R v Davis (Pre-trial ruling)

[2024] NSWDC 5

District Court

New South Wales

Medium Neutral Citation:

R v Davis (Pre-trial ruling) [2024] NSWDC 5

Hearing dates:

15 January 2024

Date of orders:

18 January 2024

Decision date:

18 January 2024

Jurisdiction:

Criminal

Before:

Priestley SC DCJ

Decision:

See [49-55]

Legislation Cited:

Crimes Act 1900 (NSW)

Criminal Procedure Act 1986 (NSW)

Commonwealth Criminal Code 1995 (Cth)

Cases Cited:

He Kaw Te (1985) 157 CLR 523

Xue v The Queen [2021] NSWCCA 270

Lin v R [2015] NSWCCA 204

Pereira v DPP (1988) 35 ACrim R 382

Texts Cited:

CRIME — Money laundering — Recklessly dealing with proceeds of crime

Category:

Procedural rulings

Parties:

Rex (Crown)
Davis (Offender)

Representation:

Counsel:
Cochrane for Davis
Morters the Crown

File Number(s):

2021/00174032

Publication restriction:

Nill

PRE TRIAL RULING

1. The accused has been arraigned on an indictment dated 14 April 2023 of two charges of dealing with proceeds of crime in circumstances where he was reckless as to whether the funds in a bank account to a certain value were the proceeds of crime. Both charges are brought pursuant to the terms of section 193B(3) of the Crimes Act. By reason of section 193E(2A) of the Crimes Act there is an alternative charge so that should the jury not be satisfied the accused is guilty of the offence charged but is satisfied the accused is guilty of an offence under section 193C(1) the accused may be found not guilty of the offence charged but guilty of that other offence.

2. A trial date has been set for May 2024.

3. There is a difference of opinion between the parties as to how the jury should be directed as to the state of mind of the accused that the Crown is required to prove for the element of dealing with proceeds of crime in respect of both section 193B and the alternative charge under section 193C. In broad terms the argument concerns the knowledge of the accused of the transaction resulting in the funds the subject of the two charges coming to be in the relevant bank accounts.

4. The application is made by the Crown and reliance is placed on section 139(3)(g) of the Criminal Procedure Act for a pre-trial ruling on any question of law that might arise at the trial.

5. The only evidence on this application, which was tendered without objection, and became exhibit A is the Crown case statement dated 28 November 2022.

The facts

6. The following chronology of the facts alleged by the Crown is taken from the Crown case statement:

Date	Event
Re counts 1 and 2
9.19-9.20	A Mr Dawson receives approx $4.7M to invest. The allegation is this money was obtained as part of a fraudulent scheme.
14.5.20	Leading up to this date, the complainant in respect of count 1, Partap Singh has numerous phone conversations from people purporting to be representatives of an organisation known as “SMSF Advisory Services” (SMSF) leading to an email of 14.5.20
20.5.20	Accused registers SA Services and PW Pty Ltd (SAS). Accused is the sole director and secretary. The registered address is Dawson’s address
3.6.20	Accused opens BOQ a/c for SAS and is sole signatory; address given is Dawson’s. This is the relevant account for count 1
13.6.20	Various communications between the complainant and SMSF occurred after 14.5.20 and the complainant became suspicious and made a call to a number on an email he had received
15.6.20	Complainant contacts his super fund, HUB24 about his suspicions and tells them not to deal with Tony Case (a SMSF representative)
25.6.20	Accused opens PO Box address
25.6.20	Accused opens NAB a/c for SAS; contact details include Dawson address and PO Box. It is said only the accused has access. This is the relevant account for count 2
Pre 22.7.20	Accused opens Westpac a/c for SAS with PO Box as address
23.7.20	Accused transfers 22K from Westpac to BOQ
15.8.20	Complainant discovers his super balance with HUB24 is nil, and 259K withdrawn. It had been rolled over upon request, purportedly of C
4.9.20	The roll over was initiated by an initiation form not completed by C. The a/c nominated to HUB24 was the BOQ account, showing a 259K credit on 5.8.20, with transfer out the next day of amounts totalling $269K (presumably a typo in the CCS) and with $103,400 going to a crypto a/c held in name of Dawson. This $259K is the subject of count 1
Count 2
19.5.20	The complainant Adrian West speaks with Daniel Shepherd of SMSF
22.7.20	The complainant sends his drivers licence and tax file details to SMSF but does not complete other paperwork later sent
2.9.20	Complainant notified his super of 119K has been transferred. This had been transferred to the NAB a/c on 21.8.20

7. For the purposes of the argument on this application it was accepted that the funds in the BOQ account in respect of count 1 and in the NAB account in respect of count 2 were funds which had been obtained fraudulently and were thus proceeds of crime.

