (2017) 347 ALR 405; [2017] HCA 34, the plurality stated, at [14], that:

“The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose. Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense. This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected.”

See also the observations of Gageler J at [35]-[39].

33. The Commissioner referred the Court to two decisions which considered the principles applicable to the construction of the Proceeds of Crime Act. First, in Lee v Director of Public Prosecutions (Cth) (2009) 75 NSWLR 581; [2009] NSWCA 347, the Court considered the interaction between the principle of legality, which denies a statutory intention to modify or abolish fundamental rights or freedoms absent clear and unambiguous language, whether by express reference or arising by necessary implication, and the principle that a provision must be construed by reference to its context and purpose. In Lee, the Court held, at [20]-[21], that:

“The Proceeds of Crime Act … manifests a plain and clear intention to effect the confiscation of property in the circumstances which it prescribes, regardless of the interests of any person in the property…

Thus, the confiscation of property is not achieved by words of general implication, nor is it an intrusion on general law protections which has come about incidentally to the main purpose of the legislation … The taking of the property in the prescribed circumstance is the primary purpose of the legislation: [Proceeds of Crime Act], s 5. The interests of a person in property the subject of a valid restraining order are deliberately and expressly at risk of confiscation, absent affirmative steps to exclude property on the application of the interested person. There is thus a clear and manifest intention to interfere with property rights.” (citations omitted)

34. The Commissioner submitted that, pursuant to Lee, the provisions of the Proceeds of Crime Act should not be construed by reference to an “overarching presumption or inclination towards a narrower application or lesser interference with property rights”, having regard, in particular, to the Proceeds of Crime Act, s 5. The Commissioner submitted that the principle of legality cannot operate to “frustrate an object of [the Proceeds of Crime Act] or render [the] means by which [it] sets out to achieve that object inoperative or nonsensical”: see R v Independent Broad-Based Anti-Corruption Commissioner (2016) 256 CLR 459; [2016] HCA 8 at [77].

34. The Commissioner also referred the Court to Commissioner of the Australian Federal Police v Hart (2018) 351 ALR 1; [2018] HCA 1, in which Gordon J emphasised, at [48], the importance of the statutory context and framework erected by the Proceeds of Crime Act to questions of construction. In relation to the exclusion of property from a restraining order, her Honour noted that:

“The [Proceeds of Crime Act] contains procedures for property to be excluded from a restraining order and for a restraining order to be revoked. Consistent with the intended reach of the POCA, the circumstances are limited and the conditions strict.” (citations omitted)

Basis of application for exclusion order

36. The appellants, in their exclusion application, stated that they were the beneficial owners of the money in the accounts and that their “interest” in the “property” was neither the proceeds of an offence, nor an instrument of an offence. They provided the following particulars of their interest as follows:

“(i)   [The appellants] held funds in Indonesia and Singapore which were all lawfully derived from [the appellants’] income and investments.

(ii)   [Ms Koenia] entered into agreements with [money changers] in Jakarta, Indonesia … to pay amounts in Indonesian rupiah in order to purchase at agreed exchange rates, amounts in Australian dollars to be deposited by the [money changers] into Australian bank accounts at the Commonwealth Bank of Australia operated by one or both of [the appellants].

(iii)   The agreed exchange rates were rates that reflected the value of the amounts paid, having regard solely to commercial considerations.

(iv)   In respect of each relevant transaction, upon the payment by [the appellants] of the Indonesian rupiah as directed by the [money changer], the [money changer] became indebted to [the appellants] in the amount that was agreed to be deposited into [the appellants’ accounts].

(v)   In respect of each relevant transaction, pursuant to the contract between it and [Ms Koernia] (on behalf of herself and [Mr Lordianto]), the relevant [money changer] caused the Australian dollars purchased by [the appellants] to be deposited into [the appellants’ accounts].

(vi)   By depositing each sum in Australian dollars purchased by [the appellants] on the terms set out in sub-paragraph (ii) into [the appellants’ accounts], the relevant Remitter discharged the debt arising from each relevant transaction.

(vii)   By reason that the total amount of the deposits for each transaction:

(A)   equalled the amount of each debt; and

(B)   reflected the value of the Indonesian rupiah paid by [the appellants],

[the appellants’] interest in the [monies] was acquired for sufficient consideration by [the appellants].

(viii)   The circumstances in which [the appellants] acquired their interest in the [monies] would not arouse a reasonable suspicion, and [the appellants] did not know, that the property was proceeds of an offence [or] an instrument of an offence (which is not admitted).

(ix)   In acquiring their interest in the [monies], [the appellants] were not party to any unlawful conduct, and are therefore ‘third parties’.”

First issue on the appeal

Whether each deposit into the appellants’ bank accounts constituted an acquisition of an “interest” in “property” by them within the meaning of the Proceeds of Crime Act: appeal grounds 1 and 2

Primary judge’s reasons

37. The primary judge set out, at [68], the five elements that must be proved under s 330(4)(a) in order for property to cease to be the proceeds of an offence or an instrument of an offence. The first element was that there must have been an acquisition of property after the ‘activity’ that caused the property to become tainted had occurred. In this case, the relevant ‘activity’ was the making of the structured deposits.

38. Her Honour concluded, at [72], that the “interest” in “property” said to have been acquired was not ‘money’. Rather, the correct characterisation of the appellants’ interests in the Commonwealth Bank accounts was that of a chose in action, which gave the appellants an entitlement to require the bank to pay to them, on demand, all or part of the amount credited to their accounts.

39. Her Honour held that the choses in action were acquired when the appellants opened their bank accounts and that that interest did not vary. At all times, it remained the same contractual right to require the Commonwealth Bank to repay to them the balance in their accounts. Thus, whilst the value of the choses in action fluctuated, depending on the balance in their bank accounts from time to time, their interest in the property remained the same as when the bank accounts were opened. On this view, at the time that the appellants acquired their choses in action in opening the accounts, the structuring offence upon which the restraining order was based had not been committed.

40. As her Honour stated, at [83], “[t]he property of [the appellants] remained what it had always been – a chose in action; a contractual right”, the value of which rose and fell with deposits and withdrawals. In other words:

“The deposits represented an increment in the value of the property, but did not change its nature, and did not constitute an acquisition of property. There was no fresh or additional loan constituted by the deposits. [The appellants] had no property in the money deposited. The money was the property of the CBA.”

