Supreme Court New South Wales Medium Neutral Citation: Application of the Commissioner of the Australian Federal Police; In the matter of Lami [2017] NSWSC 1345 Hearing dates: 15 September 2017 Date of orders: 15 September 2017 Decision date: 04 October 2017 Jurisdiction: Common Law Before: Walton J Decision: Upon the basis that the plaintiff provided, on behalf of the Commonwealth, the usual undertaking as to costs and damages, the Court confirms the orders and direction made on 15 September 2017. Catchwords: CRIME – Proceeds of Crime Act 2002 (Cth) – proceeds of crime – application for restraining order – custody and control orders – ancillary orders – orders made Legislation Cited: Criminal Code Act 1995 (Cth) Proceeds of Crime Act 2002 (Cth) Cases Cited: Director of Public Prosecutions v Chan (2004) 150 A Crim R 163; [2004] ACTSC 101 Category: Principal judgment Parties: Commissioner of the Australian Federal Police (Plaintiff) Representation: Solicitors: Australian Federal Police (Plaintiff) File Number(s): 2017/243516 REASONS FOR Judgment 1. By a summons filed 10 August 2017, the Commissioner of the Australian Federal Police ("the Commissioner") made an application under s 25 of the Proceeds of Crime Act 2002 (Cth) ("the Act") for a restraining order pursuant to s 19 of that Act. The Commissioner relied upon two affidavits of Adrian Linus Edwards sworn 10 and 24 August 2017. 2. The Commissioner sought the orders with respect to the following property: 1. All funds standing to the credit of the Commonwealth Bank of Australia Limited ("CBA") account [number omitted] held in the name of Smart Care Solutions Pty Ltd ("Smart Care Solutions"), together with any interest earned thereon. 2. All funds standing to the credit of the CBA account [number omitted] held in the name of Smart Care Solutions, together with any interest earned thereon. 1. The purpose of the orders sought was to preserve the property pending the making of a forfeiture order under s 49 of the Act. 2. On 15 September 2017, the Court made orders which appear at the close of this judgment and gave short reasons. It was indicated that full reasons would be given in due course. These are those reasons. Notice 1. Sections 26(2) and 61(1) of the Act require the responsible authority to give written notice of an application for a restraining order and an application for a forfeiture order covering property to any person the authority reasonably believes may have an interest in the property. 2. A letter from the Australian Federal Police ("AFP") giving notice of the Commissioner's application for a restraining order and a forfeiture order, a copy of the summons and a copy of the sworn affidavit of Mr Edwards filed 10 August 2017, together with exhibits, was personally served on Ms Zahraa Saadi Majeed Lami, IGrow Family Day Care Pty Ltd ("IGrow") and Smart Care Solutions on 18 August 2017; each of whom the Commissioner reasonably believed may have an "interest" in the property (as defined in s 338 of the Act). 3. A copy of the sworn affidavit of Adrian Linus Edwards filed 25 August 2017 was also personally served on Ms Lami, IGrow and Smart Care Solutions on 31 August 2017. 4. Accordingly, the requisite notice was given in accordance with the Act. The Statutory Scheme 1. The grounds for making a restraining order are set out in s 19(1)(c)-(f) of the Act. 2. Section 19(1) provides that a Court with a "proceeds jurisdiction" must order that property must not be disposed of or otherwise dealt with by any person except in the manner and circumstances specified in the order if: 1. a "proceeds of crime authority" applies for the order (see s 19(1)(c)); 2. there are reasonable grounds to suspect that the property is the proceeds of an indictable offence' or an instrument of a "serious offence" (see s 19(1)(d)); 3. any affidavit requirements have been met (see s 19(1)(e)); and 4. the court is satisfied that the authorised officer who made the affidavit holds the suspicions stated in the affidavit on reasonable grounds (see s 19(1)(f)). 1. In the context of the Act, it has been held that the requirement of "reasonable grounds to suspect" is something less than a prima facie case and that the requirement may be satisfied even where the evidence is less than compelling (see Director of Public Prosecutions v Chan (2004) 150 A Crim R 163; [2004] ACTSC 101 at [13]-[15]). 2. Section 19(3) provides that the Court may refuse to make a restraining order in relation to an indictable offence that is not a serious offence if the court is satisfied that it is not in the public interest to make the order (that provision does not apply in this instance because the offences identified, as will be discussed, are serious offences under the Act). 3. Section 19(4) provides that the restraining order need not be based on the commission of a particular offence. 4. Section 19(5) provides that the Court must make a restraining order even if there is no risk of the property being disposed of or otherwise dealt with. 5. "Proceeds jurisdiction" is defined in s 335(2) of the Act, as the conduct constituting the offences occurred in New South Wales. This is a Court with proceeds jurisdiction. 6. "Proceeds of crime authority" is defined in s 338. The Commissioner of the Australian Federal Police is a proceeds of crime authority. 7. "Indictable offence" is defined in s 338 of the Act, as "an offence against a law of the Commonwealth, or a non-governing Territory, that may be dealt with as an indictable offence". 