Director of Public Prosecutions (Cth) v Hart

Judgment (108 paragraphs)

[1]

CRIMINAL LAW - JURISDICTION, PRACTICE AND PROCEDURE - JUDGMENT AND PUNISHMENT - ORDERS FOR COMPENSATION, REPARATION, RESTITUTION, FORFEITURE AND OTHER MATTERS RELATING TO DISPOSAL OF PROPERTY - FORFEITURE - where pecuniary penalty order under Proceeds of Crime Act 2002 could be imposed - where application to exclude property from restraining order - whether reasonable grounds to suspect property subject to the effective control of the suspect - interpretation of ss 29(4) and 317 Proceeds of Crime Act 2002 (Cth) - onus of proof -whether suspect in effective control of property

[2]

Proceeds of Crime Act (Cth) 2002 (Cth), s 17, s 29, s 30, s 31, s 116, s 117, s 141, s 142, s 317, s 337, s 338

[3]

Burton v Honan [1952] HCA 30; (1952) 86 CLR 169, cited

[4]

Chugg v Pacific Dunlop Limited [1990] HCA 41; (1990) 170 CLR 249, considered

[5]

Connell v Lavender (1991) 7 WAR 9, cited

[6]

Director of Public Prosecutions (Cth) v Hart [2004] 2 Qd R 1; [2003] QCA 495, considered

[7]

Dowling v Bowie [1952] HCA 63; (1952) 86 CLR 136, considered

[8]

Gray v Official Trustee in Bankruptcy [1991] FCA 176; (1991) 29 FCR 166, cited

[9]

Logan Park Investments Pty Ltd v Director of Public Prosecutions (1994) 122 FLR 1, cited

[10]

Reg v Edwards [1975] 1 QB 27, considered

[11]

Vines v Djordjevitch [1955] HCA 19; (1955) 91 CLR 512, considered

[12]

Yanner v Eaton [1999] HCA 53; (1999) 201 CLR 351, considered

[13]

Director of Public Prosecutions (Commonwealth) for the respondent

[14]

[1] McPHERSON JA: A person who has committed a "serious offence", which by statutory definition includes certain specified indictable offences against Commonwealth law, may, by a court order called a pecuniary penalty order made under s 116(1)(b)(ii) of the Proceeds of Crime Act 2002 (Cth), be ordered to pay an amount to the Commonwealth. Such an order may not be made until six months after conviction of the offence: s 117(1). However, once an authorised officer on reasonable grounds suspects a person of having committed such an offence, the Director of Public Prosecutions (or "DPP") may, even before conviction, apply on affidavit to a court having "proceeds jurisdiction" for a restraining order under s 17 of the Act that property not be disposed of or dealt with by any person. In relation to a restraining order, a person charged with an offence of that kind is defined in s 338 of the Act as a "suspect". In identifying the content of the property liable to restraint, s 17(2)(a) includes all or specified property of the suspect; and also -

[15]

"(c) specified property of another person ... that is subject to the effective control of the suspect".

[16]

[2] A restraining order may therefore extend to and restrain the disposition of property other than that of the suspect if it is property that is under his or her "effective control". That the order must do, according to s 17(2), to the extent that the court is satisfied that there are reasonable grounds to suspect that specified property of another is "subject to the effective control of the suspect". Whether or not that is so falls to be determined at the time the restraining order is made: see Logan Park Investments Pty Ltd v Director of Public Prosecutions (1994) 122 FLR 1, 3-4.

[17]

[3] The "suspect" in the present matter is Mr Steven Irvine Hart, who has been charged with offences against Commonwealth law that are "indictable" offences within the terms of s 17(1)(d) and consequently "serious offences" as defined in s 338. On application by the DPP to the District Court under s 17, Brabazon DCJ acting as a "proceeds court" on 8 May 2003 made a restraining order specifying, as being subject to the effective control of Hart, certain property that was not to be disposed of or dealt with by any person. Plainly his Honour was to that extent satisfied in terms of s 17(2)(c) that there were reasonable grounds to suspect the property was subject to his control. The property in question consisted and consists mainly of various aircraft identified by type and licence numbers, as well as different allotments of registered or leased land and other things, to all of which the appellants or one or more of them lay claim as owners.

[18]

[4] Section 31(1) of the Act provides that at any time after being notified of a restraining order, a person may apply to the court to exclude specified property from a restraining order that has been made. Section 31(4) requires such person to give written notice to the DPP of both the application and the "grounds" on which its exclusion from the order is sought. At the hearing of the application, the DPP may appear and adduce evidence: s 31(5), and is bound to give notice of any "grounds" on which it is proposed to contest the application. On application under s 31, power to exclude property from a restraining order is vested in the proceeds court by s 29 of the Act subject to the fulfilment of conditions or requirements imposed by that section.

[19]

[5] In the present case, applications under s 31 were made by the appellants to the court under s 29 to exclude certain property, including the aircraft and land, from the restraining order made by Brabazon DCJ on 8 May 2003. The applications or application, as I shall call it, initially came before another District Court Judge, who summarily dismissed it holding that there was no jurisdiction to make the order for exclusion sought. On appeal, that order of dismissal was set aside and the matter was remitted for hearing and determination of the question whether the court should exercise the power conferred by s 29 to exclude the disputed property from the restraining order. See Director of Public Prosecutions (Cth) v Hart [2003] QCA 495; [2004] 2 Qd R 1. The remitted application in due course came before Brabazon DCJ, who, after hearing evidence and submissions extending over some 10 days, made an order dismissing the application for exclusion.