41. Her Honour considered, at [89], that her view gained some support from the Proceeds of Crime Act, s 77(1)(c), which provides that a court must make a compensation order if, inter alia, the court is satisfied that a proportion of the value of the interest of an applicant was not derived or realised, directly or indirectly, from the commission of any offence. In her Honour’s view, this appeared to be a recognition that “an applicant might have an interest, less than the whole, in the value of indivisible property” (emphasis in original).

42. In coming to this conclusion, her Honour rejected, at [82]-[83], the Commissioner’s argument, based upon Commissioner of the Australian Federal Police v Kalimuthu [No 3] [2017] WASC 108, in which Allanson J observed, at [116], that as “property” includes rights in connection with property, as defined in s 338, when a deposit is made into a person’s bank account, that person’s interest includes rights in relation to the additional credit balance, or to the new total credit balance. Allanson J held that that is an acquisition of property.

43. The primary judge likewise rejected the approaches taken in Commissioner of the Australian Federal Police v Fitzroy All PtyLtd (2015) 299 FLR 439; [2015] WASC 320 and Commissioner of the Australian Federal Police v Pham [2015] NSWSC 1383, and distinguished this case from the decision in Studman v Commonwealth Director of Public Prosecutions (2007) 177 A Crim R 34; [2007] NSWCA 285. These decisions are considered below.

Submissions

44. The appellants submitted that the primary judge erred in determining that they did not acquire property within the meaning of s 330(4)(a). They contended that a new or substituted chose in action arose on each occasion that a deposit was made. The Commissioner conceded that the primary judge had erred, although the argument advanced by the appellants was different in its legal analysis.

45. The appellants further submitted that their right to withdraw or deal with the funds standing to the credit of their bank accounts was an “interest” in or in connection with the property, constituted by the chose in action, whenever created, and was thus “property” as defined in the Proceeds of Crime Act.

46. The Commissioner did not cavil with her Honour’s characterisation of the appellants’ interests in the bank accounts as constituting choses in action which came into existence at the time the accounts were opened. Further, as noted earlier, the Commissioner agreed with the appellants’ submission that their interest in the credit balance in their bank accounts was “property” within the terms of the definition in s 338, which was acquired from time to time as and when deposits were made. The Commissioner submitted that her Honour should have accepted the reasoning in the first instance decisions of Pham, Fitzroy All Pty Ltd and Kalimuthu [No 3]. The Commissioner also submitted that her Honour had erroneously distinguished this case from Studman.

Consideration

47. It is important at the outset to identify the “property” that is contended to have been acquired by the appellants. The terms of the contract between the Commonwealth Bank and the appellants were not in evidence. Her Honour, and the parties, each approached the bank accounts on the basis that they operated as current accounts in credit. We will adopt that same assumption, although it should be observed that the rights of parties in a modern banker-customer relationship may well be very different depending on the precise contractual terms between them, as modified by relevant statutes.

48. The law is settled that the contract between a customer and a bank is established at the time that a bank account is opened, and does not comprise a series of loans from the customer to the bank each time a deposit is made: see N Joachimson v Swiss Bank Corporation [1921] 3 KB 110 at 127; Croton v The Queen (1967) 117 CLR 326; [1967] HCA 48 at 330; Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq) (2003) 59 NSWLR 361; [2003] NSWSC 1008 at [31]-[32].

49. Atkin LJ’s conclusion in N Joachimson v Swiss Bank Corporation that there is only one contract made between the bank and its customer has prevailed in Australia.

50. As Dixon and Evatt JJ said in Russell v Scott (1936) 55 CLR 440; [1936] HCA 34 at 450-451, a “bank account” is nothing more or less than a chose in action, consisting “in the contractual right against the bank, i.e., in a debt, but a debt fluctuating in amount as moneys might be deposited and withdrawn”.

51. In Croton, Barwick CJ said, uncontroversially and, in any event, in a passage approved in Parsons v The Queen (1999) 195 CLR 619; [1999] HCA 1 at [17]:

“But, though in a popular sense it may be said that a depositor with a bank has ‘money in the bank’, in law he has but a chose in action, a right to recover from the bank the balance standing to his credit in account with the bank at the date of his demand, or the commencement of action.”

52. The ratio of N Joachimson v Swiss Bank Corporation was described in Mark Hapgood QC (ed), Paget’s Law of Banking (13th ed, 2007, LexisNexis) at 148, as being that:

“… it is an implied term of the contract that the banker is not liable to repay the customer until demand is made. Until then, there is no presently due debt owed by the banker to his customer.”

53. These principles have been cited with approval on a number of occasions, including in the decisions of Kalimuthu [No 3]; Fitzroy All Pty Ltd; and Commissioner of the Australian Federal Police v Tjongosutiono (2018) 329 FLR 103; [2018] NSWSC 48.

54. Notwithstanding that there is but a single contract between the bank and the customer and, subject to the terms of the contract, there is no accrued cause of action unless and until the customer makes a demand for payment, that does not answer the question in issue in this case. The question in issue under appeal grounds 1 and 2 is the nature of the appellants’ “interest” in “property”, as defined terms in the Proceeds of Crime Act. This question is not answered solely by reference to the legal characterisation of a customer’s interest in a bank account as comprising a single chose in action. It must be answered having regard to the proper construction and application of the Act.

55. “Property” is defined in s 338 as follows:

“… real or personal property of every description, whether situated in Australia or elsewhere and whether tangible or intangible, and includes an interest in any such real or personal property.”

56. “Interest” is also defined in s 338 as follows:

“interest, in relation to property or a thing, means:

(a)   a legal or equitable estate or interest in the property or thing; or

(b)   a right, power or privilege in connection with the property or thing;

whether present or future and whether vested or contingent.”

The terms “right, power or privilege” in para (b) are not defined in the Act.

57. The legislative provisions in this case are complex and the interaction between the Proceeds of Crime Act and the myriad of offence-creating provisions, including the money laundering provisions of the Criminal Code and the Anti-Money Laundering and Counter-Terrorism Financing Act, are opaque. However, having grappled with the complexities of the legislative scheme, we have respectfully concluded that the primary judge’s resolution of this issue was not correct.

