Commissioner of the Australian Federal Police v Kogan [2019] NSWSC 1866

Supreme Court New South Wales

Medium Neutral Citation: Commissioner of the Australian Federal Police v Kogan [2019] NSWSC 1866 Hearing dates: 17 December 2019 Date of orders: 17 December 2019 Decision date: 17 December 2019 Jurisdiction: Common Law Before: Beech-Jones J Decision: Restraining orders made Catchwords: No question of principle Legislation Cited: Criminal Code Act 1995 (Cth) Proceeds of Crime Act 2002 (Cth) Category: Procedural and other rulings Parties: Commissioner of the Australian Federal Police (Plaintiff) Vladislav Kogan (First Defendant) Sarit Kogan (Second Defendant) Dealtex Capital Pty Ltd (Third Defendant) Digitec Trading Pty Ltd (Fourth Defendant) Representation: Counsel: W Staples (Plaintiff) Ex parte

Solicitors: Australian Federal Police (Plaintiff) Ex parte File Number(s): 2019/397482 Publication restriction: Not to be published until after the search warrants referred to in [4] have been executed.

EX TEMPORE Judgment 1. This is an application for restraining orders under ss 18 and 19 of the Proceeds of Crime Act 2002 (Cth) ("the Act") in respect of four defendants. 2. The application is made ex parte for reasons that will become obvious. I have already ordered that the Court be closed and the matter be heard in the absence of the public. 3. Before I address the particular orders sought, it is appropriate to describe the effect of the affidavit material. 4. Read on the application is the affidavit of Alexander Tutt affirmed 17 December 2019. Mr Tutt is a member of the Australian Federal Police who is currently performing duties in the Criminal Assets Confiscation Task Force in the Canberra office. In his affidavit, Mr Tutt states that it is intended to execute a search warrant tomorrow at a property in Vaucluse which is registered in the name of one of the defendants and occupied by two others. The necessity to bring this application ex parte is brought about by a concern not to subvert the effect of that search warrant and a concern that, given the nature of the property the subject of the application, that it may either be dissipated or encumbered if advance notice of these proceedings was provided. 5. There are four defendants. The first two defendants are Mr Vladislav Kogan and his wife, Sarit Kogan. The third defendant is a company effectively owned and controlled by them, Dealtex Capital Pty Ltd ("Dealtex"). The fourth defendant is another company with similar characteristics, Digitec Trading Pty Ltd ("Digitec"). 6. Mr Tutt's affidavit, and the five folders of documents that accompany it, are directed to establishing that in broad terms Mr and Mrs Kogan appear to be involved in money laundering through their accounts and by the use of the two companies. The broad effect of the affidavit establishes that despite Mr and Mrs Kogan, as well as the companies, disclosing in their tax returns very modest amounts of income, they have in effect been dealing with very substantial amounts which have been received from overseas and then sent back again. They have also made substantial cash deposits almost invariably below the relevant amount required to be reported. 7. I have read Mr Tutt's affidavit in detail. In paragraph 155, he sets out a summary of what he contends the balance of the affidavit demonstrates. On my reading, I consider it to be a fair summary. In particular, Mr Tutt states that Mr and Mrs Kogan are both Australian residents and are directors and shareholders of a number of international Australian-based companies, that they do not appear to be connected to any legitimate business activity in Australia and that they have received family tax benefits over a number of years, suggestive of them having a low income. The latter statement is consistent with the modest amounts of income they have declared in their tax returns. Despite this, international funds transfers exceeding $8 million were made into various bank accounts controlled by them between 2006 and 2019 and the funds were transferred between various accounts that they owned or controlled. Those funds have been traced to the purchase of the property in Vaucluse mentioned earlier as well as two luxury cars and cryptocurrency. 8. Mr Tutt contends, and I accept, that the amount of funds being transferred through the accounts and used for purchases appears to be grossly disproportionate to the declared income of all the persons and entities involved. Mr Tutt alleges that Mrs Kogan may have committed an offence under s 400.5(3) of the Criminal Code Act 1995 (Cth) (the "Criminal Code") in relation to a false document supplied concerning the financing of a Jaguar motor vehicle, that she and Mr Kogan otherwise appear to have failed to properly disclose income to the Australian Taxation Office, and that they appear to have engaged in structuring cash deposits to avoid the relevant threshold requirements for reporting. He contends that overall the manner in which they have dealt with transfers of money is indicative of money laundering, ie, dealing with money that could reasonably be suspected to be the proceeds of crime. 