Grant Mccleary, Harwicke Holdings Pty Ltd (Acn 009 425 129) and Portplan Pty Ltd (Acn 057 987 036) & Ors v The Commonwealth Director of Public Prosecutions & Anor [1998] WASCA 181

Court of Appeal (WA)|1998-07-17|Before: Malcolm CJ

The applicant hereby undertakes to the court that he will indemnify any third party against any costs expenses or fees reasonably incurred by such third party seeking to comply with this order as well as against all liabilities which may flow from such compliance."

Owen J granted the application and, after noting that the Commonwealth's undertaking had been given to the court, ordered that:

"1. Pursuant to of the the property described in the schedule hereto shall not be disposed of, or otherwise dealt with, for a period of 14 days from the date of this order ('the restraining order').

2. Pursuant to s43(2)(b) of the Proceeds of Crime Act 1987 the Official Trustee be directed to take custody and control of the property during the currency of the restraining order."

The restrained property included a partially completed 16 metre aluminium fishing boat owned by Portplan, together with marine, navigational and electronic equipment therefor. Subsequently the order made by Owen J was extended from time to time. It was also varied by allowing Westpac to take possession (pursuant to a bill of sale) of the partially completed fishing vessel and related equipment, on the basis that the balance of the proceeds of the sale of the property secured under the bill of sale be remitted by Westpac to the Official Trustee so that it would be subject to the restraining order.

On 31 August 1994, after a trial of some eight weeks, a jury returned verdicts of not guilty in relation to each of the charges against McCleary (and another person who was his co-accused). On 1 September 1995 Portplan applied to Murray J for an order entitling it to enforce the Commonwealth's undertaking, and that there be an inquiry into damages and costs. That application was granted. Despite the terms of the order so made, the parties treated it, in effect, as if it were merely an order that there be a hearing as to the matters raised by the application. In other words, the parties accepted that the question whether it was "just" to pay compensation at all was considered to be unresolved by the order of Murray J and to be still open for determination.

The preliminary issues, the answers provided, and the grounds of appeal

Thereafter, an order was made for certain questions of law to be heard as preliminary issues in the application to enforce the Commonwealth's undertaking. The hearing took place before Wallwork J. The questions concerned and the answers delivered by his Honour are as follows:

(a) 'Whether the evidence led at the original criminal trial of Grant McCleary in the Supreme Court of Western Australia No 32 of 1994 The Queen v Stephen Lindsay Peters, William John Langeveldt, Grant McCleary and Michael Paul Collins can be regarded as evidence on this application or not and, further, whether that evidence can be supplemented by further evidence and if so, whether by affidavit or otherwise?'

Relevant evidence led at the criminal trial, other than in the form of the transcript of the evidence from the trial, can be led in the form of affidavits or otherwise, subject to the witnesses being available for cross-examination, or as the learned trial Judge directs, and subject to the restriction that transcripts from the criminal trial are not to be exhibited or annexed to such affidavits, but subject always to the parties agreeing, and the learned trial Judge approving, that certain transcript can be put in evidence. Evidence led at the criminal trial can be supplemented by further relevant evidence whether by affidavit or otherwise.

(b) 'Whether the applicant may adduce on the hearing of this application evidence obtained by the Australian Federal Police from telephone intercepts which had been ruled inadmissible by the learned trial Judge at the trial?'

(c) 'Whether the applicant may lead evidence attempting to show that the respondent McCleary was involved in criminal conduct:

(ii) alternatively in a different way than was alleged against him at the trial but sufficiently to make him criminally liable;

or in other criminal conduct involving the use of the property seized; notwithstanding that he was acquitted of these particular charges?'

(d) 'Whether it is open to the applicant to prove that Mr McCleary was involved in the alleged criminal or other criminal conduct upon the civil, and not the criminal, standard of proof?'

(e) 'Whether it is open to the applicant to adduce evidence of other facts and circumstances which, if proved may:-

(i) cause the court to exercise its discretion not to enforce the undertaking as to damages;

(ii) show that it would be inequitable, or contrary to the public interest, to require payment of damages pursuant to the undertaking?'

Portplan, by its appeal, seeks orders setting aside the answers given by Wallwork J and asks that in lieu thereof the questions be answered as follows:

"1. That relevant evidence led at the criminal trial cannot be led as evidence on this application.

2. That further evidence not led at the trial in this matter cannot be led on this application.

3. [That] evidence that Grant McCleary was involved in criminal conduct:

(b) alternatively, in a different way than that alleged against him at the trial but sufficiently to make him criminally liable; and

(c) in other criminal conduct involving the use of the property seized, notwithstanding that he was acquitted of these particular charges

is irrelevant to the exercise of the Court's discretion in determining whether or not to award damages to Portplan pursuant to the undertaking of the Commonwealth of Australia.

4. That it is not open to the Respondent (applicant) to prove that Grant McCleary was involved in the alleged criminal conduct or other criminal conduct upon the civil and not the criminal standard of proof.

5. That it is not open to the Respondent (applicant) to produce evidence of other facts and circumstances which, if proved, may:

(a) cause the Court to exercise its discretion not to enforce the undertaking as to damages; and

(b) show that it would (sic) inequitable or contrary to public interest to require payment of damages pursuant to the undertaking.

6. That the costs of this appeal be in the cause."

"1. That the Learned Trial Judge erred in ruling that relevant evidence led at the criminal trial can be led as evidence on this application.

2. That the Learned Trial Judge erred in ruling that further evidence not led at the trial in this matter can be led on this application.

3. That the Learned Trial Judge erred in ruling that the Respondent (applicant) may lead evidence tending to show that Grant McCleary was involved in criminal conduct:

(b) alternatively, in a different way than that alleged against him at the trial but sufficient to make him criminally liable; and

(c) in other criminal conduct involving the use of the property seized, notwithstanding that he was acquitted to these particular charges.

4. That the Learned Trial Judge erred in ruling that it was open to the Respondent (applicant) to prove that Grant McCleary was involved in the alleged criminal conduct or other criminal conduct upon the civil and not the criminal standard of proof.

5. That the Learned Trial Judge erred in ruling that it was open to the Respondent (applicant) to produce evidence of other facts and circumstances which, if proved, may:

(a) cause the Court to exercise its discretion not to enforce the undertaking as to damages; and

(b) show that it would (sic) inequitable or contrary to public interest to require payment of damages pursuant to the undertaking."

Although the notice of appeal, on its face, is directed against all the answers given by Wallwork J, it is apparent from the answers for which Portplan contends, the grounds of appeal, and the argument of Mr Barker QC, senior counsel for Portplan, that Portplan attacks principally the answers to questions (c), (d) and (e) and supports the negative answer to question (b).

The Commonwealth's cross-appeal concerns the answer to question (b). The cross-appeal rests to a significant degree on amendments made to the Telecommunications (Interception) Act 1979 (C'th) by the Telecommunications (Interception and Listening Devices Amendment) Act 1997 (C'th). These amendments had not been made when Wallwork J delivered his reasons. I refer below in greater detail to the grounds on which the cross-appeal was argued.

The evidence that the Commonwealth seeks to lead in the enforcement proceedings

Before describing the evidence that the Commonwealth wishes to lead in the enforcement proceedings it is necessary to make some preliminary comments.

An issue in the enforcement proceedings is whether the loss suffered by Portplan was caused by the restraining order. Portplan does not dispute that evidence relating to causation of loss is admissible in those proceedings and such evidence is not in issue in this appeal. The comments that I make below in regard to the admissibility or otherwise of evidence have no application to evidence relevant to causation.

The questions before Wallwork J were very broad in their terms and, despite the Commonwealth tendering a summary of the evidence it wishes to lead in the application for enforcement, answers are sought from the court in something of a vacuum. In particular, the summary of evidence (understandably) does not disclose the precise nature and relevance of the individual pieces of proposed evidence. This affects the way in which, at this stage, the questions are required to be dealt with. They can, in the circumstances, only be answered in general terms. It will be for the Judge who hears the application to determine, in the light of the findings and comments of this Court, the admissibility of particular evidence that may be tendered.

