Cdpp - In The Matter of S.19 of The Proceeds of Crime Act 2002; In The Matter of Funds In A Bank Account; In The Matter of Sunshine Worldwide Holdings Limited and South East Group Limited [2005] NSWSC 117 (1 March 2005)

Last Updated: 16 March 2005

NEW SOUTH WALES SUPREME COURT

CITATION: CDPP - IN THE MATTER OF S.19 OF THE PROCEEDS OF CRIME ACT 2002; IN THE MATTER OF FUNDS IN A BANK ACCOUNT; IN THE MATTER OF SUNSHINE WORLDWIDE HOLDINGS LIMITED AND SOUTH EAST GROUP LIMITED [2005] NSWSC 117



CURRENT JURISDICTION: Common Law

FILE NUMBER(S): No. 11684 of 2003

HEARING DATE{S): 1/9/2004; 7/9/2004

JUDGMENT DATE: 01/03/2005

PARTIES:
COMMONWEALTH DIRECTOR OF PUBLIC PROSECUTIONS - IN THE MATTER OF S.19 OF THE PROCEEDS OF CRIME ACT 2002; IN THE MATTER OF FUNDS IN A BANK ACCOUNT; IN THE MATTER OF SUNSHINE WORLDWIDE HOLDINGS LIMITED AND SOUTH EAST GROUP LIMTIED

JUDGMENT OF: Greg James J

LOWER COURT JURISDICTION: Not Applicable

LOWER COURT FILE NUMBER(S): Not Applicable

LOWER COURT JUDICIAL OFFICER: Not Applicable

COUNSEL:
Plaintiff: I. Temby, QC./T. Muir
Defendant: R. Bromwich

SOLICITORS:
Plaintiff: CDPP
Defendant: Corrs Chambers Westgarth


CATCHWORDS:
Proceeds of crime - money laundering offences - definition of "proceeds" and "instrument" - whether character as one precludes also other character - revocation application - defendant on no grounds for restraining order - if property proceeds order must be made - in money laundering offences the money is both instrument and proceeds application to revoke - dismissed.

ACTS CITED:
Proceeds of Crime Act 2002 (Cth
Criminal Code Act 1995
Proceeds of Crime Act 1987 (Cth)

DECISION:
The application is dismissed. The applicant is to pay the respondent's costs.


JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION


GREG JAMES, J.


TUESDAY 1 MARCH 2005


No. 11684 of 2003


COMMONWEALTH DIRECTOR OF PUBLIC PROSECUTIONS - IN THE MATTER OF SECTION 19 OF THE PROCEEDS OF CRIME ACT 2002

IN THE MATTER OF FUNDS IN A BANK ACCOUNT

IN THE MATTER OF SUNSHINE WORLDWIDE HOLDINGS LIMITED AND SOUTH EAST GROUP LIMITED


JUDGMENT


HIS HONOUR:

The application

1 By application dated 13 February 2004, the applicant, South East Group Limited, under s.42 of the Proceeds of Crime Act 2002 (Cth) (the Act) sought the revocation of a restraining order made under s.19 of the Act in favour of the respondent, the Commonwealth Director of Public Prosecutions, on 11 December 2003, so far as that order related to certain monies standing to the applicant’s credit in a bank account in Hong Kong in the sum of approximately A$1.28 million plus interest. The applicant is not otherwise a party to the proceedings commenced by the restraining order.

2 The application seeks certain other orders which were not the subject of the proceedings before me. So far as any extension of time was necessary, as was sought in the first order claimed in the application, that extension has already been granted.

Statutory basis for the application

3 Section 42 of the Act, relevantly, provides:-

“1. A person who was not notified of the application for a *restraining order may apply to the court to revoke the order.

...

2. The applicant must give written notice to the *DPP and the *Official Trustee of both the application and the grounds on which the revocation is sought.

3. However, the *restraining order remains in force until the court revokes the order.

4. The *DPP may adduce additional material to the court relating to the application to revoke the *restraining order.

5. The court may revoke the *restraining order if satisfied that there are no grounds on which to make the order at the time of considering the application to revoke the order.”

4 (* are references to terms defined in the Dictionary provided in s.338 of the Act.)

The grounds

5 The grounds on which the applicant claims the order should be revoked are:-

“1. The money in the bank account that was restrained was, and is, incapable at law of being the proceeds of an indictable offence of money laundering contrary to a provision of Part 10.2 of the Criminal Code (Cth) (‘the Code’) committed within six years prior to the application being made because the terms of each such offence, which concern dealing with money or property that is already the proceeds of an indictable offence.

2. The evidence in support of the application for a restraining order was, and is, insufficient to afford reasonable grounds for a suspicion that the money in the bank account that was restrained was the proceeds of an indictable offence of money laundering contrary to a provision of Part 10.2 of the Code committed within six years prior to the application being made.”

