Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : DIRECTOR OF PUBLIC PROSECUTIONS -v- MANSFIELD [2005] WASC 237

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : DIRECTOR OF PUBLIC PROSECUTIONS -v- MANSFIELD [2006] WASC 246

Appeal - Criminal Property Confiscation Act 2000 (WA) - Freezing order - Whether s 52 impliedly prohibits frozen funds from being used to make mortgage repayments in respect of frozen real property - Mortgage repayments can be made from frozen funds with leave of court if they meet description of reasonable living and business expenses in s 45(e)

Interlocutory appeal - Criminal Property Confiscation Act 2000 (WA) - Application for criminal benefits declaration - Confiscation offences of insider trading relied upon - Assessment of value of criminal benefit acquired as a result of involvement in confiscation offence - Primary Judge refused DPP leave to amend statement of claim to plead that benefit acquired was total proceeds of sale of shares - Respondent contended benefit could amount only to difference between true value of shares at time of sale and price received - Presumption in s 16(3) - If respondent discharges onus in respect of part of property, court will assess value of only that part of benefit in respect of which onus not discharged

Criminal Property Confiscation Act 2000 (WA), s 4, s 6, s 8, s 9, s 15, s 16, s 17, s 18, s 19, s 20, s 25, s 26, s 30, s 41, s 43, s 45(e), s 50, s 51, s 52, s 141, s 143, s 145, s 148, s 151, Pt 3 Div 1, Pt 3 Div 3

First Respondent : Mr B Fiannaca SC & Mr T A Staples

First Respondent : State Director of Public Prosecutions

First Respondent : Mr M L Bennett & Mr S K Shepherd

Director of Public Prosecutions v Mansfield [2005] WASC 237

Director of Public Prosecutions v Mansfield [2006] WASC 246

Director of Public Prosecutions v Nieves [1992] VicRp 15; [1992] 1 VR 257

Federal Commissioner of Taxation v Smorgon (1977) 16 ALR 721

General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125

Industrial Acceptance Corporation Ltd v Tarulli [1974] WAR 125

Mansfield v Director of Public Prosecutions (WA) [2006] HCA 38; (2006) 80 ALJR 1366

Public Transport Commission of New South Wales v J Murray-More (NSW) Pty Ltd [1975] HCA 28; (1975) 132 CLR 336

R v Pedersen [1995] 2 NZLR 386

R v Peterson [1992] VicRp 20; [1992] 1 VR 297

1 STEYTLER P: There are two appeals, involving the same parties, concerning the interpretation of provisions of the Criminal Property Confiscation Act 2000 (WA) ("Act"). The first, CACV 104 of 2006, is brought by Mr Nigel Mansfield. In that appeal the Director of Public Prosecutions for The State of Western Australia ("DPP") is the first respondent and Mrs Rosalind Mansfield is the second respondent. The second appeal, CACV 150 of 2006, is brought by the DPP. Mr Mansfield is the first respondent and, once again, Mrs Mansfield (who chose to play no part in either appeal) is the second respondent.

2 The appeals arise out of the following circumstances.

3 On 12 July 2002 the DPP obtained a freezing order under s 41 and s 43(3) of the Act in respect of all property owned by Mr Mansfield or effectively controlled by him. Property falling within the second of those categories was owned by Mrs Mansfield. The effect of the freezing order was that, subject to various exceptions, no person could deal with the frozen property in any way: s 50 of the Act.

4 In November 2005, the primary Judge delivered judgment on an application brought by Mr and Mrs Mansfield. They had sought, amongst other orders, an order under s 45(e) of the Act providing for the payment, out of the frozen property, of mortgage repayments in respect of their home in South Perth, itself forming part of the frozen property. The primary Judge declined to make the order sought. He concluded that he was not permitted by the Act to make it: Director of Public Prosecutions v Mansfield [2005] WASC 237. Mr Mansfield appeals against that decision in CACV 104 of 2006.

5 Earlier, in July 2002, the DPP had applied under s 15 of the Act for a "criminal benefits declaration" against Mr Mansfield. That is a declaration, effectively, that the property, service, advantage or benefit described in the application and forming part of the respondent's wealth was not lawfully acquired or was wholly or partly derived or realised as a result of involvement in the commission of a confiscation offence: s 16 and s 17 of the Act. A confiscation offence is defined to include, amongst other offences, an offence against a law in force anywhere in Australia that is punishable by imprisonment for 2 years or more: s 141(1) of the Act. If a criminal benefits declaration is made, the respondent is liable to pay the assessed value of the criminal benefit acquired by the respondent to the State: s 20 of the Act. If that amount is not paid within the specified time, the State may recover it from frozen property: s 25 and s 26 of the Act.

