New South Wales Crime Commission v Jason Lee
[2012] NSWSC 437
•04 May 2012
Supreme Court
New South Wales
Medium Neutral Citation: New South Wales Crime Commission v Jason LEE [2012] NSWSC 437 Hearing dates: 29 September 2011 Decision date: 04 May 2012 Before: Hidden J Decision: Motion dismissed
Catchwords: CRIMINAL ASSETS - application for provision for reasonable legal expenses out of restrained property - whether defending a criminal charge embraces appeal to Court of Criminal Appeal - whether property illegally acquired Legislation Cited: Criminal Assets Recovery Act 1990
Drug Misuse and Trafficking Act 1985
Proceeds of Crime Act 1987 (Cth)Cases Cited: Director of Public Prosecutions (Cth) v Saxon (1990) 28 NSWLR 263
NSW Crime Commission v Younan (1993) 31 NSWLR 44
NSW Crime Commission v OB & Anor [2002] NSWSC 633Category: Procedural and other rulings Parties: New South Wales Crime Commission (Plaintiff)
Jason Lee (First Defendant)
Elizabeth Park (Second Defendant)
J & Lee Property Investment Group Pty Limited (Third Defendant)
Seong Lee (Fourth Defendant)Representation: Mr I D Temby QC (Plaintiff)
Mr R Sutherland SC/ Mr B Clark (Defendants)
New South Wales Crime Commission (Plaintiff)
Nyman Gibson Stewart (Defendants)
File Number(s): 10/118966
Judgment
HIS HONOUR: The first defendant in these proceedings, Jason Lee, is the father of the fourth defendant, Seong Lee. I shall refer to them as Jason and Seong. The third defendant, J & Lee Property Investment Group Pty Limited, has been referred to as a family company. It was incorporated in April 2008. Seong is, and always has been, a director of the company and is the majority shareholder. Jason was a director for a period between May and June 2009 and, apparently, is the CEO of the company.
On 16 March 2011, after a trial in the District Court, Jason was convicted of two counts of supplying a large commercial quantity of pseudo- ephedrine, and a firearms charge. Seong was convicted of knowingly taking part in the supply of the drug, together with four firearms charges. The allegation of supply was founded upon their possession of that quantity of the drug, engaging the deeming provision in s 29 of the Drug Misuse and Trafficking Act 1985. The drug was found on 7 December 2009 in a home unit in Lachlan Street, Waterloo, a property which had been acquired by the family company in August 2008. As I understand it, there were two counts of supplying the drug because quantities of it were found in different locations within the premises.
In all, there were some 44 kilograms of the drug (as an admixture), said to have a street value in excess of $2,000,000. Over a million dollars in cash was also found in the main bedroom of the unit.
On 12 May 2010, the plaintiff, New South Wales Crime Commission, obtained a restraining order, pursuant to s 10A of the Criminal Assets Recovery Act 1990, in respect of the interests in property of Jason. Among other things, that order applies to Jason's interests in the property of the company. It also extends to his interest in a property at Chifley, registered in Seong's name. In addition, the order applies to the interest of a woman named Elizabeth Park in a unit at Waterloo. Ms Park is the second defendant, and I shall explain her connection with this matter later.
Both Jason and Seong have appealed to the Court of Criminal Appeal against their convictions. In addition, Seong is yet to face trial in the District Court upon a charge of knowingly dealing with the proceeds of crime. Before me is a motion by them for a variation of the restraining order to permit payment of their reasonable legal expenses for those proceedings. The application is made pursuant to s 10B(3)(b) of the Act, by which a restraining order may provide for meeting out of the restrained property "reasonable legal expenses of any person whose interests in property are subject to the restraining order.... incurred in defending a criminal charge."
By s 16A (1)(e), any such provision must specify the particular interest in property out of which the expenses concerned may be met. The property specified in the present case is a bank cheque in favour of the company in the amount of $100,000, and funds amounting to a little over $200,000 held in an ANZ bank account in the name of the company.
Section 10B(3)(b) is expressed to be subject to s 16A. By s 16A(1)(b), no provision for legal expenses is to be made "in relation to any particular interest in property if the Supreme Court is satisfied that the interest is illegally acquired property." The expression "illegally acquired property" is broadly defined in s 9(1), and includes property which was wholly or partly acquired using illegally acquired property: s 9(1)(c). In s 4(1), "illegal activity" is also broadly defined, so as to embrace any offence against the laws of New South Wales or the Commonwealth.
