New South Wales Crime Commission v Li Zhang [2012] NSWSC 316

Supreme Court New South Wales

Medium Neutral Citation: New South Wales Crime Commission v Li Zhang [2012] NSWSC 316 Hearing dates: 29 March 2012 Decision date: 16 April 2012 Jurisdiction: Common Law Before: Bellew J Decision: 1. Matter stood over for further directions at 9.30 am on 23 April 2012. 2. Direct the parties to bring in Short Minutes of Orders reflecting the conclusions I have reached in this judgment. Catchwords: Criminal assets recovery - whether relevant suspicion based on reasonable grounds - whether interest in property is "serious crime derived property" - whether such interest has ceased to become "serious crime derived property" Legislation Cited: Crimes Act New South Wales 1900 Criminal Assets Recovery Act 1990 Cases Cited: George v Rockett (1990) 170 CLR 104 R v Ho & Szeto (1989) 39 A Crim R 145 Category: Procedural and other rulings Parties: New South Wales Crime Commission (Plaintiff) Li Zhang (Defendant) Representation: I. D. Temby QC (Plaintiff) G. Jones / B. Clark (Defendant) A. Bishop (Plaintiff) Streeton Lawyers (Defendant) File Number(s): 2011/98923

Judgment Background 1On 25 March 2011, on the application of the NSW Crime Commission ("the Commission") orders were made by this Court against the defendant Li Zhang pursuant to the Criminal Assets Recovery Act 1990 ("the Act") in relation to property known as Unit 15, 9 Pitt Street, Mortdale ("the Mortdale property"). Those orders included an order pursuant to s 10A of the Act preventing disposal of the Mortdale property ("the restraining order"). 2The restraining order remains in force at the present time and was made having regard to the contents of an affidavit of Jonathon Lee Spark sworn on 25 March 2011. That affidavit deposed to a number of facts, on the basis of which Mr Spark suspected that either: (a)statements made by the defendant to a home loan provider in an application for a loan were false, were known by her to be false, and were made for the purposes of dishonestly obtaining a loan from that home loan provider for the purposes of purchasing the property; or alternatively (b)an Income Tax Return lodged by the defendant to the Australian Taxation Office for the year ending 30 June 2004 was false, was known by the defendant to be false, and was lodged by her for the purposes of dishonestly obtaining the benefit of paying less income tax than she would have had a liability to pay had she correctly declared her greater taxable income. 3On 6 February 2012 the defendant filed a notice of motion seeking that the restraining order be set aside. It was this notice of motion which was listed for hearing before me on 29 March 2012. In short, the defendant sought that the restraining order be set aside on the basis that if there had been any dishonest conduct, she was neither involved in it, nor aware of it. In this regard, paragraph 8(c) of the defendant's affidavit of 5 February 2012 which was filed in support of the motion was in the following terms: Gladiator Home Loans provided the home loan for the property in the sum of $240,000. Annexed herewith and marked "C" is their approval advice. This loan was negotiated by contact between my husband, Henley Han, and a broker named Tony Nguyen. Tony Nguyen was a broker for Gladiator Home Loans. I did not see nor sign the Loan Application Form. 4At the commencement of the proceedings on 29 March 2012 Mr Temby QC, who appeared on behalf of the Commission, filed a notice of motion in Court seeking (inter alia) a further restraining order. In doing so, Mr Temby explained that what the Commission now sought was a restraining order based upon the fact that the defendant's interest in the Mortdale property is serious crime derived property, not as a result of any serious crime related activity of the defendant, but as a result of such activity on the part of her husband, Henley Han ("Han"), either alone or in combination with Tony Nguyen ("Nguyen"), a Mortgage Broker. 5In circumstances where there were two motions before the Court, Mr Temby submitted that the Commission's motion should be dealt with first. Mr Jones, who appeared with Mr Clark for the defendant, did not argue against that course but made it clear that the orders sought by the Commission were opposed. Mr Jones further submitted that if I came to the view that such orders were appropriate, they should be granted on terms which allowed the defendant to access her equity in the Mortdale if property to meet her reasonable legal expenses. Mr Temby indicated that if that issue arose, he would require an opportunity to consider it and obtain instructions. 