6 Ground one was explained in the written and oral submissions as asserting that the money in the account could not, as a matter of law, have been derived or realised from any money laundering offence in Australia because, so it was argued, the money could not be proceeds of such an offence if it became an, or the, instrument of such an offence. It was submitted the money could not have both characters simultaneously on a proper construction of the Act and the Code. The ground depends upon the acceptance of submissions as to the proper construction of s.329 and s.330 of the Act and the nature of the offence of money laundering.

The Act

7 I set out the relevant provisions of the Act and the Code with the relevant terms in bold for clarity’s sake. Sections 329 and 300 provide the definition of “proceeds” and “instrument” as those terms are used in the Act. Section 329 provides:-

“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.”

8 Section 330 provides:-

“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

(b) if the property vests in a person from the distribution of the estate of a deceased person, having been previously vested in a person from the distribution of the estate of another deceased person while the property was still proceeds of an offence or an instrument of an offence (as the case requires); or

(ba) the property has been distributed in accordance with:-

(i) an order in proceedings under the Family Law Act 1975 with respect to the property of the parties to a marriage or either of them; or

(ii) a financial agreement within the meaning of that Act.

(c) if the property is acquired by a person as payment for reasonable legal expenses incurred in connection with an application under this Act or defending a criminal *charge; or

(d) if a *forfeiture order in respect of the property is satisfied; or

(e) if an *interstate restraining order or an *interstate forfeiture order is satisfied in respect of the property; or

(f) if the property is otherwise sold or disposed of under this Act; or

(g) in any other circumstances specified in the regulations.

5. However, if:-

(a) a person once owned property that was *proceeds of an offence or an *instrument of an offence; and

(b) the person ceased to be the owner of the property and (at that time or a later time) the property stopped being proceeds of an offence or an instrument of the offence under subsection (4) (other than under paragraph (4)(d)); and

(c) the person acquires the property again;

then the property becomes proceeds of an offence or an instrument of the offence again (as the case requires).

5A. Paragraph (4)(ba) does not apply if, despite the distribution referred to in that paragraph, the property is still subject to the *effective control of a person who:-

(a) has been convicted of; or

(b) has been charged with, or who is proposed to be charged with; or

(c) has committed, or is suspected of having committed;

the offence in question.

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.”

Money laundering, the Code and its predecessor

9 Division 400 of Part 10.2 of Chapter 10 of the Criminal Code Act 1995 provides for the offences of money laundering. That Act commenced on 1 January 2003 on the repeal of, inter alia, the money laundering offence provisions contained in s.81 and s.82 of the Proceeds of Crime Act 1987 which sections continue in effect as to the liability for offences committed before that date (Acts Interpretation Act, ss.7 to 11). Thus activity which before that date was criminal retains that character thereafter and is included in the activity caught by the definition of “unlawful activity” in s.328. Although Federal Agent Chapman, in his affidavit of 11 December, expressly referred his suspicion to the offences under Part 10.2 of the Criminal Code, in my view s.42(5) requires an absence of any grounds on which to make the order at the time the matter is before me. I should have regard to the possible liability under s.81 and s.82 and that the application of those sections could, subject to holding that money laundering offences involve the money only as an instrument and therefore not as proceeds, render the money the proceeds of unlawful activity.

10 Section 81 provided:-

“1. In this section transaction includes the receiving or making of a gift.

2. A person who, after the commencement of this Act, engages in money laundering is guilty of an offence against this section punishable, upon conviction, by:-

(a) if the offender is a natural person – a fine not exceeding $200,000 or imprisonment for a period not exceeding 20 years, or both; or

(b) if the offender is a body corporate – a fine not exceeding $600,000.

3. A person shall be taken to engage in money laundering if, and only if:-

(a) the person engages, directly or indirectly, in a transaction that involves money, or other property, that is proceeds of crime; or

(b) the person receives, possesses, conceals, disposes of or brings into Australia any money, or other property, that is proceeds of crime;

and the person knows, or ought reasonably to know, that the money or other property is derived or realised, directly or indirectly, from some form of unlawful activity.”

11 Section 82 provided:-

“1. A person who, after the commencement of this Act, receives, possesses, conceals, disposes of or brings into Australia any money, or other property, that may reasonably be suspected of being proceeds of crime is guilty of an offence against this section punishable, upon conviction, by:-

(a) if the offender is a natural person – a fine not exceeding $5,000 or imprisonment for a period not exceeding two years, or both; or

(b) if the offender is a body corporate – a fine not exceeding $15,000.

