The Commissioner of the Australian Federal Police v Pharmacy Depot Hurstville Pty Ltd (in liq)

[2019] NSWSC 643

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:	The Commissioner of the Australian Federal Police v Pharmacy Depot Hurstville Pty Ltd (in liq) [2019] NSWSC 643
Hearing dates:	10 – 12 April 2019
Decision date:	03 June 2019
Jurisdiction:	Common Law
Before:	R A Hulme J
Decision:	(1) Applications pursuant to ss 29 and 31 and pursuant to s 44 of the Proceeds of Crime Act 2002 (Cth) for exclusion of property at Arncliffe from the restraining order made on 10 March 2017 refused. (2) Applicants to pay the plaintiff’s costs.
Catchwords:	CRIMINAL LAW – proceeds of crime – restraining order – application for exclusion of property from restraining orders – when property becomes, remains and ceases to be proceeds or an instrument under s 330(4)(a) Proceeds of Crime Act 2002 (Cth) – third parties – sufficient consideration – issue of knowledge or reasonable suspicion in circumstances that loan funds were proceeds of crime – applicants’ case that acquisition of funds for purchase of residential property made pursuant to a loan not accepted – alternative basis for discretionary exclusion based on undertaking to repay pursuant to s 44 – strong subjective case presented – bank funds to repay obtained on wrongful basis – applicants’ onus not discharged – application for exclusion of property from restraining order refused
Legislation Cited:	Corporations Act 2001 (Cth), s 471B Criminal Code (Cth), ss 134.2, 400.9(1) Proceeds of Crime Act 2002 (Cth), ss 5, 18, 18(2)(c), 18(2)(d), 29, 29(1), 29(2)(c), 30, 31, 31(4), 31(6) 44, 44(2), 44(2)(c), 44(2)(d), 47(4), 48(3), 73, 317, 329, 330, 330(3), 330(4)(a), 337, 338
Cases Cited:	Commissioner of the Australian Federal Police v Hart (2018) 262 CLR 76; [2018] HCA 1 Lordianto v Commissioner of the Australian Federal Police [2018] NSWCA 199
Category:	Principal judgment
Parties:	The Commissioner of the Australian Federal Police (Plaintiff/Respondent) Pharmacy Depot Hurstville Pty Ltd (In Liquidation) (First Defendant) Yaakop Youssef (Second Defendant) Hamza Amin Zoghbi (Third Defendant) Zeinab Youssef (aka Haidar) and Hussein Mohamed Ali Haidar (Applicants)
Representation:	Counsel: Ms E A Cheeseman SC with Ms D Tang (Plaintiff) Mr J Dooley (Applicants)   Solicitors: HWL Ebsworth Lawyers (Plaintiff) Streeton Lawyers (Applicants)
File Number(s):	2015/114787

Judgment

1. HIS HONOUR: On 10 March 2017, by application of the Commissioner of the Australian Federal Police (the AFP) under s 18 of the Proceeds of Crime Act 2002 (Cth) (the Act), a restraining order was made in respect of property at 709/9-11 Wollongong Road, Arncliffe (the Property). The Property is owned by Ms Zeinab Haidar [1] and her husband, Mr Hussein Haidar (the applicants).

   1. Although Ms Haidar was referred to as Ms Youssef in written and oral submissions, in these reasons I will refer to her as Ms Haidar so as to distinguish her from her brother, Mr Yaakop (Jacob) Youssef.

2. There is no suggestion that Ms Haidar or Mr Haidar had committed any offence. Rather, the AFP alleges that Pharmacy Depot Hurstville Pty Ltd (Pharmacy Depot), Yaakop (Jacob) Youssef (Ms Haidar's brother), and Hamza Zoghbi defrauded the Pharmaceutical Benefits Scheme to the tune of about $18 million. Messrs Youssef and Zoghbi were the sole directors and shareholders, as well as the executive directors, of Pharmacy Depot. It is common ground that the applicants received $558,000 from Pharmacy Depot, which they used to purchase the Property. The AFP contends that the Property represents proceeds of unlawful activity or is an instrument of a serious offence and should be forfeited to the Commonwealth.

3. On 13 April 2018, the applicants filed a Notice of Motion under s 31 of the Act seeking an order under s 29 that the Property be excluded from the restraining order. Alternatively, they seek an order under s 44 that the Property be excluded upon them giving an undertaking in a form satisfactory to the Court. Their case is that the money was received from Pharmacy Depot by way of loans and that they were completely ignorant of the possibility that it may have been derived from any unlawful activity.

Legislative provisions

4. It was the joint position of the parties that the version of the Act that must be applied is that in Compilation No 46 of 1 December 2016.

5. In Commissioner of the Australian Federal Police v Hart (2018) 262 CLR 76; [2018] HCA 1 at [32], Gordon J observed:

"The Proceeds of Crime Act 2002 (Cth) (16) (“the POCA”) is intended to, and does, prevent criminals from enjoying the fruits of their crimes, deprive them of the proceeds of and benefits derived from criminal conduct, prevent the reinvestment of those proceeds and benefits in further criminal activities, punish and deter breaches of laws, and enable law enforcement authorities to trace the fruits of offences."

6. Her Honour also observed (at [66]):

"The POCA contains procedures for property to be excluded from a restraining order and for a restraining order to be revoked. Consistent with the intended reach of the POCA, the circumstances are limited and the conditions strict." (Footnotes omitted)

7. The principal objects of the Act are listed in s 5. Overall, they tend to explain the very stringent provisions made by the Act for the confiscation of proceeds of crime. Chapter 2 of the Act provides for a confiscation scheme which sets out provisions relating to freezing orders in respect of accounts with financial institutions (Pt 2-1A); restraining orders prohibiting disposal of or dealing with property (Pt 2-1); forfeiture orders under which property is forfeited to the Commonwealth (Pt 2-2); forfeiture of property to the Commonwealth on conviction for a serious offence (Pt 2-3); pecuniary penalty orders requiring payment of amounts based on benefits derived from committing offences (Pt 2-4); literary proceeds orders requiring payment of amounts based on literary proceeds relating to offences (Pt 2-5); and unexplained wealth orders requiring payment of unexplained wealth amounts (Pt 2-6).

8. This matter is concerned with Pt 2-1 (ss 16 – 45A) which sets out provisions concerning restraining orders. Section 18 provides for the making of restraining orders where a person is suspected of committing a "serious offence". The offences alleged to have been committed by the defendants are within the definition of a "serious offence" in the Dictionary in s 338.

9. Division 3 of Pt 2-1 (ss 29 – 32) provides for the exclusion of property from restraining orders.

10. Section 29 provides (relevantly) for the exclusion of property from restraining orders as follows:

29 Excluding property from certain restraining orders

(1) The court to which an application for a *restraining order under section 17, 18 or 19 was made must, when the order is made or at a later time, exclude a specified *interest in property from the order if:

(a) an application is made under section 30 or 31; and

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

Note:   Section 32 may prevent the court from hearing the application until the responsible authority has had a reasonable opportunity to conduct an examination of the applicant.

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

…

(c) for a restraining order under section 18—the interest is neither:

(i)  in any case—proceeds of unlawful activity; nor

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

(d) …

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

…

(4) However, the court must not exclude a specified *interest in property from a *restraining order under section 17 or 18 unless it is also satisfied that neither a *pecuniary penalty order nor a *literary proceeds order could be made against:

(a) the person who has the interest; or

(b) if the interest is not held by the *suspect but is under his or her *effective control—the suspect.

11. The term "unlawful activity" is defined in the Dictionary in s 338 of the Act. There is no issue that the offences alleged to have been committed fall within this term.

12. Section 30 makes provision for the exclusion of property from a restraining order before such an order is made. Section 31 provides (relevantly) for the making of an application to exclude property after a restraining order has been made:

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

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

(1A) An application under subsection (1):

(a) must be made to the court that made the *restraining order; and

(b) may be made at any time after the restraining order is made.

