From time-to-time foreign governments obtain proceeds of crime forfeiture orders over property in Australia.
I was involved in one of the first such cases, when I worked at the Australia Federal Police as a senior lawyer. See more regarding the Goldfinger case here. I have since been involved in a couple of other matters.
The mutual assistance in criminal matters process
The broad process is:
- The foreign government obtains a forfeiture order from one of its own courts;
- The foreign government requests assistance from the Australian government; and
- The Commissioner of the Australian Federal Police (AFP) then applies under the Mutual Assistance in Criminal Matters Act 1987 (Cth)(MACMA) to register that order in an Australian Court so that the foreign order takes effect as if it were an Australian order.
The Mutual Assistance or MA process (sometimes also called MLAT, for Mutual Legal Assistance, process) is often used by law enforcement and prosecution authorities in relation to criminal prosecutions. Australia like many countries allows use of the process for proceeds of crime matters as well.
Contrary to the interests of justice
An important feature of the MA process for registering a foreign forfeiture order is that the Australian court must register the order if certain administrative criteria are met, but even if those criteria are met, must not register the order if it would be “contrary to the interests of justice to do so”. See s34A(1) of the MAMCA.
A recent decision of the NSW Supreme Court raises questions about the approach to be taken to registration under the MACMA. The decision was published by Adamson J in the New South Wales Supreme Court. ((The court was exercising federal jurisdiction under the MACMA)) The decision can be found here: Commissioner of the Australian Federal Police v Ortmann [2021] NSWSC 451
The facts in Ortmann
Mr Ortmann assisted a man by the name of Kim Dotcom ((Mr Dotcom has himself has become well known in New Zealand and the United States in the context of extradition and MA jurisprudence)) to set up a file sharing site called megaupload. Mr Ortmann had a 25% share in Megaupload.
The US federal government made serious criminal allegations against Mr Dotcom and Mr Ortman. An indictment filed in the United States alleged conspiracy to commit racketeering, conspiracy to commit copyright infringement, conspiracy to commit money laundering, criminal copyright infringement and aiding and abetting criminal copyright infringement. The relief sought in the indictment included criminal forfeiture of assets around the world, including Mr Ortmann’s bank accounts at HSBC Australia.
Mr Ortmann denied all charges and at the time of the decision in Australia was yet to be tried. In accordance with US and Australian law he was presumed innocent.
Mr Ortmann appears to be a German national. ((See https://en.wikipedia.org/wiki/Megaupload_legal_case)) Not an American. It does not appear that Mr Ortmann is alleged to have been physically in the United States when he committed the offences the subject of the US indictment.
Extradition
After Ortmann’s case was decided in Australia, a deal was done that meant that Mr Ortmann will not face extradition to the United States and instead will face charges in New Zealand.
Mr Ortmann had at all times remained in New Zealand where the US authorities sought to have him extradited from. The question of whether he should be surrendered by New Zealand and extradited to the United States was a question to be resolved under New Zealand law. Prior to the Australian decision, it had been to the New Zealand Supreme Court where Mr Ortmann had had at least some success. See Ortmann v United States of America [2020] NZSC 120
It must be appreciated that Mr Ortmann’s location in New Zealand was known to the US authorities at all times. The New Zealand courts were (at the time of the Australian decision) simply working through the process of whether he should be extradited. He had not disappeared. He was not in hiding.
United States federal law appeared to treat the fact that Mr Ortmann opposed his extradition (i.e. exercising his lawful rights under New Zealand law) as a basis to brand him a “fugitive”. And that label in turn allowed the US authorities to seek civil forfeiture of his assets. As a fugitive, Mr Ortmann was “disentitled” under US law from resisting civil forfeiture. So that is precisely what the US government sought to apply for.
On 22 January 2018 the United States District Court for the Eastern District of Virginia made an order, upon the application of the US Federal Government, forfeiting Mr Ortmann’s three bank accounts with HSBC Australia. The order made in the United States was made in Mr Ortmann’s absence (he being subject to the fugitive disentitlement doctrine). ((See generally at [2] and [31].))
The US government then made a request of Australia to enforce the January 2018 order in Australia. A delegate of the Australian Attorney-General authorised the AFP to make an application under the MACMA to the Supreme Court to register the US order.
The application was duly made by the AFP and came on for hearing before Adamson J. Ultimately, Mr Ortmann was allowed to participate in the process. He was represented by counsel at the hearing before Her Honour in Sydney.
Mr Ortmann’s arguments
Mr Ortmann’s counsel accepted that the formal requirements for registration of the US forfeiture order were met. Mr Ortmann argued:
- That it was an abuse of process for the US to seek civil forfeiture in circumstances where they already sought criminal forfeiture. With respect I am not surprised this argument was dismissed by Adamson J. ((at [38], [46] – [54)) It is common the world over for proceeds of crime orders to be available on both a civil and/or criminal basis. It is equally common for the dual pathways to be pursued concurrently.