[20]

[6] The appeal before us now is brought by the four applicant corporations who claim to be owners of the disputed property and who assert it was not under the effective control of Hart at any relevant time. As to this, the appellants submit that, in dismissing their application for exclusion orders, the learned judge was wrong in holding that the onus rested on them as the applicants; that his Honour misconstrued or misapplied the true meaning of "effective control" in s 29(4)(b); and that he was wrong in finding that the property was subject to the effective control of Hart.

[21]

[7] It is time now to state the effect and set out relevant provisions of s 29 on which this appeal turns. The section begins by providing in s 29(1) that the court to which application is made for a restraining order under s 17 may, either then or later, exclude specified property from the restraining order if: (a) an application is made under ss 30 or 31; and (b) the court is in terms of s 29(1)(b) satisfied that "relevant reason" under s 29(2) or s 29(3) exists for so excluding it. For present purposes, it is enough to confine attention to s 29(2). It provides in s 29(2)(b) that, if s 29(1)(a) does not apply, "reasons" for excluding specified property from a restraining order are: (b), in the case of a restraining order under s 17, that the property is "neither proceeds nor an instrument of the offence" to which the order relates. The words "proceeds" and "instrument" of an offence are defined in and ; but it is not necessary to consider them here because it is not suggested that the property in dispute, or any of it, is either proceeds or an instrument of an offence within the meaning of those two sections. A "reason" in terms of therefore exists for excluding property from the restraining order made on 8 May 2003. In response, however, the DPP submits that, being property that is under the effective control of the suspect Hart, the court is precluded by from excluding it from the restraining order.

[22]

[8] After identifying in ss 29(2) and (3) what are relevant "reasons" for excluding specified property from a restraining order, s 29(4) proceeds as follows:

[23]

"(4) However, the court must not exclude property from a restraining order under section 17 ... unless it is also satisfied that neither a pecuniary penalty order nor a literary proceeds order could be made against:

[24]

(b) if the property is not owned by the suspect but is under his or her effective control - the suspect."

[25]

No question of a literary proceeds order arises here. It is, however, conceded that under s 116(1)(b)(ii) a pecuniary penalty order could be made against the suspect Hart; or (what is the same thing) that the appellants were and are unable to show that such an order could not be made. Embodying or depending as it does on a series of negatives, it is at first glance not altogether easy to read s 29(4)(b) or to state its effect in a simple way. In a passage in the reasons for judgment (with which I agreed) of the President in DPP v Hart [2003] QCA 495; [2004] 2 Qd R 1, at 4-5, her Honour said:

[26]

"According to the ordinary meaning of the words contained in s 29, there is then a relevant reason under s 29(2)(a) to exclude the specified property of each appellant from the restraining order and the court may under s 29(1) exclude the property from the order but, because of s 29(4), cannot do so if a pecuniary penalty order could be made against the suspect, Mr Hart, and if the property, though not owned by Mr Hart, is under his effective control. It follows that s 29 has the effect that the court may exclude the specified property the subject of the appellants' applications from the restraining order if satisfied that a pecuniary penalty order could be made against Mr Hart and that he effectively controlled the specified property."

[27]

The first sentence accurately states the operation or effect of s 29(4) in this instance. However, the second sentence beginning "It follows that s 29 has the effect ...", is, on reflection, in need of some degree of revision to ensure its correspondence with what immediately precedes it and with s 29(4) itself. In that regard, it would probably suffice to include the word "not" immediately after "court may" in that sentence.

[28]

[9] In understanding and applying s 29(4), it helps I think to approach it from the bottom upwards beginning with s 29(4)(b). The "suspect" here is Hart. For present purposes, it may be accepted that he does not own the disputed property and that a pecuniary penalty order could not be made against the person who does own it, who in this instance are the appellants. If, however, although Hart is not the owner of the property, it is under his effective control and a pecuniary penalty could be made against him, the court must not under s 29(4) exclude the property from the restraining order made on 8 May 2003. Since it is evident that a pecuniary penalty order could in future be made against Hart pursuant to s 116(1)(b)(ii), the real question in this and the court below is whether Hart had effective control of the property when the restraining order was made. If the answer to that question is "yes", as the learned judge here held it was (or if at least it is not "no"), then the court is precluded by s 29(4) from making the exclusion order sought by the applicants now the appellants before this Court.

[29]

[10] The starting point on this appeal is to determine who, in an application like this, bears the onus of establishing that Hart is not, or on 8 May 2003 was not, in effective control of the property. Since the appellants were the applicants for the exclusion order, one would expect that it would be for them to demonstrate that the case is not one covered by the provision in s 29(4) precluding the court from making an exclusion order. Whatever doubts might be entertained on that question are, in my opinion, put to rest by s 317 of the Act, which provides:

[30]

"(1) The applicant in any proceedings under this Act bears the onus of proving the matters necessary to establish the grounds for making the order applied for.

[31]

(2) ... any question of fact to be decided by a court on an application under this Act is to be decided on the balance of probabilities".

[32]

On the face of it, this appears to leave no doubt that the answer to the question posed is that it is the appellants as applicants under s 29(4), who by virtue of s 317(1) bear the onus of proving that Hart was not in effective control of the disputed property. That, or the matters necessary to establish it, is the "ground" for making the exclusion order applied for under s 29(1), and, unless it is established, the court is precluded by s 29(4) from making such an order.

[33]

[11] On behalf of the appellants Mr Sofronoff QC submitted, however, that correctly interpreted s 29 operated in this way. The onus was on the applicants to prove that the property was not, in terms of s 29(2)(b), proceeds of an unlawful activity or an instrument of an offence. The onus then fell on the respondent DPP to prove that the property was, in terms of s 29(4)(b), under the effective control of the suspect. If the DPP proved that the property was under the suspect's effective control, then the onus reverted to the applicants under s 29(4) to show that no pecuniary penalty order could be made against the suspect.