…

(4) The person must give written notice to the *responsible authority of both the application and the grounds on which the exclusion is sought.

(5) The *responsible authority may appear and adduce evidence at the hearing of the application.

(6) The *responsible authority must give the person notice of any grounds on which it proposes to contest the application. However, the authority need not do so until it has had a reasonable opportunity to conduct *examinations in relation to the application.

13. Some of the terms used in the above provisions are defined later in the Act.

14. The meaning of "proceeds of an offence" and "instrument of an offence" are defined in s 329:

329 Meaning of proceeds and instrument

(1) Property is proceeds of an offence if:

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

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

whether the property is situated within or outside *Australia.

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

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

or

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

whether the property is situated within or outside *Australia.

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

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

15. Section 330 sets out provisions for when property becomes, remains and ceases to be proceeds or an instrument. The following aspects are presently relevant:

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

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

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

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

including because of a previous application of this section.

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

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

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

including because of a previous application of this section.

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

(a) it is credited to an *account; or

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

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

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

(6) Property becomes, remains or ceases to be *proceeds of an *unlawful activity, or an *instrument of an unlawful activity, if the property becomes, remains or ceases to be proceeds of the offence, or an instrument of the offence, constituted by the act or omission that constitutes the unlawful activity.

16. Another term which is relevant to the issues in the present case is "effective control" which is defined in s 337. The following aspects are relevant:

337 Meaning of effective control

(1) Property may be subject to the effective control of a person whether or not the person has:

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

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

…

(5) In determining whether or not property is subject to the effective control of a person, regard may be had to:

(a) shareholdings in, debentures over or *directorships of a company that has an *interest (whether direct or indirect) in the property; and

…

(c) family, domestic and business relationships between persons having an interest in the property, or in companies of the kind referred to in paragraph (a) … and other persons.

…

17. The Dictionary in s 338 includes the following that are relevant in the present case:

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

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

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

whether present or future and whether vested or contingent.

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

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

18. The alternative form of relief sought by the applicants is under s 44(2):

44 Giving security etc. to revoke etc. a restraining order

…

(2) A court may:

(a) revoke a *restraining order that covers the property of a person who is not a *suspect; or

(b) exclude specified property from such a restraining order;

if:

(c) the person applies to the court to revoke the order or exclude the property; and

(d) the person gives written notice of the application to the *responsible authority; and

(e) the person gives an undertaking concerning the person’s property that is satisfactory to the court.

Procedural history

19. On 17 April 2015, the AFP commenced proceedings under the Act against Pharmacy Depot and its sole directors and shareholders, Jacob Youssef and Hamza Zoghbi. The ultimate relief sought by the AFP includes pecuniary penalty orders against the three defendants.

20. On 4 December 2017, provisional liquidators were appointed to Pharmacy Depot on the petition of Mr Zoghbi. On 25 June 2018, an order was made for the winding up of Pharmacy Depot and liquidators were appointed. Leave was granted under s 471B of the Corporations Act 2001 (Cth) on 6 September 2018 enabling the AFP to proceed against Pharmacy Depot in liquidation.

21. Restraining orders were made against various items of property in 2015 and following. As mentioned, on 10 March 2017, a restraining order was made in respect of the Property the subject of these proceedings. An amended summons was filed with leave by which, inter alia, relief in the form of a forfeiture order against the Property was sought.

22. Each of the restraining orders made to date in the proceedings were based upon the defendants being reasonably suspected of committing the offences of obtaining a financial advantage from the Commonwealth by deception[2] (the fraud offence), and dealing with money exceeding $100,000 which is reasonably suspected of being the proceeds of crime[3] (the money laundering offence).

    2. Contrary to s 134.2 of the Criminal Code (Cth).

    3. Contrary to s 400.9(1) of the Criminal Code (Cth).

23. The Property was suspected of being either (a) property of another person that is subject to the “effective control” of Pharmacy Depot (s 18(2)(c) of the Act) or (b) property of another person which is the "proceeds" of the suspected offences committed by Pharmacy Depot (s 18(2)(d) of the Act).

24. Criminal proceedings are pending against Mr Zoghbi. Court Attendance Notices have been filed in respect of Mr Youssef but have not been served. He has left the country and has not returned.

25. The applicants are registered owners as joint tenants of the Property. They seek to exclude their interests in the Property from the restraining order made on 10 March 2017 pursuant to either ss 29 and 31, or s 44(2) of the Act. They bear the onus of proving the matters necessary to establish the grounds for making the order applied for on the civil standard of proof: s 317 of the Act.

26. The applicants have complied with the requirement in s 31(4) of the Act to give notice of the grounds on which they seek exclusion from restraint pursuant to ss 29 and 31. They have also provided, in draft form, an undertaking they are prepared to make for the purpose of the application under s 44. The AFP has given notice of its grounds of opposition to the ss 29 and 31 application in accordance with s 31(6).

Evidence

27. Pharmacy Depot was an approved supplier under the Pharmaceutical Benefits Scheme (PBS). Fraudulent claims are alleged to have been made under the PBS for the supply of particular products which resulted in Pharmacy Depot being paid about $18 million by the Department of Health. In fact, Pharmacy Depot only ever received two invoices for the purchase of these types of products for a total value of $2276. Mr Youssef and Mr Zoghbi were Pharmacy Depot’s authorised persons for the making of PBS claims. The payments were made into a bank account nominated by Pharmacy Depot for the receipt of PBS reimbursements. The conduct underlying the fraud offence is alleged to have occurred between about 30 November 2013 and 12 March 2015.

28. In a written outline of submissions at the commencement of the hearing, [4] the applicants accepted that the submission of fraudulent PBS claims and receipt of over $18 million from the Commonwealth constituted the fraud offence alleged; that the funds received from the Commonwealth were proceeds or an instrument of crimes; and that dealing with such funds constituted the money laundering offence alleged.

    4. Applicant’s written submissions (AWS) at pars 7-8.

The applicants' background

29. Ms Haidar said in her affidavit that she graduated from secondary school with the Higher School Certificate. She worked as a medical receptionist for four years and then worked as a call centre worker with Vodafone. She married her husband in 2002. In 2010, she was made redundant from Vodafone.

30. In early 2014, Ms Haidar was asked by her brother, Jacob Youssef, if she could work at Pharmacy Depot. She worked around 5 to 6 hours per day, three days a week, and performed a range of clerical and administrative tasks. These included preparing lists of accounts payable and receivable which she provided to the directors, her brother, and Mr Zoghbi. She was sometimes required to send documents to the accountants for Pharmacy Depot such as bank statements and sales reports. The bank statements generally showed "it had millions of dollars in its bank account". [5]

    5. Affidavit, Zeinab Youssef (aka Haidar), 11 April 2018 at par 18.

31. Ms Haidar said that she mainly communicated with the accountants by email. If she was unable to answer an inquiry from the accountants she would refer it to one of the directors and then respond in accordance with their instructions.

32. Ms Haidar listed a number of financial matters and matters relating to PBS payments for which she had no involvement.

33. Ms Haidar said that in 2013, her husband and their family were living in a rented apartment at Banksia and they decided they wanted to buy their own property rather than renting. She and her husband applied for a loan for about $520,000 with Westpac. She said "a copy of the approval" was included in an exhibit to her affidavit. [6] (The document referred to actually advised of an approval "in principle" that was valid for 90 days from 28 October 2013.)

    6. Ex ZY-1, tab 1.

29. Ms Haidar said that in the first half of 2014, after she had commenced working at Pharmacy Depot, she had "general discussions at work with Jacob and Hamza about the fact that my husband and I were looking for a property". At that time, she and her husband had tried to purchase a few houses; they had placed bids at auctions but had not been successful.

30. Mr Haidar stated in his affidavit that his occupation was as a "mechanic". He said that he currently worked at Euro Star Car Parts and had been working there for around 10 years. He said he was born in Lebanon. He spoke English, but not fluently, and he could not read or write English.

