Favourable ruling for defendants in proceeds of crime matter: AFP v Zhang & Anor (Ruling No 3) [2015] VSC 438

Criminal Law, Miscellaneous

A Victorian Supreme Court judge has ruled against the Australian Federal Police (AFP) in a proceeds of crime matter brought under the Commonwealth Proceeds of Crime Act 2002, in what one Victorian silk has described as a “huge blow” to the usual procedure adopted by the AFP in proceeds of crime litigation.

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Justice Terry Forrest found that “fundamental notions of fairness” required him to hear and determine a forfeiture application before he determined an exclusion application. The object of a forfeiture application for the AFP is to have the subject property forfeited to the Commonwealth. The purpose of an exclusion application is to have certain property excluded from a forfeiture order, for example where a co-owner or dependant has an innocent need or interest in the property the subject of the forfeiture order.

The usual procedure pressed by the AFP would have been to have the forfeiture application decided at the same time as the exclusion application. To prove forfeiture, the AFP must prove to the court’s satisfaction that the property is either proceeds or an instrument of a relevant offence. This determination must only be made on the balance of probabilities, that is, the civil standard rather than the criminal standard of beyond reasonable doubt, and there does not need to be a conviction for a criminal offence.

To have the persons affected by the forfeiture application argue for exclusion at the same time as the AFP argued for forfeiture would require those persons to “show their hand” in order to prove their case and thereby prejudice their case against forfeiture. The approach adopted by Justice Forrest was to put the AFP to proof on their forfeiture application first. After the AFP closed their case for forfeiture, the lawyers for the affected persons made a “no case to answer” submission, put simply, the AFP had not proved to the civil standard that the property in question, two Melbourne homes purchased for a combined $5.6 million and a Mercedes-Benz purchased for $110,000, were the proceeds or an instrument of crime. The only positive evidence the AFP had to suggest this was that funds were placed in one of the affected person’s bank accounts in a “convoluted” fashion by diverse persons. Justice Forrest therefore ruled that the AFP had failed to prove its case even at a prima facie level and dismissed the forfeiture application, meaning the affected persons can retain their property.

This case has significant importance for litigation in this area, as proceeds of crime litigation is commenced by way of a “restraining order”, which only requires “reasonable suspicion” that property is the proceeds or an instrument of crime, which, if after 6 months the affected person has not contested the restraining order, the property is automatically forfeited to the Crown. If the affected person does contest the order (by making an application for exclusion), the Court must then determine whether the property is the proceeds or an instrument of crime on the balance of probabilities.

Justice Forrest’s rationale for adopting the procedure he put forth is that before such an “extraordinary interference with proprietary rights” is made, the owner should not be required to “answer anything at all” until the AFP or similar authority has put forth its case, and that such an approach accords with procedural fairness. In describing the judgment as a “huge blow” to the procedure pressed by the AFP, an unnamed silk described the former procedure, which has been referred to as “draconian” in a NSW judgment, thus: “In other words, the AFP could restrain your house on ‘reasonable suspicion’ and then require you to show that it was not proceeds of crime … Reasonable suspicion falls way short of any sort of real proof, and can be based on hearsay.”

The AFP has reportedly sought leave to appeal the decision. Regardless of the result, it is hoped that the appellate court will provide some clarity for what is apparently a fundamentally unfair process.

Relevant portions of the Commonwealth proceeds of crime legislation is extracted for reference below.

Image credit:  Louie Douvis and The Age

Read more:  http://www.theage.com.au/victoria/supreme-court-ruling-curbs-afps-draconian-proceeds-of-crime-powers-20150906-gjg98p.html

http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/vic/VSC/2015/438.html?stem=0&synonyms=0&query=proceeds%20of%20crime

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Legislative framework

 

Section 19 empowers a court to restrain individuals from dealing with certain property

suspected of being inter alia proceeds of crime or an instrument of a serious offence.

PROCEEDS OF CRIME ACT 2002 – SECT 19

Restraining orders–property suspected of being proceeds of indictable offences

etc.