[34]

[12] Since there is no doubting that a pecuniary penalty order could be made against Hart, the trick is in the second step, which is the stage at which the inquiry as to the onus started out before the impact of s 317(1) was brought into account. In order to displace its impact, Mr Sofronoff seeks to identify the "grounds" referred to in s 317(1) with the "relevant reasons" in s 29(1), which are those specified in s 29(2) and s 29(3). But there is in truth no basis for limiting the expression "grounds" in this way. Section 317(1) imposes on an applicant in proceedings under the Act the onus of proving the matters that go to establish the "grounds" for making the order sought. It thus covers the case of a person applying to the court under s 31(1) to exclude property from a restraining order; and by s 31(4) that person is required to give written notice of the "grounds" on which the exclusion is sought. There is an evident correspondence between the "grounds" on which the exclusion is applied for under s 31 and the "grounds" referred to in s 317(1), which casts on the applicant who seeks the exclusionary order the onus of proving the matters necessary to establish those grounds. If that is not done, the court is prevented by from making such an order. There is no justification for confining the matters to be proved to those contained in or

[35]

[13] Then it was said that the interpretation contended for accords with the approach adopted by the High Court in Vines v Djordjevitch [1955] HCA 19; (1955) 91 CLR 512, 519-520:

[36]

"But in whatever form the enactment is cast, if it expresses an exculpation, justification, excuse, ground of defeasance or exclusion which assumes the existence of the general or primary grounds from which the liability or right arises but denies the right or liability in a particular case by reason of additional or special facts, then it is evident that such an enactment supplies considerations of substance for placing the burden of proof on the party seeking to rely upon the additional or special matter."

[37]

Far from assisting the appellants, I consider that, when applied here, the passage quoted goes against them. The statutory provision may be susceptible of more than one interpretation; but as I see it, the exclusion under s 29(4) denies the liability of the applicants to a restraining order pursuant to s 17 over property they claim is theirs. It does so in the particular case of s 29(4) by reason of special or additional facts. Those facts, or "matters" as s 317(1) would describe them, are or include in this instance proof that the property is not or on 8 May 2003 was not under the effective control of Hart. Section 29(4) is thus "expressed as a statement of a further requirement to be fulfilled ... before the main provision can be availed of" : Vines v Djordjevitch [1955] HCA 19; (1955) 91 CLR 512, 520. The "main provision" in this context is s 29(1) which empowers the court to exclude specified property from the order if: (a) an application is made under s 30 or s 31; and (b) the court is satisfied that the relevant reason under s 29(2) or (3) exists for excluding the property from the order. Once a restraining order under is made extending over property that the court has under reasonable grounds to suspect is subject to the effective control of the suspect, it thereupon lies on the applicant for an exclusion order to prove that the suspect is not in effective control of that property.

[38]

[14] The fact that, as a consequence, the applicants may or will be called on to prove a negative (scil, that Hart had no effective control over the property) is not sufficient to displace this reading of s 29(4) and s 317(1). Cf Slivak v Lurgi [2001] HCA 6; (2001) 205 CLR 304, 335 at ss 95-98 (Callinan J, with whom Gleeson CJ, Gummow, and Hayne JJ agreed at s 39, and Gaudron J at s 58). Especially is this so in the present case when the appellants are in a better position than anyone, except perhaps Hart himself, to know whether he has been exercising effective control over the disputed property. In the end, however, the conclusion reached here rests on the terms of s 29(4) itself read in conjunction with s 317(1). Despite some difficulties of comprehension, s 29(4) shows a clear legislative intention that it is for an applicant to prove the matters necessary to establish grounds for excluding property from the scope of a restraining order that is being, or in this case has been, made. That onus includes proof of matters that show that Hart was not in effective control of the subject property.

[39]

[15] The appellants further submitted that in interpreting s 29(4), and indeed the Act as a whole, effect should be given to the well settled principle of statutory interpretation that any ambiguity in legislation that radically restricts property rights must be strictly construed in favour of the appellants as property owners: DPP v Hart [2003] QCA 495; [2004] 2 Qd R 1, 5. Here, the Act provides in s 142(1) for the automatic creation, on the making of a restraining order, of a charge on the property in question to secure payment of a pecuniary penalty order by the person prosecuted; but the provision in s 142(1) is, as regards the property of another, operative under s 141(1)(c) only when a pecuniary penalty order is made and is ultimately dependent on the court declaring under s 141(1) that the whole or a specified part of that property is available to satisfy the penalty order. The proceedings are at present well short of completion of that stage. Likewise, the provisions of ss 92 and 94 of the Act providing in certain circumstances for forfeiture to the Commonwealth of property subject to a restraining order depend for their operation upon the event of conviction of a person for a serious offence, and are subject to all the qualifications and conditions stated in the Divisions of Chapter 2.

[40]

[16] There is a lengthy history of the use of legislative provisions like these as adjuncts to enforcing customs and excise duties, trade and navigation laws, anti-slave trading measures, and other activities prohibited by Parliament. Courts of admiralty and exchequer developed special procedures in rem against forfeited goods to give effect to such legislation, which in modern times have been held to be still available to common law courts in the United States: see discussion in C J Hendry Co v Moore [1943] USSC 67; (1943) 318 US 133 and cf Willey v Synan [1935] HCA 76; (1935) 54 CLR 175, 185-186. In Burton v Honan [1952] HCA 30; (1952) 86 CLR 169, 180-181, the High Court held that legislation providing for such statutory forfeitures of the property of other, even apparently innocent, persons was within the competence of the Commonwealth Parliament and fell outside the ambit of s 51(xxxi) of the Constitution requiring acquisition of property to be on just terms. "It has", their Honours said there, "no more to do with the acquisition of property for a purpose in respect of which the Parliament has power to make laws within s 51(xxxi) than has the imposition of taxation itself, or the forfeiture of goods in the hands of the actual offender". See also , 101-103. The judicial tendency to adopt narrow interpretations of legislation that radically restricts property rights, although not without weight as a consideration, cannot control the unambiguous meaning and effect of the provisions of and s 317(1).

