In this case, the first respondent used unrestrained funds to discharge a mortgage over a property that was subject to restraining orders under the Proceeds of Crime Act 2002 (Cth) (“POC Act”). The property was sold while under restraint, and the funds that would otherwise have been expended in discharging the mortgage were instead remitted to the Official Trustee. The first respondent applied to have the restraining orders varied pursuant to s 39 POC Act to allow the Official Trustee to release the funds. After the appellant unsuccessfully opposed the variation on grounds including that s 29 POC Act provided exhaustively for the means by which property could be released from restraint, a stay was granted pending an appeal. Philippides and McMurdo JJA allowed the appeal and set aside the orders (Gotterson JA agreeing in part), holding that the general power to vary a restraint under s 39 POC Act could not be exercised to exclude property from restraint where s 29 POC Act provided a specific and conditional power for that purpose.
Gotterson and Philippides and McMurdo JJA
26 July 2019
The appellant obtained orders pursuant to the Proceeds of Crime Act 2002 (Cth) (“POC Act”) restraining the first and second respondent from dealing with particular property on the basis of a suspicion that the first respondent was engaged in money laundering. . At the time of the orders, the restrained property relevantly included a Gold Coast based property that was under a contract of sale and was subject to two mortgages, the first to a bank and the second to a private lender. .
The restraining orders enabled the sale of the property to continue on the basis that the proceeds were applied only to satisfy the costs and expenses associated with the sale and to discharge the outstanding mortgages, with any remainder remitted to the custody of the Official Trustee. –. However, before the sale was finalised, the first respondent paid out the private mortgage using unrestrained funds. –. Upon completion of the sale, the funds that would originally have been paid in satisfaction of the private mortgage (the “additional funds”) were instead remitted to the Official Trustee. .
The first respondent subsequently applied to have the restraining orders varied pursuant to s 39 POC Act to permit the Official Trustee to remit the additional funds to the first respondent. . The appellant opposed the application on grounds including that s 29 POC Act provided “exhaustively for the circumstances in which property [could] be released from restraint and applied for the benefit of a person suspected of having committed offences”. , . After orders were made varying the restraint and allowing the funds to be paid to the first respondent, a stay was granted pending an appeal. , .
The power to exclude restrained property
Philippides JA held that the primary judge had erred in finding that ss 24 and 29 POC Act were not relevant to the interpretation of s 39 POC Act, and in construing the ambit of s 29. , . Section 39 POC Act was to be construed with regard to the fact that other provisions within that Act expressly provided for constrained avenues by which a person could apply for the exclusion of property from a restraining order. . The primary judge’s construction of the statute had the consequence of allowing a person whose property was restrained to circumvent the pre-conditions and onus imposed in ss 24 and 29 POC Act. .
Her Honour also considered that the primary judge had acted upon a wrong principle in finding that the additional funds were not “proceeds of crime”. . The fact that the additional funds would not have been remitted to the Official Trustee if the private mortgage had been outstanding upon completion of the sale was beside the point, and overlooked that any proceeds of sale used to satisfy the encumbrance would have remained “proceeds of an offence” by virtue of s 330(1)(a) POC Act. –.
McMurdo JA similarly found that the general power to vary an order as conferred by s 39 POC Act was not exercisable where the Court was asked to exclude a specified interest from restraint, because a more specific and conditional power to make such an order was conferred by s 29 POC Act. –. His Honour disagreed with the primary judge’s conclusion that the matter did not involve the exclusion of a specified interest in the terms of s 29(1) POC Act, because all of the funds that had in fact been paid to the Official Trustee were subject to the restraint imposed by the terms of the original orders. –.
Ultimately, what the first respondent had sought was an order of a kind within the terms of s 29(1) POC Act, and as the preconditions to the exercise of that power were not established, there was no power to make the order that the primary judge had made. –.
In the result, Philippides and McMurdo JJA allowed the appeal and set aside the orders of the primary judge (Gotterson JA agreeing insofar as their Honours found that the primary judge had mischaracterised the additional funds, and as to the form of appropriate orders). –, , .