58. The meaning of words and phrases is influenced by the immediate context in which they are used. The meaning of the whole may be different to the sum of the meaning of the parts: Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389; [1996] HCA 36 at 396-397 per Brennan CJ, Dawson, Toohey, Gaudron and McHugh JJ, citing Lord Hoffmann in R v Brown [1996] 1 AC 543 at 561. The modern approach to statutory interpretation uses “context” in its widest sense “to include such things as the existing state of the law and the mischief which, by legitimate means … one may discern the statute was intended to remedy”: CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; [1997] HCA 2 at 408 per Brennan CJ, Dawson, Toohey and Gummow JJ. A construction that would promote the purpose or object underlying the Act or statutory rule (whether or not that purpose or object is expressly stated in the Act or statutory rule or, in the case of a statutory rule, in the Act under which the rule was made) shall be preferred to a construction that would not promote that purpose or object: Acts Interpretation Act1901 (Cth), s 15AA.

59. In Taylor v The Owners – Strata Plan No11564 (2014) 253 CLR 531; [2014] HCA 9, French CJ, Crennan and Bell JJ said, at [39], that:

“… the task remains the construction of the words the legislature has enacted. In this respect it may not be sufficient that ‘the modified construction is reasonably open having regard to the statutory scheme’ because any modified meaning must be consistent with the language in fact used by the legislature. Lord Diplock never suggested otherwise. Sometimes, as McHugh J observed in Newcastle City Council v GIO General Ltd, the language of a provision will not admit of a remedial construction. Relevant for present purposes was his Honour's further observation, ‘[i]f the legislature uses language which covers only one state of affairs, a court cannot legitimately construe the words of the section in a tortured and unrealistic manner to cover another set of circumstances.’” (citations omitted)

60. As Gageler and Keane JJ pointed out in the same case, at [65]-[66], the choice between alternative meanings involves an evaluation of the relative coherence of the alternatives with identified statutory objects or policies. The identified statutory objects or policies of the Proceeds of Crime Act are tolerably clear. Among its principal objects, the Act is intended to “deprive persons of the proceeds of offences, the instruments of offences, and benefits derived from offences, against the laws of the Commonwealth” and to “punish and deter persons from breaching laws of the Commonwealth”.

61. The Anti-Money Laundering and Counter-Terrorism Financing Act is plainly intended to regulate cash deposits of sizeable amounts in order that law enforcement agencies can stop or restrict the laundering of money from criminal activity and the funding of terrorism. Similarly, the Criminal Code, s 400.9 is intended to deter persons from dealing with property that is reasonably suspected of being the proceeds of crime, including by depositing funds into existing bank accounts.

62. For the reasons that follow, we have concluded that the appellants acquired an “interest” in “property” for the purposes of s 330(4)(a) each time a deposit was made into one of their accounts, because on such occasion, the appellants acquired a “right” or “power … in connection with the property” within the meaning of the term “interest”.

63. In Director of Public Prosecutions (Vic) v Le (2007) 232 CLR 562; [2007] HCA 52, a majority of the High Court (Kirby and Crennan JJ with whom Gleeson CJ agreed at [1]) said of cognate Victorian legislation:

“[80]   Section 3(1) also defines interest in property:

‘‘interest’, in relation to property, means—

(a)   a legal or equitable estate or interest in the property; or

(b)   a right, power or privilege over, or in connection with, the property’.’

[81]   Far from distinguishing ‘property’ as signifying only a thing or an object (eg, Blackacre) from ‘property’ as signifying a ‘legal relationship with a thing’ [Yanner v Eaton (1999) 201 CLR 351; [1999] HCA 53 at [17]] (eg, a joint tenancy), the definitions in s 3(1) indicate that the statutory meaning of property comprehends ‘property’ in both manifestations.”

64. The explicit reference in this context to Yanner v Eaton is important. At [17], Gleeson CJ, Gaudron, Kirby and Hayne JJ said:

“The word ‘property’ is often used to refer to something that belongs to another. But in the Fauna Act, as elsewhere in the law, ‘property’ does not refer to a thing; it is a description of a legal relationship with a thing. It refers to a degree of power that is recognised in law as power permissibly exercised over the thing. The concept of ‘property’ may be elusive. Usually it is treated as a ‘bundle of rights’. But even this may have its limits as an analytical tool or accurate description, and it may be, as Professor Gray has said, that ‘the ultimate fact about property is that it does not really exist: it is mere illusion’. Considering whether, or to what extent, there can be property in knowledge or information or property in human tissue may illustrate some of the difficulties in deciding what is meant by ‘property’ in a subject matter. So too, identifying the apparent circularity of reasoning from the availability of specific performance in protection of property rights in a chattel to the conclusion that the rights protected are proprietary may illustrate some of the limits to the use of ‘property’ as an analytical tool. No doubt the examples could be multiplied.” (footnotes omitted)

65. In Studman, the Court was concerned, relevantly, with whether an exclusion order ought to have been made in respect of “funds standing to the credit of” a specified bank account. McClellan CJ at CL (Spigelman CJ and Handley AJA agreeing) observed, at [39]:

“An account with a cash dealer creates rights and obligations in both the cash dealer and the customer. The customer obtains the right to deposit and withdraw monies together with, in many cases, a right to interest on the monies deposited. Those rights are comprised in a chose in action which is the property obtained by the customer upon opening the account.”

66. In respect of the “funds standing to the credit of” the bank account, McClellan CJ at CL correctly characterised, at [41], the relevant property as a chose in action obtained when the bank account was opened. His Honour noted that pursuant to the arrangement relating to the account, “the appellant could deposit and withdraw monies or direct that a payment be made to a third party”. His Honour continued:

“41.   … The fact that the money which the appellant deposited may have been lawfully acquired by him is not to the point. Once deposited the monies become the property of the receiving party.

…

43.   It is true that the opening of a cash account is not an offence. However, it is an offence to do so in a false name. The appellant committed that offence when opening the accounts with the bank and the stockbroker. Accordingly, the right to the monies in the accounts was derived directly from the commission of the offence.”

67. Studman was different from the present case in that, in Studman, the chose in action comprising the contractual rights in relation to the bank account was acquired simultaneously with the occurrence of the unlawful activity, namely, the opening of the account in a false name.

68. Authority at first instance in relation to the Proceeds of Crime Act has generally accepted that in respect of a current account, there is only one contract giving rise to the debt, as opposed to a series of contracts made by reason of each separate deposit.