[41]

[17] While deciding that the onus lay on the appellants to prove that the disputed property was not subject to the effective control of the suspect Hart, the learned primary judge went on, independently of that ruling, to consider the evidence and to find that Hart was in fact in effective control of the property. The appellants submit that in doing so, his Honour misconstrued both "effective control" and "property" as those expressions are used in the Act.

[42]

[18] The expression "effective control" is given a statutory meaning in s 337, which in sub-section (1) provides:

[43]

"(1) Property may be subject to the effective control of a person whether or not the person has

[44]

(a) a legal or equitable estate or interest in the property; or

[45]

(b) a right, power or privilege in connection with the property".

[46]

"real or personal property of every description, whether situated in Australia or elsewhere and whether tangible or intangible, and includes an interest in any such real or personal property.

[47]

"Interest" is in turn defined "in relation to property or a thing" to mean:

[48]

"(a) a legal or equitable estate or interest in the property or thing; or

[49]

(b) a right, power or privilege in connection with the property or thing;

[50]

whether present or future and whether vested or contingent."

[51]

[19] None of these meanings is unconventional or extraordinary. However, the appellants submitted that his Honour erred in approaching the "property" in this case as being the thing or object itself - the individual aircraft or allotments of land or other objects - rather than the particular legal or beneficial interest held by someone in that thing or object. This error was said to be implicit in the fourth sentence in para 166 of his Honour's reasons in which he found that Hart "continues to treat the companies' property as his own".

[52]

[20] In support of this contention, reference was made to Yanner v Eaton [1999] HCA 53; (1999) 201 CLR 351, 365-366, where Gleeson CJ, Gaudron, Kirby and Hayne JJ said:

[53]

"The word 'property' is often used to refer to something that belongs to another. But in the Fauna Act, as elsewhere in the law, 'property' does not refer to a thing; it is a description of a legal relationship with a thing. It refers to a degree of power that is recognised in law as power permissibly exercised over the thing."

[54]

It followed, or so the appellants said, that the word "property" as defined in s 338 of the Act means not the aircraft or land or "thing" itself but some right or interest in it over which Hart, if at all, exercised effective control, and this the DPP had failed to specify or to establish. I am, however, quite unable to accept this proposition. The word "property" is plainly capable of meaning either or both of the thing owned or ownership of the thing; as when one says of something that "that property is my property". In Yanner v Eaton, the relevant provision under consideration, which was s 7(1) of the Fauna Conservation Act 1974, provided that all fauna, meaning or including wild animals, "is the property of the Crown". In that context, "property" referred to ownership, and not to the wild animal itself which was, or was claimed by the Crown under the Act to be, the subject of its ownership. It is plainly not in this sense, but in the sense of a thing or object (or res as the Roman lawyers would have called it) that the word "property" is used in s 338. To ascribe to it in that context the meaning "ownership" would make nonsense of the statutory definition, as well as of the related definition of the word "interest", which speaks of an estate or interest "in the property or thing". Indeed, s 29(4) speaks of "property" that is "owned" or "not owned"; and one does not naturally speak of ownership being owned. Taken together, the statutory meanings of "property" and "interest" are perhaps capable of referring to either or both of the object owned and the ownership of or an interest in it. But the primary meaning of "property" in s 338(1) is the thing itself.

[55]

[21] Hence, when s 337 speaks of property being subject to the "effective control" of a person, it refers, in this case primarily to the effective control by Hart of or over the things, such as the aircraft and land, which are targets of the restraining order of 8 May 2003. By s 337(1):

[56]

"(1) Property may be subject to the effective control of a person whether or not the person has:

[57]

(a) a legal or equitable estate or interest in the property; or

[58]

(b) a right, power or privilege in connection with the property."

[59]

Speaking of the statutory expression "effective control" in Connell v Lavender (1991) 7 WAR 9, 22, Rowland J in the Full Court of Western Australia said that it meant control in fact and that what it contemplates is control "that is practically effective, in the sense that the person has in fact the capacity to control the possession, use or disposition of the property ...". See also DPP v Toro-Martinez (1993) 33 NSWLR 82, 89. Like Heerey J in Gray v Official Trustee in Bankruptcy [1991] FCA 176; (1991) 29 FCR 166, 173, I regard the expression "effective control" as readily comprehensible, and I respectfully agree that no purpose is served by paraphrasing or redefining it. Indeed, repeated judicial exegesis is likely in the end to divert rather than elucidate its present clear and simple meaning.

[60]

[22] Despite judicial adjurations like these, Mr Sofronoff QC nevertheless sought to incorporate into the notion of effective control a requirement that it could not be found to exist if the "suspect" lacks the practical power to take the benefits of the property for himself. Thus, he said, the chief executive officer of a corporation has or may have express or implied authority to control the possession or use of physical objects belonging to the company, even to the extent of being able to sell them, but is nevertheless not entitled to treat the property or its proceeds as his own. But to import into "effective control" conceptions of beneficial ownership is to fly in the face of the express provision in s 337(1) making it independent of whether or not the suspect has an equitable interest in the property or any right or power with respect to it. Speaking generally, the possession or custody of a servant or employee is that of his master or employer: Willey v Synan [1937] HCA 85; (1937) 57 CLR 200, 216; Byrne v Hoare [1965] Qd R 135, 147, so that any control exercised by a corporate officer over property of a corporation would be considered the control of the corporation itself. That is no doubt because the officer of a corporation is ordinarily subject in his daily actions with respect to corporate property and powers to the instructions and supervision of the board of directors or one of their number, whose effective control is in turn that of the company whose directing mind and will they represent: Lennard's Carrying Company v Asiatic Petroleum Co [1915] AC 705, 713. But who, in a particular case, in fact exercises that directing mind and will depends on the particular circumstances prevailing in that corporation. It is to the circumstances that prevailed here in the case of the appellants that I now turn.