2. Where a person is charged with an offence against this section, it is a defence to the charge if the person satisfies the court that he or she had no reasonable grounds for suspecting that the property referred to in the charge was derived or realised, directly or indirectly, from some form of unlawful activity.”

12 Since they focus only on property that is proceeds of crime, those sections draw no express distinction between money which is proceeds of an offence and money that is involved in a transaction or disposition or other activity to which the sections apply. Indeed, the sections expressly contemplate that the money will be already the proceeds of crime before the relevant activity, but are not so narrow in terms as to exclude the relevant crime itself involving the use of money, eg., fraud or money laundering. Although the Proceeds of Crime Act 1987 did elsewhere distinguish between tainted property, ie., property used in connection with an offence and proceeds, it did so in the context of forfeiture or proceeds assessment rather than when defining the offence of money laundering (see eg., s.4A and s.48). The Code, however, distinguishes between proceeds of crime and instruments of crime.

13 Section 400.1 of the Criminal Code Act relevantly provides:-

“1. ...

deals with money or other property has the meaning given by s.400.2.

instrument of crime: money or other property is an instrument of crime if it is used in the commission of, or used to facilitate the commission of, an offence that may be dealt with as an indictable offence (even if it may, in some circumstances, be dealt with as a summary offence).

proceeds of crime means any money or other property that is derived or realised, directly or indirectly, by any person from the commission of an offence that may be dealt with as an indictable offence (even if it may, in some circumstances, be dealt with as a summary offence).

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

2. To avoid doubt, a reference in this Division to money or other property includes a reference to financial instruments, cards and other objects that represent money or can be exchanged for money, whether or not they have intrinsic value.”

14 Section 400.2 provides:-

“1. For the purposes of this Division, a person deals with money or other property if:-

(a) the person does any of the following:-

(i) receives, possesses, conceals or disposes of money or other property;

(ii) imports money or other property into, or exports money or other property from, Australia;

(iii) engages in a banking transaction relating to money or other property; and

(b) the money or other property is proceeds of crime, or could become an instrument of crime, in relation to an offence that is a Commonwealth indictable offence or a foreign indictable offence.

2. For the purposes of this Division, a person deals with money or other property if:-

(a) the person does any of the following:-

(i) receives, possesses, conceals or disposes of money or other property;

(ii) imports money or other property into, or exports money or other property from, Australia;

(iii) engages in a banking transaction relating to money or other property; and

(b) the person does any of the matters referred to in paragraph (a):-

(i) in the course of or for the purposes of importation of goods into, or exportation of goods from, Australia or

(ii) by means of a communication using a postal, telegraphic or telephonic service within the meaning of paragraph 51(xx) of the Constitution; or

(iii) in the course of banking (other than State banking that does not extend beyond the limits of the State concerned).

3. In this section:-

banking transaction includes:-

(a) any transaction made at an ADI; and

(b) any transaction involving a money order;

Commonwealth indictable offence means an offence against a law of the Commonwealth, or a law of a Territory (other than the Australian Capital Territory and the Northern Territory), that may be dealt with as an indictable offence (even if it may, in some circumstances, be dealt with as a summary offence).

export money or other property , from Australia, includes transfer money or other property from Australia by an electronic communication.

Foreign indictable offence means an offence against a law of a foreign country constituted by conduct that, if it had occurred in Australia, would have constituted an offence against:-

(a) law of the Commonwealth; or

(b) a law of a State or Territory connected with the offence;

that may be dealt with as an indictable offence (even if it may, in some circumstances, be dealt with as a summary offence).

Import money or other property, into Australia, includes transfer money or other property to Australia by an electronic communication.

4. For the purposes of the definition of foreign indictable offence in subsection (3), a State or Territory is connected with the offence if:-

(a) a dealing in money or property takes place in the State or Territory; and

(b) the money or property would be proceeds of crime, or could become an instrument of crime, in relation to the offence if the offence were a foreign indictable offence.”

15 Sections 400.3 to 400.8 provide for various crimes, distinguished particularly by the amount involved, of dealing with money or other property. The substance of each of the offences is expressed similarly. It is sufficient to set out s.400.4(1), (2) and (3):-

“1. A person is guilty of an offence if:-

(a) the person deals with money or other property; and

(b) either:-

(i) the money or property is, and the person believes it to be, proceeds of crime; or

(ii) the person intends that the money or property will become an instrument of crime; and

(c) at the time of the dealing, the value of the money and other property is $1,000,000 or more.

2. A person is guilty of an offence if:-

(a) the person deals with money or other property; and

(b) either:-

(i) the money or property is proceeds of crime; or

(ii) there is a risk that the money or property will become an instrument of crime; and

(c) the person is reckless as to the fact that the money or property is proceeds of crime or the fact that there is a risk that it will become an instrument of crime (as the case requires); and

(d) at the time of the dealing, the value of the money and other property is $1,000,000 or more.