In considering the admissibility of the evidence on which the Commonwealth seeks to rely, it is necessary to bear in mind that the Commonwealth intends to tender the evidence in question on the basis that the civil standard of proof applies. The Commonwealth contends in fact that all issues that arise in the enforcement proceedings are to be decided on a balance of probabilities. Whether this is the case is the subject of question (d).

From the papers before the court and from the submissions of Mr Heenan QC, senior counsel for the Commonwealth, it seems to me that the evidence proposed to be led by the Commonwealth can be categorised as follows:

(I) Evidence admitted in the original criminal trial of McCleary, for the purpose of proving that McCleary was in fact guilty of the offences of which he had been acquitted.

(II) Other evidence not led at the criminal trial (except for telecommunications interception evidence referred to in category (IV) below), for the purpose of proving that McCleary was guilty of the offences of which he had been acquitted. This is presumably fresh evidence or evidence proving that the verdict of the jury was fraudulently obtained.

(III) Evidence, including but not limited to evidence of the kind referred to in categories (I) and (II), for the purpose of proving that McCleary was involved in other criminal conduct (i.e. not the offences of which he had been acquitted) specifically involving the use of the property seized.

(IV) Telecommunications intercept evidence obtained under a warrant issued under the Telecommunications (Interception) Act 1979.

(V) Evidence, other than that referred to in categories (I), (II), (III) and (IV) above, to establish that the Commonwealth acted reasonably in obtaining the restraining order.

(VI) Evidence concerning the Westpac Banking Corporation loan to Portplan and the calling in of the loan by Westpac. This is said to relate to issues of causation of loss, and in my view is admissible on that ground, in any event. I shall not again refer to evidence of this category.

(VII) Evidence, including but not limited to evidence of the kind referred to in categories (I) and (II) above, for the purposes of proving that Portplan's property, the subject of the restraining order, had been acquired by it, directly or indirectly, by criminal conduct, or that criminal conduct caused or contributed to Portplan's loss, such that it would be inequitable or against public policy to require the Commonwealth to compensate Portplan for its loss.

(VIII) Evidence concerning McCleary's involvement in offences under the Cash Transaction Reports Act 1988. I understand this to be a specific example of evidence falling into categories (III) or (VII).

Question (b) is concerned with category (IV), the telecommunications intercept evidence. Portplan, in effect, made no submissions in this regard (but did not concede the correctness of the Commonwealth's submissions in this respect).

Although the meaning of question (c) is not entirely clear, it is apparent that the parties understand it to be concerned with the evidence falling into categories (I), (II), (III) and (V) above). That is to say, question (c) is concerned with evidence admitted in the criminal trial, or fresh evidence showing that McCleary was guilty of the offences of which he had been charged, or that the verdict was fraudulently obtained, and evidence that McCleary was involved in other criminal conduct involving the use of the property seized. It is also said that evidence bearing on the reasonableness of the Commonwealth's conduct, in obtaining the restraining order is relevant to question (c), generally. Depending on the answer to question (b), category (IV) (the telecommunications intercept evidence) may also be relevant to question (c). It is to be noted that, in regard to question (c), the Commonwealth does not seek to tender evidence to show that its conduct in obtaining the restraining order was reasonable because it was misled by any person.

Question (e) is concerned with categories (VII) and (VIII). Again, depending on the answer to question (b), category (IV) may also be relevant to this question. That is to say, question (e) is concerned with evidence that Portplan's property, the subject of the restraining order, had been acquired by criminal conduct, or that criminal conduct caused or contributed to Portplan's loss.

Portplan made what may be described as two principal submissions in regard to questions (c) and (e) The first was that any evidence which tended to show that McCleary is guilty of the charges of which he had been acquitted by the jury was inadmissible for the purposes of determining what compensation "the court may in its discretion consider in the circumstances to be just" (in the words of the Commonwealth's undertaking). The second was, in effect, that no evidence is admissible for the purpose of showing that McCleary (or Portplan) was guilty of any criminal offence of which he (or it) had not been charged and found guilty.

The scheme of the Proceeds of Crime Act

The compensation payable in terms of the Commonwealth's undertaking depends upon what "the court may in its discretion consider in the circumstances to be just". These are words used in the undertaking and it is the undertaking that has to be construed to determine whether the discretion of the court is limited as Portplan contends.

The source of Portplan's claim for enforcement of the Commonwealth's undertaking is the undertaking itself and the undertaking alone (construed of course in the light of all relevant surrounding circumstances). The Proceeds of Crime Act is not the source of Portplan's claim for compensation, but it is part of the context in which the Commonwealth's undertaking was given, and the provisions thereof have an important bearing on the construction exercise that has to be undertaken. I turn, therefore, to the relevant provisions of the Act.

The principal objects of the Proceeds of Crime Act are set out in s3(1) thereof. They include depriving persons of the proceeds of, and benefits derived from, the commission of offences against the laws of the Commonwealth, and providing for the forfeiture of property used in or in connection with the commission of such offences. Prof Fisse, in his essay in Fisse, Fraser and Coss (eds) The Money Trail: Confiscation of Proceeds of Crime, Money Laundering and Cash Transaction Reporting, Law Book Co Sydney (1992) at 74 explains that:

"The Proceeds of Crime Act 1987 (Cth) (POC Act) and similar legislation at the State level provide a new regime for controlling crime. The distinctive method of control under this regime is to attack the money trail by confiscating the proceeds of crime, usually by proceedings in personam. By confiscating the proceeds of serious offences it is hoped that organised crime, especially organised drug-related crime, will be dealt a crippling blow. As one commentator has observed (Pianin, 'Criminal Forfeiture: Attacking the Economic Dimension of Organised Narcotics Trafficking' (1982) 32 Am U L Rev 227 at 254-255):

'Incarcerating ringleaders of large scale narcotics operations while leaving intact their illegally obtained empires allows illicit enterprises to continue in operation. Criminal forfeiture affords law enforcement officials the opportunity to attack drug traffickers where they are most vulnerable - in their pocketbooks. Incarcerated individuals can be replaced, but without financial support the well-insulated criminal empire cannot continue as a viable enterprise. In addition, seizure and forfeiture statutes that strike at the economic base of organised crime have the potential to provide funding for further narcotics investigations. Through forfeiture, law enforcement may produce large amounts of revenue ... The concept of having multi-million dollar drug rings pay for criminal investigations, convictions and incarcerations through criminal forfeiture is of significant import.'"

See further the discussion by Kirby P in Director of Public Prosecutions (C'th) v Toro-Martinez (1993) 119 ALR 517.

As part of the means by which the objects of the Act are sought to be achieved, s43(1) and (2) provide that the DPP may apply for a restraining order against property of the defendant (who is defined to be a person convicted of an indictable offence or a person who has been or is about to be charged with such an offence), and specified property of a person other than the defendant. Where the offence is an ordinary indictable offence, a restraining order should only be made if it is established that there are reasonable grounds for believing that the property concerned is tainted property in relation to that offence, or the defendant derived a benefit directly or indirectly from the commission of that offence. "Tainted property" in relation to an offence is defined in s4 of the Act as:

"(a) property used in, or in connection with, the commission of the offence; or

and when used without reference to a particular offence means tainted property in relation to an indictable offence."

As it is common cause that McCleary was charged with what the Act describes as "serious offences", it is necessary to have regard to the provisions dealing with such offences. Section 44(1) provides:

"Where the offence concerned is a serious offence, the court shall, subject to subsections (3), (4), (7A) and (10), make a restraining order against the property."

"Serious offence" means a "serious narcotic offence" as defined (that is, an offence involving a trafficable quantity of drugs), organised fraud, or money laundering in relation to the proceeds of a serious narcotics offence or organised fraud (s7).

"If the defendant has not been convicted of the offence concerned, the court shall not make a restraining order unless:

(a) the application for the order is supported by an affidavit of a police officer stating that the officer believes that the defendant committed the offence; and

(b) the court is satisfied, having regard to the matters contained in the affidavit, that there are reasonable grounds for holding that belief."

The Commonwealth's application for a restraining order was supported by an affidavit of a police officer as required by s44(3)(a) and the court was satisfied in terms of s44(3)(b) that there were reasonable grounds for the police officer concerned believing that the defendant committed the offence. Hence, the restraining order was granted.