When a restraining order must be made

[2]

(1)  A court with * proceeds jurisdiction must order that:

(a)  property must not be disposed of or otherwise dealt with by any

person; or

(b)  property must not be disposed of or otherwise dealt with by any

person except in the manner and circumstances specified in the order;

if:

(c)  a * proceeds of crime authority applies for the order; and

(d)  there are reasonable grounds to suspect that the property is:

(i)  the * proceeds of a * terrorism offence or any

other * indictable offence, a * foreign indictable offence or an * indictable offence of

Commonwealth concern (whether or not the identity of the person who committed

the offence is known); or

(ii)  an * instrument of a * serious offence; and

(e)  the application for the order is supported by an affidavit of

an * authorised officer stating that the authorised officer suspects that:

(i)  in any case–the property is proceeds of the offence; or

(ii)  if the offence to which the order relates is a serious offence–the

property is an * instrument of the offence;

and including the grounds on which the authorised officer holds the

suspicion; and

(f)  the court is satisfied that the * authorised officer who made the

affidavit holds the suspicion stated in the affidavit on reasonable grounds.

Property that a restraining order may cover

[3]

(2)  The order must specify, as property that must not be disposed of or

otherwise dealt with, the property specified in the application for the order, to the

extent that the court is satisfied that there are reasonable grounds to suspect that

that property is:

(a)  in any case– * proceeds of the offence; or

(b)  if the offence to which the order relates is a * serious offence–

an * instrument of the offence.

Refusal to make a restraining order

(3)  Despite subsection (1), the court may refuse to make a * restraining order

in relation to an * indictable offence that is not a * serious offence if the court is

satisfied that it is not in the public interest to make the order.

Note:          A court can also refuse to make a restraining order if the Commonwealth

refuses to give an undertaking: see section 21.

Restraining order need not be based on commission of a particular offence

(4)  The reasonable grounds referred to in paragraph (1)(d) need not be based

on a finding as to the commission of a particular offence.

Risk of property being disposed of etc.

(5)  The court must make a * restraining order even if there is no risk of the

property being disposed of or otherwise dealt with.

A forfeiture order can be made by a court if a restraining order has been in force for at least

six months, the person affected by the restraining order has applied to exclude their interest

from the restraining order and the court is satisfied inter alia that the property is the

proceeds of crime or an instrument of a serious offence. If no application to exclude

property from the restraining order has been made by the person affected, if they have

made and subsequently withdrawn such an application, the court can forfeit the property

without considering whether the property is proceeds of crime.

[4]

PROCEEDS OF CRIME ACT 2002 – SECT 49

Forfeiture orders–property suspected of being proceeds of indictable offences etc.

(1)  A court with * proceeds jurisdiction must make an order that property

specified in the order is forfeited to the Commonwealth if:

(a)  the * responsible authority for a * restraining order under section 19

that covers the property applies for an order under this subsection; and

(b)  the restraining order has been in force for at least 6 months; and

(c)  the court is satisfied that one or more of the following applies:

(i)  the property is * proceeds of one or more * indictable offences;

(ii)  the property is proceeds of one or more * foreign indictable

offences;

(iii)  the property is proceeds of one or more * indictable offences of

Commonwealth concern;

(iv)  the property is an instrument of one or more * serious offences;

and

(e)  the court is satisfied that the authority has taken reasonable steps to

identify and notify persons with an * interest in the property.

(2)  A finding of the court for the purposes of paragraph (1)(c):

(a)  need not be based on a finding that a particular person committed

any offence; and

(b)  need not be based on a finding as to the commission of a particular

 

offence, and can be based on a finding that some offence or other of a kind referred

to in paragraph (1)(c) was committed.

[5]

(3)  Paragraph (1)(c) does not apply if the court is satisfied that:

(a)  no application has been made under Division 3 of Part 2-1 for the

property to be excluded from the * restraining order; or

(b)  any such application that has been made has been withdrawn.

Refusal to make a forfeiture order

(4)  Despite subsection (1), the court may refuse to make an order under that

subsection relating to property that the court is satisfied:

(a)  is an * instrument of a * serious offence other than a * terrorism

offence; and

(b)  is not * proceeds of an offence;

if the court is satisfied that it is not in the public interest to make the order.

Favourable ruling for defendants in proceeds of crime matter: AFP v Zhang & Anor (Ruling No 3) [2015] VSC 438