3. A person is guilty of an offence if:-

(a) the person deals with money or other property; and

(b) either:-

(i) the money or property is proceeds of crime; or

(ii) there is a risk that the money or property will become an instrument of crime; and

(c) the person is negligent as to the fact that the money or property is proceeds of crime or the fact that there is a risk that it will become an instrument of crime (as the case requires); and

(d) at the time of the dealing, the value of the money and other property is $1,000,000 or more.”

16 The definitions of the relevant terms used in the Code are not dissimilar to those used in the Act. That, no doubt, reflects a purpose of both statutes, to provide an internally congruent and consistent regime dealing with offences and the potential forfeiture of the proceeds and instruments of offences. The terms and the sections in which they appear in the Act and the Code should be construed with that in mind.

The restraining order

17 Although the Act makes provision for various kinds of restraining orders in ss.17, 18 and 19, s.45(5) requires consideration of the kind of restraining order which might be made at the time of considering revocation. It is sufficient, as will appear, to consider in the present case the possible application of s.19 which provides:-

“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) the *DPP 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 terrorism offence;

and, if the offence is not a terrorism offence, that the offence was committed within the six years preceding the application, or since the application was made; 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 terrorism 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.

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 *terrorism offence – an *instrument of the offence.

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.

4. The reasonable grounds referred to in paragraph 1(d) need not be based on a finding as to the commission of a particular *indictable offence.

5. The court must make a *restraining order even if there is no risk of the property being disposed of or otherwise dealt with.” (emphasis added)

18 The DPP submits that the application must fail if grounds remain for an order under any of ss.17, 18 and 19. The applicant contends it is merely sufficient to show no grounds for the relevant order that was made, ie., an order under s.19.

19 There are distinctions between ss.17, 18 and 19 of some general significance. However, as will appear, I consider this matter can adequately be disposed of without accepting the DPP’s wider submission simply by considering the criteria in s.19.

The evidence

20 At the time of its making and at the time of my considering this application, the order was supported by an affidavit of Phillip Chapman of the Australian Federal Police sworn 11 December 2003 to which was annexed his affidavit of 8 July 2003.

21 Subsequently, on 30 January 2003, after the making of the order, Mr. Chapman swore and filed a third affidavit concerning certain aspects of his second affidavit. By reason of s.42(4), the content of that affidavit is before me considering the application in addition to the content of the two previous affidavits, even though it was not before the court at the time of the making of the order.

22 In the original affidavit placed before Kirby, J., who made the restraining order, it appeared that the money was suspected of having been the proceeds of the indictable offence of money laundering contrary to Part 10.2 of the Criminal Code of the Commonwealth. In that and the earlier affidavit was set out the necessary expression of suspicion and the asserted grounds for that suspicion. By making the order, Kirby, J. (albeit ex parte) held that he was satisfied there were reasonable grounds for that suspicion. There was no evidence before Kirby, J. or before me from the applicant nor cross-examination nor factual challenge to the affidavits relied on by the DPP. The applicant relied entirely on the arguments of law.

23 At the hearing, both parties filed written submissions and further submissions and there was extensive argument as to the scheme of the Act and the proper construction of s.42, in particular, s.42(5).

24 Notwithstanding the applicant has contented itself with legal argument, since the DPP relied and relies on money laundering as the foundational offence, and in order to understand the context of the legal submissions, regard must be had to the provenance of the money standing to the credit of the applicant in the Hong Kong account as appears from the evidence.

25 In summary, the money was asserted to have been the proceeds of an international funds transfer to the Hong Kong account from Australia by Sunshine Worldwide Holdings Limited, a company associated with one Hendra Rahardja prior to his death. He, it was asserted, had committed crimes in Indonesia from which the proceeds had been used to deal in property in Australia and put money into bank accounts in Australia, either personally or through various companies, including using Sunshine Worldwide Holdings Limited, thus committing money laundering offences against Australian law.

26 The affidavit material before Kirby, J. condescended to considerably greater detail of the dealings in property of Sunshine Worldwide Holdings Limited, Hendra Rahardja and companies associated with him or over the management of which it is said he had effective control. It was particularly asserted that the monies in the relevant account had, immediately prior to the transfer to Hong Kong, been obtained by the sale of property in Bullbarnet Road, Moora in Western Australia.

27 Paragraphs 3(j), (k), (l) and (m) of the affidavit of Mr. Chapman of 11 December 2003 read as follows:-

“(j) I have sighted documents obtained by the authorities of the Hong Kong SAR which were provided to Australia in response to a Mutual Assistance request which shows that South East Group Limited is a company incorporated in Bermuda and that it was known as Benelux International Limited until 16 April 1998. These documents also show the address of South East Group Limited as Flat 1103A 11/F block 1 Admiralty Centre, 18 Harcourt Road, Central Hong Kong.