8. "Serious offence" is defined in s 338 of the Act to mean, inter alia: (a) an indictable offence punishable by imprisonment for 3 or more years, involving: … (ii) unlawful conduct constituted by or relating to a breach of section 81 of the Proceeds of Crime Act 1987 or Part 10.2 of the Criminal Code (money‑laundering); or (iii) unlawful conduct by a person that causes, or is intended to cause, a benefit to the value of at least $10,000 for that person or another person; or (iv) unlawful conduct by a person that causes, or is intended to cause, a loss to the Commonwealth or another person of at least $10,000; ... The Suspected Offence 1. On 4 August 2017, Ms Lami was charged with two counts of obtaining a financial advantage by deception pursuant to s 134(2) of the Criminal Code Act 1995 (Cth) ("the Criminal Code") and one count of intentionally dealing in proceeds of crime, being money in excess of $1,000,000 pursuant to s 400.3(1) of the Criminal Code. 2. An offence against s 134.2(1) of the Criminal Code is an indictable offence against the law of the Commonwealth punishable by a maximum penalty of 10 years imprisonment and is a serious offence pursuant to s 338 of the Act. 3. An offence against s 400.3(1) of the Criminal Code is an indictable offence against the law of the Commonwealth punishable by a maximum penalty of 25 years imprisonment and is a serious offence pursuant to s 338 of the Act. 4. Property which is "proceeds" of an offence is defined in s 329(1) of the Act to mean property which is wholly or partly derived or realised, whether directly or indirectly, from the commission of the offence. 5. Property which is an instrument of an offence is defined in s 329(2) of the Act to mean property which is used or intended to be used in, or in connection with, the commission of an offence. 6. Pursuant to s 329(3) of the Act, property can be proceeds of an offence or an instrument of an offence even if no person has been convicted of the offence. 7. The question of whether the property sought to be restrained is actually the proceeds of an offence or the instrument of an offence is not decisive on this application, provided it is reasonably suspected of being either type. That issue may, however, become relevant in terms of the potential exercise of discretion by the Court in later confiscation proceedings (see s 49(4) of the Act). Property Suspected of Being Proceeds or an Instrument 1. Section 19(1)(e) requires that the application be supported by an affidavit of an "authorised officer" stating that the authorised officer suspects that: 1. in any case, the property is "proceeds" of the offence (see s 19(1)(e)(i)); or 2. if the offence to which the order relates is a serious offence, the property is an instrument' of the offence (see 19(1)(e)(ii)); and 3. the affidavit must include the grounds on which the authorised officer holds those suspicions. 1. "Authorised officer" is defined in s 338. Special Member Adrian Edwards who gives evidence by affidavit is an AFP member authorised by the Commissioner. 2. The Court must be satisfied that there are reasonable grounds to suspect that the property was the proceeds or an instrument of an offence (see s 19(1)(d)). It was submitted that Special Member Edwards holds the required suspicion and that he had deposed to a detailed set of circumstances which give rise to this suspicion. I accept that submission. 3. The grounds upon which Special Member Edward's suspected that the property was the proceeds or an instrument of the offences, with which Ms Lami has been charged, were set out in his affidavits. 4. That evidence revealed the following facts upon which Special Member Edward's suspicion was based: 1. In July 2017, the Child Care Fraud Investigation Team ("CCFIT") of the Commonwealth Department of Education and Training ("DET") received a series of complaints from the parents of children regarding IGrow, a registered Family Day Care Service ("FDC Service"). The complaints alleged that IGrow had fraudulently claimed care of their children and had lodged false claims for Child Care Benefit / Child Care Rebate payments (hereinafter referred to as "CCB/CCR payments"); 2. A subsequent DET investigation identified 11 suspicious payments made to IGrow's nominated CBA account [number omitted] ("IGrow's CBA account") by DET between 5 July 2017 and 19 July 2017, amounting to $5,398,886.79, as a result of claims made by IGrow; 3. DET payment analysis revealed IGrow received the CCB/CCR funding from the Commonwealth over a period from 2013 to 2017 in various amounts particularised in the evidence; 4. During the two week period between 5 July 2017 and 19 July 2017, IGrow claimed more money than in the past four financial years combined; 5. On 19 July 2017, the DET suspended further payments to IGrow pending compliance action; 6. The July 2017 claims by IGrow and related DET payments were determined illegitimate by the DET for the following reasons: 1. 1,775 unique child enrolments were created at IGrow in July 2017 which were considered suspicious because of the volume of educator/parent contractual agreements required and the inconsistency with a service of the size of IGrow (which had limited personnel to carry out due diligence in accordance with relevant obligations) 2. 1,775 enrolments were backdated to 13 March 2017, meaning that children had been in the care of IGrow for a minimum period of four months without enrolment details being provided in breach of service obligations; and 3. 143,494 of 235,648 total attendances for sessions of care submitted by IGrow had no educator details provided. 