The High Court has today in a unanimous single judgment ((Of a 5 member bench, comprising French CJ, Hayne, Kiefel, Bell and Keane JJ.)) dismissed an appeal by the Commissioner of the Australian Federal Police (AFP) in relation to civil confiscation under the Proceeds of Crime Act 2002 (Cth). ((Commissioner of the AFP v Zhao & Jin [2015] HCA 5.))

The effect of the decision in Commissioner of the AFP v Zhao & Jin [2015] HCA 5 is that litigation under the Proceeds of Crime Act is likely to be stayed where there is an identity of issues (and in all probability a substantial overlap) between pending criminal charges and offences relied upon by the AFP to ground an application under the Act.

The decision is likely to result in a flood of applications to stay Proceeds of Crime Act applications until after the determination of related criminal charges.

The Judgment

It seems to me the decision substantially turns upon the construction of two sections of the Proceeds of Crime Act 2002, sections 319 and 266A.

Section 319 provides:

319 Stay of proceedings
The fact that criminal proceedings have been instituted or have commenced (whether or not under this Act) is not a ground on which a court may stay proceedings under this Act that are not criminal proceedings.

Section 319 has previously been described as statutory abrogation of the rule in Smith v Selwyn [1914] 3 KB 98. ((In the context of the Proceeds of Crime Act, see AFP v Ruzehaji (No 3) [2014] SADC 62 at [25]. More generally see Lee #1 at [338] to [340] per Keane and Gageler JJ.)) That is to say a reversal of the rule that civil proceedings should invariably be stayed pending a criminal trial concerning the same subject matter.

However in Zhao the Court found ((At [35].)) that s 319 was “strictly unnecessary,” in effect saying that the law has moved on since Smith v Selwyn and that in any event:

“Courts will not grant a stay of civil proceedings merely because related charges have been brought against a person and criminal proceedings are pending. More is required. To warrant a stay of the forfeiture proceedings, it must be apparent that the person whose property is in question is at risk of prejudice in the conduct of his or her defence in the criminal trial.” ((At [35].))

Section 266A, the full terms of which are available here, enables the AFP to disclose information, including but not limited to:

  • information contained in a sworn statement provided under s 39(1); and
  • information obtained in the course of a compulsory examination conducted under s 180,

to various bodies, including criminal investigators and criminal prosecutors.

In what can only be a reference to s 266A, the Court noted with apparent approval ((At [17].)) the conclusion of the Court of Appeal that:

In the present matter … if the proceedings were not stayed, the prosecution would be informed, in advance of the second respondent’s trial, of his defence because he could not realistically defend the forfeiture proceedings without telegraphing his likely defence. (emphasis added, citations omitted)

The Court also observed that s 266A “may be one factor in favour of the grant of a stay.” ((At [33].)) And later ((At [46].)) noted:

[Section] 266A would not render the provision of … evidence [obtained by the AFP under the Proceeds of Crime Act] to the [criminal] prosecution unlawful. Even if [that evidence] could not be used as evidence against [the accused], its possession by the prosecution might affect his defence. The Court of Appeal’s view, that protective orders would not suffice to remove the risk of prejudice … is clearly correct.

The concluding remarks of the judgment ((At [49] – [50].)) are worthy of reproduction:

It may be accepted that criminal proceedings are not an impediment to civil proceedings under the POC Act, but it does not follow that it is intended that forfeiture proceedings brought under the POC Act will continue where to do so would put a respondent at risk of prejudice in his or her criminal trial.

The interests of justice are not served by requiring the second respondent to defend the forfeiture proceedings or pursue the exclusion proceedings before his criminal proceedings are finalised, especially since the Commissioner will suffer no relevant prejudice from a delay in the continuation of the forfeiture proceedings.

The facts in AFP v Zhao & Jin

The following facts are taken from the Court of Appeal’s (([2014] VSCA 137 at [1] to [8]. Nettle, Tate and Beach JJA joined in a single decision in that Court. Of note Justice Nettle has since been elevated to the High Court.)) decision:

  • On 2 July 2013 Jin was charged with dealing with the proceeds of crime. The Crown alleged that Jin is a brothel owner and broker of sex workers who aided and abetted the commission of offences by dealing with cash taken from illegal workers. Jin denies the allegations.
  • Zhao is Jin’s wife but she has not been charged.
  • Jin and Zhao live together at a property in Donvale, of which Zhao is the registered proprietor.
  • There is also an apartment at Southbank Melbourne registered to Jin.
  • Jin is also director of Jaks Investments Australia Pty Ltd (‘Jaks’) and Jaks is the registered proprietor of a 2012 Jeep Grand Cherokee motor car.
  • Also on 2 July 2013, a judge of the County Court made orders on the application of the Commissioner under the Proceeds of Crime Act to restrain the disposition of the Donvale property, the Southbank property, the Jeep and some cash and other personal items. Pursuant to those orders, all of Jin’s and Zhao’s substantial assets were seized and restrained.
  • On 24 July 2013, the Commissioner filed an application for forfeiture of the restrained property pursuant to s 49 of the Proceeds of Crime Act. That is an application for forfeiture on a civil, or non-conviction, basis.
  • On 24 September 2013, Jin and Zhao each filed applications for orders for the exclusion of the real property from the restraining orders under s 31 of the POC Act; an order for exclusion from forfeiture under s 74 of the POC Act; and a compensation order under s 78 of the POC Act.
  • On 22 November 2013, Jin and Zhao also filed applications pursuant to s 49 of the County Court Act 1958 for a stay of the forfeiture proceedings and exclusion and compensation applications until after the hearing and determination of the charges pending against Jin.
  • The stay application was supported by an affidavit in which Jin deposed “I am concerned that if I have to make a detailed affidavit or be cross examined regarding the purchase of the Restrained Property and source of any relevant funds that there is a real risk that any such evidence will prejudice my criminal case.”
  • Zhao did not offer any evidence as to how she would be prejudiced if the forfeiture proceedings were not stayed.
  • At first instance the stay application was rejected. His Honour found that there was no evidence as to how the applicants giving evidence in the forfeiture proceedings might give rise to a real risk of prejudice in the criminal proceedings.
  • The judge at first instance also held that, taking into account ss 47, 49, 266A and 319 of the POC Act, he was not persuaded that failure to stay the proceedings would interfere with the administration of criminal justice. To the contrary, his Honour said, he considered that a stay would be more likely to frustrate the clear intention of the POC Act that forfeiture and exclusion proceedings may progress while criminal proceedings are extant. His Honour referred in particular to s 319 and Lee #1.
  • The Court of Appeal reversed his Honour’s decision and ordered stays in the Proceeds of Crime Act applications against both Zhao and Jin.

They are recited in similar fashion at the commencement of the High Court judgment.