6In these circumstances, I proceeded to hear the Commission's motion. The evidence 7Mr Temby relied upon three affidavits in support of the motion, namely: (i)an affidavit of Jonathan Lee Spark sworn 9 March 2012 ("the first Spark affidavit"); (ii)a further affidavit of Jonathan Lee Spark sworn 28 March 2012 ("the second Spark affidavit"); and (iii)an affidavit of the defendant sworn 5 February 2012 ("the defendant's affidavit"). 8The majority of the evidence relied upon by the Commission is contained in Exhibit JLS-1 to the first Spark affidavit. 9The first Spark affidavit contained some typographical and formatting errors which are corrected by the second Spark affidavit. I should also note that although a further affidavit of the defendant sworn on 29 March 2012 was filed in Court, this affidavit is relevant only to the application foreshadowed by Mr Jones as to the terms on which any orders should be made and was not relied upon either party on the hearing of the Commission's motion. 10The evidence relied upon by the Commission discloses the following. 11The defendant and Han are married. On 11 September 2003, a Mortgage Loan Application (part of Exhibit JLS-1/Tab1) ("the application") was completed in the name of the defendant for the stated purpose of borrowing an amount of $240,000.00 from Gladiator Home Loans ("Gladiator") to assist in the purchase of the Mortdale property, which was offered as security for the loan. 12The defendant has stated that the signature on the application is not hers and that she did not complete that document (defendant's affidavit at paragraph 8(c)). She has further stated (in the same paragraph) that the loan was negotiated between Han and Tony Nguyen ("Nguyen"), the latter being Mortgage Broker for Gladiator. 13The application stated that the defendant was employed by a company called Rovil Pty Limited ("Rovil") and was paid an annual salary of $55,016.00 per annum. 14Exhibit JLS-1/Tab 3 discloses: (a)that the defendant has been a director of Rovil since 26 February 2002; (b)that Han has been a director and secretary of Rovil since 16 August 2000; (c)that Han is the sole shareholder of Rovil; and (c)that the Mortdale property is Rovil's principal place of business and registered office. 15The application was supported by a series of other documents (which also form part of Exhibit JLS-1/Tab 1). They included: (a)an "Employment Verification" form which bears the name of Nguyen and a signature next to the words "completed by", and which purported to verify that the defendant's employment with Rovil, and the amount of her salary, had been confirmed. Han's name appears as the person who was contacted for the purposes of that confirmation; (b)a document on the letterhead of Rovil, signed "Henley Han, Sales Manager", certifying that the defendant had been employed by Rovil as a saleswoman for two years and earned a weekly wage of $1,058.00; (c)a document entitled "Payment Summary Report" showing that for the year ending 30 June 2003 the defendant was paid a sum of $54,349.00 from Rovil; (d)a document entitled "Loan Submission Summary" dated 2 October 2003 confirming Nguyen as the contact person in respect of the loan. 16A title search (Exhibit JLS-1/Tab 2) establishes that the defendant is the registered proprietor of the Mortdale property, it having been transferred to her on 22 November 2003. 17Documents obtained from the Australian Taxation Office (Exhibit JLS-1/Tab 4) establish that in the financial year ending 30 June 2004 (that being the financial year in which the application was submitted) Rovil's total salary and wage expenses were $6,600.00. In the defendant's taxation return for the year ending 30 June 2004 it was declared that she was employed by Rovil and received salary and wages from Rovil totalling $6,600.00. It was further declared that her taxable income for that financial year was $6,530.00. Relevant legislative provisions 18Section 10A of the Act is in (inter alia) the following terms: 10AProceedings for restraining orders (1) Application for order The Commission may apply to the Supreme Court, ex parte, for a restraining order in respect of specified interests, a specified class of interests, or all the interests, in property of any person (including interests acquired after the making of the order). (2) ... (3) ... (4) .... (5) Determination of applications The Supreme Court must make a restraining order if the application for the order is supported by an affidavit of an authorised officer stating that: (a)in the case of an application in respect of an interest referred to in subsection (1)-the authorised officer suspects that: (i)the person whose interest is the subject of the application has engaged in a serious crime related activity or serious