Mai v Commissioner of the Australian Federal Police
[2020] VSCA 38
•5 March 2020
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2019 0008
| TITCHIANG HOTH MAI | Applicant |
| v | |
| COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE | Respondent |
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| JUDGES: | TATE, McLEISH and HARGRAVE JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 31 January 2020 |
| DATE OF JUDGMENT: | 5 March 2020 |
| MEDIUM NEUTRAL CITATION: | [2020] VSCA 38 |
| JUDGMENT APPEALED FROM: | [2018] VCC 2103 (Judge Dyer) |
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CONFISCATION – Restraining order – Revocation application – Requirement that no grounds on which to make order at time of considering revocation application – Onus on applicant for revocation – Whether required to prove no possible ground for restraining order – Requirement relates back to and invokes statutory test for making of restraining orders – Applicant required to show no grounds for making restraining order on evidence before court – Director of Public Prosecutions (Cth) v Kamal (2011) 248 FLR 64, Lee v Director of Public Prosecutions (Cth) (2009) 75 NSWLR 581, considered – Requirement that court be satisfied authorised officer holds suspicion on reasonable grounds – Whether grounds for suspicion must be those of authorised officer – Relevant grounds are grounds stated by officer – George v Rockett (1990) 170 CLR 104, considered – Proceeds of Crime Act 2002 (Cth) ss 18, 19, 42, 329, 330, 338.
CONFISCATION – Restraining order – Suspicion of use of position as director dishonestly with intention of gaining advantage and doing anything with intention of dishonestly obtaining gain from or causing loss to Commonwealth entity – Criminal Code Act 1995 (Cth) sch 1, s 135.1(1) and (3) – Corporations Act 2001 (Cth) s 184(2) – Whether grounds for suspicion reasonable – No requirement to suspect actual advantage, gain or loss – Use of company account suspected for purpose of concealing financial position from taxation and social security authorities – Reasonable grounds established – Appeal dismissed.
WORDS AND PHRASES – ‘suspicion’ – ‘reasonable grounds’.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr T Gyorffy QC with | Nicholson Ryan Lawyers |
| Ms E H Ruddle and | ||
| Mr H Mazloum | ||
| For the Respondent | Mr N J O’Bryan SC with | Australian Federal Police |
| Mr A P Yuile |
TATE JA
McLEISH JA
HARGRAVE JA:
The applicant was unsuccessful in seeking to have the County Court revoke a restraining order made under the Proceeds of Crime Act 2002 (Cth) (‘the Act’) at the instigation of the Commissioner of the Australian Federal Police. She now seeks to appeal. For the reasons that follow, leave to appeal should be granted but the appeal must be dismissed.
Legislation
It is first necessary to explain the operation of the legislation.
Part 2.1 of the Act is titled ‘Restraining Orders’. Several provisions allow for a court to make a restraining order. The order in this case was based on ss 18 and 19. Section 18 concerns people suspected of committing ‘serious offences’. That expression is defined in s 338. It includes an indictable offence punishable by imprisonment for 3 or more years involving unlawful conduct that causes, or is intended to cause, a benefit to the value of at least $10,000 to that person or another person, or a loss to the Commonwealth or another person of at least $10,000.
Two statutory offences are in issue in the present case. First, the Commissioner suspects offences against s 184(2) of the Corporations Act 2001 (Cth), which states:
Use of position--directors, other officers and employees
(2)A director, other officer or employee of a corporation commits an offence if they use their position dishonestly:
(a)with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation; or
(b)recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation.
At the relevant time, an offence against s 184(2) was punishable by up to 5 years’ imprisonment, by virtue of s 1311(3)(b) and item 30 of sch 3 of the Corporations Act.[1]
[1]An offence against s 184(2) is now punishable by up to 15 years’ imprisonment, by virtue of s 1311E(1)(a) and sch 3 of the Corporations Act.
Secondly, there are suspected dishonesty offences under s 135.1(1) and (3) of the Criminal Code Act 1995 (Cth) sch 1 (‘Code’), which provide:
(1) A person commits an offence if:
(a)the person does anything with the intention of dishonestly obtaining a gain from another person; and
(b) the other person is a Commonwealth entity.
Penalty: Imprisonment for 10 years.
...
(3) A person commits an offence if:
(a)the person does anything with the intention of dishonestly causing a loss to another person; and
(b) the other person is a Commonwealth entity.
Penalty: Imprisonment for 10 years.
Section 19 of the Act permits an order to be made where property is suspected, relevantly, of being the ‘proceeds’ of an indictable offence or an ‘instrument’ of a serious offence. It is not necessary to refer to the definition of ‘indictable offence’. It extends to offences against s 184(2) of the Corporations Act and s 135.1(1) and (3) of the Code.
The concepts of ‘proceeds’ and an ‘instrument’ of an offence are defined at some length in s 329 of the Act, which relevantly states:
329Meaning 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.
...
Section 330 of the Act then elaborates as to when property becomes ‘proceeds’ or an ‘instrument’ of an offence. It suffices to set out the following parts of that section:
(1) Property becomes proceeds of an offence if:
(a)the property is wholly or partly derived or realised from a disposal or other dealing with proceeds of the offence; or
(b)the property is wholly or partly acquired using proceeds of the offence;
…
(2)Property becomes an instrument of an offence if:
(a)the property is wholly or partly derived or realised from the disposal or other dealing with an instrument of the offence; or
(b)the property is wholly or partly acquired using an instrument of the offence.
…
(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.
The making of restraining orders fits into a wider scheme under the Act for the confiscation of property. The scheme was described by N Adams J in Commissioner of the Australian Federal Police v Tjongosutiono as involving several ‘interlocutory stages’, as follows:
Although the applicant’s property is currently restrained, what the Commissioner ultimately seeks is the forfeiture of the applicant’s property. Before a court makes any forfeiture order under the Act in relation to property either suspected of being the proceeds of an offence or the instrument of a serious offence, there are a number of interlocutory stages through which the proceedings might pass. The first stage is that the Commissioner seeks that the relevant property be restrained. Those proceedings are usually heard and determined ex parte.
If the restraint proceedings have been heard ex parte and orders restraining the property made, then the owner of the property is entitled to have the orders revoked under s 42 or the Act, presuming the application is brought within 28 days. As stated above, in the present matter, there was no issue taken that the restraining orders were made ex parte and that the applicant brought these revocation proceedings within the statutory time limit in s 42(2) of the Act.
Proceedings brought under s 42 of the Act are effectively ‘strike-out’ proceedings heard after the restraining orders are first made and before the matter proceeds any further.
Presuming that a revocation application is unsuccessful, the next stage is usually that the owner of the property will be examined under s 180 of the Act. Davies J made an examination order in relation to the applicant at the same time that his Honour made the restraining orders in this matter.
After he or she has been examined, the property owner can seek that an interest held in the restrained property be excluded from the restraining order. Section 29 provides that an exclusion order can be made in relation to a restraining order if the court is satisfied that the relevant interest is neither the proceeds of a relevant indictable offence or an instrument of any serious offence. Section 32 provides that such an order cannot be made until after the property owner has been examined under the Act.
Presuming that no exclusion order has been made, the next stage is that the Commissioner will seek a forfeiture order under ss 47 or 49 of the Act. Section 49(4) confers a discretion upon the court to refuse to make a forfeiture order if, although satisfied that the property is an instrument of a serious offence, it is not satisfied that it is the proceeds of an offence and it is also satisfied that it is ‘not in the public interest to make the order’. Section 73 provides that the court is to make an order excluding specified property from a forfeiture order if satisfied that it is neither the proceeds of unlawful activity nor the instrument of a serious offence.[2]
[2](2018) 329 FLR 103, 124–5 [96]–[101] (‘Tjongosutiono’).
