R v Hnoudis No. DCCRM-98-692 Judgment No. D3941
[1998] SADC 3941
•3 December 1998
R v Jeffrey Hnoudis
[1998] SADC D3941
Judge Sulan
Criminal
The accused Jeffrey Hnoudis is charged with a breach of section 31(1) of the Financial Transaction Reports Act 1988 (Commonwealth).
The information alleges that between the 4th day of February 1997 and the 4th day of April 1997, at Torrensville, in the said State he was a party to two or more non-reportable cash transactions, namely the receipt of Express Money Orders made payable to the defendant or his agent Kathy Kambouris (aka Sounios). It is further alleged that the money orders were then redeemed by the defendant to receive payment of the following amounts of cash :
Date Amount Date Amount
04/02/97 $9,500 14/02/97 $6,500
06/02/97 $9,500 24/02/97 $5,000
11/02/97 $9,500 21/03/97 $8,000
13/02/97 $9,500 04/04/97 $9,500
14/02/97 $6,000 04/04/97 $9,500
And having regard to the manner and form in which the transactions were conducted, it was reasonable to conclude that the transactions were conducted for the sole or dominant purpose of ensuring, or attempting to ensure that the currency involved in the transactions was transferred in a manner and form that would not give rise to a significant cash transaction.
Section 31(1) provides :
(1) A person commits an offence against this section if:
(a) the person is a party to 2 or more non-reportable cash transactions; and
(b) having regard to:
(i) the manner and form in which the transactions were conducted, including, without limiting the generality of this, all or any of the following:
(A) the value of the currency involved in each transaction;
(B) the aggregated value of the transactions;
(C) the period of time over which the transactions took place;
(D) the interval of time between any of the transactions;
(E) the locations at which the transactions took place; and
(ii) any explanation made by the person as to the manner or form in which the transactions were conducted;
it would be reasonable to conclude that the person conducted the transactions in that manner or form for the sole or dominant purpose of ensuring, or attempting to ensure, that the currency involved in the transactions was transferred in a manner and form that:
(iii) would not give rise to a significant cash transaction; or
(i) would give rise to exempt cash transactions.
The scheme of the Act is to monitor cash transactions. A cash transaction is the physical transfer of currency from one person to another. The Act imposes an obligation upon a cash dealer, which is widely defined, negotiating currency transfers on behalf of other persons, to report any significant cash transaction to the director of the Australian Transaction Reports and Analysis Centre, a body created under the Act. A significant cash transaction is a cash transaction for $10,000 or more.
Section 31 was enacted to prevent people evading the Act by simply transferring amounts of less than $10,000, when it was their purpose to in fact transfer an amount greater than $10,000. Section 31 creates an offence if a person breaks up an amount greater than $10,000 into smaller amounts of less than $10,000 and thereby seeks to avoid the provisions of the Act.
Section 31 was discussed in Leask v The Commonwealth of Australia (1995-6) 187 CLR 579. The High Court there considered whether section 31(1) was a valid law of the Commonwealth. In the course of various judgments, some of their Honours considered the meaning of section 31(1) and in particular what, if any, mens rea was required to constitute the offence.
Brennan CJ dealt with the objects of the Act and explained the scheme of the Act including the reporting obligations. His Honour said at page 589 :
“A cash transaction involving the transfer of currency of a value less than $10,000 does not attract an obligation to report, unless it is a suspect transaction falling within section 16. Suspect transactions apart, a person who wishes to use the services of cash dealers for the transfer of more than that amount can avoid enlivening a dealer’s obligation to report by splitting the total amount into sums less than $10,000 and transferring currency to the value of those lesser sums in a series of distinct transactions. Section 31 seeks to prevent this and similar means of avoiding the operation of sections 7 and 16.”