[61]

[23] In broad outline, the facts, as they are and were found by his Honour to be, are that at relevant times before 2002 Steven Hart carried on a large scale the business of accounting and of giving advice to others on tax and financial planning, as well as being an insurance broker. In addition, he engaged in building and buying homes for rent. In 1998 he arranged a public flotation of Harts Australia, which had over 300 employees and conducted an accounting business throughout Australia. It collapsed financially at some time in about 2000 or 2001, and he became bankrupt on 22 April 2002. He maintained a passion for acquiring aircraft, especially military aircraft or "war birds", which he bought and sold and of which he built up a large collection. He was himself an experienced pilot who engaged in flying and aerobatics.

[62]

[24] On the personal side, his Honour described him as a man who commanded the loyalty and support of those close to him. One of those was a Ms Petersen who for 20 years was the office administrator for what she called the Hart family group of companies. She began a personal relationship with Hart in 1974. They never married but lived together for some time and have two now grown-up children. In addition, there is now Mrs Laura Hart, whom he married in 1991. She worked as his personal assistant and later as his receptionist. His Honour found that Mr and Mrs Hart, Ms Petersen and her children have a very close relationship to the point, for example, of taking annual holidays together. Ms Petersen and Mrs Hart are the shareholders in and are directors of all four of the corporate appellants. They comprise a holding company Flying Fighters Pty Ltd, together with Nemesis Australia Pty Ltd; Bubbling Springs Pty Ltd and Yak 3 Investments Pty Ltd. Each of them is trustee of a trust of which Hart is a discretionary beneficiary as are others who are linked to him by personal or family relationships (ex 25). Hart was formerly a director of Nemesis Australia and Bubbling Springs (but not of Flying Fighters) until his resignation in October 2001, whereupon Nigel Arnot was appointed in his place as director of Nemesis Australia and of Bubbling Springs. Hart's friend Dr Ambler was appointed a director of Yak 3 Investments, of which Hart himself had ceased to be a director in as early as 1993. Nigel Arnot, the managing director of Flying Fighters, is also a close friend of Hart, as well as being like him an aircraft enthusiast.

[63]

[25] Ms Petersen and Mrs Hart gave evidence by affidavit and were cross-examined at the hearing, which altogether produced 22 volumes of appeal records covering more than 5000 pages. Each of them deposed and testified that they, and not Hart, were in effective control of one or other of the appellants. Hart himself was available to give evidence but he did not do so, leaving it to his Honour to draw the inference that he had nothing to say that would have assisted the appellants or supported what witnesses said on their behalf. His Honour did not accept the evidence of Ms Petersen and Mrs Hart claiming to have active roles as directors, which he said he found "unconvincing". Considering the evidence as a whole and in the light of the family and personal relationships, he found that they were in truth Hart's administrative staff and gave effect to his directions "on any occasion which is significant, or when he chooses to intervene". His Honour also found that Nigel Arnot, who was cross-examined at length on his affidavits, deferred to Hart in any matter of substance, and that Hart's friends Dr Ambler and Dr Fleming did not play any effective role in restraining Hart. The judge concluded by finding that Hart's role was "dominant" and that, despite his formal resignations as director in October 2001, he remained in effective control of the appellants.

[64]

[26] In view of the evidence, oral and documentary, his Honour's findings were plainly justified. By way of example, in the case of the appellant Flying Fighters Pty Ltd, whose property includes eight aircraft and a motor vehicle, Mr Arnot, the designated managing director, confirmed major decisions with Hart, although Hart was formally not a director; he reported to Hart in relation to corporate assets and acted at his direction in respect of them. He requested Hart to arrange for funds for payment for aircraft purchased and spare parts. On occasions Hart referred in writing or conversation to company aircraft as being his or as being owned by him, and on other occasions he signed documents, such as a loan agreement, a charge, a contract and solicitors' trust account authorities, sometimes doing so ostensibly in the capacity of a director. By comparison, Arnot was not even aware of significant financial transitions that had taken place, such as obtaining loans and granting securities, which had been undertaken by the appellant company.

[65]

[27] A similar state of affairs prevailed in the case of the appellant Nemesis Pty Ltd. For example, it owned land at 88 Brandon Road, Runcorn. It was Hart who arranged with Kevin Smith to prepare a fee estimate for the design of units for a proposed development on that land. After it had been provided, Hart instructed Smith to proceed with it and he was later told by Mrs Hart that Hart said to go ahead with the project. A contract between Nemesis and Brandon Road Development Pty Ltd relating to the Brandon Road project was later found by the DPP in the course of a search; it is undated and unstamped but was marked for Hart's attention. After Flying Fighters had borrowed money from Hart's friends Dr Ambler and Dr Fleming, Hart made arrangements with them by which they each agreed to take a share in the Brandon Street land in lieu of being repaid the amounts of the outstanding loans made to Flying Fighters. Similar observations may be made about the business and assets of the other two appellants Yak 3 Investments Pty Ltd and of Bubbling Springs Pty Ltd.