8. There was also no dispute for the purposes of this argument that it was the accused who had established the BOQ and NAB bank accounts into which the monies the subject of counts 1 and 2 respectively had been placed.

9. Reference was made in submissions to further charges presently in the Local Court and to numerous transactions said to have occurred involving the BOQ and NAB, and also the Westpac account. There is no evidence of these matters nor is there any charge presently before the court relevant to them nor was any reason or argument put as to why taking such matters into account assists in determining the current question. It is also unclear what the relevance of the $22,000 transfer from the Westpac account is; it would seem to suggest that there was more money in the BOQ account than simply the money of Mr Singh. No submission was made by either party as to the impact that transfer has on the argument concerning the appropriate direction.

The legislative provisions

10. Section 193B(3) provides as follows:

11. (3) A person who deals with proceeds of crime being reckless as to whether it is proceeds of crime is guilty of an offence.

12. Subsection 4 provides a defence to a section 193B charge, but is not relevant to this application.

13. Section 193C(1) provides as follows:

1. A person is guilty of an offence if--

1. the person deals with property, and

2. there are reasonable grounds to suspect that the property is proceeds of crime, and

3. at the time of the dealing, the value of the property is $100,000 or more but less than $5 million.

14. Also raised in argument was s193C(4). It is different to s193B(4), and provides a different defence. It provides as follows:

15. (4) It is a defence to a prosecution for an offence under this section if the defendant satisfies the court that the defendant had no reasonable grounds for suspecting that the property was substantially derived or realised, directly or indirectly, from an act or omission constituting an offence against a law in force in the Commonwealth, a State or a Territory or another country.

16. Common to both s193B(3) and s193C(1) is the expression “deals with”, and this term was of significance in the arguments advanced by both parties. That term is a defined term for the purposes of s193B and 193C, with the definition set out in s193A being as follows:

17. "deal with" includes--

18. (a) receive, possess, conceal or dispose of, or

19. (b) bring or cause to be brought into New South Wales, including transfer or cause to be transferred by electronic communication, or

20. (b1) send or cause to be sent out of New South Wales, including transfer or cause to be transferred by electronic communication, or

21. (c) engage directly or indirectly in a transaction, including receiving or making a gift.

The disputed question of law

22. The argument focuses on the first element of the offences created by both sections 193B(3) and 193C(1). That is the element of “deals with” proceeds of crime (s193B(3)), and “deals with” property (s193C(1)). In issue is what is the required state of mind of the accused that the Crown must establish in dealing with “proceeds of crime” / “property”.

23. The argument of the accused is that the jury should be directed that the accused must know of the presence of the money said to be the proceeds of crime (193B(3)) or property (193C(1)) in the relevant bank account. In the accused’s written submissions (AWS) at [43b] it was said this knowledge may be inferred from all the circumstances, provided the jury are satisfied beyond reasonable doubt that the accused knew of the presence in the bank account of the relevant money.

24. The Crown’s position as stated in the Crown’s written submissions (CWS) at [6] was that the Crown “is not required to prove that the accused had actual knowledge of the receipt or possession of tainted property” in order to have dealt with such property because of the definition of “deal with” contained in s193A, and specifically that the definition includes “engage directly or indirectly in a transaction”.

25. The parties agree in respect of s193B that the element of “reckless” attaches to the state of mind of the accused in relation to the nature of what is being dealt with (the alleged proceeds of crime), and not with the dealing, or transaction, itself.

26. The elements of the s193B offence are:

1. 1.1 A person who “deals with”;

2. 1.2 Proceeds of crime;

3. 1.3 Being reckless as to whether it is proceeds of crime.