The Crime Commission opposes the order sought on three bases:
- The property from which provision for legal expenses is sought was illegally acquired.
- The legal expenses sought to pursue the appeals to the Court of Criminal Appeal are not expenses "incurred in defending a criminal charge", within the meaning of s 10B(3)(b).
- Seong has no entitlement to such an order because he is not a "person whose interests in property are subject to the restraining order", within the meaning of that same provision.
Defending a criminal charge
It is convenient to deal immediately with the second point. Senior Counsel for the Commission, Mr Temby QC, submitted that the provision in s10B(3)(b) for meeting out of restrained property expenses "incurred in defending a criminal charge" does not embrace the expenses of an appeal to the Court of Criminal Appeal. He argued that an appeal is separate and distinct from the defence of a criminal charge, which embraces trial and sentence. As he put it in oral argument, an appeal is "not a defence to the charge, but rather a challenge to the verdict on conviction which is entered."
No authority for this proposition was cited. Mr Sutherland SC, who appeared with Mr Clark for the two defendants, referred me to a passage in the judgment of Kirby P in Director of Public Prosecutions (Cth) v Saxon (1990) 28 NSWLR 263, at 268 - 269. That case was concerned with the Proceeds of Crime Act 1987 (Cth), in which provision was also made for meeting out of restrained property a person's "reasonable expenses in defending a criminal charge": s 43(3). The President saw the expression as one of wide import, noting that applications for bail and representation in committal proceedings had been held to fall within it. Whether it extended to an appeal after conviction was not a matter which needed to be considered in that case.
I cannot accept Mr Temby's submission. I see the appeal process as an integral part of the criminal justice system. An accused person might contend on appeal that the verdict is unreasonable and that he or she should be acquitted, or that the trial process was affected by error and there should be a new trial. In either event, the accused seeks to demonstrate that there has been a miscarriage of justice. The criminal proceedings against the accused remain on foot until the appeal is determined and, indeed, they continue thereafter if a new trial is ordered. The whole of this process should properly be seen as part of the defence of the criminal charge in question and, accordingly, is susceptible to provision for legal reasonable expenses under s 10B(3)(d).
Illegally acquired property
The principal area of contention is whether the property from which provision for legal expenses is sought was illegally acquired. Before turning to the provenance of that property, it is necessary to sketch the dealings with other property of the two defendants and the company. The evidence of these dealings is not challenged, but there is a dispute as to the inferences to be drawn from it.
As I have said, among the interests in property of Jason the subject of the restraining order are his interests in the property of the company. This includes ten properties in and around Sydney purchased by the company between May 2008 and December 2009. It also includes some motor vehicles, a matter to which I shall return. In addition, it will be remembered that Ms Elizabeth Park's interest in a home unit at Waterloo is the subject of the order, as is Jason's interest in a property at Chifley in the name of Seong.
It is convenient at this point to bring into the picture Mr Brendon Pak, an associate of Jason and Seong. In an affidavit he discloses that during 2008 and 2009 he operated a number of bank accounts with the Commonwealth Bank of Australia (CBA). On a number of occasions over that period, he deposes, Jason provided him with cash, saying that he needed to buy a bank cheque for the company. Mr Pak would deposit the cash into one of his accounts, and soon thereafter would purchase a bank cheque made out to the company. He would hand those cheques to Jason or Seong. As I understand it, Ms Park is Mr Pak's partner.
Real estate
Information about the ten properties purchased by the company, and the properties purchased in the name of Ms Park and Seong, is to be found in an affidavit of Jonathon Lee Spark, the Director of Financial Investigations with the Commission, together with the source documents which are an exhibit to that affidavit. For present purposes, it is not necessary to examine this evidence in detail. What it discloses is that all but one of the properties acquired by the company were purchased without the assistance of mortgage funds. For one of them, a property at Cabarita, both the deposit and the balance of the purchase price were paid overseas. For another, a unit in Liverpool Street, Sydney, the deposit was paid in cash but the balance of the price was paid overseas. A property at St Leonards was paid for substantially, if not wholly, in cash supplied to the vendor by Jason. For a property at Vineyard, more than half the purchase price was paid in cash to the vendor by Jason and the balance by company cheques.
