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High Court of Australia Transcripts |
Last Updated: 15 September 2020
IN THE HIGH COURT OF AUSTRALIA
Office of the
Registry
Melbourne No M26 of 2020
B e t w e e n -
TITCHIANG HOTH MAI
Applicant
and
COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE
Respondent
Application for special leave to appeal
KIEFEL CJ
NETTLE J
TRANSCRIPT OF PROCEEDINGS
FROM BRISBANE BY VIDEO CONNECTION TO MELBOURNE
ON FRIDAY, 11 SEPTEMBER 2020, AT 2.08 PM
Copyright in the High Court of
Australia
MR T. GYORFFY,
QC: If it please the Court, I appear with my learned friend,
MS E.H. RUDDLE, for the applicant. (instructed
by Nicholson Ryan Lawyers)
MS L.G. DE FERRARI, SC: May it please the Court, I appear with MR A.P. YUILE for the Commissioner, the respondent. (instructed by the Australian Federal Police)
KIEFEL CJ: Yes, Mr Gyorffy.
MR GYORFFY: Your Honour, it is proposed that I do ground 1 and Ms Ruddle will do grounds 2, 3 and 4, and the reply. In relation to ground 1 the point we make, your Honours, is that there were three grounds that were relied on by the authorised officer in relation to supporting the application for the restraining order.
All three of those grounds were, in effect, dismissed by the Court of Appeal and the Court of Appeal came up with its own ground. What I propose to do is take your Honours through the judgment, beginning with paragraphs 21, 22 and 23 where the Court of Appeal set out precisely what the suspicions and grounds were of the authorised officer.
In paragraph 21 the essence of it was that Mr Nguoth
had used Sportcars’ funds for the purchase of the Narre Warren
property
and by doing so he has breached the duty to Sportcars as a director by
not acting in the interest of Sportcars. The charge there
is a section 184
charge under the Corporations Act of:
using his position as a director to gain an advantage for himself and for his sister at the expense of the company’.
That advantage is the use of the company’s funds to purchase the Narre Warren property and the Audi.
The second ground relied on was in paragraph 22 where
Mr White identified two suspected breaches of section 135.1 of the
Code. The
first concerned Division 7A of Part III of the Income
Tax Assessment Act. Under the relevant provisions, a payment or benefit
provided by a private company to a shareholder or associate can be treated
as
income or a dividend for income tax purposes. What Mr White said was
that:
Nguoth, as a director and shareholder of Sportcars, was required to declare the benefit he received in the form of the Narre Warren property which was purchased using Sportcars’ funds.
The second way that
section 135.1 was put was in paragraph 23. There, the court
said:
Mr White stated that he suspected that Sportcars was set up ‘for the sole purpose of moving money from overseas into Australia to purchase the property without alerting Centrelink’.
A key point that we make is that this is alleged by the authorised
officer as being a breach of section 135.1, not section 184. Then
it
sets out in the quoted part in that paragraph:
I suspect the money from overseas was not deposited into their personal bank accounts as this would have alerted Centrelink who could have stopped the payment of the benefits to both of them. I suspect that Nguoth committed the offence of dishonestly causing a gain to himself from a Commonwealth entity under s 135.1 of the Criminal Code –
Those were the grounds that we turned up to fight because that was the
way that the case was put. The court dismissed those grounds.
The other matter
that was raised by the applicant down below was the test that was to be applied.
The test is set out in section
51 of the reasons of the Court. In
paragraph 58, the court said:
the applicant’s proffered construction . . . should be accepted.
The essence of that construction was, for the purpose of the entire
hearing, to determine whether the suspicions were held by the
authorised officer
and were held on reasonable grounds. It was accepted by the court that it is
the grounds and the reasons –
sorry, the suspicion and the grounds
given by the officer that are relevant. As I indicated, the court did not
accept those three
grounds. Instead, what it did was it generated its own
ground ‑ ‑ ‑
KIEFEL CJ: Mr Gyorffy, did not the Court of Appeal accept that it was constrained to consider any of the grounds articulated by the authorised officer, but it made the point that it was entitled to look more broadly at the evidence in relation to those grounds because it had the wider inquiry pursuant to section 42? So the distinction, I think, that the court was drawing was between grounds and evidence.
MR GYORFFY: We submit that in fact what was accepted by the court was that it had to confine itself to the grounds as put forward by the officer and that it was not entitled to go and search at its own discretion to find grounds. That is our submission.
KIEFEL CJ: But is that not contrary to what you are saying?