31. Mr Haidar said that his brother-in-law, Jacob Youssef, was a director of Pharmacy Depot. He was aware of another director, Hamza (Mr Zoghbi) but had only met him on a few occasions and not prior to the events of 2015.

32. The evidence of the applicants' financial circumstances indicates they had very modest incomes and fairly minimal assets. Their combined taxable income for FY 2014-2016 was $47,000, $76,000 and $87,000 respectively. [7] They each agreed in cross-examination that they could not afford the deposit for a home. [8] They lived in rental accommodation and prior to 2015 had never owned real property.

    7. Ex JC-6, tab 11; based upon Ms Haidar's declared taxable income and what she stated was her husband's income in those years.

    8. Mr Haidar at tcpt, 10 April 2019, p 37(49); Ms Haidar at tcpt, 11 April 2019, p 114(44).

Acquisition of the Property

38. Ms Haidar said that in mid-2014, she found that she had unexpectedly fallen pregnant with her fourth child. She and her husband were worried about money, particularly because she would not be able to work for a time after the birth. She also felt under increased pressure to find a new home because the family, then of three but soon to become four, was living in a one bedroom apartment.

39. Ms Haidar said that it was around this time that either her brother or Mr Zoghbi said, "We might be able to lend you the money for your new house". [9] A week or two later, there was a further conversation with both men. They said they had discussed lending her the money; they were happy to "start you off with an amount for a deposit and we can lend you the rest once you actually buy the property". The offer included that "we also are willing to give you 12 months of no repayments". One of them asked what her husband was earning and she said, "I think he's earning about $40,000 or so". She was asked to show them "the pre-approval that you already have" and she said she would find it". [10]

    9. Affidavit, Zeinab Youssef (aka Haidar), 11 April 2018 at par 28.

    10. Ibid at par 30.

40. Ms Haidar said that she was excited by this proposal and she discussed it with her husband. She was particularly keen on having the 12-month period of no repayments as it would take pressure off with the new baby and they would not have to worry about finances as much as otherwise. Her husband was also happy about that aspect. She said, "This was one of the reasons that we accepted the loan offer with Pharmacy Depot instead of Westpac". [11]

    11. Ibid at par 32.

41. Mr Haidar said that in around mid-2014, his wife told him that the directors of Pharmacy Depot had offered them a loan as they knew they were looking for a property. He said the "key term of the loan which grabbed my attention was that there were no repayments for the first 12 months". [12] He was "elated". Because of his lack of English language skills, he left the arrangements to his wife.

    12. Ibid at par 15.

42. Ms Haidar told her brother soon afterwards that she and her husband wanted to go ahead with the loan. She provided him with the Westpac pre-approval. A day or two later, he gave her a written loan agreement. She took it home and looked at it with her husband. She had to explain some parts to him because he did not read English. The agreement included the 12-month no payment period as a clause. She and her husband were happy with the agreement.

43. Mr Haidar said that Ms Haidar showed him a written loan agreement and they talked about it. He did not remember any specific terms except for there being no repayments for 12 months.

44. Mr Haidar described his cousins, Mohamed Mousselmani and Mahmoud Mouhana, as property developers by trade. They developed the apartment building in which the Property was located. He said his cousins contacted him as they knew he and Ms Haidar were looking to buy a home. They offered them the Property at less than market value "as a family discount". [13] He and his wife agreed to buy the Property. It was the first time they had bought any property.

    13. Affidavit, Hussein Haidar, 27 March 2018 at par 15.

45. The Property had been listed on the open market at around $789,000, but Ms Haidar understood the vendors were willing to sell at under the market rate because of the close family connection. (So, in effect, the applicants were gifted more than $200,000.)

46. Ms Haidar said that when she told her brother that she and her husband were ready to go ahead, he asked when her husband would be available to sign the agreement. One day soon after, when Mr Haidar came to pick her up from work, he signed the loan agreement which provided for an advance to him of $250,000. Mr Haidar recalled going to Pharmacy Depot to sign an agreement for a loan of $250,000. Both of the directors were present. The money was deposited into his account on 27 August 2014. (The account had a balance of $133.85 prior to the deposit. [14] )

    14. Ex JC-4, tab 10, p 1072.

47. The sale price of the Property was $550,000. The $55,000 deposit was paid out of the $250,000 advanced by Pharmacy Depot. The contract for sale dated 30 October 2014 was only in Ms Haidar's name as purchaser. [15] Towards the end of her cross-examination, Ms Haidar was adamant that her husband signed the contract, but she was wrong. [16] I note, however, that earlier in her evidence, she had accepted that the contract was in her name alone. [17] A local law firm, Zahr & Zahr, acted on the purchase.

    15. Ex 4.

    16. Tcpt, 11 April 2019, pp 141(7); 141(21); 143(2).

    17. Tcpt, 11 April 2019, p 128(35).

48. Ms Haidar said that on about 11 December 2014, she signed "a copy of the loan agreement with Pharmacy Depot" at her brother's request. She said it was not the one her husband had signed, and it was for $308,000.

49. Ms Haidar said that on 12 December 2014, Pharmacy Depot advanced $308,000 to her and her husband by way of bank cheque made out to the vendors of the Property.

50. These funds advanced by Pharmacy Depot were used for settlement, which occurred on or around 16 December 2014. Ms Haidar said that they did not have to pay stamp duty as they were first home buyers.

51. Ms Haidar said that she did not know or suspect that the loan money provided to her husband and herself from Pharmacy Depot was proceeds of crime. [18] Mr Haidar said the same. He thought it was just a case of his wife's brother helping his family where he was in a position to do so. [19] The applicants accept, however, that because of s 330(3) of the Act, the funds they received remained proceeds or an instrument of crime (unless they ceased to be so because the matters in s 330(4)(a) are made out). [20]

    18. Affidavit, Zeinab Youssef (aka Haidar), 11 April 2018 at par 51.

    19. Affidavit, Hussein Haidar, 27 March 2018, at par 22.

    20. AWS at par 9.

Subsequent events

52. Ms Haidar continued in her affidavit to say that the solicitors did not register the paperwork and she only became aware that she and her husband were not registered as the owners of the Property when she received a notice of disconnection for the water service.

53. It is common ground that no charge or mortgage was registered by Pharmacy Depot over the property in relation to the loans it was said to have advanced. Ms Haidar was insistent at the conclusion of her cross-examination that there was a mortgage. [21] Whether she understood what a mortgage was, or whether she was referring merely to her understanding that there was a debt due to Pharmacy Depot, is not entirely clear.

    21. Tcpt, 11 April 2019, p 144(45)-145(15).

54. Ms Haidar said she was aware that the AFP had started investigating Pharmacy Depot in early 2015. Neither her brother, nor Mr Zoghbi, spoke to her about it.

55. A search warrant was executed at the business premises of Pharmacy Depot on 26 March 2015. On 17 April 2015, the first restraining orders in the proceedings were made. Examination orders were also made in relation to the two directors and Ms Haidar. Messrs Zoghbi and Youssef were examined in May 2015. Ms Haidar was supposed to have been examined around that time as well but she did not attend to be examined until 22 July 2015. [22]

    22. Ex 1.

56. On 8 May 2015, the applicants signed an application to Westpac for a loan of $600,000. [23] The application form contains a considerable number of anomalies. For example, the address of the applicants was said to be their former rental accommodation. The loan was said to be for the "purchase of a dwelling for rental/resale", the dwelling being the Property. The applicants were said to have no dependents. The claimed market value of the property they were to purchase, and their own property assets, were both said to be $780,000. They were said to have "shares/unit trusts/bonds/debentures (cash value only)” amounting to $125,000, which was patently incorrect. One particular matter noted by the AFP was that there was no mention of any liability in terms of a loan from Pharmacy Depot to the value of $558,000.