69. In Fitzroy All Pty Ltd, Mitchell J said, at [26]:

“‘Property’ is defined by s 338 of the POC Act to include personal property. In the present case the relevant personal property is the chose in action which Fitzroy has against NAB for payment of the amount standing to Fitzroy’s credit in the Account. That is, the property is not cash but a debt which is owed to Fitzroy by NAB in the amount of funds standing to the credit of the Account. The contract giving rise to the debt is a single continuing contract, as opposed to a series of contracts made on each deposit. Therefore, the debt owed by NAB to Fitzroy is a single obligation to pay the amount standing to the credit of the Account from time to time. It is not a series of debts relating to each deposit credited to the Account.”

70. In Pham, Beech-Jones J said, at [36]:

“There is no doubt that the relevant property that is the subject of this application is of the intangible kind that I referred to earlier; namely, the chose in action represented by the rights that each of the three defendants have against the CBA and the ANZ concerning the amounts standing to their credit in those bank accounts ... The question raised by this matter is whether those rights are the proceeds of a contravention of s 142(1) of the [Anti-Money Laundering and Counter-Terrorism Financing Act].”

71. Some limited support for that construction is provided by Campbell J in Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq). The context of his Honour’s remarks was the rules of tracing and the operation of Clayton’s Case (Devaynes v Noble (1816) 1 Mer 572) in the case of proposed distributions by a liquidator appointed under the Corporations Act 2001 (Cth). His Honour determined that Clayton’s Case was not applicable in the distribution of trust monies held by the liquidator. In the particular circumstances of that case, the liquidator was justified in making a pari passu distribution amongst claimants on the trust fund. His Honour said, at [61]:

“At one level of legal analysis, there is a vast difference between a credit in a bank account, and money in a bag. The first is an inchoate chose in action (inchoate because of the need to make demand before there is a cause of action that can be sued on), while the second is a chose in possession. Coins in a bag are each separate and individually identifiable things, even though coins of the one denomination are for most practical purposes interchangeable, and adding more coins to a bag is simply adding an additional number of things of that type to the bag. In contrast, a debt owed by a banker to a customer is a single thing – an obligation to pay X dollars – and the client’s paying more money into a bank account results in the creation of a different thing – an obligation to pay some larger number than X dollars. However the purpose of the activity that the Court of Appeal was engaged in was working out whether the defaulting solicitor could, conscientiously, deny that some of the money which remained in the bank account – the inchoate chose in action to pay the balance to the customer – was money of a particular client. For that purpose, there was no difference between a bank account, and coins from various sources placed in a bag. Functionally, the bank account and coins in the bag operated identically …” (emphasis added)

72. To similar effect is the Full Federal Court decision in National Australia Bank Ltd v Norman (2009) 180 FCR 243; [2009] FCAFC 152, where Graham J (with whom Spender J generally agreed), referring to the passage above, observed, at [53]:

“A credit in a bank account is not a chose in possession. Rather it is an inchoate chose in action (inchoate because of the need to make demand before there is a cause of action that can be sued on). A debt owed by a banker to a customer is a single thing – an obligation to pay $X – and the client’s paying more money into a bank account results in the creation of a different thing – an obligation to pay some larger amount than $X ...”

73. The context of these remarks was an appeal in relation to orders winding up an alleged unregistered managed investment scheme under Chapter 5C of the Corporations Act. The National Australia Bank in that case held the account into which the putative manager of the unregistered managed investment scheme made deposits, which he styled for the purpose of soliciting funds for deposit as “trust account” bank funds. Graham J was explaining why it was that the National Australia Bank was not a trustee of monies standing to the credit of the putative manager of the unregistered managed investment scheme.

74. Both of these cases direct attention to the purposes for which the question of the true nature of a debt owed by a banker to a customer is being posed.

75. In Tjongosutiono, N Adams J found, first, that each time there is a deposit into or withdrawal from a current account with a bank, a new chose in action is created and the previous one no longer exists. That conclusion is inconsistent with Russell v Scott and Croton and must therefore be rejected.

76. However, her Honour gave a second reason for her conclusion. By reason of the definitions of “property” and “interest” in the Proceeds of Crime Act, an account holder’s right to withdraw funds standing to the credit of an account is an “interest” in or in connection with that property. That right or power to withdraw or deal with the credit balance after the structured deposits were made is a different right or power from that which existed before the making of the deposits. There was no right or power to withdraw or otherwise deal with the increased credit balance until the structured deposits were made. At any point in time thereafter, the right or power is to withdraw or deal with the newly deposited funds.

77. Some support for N Adams J’s conclusion is provided by an analysis of the inchoate cause of action in debt possessed by the appellants here before and after the deposits were made giving effect to a non-reportable transaction referred to in the Anti-Money Laundering and Counter-Terrorism Financing Act, s 142. It will be recalled that N Joachimson v Swiss Bank Corporation established that it is an implied term of the contract that the banker is not liable to repay the customer until demand is made. Until then, there is no presently due debt owed by the banker to his or her customer. The inchoate cause of action in debt possessed by the appellants here was for a materially smaller amount than the inchoate cause of action in debt after each of the deposits were made giving effect to a non-reportable transaction.

78. The same point had been made in Shields v New South Wales Crime Commission (2007) 177 A Crim R 130; [2007] NSWCA 309, which involved a challenge to a restraining order made under the Criminal Assets Recovery Act 1990 (NSW) in respect of, inter alia, certain bank accounts, one of the questions in issue was whether the restraining order had specified an “interest in property” within the meaning of s 10 of the Act. An “interest in property” was defined in identical terms to the definition in s 338. Beazley JA stated (Hodgson and Tobias JJA agreeing), at [83], that “[b]eing the signatory to an account is a right or power or privilege in connection with the property comprising that bank account”. Neither party referred to this decision and it has not been the subject of challenge, although it must be said that the Court did not there engage in the analysis that this case has called for.

79. The definition of “interest” in s 338 must also be construed in the context of the Act as a whole. In this regard, there are two observations to be made in respect of the second limb of the definition. First, the second limb is wider than the first limb, that being a “legal or equitable estate or interest in the property or thing”. If that were not the case, the second limb would be superfluous. Secondly, the phrase “in connection with” is of wide import. The phrase is capable of describing a spectrum of relationships ranging from the direct and immediate to the tenuous and remote: Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280; [1993] FCA 456 at 288 per Neaves, French and Cooper JJ. The judgment of connection depends on the statutory context in which the words are used. In the present context, the connection is close.