27. The definition of “deal with” is set out above. The accused for present purposes accepts the money in question to be proceeds of crime. The accused also accepts establishing the bank accounts in question. The contested direction is what should the jury be told concerning the accused’s state of mind in establishing the bank accounts. Need that be done in the knowledge that proceeds of crime would be deposited there, as in fact occurred? Further, as emphasised by the accused’s argument, is it necessary for the jury to be satisfied that the accused knew that the relevant transaction had in fact occurred?

28. The accused argued that the Crown’s position amounted to creating in s193B a strict liability offence. That argument was based on the assertion that the Crown argues for a direction that if it is established that the accused created the account, then by doing so, without any knowledge of the purpose of the account, has dealt with proceeds of crime. That is, as put by the accused, the Crown argues the offence is made out simply if it is established that the the accused engaged indirectly in a transaction, and that this is made out by the establishing of the account, without any knowledge of the intended purpose of the account, or of any knowledge any actual deposit into the account. This submission is a fair recount of CWS at [6].

29. In oral submissions the Crown expressly disavowed that the Crown sought to render s193B an offence of strict liability. The position of the Crown as it developed in the initial oral submissions, and confirmed in its oral reply submissions was that any direction needs to include that the jury be satisfied the accused had an awareness of the activities the bank accounts were being used for, and, I would add, (at least on the facts of this case) at the time of establishing those accounts. The Crown added that it would not be necessary for the jury to be satisfied that the deposits in question had in fact been made.

30. This is a markedly different position than that stated at CWS at [6], and in my view, for reasons that follow, is essentially the correct approach to the direction to be given to the jury.

31. The submissions of the accused emphasised by way of analogy and examples circumstances of criminality involving possession. At the same time it was conceded that the definition of “deal with” has the consequence that possession of the proceeds of crime is not necessary for the offence to be made out. The accused also fairly acknowledged that the offence can be made out even where the accused is unaware of the deposit having been made into the accounts in question. The accused asserted the jury would need to be satisfied beyond reasonable doubt that the accused was aware of the intended transaction at the time of establishing the accounts.

32. With respect to both parties, the position of the accused as just stated is to the same effect as the position ultimately adopted by the Crown as set out at [22] above, and nothing was said in submissions by the Crown that would suggest it disputed the need for the Crown to establish the relevant “awareness” or knowledge of the accused as to the purpose of the accounts at the time they were created.

33. The parties both helpfully canvassed some authorities concerning other legislation to assist the Court which is appreciated. The focus there however was on the concept of possession and of knowledge of possession. But for one matter, those references need not be considered given the above position, and also because this present case does not involve possession.

34. The one exception is as to the extent of the knowledge of the accused as to the use of the bank accounts. That said, based on the Crown’s submissions, in this case this is a matter of little if any significance. This is because the range of matters relied upon by the Crown (see at CWS at [19]) to allow for an inference to make out the necessary mental element includes matters going to show that the proceeds of crime in question were the proceeds of the superannuation fraud; see specifically the third and sixth bullet points. In oral submissions the Crown accepted that it must establish that the accused, in carrying out the conduct amounting to “dealing with”, acted with “evil intent”. That is, the Crown case is that the proceeds of crime were the monies fraudulently obtained by the superannuation fraud and that the accused dealt with those proceeds by establishing the accounts knowing, or being aware, of the intended use of the bank accounts to be where the superannuation fraud monies were to be deposited. This position was qualified to the extent it was submitted it was not necessary for the Crown to show the accused had knowledge of the specific transactions, ie the deposits, occurring.