(k) I have sighted copies of documents filed with the Hong Kong stock exchange extracted by AFP financial analyst Shaun Mark from the internet on 5 May 2003 which show that Cheong Swee Khent was Executive Chairperson of South East Group Limited until 24 September 2002. It appears from those documents that Budiman Rahardja replaced Cheong as Executive Chairperson on that date. Cheong is the widow of Hendra Rahardja and Budiman Rahardja is his son. It is apparent that South East Group Limited is part of the Rahardja group of companies. That is confirmed by the AUSTRAC data attached to the Rahardja affidavit, which shows that were numerous transfers of money between South East Group Limited/Benelux International Limited and Australian companies and individuals. It follows that there is no reason to think that the money in the bank account at HSBC has lost its status as proceeds of crime by operation of s.330(4)(a) of the Act or any other provision of the Act.

(l) I have sighted documents by the government of the British Virgin Islands which were provided to Australia in response to a Mutual Assistance request which show that:-

(a) Sunshine Worldwide Holdings Limited is a company which was incorporated in the British Virgin Islands on 5 November 1998;

(b) its Agent is Commonwealth Trust Limited of P O Box 3321, Road Town, Tortola, British Virgin Islands;

(c) the Registered Office of Sunshine Worldwide Holdings is at the offices of Commonwealth Trust Limited, P O Box 3321, Road Town, Tortola, British Virgin Islands.

(m) I have sighted documents obtained from the Australian Securities and Investments Commission on 9 December 2003 which show that Sunshine Worldwide Holdings Limited as an Australian Office registered in Australia at ‘Full Sea International Limited, 192-196 Parramatta Road, Ashfield, NSW, 2131’. However, enquiries have established that the property at Parramatta Road, Ashfield, NSW has been sold and none of the Rahardja companies have any continuing connection with that address.”

28 The earlier affidavit to which that affidavit referred, ie., the affidavit of Mr. Chapman of 8 July 2003, referred to the suspicion held by the officer that the properties and the money held in the bank accounts were the proceeds of indictable offences, namely money laundering, having regard to what he had been informed of by the Acting Director of Criminal Law, Director General of Legal Affairs, Department of Justice of the Republic of Indonesia on a request for extradition.

29 It was contended that the crimes of the deceased Rahardja produced a total loss to the Central Bank of Indonesia of A$390 million of which some A$38.5 million came to Australia. The deceased had been convicted in Indonesia on 18 March 2002 in absentia of charges relating to this matter and was sentenced to life imprisonment and fined 30 million rupiah. That affidavit referred to details of property transactions conducted by or on behalf of the deceased after he left Indonesia following the making of the illegal bank loans to which I will later refer.

30 The Bullbarnet Road property was purchased on 1 February 1999 by Good Cloud International Limited, a company of which Rahardja was a director until 31 March 1999. He was arrested in Australia the following day. That property with certain plant, livestock and machinery was sold on 20 March 2003 for A$1.255 million by Sunshine Worldwide Holdings and on 28 April 2003 A$1.280 million was deposited to the applicant’s credit in the Hong Kong account by that company.

31 Appended to the affidavit is an extensive document referring to the obtaining of monies from the P T Bank, Harapan Sentosa in Jakarta, Indonesia, a bank of which the deceased and his family were the major shareholders and of which the deceased was the President Commissioner supervising the directors responsible for the granting of loans and the provision of reports to the Indonesian Central Bank. Loans in excess of one billion rupiah were required to be approved of by at least two members of the board or by him. The bank granted loans to six companies owned by the deceased and his family which dealt in the property sector. The total amount of loans exceeded the maximum legal credit limit thus causing the making of such loans to be an offence. The amounts lent were nearly six times the bank’s capital at the relevant time. The loan funds were never received by the six companies but were received and used by the deceased for his own use. They have never been repaid. Bank Indonesia paid out 2,233,524,000,000 (two trillion, two hundred and thirty-three billion, five hundred and twenty-four million) rupiahs to the deposits of the bank of this account. The original loans were granted between 1991 and 1996. It was the making of those loans which the applicant submitted was the relevant criminal activity. The use of the money obtained from that activity in Australia in various transactions, including by Good Cloud International Limited, and the transmission to the account in Hong Kong were relied on by the DPP as suspected money laundering and to trace the monies back through the various dealings said to be suspected of being money laundering offences to that original criminal activity.