80. In this case, the appellants possessed a chose in action in respect of each of their bank accounts enforceable against the Commonwealth Bank constituted by the right to compel the bank upon demand to pay to, or at their direction, an amount equivalent to the amount standing to the credit of each of their accounts. Those choses in action are a species of intangible personal property within the definition of “property” in the Proceeds of Crime Act, s 338. The property is intangible in the sense that it is incapable of physical possession. It is inchoate as, until a demand for payment is made, the cause of action is not complete.

81. Funds were deposited into existing bank accounts in contravention of the Anti-Money Laundering and Counter-Terrorism Financing Act, s 142. We have concluded that the appellants’ right to demand payment of the amount standing to the credit in each of their accounts is a “right” or “power … in connection with the property”, being the appellants’ chose in action as it affects a change in the amount of the demand which may be made by the appellants on the Commonwealth Bank.

82. It follows that the primary judge’s finding that the appellants did not acquire an “interest” in “property” each time a deposit was made into their accounts was incorrect. This, however, is only the first step in the analysis of whether the appeal should be allowed.

Second issue on the appeal

Whether the appellants were a “third party” under the Proceeds of Crime Act, s 330(4)(a): appeal grounds 3, 4 and 5

Primary judge’s reasons

83. The primary judge rejected the appellants’ argument that they were a “third party” within the meaning of s 330(4)(a). After careful consideration of the terms of s 330(4)(a) in their context, her Honour concluded:

“[101] The use of the term ‘third party’ is infelicitous. Light is cast upon its proper construction when regard is had to the purpose for which s 330(4)(a) was enacted … It may, on its face, be seen to have been intended to protect a person who innocently acquires property (for sufficient consideration) unaware of the circumstances in which it became tainted. It is the statutory enactment of the equitable notion of a purchaser for value without notice. A third party is a person to whom property passes – a third party to the ownership of the property. It is the party by whom the property is acquired. The paragraph is concerned with the transfer of property. A person is not a third party only because he or she had no connection with the offence that causes the property to be tainted.

…

[104] The ordinary meaning of the words ‘third party’ and the ascertainable legislative intention of the provision, dictate that a ‘third party’ within s 330(4)(a) is a party who is, at the time of the criminal conduct, wholly removed from the property constituting the proceeds or instrument; it is not an owner of property who is wholly removed from the criminality that causes the property to be tainted.”

Submissions

84. The appellants argued before the primary judge that a “third party” within the meaning of s 330(4)(a) was a person other than a party to the criminal conduct which caused the property to become tainted. It followed on this argument that because the structuring offences were transactions between the depositor and the bank, the appellants were a “third party”. They reiterated that argument on the appeal. The appellants also submitted that the primary judge’s construction of “third party” produced the “absurd” result that no acquirer of the proceeds of an offence could ever avail themselves of s 330(4)(a). Rather, s 330(4)(a) would only ever apply to an instrument of an offence, contrary to the express words of the provision. The appellants submitted that s 330(4)(a) should be construed as a statutory manifestation of the equitable concept of a bona fide purchaser for value without notice.

85. The appellants also submitted that, by virtue of the operation of s 330(4)(a), the deposits into their bank accounts ceased to become proceeds of crime at the same time as they would ordinarily have become such proceeds. It was integral to this argument that s 330(4)(a) did not require a temporal disjunction between the two events and that the transaction by which the property became proceeds of an offence or an instrument of an offence and its ceasing to be so could occur simultaneously. The import of their submission was that property that would otherwise become proceeds of crime does not become proceeds in circumstances where a person acquires property in accordance with s 330(4)(a). They contended that were it otherwise, an innocent acquirer of property would be bound to have the property forfeited if application is made for that purpose.

86. The Commissioner’s position before the primary judge was that a “third party” does not simply refer to someone not a party to the offence. On the appeal, the Commissioner submitted that the primary judge’s conclusion at [101] was correct. The Commissioner submitted that to adopt the construction for which the appellants contended would fail to give any substantive content to the term “third party” beyond the other, separately expressed, requirements of s 330(4)(a).

87. The Commissioner submitted that as account holders, the appellants “possessed, controlled and exercised the right to operate” the bank accounts into which the structured deposits were made, thereby causing the accounts to become instruments of offences. The appellants did not, on the Commissioner’s submission, thereby become third parties in relation to their accounts.

88. The Commissioner also submitted that the fact that s 330(4)(a) governs when property ceases to be proceeds of an offence or an instrument of an offence “logically necessitates” that the property was previously proceeds of an offence or an instrument of an offence. The Commissioner submitted that the requirement of a temporal disjunction was apparent from the “clear words” of s 330(4)(a), and that to suggest otherwise would:

“… be to give the sub-section an unworkable temporal operation in its application to s 142 of the [Anti-Money Laundering and Counter-Terrorism Financing Act] and s 400.9 of the Criminal Code. It would produce the absurd result that property would ‘cease to be’ the proceeds or instrument of an offence either from the moment the offence occurred or indeed, at a midpoint during the commission of the offence itself. That cannot have been the intention of the legislature in enacting s 330(4)(a).”

Consideration

89. The meaning of “third party” in s 330(4)(a) is not without difficulty, as our reasons below and our respectful disagreement with the separate reasons of McColl JA make apparent. The appellants accepted that these deposits immediately gave rise to an interest in property, held by the appellants, which interest became proceeds of an offence within the meaning of the Proceeds of Crime Act, s 330(1). The issue under s 29 of the Proceeds of Crime Act was thus whether the appellants had proven that their interest in the property ceased to be the proceeds of crime, within the meaning of the Proceeds of Crime Act, s 330(4). The Note to the Proceeds of Crime Act, s 29(2) says:

“Note: One of the circumstances in which property ceases to be proceeds of an offence or unlawful activity involves acquisition of the property by an innocent third party for sufficient consideration: see s300(4)(a).”

90. The concept of a “third party” is not defined in the Proceeds of Crime Act. The terms “third party” (used in s 330(4)(a)) and “innocent third party” (used in the extrinsic materials and the note to s 29) appear to have originated in a report by the Australian Law Reform Commission entitled Confiscation That Counts – A Review of the Proceeds of Crime Act 1987, Report No 87, (1999). Relevantly, chapter 12 provides as follows:

“[12.3]   It is clear from the various provisions dealing with the rights of third parties in both the POC Act and the Customs Act, Part XIII, Division 3 that it was not the intention of the legislature that there be any adverse impact on truly innocent third parties with bona fide interests in property. That said, the provisions providing relief for innocent third parties are extremely complex, although no more so than the confiscatory provisions from which they are intended to offer such relief.