1. Australian Securities and Investments Commission ("ASIC") records show that Ms Lami was the sole director of IGrow; 2. CBA records showed that Ms Lami was the sole signatory to IGrow's CBA account; 3. On 3 August 2017, Ms Lami participated in a record of interview ("ROI"), under caution, with the AFP. During the ROI, Ms Lami provided information which included admissions as to the circumstances of her involvement in the childcare operation. These were particularised in the evidence; 4. AFP financial inquiries confirmed the affirmative financial transactions through IGrow's CBA account. For example, the evidence revealed that between 11 July 2017 and 19 July 2017, five funds transfers totalling $3,886,638.00 were made from IGrow's CBA account to a CBA account held in the name Smart Care Solutions; 5. ASIC records show that Ms Lami is the sole director and shareholder of Smart Care Solutions; 6. CBA records show that Ms Lami is the sole signatory to relevant Smart Care Solutions CBA accounts; 7. Between 19 and 20 July 2017, 22 cheques were drawn against the two Smart Care Solutions CBA accounts; 8. On 21 July 2017, the CBA placed a "stop" on certain Smart Care Solutions CBA accounts on the basis of the alleged fraud identified by the AFP. Reasonable Suspicion 1. Section 19(1)(f) requires that the Court must be satisfied that the authorised officer holds the suspicions stated in the affidavit on reasonable grounds. On the evidence before the Court, I am satisfied that the Authorised Officer holds the suspicions stated in the affidavit on reasonable grounds and that there are reasonable grounds to suspect that the property sought to be restrained was the proceeds of the offence (see s 19(2)(a)) or an instrument of the offence (see s 19(2)(b)). Undertaking 1. Section 21 of the Act provides that the Court may refuse to make a restraining order if the Commonwealth refuses or fails to give the Court an appropriate undertaking, with respect to damages and/or costs, and that the responsible authority may give such an undertaking on behalf of the Commonwealth. "Responsible authority" is defined by s 338 of the Act to mean the proceeds of crime authority that made the application. Mr Jebb, legal representative for the Commissioner, was authorised to and did give an undertaking on behalf of the Commissioner being the responsible authority making this application. Custody and Control 1. Section 38 of the Act provides that the Court may order the Official Trustee to take custody and control of property, or specified property, covered by a restraining order if the Court is satisfied that this is required. An order is sought by para 2 of the summons that the Official Trustee take custody and control of the funds from the bank accounts, specified in "Schedule A" to the summons. The Applicant submitted that these orders are required to safeguard against any inadvertent access or dissipation of the funds contained within the bank accounts through administrative error, thereby ensuring that those funds are preserved pending the resolution of these proceedings. I accept that submission. Ancillary Orders 1. Section 39(1)(ca) of the Act provides that a court that makes a restraining order may make an order directing the suspect in relation to the restraining order to give a sworn statement to a specified person within a specified period, setting out all of his or her interests in property, and his or her liabilities. The Commissioner's application seeks an order that Ms Lami provide a sworn statement to the Commissioner setting out her interests in property and liabilities. The purpose of the order sought is to assist the AFP with the ongoing investigation and tracing of the proceeds of the offences. It is appropriate that order be granted in the circumstances of this matter. Application for Forfeiture Order 1. The order sought in the prayer for relief in para 4 of the summons, namely, an order pursuant to s 49 of the Act, that the property specified in Schedule A to the summons be forfeited to the Commonwealth was not pressed at the hearing of this matter. Cessation of Restraining Order 1. Pursuant to s 45(2) of the Act a restraining order will cease to be in force if, within 28 days after the order is made, the suspect has not been convicted or charged with at least one of the offences to which the restraining order relates and there was no application for a confiscation order. The aforementioned application under s 49 is an application for a confiscation order. Conclusion 1. In all of the circumstances, I consider that the Commissioner has satisfied the statutory requirements for the making of the orders sought in the summons, noting that the forfeiture orders were not pressed. Orders 1. Upon the basis that the plaintiff provided, on behalf of the Commonwealth, the usual undertaking as to costs and damages, the Court confirms the orders and direction made on 15 September 2017 (which were entered forthwith) as follows: Restraining orders 1. Pursuant to s 19 of the Act, the property specified in Schedule A must not be disposed of or otherwise dealt with by any person except in the manner and circumstances specified in this order. Custody and control orders 1. Pursuant to s 38 of the Act, the Official Trustee in Bankruptcy is to take custody and control of the property specified in Schedule A. Ancillary orders 1. Pursuant to s 39(1) of the Act, Zahraa Saadi Majeed Lami born 4 April 1984 is directed to provide to the Commissioner of the Australian Federal Police or his delegate within twenty-eight (28) days of the service of these orders, a sworn statement, setting out: 1. all of her interests in property valued at AUD5.000 or more; 2. all of her liabilities valued at AUD5,000 or more. Other Orders 1. These proceedings are adjourned for directions before the Common Law Registrar. 2. Liberty to restore on two day's written notice. SCHEDULE A Item 1: All funds standing to the credit of Commonwealth Bank of Australia Limited account [number omitted] held in the name of Smart Care Solutions Pty Ltd, together with any interest earned thereon. Item 2: All funds standing to the credit of Commonwealth Bank of Australia Limited account [number omitted] held in the name Smart Care Solutions Pty Ltd together with any interest earned thereon. ********** 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: 04 October 2017