The Commissioner of the Australian Federal Police v Anthony James Dickson & Ors

1. [1]

   By Amended Notice of Motion filed on 22 April 2021 the ninth defendant, Mrs Donrecka Issakidis, the tenth defendant, Hilldon Pty Ltd, and the thirteenth defendant, Jodoway Pty Ltd, together ‘the applicants’, seek orders pursuant to s 104(3), or in the alternative, s 94A(3) of the Proceeds of Crime Act 2002 (Cth) (‘POCA’) for leave to apply for relief from the forfeiture of certain property to the Commonwealth the subject of restraining orders made pursuant to the Act and by dint of s 92 of the Act. Unless indicated otherwise, all references to legislation are to this Act.

2. [2]

   Leave is required to apply for the relief sought where notice of the forfeiture was given to affected persons under s 92A and where, following the issue of that notice, an application under ss 29, 94 or 94A(3) was not made within the time allowed: ss 94A(4) and 104(2). I interpolate that notice was given to the applicants and they did not make any such application. Lonergan J declared that the property the subject of this application was forfeited immediately before 29 September 2018 under s 92(1): The Commissioner of the Australian Federal Police v Dickson & Ors [2020] NSWSC 869.

3. [3]

   For the purpose of this judgment and in accordance with how the case was conducted before me in both written and oral submissions, I will focus on the question of leave under s 104(3). In any event, I do not understand there to be any difference in my task under either ss 94A(4) or 104(3). The former is in virtually identical terms to the latter. The substantive difference between the provisions is that relief from forfeiture under s 94A(2) is by way of compensation for the forfeited interest and relief under s 102, to which s 104(3) relates, is by way of (re-)transfer of interests in the forfeited property or a declaration of an entitlement to payment of the value of the contested interest in the property.

Context

1. [4]

   Mrs Issakidis is the wife of the third defendant, Mr Michael Issakidis. Mr Issakidis was sentenced by Harrison J in 2017 on one count of deliberately causing a loss or risk of loss to the Commonwealth, and one count of dealing with property of a value of more than $1,000,000 believing it to be proceeds of crime: affidavit of Steven Davidson dated 25 March 2021; R v Issakidis [2018] NSWSC 378 (‘Sentencing Judgment’). Mr Issakidis and his co-conspirator, Mr Anthony James Dickson (who appears in the short title of this long-running confiscation proceeding), engaged in a large and sophisticated tax fraud. There is not, nor has there ever been, a suggestion Mrs Issakidis was complicit in the conspiracy.

Legislation

1. [5]

   I will not set out s 94A(4).The leave mechanism under s 104 is in the following terms:

Issue

1. [6]

   The question on the grant of leave therefore becomes, have the applicants satisfied me that either they had a “good reason” for not making an application when issued with the s 92A notice, or there exists “special grounds” justifying the grant of leave. Even if I am satisfied about either limb, I retain a discretion whether to grant or refuse the leave sought.

2. [7]

   The question of whether the applicants had a good reason for not making the application is temporally limited to the time when the application should have been made, being before the date of forfeiture but after service of the s 92A notices. Whether there exist special grounds for the grant of leave is not so limited. What might be a good reason for not making an application can also constitute special grounds for granting leave. An extreme example far removed from the case at hand is where a party seeking leave was in a coma at the time the s 92A notices were issued. That same circumstance would certainly satisfy both a good reason for not having made an application and constitute special grounds for granting the leave.

3. [8]

   As the parties brought to my attention, there is little judicial consideration regarding what satisfies a “good reason” or “special grounds” for the purposes of granting the leave sought. Suffice to say, whether either of these normative but protean expressions is satisfied necessarily turns on the close consideration of all of the circumstances of the case at hand.

Evidence relied upon at the hearing

1. [9]

   The applicants rely on the following evidence:

   1. (1)

      Affidavit of Lachlan Henry dated 24 September 2020 (‘first Henry affidavit’) and the annexed Exhibit LETH-1;

   2. (2)

      Affidavit of Lachlan Henry dated 1 December 2020 (‘second Henry affidavit’);

   3. (3)

      Affidavit of Lachlan Henry dated 23 December 2020 (‘third Henry affidavit’) and the annexed Exhibit LETH-2;

   4. (4)

      Affidavit of Lachlan Henry dated 22 April 2021 (‘fourth Henry affidavit’) and the annexed Exhibit LETH-3;

   5. (5)

      Affidavit of Donrecka Issakidis dated 23 December 2020; and

   6. (6)

      Affidavit of Steven Murray dated 23 December 2020.

2. [10]

   The Commissioner relies on the affidavit of Mr Steven Davidson dated 25 March 2021 which annexed Exhibit SD-2.

Factual matrix

1. [11]

   Broadly speaking, the tax fraud that Mr Dickson and Mr Issakidis perpetrated involved the false overvaluation of medical technologies, allowing the corporate vehicle for their fraud to claim very large tax deductions for the depreciation of those assets. Through these tax deductions, the corporate vehicle avoided significant tax liabilities on income generated as the owner of a number of units in certain trusts operating buy-back leasing arrangements facilitated by ANZ Bank with some of its clients.

2. [12]

   The first distribution of cash from the fraud to the corporate vehicle operated by Mr Issakidis and Mr Dickson was made on 26 October 2006: Sentencing Judgment at [16]. So although the “Machiavellian plot”, as his Honour Harrison J puts it, had well and truly been contrived and put in motion before then, it could not be said that the conspiracy had borne fruit prior to this first distribution. These distributions were absorbed into the revenue of the corporate vehicle, of which Mr Issakidis was a director. Mr Issakidis derived a benefit of some $15,738,020 from the conspiracy: Sentencing Judgment at [57]. Although, the conspiracy intended to cause a risk of loss to the Commonwealth of $135 million: at [70].

3. [13]

   It is the applicants’ case that the property the subject of the orders sought was lawfully acquired by Mr and Mrs Issakidis during their marriage. The applicants seek relief with respect to nine real properties situated in Queensland, which they group into three distinct categories: the Redbank property; the Roth property (since sold); and the Wynnum properties, constituting seven units in a retirement complex. I adopt the applicants’ stratification of the relevant properties.

4. [14]

   Taking the evidence at its highest for the purpose of this interlocutory application, it is arguable that the applicants have lawful interests in the property claimed.

5. [15]

   With regards to the ‘Redbank property’, land was purchased by Hilldon Pty Ltd as trustee for the Redbank Woollen Mills Trust in 1996 for a sum of $4,496,360 (LETH-1 p 2). Since 12 December 2006, Mr and Mrs Issakidis have each owned one of two shares in Hilldon Pty Ltd (Affidavit of Steven Davidson dated 25 March 2021 p 3). This post-dates 26 October 2006. Mr Issakidis was at all material times and remains the sole director of Hilldon Pty Ltd. But Mrs Issakidis was a beneficiary named in the Redbank Woollen Mills Trust Deed at the time of acquisition of the “Redbank property”. (LETH-1 p 31). Mrs Issakidis appears to be named as a director witnessing the affixation of Hilldon’s corporate seal to the trust deed, although not otherwise in the evidence.

6. [16]

   Hilldon sold part of the land to a third party in 2000 on terms that the third party would later subdivide the land into lots and transfer one of the subdivided lots back to Hilldon. That subdivided lot is the ‘Redbank property’ and that re-transfer was made to Hilldon in 2007 (LETH-1 p 81). The 2007 transfer of the ‘Redbank property’ was the last dealing over the property before its forfeiture to the Commonwealth, and was on terms set out in the 2000 sale, that is to say there was no consideration paid for the lot in 2007. So despite the acquisition of the property postdating the first distribution, the evidence suggests there is no nexus linking the offending, the proceeds and the acquisition of Hilldon’s interest in the Redbank property.

7. [17]

   Turning to the ‘Wynnum properties’ and the ‘Roth property’, the evidence discloses a basis for fairly arguing that they too were acquired before any proceeds of the fraud were distributed to Mr Issakidis. The Wynnum properties comprise seven individual lots in a retirement complex. The Roth property is an individual lot in this complex, sold to a Ms Roth in 2012 after the restraining order was made in relation to the applicants’ property (LETH-3 p 3). The applicants’ case on the Roth property relates to the proceeds of that sale, an amount of $83,000.

8. [18]

   Jodoway Pty Ltd was the owner of the Wynnum properties, and the Roth property before its sale to Ms Roth. Originally Jodoway was the proprietor of all 80 units within the retirement complex, and operated the retirement complex under the business name Palm Springs Retirement Village. Through the progressive sale of the units, bar the eight subject to in the application for leave, Jodoway discharged two mortgages over the complex before October 2006, the latter mortgage being discharged in May of that year (first Henry affidavit p 9).

9. [19]

   ASIC records reveal that both Mr and Mrs Issakidis were appointed directors of Jodoway in 2002, Mr Issakidis was also appointed the company secretary 2002, and Mrs Issakidis has been the sole ordinary shareholder of Jodoway since 2003 (SD-2 p 10).

10. [20]

    At the time of the hearing Mrs Issakidis was 72 years old. The nature of the relationship between Mr and Mrs Issakidis, who married in 1977, is not uncommon for women of her generation. The evidence appears to demonstrate she was entirely dependent on her husband on matters of finance and business throughout their union, since the early days of their courtship.

11. [21]

    Mrs Issakidis deposes that her only employment experience includes two years of unpaid administrative work in her husband’s office shortly after they had met, twelve months operating a community market stall in 2005, and some 15 years of participation on the community management committee of the Palm Springs Retirement Village (Donrecka affidavit pp 5-6).

12. [22]

    She states she has been entirely financially dependent on her husband since they married. He catered for her financial needs and provided her with a credit card. When she was examined in relation to her husband’s affairs under s 180, she gave evidence that she had not opened her own mail in 42 years (SD-2 p 81). She would sign financial documents that her husband would ask her to sign, but she struggled to understand what any of the contents meant. She has trouble reading. When asked about the words ‘Hilldon’ and ‘Jodoway’, she indicated that she had heard the words before, but was unable to say if she was a director or shareholder of those companies (SD-2 pp 100-1). It is not clear she even knew they were companies before the line of questioning implied that to be so.

13. [23]

    As a result of the forfeiture orders she is entirely dependent on her age pension and has no assets of value (Donrecka affidavit p 5; Murray affidavit p 5).

14. [24]

    Mrs Issakidis also states she suffers from a number of mental health issues, particularly in light of the traumatic experience of her husband’s arrest and conviction. On the evidence before me, it appears that Mrs Issakidis has complained of mental health symptoms since at least 2013, when she was questioned pursuant to s 180 (SD-2 p 122).

15. [25]

    Her mental health issues appear to have come to a head in October of 2017, just prior to Mr Issakidis’s sentencing. The pair regrettably attempted to carry out a suicide pact (Donrecka affidavit p 7; Murray affidavit p 3). Mrs Issakidis was relayed to Gold Coast Hospital for treatment. Her discharge summary records that she presented with a depressed mood and she had self-reported untreated depression and anxiety for many years (LETH-2 p 12). A letter dated 17 June 2020 from her treating GP, Dr Gowrie Senaweera, states that she “has been suffering from anxiety and depression [for] a few years” and that her “symptoms are worse, ever since her husband was imprisoned” (LETH-2 p 3).

16. [26]

    Mrs Issakidis’s solicitor took steps to procure an independent psychiatric evaluation of Mrs Issakidis but, due to her impecuniosity, those attempts were unsuccessful (second Henry affidavit p 3). I interpolate the present solicitors for the applicants are acting on a conditional no-win no-fee basis (Donrecka affidavit p 5). Although far from definitive, I am satisfied that the evidence sufficiently supports a finding at this interlocutory level that Mrs Issakidis’s anxiety and depression materially impede her ability to look after and advance her own interests in the conduct of this litigation.

17. [27]

    On 13 June 2018 s 92A notices were served on Mrs Issakidis, Hilldon and Jodoway in accordance with the requirements of that section (Exhibit SD-2 pp 182, 188, 194). At that time, Mr and Mrs Issakidis, Jodoway and Hilldon were represented by Robert Candelori of McGirr Lawyers (SD-2 p 164).

18. [28]

    On 21 February 2018, before the s 92A notices were issued, Mr and Mrs Issakidis’s previous solicitor records the following file note in relation to the POCA proceedings (LETH-2 pp 32-33):

19. [29]

    Upon receipt of the 92A notices, on 15 June 2018, the solicitor records the following file note (LETH-2 p 40):

20. [30]

    Following a conference with Mrs Issakidis, after the property had been forfeited (but not yet declared forfeited by Lonergan J), on 1 October 2018, the solicitor made the following file note (LETH-2 p 42):

21. [31]

    Notwithstanding that these file notes indicate that the applicants’ solicitors were alive to the POCA proceedings, no application or objection was made on Mrs Issakidis’s behalf subsequent to the s 92A notices. Rather, in accordance with his instructions, the former solicitors for Mr Issakidis focussed on his conviction appeal to the Court of Criminal Appeal (Issakidis v R [2019] NSWCCA 302) which was unsuccessful, and the High Court special leave application (Issakidis v The Queen [2020] HCASL 121), which was rejected. It goes without saying that there is some forensic advantage in pursuing a conviction appeal in relation to POCA proceedings under the Act. By operation of s 107, forfeitures of property related to a person’s conviction for an offence cease to have an effect upon the quashing of the conviction, so long as the orders do not also relate to other convictions not quashed. However, Mrs Issakidis’s rights were not co-extensive with those her husband may have had.

22. [32]

    Mrs Issakidis deposes to her knowledge of the circumstances surrounding both the s 92A notices and the POCA proceedings. She deposes that she was unaware of the POCA proceedings or the risk that the property would be forfeited until June 2020, when she engaged her current solicitors (Donrecka affidavit p 3). She does not remember having ever had any contact with Mr Candelori, the solicitor on record and whose notes are extracted above – although I add she clearly had some contact with him. She admits that due to her mental health issues she has problems with her recollection, but states that she was not aware that the properties claimed would be forfeited, nor that they would be forfeited by a particular date (Donrecka affidavit p 4).

23. [33]

    The consideration that the evidence supports a conclusion that Mrs Issakidis must have had some direct contact with the solicitor about the POCA proceedings is of limited relevance because this was not until 1 October 2018, which is after forfeiture by force of law. This is not inconsistent with the overall impression that Mr Issakidis was “calling the shots”. This too is consistent with Mrs Issakidis’s evidence, which is not directly challenged about her dependency on her husband.

Argument of the applicants

1. [34]

   The applicants say they had a good reason for failing to bring an application to exclude the property forfeited to the Commonwealth due to a combination of four reasons. First, when the s 92A notices were served on the applicants Mrs Issakidis’s mental health was in a state of decline. Secondly, she relied on her husband and legal representatives to act in her best interest in relation to the POCA proceedings, which she did not herself understand. Thirdly, she was in a state of vulnerability in the relevant period between forfeiture and service of the s 92A notices because of a combination of her mental health issues, her dependency on her husband in financial matters and her physical separation from her husband for the first time in 35 years. Finally, the applicants submit that the file notes of the applicants’ solicitors reveal she was not adequately advised that the property would be forfeited subsequent to the issue of the s 92A notices if an application for exclusion was not made.

2. [35]

   The applicants submit that the following matters are relevant to the question of special grounds: the reason why the application was late; the prospects of success of the application under s 102; whether injustice to the applicants will result if leave is not granted; and any prejudice suffered by the respondent from the grant of leave.

3. [36]

   To these points the applicants again advance Mrs Issakidis’s mental health issues in combination with the failure of her legal representatives to look after her interests. They suggest that there are prospects for the success of the application as her interests claimed were lawfully acquired during the course of her marriage with Mr Issakidis and are temporally sequestered from the proceeds of her husband’s fraud, ie before 26 October 2006. Due to her impecuniosity and reliance on her government pension, she would suffer significant hardship were she not granted leave to apply for relief from the forfeiture. Her hardship is due to the forfeiture. Finally, there is no appreciable prejudice to the Commonwealth by reason of her delay in bringing the application.

Argument of the Commissioner

1. [37]

   The Commissioner contends that the applicants have not discharged their onus in establishing they had a good reason for not making the application in time or that there are special grounds for granting leave. The crux of this first argument is that the adequacy or otherwise of the applicants’ representation with regard to the POCA proceedings is a matter for the applicants and their former solicitors. The Commissioner submits that Mr Issakidis instructed solicitors on her behalf and that she actively chose not to participate in the proceedings, leaving the instruction of the solicitors up to her husband. This is effectively an argument of neglect of her own interests or at least acquiescence.

2. [38]

   The Commissioner also argues that the requirements for a grant of leave are to be strictly applied. The ‘leave provisions’ contained in ss 94A(4) and 104(2) were introduced following the passage of the Crimes Legislation Amendment (Serious and Organised Crime) (No. 2) Bill 2009 (Cth). The Commissioner drew my attention to the following passage in the Bill’s accompanying explanatory memorandum (at pp 21-22):

3. [39]

   I interpolate that in response, the applicants pointed to the following aspect of the explanatory memorandum (at p 2):

4. [40]

   The former leave provisions under s 94A(4) and s 104(2) were couched in the following terms:

5. [41]

   Clearly, “any neglect” was disentitling conduct. “Good reason” or “special grounds” on the other hand are expressions capable of accommodating even a degree of “neglect” on the part of an applicant. That is to say, “neglect”, where it exists, is not decisive of a leave application.

6. [42]

   The Commissioner submits that even if I were satisfied that grounds have been shown to grant leave, I would not exercise my discretion to do so. This argument is double-pronged. The Commissioner, first, argues that I would not grant the leave sought as there are strong policy reasons running contrary to the grant of leave. The Commissioner contends that, in light of Mrs Issakidis’s lack of commercial sophistication and the characteristic joint-interest in the property claimed, the property remains under the effective control of Mr Issakidis.

7. [43]

   The second discretionary factor, in the Commissioner’s submission, weighing against the grant of leave, is the Commissioner’s application for a pecuniary penalty order (‘PPO’) against Mr Issakidis. A PPO under s 116 operates as a judgment debt against an offender where their assets are insufficient to satisfy a forfeiture order: s 140(1). If the court upon making a PPO is satisfied that certain property is under the “effective control of the person”, then the court may specify that certain property is available to satisfy the PPO. Importantly, the power to declare property under the effective control of the person available to satisfy the PPO is itself discretionary. I understood these related aspects of the Commissioner’s argument to be one of futility.

Consideration

1. [44]

   As I have indicated previously, the expression ‘good reason’ necessarily turns on the facts of the case and is incapable of lengthy exposition. So, too, is the expression ‘special ground’, although the latter expression necessarily requires something out of the ordinary. It is unhelpful to attempt to categorise in either event what particular circumstances may satisfy either term; they are necessarily fact-sensitive.

2. [45]

   I agree with the arguments of the Commissioner that the Act contemplates some degree of expedition on the part of a person whose interests in property are affected by a restraining order in taking steps available under the Act to protect one’s own interests. That being said, the change in the relevant state of satisfaction for the engagement of the leave provisions from, “not due to any neglect” on the part of the applicant to a “good reason” for not having made the application is one that favours applicants, not the Commissioner, in my view for the reason I have explained above. This more liberal interpretation of the leave provision is also supported by those sections of the explanatory memorandum identified by the applicants’ above. It would be erroneous to construe the provision strictly; it is clearly intended to offer relief to persons who fail to comply strictly with the statutory regime for challenging the effect of restraining orders, at least in the limited circumstances connoted by either “good reason” or “special grounds”.

3. [46]

   As for the question of both a ‘good reason’ for not bringing the application and whether there are ‘special grounds’ for granting leave, I am satisfied that both limbs are satisfied, in the alternative, through a combination of the following factors: Mrs Issakidis’s mental health at the time the s 92A notices were issued; her reliance on her husband in matters of business and, especially, for the appropriate conduct of the forfeiture proceedings; and her present impecuniosity relative to her fairly arguable interests in the property the subject of this application.

4. [47]

   It is not lost on me that Mrs Issakidis was legally represented at the time when the application should have been made. It is also not my place to adjudge the quality of that representation. However, although it may have ultimately produced a favourable result for Mrs Issakidis, focussing on her husband’s appeal in relation to the forfeiture proceedings does seem to me to have been a ‘sink or swim’ strategy. To take such a course where there is nothing in the act precluding an application being made while a conviction appeal is pending and, to be blunt, there are the obvious forensic difficulties in persuading a court of criminal appeal to quash the verdict of a jury on the basis it was unreasonable, is a strategy that can only be described as high-risk.

5. [48]

   The course taken and the evidence in the file notes leaves open only one available inference, Mr Issakidis was the sole source of the solicitor’s instructions. His interests were at the forefront of his thinking. By instructing the solicitors focus on the appeal and not the forfeiture proceedings, it could not be said that Mrs Issakidis’s interests were actively protected. As much is obvious from the need for leave. One, of course, may draw a direct line between the course taken by the solicitors to the relationship of dependency that existed between Mrs Issakidis and her husband. But I see no reason why that should now, at an interlocutory stage where leave and not final relief is being sought, bind her to the course taken by her husband which was not objectively in her best interests. She has an arguable claim to at least some interest in the property; property which was obtained prior to her husband’s offending. This in my view explains the absence of a timely application and these circumstances, on their own, would provide a good reason for not making the application.

6. [49]

   This conclusion is reinforced by the consideration of her mental health at the time of the notices. She, to me at least, appears to have been in no position to adequately instruct solicitors to protect her lawful interests. It could not be said, as suggested by the Commissioner, that she acquiesced in the course chosen by her husband. She was a woman, significantly dependent on her husband – who had just entered prison and left her side for likely the first time in their lives together – with observable diagnosable mental health issues. To refuse her leave on the basis she ‘acquiesced’ to the course taken by her husband and his solicitors would involve a perversion of the circumstances surrounding Mrs Issakidis’s situation in the relevant period. Leaving the matter in her husband’s hands was entirely consistent with her dependency upon her husband rather than with mere acquiescence in the strategy adopted, let alone with the making of a conscious election not to take steps to advance her own interests.

7. [50]

   Finally, and temporally relevant only so far as the special grounds limb is concerned, the pair clearly acquired the impugned property lawfully. They enjoyed a life of significant affluence well before the “Machiavellian plot” was hatched, a not uncommon experience of the courts when it comes to white-collar offenders. When their previous financial success and established interests in the forfeited property the subject of the application is juxtaposed with Mrs Issakidis’s current impecuniosity, viewed in light of her mental health issues when the s 92A notices were to be responded to, if necessary, I would have been satisfied that special grounds for granting leave exist.

8. [51]

   The Commissioner argues that it would be futile to grant leave to the applicants in light of the application made for a PPO against Mr Issakidis.

9. [52]

   This argument can be readily dismissed. The burden of discharging the futility argument, at this interlocutory stage, would need to rise, in my opinion, to the level of the well-known test propounded in General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125; [1964] HCA 69. It is impossible for me to conclude that the futility argument could rise so high. Even if I were presently satisfied that there each property claimed may be used to satisfy any PPO, and I need not making a finding on that, I would still need to be satisfied that whichever judge determined the PPO would not exercise his or her discretion to refuse the order sought. The very nature of judicial discretion prohibits certainty of outcome.

10. [53]

    There is, I acknowledge, evidence to suggest that the relevant property is under the effective control of Mr Issakidis, not least of which is the nature of the relationship between them. I do not doubt that the Commonwealth’s position on the effective control point will be at least arguable upon their application for a PPO: Lordianto v Commissioner of the Australian Federal Police (2019) 266 CLR 273; [2019] HCA 39 Commissioner of the Australian Federal Police v Hart (2018) 262 CLR 76; [2018] HCA 1. But that a point is arguable does not meet the high standard propounded in General Steel. Nor should the mere existence of an arguable contrary point prevent a litigant from pursuing relief in the courts.

11. [54]

    One significant factor operating in favour of the grant of leave however is the lack of prejudice to the Commonwealth, on the one hand, and the significant hardship and injustice that may result from a refusal to grant leave, on the other.

Orders

1. [55]

   Accordingly, my orders are:

   1. (1)

      Under s 104 Proceeds of Crime Act 2002 (Cth) grant leave to the applicants to apply for an order under s 102 of the said Act;

   2. (2)

      Under s 94A(4) of the said Act, grant leave to the applicant to apply for compensation under s 94A, in the alternative to relief under s 102, of the said Act.

   3. (3)

      The parties’ costs are costs in the cause;

   4. (4)

      Liberty to the parties to apply in respect of the form of these orders by prior notice given on or before 17 December 2021;

   5. (5)

      List for directions before the Common Law Division Case-Management Registrar on 31 January 2022.