    23. Ex JC-4, tab 5.

57. It was submitted by the applicants' counsel that there were so many anomalies in the form, at least some of which the bank officer would clearly have recognised, that it cannot be held to reflect adversely upon the applicants' credit. It is difficult to know in relation to any specific item whether the blame lay with the bank officer, or the applicants, or both.

58. The bank approved this loan application and there is a letter from Westpac dated 18 June 2015 advising to that effect annexed to Ms Haidar's affidavit. [24] A mortgage over the Property was registered on 2 July 2015. [25] The full amount of the loan was drawn but was placed in a redraw account that functioned as an offset account so that no interest was being incurred on the loan funds.

    24. Ex ZY-1, tab 4, p 253.

    25. Ex JC-4, tab 3, p 1002.

59. It was in the course of arranging the Westpac loan that the applicants took steps to be registered as the owners of the Property. Letters and other documents dated between 19 May 2015 and 3 June 2015 are to the effect that this and related requests were successful. [26] The transfer was registered on 10 June 2015. [27] Curiously, this followed a letter from the applicants' conveyancing solicitors, Zahr & Zahr, asking that the registration occur urgently "as they are purchasing property elsewhere and require the Deeds for the purposes of facilitating their loan" and that if they do not receive the Deeds by the end of the week "they will suffer financial hardship and incur penalty interest for the delay of their purchase property". [28] This is curious because it coincides with an aspect of the anomalous information included in the Westpac loan application.

    26. Ex JC-6, tab 18, pp 1533, 1542-56; tab 30, p 1556; ex 4.

    27. Ex JC-4, tab 3, p 1002.

    28. Ex JC-6 tab 31, p 1557.

60. In a letter of 18 September 2015 to the AFP from a firm of solicitors acting for the defendants (Galloways), it was confirmed that "the loans" referred to in previous correspondence (which is not in evidence) were made to Mr Haidar ($250,000) and Ms Haidar ($308,000) for their purchase of Property. [29] It was proposed that the applicants repay the $558,000 by deposit to the bank account of Pharmacy Depot and the defendants would consent to such funds then being restrained. The AFP agreed with the proposal in a reply letter of 25 September 2015. [30]

    29. Ex ZY-1, tab 5, p 258. (The address of the property is as it was before a block of units was built upon it.)

    30. Ex ZY-1, tab 5, p 255-6.

61. Ms Haidar referred in her affidavit to the making of the restraining order on 10 March 2017. She said that ultimately the loan to Pharmacy Depot was not repaid. This was because of some uncertainty arising about the legal effect this would have in terms of the AFP's involvement.

62. A letter from Westpac to Ms Haidar dated 20 March 2017 enclosed an Order dated 10 March 2017 (the restraining order) which had been served on the bank. [31] The letter advised that no drawings were permitted from the offset account until such time as the Order is varied, and that if the Order is lifted, she would be required to complete a new authority for redraw to be re-activated on the loan account.

    31. Affidavit, Zeinab Youssef (aka Haidar), 3 April 2019, annexure A.

63. In a letter to the AFP by the applicants' solicitors (Streeton Lawyers) dated 2 August 2017, the AFP were asked to consider the repayment of $558,000 in exchange for no further action being taken in respect of the Property. The letter suggested that the benefits of the AFP accepting this proposal included that the AFP would receive into an account of its choosing the full amount of the "proceeds"; it would save the AFP from the complexity and cost of taking action in respect of real property; it would focus "on the real issues in dispute" concerning Pharmacy Depot's alleged wrongdoing; and would provide the applicants with certainty over their future, being a family with five children et cetera. [32]

    32. Ex ZY-1, tab 7, p 269.

64. The AFP rejected the offer in a letter of 28 August 2017. [33] The rejection was, at least in part, on the basis that no evidence had been provided to establish that there had in fact been a loan from Pharmacy Depot to the applicants. Further, it was contended that the applicants would no doubt have derived a benefit from the value of the Property having "significantly increased" since the time it was purchased in 2015, thereby increasing the value of the benefit derived by the applicants from the suspected offending. Thus, the AFP contended that the entire value of the Property, including such gain, was the proceeds of crime. (The AFP has maintained this position.)

    33. Exhibit ZY-1, tab 8, p 281.

65. Ms Haidar concluded her first affidavit by saying that she had searched in vain for the written loan agreement. She said that in October 2017, her brother sent her a copy of an unexecuted blank loan agreement. She said that "the loan agreements that my husband and I signed were in accordance with this document, save that there was a clause that there would be no repayments for 12 months". [34]

    34. Affidavit, Zeinab Youssef (aka Haidar), 11 April 2018 at par 62.

66. The blank loan agreement document annexed to Ms Haidar's affidavit [35] nominates Pharmacy Depot as the "lender" but the space for the name of the "borrower" is blank. All other fields, such as the name of the property are also blank. Other noteworthy aspects include:

    35. Ex ZY-1, tab 9.

●   The loan is said to be for the "private investment purposes" of the borrower.

●   Provision is made for progressive drawings by the borrower up to "the Limit".

●   A $500 establishment fee which would be added to the total loan amount.

●   A termination fee of $5000 must be paid by the borrower if the loan amount was paid in full within the first 12 months.

●   All payments were required to be made in full within 7 years from the draw down date.

●   At least one payment toward principal was to be made within 12 months of the first draw down date.

●   Interest was to be calculated daily and paid annually in arrears from the draw down date on drawn amounts.

●   There is no provision for there to be no repayments for the first 12 months.

67. Letters sent to each of the applicants by the liquidators of Pharmacy Depot dated 13 November 2018 advised of their appointment on 25 June 2018. They were advised that the company records indicated a "loan" to Ms Haidar of $308,010 and a "loan" to Mr Haidar of $250,000, both of which were "due and payable". Payment was required within 14 days. The annexed "loan account" printouts indicated the drawing of Ms Haidar's "loan" in December 2015 and Mr Haidar's "loan" in August 2015. [36]

    36. Affidavit, Mikaela Karen Eldridge, 14 March 2019, annexure A (the applicants’ solicitor).

68. A letter from the applicants' solicitors to the liquidator dated 23 November 2018, aside from recounting the history, suggested that the liquidator should await the determination of the applicants' exclusion application. If they were successful, they proposed being able to repay the loans by drawing down the Westpac loan account. A further letter of 20 February 2019, insofar as it is relevant, advised that the applicants' Notice of Motion had been listed for hearing on 10 April 2019. [37]

    37. Ibid, annexures B and C.

69. A letter from the liquidator's solicitor to the applicant's solicitors, dated 14 March 2019, indicated that the liquidators believed that no restraining order prevented them from pursuing the applicants for a debt owed to Pharmacy Depot. [38] On 2 April 2019, the applicants' solicitors replied to the solicitors for the liquidator, copying in the solicitors for the plaintiff, and enclosing for consideration a revised undertaking for the purpose of s 44(2) of the Act. It included that if the applicants were successful in their application for an order pursuant to s 44, they would draw down the funds standing to their credit in their Westpac loan account and pay the same to the liquidator of Pharmacy Depot.

The issues as to whether the Property should be excluded pursuant to ss 29 and 31 and whether the funds were acquired pursuant to loans

38. Affidavit, Mikaela Karen Eldridge, 5 April 2019, annexure A.

70. There was an issue in the proceedings as to whether the funds advanced by Pharmacy Depot to the applicants were an "instrument" of an offence. [39] Nothing practical turns on this because the applicants' contention remains the same; s 330(4)(a) would operate to cease any such characterisation. [40]

    39. AWS at pars 123ff; plaintiff’s written submissions (PWS) at pars 91ff.

    40. AWS at par 129.

71. The applicants accept that the funds were proceeds or an instrument of an offence, but contend they ceased to have that character on the basis that each of the four elements in s 330(4)(a) of the Act are made out:

1.   the funds were acquired by a third party;

2.   for sufficient consideration;

3.   without the third party knowing that the funds were proceeds or an instrument of an offence; and

4.   in circumstances that would not arouse a reasonable suspicion that the funds were proceeds or an instrument of an offence.