crime related activities, or (ii)the person whose interest is the subject of the application has acquired serious crime derived property because of any such activity of the person or of another person, or (iii)the interest is serious crime derived property, and stating the grounds on which that suspicion is based, and (b) (Repealed) (c)in the case of an application in respect of an interest referred to in subsection (2)-the authorised officer suspects that the interest is fraudulently acquired property that is illegally acquired property and stating the grounds on which that suspicion is based, and the Court considers that, having regard to the matters contained in any such affidavit and any evidence adduced under subsection (4), there are reasonable grounds for any such suspicion. (6)The Supreme Court may grant an application under this section for a restraining order for interests in property derived from external serious crime related activity only if the application is supported by an affidavit of an authorised officer stating that the officer has made due enquiry and is satisfied that no action has been taken under a law of the Commonwealth or any place outside this State (including outside Australia) against any interests in property of the person concerned that are the subject of the application as a result of the external serious crime related activity. ...... 19Section 6(1) of the Act defines "serious crime related activity" in (inter alia) the following terms: 6Meaning of "serious crime related activity" (1)In this Act, a reference to a serious crime related activity of a person is a reference to anything done by the person that was at the time a serious criminal offence, whether or not the person has been charged with the offence or, if charged: (a)has been tried, or (b)has been tried and acquitted, or (c)has been convicted (even if the conviction has been quashed or set aside). (2)In this section, a reference to a serious criminal offence is a reference to: ..... (d)an offence that is punishable by imprisonment for 5 years or more and involves theft, fraud, obtaining financial benefit from the crime of another, money laundering, extortion, violence, bribery, corruption, harbouring criminals, blackmail, obtaining or offering a secret commission, perverting the course of justice, tax or revenue evasion, illegal gambling, forgery or homicide, or ....... 20Section 9 of the Act is in (inter alia) the following terms: 9Meaning of "serious crime derived property" and "illegally acquired property" (1)An interest in property is serious crime derived property if: (a)it is all or part of the proceeds of a serious crime related activity, or (b)it is all or part of the proceeds of the disposal of or other dealing in serious crime derived property, or (c)it was wholly or partly acquired using serious crime derived property. ..... (5)An interest in property ceases to be serious crime derived property or illegally acquired property: (a)when it is acquired by a person for sufficient consideration without knowing and in circumstances that would not arouse a reasonable suspicion, that the interest was, at the time of acquisition, serious crime derived property or illegally acquired property; ....... The submissions of the parties 21Section 10A(5) of the Act mandates the making of a restraining order if a number of pre-requisites are satisfied. For the purposes of the present case, those pre-requisites are that: (a)the application is supported by an affidavit of an authorised officer; (b)the affidavit states that the authorised officer suspects that (in this case) the defendant has acquired serious crime derived property because of the serious crime related activity of another person; (c)the affidavit sets out the grounds upon which the suspicion is based; and (d)the Court considers that, having regard to the matters contained in any such affidavit, and any evidence filed by the defendant, there are reasonable grounds for any such suspicion. 22Mr Jones did not dispute that the matters in (a), (b) and (c) were made out. He helpfully confined his argument to two propositions. Firstly, he submitted that the evidence was not sufficient to establish that there were reasonable grounds for the suspicion held by Mr Spark. Secondly, he submitted that the Mortdale property had, having regard to the provisions of s 9(5)(a) of the Act, ceased to become serious crime derived property. 