Australian Federal Police v Steven Hoitou Xin & Ors

Amongst the numerous applications before the Court on 12 August 2024 was an application by an interested party, namely the National Australia Bank. The application concerns a residential property at Bellevue Hill of which the fourteenth and fifteenth defendants are registered proprietors. It is their home where the fifteenth defendant lives with their eight “children”. The fourteenth defendant also lived there until he went into custody on 1 February 2023.

On the application of the plaintiff, on 31 January 2023 the Court made restraining orders under ss 18(2)(a), 18(2)(b) and 19 of the Proceeds of Crime Act 2002 (Cth) in relation to the property. NAB is the first registered mortgagee of the property. It did not have notice of the application for restraining orders and did not appear before the Court on 31 January 2023. NAB’s mortgage secures a home loan made by NAB to the fourteenth and fifteenth defendants in 2021, at which time the principal advanced was approximately $9.2 million.

There is no dispute that the fourteenth and fifteenth defendants are now in default under the mortgage. On 22 August 2023 NAB issued a default notice demanding payment of the amount then due, just over $9 million. Since then, the amount due has increased. In May 2024 it was approximately $9.5 million. It may be inferred that the amount has increased further since then.

NAB wants to be repaid. It wishes to enforce the security, including exercising its rights under the mortgage to enter into possession of the property.

On 27 May 2024 NAB filed a Notice of Motion in these proceedings pursuant to which it sought:

In support of the application NAB relied upon an Affidavit of its solicitor which was affirmed on 24 May 2024, and the documentation exhibited to that Affidavit. The Affidavit largely addresses the matters set out in the preceding paragraphs.

Apart from the fourteenth and fifteenth defendants, there is no objection to the orders sought by NAB. In particular, the plaintiff, who obtained the restraining orders in the first place, does not object to NAB’s interest now being excluded.

The fourteenth and fifteenth defendants oppose the orders sought by NAB. On 9 August 2024 the fourteenth defendant filed his own Notice of Motion together with an Affidavit by his solicitor. By his Notice of Motion, the fourteenth defendant sought:

The other property which is referred to in the fourteenth defendant’s Notice of Motion includes real property at Richmond, Tarlo and other places. There are also some bank accounts in the names of various individuals and corporations.

Apart from the stay in prayer 1, the fourteenth defendant’s Notice of Motion does not explicitly address NAB’s rights as mortgagee. An essential element of the arrangement contemplated by the fourteenth defendant is that NAB will be precluded from exercising its rights under the mortgage and instead be obliged to look to other assets to ensure repayment of the debt. In the absence of NAB’s agreement (which is not forthcoming), the fourteenth defendant seeks to have the alternative arrangement imposed upon NAB by order of the Court.

At a procedural level the fourteenth defendant has proposed that NAB’s motion be adjourned to a date in November 2024 and that a timetable be set to prepare the fourteenth defendant’s motion for simultaneous hearing on that date.

The Affidavit by the fourteenth defendant’s solicitor explains how the solicitor was instructed in the case in mid-May 2024. He has had difficulty getting instructions because of the unavailability of documents and because of poor communication with the fourteenth defendant who is a non-English-speaking person currently in custody and heavily distracted by other legal matters, including criminal proceedings. There have also been difficulties in retaining counsel.

The fourteenth defendant’s solicitor also gives some evidence about the alternative property which might be used to repay NAB’s debt instead of the Bellevue Hill property. The real properties at Richmond and Tarlo are said to be “substantial rural properties” available for sale to “reduce” the NAB debt. There is no evidence about the other real properties. As for the bank accounts, the amount of money in the accounts is not specified. The solicitor is informed, but does not express any belief, that there is more than $4.5 million being held in trust for “ACIF Prosperity Fund”. There is no evidence about the availability of that money for use by the fourteenth and/or fifteenth defendants. The plaintiff points out some of this property is held in the name of various corporations and it is not clear the basis upon which the fourteenth and/or fifteenth defendants would be entitled to use the property for their own benefit.

In light of this evidence, NAB’s apparent preference to focus on its legal rights to the Bellevue Hill property is understandable.

The fourteenth defendant’s solicitor’s Affidavit also includes evidence about the current occupation of the Bellevue Hill property by the fourteenth defendant’s wife (the fifteenth defendant) and their eight “children”. The fourteenth defendant is concerned that enforcement action by NAB will render his wife and children homeless.

Further information about the domestic circumstances of the fifteenth defendant and the eight children is provided in an Affidavit affirmed on 11 August 2024 by the fifteenth defendant herself. In that Affidavit she explains that she is a homemaker and that four of the children are aged 19, 22, 23 and 24. The eldest was previously employed full time but has recently decided to return to full time study which will necessitate financial assistance from her parents. The second eldest is employed by an “accounting company”. The next two are university students. All four previously lived out of home but have now returned for want of financial support from their parents.