72. It is common ground that the applicants "acquired" the funds. They submit that they were in the category of being a "third party", wholly removed from the transaction by which the funds earlier became proceeds or an instrument of an offence: Lordianto v Commissioner of the Australian Federal Police [2018] NSWCA 199 at [101]-[106]. [41]

    41. AWS at pars 80-92.

73. The applicants' submit that the funds were acquired for consideration, namely the obligations (whether written or oral) to repay the amounts of loans, with interest, which was sufficient and reflected the value of the funds, having regard solely to commercial considerations: s 338 of the Act. [42]

    42. AWS at pars 93-112.

74. The applicants also contend that they did not know, or suspect, that the loan funds were proceeds of crime and there was nothing in the circumstances that would have aroused a reasonable suspicion that the funds were proceeds or an instrument of an offence. [43]

    43. AWS at pars 113-117.

75. The applicants' case is very much dependent upon the Court’s acceptance of their evidence that they received the funds pursuant to loans. The AFP submitted that their evidence could only be accepted where it is supported by contemporaneous records or is against interest. [44]

    44. PWS at par 65.

72. A number of matters arising from the evidence provide a hurdle to the Court’s acceptance of the applicants' case on this issue.

73. First, and significantly, the applicants were not always impressive witnesses. It must be acknowledged that they are relatively unsophisticated people, Mr Haidar more so than his wife, and also that Mr Haidar was giving evidence through an interpreter. Allowance must also be made for the possibility that a witness may think that a short direct answer to a question will not adequately explain the matter and so proceed to provide additional contextual information.

74. Demeanour was not a reliable indicator of credibility or reliability in relation to both applicants and I have disregarded it. There are important matters at stake for them in these proceedings and it may well be that the occasions when they became emotional in their responses were simply a product of the understandable anxiety they would be experiencing.

75. Having said that, it was a feature of both applicants' evidence that they resorted to, on quite a number of occasions, giving answers which were unresponsive or where they volunteered extraneous information, or both, and thereby gave the appearance of evasiveness. [45] One particular aspect of the cross-examination of Ms Haidar diminished her credibility considerably. [46] As counsel for the applicants submitted, it was in relation to a document "completely unrelated to the subject matter of the case". [47] It related to her advising the Pharmacy Depot accountant of information that had been provided to a financial institution in support of an application by her brother for a credit card. [48] It included the false information that her brother was single when in fact he was married. Nothing turns on this except that instead of acknowledging the incorrectness of the information, Ms Haidar elected to prevaricate to a rather extraordinary degree.

    45. For example, in relation to Mr Haidar, see tcpt, 10 April 2019, pp 37(1)-39(10); and in relation to Ms Haidar, see tcpt, 11 April 2019, pp 141(4)-143(2).

    46. Tcpt, 11 April 2019, pp 88(37)-90(38).

    47. Tcpt, 12 April 2019, p 175(40).

    48. Ex 9, email dated 18 July 2019 at 1.26pm from Ms Haidar to the Pharmacy Depot accountants.

76. Overall, the applicants' evidence did not imbue confidence that they could be taken on their word alone. Acceptance of their case turns very much on the extent to which their testimony was supported by documentary material.

77. The most prominent document in terms of what might have been expected to be produced in order to confirm the applicants' claim that funds were received by way of legitimate loans from Pharmacy Depot is a written signed loan agreement. The applicants claim in their affidavits that two such agreements were brought into existence but they have been unable to produce either.

78. Neither of the directors of Pharmacy Depot were called to support the applicants' assertion that there were loans. Ms Haidar specifically agreed that she had not sought her brother's assistance in this respect. [49]

    49. Tcpt, 11 April 2019, p 109(1).

79. Mr Haidar said in his affidavit that he could not recall any specific terms of the loan agreement his wife showed him, "except for the no repayments for 12 months". [50] He was asked about this in cross-examination: [51]

    50. Affidavit, Hussein Haidar. 27 March 2018 at par 17.

    51. Tcpt, 10 April 2019, p 35-37.

"Q. Was it your understanding that there were no repayments at all or only no payments of interest?

A. INTERPRETER: Interest only. I believe only interest, not payment for interest.

Q. What was your understanding about repayment of principal during the first 12 months?

A. INTERPRETER: For this part which is I believe is legal things, my wife knows it better than me and I approved as my wife approved.

Q. I’m asking you about what your understanding was about the loan agreement you say you had with Pharmacy Depot?

A. INTERPRETER: I understood that the first year I don’t pay. If was interest or the principals I wouldn’t differentiate, but was encouraged because I know there is no payment first 12 months. I believe so.

Q. Did interest accrue on the loan during the first 12 months but did not have to be paid until after 12 months?

A. INTERPRETER: Yes I believe, yeah that could be correct.

Q. So interest was incurred during the first 12 months but you and your wife did not have to pay it until after 12 months had past?

A. INTERPRETER: Yes - was I think was attracted to me because I want to buy the unit, it was cheap from my cousin, so I was more in a hurry to get it because it was cheap.

Q. Can you answer the question I asked you?

A. INTERPRETER: Yes I’m answering.

Q. Did you understand that you would have to pay interest for the first 12 months of the loan but that payment would be after 12 months had elapsed?

A. INTERPRETER: Yes it’s correct.

Q. What was your understanding about the amount of repayments that you would have to make after 12 months had elapsed?

A. INTERPRETER: What do you mean the amount?

Q. Your evidence is that you had to pay nothing for the first 12 months, correct?

A. INTERPRETER: Yes it’s been translated for me.

Q. In the second year you would have to start making repayments, correct?

A. INTERPRETER: Well I had to pay amount, it will be very close to the rent I used to pay because there is no interest that’s the way I took the loan from Pharmacy Depot. I believe so.

Q. So you are now saying that you understood that when repayments started they would be in the same amount as your rent, is that correct?

A. INTERPRETER: My wife was a lady who understand all of this and I was comfortable with this and I followed my wife what she admit on.

Q. I suggest to you that you have no recollection or understanding at all of the terms of the loan agreement that you say you have with Pharmacy Depot, do you agree with that?

A. INTERPRETER: What do you mean, is my wife deceiving me in this or trying to confuse me?

Q. Can you tell his Honour what the term of the loan was, when did it ultimately have to be paid back?

A. INTERPRETER: So first year I will have no payment, and the second year I will have to start payment. That’s what I understood.

HIS HONOUR

Q. How much?

A. INTERPRETER: Look, I believe my wife knows about it but I believe somehow it’s equal to the rent I used to pay at the place I was renting.

Q. When did it have to be all paid back by?

A. INTERPRETER: Well was about five, six months my wife was having baby, everything went fast. Well my cousin who is a developer, he was putting pressure on me and was pushing me to buy it before the prices goes up, so I was going to buy the unit and that’s what happened.

Q. That’s not my question. My question was, when did you have to pay all the loan back by?

INTERPRETER: Your Honour do you mind if I explain to him in a simpler word?

HIS HONOUR: Sure.

INTERPRETER: The home loan to be paid your Honour?

HIS HONOUR: Yes.

INTERPRETER: I can’t recall the agreement with my wife."

84. Mr Haidar's evidence about the repayments being "very close to the rent I used to pay" needs to be read with his evidence to the effect that he did not know the exact amount of rent he had been paying. He said, variously, "well 400, 420"; his wife looked after that; "would have been more than 460"; "it's under $500"; he attached no significance to the amount of rent he was paying in August 2014 because "my wife does this". [52] Ms Haidar thought they had been paying a little under $500. [53]

    52. Tcpt, 10 April 2019, pp 33-34.

    53. Tcpt, 11 April 2019, p 68(11).

85. Ms Haidar's ability to recall the terms of the loan agreement was not greatly different. She said in her affidavit that she explained the agreement to her husband because he did not read English. She recalled it had a 12 month no repayment period as a clause and that she and her husband were happy with it. She recalled the agreement signed by her husband provided for an advance to him of $250,000. Shortly before settlement, she signed "a copy of the loan agreement" which was "different from that signed by my husband". She did not "recall any differences in wording save as to the amount". [54] Aside from these matters, there was nothing in her affidavits about the terms of the agreement.