[66]

[28] Details of all these matters, with copious references to pages of the transcript of proceedings and documentary exhibits in the record, are set out in Annexure A to the written outline on appeal of the respondent DPP. For two reasons I do not propose to discuss them further. One is that, on behalf of the appellants, Mr Sofronoff QC said he did not contest any of the matters of primary fact to which Annexure A refers, but only the ultimate conclusion or inference of effective control derived from them. The other is that, with three exceptions to which I will refer, there were on appeal no challenges to the findings made by his Honour. As this is an appeal by way of "rehearing" in the limited sense, in a proceeding in which by s 317(2) proof of matters of fact are to be decided on the balance of probabilities, it is for the appellants to identify and persuade this Court of the material respects in which the primary judge is said to have gone wrong. His findings of fact, including those based on inference, are therefore to be taken as correct unless and until the contrary is demonstrated. This is to state no more than the elementary rule that, in an appeal raising issues of fact, it is for the appellant to satisfy this Court that the decision of the judge below is wrong. If authority is needed, it can be found in Savanoff v Re-Car Pty Limited [1983] 2 Qd R 219, 223, 231.

[67]

[29] His Honour made his findings partly on the strength of adverse impressions of the credibility of Ms Petersen, Mrs Hart and Mr Arnot. Such findings are regarded as difficult to disturb on appeal: Fox v Percy [2003] HCA 22; (2003) 214 CLR 118. Here the trial judge's findings are said to be affected by three errors of fact visible in his reasons. One concerned the purchase by Flying Fighters of a Hawker Sea Fury aircraft, which his Honour said was financed by an arrangement with his friend Dr Fleming (whose description as "another flying enthusiast" is questioned), lending $280,000 secured by a charge dated 20 September 2001. In fact, his Honour confused the purchase of the Sea Fury by Flying Fighters with the acquisition of another aircraft, the T28, as to which Dr Ambler (who was a flying enthusiast) provided a loan of $228,000 to Flying Fighters. When the loan was not repaid in six weeks as agreed, Dr Ambler was offered the one third share in the Brandon Road property mentioned earlier in these reasons.

[68]

[30] While conceding his Honour's factual errors in these respects, the DPP contends they had and have no material impact on the outcome of the case. The point sought to be demonstrated always was that Hart was the individual who negotiated the purchasing and financing of aircraft, including the Sea Fury, by Flying Fighters. Although not himself a director of that company, it was Hart who sought and negotiated the terms of the loan with Dr Ambler to acquire the T28, and it was he who offered to Dr Ambler the interest in the Brandon Road property to replace the loan he had made that the company was unable to repay.

[69]

[31] In reaching his conclusions his Honour did not reject the evidence of Dr Fleming or Dr Ambler on the basis of assessments of their credibility, as he did in the case of Ms Petersen, Mrs Hart and Mr Arnot. As regards the latter three, the only specific complaint on appeal concerned the following passage in the reasons:

[70]

"Miss Petersen and Mrs Hart say they are effectively in control of the applicants. However, they could not produce one documentary record, such as a notice of meeting, to support that assertion."

[71]

It was urged that this overlooked Ms Petersen's affidavit, which exhibited documents including minutes of meetings. But those documents, although perhaps neutral in themselves, do nothing to support the claim that it was they rather than Hart who were in effective control of the appellants or their property; whereas there are other documents that demonstrate the contrary. There is, in short, nothing that materially undermines his Honour's adverse assessment of those three critical witnesses for the appellants, but, on the contrary, there is a wealth of material to show that Hart was, as his Honour found, in fact in control of the companies. This, in turn, was said to fall short of demonstrating that he was in effective control of the disputed property itself. But the evidence leaves no doubt that he was in effective control of the property as well as the affairs of the corporate appellants. His attitude and his behaviour towards them is reminiscent of many others who persist in treating the business and assets of companies as if they were their own, with scant regard for the legal boundaries dividing personal and corporate powers and ownership. In adopting the criterion of effective control of property laid down in s 337, the Act was plainly designed to look beyond the rule in Salomon v Salomon [1896] UKHL 1; [1897] AC 22.

[72]

[32] In my opinion the evidence proves that Hart was in effective control of the property the subject of the restraining order made on 8 May 2003; or, if not, the appellants as applicants for the order under s 29 excluding it from that restraint, have failed to discharge the onus of showing that he was not. His Honour's decision to that effect has not been demonstrated to be wrong.

[73]

[34] WILLIAMS JA: The detailed reasoning of McPherson JA with which I agree, amply demonstrates that the appeal must be dismissed. Whilst s 29 of the Proceeds of Crime Act 2002 (Cth) is not felicitously worded, nevertheless when the Act is considered as a whole its meaning and effect becomes clear. Given the relationship between the suspect and the directors and shareholders of the appellant companies, the evidence as to the extent of the suspect's involvement in decision-making with respect to the property in question, and the fact that the suspect remained a potential beneficiary with respect to the property, there was ample evidence to support the findings of fact made by the learned judge at first instance (notwithstanding the minor factual errors in his reasoning referred to by McPherson JA).

[74]

[35] I also agree with the reasoning of Chesterman J in relation to the onus of proof.

[75]

[36] For the reasons given by McPherson JA and Chesterman J the appeal should be dismissed with costs.

[76]

[37] CHESTERMAN J: The facts relevant to the appeal and a description of the issues which arise in it are set out in the reasons of McPherson JA, and need not be repeated.

[77]

[38] Section 29 of the Proceeds of Crime Act 2002 (Cth) ('the Act') relevantly provides:

[78]

'(1) The court to which an application for a restraining order under section 17 ... was made may, ... at a later time, exclude specified property from the order if:

[79]

(a) an application is made under section 30 or 31; and

[80]

(b) the court is satisfied that the relevant reason under subsection (2) or (3) for excluding the property from the order exists.