Section 44(4) is not presently relevant. Section 44(7A) provides:

"Where the application seeks a restraining order against specified property of a person other than the defendant and the offence concerned is a serious offence, the court shall not make a restraining order the property unless:

(a) the application is supported by an affidavit of a police officer stating that:

(i) the officer believes that the property is tainted property in relation to the offence; or

(ii) the officer believes that the property is subject to the effective control of the defendant; and

(b) the court is satisfied having regard to the matters contained in the affidavit, that there are reasonable grounds for holding that belief."

In making the application for the restraining order, the Commonwealth relied on the fact that Portplan was under the effective control of McCleary. This is not in dispute.

"(10) A court may refuse to make a restraining order if the Commonwealth refuses or fails to give the court such undertakings as the court considers appropriate with respect to the payment of damages of costs, or both, in relation to the making and operation of the order."

"(11) For the purposes of an application under section 43, the DPP may, on behalf of the Commonwealth, give to the court such undertakings with respect to the payment of damages or costs, or both, as are required by the court."

Accordingly, it is ss44(10) and (11) that provide the specific legal framework pursuant to which the Commonwealth's undertaking was given.

Where the defendant is charged with a serious offence, the property of the other person may be made subject to a restraining order if, firstly, the defendant is charged with the offence or a related offence within 48 hours of the application for a restraining order; secondly, if there are reasonable grounds for believing that the defendant committed the offence in question; and, thirdly, if there are reasonable grounds for believing that the property in question is "tainted" or subject to the effective control of the defendant. In the event of these matters being established to the satisfaction of the court, the only ground on which the court may refuse to make a restraining order, is if the Commonwealth refuses to give the court an undertaking as to damages or costs or both in terms of ss44(10) and (11). In the case of an ordinary indictable offence, the Commonwealth has to establish the additional element that the defendant derived a benefit directly or indirectly from the commission of the offence.

Where a person has been convicted of a "serious offence" and a restraining order remains in force in relation to that person's property for six months after that conviction, the property is automatically forfeited (ss30(1) and (2)).

Section 48(4) empowers a defendant to apply to the court for a declaration that the restraining order, to the extent to which it relates to particular property, shall be disregarded for the purposes of s30. For such a declaration to be made, the court must be satisfied that the property was not used in, or in connection with, any unlawful activity and was not derived by any person from any unlawful activity, and that the defendant's interest in the property was lawfully acquired. Section 4(1) of the Act defines an "unlawful activity" as "an act or omission that constitutes an offence against a law enforced in the Commonwealth, a State, a Territory or a foreign country." Thus, it is not sufficient for the applicant defendant to satisfy the court only that the property was not used in or in connection with the offence for which the person was convicted.

Where property has been forfeited under s30, a person who claims an interest in that property may apply for an order under s31(6) directing the Commonwealth to transfer that interest to the applicant, or declaring that the Commonwealth pay to the applicant an amount equal to the value of the interest. Again, it is pertinent to note that in order to obtain relief under the subsection, the applicant must prove, amongst other things, that he or she was not, in any way, involved in the commission of the relevant serious offence, that he or she acquired the property without knowing (and in circumstances such as not to arouse a reasonable suspicion) that it was tainted property, that the property was not used in, or in connection with, any unlawful activity and was not derived or realised, directly or indirectly, by any person from any unlawful activity, and that the applicant's interest in the property was lawfully acquired.

In terms of s32, where property is forfeited to the Commonwealth under s30 by reason of a person's conviction of a serious offence, and the conviction is subsequently quashed, mechanisms are provided whereby a person claiming an interest in the property may apply for the transfer of that interest to that person.

It may be noted that ss19 and 26 provide for discretionary forfeiture and pecuniary penalties where a party has been convicted of an indictable offence. In terms of s28(1), in assessing the value of benefits derived by a person from the commission of an offence or offences, the court may treat as property of the person any property that, in the opinion of the court, is subject to the effective control of the person.

To complete the scheme of the Act insofar as it is relevant to the present appeal, s57(1)(d) provides, in effect, that where a restraining order is made in reliance on the proposed charging of a person, and the person is acquitted of the charge, the restraining order ceases to be in force when the acquittal occurs. Accordingly, had McCleary been convicted, the property of Portplan that was subject to the restraining order would have been automatically forfeited to the Commonwealth pursuant to s30(1), but by virtue of his acquittal, the restraining order ceased to be in force and therefore, upon acquittal, was spent.

What are the features of this legislative scheme that are relevant in construing the undertaking? The following seem to me to be of particular note.

Parliament has perceived the need to take unusually far-reaching steps to combat serious crime, including drug trafficking. The harm that is brought about by the illegal distribution of narcotic drugs is so well-known there is no need to adumbrate upon it. It would be sufficient to say that anyone concerned in the daily work of the courts would recognise the very strong need for effective means to combat drug-related criminal activities. Plainly, Parliament considers that the dangers that these activities pose to our community require alterations to processes and principles previously well established in the common law. As Kirby P noted (at 526) in Director of Public Prosecutions (C'th) v Toro-Martinez, in regard to criticism of the severity of the provisions of the Act expressed by several commentators:

"At the heart of the criticism is the call back to the common law's principle that criminal liability is personal not vicarious: see Tesco Supermarkets Ltd v Nattrass [1971] UKHL 1; (1972) AC 153 HL at 201 it 'cuts against the grain' to depart from that principle. But if a competent legislature, by valid legislation clearly does so, it is the duty of the court to give effect to the will of the law makers, so expressed. The justification of the kind of legislative provisions with which we are dealing here is advanced by J Thornton in his essay in Fisse, Fraser and Coss (eds) The Money Trail: Confiscation of Proceeds of Crime, Money Laundering and Cash Transaction Reporting, Law Book Co Sydney (1992) ...

'... Restraining orders are a key element in ensuring the effectiveness of confiscation legislation. Without them, many who are charged with offences would hide, transfer, consume or otherwise ensure that their assets were not available to meet any final orders. To allow this to happen would effectively defeat the objects of the legislation.' "

Legal ownership of property will not prevent forfeiture if the conditions precedent to the exercise of the power of forfeiture are satisfied. Nevertheless, the Act recognises the need to protect persons who are innocent of any wrongdoing in the broad sense and mechanisms are provided whereby they can defend their property against forfeiture. However, a person who applies for the release of property subject to forfeiture must satisfy a broad range of stringent requirements all designed to ensure that the court is satisfied that the applicant is innocent of the relevant offence and that the property was not acquired in any way through or used in unlawful activities.

The forfeiture and other related provisions of the Act are dependent on the defendant being convicted of the offence, the charging of which was the precondition to the granting of a restraining order. As is pointed out in Fisse's essay in The Money Trail op cit at 92, because the Act is conviction based it does "not allow forfeiture and pecuniary penalties to be used as a means of circumventing the stricter procedural and evidentiary requirements of the criminal process".

Under the Act, restraining orders can more readily be obtained where persons are charged with serious offences. Particularly where a person is charged with such an offence, the provision by the Commonwealth of an appropriate undertaking as to damages or costs or both may be a critical factor in persuading the court to make a restraining order.

Basically, a restraining order under the Proceeds of Crime Act serves the same purpose as a Mareva injunction in civil proceedings. A restraining order is intended to maintain intact property which might become the subject of a forfeiture order in relation to tainted property, a pecuniary penalty order or forfeiture which would automatically follow upon conviction under s30: see Saffron (No 4) (1989) 39 A Crim R 353 .

The circumstances surrounding the giving of the Commonwealth's undertaking

There is no evidence before this Court as to whether the Commonwealth gave its undertaking because Owen J indicated that he would not grant the restraining order without it or whether the undertaking was simply offered by the Commonwealth as an integral part of its application, without any requirement therefore being expressed by his Honour. In my experience, the general practice is for an undertaking to be offered of its own volition by the Commonwealth, as part and parcel of the application for a restraining order, and accordingly, in the absence of any evidence to the contrary, I shall assume that this is what occurred.