Consistently with this scheme, the Commissioner in the present case sought restraining orders under ss 18 and 19 and, after that, an examination order against various persons. The critical provisions for present purposes are ss 18 and 19. They relevantly provide:
18 Restraining orders—people suspected of committing serious offences
When a restraining order must be made
(1) A court with proceeds jurisdiction must order that:
(a)property must not be disposed of or otherwise dealt with by any person; or
(b)property must not be disposed of or otherwise dealt with by any person except in the manner and circumstances specified in the order;
if:
(c)a proceeds of crime authority applies for the order; and
(d)there are reasonable grounds to suspect that a person has committed a serious offence; and
(e)any affidavit requirements in subsection (3) for the application have been met; and
(f)the court is satisfied that the authorised officer who made the affidavit holds the suspicion or suspicions stated in the affidavit on reasonable grounds.
…
Property that a restraining order may cover
(2)The order must specify, as property that must not be disposed of or otherwise dealt with, the property specified in the application for the order, to the extent that the court is satisfied that there are reasonable grounds to suspect that that property is any one or more of the following:
(a)all or specified property of the suspect;
…
(b)all property of the suspect other than specified property;
…
(c)specified property of another person (whether or not that other person’s identity is known) that is subject to the effective control of the suspect;
(d)specified property of another person (whether or not that other person’s identity is known) that is:
(i)in any case—proceeds of the offence; or
(ii)if the offence to which the order relates is a serious offence—an instrument of the offence.
Affidavit requirements
(3)The application for the order must be supported by an affidavit of an authorised officer stating:
(a)that the authorised officer suspects that the suspect committed the offence; and
(b)if the application is to restrain property of a person other than the suspect but not to restrain bankruptcy property of the suspect—that the authorised officer suspects that:
(i)the property is subject to the effective control of the suspect; or
(ii)in any case—the property is proceeds of the offence; or
(iii)if the offence to which the order relates is a serious offence—the property is an instrument of the offence.
The affidavit must include the grounds on which the authorised officer holds those suspicions.
Restraining order need not be based on commission of a particular offence
(4)The reasonable grounds referred to in paragraph (1)(d) need not be based on a finding as to the commission of a particular serious offence.
...
19 Restraining orders—property suspected of being proceeds of indictable offences etc.
When a restraining order must be made
(1) A court with proceeds jurisdiction must order that:
(a)property must not be disposed of or otherwise dealt with by any person; or
(b)property must not be disposed of or otherwise dealt with by any person except in the manner and circumstances specified in the order;
if:
(c)a proceeds of crime authority applies for the order; and
(d)there are reasonable grounds to suspect that the property is:
(i)the proceeds of a terrorism offence or any other indictable offence, a foreign indictable offence or an indictable offence of Commonwealth concern (whether or not the identity of the person who committed the offence is known); or
(ii)an instrument of a serious offence; and
(e)the application for the order is supported by an affidavit of an authorised officer stating that the authorised officer suspects that:
(i)in any case—the property is proceeds of the offence; or
(ii)if the offence to which the order relates is a serious offence—the property is an instrument of the offence;
and including the grounds on which the authorised officer holds the suspicion; and
(f)the court is satisfied that the authorised officer who made the affidavit holds the suspicion stated in the affidavit on reasonable grounds.
Property that a restraining order may cover
(2)The order must specify, as property that must not be disposed of or otherwise dealt with, the property specified in the application for the order, to the extent that the court is satisfied that there are reasonable grounds to suspect that that property is:
(a)in any case—proceeds of the offence; or
(b)if the offence to which the order relates is a serious offence—an instrument of the offence.
…
Restraining order need not be based on commission of a particular offence
(4)The reasonable grounds referred to in paragraph (1)(d) need not be based on a finding as to the commission of a particular offence.
...
It can be seen that a critical step in the making of a restraining order under either of these provisions involves an authorised officer deposing by affidavit as to the fact that he or she holds the relevant suspicions, and stating the grounds of those suspicions: ss 18(3), 19(1)(e). It will later be necessary to construe the related requirement that the court be satisfied that the officer ‘holds the suspicion(s) stated in the affidavit on reasonable grounds’: ss 18(1)(f), 19(1)(f). First, it is necessary to outline the contents of the affidavits in support of the present restraining order.
Affidavit evidence
The Commissioner made the application for restraining orders under ss 18 and 19 upon the affidavit of federal agent Graham White.
The application sought orders in respect of real property in Narre Warren and an Audi motor vehicle. The application under s 18 was based on a suspicion that Nguoth Oth Mai (‘Nguoth’), the applicant’s brother, had committed offences against s 184(2) of the Corporations Act and s 135.1 of the Code, that the Narre Warren property was his property and that the Audi vehicle was the property of the applicant, and that each was either the proceeds or an instrument of the offences. The application under s 19 was based on a suspicion that both the Narre Warren property and the Audi vehicle were the proceeds of the same offences or an instrument of those offences.
In his affidavit, Mr White stated that the Australian Federal Police were investigating the acquisition of assets in Australia by the family of James Hoth Mai (‘Mai’), the father of the applicant and Nguoth, who had been a general and chief of staff in the Sudanese People’s Liberation Army between 2009 and 2014. He stated that it was believed that Mai currently resided in Kenya or Uganda and that his wife (‘Nyawarga’) and their children lived in public housing from their progressive arrival in Australia starting in 2001, until they moved to the Narre Warren property in October 2014.
Mr White stated that Nguoth owned the Narre Warren property and that the applicant owned the Audi vehicle. Neither of them had declared any income to the Australian Taxation Office since 2009. Each of them had received Centrelink benefits, including after the acquisition of the property and the car respectively. Nyawarga had also received Centrelink benefits since 2006.
By way of background to the acquisition of the Narre Warren property and the Audi vehicle, Mr White described events involving a company called Sportcars Dealers Pty Ltd (‘Sportcars’). Mr White said that on 7 June 2014, Nguoth lodged an application to register Sportcars which was ostensibly set up to import luxury cars into Australia. The application listed the directors and shareholders as Nguoth and Samson Demissie (‘Demissie’). Nguoth had a shareholding of 80 per cent and Demissie held the remaining 20 per cent. Sportcars was registered on 12 June 2014 as a proprietary company and deregistered on 15 September 2016.
Mr White said that his enquiries revealed that Sportcars did not carry on any business while it was registered and that Australian Taxation Office records showed that it lodged returns in 2015 and 2016 declaring no income. However, on 27 June 2014, Sportcars opened two bank accounts with National Australia Bank. Analysis of those bank accounts showed five substantial payments into one of them between July 2014 and January 2015, in the total amount of $1,547,318.78. The money was said to have originated in Uganda and Kenya.
Mr White deposed to the acquisition of the Narre Warren property. He said that on 1 October 2014, Nguoth became the sole registered owner of the property, having purchased it for a price of $1.5 million plus stamp duty of $82,500. Mr White said that at the time of the purchase, Nguoth was 22 years old, was not employed and had been receiving youth allowance payments since 2008 except for a period between 2012 and 2014, during part of which time he had been outside Australia. The contract for the sale of the property was signed by Nyawarga on 2 June 2014. Settlement of the sale took place on 22 August 2014. Mr White said that records showed that the sum of $155,171.77 was paid by way of deposit to the trust account of the real estate agent handling the sale of the property on 5 June 2014. The money originated from a development and construction company based in Uganda. On the day before settlement, Nguoth transferred $1,405,195.66 between Sportcars’ two accounts. On the same day, he withdrew $1,360,661 from one account by making cheque payments towards the settlement of the property, including payment out of the vendor’s mortgage and payments of amounts due to the local council, as well as legal and conveyancing costs, State Revenue Office fees and other minor charges.