32 The subsequent affidavit of Mr. Chapman, while correcting certain information in the earlier affidavits, referred to the deceased’s widow, as being a director of Sunshine Worldwide Holdings Limited, entering into company transactions between Sunshine Worldwide Holdings Limited and Good Cloud International Limited, and asserts that there was a reasonable suspicion that Sunshine Worldwide Holdings Limited was a company controlled by the deceased at the relevant time, even though he was not formally a director.

The submissions

33 In summary, the grounds for revocation here asserted were that the property, the subject of the restraining order, was incapable in law of being the proceeds of an indictable offence of money laundering or alternatively the evidence in support of the application was insufficient to afford reasonable grounds for the suspicion that it was.

34 It is submitted on behalf of the applicant that under s.19, except in the case of terrorism offences, there must be a reasonable suspicion that the property sought to be restrained is the proceeds of the offence in question and is not an instrument of that offence, since the operative part of the section does not extent to instruments. An order can only be made in respect of proceeds derived from only offences committed within six years prior to the date of the application for the forfeiture order. It is submitted that the Indonesian offences are far too old, further that the use of the money in the Australian transactions at most was as an instrument of an offence, which did not become the proceeds of any possible criminal activity.

35 It is submitted that because of the nature of money laundering offences, money can only be the instrument of the offence not derived from it and hence is not proceeding, so the section does not apply.

36 Expressing the matter slightly differently, it is contended that proceeds of an offence are property derived or realised (directly or indirectly) from the commission of the offence, whereas property used in or in connection with the commission of an offence is asserted to be merely an instrument of an offence.

37 It is put that the concept of money laundering is that of a crime of dealing with money that had already been realised or derived from the commission of another crime. It is put that the types of dealings with property covered by a money laundering offence are only prohibited if the property is already and remains the proceeds of the prior crime. In effect, it is put, that once money is derived from an offence it may thereafter only be the instrument of a money laundering offence because money laundering offences involve the dealing with the money and thus, so it is put, it cannot be the means by which proceeds are derived or realised.

38 It is submitted that such a conclusion is supported by an argument that otherwise the six-year limitation period would be otiose unless there were no dealings with the money. Such a submission if accepted would deprive each transaction in a chain of transactions its illegal character. Alternatively, such a submission, if accepted, would have the effect that every subsequent dealing with money being the proceeds of crime would be a money laundering offence so that a new six-year period would run from each such dealing. It is contended that such a reading shows that is not what was the purpose of s.19. Alternatively, it was put if the Act is ambiguous, it is well established that that ambiguity should be resolved in favour of the applicant and against any construction which would widen the ambit of any criminal offence. Reference was made to the principles enunciated in DPP v. Logan Park Investments Pty. Limited (1995) 37 NSWLR 118 at 125D to 127D; Jeffrey v. DPP (Commonwealth) (1995) 79 A. Crim. R. 514 at 517.5 to 518.3 and DPP (Commonwealth) v. Diez [2004] NSWCA 452. It was submitted in favour of the applicant that the Act should be so construed in accordance with ordinary principles.

39 The argument that it could not have been intended that each fresh dealing would amount to a fresh money laundering and thus the initiation of a further six year period echoes that referred to by the majority of the High Court and Murphy, J. in Regina v. Grant [1981] HCA 32; (1981) 147 CLR 503 in which Murphy, J. referred to Proudhon’s dictum “all property is theft”. That argument was successful in that case because the relevant provision referred to “things”, not money as currency, nor in the form of a credit in an account. The present legislation is entirely different.

40 It is said that the original crime generated proceeds but is so old it must be disregarded and that on a proper construction, the illegal subsequent dealings should be ignored as generating further proceeds, since the money was only an instrument in each case , not proceeds. Thus the argument concludes that in law the monies standing to the credit of the applicant in the account are not capable of being reasonably suspected of being of the character to which s.19 applies.

41 Alternatively, it is said, that there was insufficient evidence on which to base the asserted suspicion since the applicant was a public listed company and Dr. Rahardja was merely a major shareholder. The material, it is submitted, would not allow the inference or suspicion of more. There is simply no proper basis, it is said, to link the money with any dealing within the past six years to which s.81 or s.82 of the Proceeds of Crime Act or any of the offences under the Criminal Code Act apply.

42 As to the second, as can be seen from what I have said by way of summary of the material in Mr. Chapman’s affidavit, if one puts aside the applicant’s legal submission and applies the principles set out in George v. Rockett & Anor [1990] HCA 26; (1990) 170 CLR 104; Anderson v. Judges of the District Court of New South Wales & Anor (1992) 27 NSWLR 701; Williams v. Keelty [2001] FCA 1301; Queensland Bacon Pty. Limited v. Rees [1966] HCA 21; (1996) 115 CLR 266; Shaaban Bin Hussein v. Chong Fook Cam [1969] UKPC 26; [1970] AC 942 there was clearly enough shown by way of the tracing of the proceeds of the Indonesian loans through to the sale of the Western Australian property and the remitting of the money to the Hong Kong account to sufficiently found, on reasonable grounds, at least a reasonable suspicion, that the monies in the account were directly or indirectly derived both from the original Indonesian crimes and the subsequent Australian transactions and a reasonable suspicion that, particularly the most recent of those transactions, including the banking of the money in the Hong Kong account, constituted the indictable offences of money laundering committed in the past six years. Ground two is rejected. I turn to ground one.