At page 591-2 His Honour went on to say :
“The two paragraphs of section 31(1) contain distinct elements of the offence created by the subsection. Paragraph (a) prescribes that elements constituted by the conduct of the offender; paragraph (b) prescribes the quality of the cash transactions to which the offender became a party. The plaintiff points to the clause ‘it would be reasonable to conclude’ in paragraph (b) to show that the elements of that paragraph may be satisfied irrespective of the actual purpose of the offender in conducting the cash transactions referred to in paragraph (a) in the manner and form in which they were conducted. As the actual purpose of an alleged offender is not an element of the offence created by section 31(1), it is said that section 31(1) purports to create an offence of strict liability without the ordinary requirement of mens rea and that in the absence of an intent to impair the effectiveness of the taxation laws the connection between such an offence and the subject of taxation is too tenuous or remote to attract the support of section 51(ii) of the Constitution. This submission was supported by an argument that section 31(1) is not ‘reasonably proportionate’ to the purpose of preventing tax fraud or money laundering. The submission encounters a number of difficulties which, for reasons presently to be mentioned, need not be finally decided. But as some stress was laid on the supposed absence of mens rea and the notion of proportionality, I refer to these points.
The terms ‘mens rea’ may be used to connote not only the voluntary doing of an offender’s act but his concurrent knowledge of the circumstances in which it is done, his appreciation of the nature and quality of his act done in this circumstances and a specific intention that any result of his conduct prescribed as an element of the offence should be achieved. But the mens rea required for criminal responsibility for the commission of a statutory offence has to be ascertained by reference to the text which creates the offence. The mens rea required by section 31(1) is confined, in my opinion to the elements of the offence prescribed in paragraph (a). A person who engages in the conduct mentioned in section 31(1)(a) is liable to conviction only if he voluntarily conducted the two or more ‘non-reportable cash transactions’ therein mentioned and knew the facts which gave the transactions the character of ‘non-reportable cash transactions’. In my opinion the mens rea of the offence does not extend to a specific intention to achieve ‘the sole or dominant purpose’ referred to in paragraph (b) of section 31(1). Paragraph (b) requires the relevant transactions to have a particular objective quality, that is, they must exhibit such of the features mentioned in subparagraph (b)(i) as would lead a reasonable person to conclude that the offender’s sole or dominant purpose in conducting the transactions was one of those specified in paragraph (b). But as to these elements, the mental state of the alleged offender is irrelevant except as a factor in an explanation offered by the alleged offender which precludes (by raising a doubt) a finding that an hypothetical reasonable person would reach the conclusion stated in paragraph (b). It is immaterial whether the offender knew that his conduct was unlawful or that a court might, in the absence of any explanation by the offender, find that it would be reasonable to reach the conclusion stated in paragraph (b). Section 31(1) is not a provision imposing strict liability but the mens rea of the offence is extremely limited.”
That decision was considered by the Court of Criminal Appeal in South Australia in Question of Law Reserved (No. 2 of 1998) (1998) 70 SASR 502.
In his judgment Doyle CJ considered the mens rea required for the offence. He considered the decision of the High Court in Leask and in particular the dicta of Brennan CJ. His Honour considered that section 31 is intended to prevent evasion of the reporting obligations imposed upon a cash dealer, the evasion being achieved by conducting a transaction with a view to avoiding the occurrence which would give rise to the requirement to report. His Honour said that the purpose suggests that the section is aimed at persons who are aware of the potential significance of the manner in which a transaction is conducted. His Honour said at 508 :
“In my respectful opinion, the construction of section 31(1) favoured by Brennan CJ does not serve a useful purpose. I consider that section 31 is intended to prevent evasion of the reporting obligations imposed upon a cash dealer, the evasion being achieved by conducting a transaction with a view to avoiding the occurrence of a significant cash transaction. That purpose suggests that the section is aimed at persons who are aware of the potential significance of the manner in which a transaction is conducted. ….. I do not see much sense, in this context, in punishing a person who might be unaware of the difference between a significant cash transaction and a non-reportable cash transaction. ….. These considerations, coupled with the ambiguous form in which section 31 is expressed, incline me towards the view that there is a further aspect to the mental element that must be proved. Subject to the impact of subparagraph (b), that element would involve proof of the following :
that the accused person knew that a transaction involved currency of $10,000 or more in value must, by law, be reported to a Government agency, and that a transaction involving currency of less than $10,000 in value did not have to be reported to a Government agency.”