…

[12.80]   In his submission, the DPP states that, in the experience of his office, the rights of innocent third parties are adequately protected under the current provisions … the submission says that

… the DPP would have no difficulty with additional provisions being enacted if that was considered necessary. However, any additional provisions will need to be carefully worded to ensure that they do not simply give defendants, and their associates, additional opportunities to delay the operation of the Act.

…

[12.82]   These submissions, as reinforced in face to face discussions, add significant weight to the Commission’s own analysis and concerns that, whether in respect of third party interests at large, or in relation to interests of creditor encumbrancees, it is imperative that the legislation be framed in such a way as to eliminate, or reduce to the extent practicable, the scope for third parties to obtain relief from restraining and forfeiture orders, and from the charging of property to satisfy pecuniary penalty orders, where the third party interest is acquired otherwise than from a bona fide and at arms length transaction.

…

Recommendation 53

•   The POC Act should prescribe a uniform set of matters in respect of which a third party must satisfy the court when seeking exclusion of the third party’s interest other than an encumbrance

…

–   from a restraining order or forfeiture under the new non-conviction based regime

•   The matters on which the third party should be required to satisfy the court are that

–   the third party was not involved in the conduct to which the restraining or forfeiture order applies

–   that the third party’s interest is not subject to the effective control of the defendant and

–   where the interest was acquired directly or indirectly from the defendant, the third party acquired the interest bona fide and for valuable consideration.” (citations omitted)

91. The Revised Explanatory Memorandum to the Proceeds of Crime Bill 2002 (Cth) stated the following in relation to cl 330:

“This clause establishes that money or other property which is ‘proceeds of an offence’ or an ‘instrument of an offence’ does not lose its nature as such merely because it is exchanged for another item or is otherwise dealt with (for example by the sale of property which is proceeds or an instrument, or by placing cash which is proceeds into a bank account, or using cash which is proceeds to purchase property). This prevents a person from transforming property which is proceeds or an instrument into ‘clean’ property just by changing its nature.

Subclause 330(1) deals with proceeds by providing that property becomes the proceeds of an offence if it is wholly or partly derived or realised from, or acquired with, proceeds of the offence. For example, if a house is acquired for $300,000, and $100,000 of the money used is proceeds of an offence, the entire property becomes the proceeds of the offence and is liable to forfeiture.

193. In Moreton Bay Regional Council, [27] the plurality rejected a submission that the definition of “common areas” which appeared in Pt 3 (Interpretation), Div 2 (Extended definitions), [28] in the Retail Shop Leases Act 1994 (Qld) (RSLA) was a substantive enactment served any function other than defining that expression for the purposes of the RSLA. In their Honours’ view, there was nothing about the definition of “common areas” in the RSLA which suggested it was the purpose of the RSLA to achieve the object in s 3 of the RSLA of “efficiency and equity” by substituting the statutory definition of “common areas” for the definition in a lease wherever it occurred. Rather, “[o]f itself, the statutory definition of ‘common areas’ [did] no more than define the meaning to be assigned to the term ‘common areas’ as it is used in the RSLA.”

     27. At [64].

     28.    Pt 3, Div 3 of the RSLA is now headed “Key concepts”.

194. While it is apparent that Pt 6-1 of the POCA was intended to be an aid to the meaning of “important concepts” which appear in the POCA, it is not readily apparent, having regard to its structure, that it could be interpreted in the manner McHugh J contemplated when dealing with the meaning of the phrase. That is to say, one cannot readily insert, for example, s 330(4)(a), into every provision of the POCA in which the question whether property “is” the proceeds or instrument of an offence arises, and then construe that provision.

195. While that unwieldy exercise is not readily attractive, its grammatical impracticality does not detract, in my view, from a characterisation of Pt 6-1 by analogy with the principles applied to the characterisation of definition provisions as an aid to the construction of provisions (including s 29) to which the state of “being” of the relevant property is relevant. That is, not least, because of the clear statement in s 6 of the POCA concerning material which appears after Ch 2 – 4, relevantly for present purposes in Ch 6, as being “other interpretive material”. That makes it clear that Pt 6-1 does not set out substantive enactments, but, as its title also indicates, explains the meaning of some important concepts to be used when applying the substantive provisions of the POCA, in this case, relevantly, s 29.

196. Thus, as in Moreton Bay Regional Council, it is apparent that the legislature intended that when the “concepts” reflecting the characterisation of property referred to in s 330 are found in the substantive parts of the POCA, they are to be understood as complementing s 329 and, ultimately, assisting in the application of a provision in which the “is” question arises, in this case, the application for a s 29 exclusion order.

197. What explanation s 330 affords an applicant for a s 29 exclusion order must be determined in the context that it is apparent from the terms of s 29 itself, that the circumstances in which an exclusion order might be granted are limited and the conditions strict. [29] Consistently with that interpretation of s 29, s 329 casts a wide net, a matter I address later in these reasons.

     29.    Hart at [66] per Gordon J.

198. Accordingly, in order to succeed on the exclusion application, the appellants had to establish on the balance of probabilities within the meaning of the POCA, s 29 that their interest in the Restrained Property “is” not an “instrument of any serious offence”. Their concession that the Restrained Property had that characteristic when the restraining order was made, did not, extend to a concession that the Restrained Property had that characteristic in their hands. Their essential submission was that even if the credits to their various bank accounts remained proceeds or an instrument of an offence, on their acquisition of their interests in the Restrained Property, it ceased to be so characterised.

Section 330(4)(a): third party

209. The primary judge held “third party” in s 330(4)(a) was “the statutory enactment of the equitable notion of a purchaser for value without notice.” [30] In Tjongosutiono, [31] N Adams J observed that “[t]he concept of a third party is usually someone at arm’s length”.

     30. Primary judgment at [101].

     31. At [168]. Her Honour also referred to the applicant’s submission that “third party” had the sense of the Macquarie Dictionary (6th ed, 2013) definition as “any person other than the principal [sic, principals] to some transaction, proceeding or agreement”. It is apparent from her Honour’s dispositive reasons that she did not accept that submission.

