The Commissioner of the Australian Federal Police v Cranston and Ors (No 5)

HER HONOUR: Jason Onley and Dev Menon are the 2nd and 4th defendants respectively in civil proceedings brought by the Commissioner of the Australian Federal Police (“the Commissioner”) under the Proceeds of Crime Act 2002 (Cth) (“the POCA”) pursuant to a summons originally filed on 16 May 2017. The summons has been the subject of amendment since that date.

The substantive relief sought in those proceedings includes an order pursuant to s 116(1) of the POCA that both defendants pay a pecuniary penalty to the Commonwealth in an amount to be determined by the Court and a further order that property in which it is said they each have a relevant interest be forfeited to the Commonwealth pursuant to s 47 of the Act.

On 16 May 2017, I made orders under ss 18 and 19 of the POCA restraining a large number of individuals and entities (including the 2nd and 4th defendants) from dealing with the property itemised in the schedules to the summons. I also made orders ancillary to those orders including, relevantly for present purposes, an order under s 180 of the POCA that the 2nd and 4th defendants be examined in relation to their own affairs and in relation to the affairs of other named defendants (“the Examination Orders”), and an order under s 39(1)(ca) that they each provide of a sworn statement (“the Statement”) setting out their interests in property (as defined) and their liabilities.

On 16 May 2017, both defendants were charged with conspiring with other named defendants to dishonestly cause a loss to the Australian Taxation Office in the amount of $83,735,535.28 contrary to s 135.4(3) of the Criminal Code Act 1995 (Cth). They were also charged with dealing with the proceeds of crime where the money or other property was valued at $1,000,000 or more contrary to s 400.3(1) of the Criminal Code Act. Both offences were charged at the culmination of an investigation by the Australian Federal Police into a substantial and organised taxation fraud.

The criminal proceedings are currently being processed in the Local Court. The charges are strictly indictable. The brief of evidence is expected to be voluminous. On the assumption that the defendants intend to defend the criminal charges, and that the prosecution intends to present a joint indictment against all or even some of the alleged conspirators, the criminal proceedings are unlikely to be the subject of a committal for trial in the foreseeable future.

The examination of the 2nd defendant was originally listed to proceed on 13 June 2017 before an approved examiner in accordance with the procedure in Division 3 Chapter 3 of the POCA. The examination of the 4th defendant was scheduled to proceed on that date or soon thereafter. I understood at the time the Examination Orders were made that the scheduling of the examinations of all of the defendants who had received an examination notice under s 186 of the POCA, and the order in which the examinations were to be conducted, was with a view to the Commissioner gathering information to investigate and trace the proceeds of crime (including the proceeds of the alleged taxation fraud and the reinvestment of the proceeds of that offence) in a timely, efficient and structured way in accordance with the powers provided for in the POCA and consistent with the overriding purpose of the Civil Procedure Act 2005 (NSW).

On 27 June 2017, the 4th defendant served a further amended notice of motion seeking, inter alia, the following orders:

On 4 July 2017, the 4th defendant’s notice of motion (together with notices of motion filed by the 1st, 2nd and 3rd defendants for similar relief) was listed for hearing on 12-14 September 2017. At that time, the Court noted the plaintiff’s undertaking that he will not seek to have those defendants examined before the notices of motion are heard and determined.

It is common ground that the hearing of the 4th defendant’s motion (and that of the 1st, 2nd and 3rd defendants) will invoke the operation of s 319 of the POCA. That section provides:

On 19 June 2017, a notice was served on the Commissioner on behalf of both the 2nd and 4th defendants to produce documents in a number of categories which, as at the date of service, they must be taken to have contended would be documents that it was “on the cards” would materially assist in their application for a stay of the examination proceedings pending determination of the criminal proceedings, and the related relief sought in the notices of motion listed for hearing in September 2017 (see R v Salem [1999] NSWCA 86 at [11].

The Commissioner seeks an order pursuant to rule 34.2(1) of the UCPR setting aside the Notice to Produce as lacking any legitimate forensic purpose.

As originally served, the Notice to Produce sought the following:

The defendants were notified there were no documents satisfying the description of “joint agency agreements” in paragraphs 3 and 4.

On the hearing of that application, Mr Bruckner, counsel for the 4th defendant, advised that the description of the documents the subject of the alternative construction in paragraphs 3 and 4 had been recast. Mr Johnson, counsel for the 2nd defendant, adopted the same approach. He also adopted Mr Bruckner’s submissions in resisting the Commissioner’s application to set aside the Notice to Produce.

The recast category of documents in paragraphs 3 and 4 now reads:

Mr McLure, senior counsel for the Commissioner, referred to correspondence wherein the 4th defendant was invited to identify the way in which it was said that it would be “on the cards” that the documents the subject of the Notice to Produce (in its then unamended form) would yield relevant evidence as to the potential for any material compulsorily acquired in the examination process or in the statements of financial affairs to be proliferated such that it might be available for direct or derivative use in his criminal prosecution.