23As to the first issue, Mr Temby submitted that the evidence established reasonable grounds for Mr Spark's suspicion that the defendant had acquired serious crime derived property as a result of the serious crime related activity of Han and/or Nguyen. Specifically, Mr Temby submitted that the evidence established reasonable grounds for the suspicion that that an offence had been committed, by Han and/or Nguyen, against s 178BB of the Crimes Act 1900. Although that section is now repealed, it was, at the material time, in force and was in the following terms: 178BBObtaining money etc by false or misleading statements (1)Whosoever, with intent to obtain for himself or herself or another person any money or valuable thing or any financial advantage of any kind whatsoever, makes or publishes, or concurs in making or publishing, any statement (whether or not in writing) which he or she knows to be false or misleading in a material particular or which is false or misleading in a material particular and is made with reckless disregard as to whether it is true or is false or misleading in a material particular shall be liable to imprisonment for 5 years. 24Having regard to the term of imprisonment for which s 178BB(1) provides, the offence created by that section is a "serious criminal offence" within the meaning of s 6(2)(d) of the Act. 25As to the second issue, Mr Temby submitted that there was an onus on the defendant to adduce evidence in support of her reliance upon s 9(5)(a), and that such onus had not been discharged. He further submitted that the evidence upon which Mr Spark based his suspicion would lead me to conclude that the circumstances surrounding the defendant's acquisition of the Mortdale property were such as to arouse the reasonable suspicion of which s 9(5)(a) speaks. 26In relation to the first issue, Mr Jones' position was essentially confined to one proposition. He submitted that the evidence was not sufficient to establish reasonable grounds for the suspicion held by Mr Spark because, in order to reach that point, it was necessary for the Commission to show a causal nexus between the making of a false statement in the application, and the payment of the money by Gladiator. At paragraph 17 of his written submissions, Mr Jones put the submission in this way: It is essential for the Commission to show a nexus between the false/misleading statement and the benefit. The Court cannot assume that Gladiator Home Loans Pty Limited acted on the false/misleading statement and there is no fact that would warrant such an assumption. The simple making of a false or misleading statement is not sufficient to ground the offence. The facts that ground Spark' (sic) suspicion are insufficient for his suspicion to be reasonable. As particularised the Commission must demonstrate a factual nexus between the false statement and the obtaining of a bank loan from Gladiator Home Loans Pty Limited. 27In support of this submission Mr Jones cited the decision of the Court of Criminal Appeal in R v Ho & Szeto (1989) 39 A Crim R 145. He also relied upon the decision of the High Court in George v Rockett (1990) 170 CLR 104. 28In respect of the second issue, Mr Jones submitted that in circumstances where the defendant had not herself been charged with any criminal offence, the evidence, at its highest, pointed to nothing more than the fact that she obtained a loan which had been arranged by Han or alternatively by Han and Nguyen. He submitted that this evidence was not sufficient to arouse the reasonable suspicion to which s 9(5)(a) refers. Resolution of the issues Are there reasonable grounds for the suspicion held by Mr Spark? 29In George v Rockett (1990) 170 CLR 104 the High Court made a number of observations in relation to the concepts of "reasonable grounds" and "suspicion". As to the former, the Court observed (at p112): When a statute prescribes that there must be "reasonable grounds" for a state of mind - including suspicion and belief - it requires the existence of facts which are sufficient to induce that state of mind in a reasonable person. 30As to the latter the Court observed (at p115): Suspicion, as Lord Devlin said in Hussien v Chong Fook Kam [1970] AC 942 at 948, "in its ordinary meaning is a state of conjecture or surmise where proof is lacking: 'I suspect but I cannot prove.' The facts which can reasonably ground a suspicion may be quite insufficient reasonably to ground a belief, yet some factual basis for the suspicion must be shown. In Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266, a question was raised as to whether a payee had reason to suspect that the payer, a debtor, "was unable to pay [its] debts as they became due" as that phrase was used in s 95(4) of the Bankruptcy Act 1924 (Cth). Kitto J said (at 303): A suspicion that something exists is more than a mere idle wondering whether it exists or not; it is a positive feeling of actual apprehension or mistrust, amounting to 'a slight opinion, but without sufficient