MR GYORFFY: No,
your Honour. What we are saying is that the purpose of the hearing is
purely for the Court to evaluate that which is said
by the officer to be the
offences that are relevant, suspected offences, and the grounds for the
suspicion that that offence was
committed. That is what they are to look at and
it is to be looked at on the basis of what is in the affidavit material. That
was
accepted by the court, in our submission. That is set out, we submit, in
paragraph 68 of the reasons. Paragraph 68, the court said:
Applying this reasoning, it is necessary under ss 18 and 19 of the Act to consider whether the authorised officer had an actual apprehension that an offence had been committed, or that the property and the vehicle were proceeds or an instrument of a relevant offence, rather than a mere idle wondering as to that matter or a desire to look into the possibility. It was not in issue before us that Mr White held suspicions meeting this description. The question is whether the grounds upon which he had that state of mind were reasonable. Again applying the above reasoning, that involves asking whether those grounds would in all the circumstances create in the mind of a reasonable person an apprehension –
and it goes on. So that was the point, your Honours, in fact it was the grounds held by the authorised officer that were relevant. Now, what we submit is that when we get to paragraph 74, the court has come up with what it considers to be the relevant ground in this case and it does not fit within the three grounds that were put in paragraphs 21 to 23.
KIEFEL CJ: The section 184(2) ground arose directly from the evidence that the Court of Appeal was considering? Was this not raised with the applicant’s counsel by.....
MR GYORFFY: No, your Honour. .....point of our complaint. We first found out about this ground when we read the judgment. There was no raising of this ground with the applicant’s counsel during the hearing.
KIEFEL CJ: During the hearing, I see.
MR GYORFFY: We proceeded on the basis of the affidavit material
and the grounds relied on by the officer. So what occurs, your Honours, is
then the Court itself said, in paragraph 75:
In our view, it was reasonable for Mr White to suspect a breach of s 184(2) on the basis that Nguoth had dishonestly used his position as a director with the intention of obtaining an advantage for
himself or another person by concealing the existence of the funds from the Australian Taxation Office and Centrelink.
That was not the way it was put. The way the case was put against us was on the basis of using the assets of the company to buy goods. That was it. This came up in the judgment itself and we say we did not have the opportunity to address that. That is the essence, your Honours, of ground 1. If I can hand over now to Ms Ruddle to deal with grounds 2, 3 and 4.
MS RUDDLE: Thank you, your Honours. In the applicant’s submission it is important to consider what the alleged wrongdoing was in this case, that is, it was the placement of otherwise lawful funds into the company bank account before those funds were used by Nguoth to buy a house for his family and for him to live in, a house that he is entitled to own because he is over 18 and a citizen of Australia, as well as the depositing of money into a bank account to write a cheque to buy a car. That conduct alone is said to make out the three offences.
The Court of Appeal were in error in assessing that there were reasonable grounds for each of those offences. Focusing on ground 2, which is the director’s obligations first, as we have set out in the written case it is most easily demonstrated by looking at the position in relation to the purchase of the car. What happened was money was paid into the bank account and the very same day a cheque was drawn to purchase the car. The money was not alleged by the respondent to be tainted or the proceeds of crime in any way. There is no identification either by the authorised officer or by the court in its decision as to how that conduct constitutes using the position as a director dishonestly. There is no connection between the position as a director and the alleged dishonesty.
What is described by the Court of Appeal as the requisite dishonesty in its judgment is the conduct of the director in his personal capacity in hiding the money from the ATO or Centrelink and for reasons that I will go through in ground 3 we say there is no reasonable grounds to find that money was so hidden.
It is also never explained how exchange of cash for a cheque is said to hide money from either agency. The same result could have been obtained by the purchase of a bank cheque or the use of a personal cheque account. It makes clear then that it cannot be a requisite use of position as a director to merely write a cheque on a bank account where moneys have been placed into that account.
To say that it does fails to engage with either the wording of section 184 of the Corporations Act or, importantly, the mischief with which it is intended to deal. That mischief, obviously, can be gleaned not only from the wording of it but its context in Division 1 of Part 2D.1 of the Corporations Act. That division relates to duties and powers of a director which are essentially a codification of the common law duties of a director.
Putting the Commissioner’s case at its highest in relation to the 184 offence or the alleged 184 offence it is really dishonesty whilst being a director. It surely cannot be alleged that if, for instance, a director commits a crime in the office of the company it would constitute a breach of section 184 of the Corporations Act. Likewise, there are no reasonable grounds to support the suggestion that the house was in any way hidden by the moneys being placed into the bank account.
The money was sent via registered sources. It was listed with AUSTRAC and it had noted payment towards property in Australia. It was not layered. It was not structured. It was then spent on the house, a house that importantly Nguoth was entitled to have, entitled to own, without affecting his Centrelink benefits or his income tax.