It is plain why the existence of the undertaking might persuade the court to grant a restraining order when, in the absence of such an undertaking, it would not. The existence of the undertaking would tend to satisfy any concerns the court might have that the making of a restraining order might cause innocent persons to sustain damage in a context in which, upon acquittal of the person charged, it could well be regarded as unfair and unjust for such persons to be without means of recovering such damage.

Mr Heenan pointed out, in our system of law, generally speaking, a person is not entitled to any compensation, damages or costs if criminal proceedings have been brought against that person but are later withdrawn or dismissed or result in an acquittal. It is often an inevitable result of the application of the machinery of the criminal law that hardship and loss are caused to accused persons who face trial and are acquitted. Ordinarily, under our law, such persons have no remedy for the damage they sustain. Similarly, if a restraining order is granted after a person has been charged with a serious offence, and no undertaking has been given pursuant to s44(10), and the person charged is subsequently acquitted, any person suffering damage by reason of the restraining order would have no remedy. The absence of such a remedy in those circumstances, Mr Heenan submitted, should influence the rights of a person to whom an undertaking pursuant to s44(10) is given. He submitted that those rights should be strictly construed; thereby allowing the Commonwealth to adduce evidence, in effect, falling into all the categories I have set out above. As I have mentioned, however, the very consequence that there would otherwise be no remedy for innocent persons affected by a restraining order may well persuade a court to refuse to grant a restraining order unless an undertaking were given. That being so, effective content must be accorded to the undertaking. The fact that, in the absence of such an undertaking, innocent persons might suffer irrecoverable loss does not suggest that the obligations assumed by the Commonwealth thereunder should be more readily avoided. Indeed, the contrary is the case.

The similarity between undertakings given pursuant to s44(10) and in ordinary civil litigation, and the significance thereof

The purpose of an undertaking as to damages in ordinary civil litigation is well-known. In Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd [1981] HCA 75; (1981) 146 CLR 249 at 311 Gibbs J said:

"The object of requiring a plaintiff who seeks an interlocutory injunction to enter into an undertaking of this kind is to attempt to ensure that a defendant will receive compensation for any loss which he suffers by reason of the grant of the injunction if it appears in the event that the plaintiff was not entitled to obtain it. The insistence upon the giving of an undertaking is a very important, if not an essential, means of preventing injustice from being done by the court when it makes an order at an interlocutory stage, before the rights of the parties have been finally determined."

See also F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295 at 360-361 per Lord Diplock.

The mechanism of the undertaking as to damages contemplated by the Proceeds of Crime Act is itself something of a curiosity. It is not a feature well-known in the criminal law. Once it is appreciated, however, that a restraining order is granted in order to maintain a particular property intact pending the criminal trial of the person charged with the offence, the true nature of the undertaking is revealed. It is useful to examine the restraining order by reference to the characteristics of an interim injunction described by Lord Diplock in F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry at 360-361. The restraining order is a temporary and exceptional remedy. It is available before the rights of the parties have been finally determined, indeed, even before the court has been apprised of the nature of the defendant's case. Notwithstanding the evidence tendered by the applicant, it would not be possible for the court to be certain that the person charged with the offence will be convicted. Any loss sustained by a person to whose property a restraining order applies would be without remedy.

Obviously, the undertaking under s44(10) is intended to serve the same purpose as an undertaking given to persuade the court to grant an interim or interlocutory injunction. Just as an undertaking as to damages is the price of an interim or interlocutory injunction (Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd at 319 per Stephen J) it may be said that where an undertaking is offered in terms of ss44(10) and (11), that undertaking may well be the price of a restraining order, at least as regards parties other than the defendant.

The similarity between the concept of an undertaking given pursuant to s44(10) and an undertaking as to damages in ordinary civil litigation means, in my view, that Parliament intended by the Proceeds of Crime Act that the rules and practices applicable to undertakings in ordinary civil litigation be followed, as far as is reasonably and practicably possible, in dealing with undertakings given pursuant to s44(10) subject, of course, to the terms of the undertaking in fact given.

The significance of the terms of the Commonwealth's undertaking

The very terms of the Commonwealth's undertaking are significant, having regard particularly to the breadth of the discretion afforded to the Commonwealth in this regard by s44(10).

The circumstances under which a court will grant a restraining order without an undertaking as to damages by the Commonwealth have not yet been worked out by the courts. However, it is obvious that a restraining order will more readily be made without such an undertaking when the property restrained is owned by the defendant in the criminal proceedings, rather than some third party not under the defendant's effective control. While the defendant will be an active party in the criminal trial, the third party will not, even though - on conviction of the defendant - the third party's property is subject to forfeiture. The third party's property would therefore be in jeopardy of forfeiture without him or her being able to take steps to resist that occurring. Accordingly, it would be unusual for a restraining order to be made against a third party's property without an undertaking being required under s44(10). On the other hand, in an appropriate case, I see no reason why a restraining order should not be made against the property of a defendant without an undertaking as to damages being given. This is to be contrasted with the position in ordinary civil litigation, where the general rule requires the provision of an undertaking as to damages even when the interlocutory injunction sought could affect only the interests of the defendant.

Moreover, and significantly, while O52 r9 expressly provides that (unless otherwise ordered) the undertaking must be to pay "any party restrained or affected by restraints imposed by the interlocutory injunction", s44(10) leaves open the identity of the persons in whose favour the undertaking is to be given. In addition, and equally significantly, O52 r9 expressly provides (unless otherwise ordered) that the undertaking will be to pay "such compensation as the court may in its discretion consider in the circumstances to be just", whereas s44(10) is silent as to the terms of the undertakingsave that it must be in terms that the court "considers appropriate".

Thus, the undertaking contemplated by s44(10) is far more flexible in nature than that contemplated for use in ordinary civil litigation. Section 44(10) in reality leaves the terms of the undertaking to be moulded by the Commonwealth (subject to the requirements of the court) so as to suit the circumstances of a particular case (including the identity of the beneficiaries of the undertaking), whereas O52 r9 circumscribes the form of the undertaking "unless the court otherwise orders". In the circumstances, a wide discretion is given to the Commonwealth in regard to any undertaking as to damages, if any, that is offered pursuant to ss44(10) and (11). It is pertinent therefore, to examine the terms of the undertaking in fact given.

"Unless the court otherwise orders upon the grant of an interlocutory injunction the order shall include an undertaking to the court on the part of the applicant that he will pay to any party restrained or affected by restraints imposed by the interlocutory injunction or by an interim continuation of the interlocutory injunction, such compensation as the court may in its discretion consider in the circumstances to be just. ..."

The form of the usual undertaking, as set out in Practice Direction issued on 3 October 1975 is as follows:

"The plaintiff or defendant (as the case may be) undertakes to the court that he will pay to any party restrained or affected by the restraints imposed by this interlocutory injunction, or this interlocutory undertaking to the court ... such compensation as the court may in its discretion consider in the circumstances to be just, such compensation to be assessed by the court or in accordance with such directions as the court may make and to be paid in such manner as the court may direct."

Notwithstanding the differences between the terms of s44(10) and O52 r9, and the different considerations applicable to each, the phraseology of the Commonwealth's undertaking is in the very terms specified by O52 r9 and the Practice Direction. The inference to be drawn from this, in my view, is that the Commonwealth intended that the relevant rules applicable to undertakings given pursuant to O52 r9 should be applicable, as far as is reasonably and practicably possible, to the undertaking proffered by it. In other words, the inference to be drawn from the words of the undertaking reinforce the inference, which for reasons I have expressed, is to be drawn from the Proceeds of Crime Act.

Therefore, in my opinion, close attention must be given to the circumstances which have been held to be relevant when determining whether it would be "just" for a defendant to be paid compensation pursuant to an undertaking as to damages given to the court by an unsuccessful plaintiff in ordinary civil proceedings.