evidence', as Chambers' Dictionary expresses it. Consequently, a reason to suspect that a fact exists is more than a reason to consider or look into the possibility of its existence. The notion which 'reason to suspect' expresses in sub-s (4) is, I think, of something which in all the circumstances would create in the mind of a reasonable person in the position of the payee an actual apprehension or fear that the situation of the payer is in actual fact that which the sub-section describes - a mistrust of the payer's ability to pay his debts as they become due and of the effect which acceptance of the payment would have as between the payee and the other creditors. The objective circumstances sufficient to show a reason to believe something need to point more clearly to the subject matter of the belief, but that is not to say that the objective circumstances must establish on the balance of probabilities that the subject matter in fact occurred or exists: the assent of belief is given on more slender evidence than proof. Belief is an inclination of the mind towards assenting to, rather than rejecting, a proposition and the grounds which can reasonably induce that inclination of the mind may, depending on the circumstances, leave something to surmise or conjecture. 31I have set out, in paragraphs (7) to (17) above, those matters relating to the loan application and purchase of the Mortdale property which are disclosed by the evidence. Mr Jones did not argue against the proposition that such matters were, in fact, disclosed. Bearing in mind the observations in George v Rockett to which I have referred above, I am of the view that those matters are more than sufficient to induce, in any reasonable person, the suspicion held by Mr Spark. 32I do not accept the submission advanced by Mr Jones that on the facts of the present case, it is necessary for the Commission to establish a nexus between the making of the false or misleading statement in the application, and the advancement of the money by Gladiator. In my view, there is nothing in the terms of s. 178BB of the Crimes Act which supports the conclusion that any such nexus is required. 33In particular, the decision in R v Ho and Szeto (supra) relied upon by Mr Jones provides no support for his submission and is clearly distinguishable from the present case. That decision was concerned with the provisions of s 178BA which are cast in terms which are quite different from those in s. 178BB. Whilst the decision is authority for the proposition that, for the purposes of an offence under s 178BA, there must be a causal connection between the deception of which that section speaks and the obtaining of the money, it has nothing to say about the provisions of s 178BB which, as I have said, are cast in completely different terms. Has the defendant's interest in the Mortdale property ceased to become serious crime derived property pursuant to s. 9(5)(a)? 34Accepting that the defendant did not sign the application, and further accepting that she has committed no offence, there is evidence pointing to those matters set out in paragraphs (7) to (17) above. There is also an available inference that the defendant must have executed the Memorandum of Transfer of the Mortdale property at or about the time of settlement of the purchase, in order to become the registered proprietor. 35In my view, these matters are sufficient to have aroused a reasonable suspicion of the kind contemplated by s 9(5)(a), namely that the defendant's interest in the Mortdale property was, at the time of its acquisition, serious crime derived property. Without determining the question of who might bear any onus of proof in terms of the matters set out in s. 9(5)(a), it is relevant for me to take into account that the defendant's affidavit is largely silent on the matters which, in my view, were sufficient to have aroused the relevant suspicion. Conclusion 36In my view, for the foregoing reasons, the orders sought by the Commission in its notice of motion should be granted. 37The question of whether such orders should be made on the terms sought by Mr Jones remains outstanding. That may be a matter in respect of which the parties are able to reach agreement. There will also be a necessity for an order to be made vacating those orders which are presently in force and which were made on 25 March 2011. 38In these circumstances, I make the following orders: (a)I stand the matter over for further directions until 9.30 am on 23 April 2012 before me; (b)I direct the parties to bring in Short Minutes of Orders reflecting the conclusions I have reached and which are set out in this judgment. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 April 2012