The legal submissions

43 The applicant submitted:-

“If an offence is committed and property is realised or derived from that offence, then that is the proceeds of the offence. If those proceeds are then used in, or in connection with another offence, such as money laundering, then they are the instrument of that later offence.

Section 330 of the Act creates a statutory nemo dat rule, such that proceeds continue to be proceeds and instruments continue to be instruments by a rigorous form of statutory tracing and unless and until property is acquired for sufficient consideration (ie., value having regard to commercial considerations) and without knowledge, or in circumstances that would arouse a reasonable suspicion.”

44 It further submitted:-

“Section 19 deals with people suspected of committing indictable offences as defined in s.338, which definition relevant extends to any Commonwealth offence that may be dealt with as an indictable offence. Unlike ss.17 and 18, there must be a reasonable suspicion that the property sought to be restrained is the proceeds of the offence in question. It does not extend to instruments, and has a limitation period of six years to the date of the application.”

This provision works in tandem to s,49 forfeiture in which the DPP has the onus of proving, to the civil standard, that the property is proceeds of one or more indictable, foreign indictable or indictable offences of Commonwealth concern committed since six years preceding the application for the restraining order. Because the s.19 focus is on the property and not on the person, there is no need to prove, even to the civil standard, that any particular person has committed any offence except for the purposes of showing that the property in question can apply for exclusion under s.73, but again must prove, to the civil standard, that the property is not the proceeds of any unlawful activity, and if the conduct was that of someone else, that the person was not in any way involved: s.73(c) or (d).”

45 In relation to the limitation period, the applicant submits:-

“The legislature has created a sliding scale of restraining orders so as to make it easier to restrain and to forfeit property according to the seriousness of the underlying offence, the state of the proof of its commission, whether the offence was committed more than six years ago and whether it is the actual proceeds of the offence, as opposed to secondary use of those proceeds, as an ‘instrument’ in a subsequent offence.

The application in this case is under s.19. It therefore cannot apply to property that is only an instrument or to proceeds of an offence committed more than six years prior to the application being made. SEG submits that, at its highest, the DPP case is, in law, one in relation to the instrument of an offence committed more than six years prior to the date of application for the restraining order. The application was therefore not able to be brought under s.19.

If a crime is suspected to have been committed and property thereby derived, but a charge and conviction is not possible, but the DPP must either to move against the suspected proceeds within six years of the commission of the offence, or prove, to the civil standard, that the person who has ended up with the property has committed a serious offence (eg., money laundering) within the past six years. It is not enough to have an instrument for an offence more than six years old and not be able to prove that the person committed a serious offence on the balance of probabilities.

Under s.329 of the Act, property is proceeds of an offence if it has been directly or indirectly ‘derived or realised’ from the commission of that offence. SEG submits that the money in its account could not, as a matter of law, have been derived or realised from any offence of money laundering in Australia. If it was derived or realised from any offence or offences (which is denied), it was from those committed by Dr. Rahardja up to 13 years ago.”

46 It was argued that the concepts of proceeds and instrument are exclusive, each of the other under the Act. In paragraphs eight and nine of the applicant’s further submissions appears:-

“Property that is the direct or indirect fruit of a crime is the proceeds of that crime and is subject to a particular regime of restraining and forfeiture orders, with limitation periods except for terrorism offences. But the offence must still be the origin or source of the thing said to have been derived from its commission, not merely the subject matter of the offence. It has to be more than the subject mater of the later crime and be the proceeds of that crime as well.

The property continues to be proceeds unless and until there is a legitimate acquisition by an innocent third party for value: s.330. Proceeds continue to be proceeds, and instruments continue to be instruments. What is done with proceeds may also make them the instruments of a subsequent offence, with a different regime and different restraints. Further, there is an overall remedy of restraining orders and forfeiture orders over the assets of suspects (ss.18 and 47), without the need to resort to the concepts of proceeds and instruments.”

47 The submission appears to be that property to be proceeds must originate from the offence from which it is derived.

48 The submission refers to the detail of the legislation and particularly those provisions which relate to property ceasing to be proceeds or an instrument (which it characterises as “restraints”). It is submitted:-

“The court should be slow to read down those restraints by an interpretation that radically broadens the reach of the Act, including rendering deliberate limitation period largely otiose. If the DPP are right, proceeds will never be out of time because mere possession of them (s.400.2(1)(a)(i) or (2)(a)(i)) with negligence as to the fact that they are proceeds of crim (eg., s.400.3(3)), will render them proceeds of that later crime and will keep them within time.