35. In terms of the state of mind of an accused, the accused relied on He Kaw Te (1985) 157 CLR 523. That case can be distinguished factually in numerous ways though it stands as strong authority for the need for the mens rea element, which as noted already is not in issue in this case. As to the question of whether in order for the charge to be made out the degree of awareness or knowledge of the accused needs to be in relation to specific proceeds of crime or any proceeds of crime little assistance is provided by the case. At page 538 Gibbs CJ expressly noted that the case did not concern the situation where the accused knows he has the thing in his custody but does not know its nature and gave the example as to whether it was baking soda as opposed to heroin. More on point was the question as to whether he knew it was a drug but did not know which drug. The Chief Justice noted that in Canada it was sufficient to establish that it was a prohibited drug without proving that it was the kind of drug mentioned in the charge. Gibbs CJ did not take the matter further as it did not arise though he did observe, in a way which can be seen to be apt in the present case that:

“I cannot think that in the usual run of cases questions of that kind would present much difficulty to a jury. This is a case in which if believed the accused was wholly ignorant that the substance was in his suitcase. Clearly a person does not have in his possession a narcotic drug which without his knowledge is in his baggage or his room”.

36. In other words the case for the accused was he knew nothing about the drug and that if that version was rejected it would be a small step for the jury to be satisfied that not only did he know that he had that drug but he knew what that drug was.

37. Similarly here. The accused at least in submissions suggested that there was no evidence of any ill intent on the part of the accused in establishing the accounts and that he had done so having spoken to a man named “George” with the suggestion being that it was for legitimate tax purposes. The analogy to the comments of Gibbs CJ is apparent, that is if that is rejected there would arguably be little difficulty for the jury to reach the conclusion that based on Crown evidence they may accept that it was for the purpose of placing the funds from the superannuation fraud, though of course this would all turn on the whole of the evidence at trial.

38. That does nevertheless leave unanswered at least in more general terms the question as to whether the state of mind needs to be one alive to the superannuation fraud or simply any criminal conduct. Would the charge be made out if all the evidence established was that somebody had said to the accused to establish a bank account because that person wanted to deposit proceeds of crime? Or that the person told him that they had stolen a car and had sold that car for $10,000 and wanted to put those proceeds in an account that they wanted him to open for them?

39. Relevant to this consideration is section 193F(1) which provides:

40. (1) To avoid doubt, it is not necessary, in order to prove for the purposes of an offence under this Part that property is proceeds of crime, to establish that--

41. (a) a particular offence was committed in relation to the property, or

42. (b) a particular person committed an offence in relation to the property.

43. There was no direct reference to this section by either party in either written or oral submissions.

44. The Crown referred to Xue v The Queen [2021] NSWCCA 270, which was an appeal in respect of convictions of offences under section 193C, which as noted below is markedly different to s193B in both its terms and its structure. In that case the accused submitted at trial that the Crown needed to identify the actual offence from which the funds were derived. The trial judge, Judge Noman SC held that the factfinder needed to be satisfied that the property was derived from a non-specific serious offence.

45. This determination was challenged on appeal and was dealt with at paragraphs 181 and following of the appeal judgment. In short the ground of appeal was unsuccessful with the court holding, in line with the decision of Lin v R [2015] NSWCCA 204, that the Crown was not required to particularise the indictable offences from which the proceeds of crime were alleged to be wholly or partly derived. Lin was a case concerning section 400.9 of the Commonwealth Criminal Code but it was held that the same reasoning applied to section 193C.

46. Guided by s193F and Xue the Crown does not need to particularise the particular crime from which the proceeds of crime come, at least in respect of a s193C charge. In this case, the Crown has set out the case for the accused to meet as being one where the accused was aware of where the proceeds of crime have come from, namely the alleged superannuation fraud, so that at least to that extent the issue does not arise. Remembering that the two issues the parties brought to the court for determination were whether the accused needed to be aware of the actual deposits having been made, and whether there was any mens rea element attached to the element of “deals with”, and given the lack of any argument concerning s193F, these reasons will not determine the question of the degree of awareness of the superannuation fraud the accused must have. That approach is taken also because there have not been any submissions concerning the different requirements of a direction as to the “deals with” element as between sections 193B(3) and 193C(1), the terms and structure of which differ. Further reference is made to this issue at [44]-[48] below.