To the extent that there was an informed response to that inquiry prior to the hearing, at the hearing Mr Bruckner submitted that the effectiveness of any orders the Court might make under s 266A of the POCA prohibiting the disclosure of compulsorily acquired information to prosecuting authorities depends upon the integrity of systems within the Criminal Assets Confiscation Taskforce arm of the AFP (“CACT”) to ensure against the risk of leakage of that information. It was suggested that the intersection between the CACT arm of the AFP and the criminal investigation arm of the AFP and the ATO, in its performance of its tax collecting and tax assessing function, was such that there is a potential for inadvertent leakage of compulsorily acquired material between these agencies or their secondees (directly or derivatively) and that it is “on the cards” that both the fact and extent of that risk will be exposed on production of the documents sought under the notice.

In that same correspondence and on the hearing of the Commissioner’s application to set aside the Notice to Produce as recast, Mr Bruckner placed substantial reliance upon the decision of Adamson J in The Commissioner of the Australian Federal Police v W [2016] NSWSC 683 where, at [59]-[60], in the course of giving consideration to relevant matters under s 319(6) of the Act on the defendants’ application for a stay of the civil proceedings until the determination of the pending criminal proceedings, her Honour held that the prejudice to the defendants in the conduct of their defence at trial, either by electing to give evidence themselves in the civil proceedings or giving instructions for the cross-examination of the plaintiff’s witnesses in those proceedings, could not be overcome by orders under the Court Suppression and Non-publication Orders Act 2010 (NSW) or an order to close the Court under s 319A of the Act. Her Honour said:

Mr Bruckner submitted that her Honour’s approach exemplifies the fundamental importance of preserving the integrity of the criminal process against even the slightest risk that compulsorily acquired information might make its way to those responsible for the prosecution of the defendants in this case, as it does the corresponding need to accord that risk appropriate weight on an application brought under s 319 to stay the examination of the defendants and the related relief sought on that application. Mr Bruckner submitted that continued to be a relevant consideration on the defendant’s application for a stay (and related relief) despite the amendment to s 319 and the addition of s 319A.

Mr Bruckner anticipated that the Commissioner would rely upon evidence at the hearing of that application to demonstrate that the risk of inadvertent disclosure to prosecuting authorities of the information already compulsorily acquired and the information that would be acquired in the examination process was minimal and, that being the case, and after taking into consideration the mandatory criteria in s 139(6) of the Act, the Court would be satisfied it was “not in the interests of justice” that the stay be granted.

That evidence was comprised in two affidavits Mr Bruckner tendered at the hearing of the Commissioner’s application to set aside the Notice to Produce, being affidavits of Mr Stefan Jerga of 20 and 21 June 2017.

In his position as Manager and General Counsel of the Criminal Assets Litigation (“MCAL”) overseeing the Criminal Assets Litigation (“CAL”) function of the Criminal Assets Confiscation Taskforce (“CACT”) of the AFP, Mr Jerga deposes to the following:

Mr Bruckner submitted that to the extent that the Commissioner will contend on the stay application that the risk of the inadvertent leakage of compulsorily acquired information is virtually non-existent because of the internal protections that the AFP have put in place to protect the integrity of litigation conducted under the POCA, including the conditions under which compulsorily acquired information is to be managed, it could not be said that the risk is neutralised completely. He also submitted that the risk of derivative use of the compulsorily acquired information was not addressed in Mr Jerga’s affidavits at all. Mr Bruckner submitted that, in any event, the defendants should be entitled to test the Commissioner’s contention by evidence and, since it is “on the cards” that the documents the subject of the Notice to Produce in its amended form would expose both the fact and extent of the risk of direct and derivative disclosure of compulsorily acquired information, the Commissioner’s application to set aside the Notice should be refused.

Mr Bruckner relied upon three documents as exemplifying the type of information which it would be “on the cards” would be within the recast description of documents.

Exhibit D is entitled “Joint Agency Agreement”. It concerned an agreement between the AFP and the ATO as at May 2014 in their conduct of a joint investigation into the suspected non-declaration of income of various individuals and entities unrelated to these proceedings. Mr Bruckner submitted that it was “on the cards” a “Joint Management Committee” and an “Operations Coordination Group”, as subgroups or subcommittees of the agencies who were party to the Joint Agency Agreement in Exhibit D might also exist as a subcommittee or groups with similar status in the criminal investigation arm of Operations Elbrus or Crocodile, and that information to which they might have access will likely be shared between them so as to provide a basis upon which to cross-examine the plaintiff in the pending stay applications.