So for those reasons it was not open to the court to find that there was a reasonable basis to suspect a breach of section 184 of the Corporations Act and importantly the court has essentially not invented but created that suspicion by patching together things that the authorised officer has said. So instead of assessing the actual suspicion of the authorised officer, which if the court found correctly that it ought, and that is clear from the wording of the section ‑ the court must be satisfied that the authorised officer who made the affidavit holds the suspicion or suspicions on reasonable grounds, so there must be a consideration of the actual suspicions of the authorised officer, and that is where the court has fallen down in this case.
That same error infects the findings with regards to the alleged breaches of the Criminal Code. It is most obviously demonstrated, when one considers the offence relating to the tax issue, the suspicion of the authorised officer in this case was that Nguoth had failed to declare a benefit received from the company and therefore had avoided tax pursuant to Division 7A of the Income Tax Assessment Act.
Now, while there was quite a lot of dispute as to the scope of Division 7A and its impact in this circumstance, it is beyond doubt that Division 7A only applies where the payment comes from a company. Of course, it is insufficient that there just be a non‑payment of tax. For the Criminal Code to apply, there must be a dishonest non‑payment of the tax or a dishonest avoidance.
However, the Court of Appeal, when looking at.....illegality at paragraph 86 was the use of the company to conceal income with the intention of evading tax. That is clearly, in my respectful submission, a.....argument because the dishonesty attaches to the money going in, the tax only attaches once the money has gone in and is paid out by the company.
At the time the money goes into the company, there is no basis, and the authorised officer never suggested one, to suggest that it was taxed. So there is absolutely no basis to suggest that it.....hidden.....submission demonstrates.....
KIEFEL CJ: Ms Ruddle, we are having difficulty hearing you – you might need to repeat that last submission.
MS RUDDLE: I am sorry, your honour. All I was saying ‑ ‑ ‑
KIEFEL CJ: Just the last couple of sentences.
MS RUDDLE: Thank you, your Honour. The error that is demonstrated by this reasoning demonstrates the problem with approaching it from a general suspicion basis, which is what both the court below and the Court of Appeal did – rather than looking at the suspected offence and then analysing whether there are reasonable grounds for that offence, and when one looks at the wording of the section that is what is required.
Again, the same issue applies to causing a loss to the Commonwealth. It is clear that – it is set out at paragraph 23 of the Court of Appeal judgment, but what that – and that is extracted from paragraph 51 of Mr White’s.....is the start of that paragraph which.....set up for the sole purpose of moving money.....without alerting Centrelink. The officer was under the misapprehension that Nguoth was not entitled to own home and receive Centrelink benefits. We know from section 1018 of the Social Security Act that that is not the case.
It is clear also from the judgment and from Mr White’s material, that Mr White suspected that Nguoth had obtained a benefit to which he is not entitled, being the moneys paid in 2015 and 2016 after the purchase of the house in August 2014. So there was no basis ‑ ‑ ‑
NETTLE J: Can I ask you this, please? Whilst it must be ‑ ‑ ‑
MS RUDDLE: Yes, your Honour.
NETTLE J: ‑ ‑ ‑ to have a house or - having a house does not affect one’s Centrelink benefits, might it not affect one’s Centrelink benefits if one had a pot of money, notwithstanding that he then converted it into a house.
MS RUDDLE: Yes, your Honour, it could. However, that was not the suspicion of the authorised officer. The authorised officer’s expressed suspicion was that it was the benefit in 2015 and 2016 – when he had the house and no pot of money, that impacted the – caused - was the offending.
Now, what the Court of Appeal did was then raise the sort of thing that your Honour is suggesting, perhaps there was a different basis, but that is not the task of the Court of Appeal, nor the court below. The court must confine itself to the suspicions of the authorised officer and there cannot be any logical reason to do otherwise. This is already a great imposition on the rights of a person, to have their property restrained on a mere suspicion. It cannot be that.....paragraph 91. May it please the Court.
KIEFEL CJ: Thank you. The Court will adjourn briefly to consider the course that it will take.
MS RUDDLE: Thank you, your Honour.
AT 2.30 PM SHORT ADJOURNMENT
UPON RESUMING AT 2.33 PM:
KIEFEL CJ: We need not trouble you,
Ms De Ferrari.
In our view, there are insufficient prospects of success in this matter to warrant the grant of special leave. Special leave is refused.
MR GYORFFY: If it please the Court.
AT 2.34 PM THE MATTER WAS CONCLUDED
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