Zheng & Anor v Commissioner of the Australian Federal Police & Anor

[2020] HCATrans 91

[2020] HCATrans 091

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Adelaide  No A2 of 2020

B e t w e e n -

YUNJUAN ZHENG

First Applicant

SHENGQI ZHENG

Second Applicant

and

COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE

First Respondent

DISTRICT COURT OF SOUTH AUSTRALIA

Second Respondent

Application for special leave to appeal

BELL J
GAGELER J

TRANSCRIPT OF PROCEEDINGS

FROM SYDNEY BY VIDEO CONNECTION TO CANBERRA AND ADELAIDE

ON FRIDAY, 3 JULY 2020, AT 9.30 AM

Copyright in the High Court of Australia

____________________

MR S.D. OWER, QC:   May it please the Court, I appear with MS H.M. STANLEY for the applicants.  (instructed by Lins Lawyers)

MS E.A. CHEESEMAN, SC:   May it please the Court, I appear for the respondent with my learned friend, MS S. ZELEZNIKOW.  (instructed by Australian Government Solicitor)

BELL J:   Yes, Mr Ower.

MR OWER:   If it pleases, your Honours, this application involves the question of the constitutional validity of section 400.9 of the Criminal Code.  We respectfully submit that it gives rise to two questions that are suitable for a grant of special leave:  first, in circumstances where Parliament chooses to implement a treaty and the terms of the treaty are somewhat discretionary as to the manner in which it may be implemented, what are the limitations upon the manner in which Parliament may so do; and, secondly, in respect of the question of the exercise of the banking power, whether Justice Gageler’s comments in Tajjour cause this Court to reconsider the principles that had previously been accepted in cases such as Pidoto and the Industrial Relations Act Case. 

If I could briefly take the Court to the terms of section 400.9, which appear most usefully at page 104 of the Court book, and this is the blue numbering, if it pleases the Court.  Section 400.9 is part of Division 400 which is labelled “Money Laundering” and it is the culmination of a series of offences set out in sections 400.3 to 400.8.  The earlier sections each have the same structure.  There is an element of dealing with money or other property, and an element that the money or other property is proceeds of crime as defined, and then there is a fault element - belief, intention, recklessness and negligence. 

By way of distinction, section 400.9 is an offence of absolute liability under the Criminal Code.  There is no fault element and, instead, as the Court will see from the terms of section (1)(b), there is an objective test of reasonable suspicion.  Furthermore, each of the preceding sections are premised on the fact that the property or money in question is “proceeds of crime” as defined in the legislation, whereas that is not the ‑ ‑ ‑ 

GAGELER J:   What is the property here?  Are we concerned with the Magill property?

MR OWER:   It is either the Magill property or the moneys that have otherwise been lent by the relevant banking institutions to fund the Magill property.

GAGELER J:   There is something of imprecision in the judgment and in the submissions about exactly how the facts relate to the language of the provisions.  If we just concentrate on the Magill property, we take the Magill property as being “other property”, what is the dealing?

MR OWER:   It must be, if it is anything, the purchase thereof, and the acquisition of it by my clients.

GAGELER J:   Well, that would make it section 400.2(a).  Why is it not paragraph (d), given the way in which it was financed?

MR OWER:   If it is the way in which it was financed, it would, prima facie, fall within the terms of section 400.2(d) if the section can otherwise be read down to the effect of 400.2(d).

GAGELER J:   There would be no novelty in just blue‑pencilling (a), (b) and (c) and getting straight to (d), would there?

MR OWER:   The novelty would then come from having to deal with the definition of “ADI”, which in term expressly is beyond banking under the Constitution, as otherwise constitutes State banking without an exclusion.  So the difficulty would become blue‑pencilling (a), (b) and (c), but then dealing with the definition of “ADI” at page 93 of the court book.  “ADI” is defined as:

a person who carries on State banking within the meaning of paragraph 51(xiii) of the Constitution.

The intention of Parliament in creating the definition of “ADI”, which is then of course picked up in the definition of “banking transaction” and picked up in the definition in 400.2(d), goes beyond that and, in our respectful submission, would then not lead itself to the blue‑pencilling in question.

