Commissioner of the Australian Federal Police v Hart; Commonwealth of Australia v Yak 3 Investments Pty Ltd; Commonwealth of Australia v Flying Fighters Pty Ltd

• Jurisdiction: Australia Federal only
• Judge: Kiefel CJ,Bell,Gageler,Edelman JJ.,Gordon J.
• Judgment Date: 07 February 2018
• Neutral Citation: [2018] HCA 1
• Court: High Court
• Docket Number: B21/2017, B22/2017 & B23/2017
• Date: 07 February 2018

[2018] HCA 1

HIGH COURT OF AUSTRALIA

Kiefel CJ, Bell, Gageler, Gordon AND Edelman JJ

B21/2017, B22/2017 & B23/2017

Commissioner of the Australian Federal Police

Appellant

and

Steven Irvine Hart & Ors

Respondents

Commonwealth of Australia

Appellant

and

Yak 3 Investments Pty Ltd as Trustee for Yak 3 Discretionary Trust & Ors

Respondents

Commonwealth of Australia & Anor

Appellants

and

Flying Fighters Pty Ltd & Ors

Respondents

Representation

S P Donaghue QC, Solicitor-General of the Commonwealth and G J D del Villar with J Freidgeim for the appellants (instructed by Commissioner of the Australian Federal Police, Criminal Assets Litigation)

B W Walker SC with A J Greinke and G C Dempsey for the respondents (instructed by James Conomos Lawyers)

Proceeds of Crime Act 2002 (Cth), ss 5, 6, 16, 17, 18, 24, 24A, 25, 26(4), 29, 42, 44, 66, 67, 92, 102, 104, 116, 141, 314, 315, 317, 329, 330, 337, 338.

Criminal law — Forfeiture of property — Where restraining orders made in respect of certain property suspected of being under effective control of person suspected of certain offences — Where person convicted of offences — Where property automatically forfeited to Commonwealth under s 92 of Proceeds of Crime Act 2002 (Cth) — Where companies associated with convicted person applied for orders under s 102 of Proceeds of Crime Act for recovery of interests, or amounts equal to value of interests, in forfeited property — Whether forfeited property “not used in, or in connection with, any unlawful activity” within s 102(3)(a) of Proceeds of Crime Act — Whether “use” requires that property be necessary for or have made unique contribution to unlawful activity — Whether degree of use must be proportionate to forfeiture of property — Whether forfeited property “not derived or realised, directly or indirectly, by any person from any unlawful activity” within s 102(3)(a) of Proceeds of Crime Act — Whether property “derived” if wholly or partly derived from unlawful activity — Whether degree of derivation must be substantial — Whether forfeited property “acquired … lawfully” within s 102(3)(b) of Proceeds of Crime Act — Whether applicant must prove each step in process of acquisition lawful — Whether applicant must prove all consideration paid for property lawfully acquired.

Criminal law — Forfeiture of property — Application under s 141 of Proceeds of Crime Act 2002 (Cth) for order that forfeited property be available to satisfy pecuniary penalty order against convicted person — Where court must be satisfied property subject to effective control of convicted person — Whether effective control determined as at date of restraining order in respect of property or as at date of determination of application under s 141.

Words and phrases — “acquired the property lawfully”, “derived”, “directly or indirectly”, “effective control”, “forfeiture”, “interest”, “lawfully acquired”, “partly derived”, “proceeds of an offence”, “proceeds of crime”, “realised”, “unlawful activity”, “used in, or in connection with”, “wholly derived”.

ORDER

Matter No B21/2017

Appeal dismissed with costs.

Matter No B22/2017 and Matter No B23/2017

• 1. Appeal in Matter No B22/2017 allowed in part.

• 2. Appeal in Matter No B23/2017 allowed.

• 3. Set aside the orders of the Court of Appeal of the Supreme Court of Queensland made in Appeal No 4987/13 on 29 August 2016 and 8 November 2016, and orders 1, 4(a), (b), (e) and (f), 5, 7 to 9, and 11 to 18 of that Court made in Appeal No 3908/13 on 8 November 2016, and in their place make the following orders and declarations:

  • (a) each appeal be allowed in part;

  • (b) in Appeal No 3908/13, declare that:

    • (i) Nemesis Australia Pty Ltd had legal ownership of Lot 56 on Registered Plan 188161, also known as 6 Merriwa Street, subject to the rights of the mortgagee under the mortgage in favour of Countrywide Co-operative Housing Society Ltd and the chargee under a mortgage debenture in favour of Merrell Associates Ltd, immediately prior to its forfeiture to the Commonwealth on 18 April 2006; and

    • (ii) upon satisfaction of the mortgage in favour of Countrywide Co-operative Housing Society Ltd and upon satisfaction of the amount of $1.6 million secured by the mortgage debenture in par (i), if any part of the proceeds of sale of 6 Merriwa Street has not been applied to meet that liability, the balance of proceeds then remaining (if any), together with interest on that balance, is payable by the Commonwealth to Nemesis Australia Pty Ltd; and

  • (c) in each of Appeal No 3908/13 and Appeal No 4987/13, each party bear its own costs.