Mr Heenan resisted this reasoning. He drew attention to the body of authority to the effect that, in ordinary civil litigation, the Crown is not required to provide undertakings as to damages in actions where it seeks to enforce the law of the land, as opposed to its proprietary rights: Commonwealth v John Fairfax & Sons Ltd [1980] HCA 44; (1980) 147 CLR 39 at 59; F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry. He submitted that this meant that the rules applicable to undertakings in ordinary civil litigation were of limited value. In my view, however, the peculiar position of the Crown in regard to undertakings when attempting to enforce the law of the land is irrelevant to the present issue. Under s44(10) of the Proceeds of Crime Act the Commonwealth is afforded a discretion whether or not to give an undertaking (although the court may refuse a restraining order unless such an undertaking is given). This is to be distinguished from the position where the Commonwealth, in the circumstances referred to in Commonwealth v John Fairfax & Sons Ltd, does not have to provide an undertaking as to damages in order to obtain an interlocutory injunction. The fact that in the latter situation the Commonwealth can obtain interlocutory relief without an undertaking has no bearing on the construction of an undertaking in fact provided by the Commonwealth, of its own volition, in order to obtain a restraining order.

The principles applicable in regard to the enforcement of undertakings as to damages in ordinary civil litigation

In Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd Aickin J (at 260-261) explained:

"In Graham v Campbell (1878) 7 Ch D 490 at 494 the Court of Appeal, James, Cotton and Thesiger LJJ, said:

'The undertaking as to damages which ought to be given on every interlocutory injunction is one to which (unless under special circumstances) effect ought to be given. If any damage has been occasioned by an interlocutory injunction, which on the hearing is found to have been wrongly asked for, justice requires that such damage should fall on the voluntary litigant who fails, not on the litigant who has been without just cause made so.'

No reference was made in these cases to the interlocutory injunction having been obtained by suppression of facts or on insufficient information. It was however suggested by Jessel MR that an order for damages pursuant to such an undertaking would only be made where the injunction had been obtained by some false statement or suppression of information and that it would not apply where the injunction had been wrongly granted because of some mistake of law by the court: Smith v Day (1882) 21 Ch D 421 at 424-425. However Cotton LJ dissented from those observations and pointed out that in Novello v James [1854] EngR 1015; (1854) 5 De G M & G 876 Knight Bruce LJ and Turner LJ had said that the fact that the law was doubtful was no reason for not ordering damages. The third member of the court, Brett LJ, expressly refrained from expressing a view upon the point. However, in Griffith v Blake (1884) 27 Ch D 474 the Court of Appeal expressly dissented from the dictum of Jessel MR and stated that it was not well founded. Baggallay LJ (at 476) said:

'If the Defendants turn out to be right, it appears to me that they can, under the undertaking, obtain compensation for all injury sustained by them from the granting of the injunction.'

'The dictum of the late Master of the Rolls is not consistent with what was done by the Court of Appeal in Novello v James and Newby v Harrison [1861] EngR 850; (1861) 3 De G F & J 287.' "

"The cases display a substantial variation in the language in which the principle is expressed. The following are examples of expressions used: some cases speak of damages being available if it turns out that the injunction was 'wrongfully granted'; others of where 'the court is ultimately of opinion that the order ought not to have been made', and others again say that the damage should not fall on the 'litigant who has without just cause been made so'. It seems that the first two expressions mean no more than that the plaintiff ultimately fails and are not concerned with the question whether it was correct in the circumstances prevailing at the time to grant the interlocutory injunction. At the trial the issues are of necessity different from those involved in the question of whether or not an interlocutory injunction should be granted." (My emphasis).

His Honour (at 262) referred to American authorities which proceeded upon the basis that no damages would be allowed except in cases where the matter had been prosecuted maliciously and without reasonable cause and that no damages would be allowed where the law was doubtful. Aickin J described this approach as being based "upon a view of the principles the same as or similar to that adopted by Jessel MR and subsequently rejected by the later English authorities". His Honour also noted that the American approach was rejected by the Supreme Court of Canada in Vieweger Construction Co Ltd v Rush & Tompkins Construction Ltd (1965) 48 DLR (2d) 509 where the Supreme Court stated the relevant test by reference to Griffith v Blake (1884) 27 Ch D 474. In the decision of Aickin J, Barwick CJ (at 310) accepted that Aickin J had rightly reached his conclusion by following Griffith v Blake. The learned Chief Justice said:

"[I]t is far too late to re-open the decision reached in the judgment in Griffith v Blake and the subsequent cases. I treat the relevant law as finally settled in the sense expressed by my brother Aickin."

Gibbs J focused on the conduct of the defendant. His Honour stated (at 311-312):

"The court has a discretion not to enforce such an undertaking, but unless the defendant has been guilty of conduct that would render it inequitable to enforce the undertaking it would seem just, speaking generally, that a plaintiff who has failed on the merits should recompense the defendant for the damage that he has suffered as the result of the making of the interlocutory order."

"[I]n Griffith v Blake the Court of Appeal explicitly rejected the suggestion made by Jessel MR in Smith v Day, that damages for breach of an undertaking will only be awarded when the interim injunction has been procured by a false statement or suppression of material information and that damages will not be awarded when the injunction has been wrongly granted because the court made a mistake of law.

There are statements which indicate that the court has a discretion to decide whether it shall order an inquiry for damages for breach of an undertaking given to the court - see Smith v Day. But the discretion is to be exercised according to well-settled principle (my emphasis). Generally speaking, so long as the claim for damages is not trivial or trifling an inquiry should be directed and the defendant will be entitled to recover the loss which is the natural consequence of the grant of the injunction. The Supreme Court of Canada has held that the court will be entitled to refuse a reference as to damages where there are special circumstances, i.e. when the plaintiff is a public body and acts in the public interest to hold the situation until the rights are determined or when the defendant, having succeeded on technical grounds, has been guilty of misconduct (Vieweger Construction Co Ltd v Rush & Tompkins Construction Ltd). It has not been suggested that there are any special circumstances in the present case."

Lord Diplock in F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry (at 361) expressed similar views, namely:

"[The court] retains a discretion not to enforce the undertaking if it considers the conduct of the defendant in relation to the obtaining or continuing of the injunction or the enforcement of the undertaking makes it inequitable to do so." (My emphasis).

Mr Heenan relied on remarks made in the Canadian case of Vieweger Construction Co Ltd v Rush & Tompkins Construction Ltd to which reference was made by Mason J in Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (at 323). Spence J, in delivering the judgment of the Supreme Court of Canada, said (at 519):

"There are examples of plaintiffs who are public bodies and who acted in the public interest to hold the situation in statu quo until the rights were determined. There are other cases where the defendant, although he succeeded upon technical grounds, certainly had been guilty of conduct which did not move the court to exercise its discretion in his favour. In these cases, the court has found the 'special circumstances' which entitled it to refuse a reference as to damages ... [In this case] I am of the opinion that it is an ordinary case of an injunction granted upon a plaintiff's application and upon the plaintiff's undertaking, and that the plaintiff should be required to make good its undertaking."

Mr Heenan submitted, in effect, that the position of the Commonwealth, in obtaining a restraining order, was that of a public body who was acting in the public interest to hold the situation in statu quo until the rights were determined, and therefore its conduct in obtaining the restraining order could constitute "special circumstances". He derived support for this proposition from remarks by Williams J in Cannon v DPP (1997) A Crim R 91 (at 423) from which it appeared that his Honour equated the position of the DPP in that case with the public body in Vieweger Construction Co Ltd v Rush & Tompkins Construction Ltd.

Whatever the position may be in Canada, the position laid down in F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry is that where the Crown commences proceedings to enforce the law, and in the course of doing so seeks interlocutory relief, an undertaking as to damages may not be required at all (see Lord Reid at 341 and Lord Diplock at 364). In Soil Conservation Authority v Read [1979] VicRp 55; [1979] VR 557 at 561 this proposition was accepted as being the law in Australia. In Kirklees Metropolitan BC v Wickes Building Supplies Ltd [1993] AC 227 the House of Lords held that the Crown was not exempt from giving an undertaking as to damages, but the court had a discretion (extended to other public authorities) not to require the undertaking. This was applied, for example, in Securities and Investments Board v Lloyd-Wright [1993] 4 All ER 210, where interim Mareva injunctions were granted without the applicant being required to provide an undertaking as to damages.