GAGELER J:   So to get to that point you would be saying that there is an invalidity in section 400.9 because the definition of “deals”, taking you to 400.2(d), incorporates the definition of “ADI” in section 400.1(1) and one of the inapplicable paragraphs of that definition goes beyond the banking power.  Is that the way the argument goes on the banking power?

MR OWER:   That is the way the argument goes, if it pleases.  But we furthermore say it must incorporate that in that in order to be valid each part of the Act must be read.  So we have a situation where 400.9(1)(a) states that it is an offence if there is dealing with the money or other property if the property in question is financial provision provided by the bank.  That in turn then gives rise to the definition in 400.2(d), which then in turn must pick up both “banking transaction” and the definition of “ADI”.

In order for the provision to be valid, one must not only blue‑pencil (a), (b) and (c), but construe ADI in such a way as to be within the constitutional or permissible limits of State banking.  We would say that that is squarely within the terms of Chief Justice Latham’s warnings in Pidoto in that it goes beyond what is otherwise permissible under the relevant tests. 

If it please the Court, if I could briefly turn back to the question of the external affairs power.  The extent of 400.9 relates to the money or property where the money or property is not, as a matter of fact, proceeds of crime.  We note that that is a distinction from the earlier provisions.  We say that in the circumstances it is an appropriate question for special leave as to what is the extent that Parliament may go beyond the terms of the Convention as – to use the term used in the Industrial Relations Act Case – or to characterise it in the way it was characterised in the court below – to sufficiently implement its terms without the law losing its character as an implementation of the Convention.  

If I could briefly take the Court to the terms of the Convention which are most usefully set out at page 35 of the Court book.  The Laundering Convention creates an international obligation under Article 6.1 providing that the State party shall adopt various measures which are “committed intentionally” and then in respect of paragraphs a, b, c and d there is an element of knowledge that the property is proceeds or otherwise the accessorial liability that arises in paragraph d.

Article 6.3 then, in effect, creates a discretion or permissive ability on behalf of the State party to create a measure as it considers necessary, but subject to the following terms, namely that, rather than there being actual knowledge of the property being proceeds, the offender ought to have assumed that the relevant property was proceeds.

Now, the distinction that is drawn between Article 6.1 and Article 6.3 is, we say, between actual knowledge and an assumption of knowledge – that is to say, a state of belief.  This is, in our submission, higher than a mere state of satisfaction and, furthermore, a state of belief under the Convention that is required to be held by the offender.  It is not something that is purely objective.  It must be something that is on the basis of things that were known to the offender at the relevant time.

Most importantly, it is clear that Article 6.3 still requires the property in question to be proceeds.  It is not, in our submission, within the contemplation of the Convention that the property in question can constitute matters that may or may not be, depending upon the suspicion of an objective bystander, proceeds.

The Full Court below does not, with great respect, really deal with that first proposition.  If I could take the Court to paragraph 122 of the judgment of his Honour Justice Parker, with whom the other members relate, he notes the argument that regardless of whether or not the money or property in question is a proceed, he considered that by virtue of the fact that Article 6.3 could be considered a recommendation akin to those considered in the Industrial Relations Act Case, there could be in the circumstances an implementation of it beyond the effective terms.

We respectfully submit that that is directly contrary to the way in which this Court reasoned in the Industrial Relations Act Case, in that it seems to be a step beyond the contemplation of the terms of the Convention where both Article 6.1 and Article 6.3 are premised on the fact that it is proceeds. 

His Honour went on to reason that the objects of the Convention themselves would be sufficient to give rise to, in effect, plenary power on behalf of the Commonwealth to implement terms such as section 400.9 and we respectfully submit that in the circumstances that too is directly contrary to the reasoning in the Industrial Relations Act Case, and we note that his Honour, in doing so, does not cite any authority in support of the proposition.

The final strand of his Honour’s reasoning is that in any event it could be said that the power in question is incidental – or the provision in question is incidental to the express measures contained in Article 6.1 and he notes that - in his opinion reflects the approach adopted by Chief Justice Mason, Justice Brennan and Justice Toohey in Richardson.