1 Kiefel CJ, Bell, Gageler AND Edelman JJ. Three appeals are brought from a decision of the Court of Appeal of the Supreme Court of Queensland 1 on appeal by way of rehearing from the decision of the District Court of Queensland 2 in a matter arising under the Proceeds of Crime Act 2002 (Cth) (“the POCA”). Two of the appeals turn on the construction and application of s 102(3) of the POCA, in the form in which that section existed in 2006 before it was substantially amended in 2010 3. The third of the appeals turns on the construction and application of s 141 of the POCA, in the form in which it existed in 2006 and continues to exist.

2 The procedural history of the appeals and the relevant provisions of the POCA are comprehensively set out in the reasons for judgment of Gordon J, with whose factual analysis and legal conclusions we agree. On the construction and application of s 141 of the POCA, we have nothing to add to what her Honour has written. It is necessary only to mention a few matters of fact by way of background to the issues which arise as to the construction of s 102(3) of the POCA.

3 Mr Steven Hart was an accountant who operated tax minimisation schemes. He was convicted of nine offences of defrauding the Commonwealth in contravention of s 29D of the Crimes Act 1914 (Cth). Pursuant to s 92 of the POCA property, including that of companies with which he was associated (“the Companies”) and which had previously been the subject of a restraining order, was automatically forfeited to the Commonwealth.

4 The Companies filed an application under s 102 of the POCA seeking orders for recovery of their interests in certain of the forfeited property, or the payment by the Commonwealth of an amount equal to the value of their interests. The Commonwealth Director of Public Prosecutions applied under s 141 for a declaration that the property the subject of the s 102 application was available to satisfy any pecuniary penalty order made against Mr Hart. A pecuniary penalty order was subsequently made. It required Mr Hart to pay $14,757,287.35 to the Commonwealth.

Construction of s 102(3) of the POCA

5 Section 102(1) provides that where property is forfeited to the Commonwealth under s 92, the court that made the restraining order may, on the application of a person who claims an interest in the property, make an order declaring the “nature, extent and value” of the applicant's interest in the property. The court may make further orders directing the Commonwealth to transfer the interest to the applicant or declaring that there is payable by the Commonwealth to the applicant an amount equal to that value.

6 An order under s 102(1) can only be made if the court is satisfied as to the grounds set out in s 102(2) and (3). The focus in these appeals is on the conditions stated in s 102(3). Those conditions, which the applicant by force of s 317 bears the onus of proving on the balance of probabilities, include that:

• • “the property was not used in, or in connection with, any unlawful activity” (“the use condition”);

• • “the property … was not derived or realised, directly or indirectly, by any person from any unlawful activity” (“the derivation condition”); and

• • “the applicant acquired the property lawfully” (“the acquisition condition”).

7 Proof of those conditions is proof in a State or Territory court invested with jurisdiction under s 314 of the POCA in a matter arising under the POCA and in a proceeding which by force of s 315 is civil to which the Commonwealth is a necessary party. It is proof in an adversarial proceeding conducted in accordance with the civil procedure of that court 4, including such procedure as exists in that court for the definition of issues between parties. The primary judge and the Court of Appeal were correct in taking the view that, where an application for orders under s 102 proceeds on pleadings, an applicant need not negative possibilities which the Commonwealth does not raise in its defence 5.

8 “[T]he property” referred to in the use condition and in the derivation condition is the property once the subject of the restraining order that has been forfeited to the Commonwealth under s 92. The property, ordinarily the “thing” 6, is that which at the time of the application has vested absolutely in the Commonwealth under s 96 by reason of the forfeiture that has occurred, in which the applicant claims to have had an interest at the time of forfeiture that the applicant would have retained had forfeiture not occurred. Read with the definitions of “property” and of “interest” in s 338, the reference to “the property” in the use condition and in the derivation condition extends also to any legal or equitable estate or interest in the forfeited thing and any right, power or privilege in connection with that thing.

9 “[U]nlawful activity”, referred to in the use condition and in the derivation condition, is defined in s 338 to mean an act or omission that constitutes an offence against a law of the Commonwealth or against a law of a foreign country or an indictable offence against a law of a State or Territory.

10 Satisfaction of the use condition requires proof by an applicant on the balance of probabilities that the...