210. While analogies may provide useful points of reference, the meaning of “third party” in s 330(4)(a) must be determined by the principles of statutory interpretation to which I have referred. As I have said, the fact that s 330(4)(a) is an aid to the construction of the substantive provisions of the POCA rather than a substantive enactment, does not mean that it should be construed divorced from its Pt 6-1 context. Any construction of s 330(4)(a) must be consistent with the language and purpose of all the provisions of the POCA, and reflect the “hierarchy of the provisions … to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme.” [32] In my view, with respect, decisions which have hitherto considered the meaning of “third party” have failed to have regard to, or accord sufficient weight to, the context in which s 330(4) appears and the hierarchy within s 330.

     32. Project Blue Sky at [70].

211. The concept of whether property “is neither proceeds nor an instrument [of a specified activity or offence]” is relevant to applications for exclusion orders made in relation to restraining orders made under each of s 17, (s 29(2)(a) and (b)), s 18, (s 29(2)(c)) and s 19 (s 29(2)(d)). In the latter case, reasons for excluding a specified interest in property from the s 19 restraining order turn on whether the interest “is neither” proceeds of an indictable offence, a foreign indictable offence or an indictable offence of the Commonwealth nor an instrument of any serious offence (s 29(2)(d)). Pursuant to s 29(3), a further reason for excluding a specified interest in property from any restraining order is, in part, whether “there are no reasonable grounds to suspect that the interest is *proceeds of the offence, or any of the offences” specified in the chapeau to s 29(3)(a).

212. Notably, s 29 does not expressly use the language of s 330(4) that property which is proceeds or an instrument of an offence has “cease[d]” to be such so as to warrant the grant of an exclusion order. Rather, it must be inferred that the concept of property not having that characteristic flows from the term “is neither”. That expression is apt to describe property which never became “proceeds or an instrument of an offence” within s 330(1) – (2), [33] or ceased to be such as explained in s 330(4). It is conceivable that there may be cases in which a s 29 applicant could persuade a court of the former proposition.

     33.    For example because, despite there having been a suspicion on reasonable grounds that the property had that character, on examination as to whether it did in fact, that proved not to be the case. See the earlier discussion concerning the curious lacuna as to whether and when the Commissioner has to establish property “is” either proceeds or an instrument of an offence.

213. As I have said, s 330 is found in a context which demonstrates the wide operation the confiscation scheme is clearly intended to have, as can be seen from the extent of the “property” to which it potentially applies. I have already set out the terms of s 329. In Hart,[34] the plurality observed in relation to s 329(1)(a) and (b) dealing with “proceeds of an offence” that:

“The difference between the two cases is one of degree. Property would not answer the description of being ‘partly derived’ from an act or omission if the degree of derivation were no more than trivial. Beyond that, however, there is no requirement that the degree of derivation must be substantial. And there is no requirement that the degree of derivation must be proportionate to the forfeiture that has occurred.” [Footnote omitted, emphasis added.]

34. At [12] – [14] per Kiefel CJ, Bell, Gageler and Edelman JJ. See also at [97] per Gordon J. Hart concerned the POCA as at 13 July 2006. Sections 329 and 330 in the version of the POCA relevant to the present appeal are in the same terms as they were in the 2006 version of the POCA.

214. The same observation must apply to s 329(2)(a) and (b) which deals with “an instrument of an offence”.

215. Section 330 is complementary to s 329. It establishes a continuum, as I have said, intended to facilitate the determination, for the purposes of the confiscation scheme, as to when property “becomes” proceeds or an instrument of an offence, when it “remains” so characterised and, ultimately, when it “ceases” being so characterised.

216. Each sub-section in s 330 looks to a different, or potentially different, “activity” which has taken place in relation to “property” to determine whether, having regard to that activity, specified property, in substance, “is” proceeds or an instrument of an offence within the meaning of s 329, and, in turn, within the meaning of a substantive provision of the POCA to which that concept is relevant.

217. Contextually and importantly, in my view, for the purposes of understanding the ambit of s 330(4), s 330(3) specifies the circumstances in which property “remains” proceeds or an instrument of an offence, “even if” one of the activities there referred to occurs. Those activities are that property which is proceeds or an instrument of an offence is credited to an account, as in this case (s 330(3)(a)), or disposed of or otherwise dealt with (s 330(3)(b)).

218. The use of the expression “even if” in s 330(3) underscores the strictness of the approach, already indicated by the language of s 29, [35] to be taken to determining whether property “is” proceeds or an instrument of an offence. The expression “even if” also indicates a legislative recognition that, in the ordinary course, it might otherwise be thought that a transaction of the sort referred to in s 300(3) might have the effect of depriving it of its character as proceeds or an instrument of an offence. Accordingly, s 330(3) ensures that it remains so characterised.

     35. Hart at [66].

219. However, there is a necessary interaction between s 330(3) and s 330(4). As the appellants submitted, every acquisition of property that is the proceeds of an offence involves a dealing with the proceeds of crime for the purposes of Pt 10.2 of the Criminal Code (and is a “serious offence” within s 338 of the POCA. That proposition applies to each of the transactions s 330(3) contemplates.

220. The clear intent of s 330(3), taken with the wide definition of whether property “is” either “proceeds” or an “instrument”, in my view, is that property remains so characterised, notwithstanding that it has been dealt with in a manner contemplated by s 330 whether once, or on repeated occasions. Section 330 is intended to have a never-ending effect. As long as the property can be characterised at some stage as having been proceeds or an instrument of an offence, it “remains” so characterised no matter how many s 330(3) transactions it passes through. There is never a temporal disjunction, to use the Commissioner’s expression, which can disassociate a subsequent purchaser or acquirer from a transaction which constitutes an element of an offence. Each s 330(3) transaction involves such a dealing, leading to the property remaining tainted.

221. Each sub-paragraph of s 330(4) deals with what would, prima facie, be a s 330(3) transaction. Subsection 330(4) clearly contemplates, in my view, that property which “remains” the proceeds or an instrument of an offence within s 330 by reason of a s 330(3) transaction may, notwithstanding that transaction, cease to be such proceeds or an instrument of an offence, albeit “only” in the circumstances for which s 330(4) provides. The use of the term “only” emphasises the strictness of the approach to be taken to determining whether property has lost its character as proceeds or an instrument of an offence.