The other four children are aged between 14 and 18, one is at a private boys’ school and the other three are at the local government school, having recently been removed from a private girls’ school. As a result of the restraining orders made in these proceedings, the fifteenth defendant says she has been deprived of access to bank accounts and cash. She has been forced to change the girls’ school.

Some of the children have undertaken some paid work to assist the family.

The fifteenth defendant says that one of the adult children has developed “psychological issues while carrying some burden of the family”. Some of the school-aged children have found the recent events disruptive which has manifested itself in behavioural issues. The fifteenth defendant has personally also found recent events disruptive.

The fifteenth defendant hired PT Business Advisory Pty Ltd to “help me review my bank statements and work out the ordinary and reasonable living expenses of my household”. As a result, the fifteenth defendant has been advised that her total annualised family living expenses is $921,704. That figure includes $284,509 in schooling costs per year, which the fifteenth defendant expects will decrease now that three of the children have been moved to a local government school.

Since April 2023, the fifteenth defendant has had to borrow money for expenses. She has borrowed $518,000 from family and friends.

Turning then to NAB’s application, and as I have stated above, there is no dispute that there is a default under the mortgage and that in August 2023 NAB gave notice of the default.

The plaintiff, who obtained the restraining orders over the Bellevue Hill property, accepts that NAB’s interest in the property ought to be excluded from the restraining orders. That is correct. For the purposes of the Proceeds of Crime Act, NAB’s rights as mortgagee is an “interest” and, hence, “property” under the definitions in s 338. There are three restraining orders which concern the Bellevue Hill property. The first two were made under ss 18(2)(a) and 18(2)(b) which each provide for a restraining order to be made over specified property when the Court is satisfied there are reasonable grounds to suspect that the property is property “of the suspect” (as that term is defined). NAB is not the suspect. The third restraining order was made under s 19 which provides for a restraining order to be made over property if there are reasonable grounds to suspect that the property is the “proceeds of [an] indictable offence”. There are no grounds to suspect that NAB’s interest in the property is the proceeds of an indictable offence. There is no basis for a restraining order over the property of NAB in the Bellevue Hill property.

The fourteenth and fifteenth defendants have not identified any legal reason why NAB is not entitled to the orders it seeks.

The only non-legal reason given by the fourteenth and fifteenth defendants to resist the immediate exclusion of NAB’s interest is the fear of disruption to the accommodation of the fifteenth defendant and the eight children living with her. Whilst one may have sympathy for the problems which will confront the family if the Bellevue Hill property is eventually sold, there is nothing in this case which sets it apart from any other case of a default on a bank loan secured over a family home.

It is submitted that NAB will not suffer any prejudice if there is a delay in NAB’s interest being excluded from the restraining orders. The fourteenth defendant points out that NAB is a registered first mortgagee over a prestige property in Bellevue Hill. The Court is asked to assume that property value goes up. However, the evidence does not permit the Court to conclude that NAB is not exposed to potential prejudice in the face of a proven and growing debt of $9.5 million. There is no evidence about the current value of the property. In any event, the rights which NAB wants to enforce are private rights against the fourteenth and fifteenth defendants which NAB is entitled to enforce in accordance with its own interests. NAB does not want a delay.

The prospect of an alternative arrangement being made by which other assets might be released from restraining orders and realised to fund repayment of the debt to NAB does not assist the fourteenth and fifteenth defendants’ cause. First, the evidence does not justify confidence that the other assets are of sufficient value to make it unnecessary for NAB to take possession of the Bellevue Hill property in any event. It appears to be accepted that the real property at Richmond and Tarlo are not valuable enough on their own. Nothing concrete is known about the other property. On the evidence, it is not even known if some of the other property is lawfully available to the fourteenth and fifteenth defendants.

Secondly, the mere existence of alternative assets does not disentitle NAB from exercising its private rights in relation to the Bellevue Hill property if that is what NAB wants to do.

Thirdly, there is nothing in the Proceeds of Crime Act which gives the Court power to modify, restrict or diminish NAB’s private rights as against the fourteenth and fifteenth defendants. In his Notice of Motion filed on 9 August 2024, the fourteenth defendant relies upon ss 24(1)(d) and 39(1). Section 24(1) provides:

The text of s 24(1)(d) makes clear that the Court is empowered to "allow” property to be applied to a particular debt even though the property is subject to a restraining order. The Court may give permission, with the effect that the proceeds of crime authority may not subsequently oppose the property being used in that way. Even if the Court were to make such an order in this case, it would not be enough for the fourteenth and fifteenth defendants’ purpose. There is nothing in s 24(1)(d) which empowers the Court to go further and compel a lender to accept funds from a particular source. Even more pertinently to the current circumstances, the Court is not empowered to compel a lender to forego funds from some source to which the lender is entitled.