The property which the company bought with mortgage funds was a unit in Castlereagh Street, Sydney. The remaining properties acquired by the company were paid for mainly by bank cheques purchased by it, on quite a few occasions with cash. As to the unit in Waterloo in the name of Elizabeth Park, the whole of the purchase price less the deposit was paid by bank cheques drawn from the company's account. The property at Chifley in the name of Seong was financed substantially by mortgage funds.
The purchase price of all twelve properties totalled a little over $13.8 million. Of that amount, a little over $1.7 million is established as having been paid in cash. Amounts raised on mortgage totalled about $3.2 million, leaving an amount of roughly $10.6 million paid without the assistance of mortgage funds.
Motor vehicles
Evidence of the acquisition of three expensive cars by the company, now subject to the restraining order, is to be found in Mr Spark's affidavit and the transcript of evidence given to the Commission by Mr Sid Khoury. At the relevant time Mr Khoury was a motor dealer. In 2008, he was introduced to Jason by Mr Pak. Between August and November 2008, on behalf of the company, Jason bought from him a BMW, a Hummer and a Bentley. They were paid for in cash, in amounts totalling $585,800.
In addition, on two occasions Jason lent money to Mr Khoury in amounts totalling $1,000.000. These were also paid in cash. By a series of cheques made out to the company between November 2008 and February 2009, Mr Khoury repaid amounts totalling about $780,000. At the time he gave his evidence to the Commission, in May 2010, the balance was outstanding.
Accordingly, through 2008 and 2009 Jason and Seong, personally or through the company, were dealing in very large amounts of cash. To the amounts involved in purchasing the properties and the vehicles, and the substantial loans from Jason to Mr Khoury, there should be added the amount of roughly $1.2 million in cash found at the Waterloo unit when the pseudo- ephedrine was discovered. Neither Jason nor Seong has provided any evidence about the source of this money. Nor is there any evidence of their income during the relevant period. Jason had not lodged tax returns for the financial years ending 30 June 2003 to 30 June 2010. Seong was not required to lodge tax returns for the financial years 2000 to 2005, did not lodge returns for the financial years ending 30 June 2006 and 30 June 2008, and did not have a taxable income for the financial year ending 30 June 2007. The company had not lodged tax returns for the financial years ending 30 June 2003 to 30 June 2010.
Bank Cheque/company account
I turn, then, to the property from which Jason and Seong seek provision for their legal expenses: the bank cheque in favour of the company for $100,000 and the funds of roughly $200,000 in the company's account with the ANZ Bank. On the question of the bank cheque the evidence of Mr Pak is important. Although his affidavit has been read without his having been required for cross-examination, his credibility is challenged.
Mr Pak gave evidence at the trial of Jason and Seong. By agreement I was supplied with extracts from the transcript of his cross-examination at the trial. I was not told what the overall effect of his evidence was, and it does not appear from the extracts that I have that he was being cross-examined about the matter with which I am concerned. Nevertheless, the transcript discloses that he admitted having lied in evidence at the trial and in earlier evidence to the Crime Commission, and that he acknowledged himself to be a liar, a perjurer, a welfare cheat, a tax cheat and a fraudster.
The bank cheque was found on 22 June 2010 during a search of the company's unit at Liverpool Street, Sydney. It is a Commonwealth Bank cheque, drawn on 23 October 2008. An affidavit of Grant Austen, an officer of CBA, establishes that it was purchased by Mr Pak, drawn from one of his accounts at the Bank. The same affidavit discloses that in that same month and the following month four further bank cheques were drawn in favour of the company from funds in the same account of Mr Pak: for $150,000 on 27 October, $100,000 on 28 October, $150,000 on 3 November and $100,000 on 19 November. In all, bank cheques totalling $600,000 were drawn in favour of the company between 23 October and 19 November 2008.
The evidence of Mr Pak is that these bank cheques were part of the pattern to which I have referred earlier, whereby Jason would provide cash to Mr Pak and ask him to draw bank cheques in favour of the company. This is supported by the CBA records provided by Mr Austen.
Bank statements for Mr Pak's account disclose a series of cash deposits between May and October 2008, the amounts totalling in excess of $900,000. Some of the deposits are for small amounts, which do not appear to be significant. Most of them, however, are substantial, being five or six figure amounts. More importantly, in October 2008 several of the deposits precede the drawing of bank cheques to the company, producing a balance in the account sufficient to fund the cheque.