[81]

(2) The reasons for excluding specified property from a restraining order are:

[82]

(a) for a restraining order under section 17 if the offence, or any of the offences, to which the order relates is a serious offence - the property is neither proceeds nor an instrument of unlawful activity; or

[83]

(b) for a restraining order under section 17 if paragraph (a) does not apply - the property is neither proceeds nor an instrument of the offence, or any offence, to which the order relates; or

[84]

(3) If the offence, ... to which a restraining order relates is a serious offence that is an offence against section 15, 24, 29 or 31 of the Financial Transaction Reports Act 1988, a further reason for excluding property from the order is that each of the following requirements is met: ...

[85]

(4) However, the court must not exclude property from a restraining order under section 17 ... unless it is also satisfied that neither a pecuniary penalty order nor a literary proceeds order could be made against:

[86]

(b) if the property is not owned by the suspect but is under his ... effective control - the suspect.'

[87]

[39] The order restraining the applicants' rights with respect to their property was made pursuant to s 17. The application that the applicants' property be excluded from the effect of the restraining order was made pursuant to s 31 of the Act.

[88]

[40] None of the property to which the application and the appeal relate is alleged to be the proceeds of crime or an instrument of any relevant offence. It was common ground that the relevant reason under s 17(2) 'for excluding the property from the order' exists. The suspect, for the purposes of s 29, is Mr Hart. The offences with respect to which Mr Hart was a suspect are not the subject of s 29(3), which is not relevant to the appeal. The property in question is owned by one or other of the applicants. It is common ground that no pecuniary penalty order, nor any literary proceeds order, could be made against any of the applicants. Importantly, it was accepted that a pecuniary penalty order could be made against Mr Hart. If the property in question were under Mr Hart's effective control s 29(4) dictates that the application to exclude the property from the effect of the restraining order must fail.

[89]

[41] The first question argued on the appeal was whether the applicants bore the onus of proving that the property was not under Mr Hart's effective control or whether the respondent bore the onus of proving that it was.

[90]

'(1) The applicant in any proceedings under this Act bears the onus of proving the matters necessary to establish the grounds for making the order applied for.'

[91]

[43] The applicants submit that s 29 operates so as to cast an onus on them to prove that the property was not the proceeds of an unlawful activity or an instrument of an offence. It was conceded that it was neither. This being established the submission continued that the onus falls onto the respondent to prove that the property was under the effective control of the suspect. If the respondent proves that fact, then the property cannot be excluded from the operation of the order unless the applicants show that no pecuniary penalty order could be made against the suspect.

[92]

[44] This construction is said to be consistent with s 317 in that, relevantly, the grounds therein referred to are those matters described in s 29(2) or (3). If those grounds were made out, as they were here, there is said to be 'an exception for the benefit of the respondent ... that the property is under the effective control of Mr Hart'. The onus of proving the exception was submitted to lie upon the respondent.

[93]

[45] A convenient starting point for a consideration of the applicable principle is the judgment of Dixon CJ in Dowling v Bowie [1952] HCA 63; (1952) 86 CLR 136. The Chief Justice (with whom Fullagar and Kitto JJ agreed) said (at 139-140):

[94]

'The argument treats the case as governed by the common law doctrine that where a statute having defined the grounds of some liability it imposes proceeds to introduce by some distinct provision a matter of exception or excuse, it lies upon the party seeking to avail himself of the exception or excuse to prove the facts which bring his case within it. The common law rule distinguishes between such a statutory provision and one where the definition of the grounds of liability contains within itself the statement of the exception or qualification, and in the latter case the law places upon the party asserting that the liability has been incurred the burden of negativing the existence of facts bringing the case within the exception or qualification. ... The distinction has been criticized [sic] ... The question, however, where in such case the burden of proof lies may be determined in accordance with common law principle upon considerations of substance and not of form. A qualification or exception to a general principle of liability may express an exculpation [sic] excuse or justification or ground of defeasance which assumes the existence of the facts upon which the general rule of liability is based and depends on additional facts of a special kind. If that is the effect of the statutory provisions, considerations of substance may warrant the conclusion that the party relying on the qualification or exception must show that he comes within it.'

[95]

[46] In a case decided a little later, Vines v Djordjevitch [1955] HCA 19; (1955) 91 CLR 512 the High Court (Dixon CJ, McTiernan, Webb, Fullagar and Kitto JJ) said (at 519-520):

[96]

'When an enactment is stating the grounds of some liability that it is imposing or the conditions giving rise to some right that it is creating, it is possible that in defining the elements forming the title to the right or the basis of the liability the provision may rely upon qualifications [sic] exceptions or provisos and it may employ negative as well as positive expressions. Yet it may be sufficiently clear that the whole amounts to a statement of the complete factual situation which must be found to exist before anybody obtains a right or incurs a liability .... On the other hand it may be the purpose of the enactment to lay down some principle of liability which it means to apply generally and then to provide for some special grounds of excuse, justification or exculpation depending upon new or additional facts. ... But in whatever form the enactment is cast, if it expresses an exculpation, justification, excuse, ground of defeasance or exclusion which assumes the existence of the general or primary grounds from which the liability or right arises but denies the right or liability in a particular case by reason of additional or special facts, then it is evident that such an enactment supplies considerations of substance for placing the burden of proof on the party seeking to rely upon the additional or special matter ....'

[97]

[47] The point was also addressed by Dawson, Toohey and Gaudron JJ in Chugg v Pacific Dunlop Limited [1990] HCA 41; (1990) 170 CLR 249. Their Honours said (at 257):

[98]

'For the purpose of assigning the onus of proof, a distinction is made between a requirement which forms part of the statement of a general rule and a statement of some matter of answer, whether by way of exception, exemption, excuse, qualification, exculpation or otherwise ... which serves to take a person outside the operation of a general rule. ...The distinction does not depend on the rules of formal logic .... Rather, the categorization [sic] of a provision as part of the statement of a general rule or as a statement of exception reflects its meaning as ascertained by the process of statutory construction. Where some matter is said to be an exception to an offence, the question is whether there is to be discerned a legislative intention "to impose upon the accused the ultimate burden of bringing himself within it" .... The intention may be discerned from express words or by implication.'