Mr White deposed that on 19 September 2014, Nguoth transferred $83,000 between Sportcars’ two accounts, and withdrew $82,500 from the recipient account by way of a cheque made out to the State Revenue Office. He believed this was for the payment of stamp duty on the purchase of the Narre Warren property.
Mr White also gave evidence as to the acquisition of the Audi motor vehicle. He stated that on 17 August 2015, the applicant purchased the vehicle new from Zagame Automotive for the sum of $35,274.74. On that day, Nguoth made a cash deposit of $28,600 into Sportcars’ cheque account, and on the same day a sum of $28,595 was withdrawn from that account by way of cheque payable to Zagame for the purchase of the vehicle. Mr White stated that his investigations did not reflect any corresponding withdrawals in the bank accounts of Nguoth, Mai or Nyawarga that could account for the origin of the $28,600 cash paid into Sportcars’ bank account. He stated that the accounts administrator of Zagame informed him that a sum of $8,000 in cash was paid to complete the purchase of the vehicle.
Mr White turned then to the suspected offences. First, he stated that Nguoth had used Sportcars’ funds for the purchase of the Narre Warren property and the Audi, as well as for his personal living expenses. He said that the funds used were not repaid to Sportcars. He stated that he suspected that, in purchasing the Narre Warren property in his sole name and the Audi for his sister using Sportcars’ funds, Nguoth breached his duty to Sportcars as a director by not acting in the interest of Sportcars. Mr White stated that he ‘therefore suspects that he committed the offence under s 184 of the Corporations Act 2001 by using his position as a director to gain an advantage for himself and for his sister at the expense of the company’.
Next, Mr White identified two suspected breaches of s 135.1 of the Code. The first concerned div 7A of pt III of the Income Tax Assessment Act 1936 (Cth) (‘ITAA’). Under the relevant provisions, a payment or benefit provided by a private company to a shareholder or associate can be treated as income or a dividend for income tax purposes. The recipient of the benefit is required to declare the benefit for the purposes of income tax. Mr White stated that Nguoth, as a director and shareholder of Sportcars, was required to declare the benefit he received in the form of the Narre Warren property which was purchased using Sportcars’ funds. He said that non-declaration of the receipt of that benefit resulted in Nguoth ‘evading the tax payable on this benefit’. He continued:
I therefore suspect that in failing to declare the benefit of the Narre Warren property purchased for $1.5 million plus stamp duty of $82,500 to the ATO, Nguoth caused a loss to the ATO by failing to pay the requisite tax on this benefit. I am informed by the ATO that the tax payable on this benefit is more than $10,000. I therefore suspect that Nguoth has committed the offence of dishonestly causing a loss to a Commonwealth entity under s 135.1 of the Criminal Code Act 1995.
The second suspected breach of s 135.1 concerned Centrelink payments. In that regard, Mr White stated that he suspected that Sportcars was set up ‘for the sole purpose of moving money from overseas into Australia to purchase the property without alerting Centrelink’. After referring to the fact that Sportcars’ bank records showed no funds being used for any business activity and the fact that Nguoth and Nyawarga were in receipt of Centrelink benefits paid into their personal bank accounts, Mr White continued:
I suspect the money from overseas was not deposited into their personal bank accounts as this would have alerted Centrelink who could have stopped the payment of the benefits to both of them. I suspect that Nguoth committed the offence of dishonestly causing a gain to himself from a Commonwealth entity under s 135.1 of the Criminal Code Act 1995 as he continued receiving Centrelink benefits. He received $7,029 in 2015 and $7,588 in 2016 from Centrelink.
Finally, Mr White addressed his suspicion that the Narre Warren property and the Audi vehicle were the proceeds of indictable offences. After setting out the definition, he stated:
I suspect on reasonable grounds that the Narre Warren property and the Audi vehicle are proceeds of the offence under s 184 of the Corporations Act 2001 and 135.1 of the Criminal Code Act 1995 as they were derived wholly or partly from the commission of the serious offences listed above.
It seems that this paragraph should be read with a paragraph in the part of the affidavit dealing with s 135.1 which states as follows:
The benefit derived by Nguoth was the real property worth $1.5 million plus stamp duty of $82,500 and the benefit derived by [the applicant] was the Audi vehicle worth $35,274.74.
Mr White did not articulate grounds for a suspicion that either the Narre Warren property or the Audi vehicle was an instrument of the suspected offences. In his affidavit, he stated by way of introduction that he relied on s 18 of the Act on the basis that he suspected that the Audi was either proceeds or an instrument of the suspected serious offences, and that he relied on s 19 of the Act on the basis that both the property and the vehicle were proceeds of an indictable offence or the instrument of a serious offence. However, in the substantive part of the affidavit he stated only why he suspected that they were proceeds, namely because ‘they were derived wholly or partly from the commission’ of the relevant offences.
As noted below, in his oral evidence, Mr White expanded on his evidence by explaining why he considered that the Narre Warren property was an instrument of the offences in question and, on the same basis, why he had that view of the vehicle.
County Court hearings
The matter was heard ex parte in the County Court and a judge made the restraining order on 19 December 2017. The hearing of the application for examination orders was adjourned. The applicant then initiated the process under the Act to seek revocation of the restraining order.[3] No issue was taken by the Commissioner as to the applicant’s standing to seek revocation of the order affecting the Narre Warren property belonging to her brother, presumably on the basis that she enjoyed a ‘right, power of privilege in connection with the property’ by virtue of living there, so as to satisfy the definition of ‘interest’ in s 338.
[3]In the meantime, the Commissioner had also applied for a forfeiture order. That application has been adjourned pending the resolution of the revocation application.
The application for revocation was made under s 42 of the Act. Section 42(4) permits the responsible authority to adduce additional material on the application. The court is empowered to revoke the restraining order if satisfied that there are ‘no grounds on which to make the order at the time of considering the application to revoke the order’ or it is otherwise in the interests of justice to do so: s 42(5)(a) and (b).
Pursuant to s 42(4), the Commissioner relied on a further affidavit of Mr White. This affidavit referred to affidavits sworn by Demissie and Mai which were filed but not ultimately tendered at the revocation hearing. Mr White said that, in those affidavits, the deponents said that Mai lent funds to Sportcars in order for it to start its business. Mr White deposed to the absence of documentation confirming any such loan. He also deposed to the payment of stamp duty and registration fees totalling $83,977 on the transfer of the Narre Warren property shortly after the transfer to Sportcars of $82,897.58 from overseas, and the deposit of $28,600 into Sportcars’ account the day before a cheque for $28,595 was written for the purchase of the Audi vehicle. Finally, Mr White gave evidence of a number of transfers and withdrawals which he was unable to link to any alleged business of Sportcars.
The parties at the revocation hearing also advanced expert evidence as to the operation of div 7A of pt III of the ITAA with respect to the withdrawing of funds from Sportcars. For reasons which will emerge, it is not necessary to enter into this evidence at any length. However, the applicant’s expert, Mr John Kelly, exhibited a letter of instructions to the effect that Mai and Demissie agreed to establish Sportcars as a business importing and selling cars, to be owned as to 80 per cent by Nguoth and 20 per cent by Demissie. The letter instructed that it was agreed that Mai would lend the company sufficient working capital, and that transfers totalling $1,547,318.78 were made to Sportcars ‘as an undocumented loan’. The letter stated that Mai asked Sportcars to repay some of the funds to enable him to purchase the Narre Warren property. On the basis of these instructions, Mr Kelly expressed the opinion that the payments by Sportcars were not to be treated as dividends for the purposes of div 7A.
On behalf of the Commissioner, Mr Anthony Bach of the Australian Taxation Office swore an affidavit as to his opinion that Sportcars was taken to have paid dividends to Nguoth in the amount of $1,259,661 in the 2014/15 year of income and $27,595 in the 2015/16 year, in each case assessable to Nguoth under s 44(1) of the ITAA by virtue of div 7A.