According to these authorities if, in proceedings to enforce the law, the Crown wishes to protect itself against the usual liability flowing from an undertaking as to damages, it should attempt to ensure that it is not required to given such an undertaking at all. If, however, in the exercise of its discretion, the court does require the Crown to provide an undertaking (or the Crown, of its own volition, provides an undertaking), the Crown will not be excused from liability thereunder merely because it acted reasonably in obtaining the injunction. The value, in such circumstances, of such an undertaking would be very limited, and hardly worth the price of the injunction. In my opinion, the usual rules apply to such an undertaking.

Furthermore, I do not think that the position of the Commonwealth in this case is comparable with the public body referred to in Vieweger Construction Co Ltd v Rush & Tompkins Construction Ltd. The Commonwealth, in obtaining the restraining order, was of course acting in the public interest, but its conduct in doing so and in proffering an undertaking as to damages was not equivalent to a public authority maintaining the status quo. Such a public authority seeks to preserve the status quo pending the determination of the main action. If the public body succeeds in the main action, the status quo will be maintained indefinitely. The Commonwealth on the other hand, sought to restrain property, including property of third parties, so that upon conviction the property would be forfeited - thereby altering the status quo irrevocably.

Accordingly, in my view the position of the public body referred to in Vieweger Construction Co Ltd v Rush & Tompkins Construction Ltd is of no real assistance in the present inquiry.

In my opinion, on the authority of Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd and Griffith v Blake, the following propositions can be extracted:

(a) The court has a discretion not to enforce an undertaking as to damages given in ordinary civil litigation, but that discretion is to be exercised in accordance with well-settled principle.

(b) Where a plaintiff has failed on the merits, the undertaking will be enforced unless special circumstances exist.

(c) Generally, special circumstances will involve conduct of the defendant (unrelated to the plaintiff's failure on the merits) such that would render it inequitable to enforce the undertaking.

(d) Special circumstances will not be constituted by the reasons for the plaintiff's ultimate failure, or by the fact that the plaintiff acted reasonably in obtaining the injunction, or that the injunction was granted by a mistake of law or fact on the part of the court.

An example of "special circumstances" where the successful defendant's conduct was such that it was inequitable to enforce the undertaking is Modern Transport Co Ltd v Duneric Steamship Co [1917] 1 KB 370. In this case the Court of Appeal considered that delay and other unreasonable conduct on the part of the defendant constituted special circumstances such that no inquiry as to damages ought to be granted. See also Lewandowski v Lovell (1994) 11 WAR 124 where one of the considerations that influenced the Full Court in refusing to order an inquiry as to damages was the defendant's apparent actions in contempt of the interlocutory injunction (the other reason being, in effect, that the result of the main proceedings had not yet finally been determined, there being a pending appeal).

Importantly, if the above analysis is correct, well-settled principle does not allow a plaintiff in ordinary civil litigation to escape the enforcement of an undertaking as to damages merely because it had very strong grounds to obtain the interlocutory injunction and acted reasonably in doing so. These factors relate to the plaintiff's "ultimate failure" and are irrelevant to the question whether it is, in the circumstances, just to enforce the undertaking.

There appear to be no cases dealing with the situation where a plaintiff seeks to set up "special circumstances" because of an error by the trial Judge causing the plaintiff to be unsuccessful in the main action. This is perfectly understandable, as should the plaintiff be of the opinion that such an error had been committed, it would be open to the plaintiff to appeal to a higher court. Should the plaintiff be unsuccessful on appeal it would follow that the undertaking would be enforced in accordance with the principles which I have listed. One can take the hypothesis further. Assume that the plaintiff is unsuccessful and does not appeal, but, before proceedings are taken to enforce the undertaking, judgment in another case is delivered by a higher court from which it appears that the trial Judge in the case involving the plaintiff concerned made a critical error which resulted in the plaintiff losing the case. Would the undertaking then be enforced? In my opinion it would; the reason being that it was open to the plaintiff to have appealed and, having failed to do so, it is bound by the result. The critical factor is ultimate failure on the merits, i.e. in the main action.

Question (c)(i): evidence to prove that McCleary was guilty as charged

The first part of question (c) is whether the applicant may lead evidence admitted at the criminal trial in order to prove that McCleary was "involved" in the criminal conduct of which he was acquitted. The appeal was argued on the basis that the word "involved" in question (c) means "guilty of".

Wallwork J held that question (c), as a whole, should be answered in the affirmative. His Honour noted:

"It was put for the DPP in this case that whilst it is just and proper when dealing with the liberty of the individual that any guilt of an offence must be proved beyond a reasonable doubt, that did not mean that in the event of a not guilty verdict, and where property had been restrained, there should be an award of a sum of damages where there had been good and substantial reasons to restrain the property whilst a legitimate prosecution was carried through from beginning to end."

Generally, Wallwork J upheld this argument and accepted that, in the enforcement proceedings, "special circumstances" enlivening the exercise of a discretion to refuse relief would exist if there was a strong prima facie case based on the conduct of McCleary. His Honour stated further that he accepted the proposition of the DPP that "the rule is that in ordinary civil litigation the parties are not bound by an earlier verdict of acquittal".

His Honour supported these views by his conclusion that it would be open to the Commonwealth to prove that it acted reasonably in applying for and obtaining the restraining order. Thus, his Honour said:

"In my view it would be essential for a court when considering the question which is raised by the undertaking in this matter, being 'such compensation as the court may in its discretion consider in the circumstances to be just', to consider both the conduct of the persons applying for the restraining order and the conduct of the person whom the police officer making the necessary affidavit to obtain the order, believes has the effective control of the relevant property - s44(7A). If, for example, the person having the effective control of the property had behaved in a manner which led the relevant police officer to take the action he did, and the officer at all times acted in good faith, it might not be just to order the DPP of Australia to pay compensation. "

As I understand the matter, the Commonwealth does not propose to tender evidence to prove that McCleary (the person having the effective control of the property restrained) behaved in a manner which led the relevant police officer to take the action he did (as postulated by the learned Judge). It is therefore unnecessary for the admissibility of evidence of that kind to be considered. In any event, the considerations governing the admissibility of such evidence are different to those relevant to the admissibility of evidence tending to prove that McCleary was guilty of the offences of which he was acquitted.

Evidence tendered to prove that the Commonwealth acted in good faith falls under the general category of evidence showing that the Commonwealth acting reasonably in obtaining the restraining order and that it had good grounds for believing that the defendant was in fact guilty of the offences of which he was acquitted (see category (V) above). I have assumed that the Commonwealth does wish to tender evidence of this kind. I have also assumed that such evidence is relevant to question (c)(i).

As I have pointed out, the general rule is that special circumstances will not be constituted by the fact that a plaintiff acted reasonably in obtaining an interlocutory injunction. For the reasons I have expressed, these principles apply to the Commonwealth's undertaking as far as reasonably and practically possible. In my view, there is nothing unreasonable or impracticable in such an application.

Further, in my view, the proposition that reasonable conduct on the part of the Commonwealth is relevant to whether the undertaking should be enforced, does not sit happily with the Proceeds of Crime Act. Under the Act, before a restraining order will be made, the Commonwealth has to show, in any event, that there are reasonable grounds for believing that the defendant committed the offence of which he or she had been (or would be) charged. If the Commonwealth were to be entitled to escape liability under its undertaking merely because it had reasonable grounds for believing that the defendant would be found guilty, or even very strong grounds for such belief, the undertaking itself would be very much a formality and of little comfort to those for whose apparent protection it was given. That would be inconsistent with s44(10) which plainly accords the undertaking material weight.

Accordingly I consider that such evidence is inadmissible.

I turn now to evidence (led at the trial) to the effect that McCleary was guilty of the offences of which he was acquitted.

Well-settled principle holds that, ordinarily, in proceedings for the enforcement of an undertaking as to damages, evidence tendered to show that the decision on the merits was wrong, is inadmissible. Save where it is averred that the judgment in the main action was obtained by fraud, it would not be open to an unsuccessful plaintiff, in proceedings to enforce an undertaking as to damages given by it in the course of obtaining an interlocutory injunction, to argue that it should have been successful at the trial, and that the defendant should have been held to have failed. In the absence of fraud of that kind, the unsuccessful plaintiff will not be allowed to re-litigate the case in the enforcement proceedings.