Mr Bruckner placed emphasis upon the role which the ATO was defined to have in the Joint Agency Agreement in Exhibit D including, in particular, that “the ATO will provide resourcing support to any aspect of the investigation and prosecution as necessary to achieve operational objectives” and, further, that “the ATO will use its operational powers as necessary and share relevant material with the AFP as permitted by law”. He repeated the submission that it is “on the cards” that within the recast category of documents there will likely be an identification of resourcing support the ATO is providing to the Commissioner in the POCA proceedings (including the provision of information relating to any outstanding tax assessments of the defendants). He submitted that under examination the defendants will be obliged to answer questions concerning their taxation status information which might then, directly or derivatively, be made available to the prosecution in proof of the taxation fraud.

Exhibit E is a document headed “Standard Tactical Plan”. It is dated 23 January 2015 and relates specifically to the execution of search warrants for a joint AFP/ATO investigation into the same operation which was the subject of the Joint Agency Agreement in Exhibit D. In Mr Bruckner’s submission, one of the issues that it is anticipated will be raised in the forthcoming stay application is the extent to which databases utilised by the AFP and the ATO are shared (including the extent to which they share an interface) and that it is “on the cards” that documents within the reach of the Notice to Produce might reveal that fact.

Further, in Exhibit E Mr Bruckner focused on what was described as a “briefing session” at an AFP state office in 2015 at which ATO personnel were to be in attendance. Mr Bruckner submitted that this is an indication that the ATO may have a role in both assisting with the criminal prosecution of the defendants and a role in assisting the Commissioner in the civil proceedings and that the extent of that liaison is a matter the defendants are entitled to explore. He submitted that there is a real risk that compulsorily acquired information will leak through the ATO personnel, either directly, by personnel within the ATO serving two functions, or by reason of shared information databases. He submitted that there is nothing in the affidavit evidence he anticipates the Commissioner will rely upon on the stay application that addresses that risk.

Finally, in Mr Bruckner’s submission, Exhibit F, entitled “Investigation Plan” (the same joint operation between the ATO and the AFP the subject of Exhibits D and E), is also strongly suggestive of information sharing between the AFP and the ATO where there is a real risk of the leakage of compulsorily acquired information.

In seeking production of the documents under notice, Mr Bruckner submitted that the extent to which there are secondments between the AFP and the ATO is a matter of legitimate forensic interest and that the defendants are entitled to explore the potential for that to occur.

Mr McLure submitted that Mr Bruckner has failed to identify, with the necessary precision, any legitimate forensic purpose for production of any documents within the recast categories in the Notice to Produce.

In Mr McLure’s submission, they are confined to documents that may reflect the way information is or might be shared between agencies involved in or concerned with the criminal investigation of the defendants (including, it would seem, the role of the ATO in issuing assessments for outstanding tax liabilities), not whether there is any risk of compulsorily acquired information received by or in the custody of CAL or CACT leaking to the prosecuting authorities. To the extent that the documents that are sought might show the passage of information from the criminal investigators to the Commissioner as the plaintiff in the POCA proceedings, he emphasised those documents are irrelevant to any issue with which the stay application might be concerned since they could have no bearing on the principles arising from the “X7” line of authority.

He submitted that Exhibits D, E and F, upon which Mr Bruckner relied as evidencing the type of information that would be caught by the recast Notice to Produce, relate to the sharing or exchange of information between agencies involved with the AFP in the conduct of a criminal investigation, not the AFP, through the Commissioner, in its conduct of POCA proceedings wherein information is compulsorily acquired. In any event, he submitted Exhibits D, E and F are documents which predate the implementation of the dedicated systems and protocols referred to in detail in Mr Jerga’s affidavits which are directed to ensure against the risk of information compulsorily acquired in the civil proceedings under the POCA being available to the prosecuting authorities.

In addressing the particular passages of Exhibit D upon which Mr Bruckner focused in his submissions, Mr McLure drew what I accept is a material distinction between the information the ATO may legally share with the AFP under the governing sections of the Taxation Administration Act 1953 (Cth) in support of a criminal prosecution for taxation offences, and the dissemination of information to the ATO or the prosecuting authorities acquired compulsorily under the POCA, whether directly or derivatively.

He submitted that the Notice to Produce is not, in its terms, confined to documents in the latter category and it is not the function of the Commissioner upon whom the Notice is served or the Court to read the Notice down or to construe it narrowly.

Finally, Mr McLure submitted that to the extent that the defendants relied on the observations of Adamson J in W as requiring a Court in every case where a stay under s 319 of the Act is under consideration to take into account the possibility of inadvertent or unauthorised disclosure to those who have the conduct of the criminal proceedings, however remote that risk might be, that reliance is misplaced. He submitted that to the extent that the approach taken by Adamson J departs from the approach mandated in Commissioner of the Australian Federal Police v McGlone [2016] NSWCA 103, McGlone is to be followed.

I am not persuaded that the defendants have discharged the onus of demonstrating that it is “on the cards” that documents susceptible to being comprehended by the recast Notice to Produce are confined to documents that might yield evidence material to the issues to be litigated on the pending stay application, including the risk of a potential derivative use of compulsorily acquired information by officers of the ATO.

Accordingly, I order that the Notice to Produce, as recast, be set aside.