222. Section 330(4) thus creates what can be described as a carve out. In other words, it has the effect that the characterisation as proceeds or an instrument of an offence s 330(3) ensures property the subject of a s 330(3) transaction retains, “ceases” if any sub-paragraph of s 330(4) applies. It is the legislature’s attempt to achieve the balanced and fair approach to the operation of the POCA spoken of in the Revised Explanatory Memorandum.

223. A clear example of the inter relationship between s 330(3) and s 330(4)(a), as the appellants submitted, would be a cuckoo smurfer disposing of monies which are the proceeds or an instrument of an offence to buy something, whether real or personal property (a s 330(3)(b) dealing), from a stranger to any of the activities by virtue of which the property “is” proceeds or an instrument of an offence (property transaction).

224. Applying s 330(3), the purchase money, being proceeds or an instrument of an offence, “remains” tainted in the stranger’s hands. However, the Commissioner accepted that the stranger/recipient of the purchase money could rely on s 330(4)(a) because the purchase money (property) was already “proceeds” before the stranger acquired it and, accordingly, the stranger was not a “party” to the conduct which caused the property to be proceeds in the first place.

225. In my view, the Commissioner’s submissions concerning the necessity for a temporal disjunction fail to grapple with the effect of the continuing operation of s 330(3) on property the subject of a s 330(3) transaction in the context of s 330(4)(a) third-party status. As I have said, there is never a temporal disjunction.

226. The vendor in the s 330(b) property transaction, in my view, is no different from the holder of an account in the s 330(a) credit transaction who, as the joint judgment has held, acquires an “interest” (property), within the meaning of that term as defined in s 338, for the purposes of s 330(4)(a) each time a credit is made into the holder’s account. In each case, the “cuckoo”, the depositor or purchaser, has sought to use the “nest” afforded by the account or the acquisition of the real or personal “property” the subject of the s 330(b) transaction, to launder tainted funds. In each case, the recipient of the funds (property) has, albeit unwittingly, become involved in, or a party to, an offence under either the AML Act and/or the Criminal Code and has received property which “remains” either proceeds or an instrument of an offence depending on the nature of the s 330(3) transaction. Indeed, the “property” undoubtedly retains that characterisation by operation of s 329 alone.

227. However, in each case when the holder of the account into which the funds are credited or the vendor of the property cannot be said to be a “party” to the s 330(3) transaction in the sense of being intentionally complicit in the laundering activity, or to put it another way stands at arms’ length to the transaction, he or she is, in my view, relevantly a “third party” for the purposes of s 330(4). Subsection 330(4)(a), in my view, is clearly intended to give such recipients (who would be “innocent third parties” as referred to in the Note to s 29) an opportunity to have such property excluded from a restraining order.

Tjongosutiono

228. The joint judgment has approved the primary judge’s reasons on the “third party” issue. N Adams J also substantially applied the primary judge’s conclusion as to the meaning of “third party” in Tjongosutiono. It is appropriate that I make clear, to the extent not already apparent, my reasons for disagreeing with that approach. It is convenient to do so by analysing Tjongosutiono.

229. In Tjongosutiono,[36] N Adams J held that in order to be a s 330(4)(a) “third party”, the “property must be acquired after the funds become either the proceeds or an instrument of an offence”. Her Honour’s conclusion in this respect appears to have turned on two matters. First, her earlier observation that sub–ss 330(4)(b) – (g) shared “the common characteristic that there is some effluxion of time between the property becoming the proceeds of crime and then ceasing to have that character as a result of an intervening act”. [37] Second, her Honour’s conclusion that, absent definition, the word “acquired” in s 330(4)(a) should be given its everyday meaning of “to come into possession of”. [38]

     36. At [176].

     37. At [116].

     38. At [120].

230. In Tjongosutiono, the applicant for the s 42 revocation order had to establish that there were “no grounds” on which to make the restraining order at the time of the revocation application: s 42(5)(a), POCA. Although it is difficult to draw direct factual comparisons, the facts in that case bore some similarities to the present case. Both involved “cuckoo smurfing”. The applicant had used moneychangers in Indonesia to seek to transfer money to bank accounts he held with Westpac in Australia for apparently legitimate use here. N Adams J found “the applicant’s Westpac eSaver Account was used by unknown persons to launder cash which was presumably the proceeds of criminal activity in Australia.” [39]

     39. At [75].

231. N Adams J held the applicant could not be a “third party” because, as the Commissioner submitted, he had been “involved in the first step of the process in Jakarta and was also involved in the final step in Australia when the deposits were made”. The Commissioner in that case did not submit that the applicant was complicit in a criminal sense in the “cuckoo smurfing”. As much is evident from her Honour’s conclusion that “[j]ust because the applicant was not directly involved in the criminal activity of money laundering, it does not follow that he was a ‘third party’ for the purposes of s 330(4)(a) of the Act.” [40]

     40. At [176].

232. Nevertheless, her Honour appears to have formed the view that by reason of the first and final steps (the latter not involving any “activity” on his part other than holding a bank account into which the proceeds of crime were paid by unknown persons) the applicant was “party to part of the transaction in question”. On that premise, he did not satisfy her Honour’s test that “a ‘third party’ in the context of s 330(4)(a) of the Act is someone who becomes involved with the property for the first time after it has become the proceeds or an instrument of an offence”. [41]

     41. At [177].

233. In so finding, her Honour substantially adopted the primary judge’s analysis of “third party” in this case as well as in Fernandez.

234. I cannot, with respect, agree with the primary judge’s conclusion as to the meaning of “third party”, or with N Adams J’s conclusion to like effect in Tjongosutiono. In my view an interpretation of “third party” which mandates that the beneficiary of such a classification must be a person who acquired the relevant interest in the “property” after the commission of the offences which caused it to be tainted fails to have regard to the interrelationship between s 330 and s 330(4)(a) I have sought to explain and the continuing characterisation of such “property” as “proceeds” or an “instrument”. If that explanation is correct, there never is an “after”.

Conclusion

235. Being a s 330(4)(a) third party is not sufficient to attract a finding that property “ceases” to be proceeds or an instrument of an offence. That depends on the applicant also satisfying the other requirements of s 330(4)(a). The appellants failed in that respect as the joint judgment has explained.

**********

Endnotes

Amendments

27 April 2020 - Typographical errors corrected at [26], [30], [31], [42], [89], [106], [123], [159].

Errors in case citation corrected at [129], and in references to N Joachimson and Kalimuthu throughout.

Decision last updated: 27 April 2020