The revocation application was heard over four days in November 2018. Before Mr Kelly gave evidence, counsel for the applicant indicated that the affidavits supporting the suggested undocumented loan would not be tendered. In his evidence, Mr Kelly accepted that large parts of his report depended on the assumption that the loan had been made and that those parts should no longer be relied on. However, Mr Kelly maintained his conclusion that no tax was payable under div 7A because the amounts paid into the company would have increased its paid-up share capital, resulting in a distributable surplus of nil (calculated under a formula in s 109Y of the ITAA) and zero assessable income, irrespective of whether there was a loan to Sportcars or not.
Mr Bach was also cross-examined, in particular as to whether it was necessary for the operation of div 7A that the property or money transferred by the company was the company’s own property. He stated that he considered that the payment of money by a company attracted div 7A irrespective of whether the money had been received by the company for the purpose of being paid out.
At the hearing of the application for revocation, Mr White was cross-examined as to his suspicions and the grounds for them. Among other things, he was asked questions as to the basis on which he suspected the committing of any offence in relation to Centrelink payments. In answer to a question about the use of the Sportcars account for the purpose of having a cheque drawn to buy the Narre Warren property, Mr White said:
My view of the way the business was used was that because the whole family was on benefit, they did not wish to use their bank accounts — they all had CBA bank accounts — so therefore they established a company with a bank account in which they could move funds from offshore, that wouldn’t be reported, either to the ATO or to DHS, so that they could purchase the property and the vehicle. And that was my suspicion, and that’s [what] my suspicion was based on, um, in relation to the three offences.
Later, Mr White explained:
Whereas, they are saying that they brought the money in to set up a company, but you can actually see from the transfers, that the money was brought in solely for the purchase of the property, through that shell company, so that it would not appear on any of their bank accounts in relation to either DHS or the ATO.
Mr White made it clear that he was relying on the failure of Nguoth to declare to Centrelink the money which had come into the Sportcars’ account. He said:
No, the — the offence against, um, DHS is that [Nguoth] has — whether it’s the vehicle or the house; a sum of money is moving through a company which he has not declared as an asset to the Department of — sorry to DHS, and then he’s utilised that to purchase assets either for himself or other family members. Again, which haven’t been declared. So therefore he is, um, they are — he is obtaining benefits from the Department of Human Services without declaring all his assets and interests.
Mr White also said that he was not familiar with the way in which Centrelink benefits were calculated. He described himself as not being an expert in that field, but understood that ‘all assets’ would be considered. He stated that he had made enquiries with the Department of Human Services but had been told that the Department did not ‘deal in hypotheticals’.
It was put to Mr White that he did not know the extent to which Centrelink benefits would be reduced had the amounts in issue been declared. He said it was his suspicion that if the Department was aware that Nguoth had received $1.5 million from the company, ‘he would not receive any benefit’. When asked what he based that suspicion on, Mr White referred to ‘certain thresholds’. He said ‘if you have an income of $1.5m you are not going to receive Centrelink benefit’.
Mr White also confirmed in cross-examination that he suspected both the Narre Warren property and the Audi vehicle were instruments of the offences. He explained why he considered the Narre Warren property to be both proceeds of crime and an instrument of crime, as follows:
How do you say the house is proceeds of crime?---Because moving the funds through the company and then committing offences of [sic] Division 7A, committing offences against [the] Corporations Act and causing a loss — sorry, and obtaining a gain in relation to 135, that makes the funds then proceeds of that criminal offending and, therefore, the purchase of the house, the purchase of the vehicle that’s proceeds of crime.
How is the house an instrument of crime?---Well the house is being used to move that — so the house is holding those funds. So the funds that have been moved from overseas now sit within that house. Therefore, it - - -
Well that’s covered by proceeds. How is it an instrument; how is it used to commit the crime?---Well it’s used because the money is held. So by buying that it’s then allowed the further placement of those funds. And then when we were towards the point of doing the search warrants in December 2017 they were looking to sell that property and, therefore, further, in my mind, move that money into the Australian financial system again. So that the house is there. When money enters the country into the bank account it then purchases a house, purchases a car, and then you move that money on again. So at every stage part of the stage is that the house is going to become an instrument of moving those funds.[4]
[4]Emphasis added.
It can be seen that, in this answer, Mr White explains why he suspected not only the Narre Warren property, but also the motor vehicle, to be an instrument of the offences.
Primary judge’s reasons
After setting out the background to the application and summarising the evidence, the primary judge considered the test applicable to an application for revocation under s 42 of the Act. He described the onus facing the applicant as ‘a significant one’, stating that in order to succeed ‘she must affirmatively satisfy the Court that there are “literally no grounds for the foundation of the order”’.[5] The judge noted that the applicant had not sworn an affidavit or led any factual evidence in her application before him.[6] He held that her case lacked ‘a significant factual basis upon which she could succeed’.[7] He stated that the evidence of Mr Kelly, taken at its highest, would create some doubt as to the applicability of div 7A of pt III of the ITAA, but held that this could ultimately only have relevance to one of the three offences relied upon by Mr White. The judge declined to resolve the dispute between the expert opinions.
[5]Mai v Australian Federal Police [2018] VCC 2013, [60] (‘Reasons’), citing Tjongosutiono (2018) 329 FLR 103, 125–6 [106].
[6]Reasons [58].
[7]Ibid [64].
The judge recorded that counsel for the applicant had submitted that s 42 required the Court ‘to look again at whether the conditions relating to the operation of ss 18 and 19 had continued to be met’.[8] The judge declined to accept that proposition. He stated that s 42 ‘prescribes a statutory pathway for an applicant seeking to revoke an ex parte restraining order’.[9] The judge held that it was clear that Mr White maintained the suspicions which underpinned the original application. He concluded:
The onus imposed by s 42 on an applicant is significant. The introduction in evidence of an element of doubt as to the applicability of taxation legislation does not in my view even approach the high threshold established by the statute.[10]
[8]Ibid [68].
[9]Ibid [69].
[10]Ibid [75].
Proposed grounds of appeal
The applicant relies on the following three proposed grounds of appeal:
1.His Honour erred in concluding that he was not required to consider the requirements of ss 18 and 19 of the [Act] when considering the question of whether or not there were no grounds under s 42 of that Act for the making of the restraining order.
2.His Honour erred in failing to consider whether there were reasonable grounds to support the authorised officer’s stated suspicions.
3.His Honour erred in failing to determine what if any grounds relied on by the authorised officer were reasonable grounds.
Two questions of construction
Before turning to the individual grounds, it is necessary to address two questions of construction of the Act which are raised by the submissions of the parties. The first concerns the task of a court hearing an application for revocation of a restraining order under s 42 of the Act. In particular, the question is what is meant by the requirement in s 42(5)(a) that the Court be satisfied that ‘there are no grounds on which to make the order at the time of considering the application to revoke the order’. Referring to this test, N Adams J in Tjongosutiono said:
The test has been described as a ‘tough one’ and the onus is on the applicant to demonstrate that there are ‘literally no grounds for the foundation of the order for it to be revoked’.[11]
[11]Tjongosutiono (2018) 329 FLR 103, 125–6 [106], citing DPP (Cth) v Tan [2003] NSWSC 717, [14] (‘Tan’).
The test was described in these terms by Shaw J in Tan:
This is a tough test for the applicant to meet. It seems to me to mean there must be literally no grounds for the foundation of the order for it to be revoked. I leave open the question of whether irrational, improper or unlikely grounds for suspicion are sufficient to sustain an order.[12]
[12][2003] NSWSC 717, [14].