The question then arises, at what point in time does the person have to have the required knowledge referred to by the Chief Justice. It seems to me that it must be at the time that the person enters upon the scheme to avoid the reporting provisions.
Mr Rice, on behalf of the accused, submitted that it is incumbent upon the prosecution to indicate the significant cash transaction which the prosecution allege the accused was attempting to avoid, and the prosecution must nominate the non-reportable cash transactions to which it is alleged the accused was a party in breaching the Act. He argued that there are ten separate payments alleged, amounting to $82,500 and therefore the reporting requirements as to significant cash transaction which it is alleged the accused was a party to attempting to avoid, was the amount of $82,500 and no more or less. It follows that all ten individual transactions must be proved and the jury must be satisfied that each one of them was undertaken in breach of section 31. He submitted that otherwise there is latent duplicity because it is unclear to the accused which non-reportable cash transactions make up the two or more transactions, the subject of the charge. He argued that in a situation where the explanation of the accused (if one is proffered) is a factor which the jury is required to take into account in determining whether it is reasonable to conclude that the accused conducted the transactions in a manner and form for the sole or dominant purpose of ensuring or attempting to ensure that the Act was avoided, it is a requirement that the accused knows exactly which non reportable transactions it is alleged constitute the offence. He argued it would be unfair to the accused for the prosecution to leave the matter to the determination of the jury as the accused would never know which of the transactions were the subject of the charge. He submitted it would be unfair as the accused would not know the time at which it is alleged he should have had requisite knowledge and any explanation offered by the accused would be offered in circumstances where it was unclear to the defence whether the jury were relying on two transactions or all of the transactions or which of any combination of them. Mr Rice further submitted that the prosecution should be required to elect whether it relies upon all the transactions particularised and if not, it should indicate which of the transactions upon which it relies.
Mr Birchall, on behalf of the Director of Public Prosecutions, argued that on a plain reading of section 31, all that the prosecution is required to establish is that the accused was a party to two or more non-reportable cash transactions, that he had the requisite knowledge and necessary mens rea and that having regard to the matters referred to in subparagraph (b)(i) and (ii), the jury determine that it would be reasonable to conclude that the accused conducted the transactions in that manner or form for the sole or dominant purpose of ensuring or attempting to ensure that the currency involved in the transaction was transferred in a manner and form that would not give rise to a significant cash transaction. Mr Birchall argued that the jury were entitled to consider the ten alleged non-reportable transactions and they could have regard to all ten or any combination of two or more, in concluding that the accused had breached the section. He argued that so long as there were at least two non-reportable transactions and they were transacted for the sole or dominant purpose referred to in the section and their combined total amount in respect of those taken into account would have given rise to a significant cash transaction, that was sufficient.
The question of fairness and duplicity was considered in Walsh v Tattersall (1996) 188 CLR 77. In that case the High Court was considering section 120(1)(a) of the Workers Rehabilitation and Compensation Act 1986 (SA) which provides, inter alia :
“a person who :
obtains by dishonest means any payment or other benefit under this Act ….. is guilty of an offence …..”
The appellant had been charged with one count relating to payments made between October 1992 and October 1993.
In the course of their judgments, their Honours considered the law relating to duplicity. Dawson and Toohey JJ who held that the count was not duplicitous, referred to the decision of Johnson v Miller (1937) 59 CLR 467 and in particular to a passage in the judgment of Dixon J in which His Honour said at 489 :
“... where the question is whether the prosecutor should not be required to identify one of a number of sets of facts, each amounting to the commission of the same offence as that on which the charge is based. In my opinion he clearly should be required to identify the transaction on which he relies and he should be so required as soon as it appears that his complaint, in spite of its apparent particularity, is equally capable of referring to a number of occurrences each of which constitutes the offences the illegal nature of which is described in the complaint. For a defendant is entitled to be apprised not only of the legal nature of the offence with which he is charged but also of the particular act, matter or thing alleged as a foundation of the charge.”