On 23 October, the day the subject bank cheque for $100,000 was drawn, there was a cash deposit of $140,000. On 24 October there was a deposit of nearly $150,000, and on 27 October a bank cheque in the same amount was drawn. On 27 October there was another cash deposit of $100,000 and, again, a bank cheque for that same amount was drawn on 28 October. On 29 and 30 October there were deposits of $100,000 and $130,000 respectively. Thereafter bank cheques were drawn on 3 November for $150,000 and on 19 November for $100,000.
These transactions are consistent with Mr Pak's account of his dealings with Jason. In particular, they confirm that the subject bank cheque of 23 October was funded by cash provided by Jason. Notwithstanding his lack of credibility acknowledged in cross-examination at the trial, I accept Mr Pak's evidence about this matter.
Also read was an affidavit of Harsha Maligaspe, an officer of the ANZ Bank, to which are exhibited records of the company's account with that bank. It is sufficient to say that the records disclose cash deposits totalling $995,000 between 23 October and 4 November 2009. This, of course, is proximate in time to the search of the Waterloo unit on 7 December 2009 in which the drug was found.
Again, Jason and Seong have put on no evidence to explain these large cash deposits or the bank cheques drawn from Mr Pak's account. An affidavit of Lyndall Foldvary, a personal assistant to the defendants' solicitor, was read, to which are annexed statements for the company account for the first half of 2011. They disclose regular payments from a real estate agent for rent on two of the company's properties, at Redfern and St Leonards, the subject of the restraining order. This, of course, says nothing about the period to the end of 2009. I understand it to be directed to the legitimacy of the funds currently in that account, a matter to which I shall return.
In the light of all this evidence, unexplained as it is, Mr Temby argued that I would be satisfied that the bank cheque of 23 October and the funds in the company's account are wholly or partly the product of illegal activity. He pointed out that it is not necessary to prove exactly what the illegal activity was or by whom it was perpetrated. However, he contended that I would readily conclude that the source of those items of property was drug dealing, money laundering or both. From the quantity of drug found at the Waterloo unit and the defendants' access to very large amounts of cash between mid-2008 and the end of 2009, he said, I would conclude that they had been involved in drug dealing on a large scale. He observed that drug dealing of that order is highly remunerative and those involved in it normally deal in cash. A variety of means might then be employed to launder that money. In particular in the present case, he suggested, the process whereby Jason provided cash to Mr Pak in return for bank cheques in favour of the company has all the hallmarks of a laundering exercise.
Mr Temby argued that all twelve properties to which I have referred, together with the three motor vehicles, were purchased at least in part with money acquired illegally. The same is true, he argued, of the cash from which the bank cheques were sourced and the substantial amount of cash deposited into the company's account late in 2009. As to that account, he acknowledged that the bank statements annexed to Ms Foldvary's affidavit disclose legitimate deposits in 2011. Nevertheless, he argued, the amount of money which has gone into that account since 7 December 2009 is far less than would enable one to categorise the account as "clean sourced." As he put it in oral argument, there must be "an awful lot of that $995,000 which is still in there." That being so, he said, the balance of the account has been partly acquired using illegally acquired property, within the meaning of s 9(1)(c) of the Act.
Mr Temby referred me to the decision of Sperling J in NSW Crime Commission v OB & Anor [2002] NSWSC 633. That was also an application for provision out of restrained property of reasonable legal expenses. The facts of the case were significantly different from the present case, but it did involve a number of deposits into a bank account. Sperling J referred at [6] to s 9(1)(c), observing that the effect of that provision was that "in the case of a bank account, if illegally obtained money has been contributed to the fund, the whole of it constitutes illegally acquired property." At [20], his Honour noted that leave had previously been granted to the applicant to amend the notice of motion so as to claim separately in relation to each deposit. He declined to take that approach, saying that in view of the provisions of s 9, "the amendment does not allow the bank account to be treated in such a segmented way."
In that case the applicant was charged with supplying drugs but had not yet come to trial. However, there was evidence before Sperling J of his being involved in supplying drugs at a house. The applicant proffered an innocent explanation for this evidence, which his Honour rejected. He found that money deposited into the account was the product of that drug dealing. He expressed his conclusion in this way at [61]:
"On the evidence, the enterprise carried on at the house was likely to have been highly remunerative. The applicant had no other means of accumulating a large sum of money. Absent explanation, I would infer that the money in the bank account came from the illicit drug dealing enterprise in which the applicant was involved."