In our respectful opinion, the emphatic terms in which the test has sometimes been described are not of assistance in understanding the statutory language. The requirement that there be ‘no grounds’ on which to make the order plainly relates back to and invokes the statutory test for the making of restraining orders. In the present case, that requires the Court to look to the requirements of ss 18 and 19. As s 42 makes clear, the burden rests on the party seeking to have the restraining order revoked. However, that does not require that party to embark on the exercise of seeking to prove a negative proposition to the effect that there are no circumstances warranting the making of a restraining order.[13] Rather, the application for revocation proceeds on the basis of the evidence that was before the Court making the restraining order, together with such other evidence as the parties might choose to place before it. The question for the Court will be whether the applicant for revocation has satisfied it that, on that material, a restraining order could not be made. For our part, with respect to the matters raised by Shaw J in the passage referred to above, we consider that it may well be relevant to that question whether ‘irrational, improper or unlikely grounds for suspicion’ suffice to permit the making of a restraining order.
[13]See DPP (Cth) v Kamal (2011) 248 FLR 64, 94 [110] (Martin CJ) (‘Kamal’).
This conclusion is consistent with the approach taken by Martin CJ (with whom McLure P relevantly agreed) in Director of Public Prosecutions (Cth) v Kamal:
The respondent submits that this ground imposes a different test to that imposed by s 18 for the grant of a restraining order, which requires the existence of reasonable grounds. That proposition should be rejected. There will be no grounds on which to make the restraining order, within the meaning of s 42(5) of the Act, if the requirements for the making of an order imposed by s 18 of the Act are not made out. Accordingly, if there are not ‘reasonable grounds to suspect that a person has committed a serious offence’, or if the court is not satisfied that the suspicion stated in the supporting affidavit is held on reasonable grounds, the requirements for the making of an order imposed by s 18 of the Act will not be made out, and the court will be empowered to revoke the order.[14]
[14]Ibid 92–3 [106] (Martin CJ, McLure P agreeing at 100 [142]). See also, to similar effect, 119 [254] (Buss JA).
We note that our conclusion on this aspect of the case is also consistent with the observations, made by way of obiter, of the New South Wales Court of Appeal in Lee v Director of Public Prosecutions (Cth):
It seems preferable … to treat s 42(5) as requiring satisfaction at the time of the revocation hearing as to the absence of such grounds as could have been relied upon to justify a restraining order, being the grounds specified in whichever of ss 17, 18 or 19 formed the basis of the original order. On that view, the order would be liable to revocation if the Court were satisfied that there were no reasonable grounds for the suspicion which had been relied upon.[15]
[15](2009) 75 NSWLR 581, 589 [30] (Basten and Macfarlan JJA and Sackville AJA).
The first proposed ground of appeal seeks to raise the question whether the primary judge misconstrued s 42 or failed to apply it by placing too high an onus on the applicant. For reasons that will appear, it is unnecessary to decide that question. However, our conclusion as to the operation of s 42(5)(a) leads to the second question of construction which arises, concerning an aspect of ss 18 and 19.
The second question is concerned with the meaning of the requirement in ss 18(1)(f) and 19(1)(f) that the court be ‘satisfied that the authorised officer who made the affidavit holds the suspicion [or suspicions] stated in the affidavit on reasonable grounds’.
The applicant submitted that this test was to be distinguished from a requirement that a court be satisfied that ‘there are reasonable grounds’, referring to s 18(1)(c) of the Confiscation Act 1997. It was submitted that the court is required to look at the suspicion described in the affidavit and the stated grounds for that suspicion and then to determine whether those grounds are reasonable. On that reading, the court would not be permitted to identify for itself possible grounds for the relevant suspicion which had not suggested themselves to the authorised officer, and then determine whether those grounds are reasonable grounds for holding the specified suspicion.
In contrast, the respondent Commissioner submitted that the relevant words require that the court be satisfied that there are reasonable grounds for the holding of the suspicion stated in the affidavit. In other words, there was a single inquiry into whether or not reasonable grounds existed and that was a matter for the court, unconstrained by the specification of particular grounds in the affidavit. It was pointed out that new grounds for suspicion might emerge at the hearing of the revocation application and it was submitted that it would be anomalous not to take those matters into account. On the respondent’s construction, the court hearing an application for a restraining order is at large as to the grounds which might provide a basis for the authorised officer’s suspicion. On this approach, ss 18(1)(f) and 19(1)(f) require the court to identify the relevant suspicion and then to decide whether there are reasonable grounds for it.[16]
[16]See George v Rockett (1990) 170 CLR 104, 112–13 (Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ).
In considering these arguments, it is relevant to note that the Act requires the authorised officer to include in his or her affidavit the grounds on which he or she holds the relevant suspicion or suspicions: ss 18(3) and 19(1)(e). This serves the purpose of informing the court, on the hearing of the application for a restraining order, and the parties, in any application for revocation of a restraining order, of an essential basis for the former application. It also indicates that it is a requirement of the Act that the authorised officer explain the grounds for his or her suspicion. In this way, the grounds and the suspicion are connected.
The respondent’s construction should not be accepted, for three reasons. First, the construction departs from the natural meaning of the provisions. The provisions identify the issue for the court as whether the authorised officer ‘holds the suspicion [or suspicions] … on reasonable grounds’. That language suggests that the inquiry is into the reasonableness of the grounds on which the authorised officer holds the suspicion. The respondent’s construction gives the words a wider operation, as if the provisions ask whether the court is satisfied that there are reasonable grounds for the suspicion held by the officer.
Secondly, the construction sits uneasily with the requirement that the authorised officer specify the grounds for his or her suspicion in the affidavit. That requirement demands a clear delineation of the grounds relied upon and ensures that they are the grounds in the mind of the authorised officer. The requirement would serve little, if any, purpose, if the court were able to substitute grounds identified only by lawyers or by the court itself.
Thirdly, in the face of competing constructions, the principle of legality indicates that the constructional alternative less invasive of rights traditionally protected by the common law should be chosen. The High Court put the matter this way, in the context of search warrants, in George v Rockett:
A search warrant … authorizes an invasion of premises without the consent of persons in lawful possession or occupation thereof. The validity of such a warrant is necessarily dependent upon the fulfilment of the conditions governing its issue. In prescribing conditions governing the issue of search warrants, the legislature has sought to balance the need for an effective criminal justice system against the need to protect the individual from arbitrary invasions of his privacy and property. Search warrants facilitate the gathering of evidence against, and the apprehension and conviction of, those who have broken the criminal law. In enacting s 679, the legislature has given primacy to the public interest in the effective administration of criminal justice over the private right of the individual to enjoy his privacy and property. The common law has long been jealous of the prima facie immunity from seizure of papers and possessions ...
State and Commonwealth statutes have made many exceptions to the common law position, and s 679 is a far-reaching one. Nevertheless, in construing and applying such statutes, it needs to be kept in mind that they authorize the invasion of interests which the common law has always valued highly and which, through the writ of trespass, it went to great lengths to protect. Against that background, the enactment of conditions which must be fulfilled before a search warrant can be lawfully issued and executed is to be seen as a reflection of the legislature’s concern to give a measure of protection to these interests. To insist on strict compliance with the statutory conditions governing the issue of search warrants is simply to give effect to the purpose of the legislation.[17]
In our view, the above reasoning applies with equal force to the construction of the provisions of the Act governing the making of restraining orders.
[17]Ibid 110–11.
The issue appears not to be the subject of any binding authority. The concluding words in the passage from the judgment of the New South Wales Court of Appeal in Lee set out at [48] above might be read as favouring a wider construction, but we do not take the Court to have been addressing the point now under consideration.
For these reasons, the applicant’s proffered construction of ss 18(1)(f) and 19(1)(f) should be accepted. The Court’s task under those provisions is to decide whether it is satisfied that the grounds upon which the authorised officer holds the relevant suspicion or suspicions are reasonable.