Conclusions

47. It is perhaps to confuse the nature of the offence charged to talk in terms of knowledge in the way that the parties have in this case. Section 193B(3) does not expressly by its terms have an element of knowledge. Rather the point is that there needs to be a mental element. There needs to be an intention on the part of the accused to conduct himself in a way that is in breach of the section. In the Crown’s written submissions reference was made to the case of Pereira v DPP (1988) 35 ACrim R 382, which was a case dealing with the appropriateness of a direction as to “wilful blindness” being able to satisfy an element of an offence of actual knowledge. In the passage preceding that which was quoted by the Crown is the following enlightening passage which given the terms of section 193B and 193C is instructive:

10. Although the application must fail it is nevertheless appropriate that some observations be made on the direction relating to "wilful blindness". In Bahri Kural v. The Queen [1987] HCA 16; (1987) 162 CLR 502 it was emphasized (at pp 505 and 511-512) that in this area it is important not to transform matters of fact into propositions of law. That case was concerned not with what constituted "knowledge" as a distinct element of an offence but with the unspecified requirement that the accused had acted with mens rea or a guilty mind. It was pointed out in the joint judgment of Mason C.J., Deane and Dawson JJ. (at p 504) that, depending upon the nature of the particular offence, "the requirement of a guilty mind may involve intention, foresight, knowledge or awareness with respect to some act, circumstance or consequence." Their Honours concluded (at pp 504-505) that actual knowledge or awareness of the presence of the particular substance was not an essential element in the guilty mind required for the commission of the offence involved in that case, namely, the offence of importing a prohibited import.

48. The direction that needs to be given is one which makes clear that in respect of the first element of the charge, which in each count, and in the statutory alternative, involves the words “deals with”, such dealing was done with a guilty mind.

49. In this case that must necessarily be, to repeat from the above excerpt, “knowledge or awareness with respect to some act circumstances or consequence”, which in this case as presented by the Crown is said to be a knowledge or awareness of the superannuation fraud and the intention for the BOQ and NAB accounts to be used to deposit funds from that fraud.

50. The following are the conclusions reached informing the direction in dispute:

1. 1.1    As just noted, initially the point of difference in the parties approach was whether the Crown needed to establish actual knowledge of the tainted money having been received into the BOQ account for count 1 and the NAB account for count 2. For the reasons canvassed above the answer to that is no.

2. 1.2 That conclusion does not mean that s193B(3) creates an offence of strict liability. It is not.

3. 1.3   By reason of the definition of “deals with” it is not necessary for the accused to actually be in possession of the proceeds of crime. Notably the definition in s 193A is inclusive and not exhaustive and the definition makes plain that “deal with” is satisfied other than by being in possession.

4. 1.4   A person may deal with proceeds of crime indirectly and arguably directly by being engaged in conduct preparatory to the proceeds of crime being received.

5. 1.5   The necessary state of mind as to the first element is as stated at [39] and discussed at [21]-[23] above. It must be established beyond reasonable doubt that the accused had a level of awareness of the intention to deposit funds into the accounts he created that were proceeds of crime, in this case, being proceeds of the superannuation fraud, though not to a level of detail as to precisely how the crime is being committed or as to the amount of money that is to be deposited or when. Arguably but not necessary here to decide, it may not be sufficient if the accused thought the proceeds were of some criminal activity of a different character unknown to him.

Proposed direction

51. At [43] of the AWS the substance of the direction sought was asserted. At the request of the Court the Crown provided a suggested direction following the hearing, and that document will be marked MFI 3. I have taken those proposed directions into account.

52. The proposed direction set out below reflects the ruling that has been made as just summarised. Whilst the ruling is binding on the trial judge subject to any successful application to revisit the ruling, the form of the direction is not. It is not intended to constrain the trial judge in any way in how the direction at trial is given, not only because that will be a matter for the trial judge but also because just what the facts are and just what other relevant issues might impact on the direction will not be known until the close of the evidence.

53. The ruling required concerns the first element of each charge, what might be termed the “deal with” element. In MFI 3 the Crown have ordered it differently, with the relevant element there being referred to as the second element.

54. Whilst the words of the first element for both the s193B and the s193C offence contain the words “deals with”, the sections otherwise have significant differences. This means that whilst the directions for both the s193B and 193C offences have some degree of commonality, there are also differences.