Of course, there is a difference between civil proceedings which are ordinarily tried by a Judge alone and criminal proceedings which are ordinarily tried by a jury. In civil proceedings, should the trial Judge make an error, that can be cured on appeal. However, in a criminal trial by jury, errors by the jury or the Judge are not susceptible of appeal by the Crown. This distinction is only procedural and does not affect the general rule that, once the provider of an undertaking as to damages has been unsuccessful on the merits, he or she will not ordinarily be allowed to re-open those proceedings when the successful party seeks to enforce the undertaking.

In The Queen v Storey [1978] HCA 39; (1978) 140 CLR 364 Barwick CJ said (at 372):

"The correct principle relevant to the admissibility in a subsequent trial of evidence given in an earlier trial which has resulted in an acquittal is, in my opinion, no more than this: that a verdict of acquittal shall not be challenged in a subsequent trial: the accused in a hearing of a subsequent charge must be given the full benefit of his acquittal on the earlier occasion. Evidence which was admissible to establish the earlier offence is, in my opinion, not inadmissible merely because it was tendered in the earlier proceedings: but it may not be used for the purpose of challenging, or diminishing the benefit to the accused of, the acquittal. ... [T]he citizen must not be twice put in jeopardy, that is to say, as relevant to the present discussion, must not be placed at the risk of being thought guilty of an offence of which he has been acquitted, or of in any sense been treated as guilty. It is the use of the evidence given on the prior occasion to canvass the acquittal which, if allowed, would offend the rule against double jeopardy, giving that rule a generous application."

On the other hand, it is settled law that a verdict of not guilty does not necessarily mean that the accused person was innocent: DPP v Shannon [1975] AC 717 at 772; Darby (1982) 148 CLR 666. Moreover, a verdict of acquittal does not, in subsequent civil proceedings, ordinarily prevent any other person from attempting to prove that the accused was guilty of the offence charged: Helton v Allen [1940] HCA 20; (1940) 63 CLR 691.

These matters, however, in my view, are not relevant to the present issue. It seems to me that the critical point is that, by reason of the factors to which I have referred (i.e. the body of authority relating to undertakings as to damages in ordinary civil litigation, the legislation itself and the terms of the Commonwealth's undertaking), compensation under the undertaking is payable if the Commonwealth fails ultimately in the main proceedings, unless special circumstances exist. The main proceedings are the criminal trial. In my view, having regard again to those factors relevant to the construction of the undertaking, special circumstances do not include proof that, on a balance of probabilities, McCleary committed the offences of which he was charged. That would subvert the clear intention underlying the undertaking, namely that insofar as payment of compensation is conditional on success on the merits, that condition would be satisfied by an acquittal, and the issues relevant thereto would not be re-litigated in the enforcement proceedings.

Further, in my opinion, by reason of the close connection between Portplan and McCleary, policy considerations relating to the effect of an acquittal as expressed in The Queen v Storey and Rogers v The Queen (1994) 181 CLR 251 support the argument that the Commonwealth's undertaking should not be construed so as to allow the Commonwealth to re-open and re-litigate the verdict of the jury.

Mr Heenan, argued that regard should be had to the objects of the Act, and submitted that it was in the public interest that persons involved in serious crimes should not be protected from the consequences of their misdeeds. As it was put by Wallwork J, "It is in the public interest that serious crimes be prosecuted and that persons who commit serious crimes not be able to keep the proceeds or benefits derived from them - s3 of the Proceeds of Crime Act 1987." On these grounds, Mr Heenan submitted, it should be open to the Commonwealth to show on a balance of probabilities that McCleary was guilty as charged, and that therefore Portplan should receive no compensation.

I accept, of course, the basic proposition that persons who commit crimes should not benefit from their conduct, but this broad generalisation does not override the countervailing matters to which I have referred. In any event, a rule that precludes the Commonwealth, in enforcement proceedings, from re-litigating the guilt of a person acquitted by a jury in criminal proceedings is not contrary to the policy underlying the Act.

Mr Heenan also relied on certain observations made by Williams J in Cannon v DPP. This case concerned an application for the enforcement of an undertaking by the Queensland Director of Public Prosecutions given pursuant to the Crimes (Confiscation of Profits) Act 1989 (Qld) (which in several respects is similar to the Proceeds of Crime Act). The undertaking in Cannon v DPP was given by the Queensland Director of Public Prosecutions in the course of an application for a restraining order in circumstances similar to those in the present case. At 421-422 Williams J posed what he described as the "real difficulty as is epitomised by this case", namely:

"When there are reasonable grounds for suspecting that a person has committed a serious drug offence justifying the making of an restraining order, but subsequently that person is found not guilty by a jury of the alleged offence. There are many reasons why such a result may occur. It may be and this is not the present case so far as is revealed by the evidence, that a critical prosecution witness through death or otherwise was unable to give evidence at the trial. It may be, for example, that the jury was satisfied that a dangerous drug [h]as been produced on the restrained property but they were not satisfied beyond reasonable doubt which of the two possible persons was responsible for the production. It is trite to say that a jury does not have to give reasons for its verdict and any attempt to rationalise a particular decision can never be more than speculation."

After referring to Darby and Shannon, his Honour said (at 423):

"Bearing in mind the philosophy behind the legislation, and the limitation imposed on the recovery of damages by the expression 'ought to pay', one of the issues of fact that might be raised would be whether or not the person seeking to recover damages was involved in the suspected criminal activity."

It seems to me that his Honour was persuaded to allow evidence of guilt to be led in the enforcement proceedings largely because of the weight he attached to "the philosophy behind the legislation". I have previously explained that in my view the fundamental inquiry concerns the meaning of the undertaking itself (although construed in the context of the legislation). To the extent that the phrase "ought to pay" (as used in the undertaking) has relevance, that relevance is principally to be found in the well-settled principle that governs that phrase. In my view these matters, together with the other factors I have referred to above, lead to the conclusion that it would not be open to prove in enforcement proceedings that a defendant was "involved in ... criminal activity" of which he had been acquitted. In my opinion, question (c)(i) should be answered in the negative.

I turn now to the question whether, apart from fraud, fresh evidence, not led at the criminal trial of the person acquitted, may be adduced in the enforcement proceedings for the purposes of showing that it would not be just to require compensation to be paid. By "fresh evidence", in this context, I mean fresh evidence to establish that McCleary was guilty of the charges of which he was acquitted.

In ordinary civil proceedings, once a trial has been concluded and judgment delivered, fresh evidence may be adduced on appeal (O63 r10). The conditions that have to be satisfied before fresh evidence can be led are well-known: see Orr v Holmes [1948] HCA 16; (1948) 76 CLR 632 at 640; Wollongong Corp v Cowen [1955] HCA 16; (1955) 93 CLR 435 at 444; Seaman: Civil Procedure Western Australia, para 63.10.2. But it does not follow that, in proceedings for the enforcement of an undertaking as to damages, an unsuccessful plaintiff can tender fresh evidence as to the merits on the main action, which no appellate court has held to be admissible. That is because of the general rule that, ordinarily, special circumstances will only involve inequitable conduct on the part of the defendant, unrelated to the plaintiff's failure in the main action. If an unsuccessful plaintiff wishes to raise fresh evidence, it must do so by way of appeal in the main action, not in enforcement proceedings.

It may be that the undertaking will not be enforced pending the final determination of the main proceedings, once the question of fresh evidence is raised (cf Lewandowski v Lovell), but that is a different matter. The point is that, in the enforcement proceedings, fresh evidence relevant to the merits would not be regarded as grounds for not enforcing the undertaking.

In criminal proceedings it is not open for the Crown to lead fresh evidence once the jury's verdict has been given; the verdict of acquittal being final. Thus no question of fresh evidence then arises. In my view, the undertaking given by the Commonwealth, implicitly accepts that (in the absence of fraud) the verdict of acquittal will be final and the Commonwealth will not in enforcement proceedings, seek to re-litigate the case, whether by fresh evidence or otherwise. This implication is derived from the abovementioned factors to which I have more than once referred. The defendant's acquittal means that the Commonwealth "ultimately fails" (in the words of Aickin J in Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd at 261).