Turning to s 42, as the respondent emphasised, the Act permits the inquiry to be somewhat wider, at least in so far as it enables further evidence to be adduced. Consistently with that position, the inquiry is whether there ‘are’ no grounds on which to make the order ‘at the time of considering the application to revoke the order’. However, this refers, not to the grounds of suspicion, but to the bases under ss 18 and 19 (and like provisions) for the making of restraining orders. In revisiting that issue, the power of the court to accept further evidence is broad. In particular, the authorised officer is not precluded from giving further evidence which advances new grounds for holding a suspicion previously relied upon or identifies suspicions not held at the time when the restraining order was made. The tests in ss 18 and 19 are instead to be asked and answered on the material before the court at the time of considering the revocation application. But the tests are still applied in the same way, by reference to the grounds relied upon in the evidence of the authorised officer, rather than any other suggested grounds. As already noted, the onus in this context shifts to rest upon the party seeking revocation.
Did the primary judge apply the correct test (proposed ground 3)?
Against this background, it is convenient to start the analysis of the applicant’s case in this Court by reference to the third proposed ground of appeal. That ground contends that the judge failed to determine what, if any, grounds, relied on by the authorised officer were reasonable grounds.
The judge dealt with the matter on a global basis, rather than by reference to the individual grounds for Mr White’s suspicions. The respondent contended that, in doing so, the judge rejected the applicant’s case and accepted all of Mr White’s grounds for suspicion as reasonable. However, we do not read the judge as having undertaken the exercise of considering Mr White’s grounds for suspicion and evaluating their reasonableness. He addressed only the div 7A matter, seemingly on the basis that the applicant had not led evidence except that of Mr Kelly, confined to that topic. In doing so, the judge did not apply the correct test. It was necessary instead to identify each ground for suspicion relied upon by Mr White and to determine whether the applicant had satisfied him that those grounds were not reasonable. It was only in that way that it could be decided whether there were ‘no grounds’ for the making of a restraining order on the whole of the material before the court.
This conclusion means that leave to appeal should be granted and the judge’s order dismissing the application for revocation must, subject to what appears below, be set aside. It is not necessary in those circumstances to consider whether the judge also erred in the ways alleged under proposed grounds 1 and 2.
The applicant then asks this Court either to determine the issues under s 42 itself or to remit the application for revocation for hearing and determination by another judge. In our view, the Court should address the substantive application on the merits rather than remitting the matter for rehearing. The merits of the case were fully argued before us, and the respondent submitted without objection that the Court had before it the material necessary to revisit the matter in its entirety (notwithstanding that the material was not complete). With one qualification, the applicant did not suggest that she would advance any different evidence if the matter were remitted.[18]
[18]Nor did the applicant take issue with the failure of the Commissioner to file a notice of contention.
The qualification arose because the Court invited the parties to make further submissions on a single issue, namely how the allegations involving Centrelink payments related to any statutory or regulatory provisions governing eligibility for those payments. Short written submissions on that subject were duly filed which are referred to further below. The applicant submitted that she should be entitled to call evidence as to the matters raised in those submissions, meaning that the matter should be remitted for rehearing rather than have this Court determine the merits. Were the Commissioner seeking on appeal to rely on fresh evidence, there would be force in that submission. However, the further submissions are confined to the identification of relevant legal provisions and submissions as to their application. Those matters do not call for or warrant any further evidence and so this Court is in as good a position as a court would be on remitter to decide whether the restraining order should be revoked.
On the above basis, we turn now to address the merits of the revocation application. If the Commissioner is successful in this part of the case, the appeal will be dismissed notwithstanding that the applicant has established error on the part of the trial judge.
Reasonable grounds for suspicion — Nature of test
The question whether reasonable grounds exist for suspicion of a matter or state of affairs is not a novel one. In George v Rockett the High Court addressed the meaning of ‘suspicion’ and the notion of ‘reason to suspect’ in terms which apply readily to the identification of reasonable grounds for suspicion under ss 18 and 19. The Court adopted the meaning of ‘suspicion’ articulated by Lord Devlin in Hussien v Chong Fook Kam,[19] namely ‘a state of conjecture or surmise where proof is lacking: “I suspect but I cannot prove”’.[20]
[19][1970] AC 942, 948.
[20](1990) 170 CLR 104, 115.
The Court went on to cite with approval the following observations of Kitto J in Queensland Bacon Pty Ltd v Rees,[21] concerning whether a payee had reason to suspect that the payer was unable to pay its debts as they became due:
A suspicion that something exists is more than a mere idle wondering whether it exists or not; it is a positive feeling of actual apprehension or mistrust, amounting to ‘a slight opinion, but without sufficient evidence’, as Chambers’s Dictionary expresses it. Consequently, a reason to suspect that a fact exists is more than a reason to consider or look into the possibility of its existence. The notion which ‘reason to suspect’ expresses in sub‑s (4) is, I think, of something which in all the circumstances would create in the mind of a reasonable person in the position of the payee an actual apprehension or fear that the situation of the payer is in actual fact that which the sub-section describes — a mistrust of the payer’s ability to pay his debts as they become due and of the effect which acceptance of the payment would have as between the payee and the other creditors.[22]
[21](1966) 115 CLR 266.
[22]Ibid 303, quoted in George v Rockett (1990) 170 CLR 104, 115–16.
Applying this reasoning, it is necessary under ss 18 and 19 of the Act to consider whether the authorised officer had an actual apprehension that an offence had been committed, or that the property and the vehicle were proceeds or an instrument of a relevant offence, rather than a mere idle wondering as to that matter or a desire to look into the possibility. It was not in issue before us that Mr White held suspicions meeting this description. The question is whether the grounds upon which he had that state of mind were reasonable. Again applying the above reasoning, that involves asking whether those grounds would in all the circumstances create in the mind of a reasonable person an apprehension that an offence had been committed or that relevant property was the proceeds or an instrument of an offence.
Reasonable grounds for suspicion — Corporations Act, s 184(2)
Mr White’s suspicion that Nguoth had contravened s 184(2) of the Corporations Act rested on his suspicion that he had breached his duty as a director of Sportcars by not acting in its interests, so as to obtain an advantage for himself and the applicant at the expense of the company. This suspicion rested on his assessment that Nguoth had used ‘the company’s funds’ for the purchase of the Narre Warren property and the Audi vehicle, as well as for his personal living expenses, and not repaid the funds to Sportcars.
The applicant submitted that Mr White’s grounds for suspicion had to be evaluated in the context of the whole of his evidence. In particular, he suspected that Sportcars ‘was set up for the sole purpose of moving money from overseas into Australia to purchase the [Narre Warren] property without alerting Centrelink’. Similarly, he believed that the money deposited into Sportcars’ bank account on the day the Audi vehicle was purchased was for the purpose of drawing a cheque to pay for the vehicle and not for any business of Sportcars. In that regard, Mr White referred to evidence that suggested that Sportcars never carried on any business or earned any income. The applicant submitted that the use of an apparently dormant company to move money in this way did not afford reasonable grounds for suspecting an offence against s 184(2). Nor was there a basis for suspecting the dishonesty which is an element of the offence.
The respondent submitted that Mr White based his suspicion that the money was an asset of Sportcars on the fact that it was in its bank accounts. It was submitted that this was a reasonable ground for suspecting that the subsequent uses of that money breached s 184(2). The respondent submitted that the failure of Nguoth to advance evidence at the revocation hearing as to the terms on which the money was paid into the accounts, especially in circumstances where it had been foreshadowed that evidence of a loan arrangement would be tendered, afforded further support for that conclusion. It was said that the transcript of the oral hearing revealed that Mr White plainly suspected that the movement of funds had been for a dishonest purpose.