Gaudron and Gummow JJ decided the case upon a construction of section 121(1) of the Act. Kirby J, who agreed with the majority, considered the law relating to duplicity and its application in Australia. His Honour referred to the judgment of Evatt J in Johnson v Miller and in particular the following passage at page 105 :
“It is of the very essence in the administration of criminal justice that the defendant should, at the very outset of the trial, know what is the specific offence which is being alleged against him. This fundamental principle has been deemed applicable to bodies which are not strictly judicial in character. But the rigorous application of the principle by Courts of justice proper is to be regarded as deriving from the Courts’ inherent power and jurisdiction. It is inherent because it is an essential and intrinsical part of any system of administration of justice according to law. For various reasons, including the miscarriages caused by technical objections to matter of form, the formal indictment, information or complaint is allowed to become more sparing in the information it imparts. Side by side, the jurisdiction to order particulars may call for more frequent exercise. It is an essential part of the concept of justice in criminal cases that not a single piece of evidence should be admitted against a defendant unless he has a right to resist its reception upon the ground of irrelevance, whereupon the Court has both the right and the duty to call upon such an obligation. These fundamental rights cannot be exercised if, through a failure or refusal to specify or particularise the offence charged, neither the Court nor the defendant (nor perhaps the prosecutor) is as yet aware of the offence intended to be charged. Indeed the matter arises at an even earlier stage. The defendant cannot plead unless he knows what is the precise charge being preferred against him. If he so chooses, a defendant has a right to plead guilty, and therefore to know what it is he is being called upon to answer.”
His Honour observed that much prejudice can be done to an accused person if the prosecution is permitted to roll up allegedly connected events and present them as a single charge. Further, it is unfair to an accused person to be required to answer a charge unless he or she knows with some degree of certainty exactly what the prosecution allege against him.
In my view, Mr Birchall’s contentions, if accepted, would create a situation of great uncertainty. Based on Mr Birchall’s submissions, the jury would be entitled to rely upon any two of the non-reportable transactions referred to in the indictment and the accused could be convicted by the jury relying on two or more or ten or any combination of two or more non-reportable transactions. In those circumstances, the accused would be faced in the impossible position of not knowing whether the jury relied on two transactions, ten transaction, or any combination thereof.
A further difficulty relates to mens rea. The mens rea required to be established in respect of any offence, must exist at the time of the commission of the offence. If it is unclear when the offence was committed, that is, when the first act constituting an act in furtherance of the offence took place, then this creates a further uncertainty for an accused person. This is particularly so in a charge alleging a breach of section 31 of the Act where the section specifically provides that the jury must have regard to any explanation made by the accused as to the manner or form in which the transactions were conducted. It must follow that the accused must know which transactions are the subject of the allegations against him.
An illustration of the difficulty confronting the court if Mr Birchall’s submissions were correct, is that upon a conviction, the Judge would not know whether the offence consisted of two non reportable cash transactions or more than two and, if so, which combination. The Judge would not know when the offending commenced and over what period it continued or the amount involved. In my view, that uncertainty creates the type of unfairness to which Dixon J was referring to in Johnson v Miller (supra).
In order for Mr Birchall’s submissions to be made good, I consider that words of section 31 would have to be plain and unambiguous. It would have to be clear on the face of the section that the legislature intended that the prosecution could specify a number of non-reportable transactions and then seek to rely on any combination of two or more of them. A reading of the section almost suggests the opposite interpretation because section 31 speaks of “a significant cash transaction” not any significant cash transaction.
In my view, the prosecution is required to nominate which reportable cash transactions it relies upon and to indicate to the court the non reportable cash transactions upon which the prosecution relies. Further, the prosecution is required to nominate the significant cash transaction which it alleges there was a scheme to avoid.
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