- That the order was not truly a forfeiture order but a compensation order. Again with respect I am not surprised that Adamson J rejected this argument. ((At [40] and [57])) There is nothing unusual about forfeited property being used to compensate victims.
The final argument advanced by Mr Ortmann was also dismissed. In my opinion wrongly. Mr Ortmann argued that “fugitive disentitlement was contrary to the requirements of natural justice or procedural fairness recognised by Australian law”. ((At [39])) I agree entirely with his lawyer’s submission on this question.
LFDB v SM (2017) 256 FCR 218
Her Honour’s analysis of this argument is limited to 5 paragraphs at [41] to [45] that analyse a decision of the Full Federal Court in LFDB v SM (2017) 256 FCR 218; [2017] FCAFC 178 (LFDB).
Three points must be made about LFDB. First it was not a proceeds of crime case. Second it was not a Mutual Assistance case. Third it was factually very different from Mr Ortmann’s case. In my respectful view LFDB was of no great relevance to the argument advanced by Mr Ortmann.
Facts in LFDB v SM
LFDB was a private international law case. LFDB and SM had lived together in a de facto relationship. The relationship fell apart and they engaged in a protracted series of what can loosely be termed family law litigation in New Zealand. As the Australian Full Federal Court observed at [12]:
This litigious saga had costs consequences for LFDB and after a failure to pay adverse costs orders dating back to January 2010, described by Priestley J as “longstanding and conspicuous”, an order was made in September 2012 providing that unless the costs ordered were paid by LFDB, then he was “to be barred from taking any further part in the proceedings …”.
Further similar orders were made later. LFDB ultimately failed to pay the legal costs orders that he was liable for, and was debarred from further participating in the family law litigation in New Zealand. SD duly obtained a final judgment against him in New Zealand and applied to have it registered in Australia against assets of LFDB’s. The Full Federal Court found that the primary judge in the Federal Court was correct to register the New Zealand judgment in Australia.
What is immediately apparent is that LFDB was involved in and in default of orders made in the New Zealand proceedings. His default was “longstanding and conspicuous”. In contrast Mr Ortmann is not in default of anything at all. He appears to be a German citizen. He is lawfully in New Zealand, a sovereign state. Another sovereign state (the US) seeks to remove him from New Zealand. Mr Ortmann is exercising his lawful right to test that extradition. And as at February 2021 he had tasted some success in New Zealand’s highest court.
Adamson J’s ultimate reasoning (delivered on 30 April 2021, after a hearing on 21 April 2021) is contained in a single paragraph:
… I regard the present case as relevantly indistinguishable from LFDB. In both cases, the relevant party (LFDB or the defendant in the present case) was not entitled to be heard by the relevant court because of a circumstance of his own making. In LFDB, the first appellant was not entitled to be heard because he had failed to comply with an earlier costs order and an order had been made that he would not be entitled to be heard unless he complied with that order. In the present case, the defendant was not entitled to make a claim in the Foreign Court to resist the Order because he had elected to remain in New Zealand and oppose his extradition, leading to a declaration that he was a fugitive from justice. In each case, the non-compliance with the costs order and the opposition to extradition can be regarded as the voluntary act of the person who has thereby foregone the right to be heard. For the reasons given by the Full Federal Court in LFDB, this is not sufficient to amount to a circumstance that would make the registration of the Order contrary to the interests of justice.
At [55]
To say that the US forfeiture order came about because of a “circumstance of his own making” is to say that Mr Ortmann was the author of his own misfortune. At its heart it amounts to a conclusion that Mr Ortmann should have voluntarily surrendered himself when the United States sought his extradition from New Zealand.
It will be recalled that Mr Ortmann is a German citizen, in New Zealand, who is not alleged to have committed an offence whilst IN the United States. It is not apparent from Adamson J’s reasons that Mr Ortmann had any connection to the United States. It is certainly not apparent that Mr Ortmann could properly be characterised as someone who is ‘fleeing’ from the United States. In that context one can understand his unwillingness to surrender himself to extradition to the United States.
As Mr Ortmann’s lawyers argued, fugitive disentitlement is contrary to the requirements of natural justice and procedural fairness recognised by Australian law. For that reason, her Honour:
- was in my view wrong to conclude that LFDB was relevantly indistinguishable; and rather
- should have found that registration of the US order was “contrary to the interests of justice” and refused the application for registration on that basis under s34A(1) of the MACMA.
Commissioner of the AFP v Peng and where to from here?
Ortmann has since been considered in the case of Commissioner of the Australian Federal Police v Peng by a District Court Judge in Queensland.
Peng concerned the registration of an order that had been made by a Chinese Court. The order of the Chinese Court had been made following an application by the prosecutor, notice of which was not given to the property owner. For that reason the court distinguished Ortmann and refused to register the Chinese Court order.
Peng is an example of the difficulties that arise between drastically different legal systems. Peng does not analyse the correctness of Ortmann.
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