    54. Affidavit, Zeinab Youssef (aka Haidar), 11 April 2018 at pars 38, 40, and 48.

86. In cross-examination, Ms Haidar said that apart from the "no repayments term period", she read "the fine writing, the little conditions, it's not that I didn't read them, I didn't pay much attention to them". She understood that repayments would commence 12 months later, in August 2015. [55] She was asked what the payments would be once they commenced: [56]

    55. Tcpt, 11 April 2019, pp 110-111.

    56. Tcpt, 11 April 2019, pp 111-112.

"Q. What would those payments comprise?

A. My understanding of the time, it wasn't going to be any more than what I was currently paying for rent, but I didn't know the dollar figure, exact figure. I would have worried about it when the time got closer and organised the repayment amount.

Q. So you understood you were going to be paying something under $500?

A. I knew it was with - in line of my rental, current rental. It may have varied a little bit, a bit above, but I knew it wasn't something excessive or out of, out of our, our capabilities.

Q. You understood it wasn't going to be interest free so you knew you would have to--

A. Yes, yes.

Q. --pay from the August 2014 date?

A. Yes.

Q. In August 2015 you would have to pay--

A. Start paying the interest.

Q. --first up, one year's accrued interest on 250,000?

A. Okay.

Q. Yes?

A. I don't know if I remember of it in - think of it that way, but I knew there was going to be interest on the period that we had no repayments term on. I knew that, but exactly the dollar figure and how it worked when I started to - when the time came to repay, I didn't understand or didn't really know exact dollar, but I knew it was going to be no more than my current rent, it was similar to my current rent, a bit above, and there was going to be interest on the previous term. But I knew that also I was going to be starting off as an interest only term I think in the first 12 months after that, so I knew that it was going to be still at an ease for us.

Q. You've just remembered have you that the second year of the loan would be interest only, by which you mean no repayment of principal, and only payment of interest on the balance outstanding?

A. No, I knew I could pay the 12 months interest, the 12 months that passed. I knew that we would have to pay that 12 months interest when we started to make our repayments. So I understood that, that it, that it wasn't an interest free 12 months no repayments, no interest. I knew it wasn't that. I knew it was only 12 months no repayments and the interest will take effect after we started to pay, make payments.

Q. What payments would you have to make in the second year?

A. Our loan repayments, whatever they would have given me to pay I would have done.

Q. So that--

A. So basically whatever calculations they would have given me, interest, principal, I would have repaid and I always understood it was manageable based on no more than your current rent.

Q. So your understanding was that after 12 months had elapsed you would first up have to pay 12 months' worth of interest on 250,000?

A. I didn't know if I have to pay it first up. I knew that interest will start taking effect from, from 2014, though I didn't know if they - I don't remember if they wanted it in a lump sum. I don't recall that being the case either.

Q. In addition to paying the interest that had accrued over the period August 2014 to August 2015, you would then have to start making repayments of principal and interest?

A. Pretty much, yes, I think so, yes.

Q. You had no understanding of what the interest rate would be?

A. At the time yes, and it was an average rate, it was like the banks, 4, 5, a 6 or a 7. It was around what the banks - maybe a bit more than the banks but it didn't worry me because I had 12 months no repayments. I would have worried about everything else when the time came.

Q. But it could have been anywhere between 4, 5, 6, 7% based on that answer?

A. Well it wasn't, it wasn't 12, I knew it wasn't that high. It wasn't something excessive or out of the ordinary of what the banks currently have."

87. Ms Haidar was asked about the term of the loan. She said she thought it was about seven years; she knew that this was the period in the draft unsigned loan agreement annexed to her affidavit; and she agreed to having previously said that she thought the term might be 25 or 30 years. [57]

    57. Tcpt, 11 April 2019, p 113.

88. Mr Haidar effectively conceded that he and his wife had no way of paying back the loan on the income he and his wife were receiving in 2014. That proposition was put to him in cross-examination and he conceded it was correct: [58]

    58. Tcpt, 10 April 2019, p 41.

"Q. You knew that you and your wife had no way of paying back the loan on the income that you were jointly receiving at that point in time.

A. INTERPRETER: Yes that's correct, was very attractive, and the main things I decide my wife and I to buy, because we thought we'll buy it, one year we don't pay any repayment, and then we may sell it later on and make some money, because that unit is very hard for my young kids to go up and down top level, and I think it's a big risk for my kids.

Q. You had no idea how much your repayments would be after the 12 month holiday, did you?

A. INTERPRETER: Well was mainly job of my wife who was looking after this and she knew the agreement. In my main, my main attractive things to this deal was the price and the key point one year no payment.

Q. You yourself gave no regard to how you and your wife would go about repaying an amount of $558,000 did you?

A. INTERPRETER: Yes, true, but the turning point was the 12 months no payment and my wife fell pregnant that year.

Q. Your wife was already pregnant by the time, and you knew she was pregnant, by the time you agreed to take money from Pharmacy Depot, correct?

A. INTERPRETER: Yes. For the fourth child, yeah I knew she was pregnant.

Q. You gave no consideration or thought as to how you and your wife would make repayments after 12 months did you?

A. INTERPRETER: I never thought about that. All was too fast, too fast, under pressure."

89. This evidence of Mr Haidar was to the effect that repaying the loan was not an issue because they would sell the unit and buy something more appropriate for their family. Ms Haidar, on the other hand, seemingly had a contrary view. Although there was no mention of it in her affidavits, she purported in cross-examination to "distinctly" recall quite specific conversations with her husband about them being diligent in making repayments: [59]

"Q. … What I want to suggest to you is that you knew based on the role you played in the pharmacy and what you saw coming out of the business account, and how much money was being chalked up to personal use of the directors, you knew that Pharmacy Depot giving you and your husband the entirety of the purchase price for the property was too good to be true, didn't you?

A. I knew it was great. Not too good to - I knew it was great and I knew they were capable. A bank wouldn't do it cause they don't know me personally. My brother knows me, Hamza knew me. They were being nice. I accepted that. But I also knew, because I was borrowing from my brother and Hamza, that I distinctly talking to - remember talking to my husband telling him "Because we know of these people we need to make sure we're always on top of the repayments and we're never late", because a bank if you don't - they don't know you individually, they'll send you a letter if you're late, or you know, if something's gone wrong in your repayments.

But these guys I have to deal with every day and I remember clearly telling my husband, "We make sure we're on top of it, we pay extra when we can because these are people we know." That's my brother, I don't want to be embarrassed in front of him, and that's his partner as well. So that's a distinct conversation I remember at the time because we took the loan from someone we know, not a bank that doesn't know you individually."

59. Tcpt, 11 April 2019, p 144(20).

90. I note that if the overall amount of the two asserted loans ($558,000) was to be repaid at the rate of $500 per week it would take over 21 years just to repay the principal. Yet the term of the loans was said to be seven years. (This is putting aside the asserted repayment holiday for the first 12 months.) Repayment of just the principal in seven years would require payment of around about the entirety of the applicants' taxable income. Repayment over six years after a repayment-free first 12 months would require more than they were then earning.

91. Perhaps the agreed position of Pharmacy Depot and the applicants was not that the loan would be repaid over that term but that they would pay what they could during the seven years and then obtain refinancing to pay out the balance owing. This is, however, based more upon speculation than evidence.