Nor does the court have to decide whether the proceeds of one offence cannot also be the proceeds of any other later offence, apart from money laundering. SEG’s argument is confined to money laundering, which is an offence of dealing with the proceeds of a prior offence. The subject matter of money laundering will always be an instrument. Alternatively, if that is only one of two competing interpretations, the one favouring the person at risk of confiscation without compensation should prevail.”

49 For the Director, it was submitted that there is nothing in the statutory provisions under either the Act or the Code which would warrant holding that money or property cannot be, at the one time, both of the character of “an instrument” as defined and that of “proceeds” as defined. Both are widely defined.

50 It was further submitted that the proper application of the definitions supports the contention that money or property can be both proceeds and the instrument of the same crime and proceeds of one crime can be both the proceeds and instrument of another. It was further submitted that although the six year limitation might prevent the making of an order, the property does not lose its character as proceeds or instrument until the conditions prescribed by the Act are met. Further, that it retains the character of being proceeds or an instrument or both under the Code and thus money laundering offences may continued to be committed with the same money originally derived from legal activity more than six years before the application.

51 It was submitted that there are, at the time of consideration of the revocation application, “grounds on which to make the order” if there are “reasonable grounds to suspect” that the property is proceeds of an Australian indictable offence whether or not those grounds were the grounds on which the authorised officer held the suspicion on which the restraining order was original sought: CDPP v. Tan [2003] NSWSC 717 was cited to that effect.

Conclusion

52 I accept those submissions. There is authority in favour of the Director, not only in the above cited decision of Shaw, J. in which he declined to make a general revocation, but in a later decision in which Shaw, J. affirmed the legal principle he had enunciated in his earlier decision cited above when partly revoking a restraining order.

53 Since, under s.19, the court must make the order if the statutory conditions are met, I would state the test his way: it is not open to me to revoke the order under s.42 unless the applicant affirmatively satisfies me there are no grounds at the time of this consideration of the application to revoke, on which the restraining order would be made if now sought.

54 The grounds of which s.42 speaks are those which would found such an order, that is, the reasonable grounds for suspicion that the property is the proceeds of an indictable offence reasonably suspected of being committed in the six years preceding the application.

55 To so read the term “grounds” is to preserve a consistent meaning throughout the legislation and to give effect to the purpose common to s.19 and s.42 that orders should be made or maintained whilst there remain reasonable grounds to suspect the subject property is the proceeds of an indictable offence unless or until the statutory provisions under which the property would cease to have that character take effect: s.330(3) and (4).

56 After anxious consideration of the provisions of the Act and the Code, I can find no support for the applicant’s submission that the same money or property cannot have both statutory characters of being proceeds and instrument at the one time. I do not see that one character excludes the other. They are not antithetical as the terms are used in the Act and the Code. In ordinary language both terms are capable of being applied to the same property as involved or connected with the same offence. It is the nature of the offence, eg., fraud, theft, money laundering which defines the relationship of any money involved to the other elements of the offence. Depending on the nature of the offence, money may be used in or in connection with it, and derived or realised from it, including where it is derived from a disposal or other dealing with proceeds of an offence or an instrument of an offence (s.330) including because of a previous application of that section.

57 Section 300(3) and (4) does not, in my view, particularly in the use of the words in parenthesis (as the case require) point to property having exclusively under the section one or other of the relevant characters. Rather, the section envisages that property may be either or both characters and attaches consequences to that.

58 The applicant’s submissions crucially depend on the contention which I consider unsound that the relevant property when involved in a money laundering offence cannot be proceeds as it is not derived from that offence because it is merely an instrument of the offence. That proposition does not accord with the consistent approach of the courts to the 1987 and 2002 Acts since, at least the decision of Hunt, CJ. at CL. in CDPP v. Jeffrey (1992) 58 A. Crim. R. 310 and the Court of Appeal in Jeffrey v. CDPP (1995) 79 A. Crim. R. 514.

59 That money might have originally been derived from another crime is essential for it to be the subject of a money laundering offence but that does not mean it is not derived also from a money laundering offence involving a dealing with the money, that is, the instrument of a money laundering offences does not mean, in the common use of language, nor the terms used and defined by application in the Act and the Code that it is not also properly described as proceeds of the offence.

60 I therefore conclude that the legal submission as well as the sufficiency of evidence submission fails and the application must be dismissed. The applicant is to pay the respondent’s costs.

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LAST UPDATED: 02/03/2005