55. Whilst section 193C(1) does not create a strict liability offence, it is a section which has at least 3 marked differences to s193B(3). The first is that the first element relates the “dealing with” to “property” as opposed to “proceeds of crime”. The second is that it introduces an element, which the parties agree is an objective one, of there being reasonable grounds to suspect that the “property” is proceeds of crime. The third is to introduce an element of quantum. Thus to make out the elements of the offence here, putting aside quantum, what needs to be shown is that the property was dealt with, and that as at the time of trial it can be established objectively that there are reasonable grounds to suspect that the property is proceeds of crime.

56. Thus in respect of the first element the two sections have the same actus reus requirement, but not the same mens rea requirement. The common part of the two directions is underlined in the s193B(3) proposed direction set out below.

57. Section 193C(1) then places an onus on the accused to in effect show that he did not have the intent, or mens rea to act in a criminal way, by the defence provision of subsection 4.

58. For this reason the proposed direction set out in MFI 3 in the last two pars of the first page appears largely appropriate, and has in part been adopted in the third and fourth pars of the proposed s193C(1) direction below. That said, it may be thought that this was something that was not fully ventilated at the hearing and should the accused wish to be heard further on the s193C direction, that will be accommodated.

Section 193B(3) direction

59. The first element of the s193B(3) offence is that the Crown prove beyond reasonable doubt that the accused was “a person who ‘deals with’” proceeds of crime.

60. Relevant to this case a person deals with the relevant property if they engage directly or indirectly in a transaction including receiving or making a gift. You should give the word transaction its ordinary meaning which would include depositing funds into a bank account. The establishment of such a bank account constitutes engaging indirectly in that transaction provided that the Crown satisfies you beyond reasonable doubt that at the time of establishing the bank account the accused knew or believed or was aware the bank account relevant to the particular charge was to be used for the purpose of depositing into that account proceeds of the superannuation fraud. It is not necessary for the Crown to establish that the accused knew precisely when that relevant bank account was to be so used, nor that it had in fact occurred, nor that he knew the amount.

Section 193C(1) direction.

61. The first element of the s193C(1) offence is that the Crown prove beyond reasonable doubt the accused was “a person who ‘deals with’” property.

62. Relevant to this case a person deals with the relevant property if they engage directly or indirectly in a transaction including receiving or making a gift. You should give the word transaction its ordinary meaning which would include depositing funds into a bank account. The establishment of such a bank account constitutes engaging indirectly in that transaction. It is not necessary for the Crown to establish that the accused knew precisely when that relevant bank account was to be so used, nor that it had in fact occurred, nor that he knew the amount.

63. The Crown does not have to prove in respect of this alternative charge that the accused knew or was aware, or believed, that the property was derived from criminal activity. The question is whether you are satisfied beyond reasonable doubt that objectively there are reasonable grounds to suspect that the property is proceeds of crime.

64. The accused will not be be guilty of an offence against this provision if he satisfies you on the balance of probabilities that he had no reasonable grounds to suspect that the property dealt with was substantially derived directly or indirectly from the commission of a criminal offence.

Note

65. In addition to the possibility of further submissions concerning s193C(1) as discussed above, there may be a need for clarification as to the section 193B(3) direction. That is because these reasons have resolved the issues between the parties as to the need for a mental element and the issue of the knowledge of the accused of the actual deposits to the accounts occurring. It would appear there is also no issue based on the case being presented that it is for the Crown to establish knowledge or awareness of the accused of the superannuation fraud so as to satisfy the mens rea element, or as the Crown put it, the “evil intent in respect of the S193B(3) charge”. If in light of these reasons either party considers there needs to be some further ventilation of this aspect, ie as to the extent of the knowledge or awareness of the accused of the bank accounts being used to deposit funds from the superannuation fraud, or indeed, whether it need be more generally expressed as being from funds simply from criminal activity, then they should apply to relist the matter by no later than 25 January 2024. As discussed above, the way the case is being presented suggests this is not an issue. Any application to list the matter for further submissions as to the s193C direction as referred to above should also be made by 25 January 2024. In the interests of clarity, the two aspects identified as potentially being further addressed are:

1. 55.1   The degree of intent, awareness, belief, or knowledge of the criminal activity from which the criminal proceeds come necessary to satisfy the mens rea requirement of s193B(3).

2. 55.2 The form of the s193C(1) direction.

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Decision last updated: 31 January 2024