92. How many loan agreements there were was also the subject of imprecision in the applicants' evidence. They were consistent in their affidavits in saying there was one for $250,000 and another for $308,000. In a statement of the grounds upon which exclusion from the restraining order was being sought (pursuant to s 30(2) of the Act), there was repeated reference to a single "loan agreement". [60] At one point in his cross-examination, Mr Haidar spoke of a loan for $558,000 for which both he and his wife were the borrowers, which was contained in a written agreement which he and his wife signed. [61] Both applicants had given prior testimony about a single loan, or both of them having signed the first loan agreement. [62]

    60. Letter from Mikaela Eldridge to Rebecca Korgellis dated 13 April 2018, court book, vol 1, tab 5, pp 41-43.

    61. Tcpt,10 April 2019, pp 34(39)-35(7).

    62. Ex JC-7A, pp 41; 215; 219-220.

93. There was no explanation as to why the company supposedly lent $250,000 to the applicants in August 2014. At that point, assuming they had a particular property in mind to purchase (and there is doubt about this given contracts were not exchanged for the purchase of the Property until two months later), all the applicants required were sufficient funds to pay a deposit.

94. There is no reason to doubt that there were two provisions of funds by Pharmacy Depot to the applicants; $250,000 in August 2014 and $308,000 in December 2014. The financial records make this plain. But what is not explained is why there were (on the applicants' case) two loan agreements. In the normal course of events, if a loan is provided for the purchase of a home there would be one agreement, albeit funds may be drawn down at different times if required. So in this case, why was there not a single loan agreement and a drawing down of $55,000 for the deposit at around the time contracts were exchanged in October with the balance drawn down in December at the time of settlement? Moreover, in the usual course if a loan for a home purchase is made to a married couple, both would be signatories to a written agreement with the lender, not the husband being the borrower in one agreement for part of the funds and the wife the borrower in a separate agreement for the other part.

95. Counsel sought to respond to these questions by submitting that it was a matter that supported their credibility. If the applicants were fabricating their evidence of the existence of loans, they would be more likely to put forward a simpler version. [63] However, it seems more likely that they tailored their account of the loan agreements to match the indisputable evidence of two large sums of money being provided to them four months apart.

    63. Tcpt, 12 April 2019, p 170.

96. When the applicants applied for a loan with Westpac in May 2015, they did not disclose the existence any loans with Pharmacy Depot. There has been previous mention of a number of anomalous items of information in that loan application form, but this is particularly curious given that the applicants both assert that the purpose of seeking the loan from Westpac was to repay Pharmacy Depot. The stated reason for the loan, according to the application, was to purchase another property. [64] Mr Haidar said that he did not tell Westpac about the loan from Pharmacy Depot because "I wasn't asked by the bank". [65]

    64. Ex JC-4, tab 5.

    65. Tcpt, 10 April 2019, p 32(24).

90. It may be assumed that if there was a loan, or loans, from Pharmacy Depot to the applicants, the company had an interest in the loan being repaid. The fact that the directors required the applicants to formally sign written loan agreements (on the applicants' case) is indicative of that. If the directors were in fact interested in having the company's funds returned, with interest, it would be expected that some inquiries would have been made about the applicants' assets, liabilities, and ability to repay. However, the applicants' evidence (Ms Haidar) is to the effect that the only verification sought was for them to provide the Westpac document indicating that prior to that bank carrying out any verification of the applicants' financial means, it had approved an "in principle" loan of $520,000. This pre-approval was valid for 90 days, and had been issued on 28 October 2013. [66]

    66. Ex ZY-1, tab 1.

91. The apparent implausibility of the directors of Pharmacy Depot proceeding with such a lackadaisical attitude to the company's finances is not assuaged by the fact that one of the directors was Ms Haidar's brother. The other director did not know Mr Haidar at all, and there is no suggestion that the company even considered obtaining a security or charge over the Property the applicants purchased.

92. Pharmacy Depot used MYOB software for maintaining its financial records. An MYOB card was produced by Ms Haidar at an examination last November. [67] It contained her husband's name and date of birth as well as the address of the rental accommodation where they lived prior to moving to the Property in February 2015. No data had been entered in any of the other fields; there is no record of an amount owing or when it was due. There was handwriting on the document, which was not hers: "27.08.14 $250,000". Ms Haidar denied having created the card (although it is unlikely that it was created by the directors and she said the accountant would not have). She was asked if it was a document given to her by Pharmacy Depot to prove the loan of $250,000. She said, "This is part of the documents, yes, they would have given me this". [68] (The only other document she was given was a blank loan agreement.)

    67. Ex 2.

    68. Tcpt, 11 April 2019, p 105(15).

93. The AFP submitted, and I accept, that this did not provide evidence of there being a loan of $250,000 to Mr Haidar. It pointed out that the card was created on 25 May 2015; eight months after the purported loan had been entered into. This was also after a search warrant had been executed at Pharmacy Depot's premises (26 March 2015); its property had been restrained (17 April 2015); examination orders had been made in respect of the directors and Ms Haidar (17 April 2015); and Jacob Youssef had been examined under s 180 of the Act (4 May 2015). [69] Ms Haidar said she was aware by this time that Pharmacy Depot "had some legal problems". [70] She was aware of the involvement of the AFP. [71] Mr Haidar said that by the time of applying for the loan with Westpac, the application being dated 8 May 2015, he had been asked to return the money to Pharmacy Depot: "Jacob asked me to pay the money by putting pressure on me". [72]

    69. First Affidavit, James Cutler, 17 April 2015 at par 49; Ex JC-6, tab 3; and Sixth Affidavit, James Cutler, 25 February 2019, at pars 24 and 28.

    70. Tcpt, 11 April 2019, pp 80(7); 80(16).

    71. Ex JC-7A, p 159.

    72. Tcpt, 10 April 2019, p 31(17).

94. True it is, as the applicants submitted, that they weren't to know in May 2015 that the AFP would seek a restraining order almost two years later. [73] However, I am satisfied that enough was known for them to be concerned that questions might be asked about $558,000 having been provided by Pharmacy Depot to two relatively impecunious relatives of one of its directors. For example (and in addition to the matters mentioned in the preceding paragraph), Mr Haidar gave evidence to the effect that within a few months of purchasing the Property (settlement was on 16 December 2014), it was the case that "the whole world knows" of the criminal investigation into Pharmacy Depot and its directors. He also became aware, at an early stage, of the proceedings for restraining orders in relation to the property of Pharmacy Depot and its directors. [74]

    73. Oral submissions: tcpt, 11 April 2018, p 158.

    74. Tcpt, 10 April 2019, p 55.

95. Putting aside that MYOB card, there were records of Pharmacy Depot which referred to the existence of loans to the applicants. The liquidators wrote separately to each of the applicants on 13 November 2018 indicating "the books and records of the Company revealed that you have a loan with the Company in the amount of …" A copy of the relevant "loan account in the Company's records" was attached. (The letters then proceed to demand payment with 14 days.) The attached record for Mr Haidar showed an amount of $250,000 as being outstanding since August 2014, and for Ms Haidar, showed an amount of $308,010 as being outstanding since December 2014. [75]

    75. Affidavit, Mikaela Karen Eldridge, 14 March 2019, annexure A.

96. Counsel for the applicant also referred to other evidence in which reference to loans to the applicants had been made well prior to action being initiated by the AFP against them. [76] It is unnecessary to discuss the actual evidence except to say that the earliest came into existence on 29 May 2015 and is all subject to the same response by the AFP described in the following two paragraphs.

    76. See the evidence referred to in oral submissions at tcpt, 12 April 2019, p 179; and in the First Confidential Transcript extract.

97. Mr James Cutler is a Federal Agent with the AFP. His duties encompass the investigation of serious and organised crime matters referred to the Criminal Assets Confiscation Taskforce, Sydney office. [77] Mr Cutler’s affidavit dated 25 February 2019 was read by the AFP without objection or requirement for cross-examination. It includes that purported "loans" are often used by criminals to justify unexplained wealth or to disguise suspicious financial transactions. [78] In Mr Cutler's experience, [79] he had encountered a number of common features, such as there being no loan documentation; loan documentation being "back-dated" or created after the transfer of funds; no evidence of the purported lender considering the ability of the purported borrower to repay or service interest instalments, nor evidence of adequacy of security; and the purported loan often being extended to a friend or relative on a non-commercial basis.