[99]

[48] A good example of the operation of the principle was said to be afforded by Reg v Edwards [1975] 1 QB 27. Edwards was convicted of selling liquor without a licence. The prosecution proved the sale of liquor by the defendant but did not prove that he was not licensed to sell it. It could have done so by tendering the results of a search of the registry of licences. Following an extensive review of cases on the point the Court said (at 39-40):

[100]

'... [T]his line of authority establishes that over the centuries the common law, as a result of experience and the need to ensure that justice is done both to the community and to defendants, has evolved an exception to the fundamental rule of our criminal law that the prosecution must prove every element of the offence charged. This exception, like so much else in the common law, was hammered out on the anvil of pleading. It is limited to offences arising under enactments which prohibit the doing of an act save in specified circumstances or by persons of specified classes or with specified qualifications or with the licence or permission of specified authorities. Whenever the prosecution seeks to rely on this exception, the court must construe the enactment under which the charge is laid. If the true construction is that the enactment prohibits the doing of acts, subject to provisoes, exemptions and the like, then the prosecution can rely upon the exception. ... Two consequences follow ... secondly, what shifts is the onus: it is for the defendant to prove that he was entitled to do the ... act.'

[101]

[49] The authorities make it clear that the question of who bears the onus is one of statutory interpretation. The cases describe the considerations which are relevant in determining whether the onus shifts from an applicant to a respondent, in this case for an order giving relief against the restraining order. Section 317 of the Act is itself an indication of legislative intention, at least as powerful as those described in the cases. The applicant must prove 'the matters necessary to establish the grounds for making the order applied for.' What are the 'matters necessary' for a restraining order to be modified? They clearly include the grounds identified in s 29(2) and (3). However s 29(4) prohibits the court from excluding property from a restraining order 'unless it is also satisfied' that, relevantly, the property was not under the effective control of Mr Hart. To say that the court must be satisfied of a fact before it may make an order of a specified kind is to say that someone must prove the fact. The subsection itself does not specify on whom the onus of proof lies; s 317 supplies that want. Proof that an applicant's property is not under the suspect's effective control is a matter necessary to establish the ground for making the order applied for. The plain wording of s 317 places the onus of satisfying s 29(4) on the applicants.

[102]

[50] One arrives at the same result by the route found in the authorities. They require an inquiry into whether the statute defines the grounds of some liability or right with some distinct provision amounting to an exception or excuse for the imposition of the liability or the conferral of the right. If that is the true nature of the statute 'it lies upon the party seeking to avail himself of the exception ... to prove the facts which bring his case within it.' Such a case is to be distinguished from one where 'the definition of the grounds for the conferral of the right contains within itself a complete statement of the exception', in which case the onus is on the party asserting the right to negative the facts bringing the case within the exception. If it is sufficiently clear that the statutory provision 'amounts to a statement of a complete factual situation which must be found to exist before anybody obtains a right' the whole must be satisfied before the right is proved to exist. It may be otherwise if the statutory provision expresses an exception 'which assumes the existence of the general ... grounds from which the ... right arises but denies the right ... in a particular case by reason of additional or special facts'.

[103]

[51] The plain effect of s 29 is that the matters described in sub-ss (2), (3) and (4) are facts that must be proved before the court has power to exclude property from a restraining order. They were, in my opinion, rightly described by Senior Counsel for the respondent as conditions precedent to the exercise of the discretion conferred by the section. It is no doubt right to regard the contents of sub-s (4) as an additional requirement to the matters described in sub-ss (2) and (3), but it is not right to regard the subject matter of sub-s (4) as constituting an exception to the subject matter of the grounds found in the other two subsections. The appellants submit that this is how sub-s (4) should be construed, namely as an exception to the right, generally expressed, to exclude property from the restraining order upon proof of the matters described in sub-ss (2) and (3). This requires reading the section as though it read:

[104]

The court ... may exclude specified property from the order if ... the court is satisfied that the relevant reasons under subsection (2) or (3) ... exist[s] unless the property sought to be excluded is not under the effective control of the suspect.

[105]

[52] This construction is not tenable because sub-s (4) is dealing with a different subject matter to that dealt with in sub-ss (2) and (3). One is not a qualification on the other. The subsections deal with totally separate and distinct topics. A restraining order may be made with respect to property which is the proceeds of unlawful activity or an instrument of performing the unlawful activity. If the property is either, an order may not be made under s 29(1). By contrast, s 29(4) is concerned with the property owned by, or under the effect control of, a person against whom a pecuniary penalty order might be made. By ss 141 and 142 of the Act, such property can be applied to satisfy the order.

[106]

[53] Property which is owned by, or is effectively under the control of, a suspect is property of a different character to the property described in s 29(2) and (3). The same items of property may satisfy both descriptions, but the test for determining whether property falls within the ambit of sub-ss (2) and (3) on the one hand, and sub-s (4) on the other, are different. It is not possible to regard the subject matter of sub-s (4) as an exception or qualification to the subject matter of sub-ss (2) and (3). Section 29(4) provides a separate basis by which property, or the proceeds of its sale, may be acquired by the Commonwealth, distinct from the bases provided by sub-ss (2) and (3). The three subsections are together a complete statement of the facts, which must be shown to exist before a right to exclude property from a restraining order arises.

[107]

[54] Accordingly the onus of proving the matters found in each of those subsections was on the applicants.

[108]

[55] On the other points which arose in the appeal I agree with McPherson JA. I agree also that the appeal should be dismissed, with costs.

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