9. The application for a restraining order is made under both ss 18 and 19. There does not appear to be any operative difference between orders made under both sections, although it was explained that the reason for making orders by reference to both sections is that it may trigger different pathways to forfeiture in other parts of the Act. 10. Section 18(1) of the Act requires this Court to order that property not be disposed of, or otherwise dealt with, by the relevant person if four conditions are met. This first is that a proceeds of crime authority applies for the order. That condition is clearly met. The second is that there are reasonable grounds to suspect that a person has committed a serious offence. Having read Mr Tutt's affidavit, I am satisfied that there are reasonable grounds to suspect the commission of a serious offence at least in relation to money laundering and tax fraud. The third is that the requirements in s 18(3) have been met. Those requirements include that the affidavit state that the authorised officer has the relevant suspicion of the commission of an offence and that the officer suspects that the property the subject of the application is subject to the effective control of the suspect, is the proceeds of an offence or is the instrument of an offence. Mr Tutt's affidavit does that in respect of all of the property the subject of the application. The fourth is that the Court is satisfied that the authorised officer who made the affidavit holds the suspicion or suspicions stated in the affidavit on reasonable grounds. I will come to this shortly, but I am satisfied that there are reasonable grounds for his suspicions. 11. Section 18(2) then deals with property that a restraining order may cover. This includes all the specified property of the suspect, as well as "specified property of another person that is: (i) in any case proceeds of the offence; or (ii) if the offence to which the order relates is a serious offence - an instrument of the offence". 12. The property the subject of this application comprises certain real property located in Vaucluse which is registered in the name of Digitech but in respect of which there is material suggesting it is under the effective control of Vladislav Kogan, a number of bank accounts in the name of Vladislav Kogan, a number of bank accounts in the name of Dealtex, a number of bank accounts in the name of Sarit Kogan, a number of bank accounts in the name of Digitech, two motor vehicles registered in the name of Sarit Kogan, and cryptocurrency held in the names of Sarit Kogan and Digitech, or purchased on their behalf. 13. In respect of all of that property, Mr Tutt recounts his belief, which has a reasonable basis, that it is either the specified property of the suspect, proceeds of the offence belonging to another person, or an instrument of the offence belonging to another person, or in some cases meets more than one of those criteria. It follows that I am satisfied that the requirements for the making of an order in s 18(1) are established. 14. Section 19 obliges the Court to make a restraining order if four conditions are met; the first of which has its counterpart with s 18, namely, that a proceeds of crime authority applies for the order. That condition has been met. The second is that there are reasonable grounds to suspect that the property is either the proceeds of a terrorism offence or any other indictable offence, a foreign indictable offence or an indictable offence of Commonwealth concern, or an instrument of a serious offence. The third is that the application is supported by an affidavit of an authorised officer stating a suspicion that the properties are either the proceeds of an offence or the instrument of an offence and which includes the grounds on which the authorised officer holds the suspicion. The fourth condition is satisfied if the authorised officer who made the affidavit holds the suspicion stated in the affidavit on reasonable grounds. 15. For present purposes, the relevant difference between s 18 and s 19 as applied to this matter is that s 19 does not extend to property that is merely the specified property of the suspect. Nevertheless based on Mr Tutt's affidavit, all the relevant property is capable of falling within s 19. Thus, the orders must be made. Otherwise, I note that the restraining orders sought also extend to all the property of Vladislav Kogan and Sarit Kogan (by operation of s 18(2)(a)). 16. For these reasons I will accordingly make orders 1 to 30 in the short minutes. Order 31 is a carve‑out that allows a finance company to deal with one of the luxury cars. Orders 32 to 39 are ancillary orders under s 38 of the Act enabling the Official Trustee to take custody and control of the property. Proposed orders 40 to 42 are ancillary orders under s 39(1) of the Act. They are directed to the provision of information to the plaintiff about the defendants' interests in property. 17. Order 43 is an order directed to requiring Vladislav Kogan to provide information about passwords, passcodes and security accounts relating to the storage of cryptocurrency. The power conferred by s 39(1) to make any ancillary orders requires the Court to consider them "appropriate". Section 39(1)(da) states that, without limiting the generality of the orders, such orders can extend to the provision on oath of information "relevant to identifying, locating or quantifying property". An order requiring that Mr Kogan provide information about passcodes and the like relating to cryptocurrency, albeit not on oath, appears to be at least a genus of an order of that kind and is authorised by s 39. The same observations apply in relation to proposed order 44 which is directed to Sarit Kogan. Proposed order 45 is an order enabling the undertaking of things necessary to assist the Official Trustee in taking control of the relevant property. Accordingly I will make that order. 18. Proposed order 46 simply adjourns the proceedings to 14 February 2020. Order 47 allows liberty to restore on three days' written notice. Given the time of year, and the relatively draconian nature of the orders, I will amend that to one days' written notice. Order 48 is that the orders be entered forthwith; that will be given effect to. 19. Accordingly, I will make the orders in the short minutes with the amendment I indicated. 20. I note the undertaking upon the plaintiff provided on behalf of the Commonwealth, to give an undertaking as to costs and damages.