Accordingly, I would answer question (c)(i), insofar as it relates to fresh evidence, in the negative.

Question (c) (i): evidence proving that the verdict was obtained by fraud

The Commonwealth did not expressly aver that, in the enforcement proceedings, it wished to lead evidence to prove that the verdict of the jury was obtained by fraud. However, the categories of evidence which the Commonwealth desires to lead are so broad that they encompass evidence of this kind. Accordingly, I consider it appropriate to deal specifically with evidence led for the purposes of proving fraud on the Court.

A judgment obtained by fraud upon a court is a nullity, it is "tainted and vitiated throughout" (per Williams J in Cabassi v Vila [1940] HCA 41; (1940) 64 CLR 130 at 147; see also R v Saddlers' Company [1863] EngR 91; (1863) 10 HLC 404 at 431). If judgment was obtained by fraud on the court, an action may be brought to set it aside. That is to say, where the issue of fraud is not raised by way of appeal, separate proceedings to set aside the judgment may be brought. Indeed, it is usually preferable for the issue of whether there was such a fraud to be dealt with in a separate and independent action. In Charles Bright & Co Ltd v Sellar [1904] 1 KB 6 at 12 (approved in Cabassi v Vila at 147) the Court of Appeal pointed out that actions to set aside a judgment on the ground of fraud do not invite the court to rehear the matter upon the old materials, but "fresh facts are brought forward, and the litigation may be well regarded as new and not appellate in its nature, because not involving any decision contrary to the previous decision of the High Court." In McCann v Parsons [1954] HCA 70; (1954) 93 CLR 418 Dixon CJ, Fullagar, Kitto and Taylor JJ set out the general approach at 426:

"[I]f an application for a new trial is based upon the discovery of fresh evidence showing or tending to show that the plaintiff has in truth no cause of action it can be no objection that it also shows or tends to show that at the first trial the plaintiff put forward a false case and knew it. Indeed, there was never any hesitation at common law to use the power to grant a new trial, once it appeared from further evidence that the verdict had been obtained by putting forward a false case."

See also Sicic v Snowy Mountains Hydro Electric Authority (1964-65) NSWR 178 at 181; Rahisi Pty Ltd v Banzato (1996) ASC 56,346 at 56,810; De Lasala v De Lasala [1980] AC 546 at 561, Robinson v Robinson [1982] 1 WLR 786.

Similarly, in my view, in proceedings to enforce an undertaking as to damages, any attempt to establish a fraud on the court in the main action would not involve re-litigating the criminal trial. The admission of evidence establishing such a fraud would not be in conflict with the long established rules applicable to enforcement proceedings. Moreover, if the verdict of acquittal was obtained by fraud, and the Commonwealth was precluded from establishing the fraud, the effect of such preclusion might be to allow Portplan to take advantage of the fraud. That would be unconscionable and contrary to principle.

There are many ways in which the Commonwealth may attempt to establish that the verdict of acquittal was obtained by fraud. As part of such an attempt it may, without charging the individuals concerned with the offence of perjury, seek to lead evidence showing that one or more witnesses committed perjury. I recognise that an argument may be advanced to the effect that considerations of public policy should preclude the Commonwealth from attempting to prove, in enforcement proceedings, that such an offence was committed without first subjecting its case in this respect to the full rigour of the criminal law by prosecuting the alleged offenders. In my view, however, the overriding factor in regard to this issue is that the source of the Commonwealth's liability is its own undertaking - a document to be construed largely by reference to considerations of private rather than public law. The Commonwealth's liability is not imposed by the fiat of Parliamentary statute, but by its own voluntary act in giving an undertaking in terms of its own choosing. In this context the force of public policy considerations is reduced. The basic relevance, in enforcement proceedings, of a fraud on the court in the criminal trial, is whether, in such circumstances, it would be "just" or "inequitable" to enforce the undertaking. In these circumstances, I am unable to conclude that, in determining the justice or equity of the case, the court should not be able to take into account the fact that the Commonwealth has proved to the court's satisfaction that the verdict of acquittal was obtained by fraud - even if in so doing it accepts that perjury (in respect of which no person has been criminally charged) has been committed. Of course, in deciding whether, in such circumstances, it would be just to enforce the undertaking, the court would pay particular regard to the omission to bring criminal charges of perjury, and the reasons for such an omission.

Accordingly, I consider that a fraudulently obtained verdict in the criminal trial would constitute special circumstances such that the Commonwealth's undertaking would not be enforced. It follows, in my view, that in the enforcement proceedings, the Commonwealth (should it wish to do so) is entitled to lead evidence for the purposes of proving that the verdict of the jury in the criminal proceedings against McCleary was obtained by fraud.

Question (c): evidence proving that McCleary was involved in other criminal conduct involving the use of the property seized

The Proceeds of Crime Act contains elaborate provisions enabling the Commonwealth to obtain forfeiture of tainted property. In terms of those provisions, forfeiture only occurs upon conviction of the defendant. Thus, in the present case, there was no forfeiture because McCleary was acquitted. I have expressed the view (in regard to question (c)(i)) that it is not open to the Commonwealth, in enforcement proceedings, to lead evidence to prove that McCleary was guilty of the offences of which he was acquitted. In my view this evidence remains inadmissible even if the Commonwealth seeks to lead it in order to show that the property the subject of the restraining order was tainted property in connection with those offences.

I understand, however, the phrase "other criminal conduct" in the last part of question (c) to mean criminal conduct other than that constituting the offences of which McCleary was acquitted. The Commonwealth seeks to tender evidence to show that Portplan's property was used in some way in other criminal conduct, such that it would not be "just" to pay compensation in respect of loss brought about by the restraint of that property. This evidence falls into a different category to that covered by question (c)(i). Furthermore, it was not relevant to the decision of the jury in the criminal trial.

This question requires consideration of two competing factors. On the one hand, Parliament has made it clear by the Proceeds of Crime Act that it is essential in the fight against serious crime to penalise criminals by confiscating property used in criminal conduct and the economic fruits of crimes. The Act is a manifestation of the public interest in limiting as far as possible the benefits derived from criminal conduct, and in imposing direct and indirect economic penalties on persons who participate in such conduct. Depending on the circumstances, if property is used in the commission of crimes, it may be against the public interest to compensate a person for being unable to use that property while it was subject to a restraining order. On the other hand, it is arguably unjust to penalise indirectly a beneficiary of an undertaking as to damages because his or her property was used in the commission of crimes other than those in connection with which the restraining order was made. It may be said that the potential for injustice that so arises is increased by the fact that, as I hold below, the standard of proof applicable is the civil (and not the criminal) standard.

In my view, "other criminal conduct" is to be distinguished from the offences of which McCleary was acquitted. I have pointed out that the established rule is that the plaintiff's failure in the main proceedings is a precondition of the enforcement of the undertaking. The offences of which McCleary was acquitted are equivalent to the "main proceedings". Other criminal conduct on his part is not. Further, the policy considerations relating to the weight to be accorded to an acquittal do not apply to "other criminal conduct" in respect of which there has been no acquittal. In addition, the Commonwealth does not seek to rely on other criminal conduct simpliciter. The Commonwealth wishes to establish that McCleary was involved in other criminal conduct "involving the use of the property seized".

The Proceeds of Crime Act is directed against serious crime, and property used in or in connection with (or derived from) serious crime. Therefore, it seems to me, in determining whether it would be just in the circumstances to enforce an undertaking given pursuant to s44(10), the court should be able to take into account whether the property, the subject of the restraining order, was used in or in connection with the commission of offences against the laws of the Commonwealth. This would be consistent with the public interest as expressed by the Act.

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (275 paragraphs)

Parties

Legislation Cited (6)

Cases Cited (43)

Grant Mccleary, Harwicke Holdings Pty Ltd (Acn 009 425 129) and Portplan Pty Ltd (Acn 057 987 036) & Ors v The Commonwealth Director of Public Prosecutions & Anor [1998] WASCA 181 (17 July 1998)