Section 39(1) does not assist either. It provides:

The power conferred on the Court under this provision is broad, but it is not unlimited. The ambit of s 39 is to be construed consistently with the language of the text and the purpose of all the provisions of the Proceeds of Crime Act: Commissioner of the Australian Federal Police v Kanjo & Ors [2019] QCA 143 at [43]. As for the text, s 39 empowers the Court to make an “ancillary” order. The ordinary meaning of “ancillary” is to be “subordinate, subsidiary. Later also in weakened sense: supplementary, additional; accompanying”: Oxford English Dictionary, online ed, accessed 15 August 2024. Within s 39, “ancillary” evidently means ancillary to a restraining order which the Court has already made (or could have made): Kanjo’s Case at [50]–[51].

The Court’s power is limited to making orders which the Court “considers appropriate”. Appropriateness is not some unconstrained notion of right, proper or fair. In the first instance appropriateness must be informed by the objects of the Proceeds of Crime Act. The principal objects are set out in s 5 in the following terms:

The objects were summarised in Commissioner of the Australian Federal Police v Hart (2018) 262 CLR 76; [2018] HCA 1 at [32]-[33], where Gordan J said:

Section 39 empowers the Court to make an order which it considers appropriate having regard to these purposes. The Court is empowered to make an order which the Court considers appropriate to support the particular restraining order in question.

Such an operation of s 39 is confirmed by the example orders. Nine examples of orders which the Court may make are set out in the sub-paragraphs of s 39. The examples are not exhaustive. All of the examples relate to the efficacy of the restraining orders, the efficacy of the Official Trustee’s custody and control of the property and the information gathering work of the proceeds of crime authority

In the circumstances of this case, s 39 does not empower the Court to make any order which has as its object the restraint on the exercise of NAB’s private rights against the fourteenth and fifteenth defendants. Such an order will not serve any of the objects of the statute. It could not be considered appropriate to support the restraining orders which have been made over the Bellevue Hill property, nor the restraining orders which have been made over any of the other property referred to in the fourteenth defendant’s Notice of Motion. Such orders would not conform to or resemble any of the sample orders set out in s 39.

As a further matter as they concern NAB the purpose of the orders proposed by the fourteenth defendant is to compel NAB to give up its interests in the Bellevue Hill property. Given that Division 3 of Part 2-1 of the Proceeds of Crime Act specifically contemplates that interests such as that which NAB has in the Bellevue Hill property ought not to be disrupted by restraining orders, the arrangement which the fourteenth and fifteenth defendants seek to implement would be inconsistent with the statutory regime. That is, unless NAB agrees.

I have also had regard to the fact that the orders merely exclude NAB’s interest from the restraining orders which apply to the Bellevue Hill property, and permit NAB to exercise its rights as mortgagee in conformity with the restraining orders. The orders do not enforce any of NAB’s private rights against the fourteenth and fifteenth defendants. NAB does not seek a judgment for the debt or an order for possession or a writ for possession. Such matters are not before the Court. If there be a proper basis for it, the fourteenth or fifteenth defendants may resist an application for such orders when NAB makes it. That application will be the appropriate occasion to canvas any issue arising from the private rights and obligations asserted by NAB.

For these reasons, I accepted NAB’s application on 12 August 2024. I also dismissed the fourteenth defendant’s application for a stay.

The balance of the fourteenth defendant’s Notice of Motion (prayers 2, 3 and 4) seeks orders under ss 24(1)(d) and 39(1) to facilitate an alternative arrangement for the repayment of the debt to NAB. The fourteenth defendant submitted that, even after NAB’s interest is excluded from the restraining orders, there is still utility in those prayers being heard and determined by the Court at a future date.

Whether or not that is correct depends on whether the Court’s powers under s 24(1)(d) and/or whether s 39(1) would permit the Court to compel the plaintiff (as opposed to NAB) to accommodate an alternative arrangement which (on this hypothesis) is acceptable to NAB. NAB does not consent to the arrangement currently proposed so the issue is hypothetical. However, it may be presumed that the fourteenth and fifteenth defendants wish to continue negotiations. On the evidence currently before the Court, it cannot be said that there is no prospect of agreement and hence no utility in the balance of the motion being heard at a later date.

In those circumstances, I made orders for the balance of the fourteenth defendant’s motion to be prepared for hearing on 22 November 2024.

In relation to the Notice of Motion filed by NAB on 27 May 2024, the following orders were made on 12 August 2024:

In relation to the Notice of Motion filed by the fourteenth defendant on 9 August 2024, the following orders were made on 12 August 2024: