Lordianto v Commissioner of the Australian Federal Police

BEAZLEY P and PAYNE JA: On 7 September 2017, Simpson J dismissed an application by Mr Sanko Lordianto and Ms Indriana Koernia in which they sought an order to exclude certain specified interests in property from a restraining order made on 28 June 2016 under the Proceeds of Crime Act 2002 (Cth), s 19: Commissioner of the Australian Federal Police v Lordianto [2017] NSWSC 1196. These reasons should be read together with the reasons in the related appeal, Commissioner of the Australian Federal Police v Fernandez [2018] NSWCA 198.

The subject of the restraining order was funds standing to the credit of five specified accounts held by the Commonwealth Bank of Australia (the Commonwealth Bank), identified as the First and Second Cash Investment Accounts and three Standard Term Deposit accounts in the name of either Ms Koernia or the joint names of the appellants. It is convenient for present purposes, although, as we explain later in these reasons, not legally accurate, to identify the restrained interests in property, which were also the subject of the exclusion application, as funds standing to the credit of the appellants’ bank accounts.

The restraining order was made on the basis that the court was satisfied that there were reasonable grounds to suspect that the funds in the appellants’ bank accounts were either the proceeds of an indictable offence or offences, or an instrument of a serious offence or offences: Proceeds of Crime Act, s 19. The alleged indictable or serious offence was an offence contrary to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), s 142 and/or the Criminal Code (Cth), s 400.9.

The Anti-Money Laundering and Counter-Terrorism Financing Act, s 142 provides that a person commits an offence if they cause another person to become a party to two or more non-reportable transactions and it would be reasonable to conclude that the person conducted the transactions in the manner or form in which they did for the sole or dominant purpose of ensuring that the money was transferred in such a way so as not to give rise to a “threshold transaction”, being a cash transaction of $10,000 or more, that would have had to have been reported under s 43. Under s 43, reporting entities, including banks, are required to report threshold transactions to the Australian Transaction Reports and Analysis Centre within 10 business days of the transaction occurring.

Further, it is an offence under the Criminal Code, s 400.9 to deal with money in circumstances where it is reasonable to suspect that the money is proceeds of crime and, at the time of the dealing, the value of the money was $100,000 or more.

The primary judge held that there had been no acquisition of property by the appellants at a time after the activity or transaction that caused the property to become tainted had occurred. However, her Honour considered that if, contrary to that view, the deposits into the appellants’ bank accounts involved an acquisition of property, the appellants were not a “third party” for the purposes of the Proceeds of Crime Act, s 330(4)(a), and that the appellants’ interests in the property were not acquired for sufficient consideration. Her Honour also held that the appellants had failed to establish that the property had been acquired in such a way as not to arouse a reasonable suspicion that it was either proceeds of an offence or an instrument of an offence. Her Honour noted that whether the property was proceeds of an offence or an instrument of an offence was not in issue. The issue was whether the property had ceased to be tainted.

The appellants sought leave to appeal from her Honour’s order dismissing their application for an exclusion order. The summons seeking leave to appeal was heard concurrently with the appeal. The Commissioner of the Australian Federal Police (the Commissioner) did not oppose the grant of leave. On the assumption that leave would be granted, the Commissioner submitted that the primary judge erred, as the appellants contended in grounds 1 and 2 of their notice of appeal, in holding that the appellants did not acquire property when deposits were made into their accounts, and that the primary judge should have held that each deposit into their accounts constituted an acquisition of property by them.

Leave to appeal should be granted. The legislatively-sanctioned restraint of private assets is an extraordinary measure such that there is a public interest in ensuring that the power is exercised in accordance with law. Further, as identified by the Commissioner, the central matter in issue is the proper construction of the Proceeds of Crime Act, s 330(4)(a), which stipulates when property ceases to be proceeds of an offence or an instrument of an offence. The Commissioner informed the Court that the proper construction of this provision has not been the subject of determination by the High Court or any Australian intermediate court of appeal.

On the appeal, the appellants accepted that, albeit, without their complicity, the deposits were made with a view to avoiding the reporting obligations that rest upon Australian banks. The appellants also accepted that that was sufficient evidence to conclude that the money deposited into their accounts was proceeds of crime within the meaning of the Proceeds of Crime Act and, it followed, the restraining order was properly made. However, Ms Koernia said that until the proceedings relating to the restraint of the funds standing to the credit of the appellants’ bank accounts commenced, she had no idea that “structuring” deposits constituted an offence or that it was a form of money laundering, or that international money transfers could involve money laundering.

The appellants, who are husband and wife, are Indonesian citizens. They have both been granted permanent residency in Australia and spend time in Australia. Mr Lordianto comes from a wealthy Indonesian family who has business and investment interests in Indonesia. From time to time, the appellants transferred large sums of money to accounts held in their names by the Commonwealth Bank. As between the appellants, Ms Koernia had the responsibility of transferring money from Indonesia to Australia and managing their investments in Australia. Ms Koernia gave evidence that she arranged the transfer of money through money changers, who also provided remittance services, in Indonesia.

Ms Koernia gave evidence that she does not know how to use internet banking. She said that quarterly statements for the accounts the subject of the restraining order were posted by the Commonwealth Bank to the appellants’ address in Singapore. Ms Koernia also said that if she needed to check the balance of the accounts at any time, she would go into a Commonwealth Bank branch in Australia or telephone the Commonwealth Bank representatives with whom she dealt for information as to the account balance.

Between 22 October 2013 and 5 August 2015, Ms Koernia arranged for money to be transferred into the First and Second Cash Investment Accounts in a total amount of $4,500,000. In most cases, the deposits were made in amounts under $10,000. The method whereby this was done, known as “cuckoo smurfing”, is described more fully below.

Ms Koernia described the process by which she transferred money from Indonesia to Australia as follows. Before deciding which money changer to use, Ms Koernia would check the foreign currency exchange rate being offered by different banks and money changers in Indonesia so as to obtain the most competitive rate. Ms Koernia identified two money changers that she used, each of which, she said, represented themselves to be authorised money changers.

Ms Koernia said that:

A couple of days after depositing money into the nominated Indonesian account, Ms Koernia would contact the Commonwealth Bank in Australia to check that money had been received into the appellants’ Commonwealth Bank accounts. She said that on each occasion, the Commonwealth Bank representative would tell her the current balance and list any recent deposits, so that she could tally them up. She said that on occasions, if there were too many transactions to add up easily, she would ask the bank to fax to her an account transaction listing. She said that she was always satisfied that the correct amount had been deposited into the nominated Commonwealth Bank account.

Ms Koernia said that she had never given any thought to the methods by which the money changers transferred the money and that it had never occurred to her that it might involve illegal activity. She said that at no stage did the Commonwealth Bank representatives tell her that there was anything wrong with money being paid into the appellants’ accounts by way of multiple deposits mostly under $10,000, even after reading out the list of deposits to her. The only occasion on which a remark had been made to her was when one bank representative said that her bank statement was “very crowded”, but the representative did not say that there was anything wrong with it.

From both the information given to her by bank representatives and from the bank statements, Ms Koernia was aware that numerous cash deposits in small amounts were being paid into the appellants’ Commonwealth Bank accounts. She said, however, that she did not know that the deposits were being made at a number of different branches across Australia. She also said that she did not make any enquiry of the money changers in Indonesia or of the Commonwealth Bank in Australia as to why deposits were being made in that way.

Ms Koernia said that she did not know the identity of the people who deposited money into the Commonwealth Bank accounts. She said she “had no contact with or knowledge of any transaction” interposed between her deposits into the nominated bank account in Indonesia, and the receipt of money into the Commonwealth Bank accounts in Australia.

In cross-examination, Ms Koernia denied that she suspected, from the fact that many small deposits were being made, that one possibility was that there was some form of unlawful activity involved. She also denied that she suspected that the making of a large number of deposits under $10,000 on a single day was unusual. She further denied that she suspected that one of the reasons for the deposits being made in that way was to avoid mandatory reporting requirements imposed on Australian banks. She also denied that she recognised that one possibility for the numerous low dollar amounts being deposited was to avoid Australian anti-money laundering laws. She disagreed that she had refrained from making any enquiries about the manner in which the deposits were being made so as not to confirm her suspicions of wrongdoing.

Of the $4,500,000 that was deposited into the appellants’ Commonwealth Bank accounts, a total of $2,786,062 was deposited by way of 390 cash deposits in sums of less than $10,000 over the period from 22 October 2013 to 5 August 2015. Multiple transactions were often made on the one day or over a short period of time. For example, between 23 and 31 October 2013, there were 77 cash deposits made into the appellants’ First Cash Investment Account in amounts under $10,000 from branches as widely located as Chinatown, Marrickville, Lakemba and Parramatta, to name a few of the branches in New South Wales. Deposits were also made at branches in Queensland, Victoria, South Australia and Western Australia. A similar pattern is reflected in the way in which the balance of the $2,786,062 was deposited.

The remainder of the money Ms Koernia deposited with the Indonesian money changers was deposited into the appellants’ Commonwealth Bank accounts in various amounts of over $10,000 at different branches across Australia. For example, on 24 October 2013, a cash deposit of $80,000 was made at the St James branch in New South Wales, on 29 November 2013, two cash cheques in the sum of $100,000 and $300,000 respectively were deposited at the Broadbeach branch in Queensland, and on 2 June 2015, $104,800 was deposited at the Innaloo branch in Western Australia.

It is convenient at this point to describe the process or system known as “cuckoo smurfing”. Evidence of this process was given by a former officer of the Australian Federal Police, whose report, after redaction, was admitted into evidence without objection and treated by the primary judge, at [53]-[54], as factual evidence. The process involves the following steps:

The report concluded:

The overarching issue on the appeal was whether, pursuant to the Proceeds of Crime Act, s 330(4)(a), the appellants acquired an interest in property by reason of the money being deposited into their existing bank accounts, in contravention of the Anti-Money Laundering and Counter-Terrorism Finance Act, s 142, that simultaneously ceased to be proceeds of an offence as the interest was:

The particular issues raised by the notice of appeal were as follows:

The Proceeds of Crime Act provides a comprehensive scheme for the restraint and forfeiture of proceeds of an offence or an instrument of an offence. It includes provisions whereby a person whose property is restrained may apply to have the property excluded from restraint and, in certain circumstances, for the payment of compensation. We have already referred to the operation of s 19 at [3] above. So far as is relevant to these proceedings, the Proceeds of Crime Act provides as follows:

The Court is concerned in this case with the construction of specific provisions of the Proceeds of Crime Act, in particular, s 330(4)(a).

The relevant principles of statutory construction were not in contest. In Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28, the plurality stated, at [69], that the:

Their Honours referred to Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390; [1955] HCA 27, in which Dixon CJ stated that:

In Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27; [2009] HCA 41, the plurality explained, at [47], that:

In assessing the “purpose” of a statute, the Court must look to its text and structure. As the plurality emphasised in Lacey v Attorney-General for the State of Queensland (2011) 242 CLR 573; [2011] HCA 10:

Most recently, in SZTAL v Minister for Immigration and Border Protection (2017) 347 ALR 405; [2017] HCA 34, the plurality stated, at [14], that:

The Commissioner referred the Court to two decisions which considered the principles applicable to the construction of the Proceeds of Crime Act. First, in Lee v Director of Public Prosecutions (Cth) (2009) 75 NSWLR 581; [2009] NSWCA 347, the Court considered the interaction between the principle of legality, which denies a statutory intention to modify or abolish fundamental rights or freedoms absent clear and unambiguous language, whether by express reference or arising by necessary implication, and the principle that a provision must be construed by reference to its context and purpose. In Lee, the Court held, at [20]-[21], that:

The Commissioner submitted that, pursuant to Lee, the provisions of the Proceeds of Crime Act should not be construed by reference to an “overarching presumption or inclination towards a narrower application or lesser interference with property rights”, having regard, in particular, to the Proceeds of Crime Act, s 5. The Commissioner submitted that the principle of legality cannot operate to “frustrate an object of [the Proceeds of Crime Act] or render [the] means by which [it] sets out to achieve that object inoperative or nonsensical”: see R v Independent Broad-Based Anti-Corruption Commissioner (2016) 256 CLR 459; [2016] HCA 8 at [77].

The Commissioner also referred the Court to Commissioner of the Australian Federal Police v Hart (2018) 351 ALR 1; [2018] HCA 1, in which Gordon J emphasised, at [48], the importance of the statutory context and framework erected by the Proceeds of Crime Act to questions of construction. In relation to the exclusion of property from a restraining order, her Honour noted that:

The appellants, in their exclusion application, stated that they were the beneficial owners of the money in the accounts and that their “interest” in the “property” was neither the proceeds of an offence, nor an instrument of an offence. They provided the following particulars of their interest as follows:

The primary judge set out, at [68], the five elements that must be proved under s 330(4)(a) in order for property to cease to be the proceeds of an offence or an instrument of an offence. The first element was that there must have been an acquisition of property after the ‘activity’ that caused the property to become tainted had occurred. In this case, the relevant ‘activity’ was the making of the structured deposits.

Her Honour concluded, at [72], that the “interest” in “property” said to have been acquired was not ‘money’. Rather, the correct characterisation of the appellants’ interests in the Commonwealth Bank accounts was that of a chose in action, which gave the appellants an entitlement to require the bank to pay to them, on demand, all or part of the amount credited to their accounts.

Her Honour held that the choses in action were acquired when the appellants opened their bank accounts and that that interest did not vary. At all times, it remained the same contractual right to require the Commonwealth Bank to repay to them the balance in their accounts. Thus, whilst the value of the choses in action fluctuated, depending on the balance in their bank accounts from time to time, their interest in the property remained the same as when the bank accounts were opened. On this view, at the time that the appellants acquired their choses in action in opening the accounts, the structuring offence upon which the restraining order was based had not been committed.

As her Honour stated, at [83], “[t]he property of [the appellants] remained what it had always been – a chose in action; a contractual right”, the value of which rose and fell with deposits and withdrawals. In other words:

Her Honour considered, at [89], that her view gained some support from the Proceeds of Crime Act, s 77(1)(c), which provides that a court must make a compensation order if, inter alia, the court is satisfied that a proportion of the value of the interest of an applicant was not derived or realised, directly or indirectly, from the commission of any offence. In her Honour’s view, this appeared to be a recognition that “an applicant might have an interest, less than the whole, in the value of indivisible property” (emphasis in original).

In coming to this conclusion, her Honour rejected, at [82]-[83], the Commissioner’s argument, based upon Commissioner of the Australian Federal Police v Kalimuthu [No 3] [2017] WASC 108, in which Allanson J observed, at [116], that as “property” includes rights in connection with property, as defined in s 338, when a deposit is made into a person’s bank account, that person’s interest includes rights in relation to the additional credit balance, or to the new total credit balance. Allanson J held that that is an acquisition of property.

The primary judge likewise rejected the approaches taken in Commissioner of the Australian Federal Police v Fitzroy All Pty Ltd (2015) 299 FLR 439; [2015] WASC 320 and Commissioner of the Australian Federal Police v Pham [2015] NSWSC 1383, and distinguished this case from the decision in Studman v Commonwealth Director of Public Prosecutions (2007) 177 A Crim R 34; [2007] NSWCA 285. These decisions are considered below.

The appellants submitted that the primary judge erred in determining that they did not acquire property within the meaning of s 330(4)(a). They contended that a new or substituted chose in action arose on each occasion that a deposit was made. The Commissioner conceded that the primary judge had erred, although the argument advanced by the appellants was different in its legal analysis.

The appellants further submitted that their right to withdraw or deal with the funds standing to the credit of their bank accounts was an “interest” in or in connection with the property, constituted by the chose in action, whenever created, and was thus “property” as defined in the Proceeds of Crime Act.

The Commissioner did not cavil with her Honour’s characterisation of the appellants’ interests in the bank accounts as constituting choses in action which came into existence at the time the accounts were opened. Further, as noted earlier, the Commissioner agreed with the appellants’ submission that their interest in the credit balance in their bank accounts was “property” within the terms of the definition in s 338, which was acquired from time to time as and when deposits were made. The Commissioner submitted that her Honour should have accepted the reasoning in the first instance decisions of Pham, Fitzroy All Pty Ltd and Kalimuthu [No 3]. The Commissioner also submitted that her Honour had erroneously distinguished this case from Studman.

It is important at the outset to identify the “property” that is contended to have been acquired by the appellants. The terms of the contract between the Commonwealth Bank and the appellants were not in evidence. Her Honour, and the parties, each approached the bank accounts on the basis that they operated as current accounts in credit. We will adopt that same assumption, although it should be observed that the rights of parties in a modern banker-customer relationship may well be very different depending on the precise contractual terms between them, as modified by relevant statutes.

The law is settled that the contract between a customer and a bank is established at the time that a bank account is opened, and does not comprise a series of loans from the customer to the bank each time a deposit is made: see N Joachimson v Swiss Bank Corporation [1921] 3 KB 110 at 127; Croton v The Queen (1967) 117 CLR 326; [1967] HCA 48 at 330; Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq) (2003) 59 NSWLR 361; [2003] NSWSC 1008 at [31]-[32].

Atkin LJ’s conclusion in N Joachimson v Swiss Bank Corporation that there is only one contract made between the bank and its customer has prevailed in Australia.

As Dixon and Evatt JJ said in Russell v Scott (1936) 55 CLR 440; [1936] HCA 34 at 450-451, a “bank account” is nothing more or less than a chose in action, consisting “in the contractual right against the bank, i.e., in a debt, but a debt fluctuating in amount as moneys might be deposited and withdrawn”.

In Croton, Barwick CJ said, uncontroversially and, in any event, in a passage approved in Parsons v The Queen (1999) 195 CLR 619; [1999] HCA 1 at [17]:

The ratio of N Joachimson v Swiss Bank Corporation was described in Mark Hapgood QC (ed), Paget’s Law of Banking (13th ed, 2007, LexisNexis) at 148, as being that:

These principles have been cited with approval on a number of occasions, including in the decisions of Kalimuthu [No 3]; Fitzroy All Pty Ltd; and Commissioner of the Australian Federal Police v Tjongosutiono (2018) 329 FLR 103; [2018] NSWSC 48.

Notwithstanding that there is but a single contract between the bank and the customer and, subject to the terms of the contract, there is no accrued cause of action unless and until the customer makes a demand for payment, that does not answer the question in issue in this case. The question in issue under appeal grounds 1 and 2 is the nature of the appellants’ “interest” in “property”, as defined terms in the Proceeds of Crime Act. This question is not answered solely by reference to the legal characterisation of a customer’s interest in a bank account as comprising a single chose in action. It must be answered having regard to the proper construction and application of the Act.

“Property” is defined in s 338 as follows:

“Interest” is also defined in s 338 as follows:

The legislative provisions in this case are complex and the interaction between the Proceeds of Crime Act and the myriad of offence-creating provisions, including the money laundering provisions of the Criminal Code and the Anti-Money Laundering and Counter-Terrorism Financing Act, are opaque. However, having grappled with the complexities of the legislative scheme, we have respectfully concluded that the primary judge’s resolution of this issue was not correct.

The meaning of words and phrases is influenced by the immediate context in which they are used. The meaning of the whole may be different to the sum of the meaning of the parts: Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389; [1996] HCA 36 at 396-397 per Brennan CJ, Dawson, Toohey, Gaudron and McHugh JJ, citing Lord Hoffmann in R v Brown [1996] 1 AC 543 at 561. The modern approach to statutory interpretation uses “context” in its widest sense “to include such things as the existing state of the law and the mischief which, by legitimate means … one may discern the statute was intended to remedy”: CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; [1997] HCA 2 at 408 per Brennan CJ, Dawson, Toohey and Gummow JJ. A construction that would promote the purpose or object underlying the Act or statutory rule (whether or not that purpose or object is expressly stated in the Act or statutory rule or, in the case of a statutory rule, in the Act under which the rule was made) shall be preferred to a construction that would not promote that purpose or object: Acts Interpretation Act 1901 (Cth), s 15AA.

In Taylor v The Owners – Strata Plan No11564 (2014) 253 CLR 531; [2014] HCA 9, French CJ, Crennan and Bell JJ said, at [39], that:

As Gageler and Keane JJ pointed out in the same case, at [65]-[66], the choice between alternative meanings involves an evaluation of the relative coherence of the alternatives with identified statutory objects or policies. The identified statutory objects or policies of the Proceeds of Crime Act are tolerably clear. Among its principal objects, the Act is intended to “deprive persons of the proceeds of offences, the instruments of offences, and benefits derived from offences, against the laws of the Commonwealth” and to “punish and deter persons from breaching laws of the Commonwealth”.

The Anti-Money Laundering and Counter-Terrorism Financing Act is plainly intended to regulate cash deposits of sizeable amounts in order that law enforcement agencies can stop or restrict the laundering of money from criminal activity and the funding of terrorism. Similarly, the Criminal Code, s 400.9 is intended to deter persons from dealing with property that is reasonably suspected of being the proceeds of crime, including by depositing funds into existing bank accounts.

For the reasons that follow, we have concluded that the appellants acquired an “interest” in “property” for the purposes of s 330(4)(a) each time a deposit was made into one of their accounts, because on such occasion, the appellants acquired a “right” or “power … in connection with the property” within the meaning of the term “interest”.

In Director of Public Prosecutions (Vic) v Le (2007) 232 CLR 562; [2007] HCA 52, a majority of the High Court (Kirby and Crennan JJ with whom Gleeson CJ agreed at [1]) said of cognate Victorian legislation:

The explicit reference in this context to Yanner v Eaton is important. At [17], Gleeson CJ, Gaudron, Kirby and Hayne JJ said:

In Studman, the Court was concerned, relevantly, with whether an exclusion order ought to have been made in respect of “funds standing to the credit of” a specified bank account. McClellan CJ at CL (Spigelman CJ and Handley AJA agreeing) observed, at [39]:

In respect of the “funds standing to the credit of” the bank account, McClellan CJ at CL correctly characterised, at [41], the relevant property as a chose in action obtained when the bank account was opened. His Honour noted that pursuant to the arrangement relating to the account, “the appellant could deposit and withdraw monies or direct that a payment be made to a third party”. His Honour continued:

Studman was different from the present case in that, in Studman, the chose in action comprising the contractual rights in relation to the bank account was acquired simultaneously with the occurrence of the unlawful activity, namely, the opening of the account in a false name.

Authority at first instance in relation to the Proceeds of Crime Act has generally accepted that in respect of a current account, there is only one contract giving rise to the debt, as opposed to a series of contracts made by reason of each separate deposit.

In Fitzroy All Pty Ltd, Mitchell J said, at [26]:

In Pham, Beech-Jones J said, at [36]:

Some limited support for that construction is provided by Campbell J in Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq). The context of his Honour’s remarks was the rules of tracing and the operation of Clayton’s Case (Devaynes v Noble (1816) 1 Mer 572) in the case of proposed distributions by a liquidator appointed under the Corporations Act 2001 (Cth). His Honour determined that Clayton’s Case was not applicable in the distribution of trust monies held by the liquidator. In the particular circumstances of that case, the liquidator was justified in making a pari passu distribution amongst claimants on the trust fund. His Honour said, at [61]:

To similar effect is the Full Federal Court decision in National Australia Bank Ltd v Norman (2009) 180 FCR 243; [2009] FCAFC 152, where Graham J (with whom Spender J generally agreed), referring to the passage above, observed, at [53]:

The context of these remarks was an appeal in relation to orders winding up an alleged unregistered managed investment scheme under Chapter 5C of the Corporations Act. The National Australia Bank in that case held the account into which the putative manager of the unregistered managed investment scheme made deposits, which he styled for the purpose of soliciting funds for deposit as “trust account” bank funds. Graham J was explaining why it was that the National Australia Bank was not a trustee of monies standing to the credit of the putative manager of the unregistered managed investment scheme.

Both of these cases direct attention to the purposes for which the question of the true nature of a debt owed by a banker to a customer is being posed.

In Tjongosutiono, N Adams J found, first, that each time there is a deposit into or withdrawal from a current account with a bank, a new chose in action is created and the previous one no longer exists. That conclusion is inconsistent with Russell v Scott and Croton and must therefore be rejected.

However, her Honour gave a second reason for her conclusion. By reason of the definitions of “property” and “interest” in the Proceeds of Crime Act, an account holder’s right to withdraw funds standing to the credit of an account is an “interest” in or in connection with that property. That right or power to withdraw or deal with the credit balance after the structured deposits were made is a different right or power from that which existed before the making of the deposits. There was no right or power to withdraw or otherwise deal with the increased credit balance until the structured deposits were made. At any point in time thereafter, the right or power is to withdraw or deal with the newly deposited funds.

Some support for N Adams J’s conclusion is provided by an analysis of the inchoate cause of action in debt possessed by the appellants here before and after the deposits were made giving effect to a non-reportable transaction referred to in the Anti-Money Laundering and Counter-Terrorism Financing Act, s 142. It will be recalled that N Joachimson v Swiss Bank Corporation established that it is an implied term of the contract that the banker is not liable to repay the customer until demand is made. Until then, there is no presently due debt owed by the banker to his or her customer. The inchoate cause of action in debt possessed by the appellants here was for a materially smaller amount than the inchoate cause of action in debt after each of the deposits were made giving effect to a non-reportable transaction.

The same point had been made in Shields v New South Wales Crime Commission (2007) 177 A Crim R 130; [2007] NSWCA 309, which involved a challenge to a restraining order made under the Criminal Assets Recovery Act 1990 (NSW) in respect of, inter alia, certain bank accounts, one of the questions in issue was whether the restraining order had specified an “interest in property” within the meaning of s 10 of the Act. An “interest in property” was defined in identical terms to the definition in s 338. Beazley JA stated (Hodgson and Tobias JJA agreeing), at [83], that “[b]eing the signatory to an account is a right or power or privilege in connection with the property comprising that bank account”. Neither party referred to this decision and it has not been the subject of challenge, although it must be said that the Court did not there engage in the analysis that this case has called for.

The definition of “interest” in s 338 must also be construed in the context of the Act as a whole. In this regard, there are two observations to be made in respect of the second limb of the definition. First, the second limb is wider than the first limb, that being a “legal or equitable estate or interest in the property or thing”. If that were not the case, the second limb would be superfluous. Secondly, the phrase “in connection with” is of wide import. The phrase is capable of describing a spectrum of relationships ranging from the direct and immediate to the tenuous and remote: Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280; [1993] FCA 456 at 288 per Neaves, French and Cooper JJ. The judgment of connection depends on the statutory context in which the words are used. In the present context, the connection is close.

In this case, the appellants possessed a chose in action in respect of each of their bank accounts enforceable against the Commonwealth Bank constituted by the right to compel the bank upon demand to pay to, or at their direction, an amount equivalent to the amount standing to the credit of each of their accounts. Those choses in action are a species of intangible personal property within the definition of “property” in the Proceeds of Crime Act, s 338. The property is intangible in the sense that it is incapable of physical possession. It is inchoate as, until a demand for payment is made, the cause of action is not complete.

Funds were deposited into existing bank accounts in contravention of the Anti-Money Laundering and Counter-Terrorism Financing Act, s 142. We have concluded that the appellants’ right to demand payment of the amount standing to the credit in each of their accounts is a “right” or “power … in connection with the property”, being the appellants’ chose in action as it affects a change in the amount of the demand which may be made by the appellants on the Commonwealth Bank.

It follows that the primary judge’s finding that the appellants did not acquire an “interest” in “property” each time a deposit was made into their accounts was incorrect. This, however, is only the first step in the analysis of whether the appeal should be allowed.

The primary judge rejected the appellants’ argument that they were a “third party” within the meaning of s 330(4)(a). After careful consideration of the terms of s 330(4)(a) in their context, her Honour concluded:

The appellants argued before the primary judge that a “third party” within the meaning of s 330(4)(a) was a person other than a party to the criminal conduct which caused the property to become tainted. It followed on this argument that because the structuring offences were transactions between the depositor and the bank, the appellants were a “third party”. They reiterated that argument on the appeal. The appellants also submitted that the primary judge’s construction of “third party” produced the “absurd” result that no acquirer of the proceeds of an offence could ever avail themselves of s 330(4)(a). Rather, s 330(4)(a) would only ever apply to an instrument of an offence, contrary to the express words of the provision. The appellants submitted that s 330(4)(a) should be construed as a statutory manifestation of the equitable concept of a bona fide purchaser for value without notice.

The appellants also submitted that, by virtue of the operation of s 330(4)(a), the deposits into their bank accounts ceased to become proceeds of crime at the same time as they would ordinarily have become such proceeds. It was integral to this argument that s 330(4)(a) did not require a temporal disjunction between the two events and that the transaction by which the property became proceeds of an offence or an instrument of an offence and its ceasing to be so could occur simultaneously. The import of their submission was that property that would otherwise become proceeds of crime does not become proceeds in circumstances where a person acquires property in accordance with s 330(4)(a). They contended that were it otherwise, an innocent acquirer of property would be bound to have the property forfeited if application is made for that purpose.

The Commissioner’s position before the primary judge was that a “third party” does not simply refer to someone not a party to the offence. On the appeal, the Commissioner submitted that the primary judge’s conclusion at [101] was correct. The Commissioner submitted that to adopt the construction for which the appellants contended would fail to give any substantive content to the term “third party” beyond the other, separately expressed, requirements of s 330(4)(a).

The Commissioner submitted that as account holders, the appellants “possessed, controlled and exercised the right to operate” the bank accounts into which the structured deposits were made, thereby causing the accounts to become instruments of offences. The appellants did not, on the Commissioner’s submission, thereby become third parties in relation to their accounts.

The Commissioner also submitted that the fact that s 330(4)(a) governs when property ceases to be proceeds of an offence or an instrument of an offence “logically necessitates” that the property was previously proceeds of an offence or an instrument of an offence. The Commissioner submitted that the requirement of a temporal disjunction was apparent from the “clear words” of s 330(4)(a), and that to suggest otherwise would:

The meaning of “third party” in s 330(4)(a) is not without difficulty, as our reasons below and our respectful disagreement with the separate reasons of McColl JA make apparent. The appellants accepted that these deposits immediately gave rise to an interest in property, held by the appellants, which interest became proceeds of an offence within the meaning of the Proceeds of Crime Act, s 330(1). The issue under s 29 of the Proceeds of Crime Act was thus whether the appellants had proven that their interest in the property ceased to be the proceeds of crime, within the meaning of the Proceeds of Crime Act, s 330(4). The Note to the Proceeds of Crime Act, s 29(2) says:

The concept of a “third party” is not defined in the Proceeds of Crime Act. The terms “third party” (used in s 330(4)(a)) and “innocent third party” (used in the extrinsic materials and the note to s 29) appear to have originated in a report by the Australian Law Reform Commission entitled Confiscation That Counts – A Review of the Proceeds of Crime Act 1987, Report No 87, (1999). Relevantly, chapter 12 provides as follows:

The Revised Explanatory Memorandum to the Proceeds of Crime Bill 2002 (Cth) stated the following in relation to cl 330:

The Revised Explanatory Memorandum, in a section entitled “General Outline”, also stated the following:

The Proceeds of Crime Act is intended to provide a broad intrusion upon private property rights with the avowed aim of forfeiting property which constitutes proceeds of an offence, as very broadly defined, or an instrument of an offence, again, as very broadly defined. That extraordinary sweep of powers to restrain and forfeit property is subject to strictly confined exclusions and some limited provisions designed to ameliorate the harsh application of the Act. As Gordon J explained in Hart at [66]:

A central feature at the heart of the Proceeds of Crime Act is a focus on transactions, rather than a focus on involvement in criminal conduct. This is because, as the Revised Explanatory Memorandum explains, the Act is designed to prevent “a person from transforming property which is proceeds or an instrument into ‘clean’ property just by changing its nature”. The focus on transactions is readily understandable when this central focus on tracing, by not allowing property which is proceeds of an offence or an instrument of an offence to be made ‘clean’ other than by the strict operation of the exclusion provisions, is understood.

The provisions, such as s 29, for the exclusion of property from restraint, as Gordon J pointed out in Hart, operate in limited circumstances and on strict conditions. Simply to focus on involvement in criminal conduct as a condition of exclusion as a third party would be to permit a person to transform property which is proceeds of an offence or an instrument of an offence into ‘clean’ property just by selling it to a person who was not involved in the particular crime by which the property became proceeds of an offence or an instrument of an offence, even if that person was integrally involved in the transaction through which the property constituting the proceeds or instrument came into existence.

A key issue in this case is that related criminal ‘money laundering’ provisions also operate on transactions which themselves give rise to criminal liability at the same time as property becomes proceeds of an offence or an instrument of an offence. It is this overlapping operation of provisions on transactions which is at the heart of this issue.

As is apparent from her Honour’s reasons at [101] and [104] (set out above at [83]), the primary judge was acutely aware of this issue and the problems created by the extraordinarily broad drafting of the powers to restrain and forfeit property and the significant limits upon the exclusion provisions. Section 330(4) itself provides that property only ceases to be proceeds of an offence or an instrument of an offence in the circumstances identified in that section.

It is true, as the appellants submitted, that the primary judge, in addressing the question of the meaning of “third party”, relied in part on her reasoning concerning the meaning of an “interest” in “property” which we have rejected earlier. Nevertheless, her Honour’s construction of “third party” set out at [104] is capable of standing alone.

Although agreeing that a “third party” does not simply refer to someone not a party to the offence, a different conclusion was reached by Allanson J in Kalimuthu [No 3]. His Honour reasoned by exclusion; namely, by what a “third party” was not:

The appellants’ principal contention in their written submissions was that the term “third party” had no separate work to do in s 330(4)(a). They submitted in chief that a “third party” was simply a label applied to describe people entitled to have property interests excluded from a restraining order by the Proceeds of Crime Act. Section 330(4)(a), it was submitted, simply required that the applicant for relief be a bona fide purchaser for value without notice. The appellants accepted in their submissions in reply in this Court that the term “third party” must have some work to do, but their essential submission remained the same, namely, that the section required proof, and only proof, that the applicant seeking an exclusion order should be a bona fide purchaser for value without notice of the relevant interest in the property.

The question which is posed by this aspect of the case requires an examination of the statutory purpose of including an identity requirement, that the person be a “third party”, in s 330(4)(a). The section focusses on the interest in property which is, necessarily, proceeds of an offence (s 330(1)) or an instrument of an offence (s 330(2)). The interest must be “acquired” by a third party. By including an identity requirement in s 330(4)(a), the question immediately becomes, third party to what? Who are the first and second parties envisaged in this part of the statutory scheme? For our part, we consider that the identity requirement is an indication that a “third party” is a person not a party to the transaction by which the property became proceeds of an offence or an instrument of an offence.

As a matter of ordinary English expression and in the context of s 330 as a whole, the interest in property the subject of s 330(4)(a) must be acquired after the interest in property becomes proceeds of an offence. It is difficult to describe an interest in property as “ceasing” to have a character it has never possessed.

Section 330(4)(a) then focusses on the sufficiency of the consideration given and requires an examination of all of the circumstances to reach a conclusion about whether those circumstances “would not arouse a reasonable suspicion” that the property was proceeds of an offence or an instrument of an offence.

The other subsections of s 330(4), which deal with distributions from a deceased estate (para (b)); distributions in accordance with orders under the Family Law Act 1975 (Cth) (para (ba)); payments for legal expenses (para (c)); where a forfeiture order is satisfied (para (d)); where property is confiscated under a corresponding law (para (e)); and where property is sold under the Proceeds of Crime Act (para (f)), all address the question of whether property ceases to be proceeds of an offence or an instrument of an offence in relation to an event occurring at a time after the property became proceeds of an offence or an instrument of an offence.

The conclusion that the outcome contemplated by s 330(4) necessarily occurs subsequent to the events contemplated by ss 330(1), (2) and (3) was reached by N Adams J in Tjongosutiono, who observed, at [116], that:

Her Honour concluded, at [176], that “in order to be a third party, the property must be acquired after the funds become either the proceeds or an instrument of an offence” (original emphasis).

The problem that arises in this case is that the offence which gives rise to the finding that the property becomes proceeds of an offence within the meaning of s 330(1) is part of the same transaction by which it is submitted that the property ceases to be proceeds within the meaning of s 330(4)(a). Can a transaction by which the property becomes proceeds be the same transaction by which the property ceases to be proceeds? Put another way, if the transaction by which the property becomes proceeds involves a counterparty to the transaction who is, hypothetically, wholly innocent, in the sense of not having been involved in the commission of the offence, but who is necessarily involved in the transaction which creates the property which becomes proceeds of an offence within the meaning of s 330(1) is that counterparty a “third party” within the meaning of s 330(4)(a)?

The strongest point made by the appellants was that the sheer breadth of the definitions in the Proceeds of Crime Act, considered together with the broad transaction-based offence provisions, means that whenever a party (A) uses proceeds of an offence to purchase something, he or she necessarily commits another, different, serious offence under the Criminal Code, Div 400, which concerns dealing in proceeds of crime. So much may be accepted. The appellants then posited an innocent vendor of goods and services (B) who receives the purchase price, which is already the proceeds of crime, through a separate transaction which is itself also an offence. The purchase money is an instrument of that offence. The appellants submitted that on the construction preferred by the primary judge, because B receives the proceeds at the time they become an offence, he or she cannot rely upon s 330(4)(a). Thus, it was submitted by the appellants, “unwitting participants in transaction-based offences stand to forfeit property despite their innocence”.

The Commissioner submitted that in the appellants’ example, the property first became proceeds (and presumably an instrument) at the time that A committed whatever offence first caused it to be proceeds. A then buys something from B using those proceeds. Under s 330(3)(b), the property continues to be proceeds even if “it is disposed of or otherwise dealt with”. Therefore, the property is already proceeds before B becomes involved with it. B is not a party to the transaction which first caused the property to be proceeds or an instrument. Thus, B may still rely upon s 330(4)(a).

Even accepting the apparent logic in the example posited by the appellants, we have concluded that the primary judge’s construction of “third party” at [104] of her judgment is correct. Her Honour, it will be recalled, concluded that a “third party” within s 330(4)(a) is a person who, at the time of the criminal conduct, is wholly removed from the property constituting the proceeds or instrument; a “third party” is not an owner of property who is wholly removed from the criminality that caused the property to be tainted (which is essentially the construction advanced by the appellants).

The primary judge’s construction of a “third party” in s 330(4)(a) gives the term work to do, which the appellants’ construction does not. In the example posited by the appellants, it is a separate and antecedent transaction by which the property becomes proceeds of an offence or an instrument of an offence. In such a case, the property first became proceeds (and presumably an instrument) at the time that the transaction occurred by which it became proceeds. It is true that a subsequent transaction, such as buying something using those proceeds, gives rise to a separate, and necessarily subsequent, offence. Under s 330(3)(b), however, the property continues to be proceeds or an instrument by reason of the original transaction. The property in the appellants’ example is already proceeds or an instrument before this subsequent sale transaction. The buyer, in the subsequent transaction, is not a party to the transaction which first caused that property to become or remain proceeds or an instrument. Thus, the buyer may still rely upon s 330(4)(a).

In reaching this conclusion, we have differed from McColl JA, whose conclusion is based in part on the difficult question of the interaction between ss 330(3) and (4). While recognising the difficulty, we consider that the essential feature of s 330(3) which tends in favour of the conclusion we have reached is that property remains proceeds or an instrument even if disposed of or otherwise dealt with. This focusses attention back to the antecedent transaction by which the property became proceeds or an instrument. It is this antecedent transaction to which the applicant for relief must be a “third party”.

The primary judge’s construction is also consistent with the interest in property the subject of s 330(4)(a) being acquired after the interest in property either becomes proceeds of an offence (s 330(1)) or remains proceeds of an offence (s 330(3)). The appellants’ construction is not.

We acknowledge that the construction we prefer poses considerable and difficult questions of proof for a party seeking to prove that he or she is a “third party” within the meaning of s 330(4)(a); plainly, those questions will loom large, particularly for participants in transaction-based offences, unwitting or otherwise. That consequence is ameliorated to a limited extent by other provisions in the Proceeds of Crime Act, such as ss 42(5), 72 and 77.

Nevertheless, and despite those obvious and considerable difficulties, the subject matter, scope and purpose of the Proceeds of Crime Act, s 330 leads us to conclude that a “third party” in s 330(4)(a) is a person who is “wholly removed from the property constituting the proceeds or instrument”, by which we mean a person with no involvement in the transaction by which property first becomes proceeds of an offence or an instrument of an offence.

This construction also addresses the temporal issue identified earlier. It was an essential element of the appellants’ case that at the same instant and as a result of the same physical acts by which the property became the proceeds of crime, it also ceased to be the proceeds of crime. We would reject that construction. The fact that s 330(4)(a) governs when property ceases to be proceeds of an offence necessitates that the property was previously proceeds of an offence.

Accordingly, the primary judge was correct to conclude that neither appellant was a “third party” for the purposes of s 330(4)(a). We would reject appeal grounds 3-5.

Appeal ground 6 raises the issue of whether the appellants’ interests in their bank accounts were acquired for sufficient consideration for the purposes of s 330(4)(a). Even if we are wrong as to whether the appellants were each a “third party” within the meaning of s 330(4)(a), we would nonetheless reject this ground of appeal for the reasons we give below.

The primary judge noted, at [55], that it was the appellants’ case that they were the innocent victims of cuckoo smurfing and that their legitimate transactions in Indonesia had been subverted in such a way that the deposits in their Commonwealth Bank accounts were sourced, not from their own funds, but from proceeds in Australia of criminal activity. At [106]-[110], her Honour rejected the appellants’ submission that their interests in the accounts were acquired for sufficient consideration, even if the property was taken to be “funds in the accounts” and not “an entitlement to receive the equivalent of the funds standing to their credit in the accounts”.

In reaching this conclusion, her Honour observed that the appellants’ submission contained an internal conflict. On the one hand, the appellants relied on the practice of cuckoo smurfing as the source of the funds deposited into their accounts, which necessarily meant that those funds were not the funds they had arranged with the Indonesian money changers to be deposited into their Australian accounts, there being no connection between the payments they made in Indonesia and the deposits made in Australia, other than the equivalence of amount. This meant that these were “gratuitous deposits”, being monies that were deposited without consideration passing from the appellants to the depositors. The appellants retained whatever rights they had against the Indonesian money changers. Her Honour observed, at [107], that the payments made to the money changers were made in consideration of their transfer to the Commonwealth Bank accounts, and that that was a transfer that did not eventuate.

On the other hand, as her Honour noted, the appellants contended, as they had particularised in their exclusion application (set out above at [36]), that the funds that had been deposited in their Commonwealth Bank accounts had been acquired by them for sufficient consideration, the consideration being the funds they had paid into the various Indonesian accounts in accordance with the instructions of the money changers.

Her Honour observed, at [58], that the appellants’ particularisation of their grounds for exclusion was inconsistent with their reliance on cuckoo smurfing as an explanation for the manner by which the monies were deposited into their accounts. Her Honour considered that the appellants’ reliance upon cuckoo smurfing as the explanation for the many cash deposits into their accounts contradicted their contention that they gave sufficient consideration for their interests in the property. Her Honour observed, at [109]:

This led to her Honour’s conclusion, at [110], that she:

The appellants contended that notwithstanding that sufficiency of consideration was not in issue before the primary judge, in circumstances where they had not been challenged on the commerciality of the rates at which Indonesian rupiah was exchanged for Australian dollars, the primary judge erroneously accepted the Commissioner’s argument that insufficient consideration was given as the money paid by the appellants in Indonesia was not the same money that was deposited in Australia, and that the Australian depositors received no consideration from the appellants, such that those deposits were gratuitous.

The appellants submitted that her Honour’s conclusion paid insufficient regard to the fungibility of money and to the substance of the obligation undertaken by the Indonesian money changers. The appellants explained that the transactions into which they had entered in Indonesia involved a contract between them and the money changers whereby a given amount in Indonesian rupiah, paid to nominated accounts in Indonesia, resulted in a given amount in Australian dollars being deposited in Australia. They contended that a currency exchange thereby took place. They also contended that there was “a transfer of funds as between the two countries in question”.

The appellants submitted that in fulfilling their obligations under the contract, they gave “sufficient consideration”, in that they deposited money into nominated Indonesian accounts as directed by the money changers in return for the obligation on the money changers to cause deposits to be made in Australian dollars. As the appellants sought to explain, when Ms Koernia deposited money into the nominated Indonesian accounts, there was no obligation on the money changers to deposit those same funds into the appellants’ Commonwealth Bank accounts. Indeed, that was not only contrary to the appellants’ arrangement with the money changers, but was inconsistent with usual banking practice. The obligation of the money changers was to ensure that an equivalent amount was deposited into the appellants’ Commonwealth Bank accounts.

The appellants contended that the performance of the money changers’ obligation through intermediaries did not affect the content of the obligation they had undertaken or the consequences of their performance: see Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 at 118-119. The appellants submitted that it was irrelevant how the obligation was fulfilled and who performed it.

In Australis Media Holdings Pty Ltd v Telstra Corporation Ltd, the Court referred to the principle that, in appropriate circumstances, the law recognises that the relationship between contracting parties must be personal. The Court referred to Tolhurst v Associated Portland Cement Manufacturers [1903] AC 414, in which Lord Macnaghten stated that:

The Court also referred to Davies v Collins [1945] 1 All ER 247, in which Lord Green MR stated, at 250, that:

On the appellants’ submissions, there was no personal obligation involved here. The arrangement with the Indonesian money changers was for there to be a deposit into their Commonwealth Bank accounts in Australian dollars. It followed that it was always necessary for different funds other than those deposited by the appellants in Indonesia to be deposited into their Commonwealth Bank accounts. Further, as Ms Koernia had made electronic deposits into the Indonesian accounts nominated by the money changers, there had been “mere entries in the bank’s ledgers, rather than tangible items such as coins or banknotes”. In accordance with usual banking practice, it was impossible for “the funds” she had paid into the nominated Indonesian accounts to be deposited into the Commonwealth Bank accounts she had specified. As proof of the nature of the arrangement and the fulfilment of the obligations of each party, there was evidence that Ms Koernia was asked to, and did repay money to, a money changer when a slight overpayment was made into one of the appellants’ Commonwealth Bank accounts.

The appellants submitted, therefore, that it was not open to the primary judge to find that the deposits into their Commonwealth Bank accounts were not made in consideration for the payments they made to the money changers in Indonesia. They contended that consideration had moved from them and that they received the Australian deposits they had bargained for.

The Commissioner submitted that there was no error in her Honour’s analysis of the consequences of the forensic choice made by the appellants in advancing a case that the deposits were made in the course of cuckoo smurfing operations. The Commissioner pointed out that the primary judge, when considering, at [116], whether the appellants knew that the property was tainted, described as “unconvincing” the fact that although Ms Koernia communicated with Commonwealth Bank representatives about the multiple cash deposits and received bank statements showing multiple cash deposits, she never thought it “odd, or unusual”. The appellants did not challenge this characterisation. They also acknowledged that cash was deposited into their Commonwealth Bank accounts in multiple transactions under $10,000 using the method known as cuckoo smurfing, and that these funds were sourced in Australia.

In our opinion, the primary judge’s analysis of, and conclusion as to whether, the appellants acquired property “for sufficient consideration” was correct.

In order to prove that they had acquired property for “sufficient consideration”, the appellants needed to prove that the money they paid in Indonesia to the money changers somehow represented, through a series of intermediaries or transactions, funds being deposited into their Commonwealth Bank accounts.

The appellants’ argument was that they gave sufficient consideration for the various transactions into which they entered with the Indonesian money changers. However, even if they had entered into a contract or contracts in Indonesia for which they gave sufficient consideration, they did not contend that they acquired property in Indonesia. Rather, they contended that they acquired an interest in property when deposits were made into their Commonwealth Bank accounts. In terms, their argument was that:

The difficulty with the appellants’ argument is that s 330(4)(a) requires that there be an acquisition of property “by a third party for sufficient consideration”. Assuming for the purpose of this issue, contrary to our earlier finding that the appellants were not third parties, that they acquired property as third parties, it is necessary to identify the transaction by which the property was acquired and the party from whom the property was acquired. The starting point for that consideration is the “interest” in “property” which was acquired.

As identified earlier, the “property” acquired was a “right” or “power” in respect of the chose in action constituted by the appellants’ bank accounts. The language of s 330(4)(a) does not specify to whom the consideration must be provided. Its concern is with the acquisition of property by a third party “for sufficient consideration”. As a matter of construction, there can be no “sufficient consideration” unless it is provided for the acquisition of the property. As we have explained, an interest in property was acquired by the appellants each time a cash deposit was made into their accounts by unnamed persons in Australia from funds from an unknown source or sources that, at all times, were located in Australia. The property was thus acquired from the unnamed persons who made the deposits.

The appellants had no connection, contractual or otherwise, with those persons. Indeed, the appellants specifically disavowed any suggestion that they had agreed, with anybody, that money would be transferred from Indonesia to Australia by making structured deposits in cash under $10,000 at Commonwealth Bank branches across Australia. Nor was any contractual relationship, whether as agents or otherwise, suggested, let alone proved, between the Indonesian money changers and the depositors in Australia.

What is clear is that there was no transfer of funds, whether electronically or by any other means, between Indonesia and Australia. Nor was there any direct connection between the transaction into which the appellants entered in Indonesia, which was for the transfer of funds by the money changers into the appellants’ Commonwealth Bank accounts, and the deposit of money from unknown sources into the appellants’ accounts by strangers.

Accordingly, to satisfy the requirement of having provided “sufficient consideration” for the acquisition of their interest in property, the appellants are forced, as their submissions recognised, to rely upon the transactions into which they entered into in Indonesia. To do so, however, does not identify the means by which they acquired any interest in property. We would thus reject the appellants’ argument that they acquired property for sufficient consideration.

The primary judge dealt, at [111]-[123], with the question whether the appellants knew the property was tainted. The absence of knowledge that the property was proceeds of an offence or an instrument of an offence is one of the elements under s 330(4)(a) whereby property ceases to be proceeds or an instrument. Her Honour concluded, in circumstances where the onus rested on the appellants, that they had not established that the property was acquired without their knowledge that it was either proceeds of an offence or an instrument of an offence.

In coming to this conclusion, her Honour relied upon two matters.

First, her Honour considered that Ms Koernia’s evidence as to why, on some occasions, she deposited very large sums of money to the nominated Indonesian accounts but, in other cases, deposited amounts of less than 500 million Indonesian rupiah, was “wholly unconvincing”. This was so notwithstanding that her Honour was not prepared to act upon the basis that Indonesian law required deposits of over 500 million Indonesian rupiah to be reported to the Indonesian authorities. In this regard, her Honour observed that whilst there was some indirect evidence to that effect, it was not clear whether that only related to cash transactions or extended to other forms of payment or transfer.

Secondly, her Honour considered that in circumstances where the appellants knew, over a period of years, of the unorthodox manner by which deposits were made into their accounts, they had not discharged the onus on them to prove that they did not have knowledge that the property was the proceeds of crime. In this regard, her Honour considered, at [120], that Mr Lordianto’s evidence “that his wife kept him informed of the manner in which the deposits were made fixe[d] him with sufficient knowledge”.

In reaching her conclusion, her Honour rejected a submission that the concept of “wilful blindness” provided assistance on the facts of this case. Her Honour also rejected a submission that any assistance could be gained from the fact that the appellants, as frequent entrants to Australia, were aware that a declaration was required if a sum of more than $10,000 was being imported or exported.

For the same reasons that her Honour was not satisfied that the appellants had proved that they did not know that the property was tainted, she was not satisfied that the property was acquired in such a way as not to arouse a reasonable suspicion that it was proceeds of an offence or an instrument of an offence: see at [125]. Her Honour noted that the transactions had taken place over a period beginning in October 2013 and ending in October 2015.

Her Honour considered, at [126], that the bank statements demonstrated a pattern of activity that would arouse a reasonable suspicion in any reasonable person. Her Honour also considered that the manner in which Ms Koernia was asked to make the deposits in Indonesia was such as would arouse a reasonable suspicion. Her Honour considered that the circumstances taken as a whole were such as to arouse, in a person in the position of the appellants, a reasonable suspicion that:

Her Honour continued:

The appellants challenged the primary judge’s determination on a number of bases, including that Ms Koernia’s evidence that she did not know or have a reasonable suspicion that avoiding mandatory reporting requirements was an offence had not been challenged in cross-examination, and that the primary judge erred in her application of the statutory test under s 330(4)(a). They also submitted that the means by which the money was deposited into their Commonwealth Bank accounts was immaterial to them.

The appellants submitted that in order to be “disqualified” under s 330(4)(a), they had to have had certain factual knowledge, namely, that numerous small amounts had been paid into their Commonwealth Bank accounts. They accepted that they had this knowledge. However, they submitted that it was also necessary that they knew that a possible or suspected offence was involved. They submitted that there was no evidence that they had such knowledge, or room for suspicion that an offence had been committed.

The appellants further submitted that the test for the purposes of s 330(4)(a) was that the person must have had a suspicion that a crime had actually been or might have been committed. On their argument, it was not sufficient that a person knew of matters which, of themselves, would amount to a crime. Senior Counsel for the appellants modified this submission, stating that:

The appellants submitted that the test for which they contended was based upon a textual analysis of the relevant provisions of the Proceeds of Crime Act. In brief, that was that property became proceeds of crime by virtue of an offence being committed. They contended that knowledge that the property was the proceeds of crime must, therefore, be based upon knowledge of a possible offence. Noting that the offences upon which the Commissioner relied were structuring or money laundering offences, the appellants submitted that there was no evidence that they had any knowledge of such offences.

The appellants contended that the primary judge had lowered the required level of knowledge in finding that Ms Koernia must have had “a reasonable suspicion that something untoward had occurred”. They contended that that was not the statutory test and that it was insufficient to satisfy the statutory test. They submitted that it was an error to conflate the statutory test with one of suspicion that untoward events had occurred. The appellants further submitted that her Honour fell into error in her reasoning process in that her Honour did not identify any offence of which a reasonable suspicion was or could have been aroused.

The test under s 330(4)(a) is, as the terms of the section require, an objective one. In Le, Kirby and Crennan JJ endorsed, at [127], the following statement in respect of a similar question posed by Victorian confiscation legislation, as articulated by the Victorian Court of Appeal in that case:

The emphasised words in the passage from Le reflect, in the context of s 330(4)(a), the basal concept of the criminal law that a person does not need to know that the conscious act constituting an offence with which the person is charged is forbidden by law. This is so notwithstanding the common law presumption that mens rea, or “a knowledge of the wrongfulness of the act”, is an essential ingredient in every offence: Sherras v De Rutzen [1895] 1 QB 918. In He Kaw Teh v The Queen (1985) 157 CLR 523; [1985] HCA 43, Brennan J considered, at 582, the concept of mens rea in the following terms:

However, a person need not know that the elements of the offence constituted an offence. Brennan J referred to the observations of Jordan CJ in R v Turnbull (1943) 44 SR (NSW) 108, in which his Honour stated, at 109, as follows:

Similarly, in Ostrowski v Palmer (2004) 218 CLR 493; [2004] HCA 30, Gleeson CJ and Kirby J stated, at [1], as follows:

This case was cited with approval in this Court, most recently, in Saba v Plumb [2018] NSWCA 60.

This principle is reflected in the Criminal Code, Ch 2, which codifies the general principles of criminal responsibility under laws of the Commonwealth. Section 9.3 provides that:

The appellants’ complaint under this ground was that her Honour had not applied the statutory test in finding that Ms Koernia must have had “a reasonable suspicion that something untoward had occurred”. Whilst this language is not the language of s 330(4)(a), it is clear that her Honour was explaining that to be guilty of an offence, a person does not have to know that the act said to constitute the offence with which the person is charged was forbidden by law.

Applying that concept by analogy to a statutory provision that deals with “a reasonable suspicion that the property was proceeds of an offence or an instrument of an offence”, the question is whether, having regard to what the person knew, the conduct identified by the known circumstances would arouse a reasonable suspicion that the property was proceeds of an offence or an instrument of an offence. The section does not require the person to have known that the conduct identified by the known circumstances constituted an offence.

Her Honour found Ms Koernia’s evidence in relation to her knowledge about the threshold reporting requirements in Indonesia to be unconvincing. We agree with that conclusion. The appellants were financially sophisticated and used to transferring large sums of money across national borders, as well as dealing with currency controls and a myriad of national disclosure requirements. Financially sophisticated international investors may be taken to know that many national requirements are related, broadly speaking, to the detection and prevention of money laundering. The appellants dealt regularly with some of the largest and most sophisticated financial institutions in Asia. The appellants’ evidence was that Ms Koernia was responsible for these transactions and that she chose to use Indonesian money changers to transfer the $4,500,000 to Australia because they offered a better rate than all of the most sophisticated financial institutions in Asia.

It would have been obvious to a reasonable person in the position of the appellants that for the Indonesian money changers to have offered a better rate than all of the most sophisticated financial institutions in Asia, Australian regulatory requirements (including anti-money laundering laws), which all create costs, may have been circumvented. Added to the knowledge possessed by the appellants was the fact that Ms Koernia was aware that almost 400 cash deposits of amounts under $10,000 were being made to the appellants’ Commonwealth Bank accounts at branches across Australia. Putting those two pieces of uncontested evidence together (the “advantageous rate” offered and the almost 400 cash deposits of amounts under $10,000), the conclusion that there were abundant circumstances here that would arouse a reasonable suspicion that the interests in property were proceeds of an offence or an instrument of an offence was inevitable. In any event, it is clear that the appellants failed to discharge their onus of proof on this issue.

So far as the question of costs is concerned, the usual practice of the Court is to make an order for costs at the time judgment is delivered: see Civil Procedure Act 2005 (NSW), s 98. It was open for the appellants to ask the primary judge for an opportunity to make submissions as to costs. As Basten JA (Mason P and Bryson JA agreeing) noted in Grygiel v Baine (No 2) [2005] NSWCA 434, “[f]ailure to address on costs is commonplace and … may properly be taken by the Court as an indication that no special or unusual orders are required.” His Honour identified two qualifications, neither of which arises in the present case. Accordingly, this ground of appeal must be dismissed.

It follows that the appeal must be dismissed with costs.

McCOLL JA: Subject to the following reasons, I agree with Beazley P’s and Payne JA’s reasons (joint judgment).

These reasons address the meaning of “third party” in s 330(4)(a) of the Proceeds of Crime Act 2002 (Cth) (POCA) [1] . They assume familiarity with the underlying facts and the parties’ submissions as outlined in the joint judgment. Such matters will only be repeated to the extent necessary to afford context. As will become apparent, I disagree, with respect, with their Honours conclusion that the appellants were not third parties within meaning of that term in s 330(4)(a). Nevertheless because I agree with their Honours’ conclusions otherwise I agree with the orders their Honours propose.

The appellants sought an order pursuant to s 29 of the POCA to exclude certain specified interests in property (Restrained Property) from a restraining order made by the Supreme Court of New South Wales on 28 June 2016 pursuant to the POCA, s 19. The Restrained Property consisted of funds of just under $6 million standing to the credit of the appellants in five Commonwealth Bank of Australia bank accounts, three in Ms Koernia’s name, and two in their joint names.

The appellants claimed the Restrained Property was beneficially owned by them and was not proceeds of an indictable offence, nor an instrument of any serious offence. [2] As the primary judge, Simpson J, said, although the appellant’s primary reasons for seeking the exclusion order were framed by reference to an application under s 29, the application was particularised in a manner referable to s 330(4)(a). In short, the appellants conceded before her Honour “that it would be difficult to maintain” that the Restrained Property had not been used in structured transactions, and that it was not tainted, but contended it had ceased to be the proceeds of an offence or an instrument of an offence because the appellants had acquired the Restrained Property in such circumstances as attracted the operation of s 330(4)(a) of the POCA. [3]

In short, the appellants submitted before the primary judge, and in this Court, that “third party” in s 330(4)(a) referred to a person other than a party to the criminal conduct which caused the property to become tainted. They argued that because the structuring offences were transactions between the depositor(s) of the funds and the CBA, they were, relevantly, third parties. [4]

The Commissioner resisted the exclusion application on many grounds, including that the Restrained Property was “wholly or partly the proceeds and/or instrument of an indictable and serious offence or offences within the meaning of the Act” and that the appellants had not established that the Restrained Property had ceased to be the proceeds of an offence by operation of s 330(4)(a), in particular, that they had not established within the meaning of s 330(4)(a) that they were “third parties”, who had acquired their interests in the Restrained Property for “sufficient consideration”, and lacked the knowledge referred to in that provision.

The primary judge held:

In Commissioner of the Australian Federal Police v Fernandez, [5] the primary judge expressed her conclusion concerning the meaning of “third party” as follows:

It is not entirely apparent, with respect, from the primary judge’s reasons in Lordianto, why her Honour rejected the appellants’ submission that they were s 330(4)(a) third parties. It appears to have been for two reasons. First, because they did not acquire “property” within the meaning of that term in the POCA at the time of the credits to their bank accounts. Second, as appears, with respect, more clearly from her Honour’s reasons in Fernandez, [6] because any interests the appellants did acquire in the credits were acquired at the time the money laundering offences were committed. Both the appellants and the Commissioner contend, and the joint judgment has so found, that her Honour erred in her “acquisition decision”.

The “third party” issue remains a live issue.

In this Court, the Commissioner submitted that “third party” in s 330(4)(a) identified a party other than an owner of, or interest holder in, the property whose ownership or interest arose in the transactions which constituted, or was an element of, the relevant offence. Thus, on the Commissioner’s submission, the expression “third party” was apt to identify a subsequent purchaser or acquirer of the property, or an interest in the property. That is to say an acquirer in a later transaction, which was not itself the transaction which constituted the relevant offence. On the Commissioner’s submission “third party” necessarily connotes a transmission of property, or an interest in property, to a new person or entity and is not satisfied where there is a relevant continuity of ownership in the property or interest in the property at and from the time of the offence. In the Commissioner’s submission, it followed from the opening words of s 330(4) that the acquisition by the “third party” in sub-paragraph (a) must have occurred “after” the property in question had already become proceeds or an instrument of an offence.

The Commissioner submitted that the appellants could not be regarded as third parties in this sense, when an element of the “serious offence” by reason of which the funds were constituted an instrument of an offence, was the credits to their bank accounts. On this submission, the term “third party” did not include an account holder of a bank account to which structured deposits had been credited where the making or receipt of those deposits constituted an essential element of the relevant offence contrary to s 142 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML Act) or s 400.9 of the Criminal Code (Cth). [7] The Commissioner also relied on the contention that the Commonwealth Bank acted only as intermediary for the appellants as account holders, and not on its own behalf, in receiving the funds to the credit of the accounts.

The Commissioner submitted that to construe s 330(4)(a) as the appellants contended would give that sub-section an unworkable temporal operation in its application to s 142 of the AML Act and produce the absurd result that property “would cease to be” the proceeds or instrument of an offence either from the moment the offence occurred or at a mid-point during the commission of the offence. The Commissioner submitted that that could not have been the legislative intention underpinning that provision.

Bearing in mind that the primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute, determination of the meaning of s 330(4)(a) turns on consideration of its text and its context in the POCA, including the general purpose and policy of s 330, and the mischief it is seeking to remedy. [8] Such matters are important as “the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed”. [9]

Thus it is important in order to construe s 330(4), to understand the framework of the POCA. [10]

The long title to the POCA is “An Act to provide for confiscation of the proceeds of crime, and for other purposes”. The principal objects of the Act include “depriv[ing] persons of the proceeds of offences, the instruments of offences, and benefits derived from offences, against the laws of the Commonwealth or the non-governing Territories” (s 5(a)) and “punish[ing] and deter[ing] persons from breaching laws of the Commonwealth or the non-governing Territories” (s 5(c)).

Consistently with the long title, and as explained in Ch 1 (Introduction), Pt 1-3 (Outline of this Act), s 6 (General), the POCA establishes a scheme to confiscate the proceeds of crime by setting out in Ch 2 processes by which confiscation can occur, in Ch 3 ways in which Commonwealth law enforcement agencies can obtain information relevant to those processes, in Ch 4 related administrative matters, concluding with “miscellaneous provisions and with definitions and other interpretative material”. The miscellaneous provisions appear in Ch 5 (Miscellaneous), while the definitions and other interpretative material appear in Ch 6 (Interpreting this Act).

Chapter 2 consists of “a [confiscation] scheme comprising interlocking parts”. [11] freezing orders, restraining orders, forfeiture orders under which property is forfeited to the Commonwealth, forfeiture of property to the Commonwealth on conviction of a serious offence, pecuniary penalty orders requiring payments of amounts based on benefits derived from committing offences, literary proceeds orders requiring payments of amounts based on literary proceeds relating to offences and unexplained wealth orders requiring payment of unexplained wealth amounts: s 7, POCA.

Chapter 2, Pt 2-1 (Restraining orders), Div 1 deals with the making of restraining orders, which are “a critical part of the scheme”, being the “mechanism that ensures property is not dissipated before it is able to be confiscated”. [12] In particular, s 19(1)(c) and (d) pursuant to which the restraining order in this case was made, enable such an order to be made where there are reasonable grounds to suspect that property is was 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 was known); or an instrument of a serious offence. [13]

Pt 2-1, Div 3, in which s 29 appears, deals with excluding property from certain restraining orders. That may occur by the making of an exclusion order pursuant to s 29 as the appellants sought, or a revocation order pursuant to s 42. Consistent with the intended reach of the POCA, the circumstances in which either order might be granted are limited and the conditions strict. [14]

Section 29 which appears in Ch 2 (The confiscation scheme), Pt 2-1 (Restraining orders), Div 3 (Excluding property from restraining orders) relevantly provides:

The Note to s 29(2), which appears in the printed text of the POCA, is part of the Act, [16] and can be used in its interpretation. [17] It is significant, in this respect, that as it forms part of the POCA, it has been subject to parliamentary scrutiny. [18] However, if a conflict were perceived during the construction exercise between the text of s 330(4) and the Note, the former would in my view prevail.

A court with proceeds jurisdiction must make an order that property specified in the order is forfeited to the Commonwealth if the responsible authority for a restraining order under s 19 that covers the property applies for an order under s 49(1) and the conditions specified in s 49(1)(b), (c) and (e) are satisfied. [19] Section 49(1)(c) requires the court to be satisfied that, relevantly, the property is an instrument of one or more serious offences. However, s 49(1)(c) does not apply if the court is satisfied that no application has been made under Div 3 of Pt 2-1 for the property to be excluded from the restraining order; or that any such application that has been made has been withdrawn: s 49(3). [20]

Sections 329 and 330 of the POCA which appear in Ch 6 (Interpreting this Act), Pt 6-1 (Meaning of some important concepts), Div 1 (Proceeds and instrument of an offence) provide: [21]

The applicant in any proceedings under the POCA bears the onus of proving the matters necessary to establish the grounds for making the order applied for. Subject to provisions concerning the making of orders where a person has absconded (ss 52, 118), any question of fact to be decided by a court on an application under the POCA is to be decided on the balance of probabilities: s 317(2).

Section 330(4) is in substantially, and relevantly, the same terms as when the POCA was enacted. The House of Representatives’ Revised Explanatory Memorandum to the Proceeds of Crime Bill 2002 (which became the POCA), circulated by authority of the Minister for Justice and Customs, Senator the Honourable Chris Ellison, relevantly said of s 330:

As is apparent from its text, s 330 concerns the characterisation process by which a property becomes either the proceeds, or the instrument of an offence (s 330(1) and s 330(2)), remains the proceeds of an offence (s 330(3)) and ceases to be proceeds of an offence or an instrument of an offence (s 330(4)).

As the primary judge said, the appellants particularised their exclusion application in a manner referable to s 330(4)(a) which “states the circumstances – the only circumstances – in which property ceases to be proceeds or an instrument of an offence.” [22]

The appellants conceded before the primary judge that the Restrained Property had been proceeds or an instrument of a relevant offence, albeit without their complicity. [23] Accordingly, the critical question became whether, assuming contrary to her Honour’s earlier ruling on the acquisition issue, the appellants had “acquired” an “interest” as defined in the Restrained Property, that property had ceased to be tainted in the s 330(4)(a) sense.

Both the parties’ submissions, and the primary judge’s reasons, focused on s 330(4) as answering that question. While s 330(4) was undoubtedly a relevant consideration, it is necessary to understand its place in the statutory matrix.

The s 19 restraining order turned, in part, on the applicants for that order establishing that an “authorised officer suspects” that the property the subject of the application “is proceeds of” (emphasis added) an offence referred to in s 19(1)(d) or, pursuant to s 19(1)(e), if the offence to which the order relates is a serious offence, the property “is an instrument of the offence” (emphasis added). Section 329 prima facie answers the question embedded in s 19(1)(d) and (e) by providing when property “is” proceeds or an instrument of an offence.

Section 29 requires the applicants for an exclusion order to prove that the applicants’ interest in the Restrained Property “is neither” proceeds or an instrument of an offence.

While s 329 does not directly answer the question s 29 poses, it establishes the base point: whether the property in question “is” such proceeds or “instrument” in the first place. Only when that question has been resolved can the s 29 question, whether the applicants’ “interest” in that property “is” or “is neither” one or the other, be determined. In this case the “is” question was treated as sufficiently answered by the appellants’ concession as to the characterisation to which I have referred.

Section 330 is critical to the operation of s 329. Section 330(1) and (2) explain how property first “becomes”, that is to say can be so characterised that an authorised officer can “suspect” it “is”, proceeds or an instrument of an offence in the s 19 sense, and a court can be satisfied for the purposes of s 19(1)(f) that the authorised officer holds that suspicion on reasonable grounds and thus be subject to a restraining order. Section 330(3) explains that when there is a transaction referred to in that provision in relation to proceeds or an instrument of an offence (s 330(3) transaction), it “remains” so characterised. Section 330(4) explains when property which “is” either proceeds or an instrument of an offence “ceases” being so characterised.

The parties’ submissions tended to focus on s 330(4) as if it were a substantive enactment, or, at least functioned independently of the surrounding provisions. That is not the case.

Part 6-1 of POCA in which s 330(4) is found is analogous to a definitions section. In the ordinary course, as McHugh J has explained, “the function of a definition is not to enact substantive law” but to “aid” the construction of those substantive enactments that contain the defined term or terms. In his Honour’s view, the intention of the legislature was likely to be defeated if a definition was given a narrow, literal meaning, and that meaning was used “to negate the evident policy or purpose of a substantive enactment”. Once it was clear that the definition applied, the words of the definition had to be read into the substantive enactment and the latter construed “in its extended or confined sense ‒ in its context and bearing in mind its purpose and the mischief that it was designed to overcome”. To construe “the definition before its text has been inserted into the fabric of the substantive enactment”, in his Honour’s view, “invites error as to the meaning of the substantive enactment.” [24]

Whether the general principle as to the use of definitions applies is subject to contrary legislative intent. [25] Thus, in Australian Competition and Consumer Commission v Yazaki Corporation the Full Federal Court (Allsop CJ, Middleton and Robertson JJ) held that s 4D of the Trade Practices Act 1974 (Cth) (TP Act), which provided when “[a] provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be taken to be an exclusionary provision for the purposes of this Act”, stated substantive law. Accordingly, it was not a “definition” in the sense of the phrase (“made in the course of official questioning” within the meaning of s 8(1)(b) of the Criminal Law (Detention and Interrogation) Act 1995 (Tas)) McHugh J discussed in Kelly v R. [26] This did not lead the Full Federal Court, however, to read s 4D independently of the substantive enactment (s 45 of the TP Act), but, rather, to read it first, according to its terms and in its legal context which included extrinsic materials.

In Moreton Bay Regional Council, [27] the plurality rejected a submission that the definition of “common areas” which appeared in Pt 3 (Interpretation), Div 2 (Extended definitions), [28] in the Retail Shop Leases Act 1994 (Qld) (RSLA) was a substantive enactment served any function other than defining that expression for the purposes of the RSLA. In their Honours’ view, there was nothing about the definition of “common areas” in the RSLA which suggested it was the purpose of the RSLA to achieve the object in s 3 of the RSLA of “efficiency and equity” by substituting the statutory definition of “common areas” for the definition in a lease wherever it occurred. Rather, “[o]f itself, the statutory definition of ‘common areas’ [did] no more than define the meaning to be assigned to the term ‘common areas’ as it is used in the RSLA.”

While it is apparent that Pt 6-1 of the POCA was intended to be an aid to the meaning of “important concepts” which appear in the POCA, it is not readily apparent, having regard to its structure, that it could be interpreted in the manner McHugh J contemplated when dealing with the meaning of the phrase. That is to say, one cannot readily insert, for example, s 330(4)(a), into every provision of the POCA in which the question whether property “is” the proceeds or instrument of an offence arises, and then construe that provision.

While that unwieldy exercise is not readily attractive, its grammatical impracticality does not detract, in my view, from a characterisation of Pt 6-1 by analogy with the principles applied to the characterisation of definition provisions as an aid to the construction of provisions (including s 29) to which the state of “being” of the relevant property is relevant. That is, not least, because of the clear statement in s 6 of the POCA concerning material which appears after Ch 2 – 4, relevantly for present purposes in Ch 6, as being “other interpretive material”. That makes it clear that Pt 6-1 does not set out substantive enactments, but, as its title also indicates, explains the meaning of some important concepts to be used when applying the substantive provisions of the POCA, in this case, relevantly, s 29.

Thus, as in Moreton Bay Regional Council, it is apparent that the legislature intended that when the “concepts” reflecting the characterisation of property referred to in s 330 are found in the substantive parts of the POCA, they are to be understood as complementing s 329 and, ultimately, assisting in the application of a provision in which the “is” question arises, in this case, the application for a s 29 exclusion order.

What explanation s 330 affords an applicant for a s 29 exclusion order must be determined in the context that it is apparent from the terms of s 29 itself, that the circumstances in which an exclusion order might be granted are limited and the conditions strict. [29] Consistently with that interpretation of s 29, s 329 casts a wide net, a matter I address later in these reasons.

Accordingly, in order to succeed on the exclusion application, the appellants had to establish on the balance of probabilities within the meaning of the POCA, s 29 that their interest in the Restrained Property “is” not an “instrument of any serious offence”. Their concession that the Restrained Property had that characteristic when the restraining order was made, did not, extend to a concession that the Restrained Property had that characteristic in their hands. Their essential submission was that even if the credits to their various bank accounts remained proceeds or an instrument of an offence, on their acquisition of their interests in the Restrained Property, it ceased to be so characterised.

The primary judge held “third party” in s 330(4)(a) was “the statutory enactment of the equitable notion of a purchaser for value without notice.” [30] In Tjongosutiono, [31] N Adams J observed that “[t]he concept of a third party is usually someone at arm’s length”.

