On 11 September 2018 the NSW Court of Appeal published its decision in Lordianto v Commissioner of the AFP [2018] NSWCA 199. That decision was adverse to victims of cuckoo smurfing, in litigation against the Commissioner of the Australian Federal Police under the Proceeds of Crime Act 2002 (Cth)(POCA). Click for my summary of Lordianto v Commissioner of the AFP.
On 30 October 2018, the WA Court of Appeal published its decision in the AFP’s appeal against the win I had on behalf of Mr Kalimuthu and his wife before Justice Allanson. I have also written about that previously.
Today’s decision in Commissioner of the AFP v Kalimuthu & Another [No 2] [2018] WASCA 192 is also adverse to victims of cuckoo smurfing, but not to the same degree as Lordianto.
The WA decision in Kalimuthu also turned on the construction of the POCA. There were no adverse factual/credibility findings made against Mr Kalimuthu either by Justice Allanson at first instance nor on the appeal. Indeed the appeal judges found that Mrs Kalimuthu was in an even stronger (factual) position than her husband. In the final analysis none of that mattered.
The WA Court was unable to agree on the proper construction of section 330(4)(a) of the POCA. Although their reasons differed, all three judges agreed that the Kalimuthus failed in their application to exclude their bank accounts from the restraining order (that is they failed in satisfying the legislative test to have their money un-frozen).
Justices Murphy & Beech wrote a joint decision in which they held:
- That on their own analysis, the Kalimuthus were third parties: [407]
- They were bound by precedent ((ASC v Marlborough Gold Mines NL (1993) 177 CLR 485)) to follow what the NSW Court said in Lordianto about third party, and thus held that the Kalimuthus were not third parties: [461]
- The Kalimuthus did not give sufficient consideration for the deposits to their Australian bank accounts: [473]. In my respectful opinion this overlooked the fact that there were only 2 possibilities open. Either, the deposits made to the accounts were made by people who had a relationship or connection (either direct or indirect) with the Malaysian money changers engaged by Mr Kalimuthu or the deposits were a random coincidence. It seems to me that given the correlation (both amounts and timing) between the payments made by Mr Kalimuthu to the money changer, and the deposits to the Australian bank accounts, the random coincidence possibility should have been rejected as inherently unlikely.
- Mr Kalimuthu knew that the deposits were under $10,000 and that was enough to prevent him from establishing that a reasonable person with his knowledge would not have held a suspicion that the deposits were of cash tainted by some offence or another: [500] – [502]
- Mrs Kalimuthu did not know that the deposits to her account were under $10,000 and as such Justice Allanson was correct to hold that a reasonable person in her position would not have held a suspicion that the deposits were tainted: [504]
Their Honour’s approach to third party was particularly interesting. Their Honours built upon submissions I made in holding:
“The legislative history and extrinsic material invite attention to the question of whether the evident purposes of the POCA require or sustain a construction of ‘third parties’ which is different, and materially narrower, than the effect of the broadly corresponding sections in the predecessor Proceeds of Crime Act 1987. ((At [433] – for reasons developed from [409] – [432]. I consider those 23 paragraphs some of the more interesting in what is undoubtedly a lengthy judgment.))”
“The denial of protection … [that results from the AFPs preferred approach] is so unlikely to have been intended, as to weigh substantially against construing ‘third party’ in this manner. ((At [442]))”
“[T]here seems to us to be force in the respondents’ contention that the Commissioner’s primary construction has consequences that are so objectively unlikely to have been intended as to weigh substantially against its acceptance. ((At [457]))”
President Buss wrote a separate decision and held:
- That he agreed with the majority in Lordianto – the Kalimuthus were not third parties: [193]
- That on his own analysis, the Kalimuthus did give sufficient consideration: [230]
- That he was nevertheless also bound by the precedent of Lordianto to find, contrary to his own views, that the Kalimuthus had not given sufficient consideration: [234]-[241]
- Substantially to the same effect as Justices Murphy & Beech in relation to suspicion: [500] – [504]
On the question of suspicion, I respectfully consider (contrary to all 3 judges in each of Lordianto and Kalimuthu):
- It must be remembered that these are all cases concerning the rights of innocent people. As Justice Allanson (at first instance) accurately observed the Commissioner does not allege that either [Mr Kalimuthu or Mrs Kalimuthu] committed, or is suspected of, [a structuring] offence or any other offence. ((Commissioner of the AFP v Kalimuthu [No 3] [2017] WASC 108 at [2].)) That finding was not challenged in the appeal.
- A person who knows nothing about Australian banking regulations, a person who is not vaguely aware that different sums of cash may be treated differently by those regulations, could not have a suspicion aroused in them on these facts.
Mr Kalimuthu has 28 days to decide whether to apply to the High Court of Australia for special leave to appeal. Lordianto has already filed such an application. Unlike the WA Court of Appeal, the High Court will not be bound by precedent to follow Lordianto.
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