We say, with great respect, that too is a conclusion that must be suspect in the sense that an incidental implementation of power must be one facilitating a termination of an exercise of power implementing, say, Article 6.1.  It is not something that is merely facilitating the implementation of Article 6.1 but ultimately branching out and creating an entirely new offence in terms that are otherwise not permissible under the terms of the Convention. 

We say that in those circumstances, despite the permissive nature of Article 6.3 which permits the State party to enact such measures as it thinks necessary, they are still bound upon it and accordingly it is beyond the external affairs power.  To some extent, I have made the submission as to why we say nevertheless the power – the section is also not supported by the terms of section 400.2(d) when read in terms of banking power, but our principal submission is that ‑ ‑ ‑

BELL J:   Mr Ower, I am sorry to interrupt you, but just coming back to that latter submission concerning the banking power, factually – looking at the circumstances of this case – we are dealing with transactions with NAB and Westpac. 

MR OWER:   Yes.

BELL J:   So, in its application to the circumstances of this case you contend that nonetheless the banking power does not extend ‑ ‑ ‑

MR OWER:   Yes, because the intent of Parliament, by virtue of the language it is using in respect of proceeds of crime, as well as the submission I made earlier in respect of the manner in which - the definition of “ADI” is that ‑ ‑ ‑

BELL J:   It really comes to that, does it not?

MR OWER:   Yes – that the Parliament’s intent is not merely that it has an operation in a field such as this, but it has an operation in all fields.  We would say that, in that circumstance where it is otherwise not sustained by the banking power, it must otherwise be invalid.  So, yes, I accept that the facts here do not raise an issue of State banking but, nevertheless, we say that the width by which Parliament has drafted section 400.2(d) – together with the express description of an ADI as including a State banking institution under 51(xiii) – means that the intention of Parliament is broader in the circumstances than otherwise may be read down.

It really is an example of, we say, specific words rather than general words that are not capable of being remedied by the blue‑pencil test – that, in order to read down the provision in the way perhaps suggested by the Full Court, one needs to first ignore the terms of 400.2(a), (b) and (c) but then also read some form of limitation in respect of the definition of “ADI” in circumstances where, as noted in the respondent’s submissions, earlier versions of the Act did expressly provide that the operation was only to the extent of the banking power under 51(xiii), whereas, we would properly characterise 400.2 as being a definition giving examples of conduct rather than being a provision such as may have been raised in the Work Choices Case or the earlier litigation in the 1970s, Ex parte CLM,

where there was a definition of, say, “employer” which was then defined in such a way as to make it clear as to which heads of power the relative matter fell within. 

In these particular circumstances, it cannot be seen how, for example, section 400.2(a) falls within any particular head of power.  Subsections (b) and (c) could, perhaps, be characterised as dealing with matters external to Australia.  But we would say the proper characterisation of section 400.2(a) in the circumstances constitutes examples of conduct.  If that characterisation of section 400.2 is correct, it also leans against any interpretation that otherwise simply relies upon 400.2(d) read in question with the definition of “ADI”. 

For those reasons, we respectfully submit that this is a suitable matter for the grant of special leave and say in the circumstances leave should be granted.  May it please the Court. 

BELL J:   Thank you, Mr Ower.  The Court will adjourn briefly to consider the further conduct of the application.

AT 9.48 AM SHORT ADJOURNMENT

UPON RESUMING AT 9.51 AM:

BELL J:   Thank you, Ms Cheeseman.  We do not need to hear from you.

We are of the opinion that on the facts presented by this application there is no reason to doubt that section 400.9 of the Criminal Code is supported by section 51(xiii) of the Constitution.  The application is dismissed.  Sorry, Ms Cheeseman?

MS CHEESEMAN:   If it please the Court.  The Commissioner seeks costs on the standard basis.

BELL J:   Yes, I am sorry, I take it you have nothing to say, Mr Ower?  Dismissed with costs.  The Court will adjourn until 10.30.

AT 9.52 AM THE MATTER WAS CONCLUDED