While analogies may provide useful points of reference, the meaning of “third party” in s 330(4)(a) must be determined by the principles of statutory interpretation to which I have referred. As I have said, the fact that s 330(4)(a) is an aid to the construction of the substantive provisions of the POCA rather than a substantive enactment, does not mean that it should be construed divorced from its Pt 6-1 context. Any construction of s 330(4)(a) must be consistent with the language and purpose of all the provisions of the POCA, and reflect the “hierarchy of the provisions … to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme.” [32] In my view, with respect, decisions which have hitherto considered the meaning of “third party” have failed to have regard to, or accord sufficient weight to, the context in which s 330(4) appears and the hierarchy within s 330.

The concept of whether property “is neither proceeds nor an instrument [of a specified activity or offence]” is relevant to applications for exclusion orders made in relation to restraining orders made under each of s 17, (s 29(2)(a) and (b)), s 18, (s 29(2)(c)) and s 19 (s 29(2)(d)). In the latter case, reasons for excluding a specified interest in property from the s 19 restraining order turn on whether the interest “is neither” proceeds of an indictable offence, a foreign indictable offence or an indictable offence of the Commonwealth nor an instrument of any serious offence (s 29(2)(d)). Pursuant to s 29(3), a further reason for excluding a specified interest in property from any restraining order is, in part, whether “there are no reasonable grounds to suspect that the interest is *proceeds of the offence, or any of the offences” specified in the chapeau to s 29(3)(a).

Notably, s 29 does not expressly use the language of s 330(4) that property which is proceeds or an instrument of an offence has “cease[d]” to be such so as to warrant the grant of an exclusion order. Rather, it must be inferred that the concept of property not having that characteristic flows from the term “is neither”. That expression is apt to describe property which never became “proceeds or an instrument of an offence” within s 330(1) – (2), [33] or ceased to be such as explained in s 330(4). It is conceivable that there may be cases in which a s 29 applicant could persuade a court of the former proposition.

As I have said, s 330 is found in a context which demonstrates the wide operation the confiscation scheme is clearly intended to have, as can be seen from the extent of the “property” to which it potentially applies. I have already set out the terms of s 329. In Hart, [34] the plurality observed in relation to s 329(1)(a) and (b) dealing with “proceeds of an offence” that:

The same observation must apply to s 329(2)(a) and (b) which deals with “an instrument of an offence”.

Section 330 is complementary to s 329. It establishes a continuum, as I have said, intended to facilitate the determination, for the purposes of the confiscation scheme, as to when property “becomes” proceeds or an instrument of an offence, when it “remains” so characterised and, ultimately, when it “ceases” being so characterised.

Each sub-section in s 330 looks to a different, or potentially different, “activity” which has taken place in relation to “property” to determine whether, having regard to that activity, specified property, in substance, “is” proceeds or an instrument of an offence within the meaning of s 329, and, in turn, within the meaning of a substantive provision of the POCA to which that concept is relevant.

Contextually and importantly, in my view, for the purposes of understanding the ambit of s 330(4), s 330(3) specifies the circumstances in which property “remains” proceeds or an instrument of an offence, “even if” one of the activities there referred to occurs. Those activities are that property which is proceeds or an instrument of an offence is credited to an account, as in this case (s 330(3)(a)), or disposed of or otherwise dealt with (s 330(3)(b)).

The use of the expression “even if” in s 330(3) underscores the strictness of the approach, already indicated by the language of s 29, [35] to be taken to determining whether property “is” proceeds or an instrument of an offence. The expression “even if” also indicates a legislative recognition that, in the ordinary course, it might otherwise be thought that a transaction of the sort referred to in s 300(3) might have the effect of depriving it of its character as proceeds or an instrument of an offence. Accordingly, s 330(3) ensures that it remains so characterised.

However, there is a necessary interaction between s 330(3) and s 330(4). As the appellants submitted, every acquisition of property that is the proceeds of an offence involves a dealing with the proceeds of crime for the purposes of Pt 10.2 of the Criminal Code (and is a “serious offence” within s 338 of the POCA. That proposition applies to each of the transactions s 330(3) contemplates.

The clear intent of s 330(3), taken with the wide definition of whether property “is” either “proceeds” or an “instrument”, in my view, is that property remains so characterised, notwithstanding that it has been dealt with in a manner contemplated by s 330 whether once, or on repeated occasions. Section 330 is intended to have a never-ending effect. As long as the property can be characterised at some stage as having been proceeds or an instrument of an offence, it “remains” so characterised no matter how many s 330(3) transactions it passes through. There is never a temporal disjunction, to use the Commissioner’s expression, which can disassociate a subsequent purchaser or acquirer from a transaction which constitutes an element of an offence. Each s 330(3) transaction involves such a dealing, leading to the property remaining tainted.

Each sub-paragraph of s 330(4) deals with what would, prima facie, be a s 330(3) transaction. Subsection 330(4) clearly contemplates, in my view, that property which “remains” the proceeds or an instrument of an offence within s 330 by reason of a s 330(3) transaction may, notwithstanding that transaction, cease to be such proceeds or an instrument of an offence, albeit “only” in the circumstances for which s 330(4) provides. The use of the term “only” emphasises the strictness of the approach to be taken to determining whether property has lost its character as proceeds or an instrument of an offence.

Section 330(4) thus creates what can be described as a carve out. In other words, it has the effect that the characterisation as proceeds or an instrument of an offence s 330(3) ensures property the subject of a s 330(3) transaction retains, “ceases” if any sub-paragraph of s 330(4) applies. It is the legislature’s attempt to achieve the balanced and fair approach to the operation of the POCA spoken of in the Revised Explanatory Memorandum.

A clear example of the inter relationship between s 330(3) and s 330(4)(a), as the appellants submitted, would be a cuckoo smurfer disposing of monies which are the proceeds or an instrument of an offence to buy something, whether real or personal property (a s 330(3)(b) dealing), from a stranger to any of the activities by virtue of which the property “is” proceeds or an instrument of an offence (property transaction).

Applying s 330(3), the purchase money, being proceeds or an instrument of an offence, “remains” tainted in the stranger’s hands. However, the Commissioner accepted that the stranger/recipient of the purchase money could rely on s 330(4)(a) because the purchase money (property) was already “proceeds” before the stranger acquired it and, accordingly, the stranger was not a “party” to the conduct which caused the property to be proceeds in the first place.

In my view, the Commissioner’s submissions concerning the necessity for a temporal disjunction fail to grapple with the effect of the continuing operation of s 330(3) on property the subject of a s 330(3) transaction in the context of s 330(4)(a) third-party status. As I have said, there is never a temporal disjunction.

The vendor in the s 330(b) property transaction, in my view, is no different from the holder of an account in the s 330(a) credit transaction who, as the joint judgment has held, acquires an “interest” (property), within the meaning of that term as defined in s 338, for the purposes of s 330(4)(a) each time a credit is made into the holder’s account. In each case, the “cuckoo”, the depositor or purchaser, has sought to use the “nest” afforded by the account or the acquisition of the real or personal “property” the subject of the s 330(b) transaction, to launder tainted funds. In each case, the recipient of the funds (property) has, albeit unwittingly, become involved in, or a party to, an offence under either the AML Act and/or the Criminal Code and has received property which “remains” either proceeds or an instrument of an offence depending on the nature of the s 330(3) transaction. Indeed, the “property” undoubtedly retains that characterisation by operation of s 329 alone.

However, in each case when the holder of the account into which the funds are credited or the vendor of the property cannot be said to be a “party” to the s 330(3) transaction in the sense of being intentionally complicit in the laundering activity, or to put it another way stands at arms’ length to the transaction, he or she is, in my view, relevantly a “third party” for the purposes of s 330(4). Subsection 330(4)(a), in my view, is clearly intended to give such recipients (who would be “innocent third parties” as referred to in the Note to s 29) an opportunity to have such property excluded from a restraining order.

The joint judgment has approved the primary judge’s reasons on the “third party” issue. N Adams J also substantially applied the primary judge’s conclusion as to the meaning of “third party” in Tjongosutiono. It is appropriate that I make clear, to the extent not already apparent, my reasons for disagreeing with that approach. It is convenient to do so by analysing Tjongosutiono.

In Tjongosutiono, [36] N Adams J held that in order to be a s 330(4)(a) “third party”, the “property must be acquired after the funds become either the proceeds or an instrument of an offence”. Her Honour’s conclusion in this respect appears to have turned on two matters. First, her earlier observation that sub–ss 330(4)(b) – (g) shared “the common characteristic that there is some effluxion of time between the property becoming the proceeds of crime and then ceasing to have that character as a result of an intervening act”. [37] Second, her Honour’s conclusion that, absent definition, the word “acquired” in s 330(4)(a) should be given its everyday meaning of “to come into possession of”. [38]

In Tjongosutiono, the applicant for the s 42 revocation order had to establish that there were “no grounds” on which to make the restraining order at the time of the revocation application: s 42(5)(a), POCA. Although it is difficult to draw direct factual comparisons, the facts in that case bore some similarities to the present case. Both involved “cuckoo smurfing”. The applicant had used moneychangers in Indonesia to seek to transfer money to bank accounts he held with Westpac in Australia for apparently legitimate use here. N Adams J found “the applicant’s Westpac eSaver Account was used by unknown persons to launder cash which was presumably the proceeds of criminal activity in Australia.” [39]

N Adams J held the applicant could not be a “third party” because, as the Commissioner submitted, he had been “involved in the first step of the process in Jakarta and was also involved in the final step in Australia when the deposits were made”. The Commissioner in that case did not submit that the applicant was complicit in a criminal sense in the “cuckoo smurfing”. As much is evident from her Honour’s conclusion that “[j]ust because the applicant was not directly involved in the criminal activity of money laundering, it does not follow that he was a ‘third party’ for the purposes of s 330(4)(a) of the Act.” [40]

Nevertheless, her Honour appears to have formed the view that by reason of the first and final steps (the latter not involving any “activity” on his part other than holding a bank account into which the proceeds of crime were paid by unknown persons) the applicant was “party to part of the transaction in question”. On that premise, he did not satisfy her Honour’s test that “a ‘third party’ in the context of s 330(4)(a) of the Act is someone who becomes involved with the property for the first time after it has become the proceeds or an instrument of an offence”. [41]

In so finding, her Honour substantially adopted the primary judge’s analysis of “third party” in this case as well as in Fernandez.

I cannot, with respect, agree with the primary judge’s conclusion as to the meaning of “third party”, or with N Adams J’s conclusion to like effect in Tjongosutiono. In my view an interpretation of “third party” which mandates that the beneficiary of such a classification must be a person who acquired the relevant interest in the “property” after the commission of the offences which caused it to be tainted fails to have regard to the interrelationship between s 330 and s 330(4)(a) I have sought to explain and the continuing characterisation of such “property” as “proceeds” or an “instrument”. If that explanation is correct, there never is an “after”.

Being a s 330(4)(a) third party is not sufficient to attract a finding that property “ceases” to be proceeds or an instrument of an offence. That depends on the applicant also satisfying the other requirements of s 330(4)(a). The appellants failed in that respect as the joint judgment has explained.