In our opinion, the applicant has succeeded in establishing that, to the extent that Mr White suspected that the payments made out of the Sportcars bank accounts breached s 184(2) on the ground that those accounts contained Sportcars’ own money, that ground was not reasonable. In circumstances where the evidence suggested that the company never traded and earned no income, and where Mr White himself considered that it was established only to enable the movement of funds in order to purchase the Narre Warren property, it was not reasonable to suspect that the money in the accounts was the property of the company. All the evidence, and Mr White’s own belief based on that evidence, was to the effect that the money was not the property of the company. It was not reasonable, in those circumstances, to suspect a breach of s 184(2) resting on the misuse of the company’s property.
In reaching that conclusion, we have not had regard to the fact that the applicant foreshadowed, but did not pursue, the tendering of evidence as to the ‘undocumented loan’. Mr White did not give evidence that he grounded his suspicion in relation to any offence on that course of events. It is therefore not a relevant basis upon which a restraining order could have been granted and does not avail the Commissioner under s 42(5)(a).
However, in his oral evidence, Mr White suggested a further ground for suspecting that s 184(2) had been breached. In short, he suspected that Nguoth had used his position as a director of Sportcars with the intention of obtaining an advantage for himself, namely the concealment of the funds from the knowledge of the Australian Taxation Office and Centrelink. Mr White denied that it was essential to his suspicion of an offence against s 184(2) that the money belonged to the company. He said of Nguoth that he ‘used his position as a director for his benefit which, in this particular instance, is … moving funds through the company’. His suspicion was explained in this passage:
So what I suggest to you is that there’s nothing wrong with a person with a small company using the company account to pay a bill so long as they put the money back in?---Um, I don’t agree with you. I think using, um, a company account to move cash through to purchase an item for personal use in — in my mind shows that you are trying to hide the origin of those funds, and so that immediately, ah, as an investigator I would be looking at money laundering. Um, why is that individual doing that and why are they utilising their position as a director of a company to move money through that company when they have their own personal accounts that they could just as easily move the money through.
In our view, it was reasonable for Mr White to suspect a breach of s 184(2) on the basis that Nguoth had dishonestly used his position as a director with the intention of obtaining an advantage for himself or another person by concealing the existence of the funds from the Australian Taxation Office and Centrelink. The nature of these potential tax and Centrelink advantages is discussed below. It is not necessary for a breach of s 184(2) that an advantage actually be obtained or that the company is caused any detriment.[23] It suffices that the director used his or her position with the prohibited dishonest intention.[24]
[23]Sims v Jooste [No 2] (2014) 103 ACSR 269, 304 [259] (Kenneth Martin J); see also Chew v The Queen (1992) 173 CLR 626, 633 (Mason CJ, Brennan, Gaudron and McHugh JJ).
[24]It is no part of this conclusion that any offence of money laundering was suspected. Despite the reference made to money laundering in Mr White’s evidence as set out above, he did not state grounds for suspecting any offence of that kind.
This conclusion means that the applicant fails to establish that there were, at the time of the hearing of the revocation application, ‘no grounds’ for the making of a restraining order in respect of the Narre Warren property. That is because, under s 18, the authorised officer suspected a breach of s 184(2) on reasonable grounds and the Narre Warren property was the property of the suspect (Nguoth). Mr White gave evidence that an officer of the Australian Taxation Office estimated that the income tax benefit to Nguoth from not declaring the payment from Sportcars exceeded $10,000. On that basis, it was reasonable to suspect that the offence against s 184(2), being the dishonest use of Nguoth’s position as director with the intention of obtaining that advantage, was a ‘serious offence’. Under s 19, the question is whether the court may be satisfied that Mr White suspected that the property was the proceeds or an instrument of the offence, on grounds that were reasonable: s 19(1)(f). In our view, once it is accepted that the grounds for suspecting the offence were reasonable, the same reasoning establishes that it was reasonable to suspect that the money in the accounts was used in the commission of the offence and was therefore an instrument of the offence; and to suspect that the Narre Warren property, which was acquired using that money, was therefore an instrument of that offence within the meaning of ss 329(2) and 330(2).
It was reasonable, in the same way, to suspect that the Audi vehicle was an instrument of the offence by virtue of being acquired using the money used in the commission of the offence. That brings it within s 19, and also meets the requirements of s 18(3)(b)(iii), as is required because it is not the property of the suspect.
As a result, the application for revocation must fail on the merits and the appeal must be dismissed. For completeness, however, we shall refer to the other grounds relied upon by the Commissioner for the restraining order, involving s 135.1 of the Code.
Reasonable grounds for suspicion — Code, s 135.1 — Income tax evasion
The remaining offences which Mr White suspected were against s 135.1 of the Code. Like s 184(2) of the Corporations Act, the relevant provisions prohibit actions done with a dishonest intention. Section 135.1 is broad in its scope. Subsection (1) prohibits a person from doing anything with the intention of dishonestly obtaining a gain from a Commonwealth entity. It is not necessary to prove that such a gain is actually obtained. Similarly, sub-s (3) prohibits a person from doing anything with the intention of dishonestly causing a loss to a Commonwealth entity. It is not an element of that offence that a loss is actually caused. In this respect, as explained further below, in paraphrasing the offences in the language of causing a gain or loss, and seeking to establish reasonable grounds for a suspicion in that regard, Mr White sought to establish more than the provisions require.
Section 130.3 of the Code defines ‘dishonest’ for these purposes as meaning ‘dishonest according to the standards of ordinary people’ and ‘known by the defendant to be dishonest’ according to those standards. It must be shown, in other words, not only that the person acted dishonestly, but also that he or she was aware that they acted dishonestly.[25]
[25]See, in the context of the offence in s 135.1(5) of the Code (dishonestly causing loss to the Commonwealth), R v Mackrae–Bathory [2006] VSCA 179, [62] (Chernov, Nettle and Neave JJA).
Although s 135.1(1) and (3) do not require proof of a gain or loss, respectively, the definition of ‘serious offence’ in s 338 of the Act has the effect that the offences suspected in the present case will not be ‘serious offences’ unless they caused, or were intended to cause, a benefit to the value of at least $10,000 for a person or a loss to the Commonwealth or another person of at least $10,000. That requirement must be satisfied under s 18, or in order for the ‘instrument’ limb of s 19 to apply. If the restrained property is reasonably suspected of being ‘proceeds’ of an offence against s 135.1, s 19 applies irrespective of the amount in question because it is only necessary that the offences in question be indictable offences.
It is convenient to start with s 18. Mr White deposed to his suspicion that, by failing to declare his receipt of the Narre Warren property, Nguoth had evaded income tax payable on that receipt under div 7A and caused a loss to the Australian Taxation Office exceeding $10,000. He said that he therefore suspected that Nguoth had dishonestly caused a loss to a Commonwealth entity contrary to s 135.1. (It does not appear that Mr White suspected a taxation offence in respect of the Audi vehicle.)
In his affidavit, Mr White based his belief that div 7A applied on his suspicion that the property was purchased using Sportcars’ funds. For the reasons already given, there were not reasonable grounds for suspecting that the money in the Sportcars accounts belonged to Sportcars. But the essential ground Mr White identified for suspecting an offence was that, on the suspected facts as a whole, div 7A applied to the receipt of the property and that receipt had been dishonestly not declared. The question is whether that ground was reasonable, not whether div 7A actually applied or how Mr White understood its provisions to operate. Indeed, since s 135(1) and (3) do not require proof of an actual loss or benefit, it was not necessary that Mr White suspected that tax had in fact been evaded. Suspicion as to Nguoth’s dishonest intention in that regard would have sufficed.[26]
[26]Evidence that a benefit had been acquired to which a person was plainly not entitled might, of course, tend to make it more likely that, in acting in order to obtain that benefit, the person acted dishonestly (and vice versa). Similarly, evidence that a person would plainly not be entitled to a benefit might suggest the reasonableness of a suspicion that, in taking action intended to secure that benefit, a person was acting dishonestly (and vice versa). It is not necessary to explore reasoning along these lines further in the present matter.