Alone for the obvious differences between that case and this, Mr Temby submitted that a similar inference should be drawn here.
For the defendants, Mr Sutherland submitted that I would not be satisfied that the bank cheque and the balance of the company's account were illegally acquired, even in part. He emphasised that the conviction of the defendants rested upon their possession of the drug and the deeming provision, and argued that that was an insecure foundation for a conclusion that they were drug dealers. He contrasted the present case from OB, in which there was direct evidence that the applicant was involved in drug dealing.
As to the properties, he noted that two of them were paid for, either wholly or in large part, overseas and there is no evidence as to the source of those funds. The purchase of two others was funded to a substantial extent by mortgage loans. He observed that some people choose to carry out transactions with cash, postulating that this was particularly true of people of Asian extraction. As to the bank cheques, of course, he placed emphasis on Mr Pak's admitted lack of credibility.
Mr Sutherland referred to Saxon (supra), in which an order for the provision of legal expenses from restrained property was upheld on appeal. Among other things, the Director of Public Prosecutions had contended that the restrained assets were tainted by his criminal activities, an inference which might have been available on the evidence in that case. Kirby P, with whom Mahoney and Priestley JJA agreed, said at [274]:
"The case is not analogous to the bank robber caught red-handed with the funds of others. It is, ostensibly, Mr Saxon's own property which is restrained by the orders made under the Act. How he accumulated that property may be a matter for speculation. Doubtless it may be the subject of evidence and argument as his criminal proceedings unfold. But be he should not be deprived of the use of his property for the proper defence of those proceedings unless the Act obliges such a course."
By way of contrast, Mr Sutherland also cited NSW Crime Commission v Younan & Anor (1993) 31 NSWLR 44. It is unnecessary to examine the facts of that case. It is sufficient to say that the Court of Appeal set aside an order for the provision of legal expenses from restrained bank accounts of the respondents. The primary judge had made that finding even though there was "almost overwhelming evidence" that the source of the money in those accounts was the very money the subject of the criminal activity with which they were charged.
Those cases, of course, turned on their own facts (as, of course, did OB). Moreover, in both cases evidence that the property from which provision for expenses was sought was tainted by illegality was a matter bearing upon the discretion whether to make that order. The legislation with which the Court was dealing in each case did not have an equivalent of s 16A, which leaves this Court with no choice but to refuse the order if it is satisfied that any part of the relevant property was illegally acquired.
I have carefully considered the competing arguments of counsel, aware of the potential significance of the decision I have to make. The importance of legal representation in serious criminal proceedings is the subject of abundant authority, which it is unnecessary to recite. Kirby P addressed that issue in Saxon at 268 and again at 273-274. Legal aid may well be available in this case, but at 273-274 the President referred to American authority and to the International Covenant on Civil and Political Rights, each speaking of the right of a person to legal representation of his or her own choosing.
The Commission bears the civil onus of proof, applying the Briginshaw test: OB at [59]. That onus has been discharged. For the reasons advanced by Mr Temby, I am driven to the conclusion that the bank cheque and the funds in the company's account are, at least in part, illegally acquired property. That is the only finding required to dispose of the motion before me. Evidence of the large sums of cash used for the purchase of the properties and the motor vehicles is relevant to that decision, but it is neither necessary nor appropriate for me to express a conclusion whether all of that property was also illegally acquired. Closer examination of the acquisition of some part of that property may show that it is available to raise funds for legal expenses without falling foul of s.16A. If such an application were made, it would fall to be determined on the evidence then presented.
Seong's application
Mr Temby's arguments focused on Jason's application for provision for legal expenses. As I have said, he submitted that Seong has no standing to make such an application because no interest of property of his is affected by the restraining order. That proposition may not be as simple as it sounds. Mr Sutherland submitted that, although the restraining order is confined to the interests in property of Jason (and Ms Park), it could have the effect of preventing Seong from dealing with his own propriety interests. He referred, in particular, to Seong's interest as registered proprietor of the property at Chifley.
However, as Mr Temby foreshadowed in argument, this is a matter I do not have to decide given my conclusion that the property from which provision is sought was illegally acquired. I would prefer to express no concluded view about it.
Order
The motion is dismissed.
If necessary, I shall hear the parties on costs.
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Decision last updated: 10 August 2012