    77. First Affidavit, James Cutler, 17 April 2015.

    78. Sixth Affidavit, James Cutler, 25 February 2019 at pars 85-89.

    79. Over 10 years as a criminal investigator with the AFP, having conducted numerous investigations of money laundering and financially motivated crime.

98. In the present case, Mr Cutler noted that each "loan" was alleged to have been made during the period of the offending; the "borrowers" were related to one of the company's directors; and no copies of executed and/or dated loan agreements had been produced. Mr Cutler also said that having regard to the information gathering powers utilised in the course of the investigation by the Criminal Assets Confiscation Taskforce, he would expect that if such signed and dated loan agreements were in existence they would have been located and produced.

99. Ms Haidar said that the loan agreements that she and her husband signed were in accordance with the blank loan agreement she received from her brother in October 2017, "save that there was a clause that there would be no repayments for 12 months". That blank loan agreement [80] has been described earlier (see above at [66]). It departs in so many material respects from the agreement the applicants claimed to have signed, even accounting for their lack of recall of the terms. There are many examples. They did not purport to obtain loans for their "private investment purposes". They made no mention of being able to borrow funds on a "progressive basis". The borrower had not "received information to show the borrower up is able to pay loan payments and interest over the life of the loan". The applicants gave evidence of having obtained a loan from Westpac in 2015 in order to pay back the loans to Pharmacy Depot, but indicated no concern about having to pay an unspecified amount of "break costs" for early repayment or a $5000 "termination fee" where payment in full was made within the first 12 months. The applicants gave no evidence of an "establishment fee" of $500 being added to the loan amount.

    80. Ex ZY-1, tab 9.

100. A final point identified by the AFP was that Pharmacy Depot was in the business of operating a pharmacy. It was not in the business of providing loans.

Conclusion on s 330(4)(a) of the Act

108. Having regard to the various matters discussed above (at [77]-[108]), I am not persuaded that the funds provided by Pharmacy Depot to the applicants were loans. The applicants were each insistent that they signed written loan agreements, but I am not persuaded that they did. Their counsel rather boldly suggested that I would nonetheless be satisfied that there were oral loan agreements. This might be possible if my lack of persuasion was only based upon the applicants' failure to produce the supposed written agreements. However, my failure to be persuaded rests upon a lot more than just that.

109. The applicants have failed to discharge their onus of establishing on the balance of probabilities each of the elements of s 330(4)(a) of the Act. As a consequence, their application for exclusion of the Property from the restraining order fails.

Discretionary exclusion pursuant to s 44(2) of the Act

110. In the alternative, the applicants seek exclusion under s 44 of the Act. The requirements of s 44(2)(c) and (d) have been met, and so the issue for determination is whether the applicants have provided "an undertaking … that is satisfactory to the court". A revised undertaking was forwarded to the AFP's solicitors by the applicants' solicitor by letter dated 2 April 2019. [81] The undertaking is as follows:

1. This undertaking is given pursuant to s 44 of the Proceeds of Crime Act 2002 Cth), to exclude the property located at 709/9-11 Wollongong Road, Arncliffe, NSW (6 Bidgigal Road, Arncliffe, NSW), being Lot 182 in Strata Plan 87575 (Property), from the order made in these proceedings on 10 March 2017 (Order).

2.   Upon the exclusion of the Property from the Order, Zeinab Youssef and Hussein Mohamed Ali Haidar (Applicants):

a.   must use their best endeavours to draw down funds standing to their credit in respect of the Westpac bank account number 037168 862164;

b.   undertake to pay (or to authorise payment of) the entirety of those funds to the liquidator of Pharmacy Depot Hurstville Pty Ltd (in liquidation) (CAN 163 892 939);

c.   undertake not to encumber or dispose of any interest in the Property prior to the making of the payment referred to in (b) above.

81. Affidavit, Mikaela Karen Eldridge, 5 April 2019, annexure B.

111. There is a very powerful subjective case raised by the applicants in support of exclusion pursuant to the Court's discretion. Counsel developed the case persuasively in written and oral submissions. Without meaning to discount the force of the submissions at all, the argument can be summarised quite briefly: the consequences of not excluding the applicants' family home from restraint are potentially ruinous for them financially, they being a married couple with very modest incomes who now have five children. It was submitted that such consequences should be considered in the light of there being no suggestion of criminal wrongdoing on their part. Rather they are "innocent participants" in "an incredible series of events". [82]

     82. Tcpt, 12 April 2019, p 188(12).

112. Counsel pointed out that the effect of the undertaking is that the entire $558,000 the applicants received from Pharmacy Depot would be returned and a further sum of $42,000 would be paid.

113. It is the entirety of the Property which is proceeds of crime, not just the proportion of it represented by the $558,000 the applicants received from Pharmacy Depot. There is no evidence as to what the Property might be worth now. It was on the market for $789,000 in 2014 when it was sold to the applicants by Mr Haidar's cousins at a discounted price. In March 2016, the applicants had a willing buyer at a price of $920,000 but they withdrew the Property from the market.

114. The $600,000 the applicants are prepared to repay now was the amount Westpac lent the applicants in 2015, no doubt based upon its assessment of their financial situation – as disclosed – at that time. There is no evidence as to whether the applicants might be in a position to borrow a greater amount now.

115. There are reasons to have significant doubt as to whether Westpac would be willing to reactivate the applicants' redraw authority on the offset account. The loan advance made in 2015 was based upon an assessment of the applicants' financial situation as set out in the loan application form. That financial situation was utterly misleading (for example, the applicants jointly owned assets valued at $1,078,093 and had very minimal liabilities). [83] The bank was also misled as to the purpose for which the loan was sought. It was not told that the loan was required to pay back funds provided by the directors of a company who were being investigated for an $18 million fraud; rather, it was told that the applicants wished to purchase an investment property.

     83. Ex JC-4, tab 5.

116. If a further assessment were to be carried out now, it is quite likely that Westpac would take a different view. The applicants have placed no evidence before the Court to inspire any confidence that they will in fact be granted access to the funds in the offset account.

117. It is not the end of the matter if the application for discretionary exclusion from restraint pursuant to s 44 is not granted. Senior counsel for the AFP carefully set out the statutory scheme which allows for further applications for relief at subsequent stages of the processes engaged, from restraint through to forfeiture. The relevant provisions include s 47(4) (exclusion from forfeiture if not in the public interest); s 48(3) (consideration of hardship and other matters); s 72 (ordering the Commonwealth to pay a specified amount to relieve hardship to dependents); and s 73 (exclusion of property from forfeiture if the applicant's interest is neither proceeds of unlawful activity or an instrument of a serious offence). I have borne in mind these possible alternative forms of relief that might become available to the applicants, but I acknowledge that they would probably offer them little comfort. Time and cost will be very real issues for them.

Conclusion as to s 44(2) relief

118. While it would be easy to decide this application on the basis of sympathy, the reality is that the applicants became the registered proprietors of the Property on a completely wrong basis and they now seek to extricate the Property from restraint by the use of bank funds which they also obtained on a wrong basis.

119. The applicants have not discharged their onus of establishing on the balance of probabilities that an order for discretionary exclusion from restraint should be made.

Orders

120. The following orders are made in respect of the Notice of Motion filed 13 April 2018:

(1) The applications pursuant to ss 29 and 31 and pursuant to s 44 of the Proceeds of Crime Act 2002 (Cth) for exclusion of property at Arncliffe from the restraining order made on 10 March 2017 are refused.

(2) The applicants are to pay the plaintiff’s costs.

**********

Endnotes

Decision last updated: 03 June 2019