As it happens, there were reasonable grounds for Mr White’s suspicion that tax had been evaded. As the evidence revealed, there was disagreement between the expert witnesses as to whether or not the acquisition of the Narre Warren property gave rise to assessable income in the hands of Nguoth under div 7A. Moreover, Mr Bach considered that div 7A applied even if the money had been paid into Sportcars’ account in order to purchase the property.
It is still necessary, however, to return to the more fundamental question, namely whether Mr White held reasonable grounds for suspecting dishonesty as defined. Arguably, Mr White’s affidavit proffered no grounds for suspecting that the failure to declare the alleged income was dishonest or that Nguoth knew it to be so. In circumstances where expert opinion has been shown to differ, it might be thought that something more needed to be identified to take the case out of the category of failure to declare an amount by way of income and into the realm of the criminal law. But in our opinion, this element was clearly supplied by Mr White in his oral evidence. That is shown by the passages set out at [35] above. Again, Mr White suspected that the Sportcars accounts were used to conceal income from the Australian Taxation Office and the Department of Human Services. As he put it elsewhere in his evidence:
I think the money has been put in the account of that company to hide it from DHS and the ATO in relation to it being linked to the Mai’s and therefore declared and affecting their benefit, or the requirement to pay tax on that [sic] funds. If they simply wanted to move money in the country, they all have at least one bank account in which they could have moved it.
These passages make it clear that the essential illegality suspected by Mr White was the use of the Sportcars accounts to dishonestly conceal income with the intention of evading income tax. In our view, this evidence discloses reasonable grounds for suspecting an offence on that basis.
Turning briefly to s 19, there were reasonable grounds, on the above analysis, to suspect that the Narre Warren property was an ‘instrument’ of the offence for the reasons already given in relation to s 184(2) of the Corporations Act. Because the amount of the benefit intended to be caused exceeded $10,000,[27] there is no need to consider whether the property also met the definition of ‘proceeds’.
[27]See para [76] above.
It follows that there were grounds for making the restraining order in respect of the Narre Warren property on the basis of Mr White’s suspicion concerning div 7A as well.
Reasonable grounds for suspicion — Code, s 135.1 — Social security
With some qualification, the same reasoning applies to sustain the restraining order on the basis of the suspected offence against s 135.1(1) and (3) of the Code in the context of the Centrelink payments. The position is somewhat different, first, because Mr White’s suspicion in that context extended to the Audi vehicle belonging to the applicant, secondly because the legislation governing the relevant benefit is different, and thirdly because it is less clear that the $10,000 threshold in the definition of ‘serious offence’ was satisfied. We shall deal with those matters in turn.
First, the Audi vehicle would, on the reasoning already described with respect to the Narre Warren property, be reasonably suspected of being an instrument of the suspected offence. That means that ss 18 and 19 would be satisfied if the offence were a serious offence. If the offence did not satisfy the definition of ‘serious offence’, then the question would be whether the vehicle was proceeds of the offence. Otherwise, that question can again be left to one side.
Secondly, as with the suspected tax evasion, it was not necessary for Mr White to hold a suspicion that Nguoth, or anyone else, received Centrelink benefits to which they were not entitled, as a result of the use made of the Sportcars accounts. The relevant offence is constituted, again, by action having the requisite dishonest intention in that regard. The suspicion of Mr White as to that matter was based on grounds that were reasonable for the reasons already set out regarding div 7A at [85]-[86] above.
However, it is desirable to say something about the question of entitlement to the relevant benefits, in light of the helpful submissions made by the parties on that subject. Mr White suspected that, had the money from overseas been deposited in the personal bank accounts of Nguoth and Nyawarga, Centrelink would have been alerted and would have stopped their benefits. He suspected Nguoth of the offence of dishonestly causing a gain to himself from a Commonwealth entity, noting that he received over $7,000 from Centrelink in each of 2015 and 2016. Mr White did not advance any particular aspect of the regime for Centrelink payments, such as a means test or income test, which would cause those benefits not to be received in a case where a person owned and resided at a property valued at $1.5 million or owned a motor vehicle such as the Audi. In order to help evaluate the reasonableness of Mr White’s suspicion that Centrelink benefits would have been lost, the Court invited the parties to file short written submissions addressing the statutory and regulatory scheme governing the relevant payments.[28]
[28]In particular, it was possible that the legislation would reveal plainly what the effect of using the Sportcars accounts would have been on Nguoth’s social security benefits. That might in turn have cast light on the reasonableness of Mr White’s suspicion as to Nguoth’s dishonest intentions.
Those submissions, confining themselves to Nguoth’s situation, confirmed that the mere ownership of the Narre Warren property, being Nguoth’s principal residence, would not cause him to fail the applicable assets test.[29] Treating the money, and not just the property, as belonging to Nguoth, he would appear to have exceeded the ‘assets value limit’ of $450,000 in s 547C of the Social Security Act 1991 (Cth) upon receiving the first transferred amount of $621,838.12 (into the Sportcars account) on 28 July 2014, but there is no ground for suspecting that he received any Centrelink benefit between then and 1 October 2014, when he acquired the exempt Narre Warren property; Mr White’s affidavit records that Nguoth received no Centrelink allowance in 2014. There has been shown to be no reasonable ground for suspecting that Ngouth received Centrelink benefits contrary to the proper application of the assets test.
[29]Social Security Act 1991 (Cth) s 1118(1)(a).
The position is different with the income test. The submissions filed by the Commissioner did not attempt to show that Mr White had reasonable grounds for suspecting that ‘if you have an income of $1.5m you are not going to receive Centrelink benefit’ or that receipt of income in a given week, month or year may have an ongoing effect on a person’s entitlement.[30] Equally, the applicant did not venture into those matters. The question of the effect on Nguoth’s entitlement in the face of an income of $1.5 million was not explored. Nor, as mentioned, did the parties address the entitlements of other family members.
[30]See [38] above. The answer to that question appears to depend on complex provisions surrounding the concept of ‘ordinary income’: see Social Security Act 1991 (Cth) ss 1067G, 1072, 1073.
In summary, the material before the Court does not reveal reasonable grounds for suspecting that any person received Centrelink benefits to which they were not entitled. But nor did the applicant prove that there were no reasonable grounds for that suspicion. There being no other evidence before the court (such as expert evidence of a kind similar to that led in relation to div 7A), we would have held, if this were a necessary element of the suspected offence, that the applicant had not met the test in s 42(5)(a).
The third and final question, once it is seen that Mr White had reasonable grounds for suspecting an offence against s 135.1(1) and (3), is whether he had reasonable grounds for suspecting that the offence was a serious offence. Mr White relied on the benefits Nguoth had received from Centrelink, exceeding $7,000 in each of 2015 and 2016. Although the affidavit contained different figures in an earlier table, the amounts in each of those years still exceeded $7,000. In our view, that suffices to show that there were reasonable grounds to suspect that the intended gain from the offending was at least $10,000. Like s 135.1(1) and (3), the definition of ‘serious offence’ is satisfied where a gain of $10,000 or more is intended, and it is not necessary to prove that such a gain was caused.
Accordingly, the suspected offence was a serious offence and ss 18 and 19 would apply to both the Narre Warren property and the Audi vehicle on the basis that they were suspected on reasonable grounds of being instruments of that offence, since they were acquired with the money suspected of having been dishonestly passed through the Sportcars accounts. It is therefore unnecessary to decide whether either asset also satisfied the definition of ‘proceeds’ in this context.
Conclusion
The Commissioner has succeeded in sustaining the primary judge’s order refusing the application for revocation of the restraining order. While leave to appeal should be granted, the result is that the appeal must be dismissed.
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