6 The confiscation offences relied upon by the DPP, in bringing his application for a criminal benefits declaration, are 37 offences of insider trading in contravention of s 1002G(2) of the then Corporations Law (now s 1043A(1) of the Corporations Act 2001 (Cth)). An offence of insider trading carries a maximum penalty of $200,000 or 5 years' imprisonment or both: see now s 1311, s 1375 and Sch 3 of the Corporations Act. The offences are alleged to have been committed between 13 June and 2 August 2000. In each case Mr Mansfield is said to have sold shares in a company listed on the Australian Stock Exchange, My Casino Ltd, at a time when he possessed information that was not generally available and that, if it were generally available, would have been expected by a reasonable person to have had a material adverse effect on the price or value of the shares. The net proceeds of the sale of the shares, a sum of $3,321,527.60, is said to have been paid to, or at the direction of, Mr Mansfield by way of deposits into various identified accounts.

7 On 24 March 2006, the DPP applied for leave to amend his statement of claim in the action for a criminal benefits declaration. That application was heard by the primary Judge on 19 May and 14 August 2006. The material issue, for present purposes, concerned a proposed amendment to the pleaded amount of the alleged criminal benefit. The DPP wanted to amend his statement of claim to plead that the benefit acquired by Mr Mansfield was the total sum of $3,321,527.60. Mr Mansfield contended that the benefit, if it was a criminal benefit, could amount to no more than the difference between the true value of the shares at the time of sale (if the information possessed by Mr Mansfield was generally known) and the price received for them. In his judgment given on 2 November 2006 (Director of Public Prosecutions v Mansfield [2006] WASC 246), the primary Judge accepted Mr Mansfield's contention and ruled that it was not reasonably open to the DPP to argue that the criminal benefits acquired were the total proceeds of the sale ([32] of the judgment). He refused the DPP leave to make that amendment. The DPP has appealed in CACV 150 of 2006.

8 I will deal first with CACV 104 of 2006 and then with CACV 150 of 2006.

9 Section 45(e) of the Act provides that, in a freezing order, the court may "provide for meeting the reasonable living and business expenses of the owner of the property". The primary Judge ruled that, even if the mortgage payments that Mr and Mrs Mansfield wanted to make from frozen funds "might otherwise be regarded as reasonable living expenses", s 52 of the Act impliedly "prohibits frozen funds from being used to make ... [them] in respect of real property that is also frozen" ([22] of the judgment). Section 52 reads as follows:

"52**. Permitted dealings in mortgaged property**

If mortgaged property is frozen, nothing in this Act -

(a) prevents the mortgagor from making payments to the mortgagee in accordance with the mortgage if the payments are made with money that has not been seized or frozen; or

(b) prevents the mortgagee from accepting payments from the mortgagor in accordance with the mortgage."

10 The primary Judge said that the implied prohibition arises from the fact that subs (a) excepts only payments made from money that has not been seized or frozen. He considered that this construction of s 52 is consistent with s 9 of the Act. Subsection (1) of that section provides that registrable real property that is confiscated under (amongst other provisions) s 6 of the Act (which encompasses property taken in satisfaction of a person's liability under s 20 of the Act) vests absolutely in the State when a declaration is made that the property has been confiscated (a declaration of that kind is provided for by s 30) and a memorial of the making of the declaration is registered. Section 9(2)(a) provides that, when registrable real property vests in the State under s 9(1), it does so free from all interests (subject to identified exceptions), whether registered or not, including mortgages. The primary Judge considered (at [21]) that, in the light of these provisions, the scheme of the Act is that, upon confiscation, a mortgage interest is lost along with the mortgaged property. However, he said that an innocent third party mortgagee can make an application under s 85 (which provides for the release, upon application by a person, of property that has been confiscated), relying upon s 87(2)(c) of the Act. The lastmentioned section provides that if, upon being satisfied of various matters set out in s 87(1), the court orders the release of the property, then, if the property is not money and has been sold, the property released is to be an amount equal to the value of the property.

11 There are two grounds of appeal. They may be distilled to the single proposition that the primary Judge erred in construing the Act so as to conclude that mortgage payments in respect of frozen registrable property cannot be provided for under s 45(e) from frozen funds.

12 Before considering what was intended by s 52, it is necessary to place it in context. I have said that s 50 of the Act provides that, subject to specified exceptions, a person must not deal with seized or frozen property in any way. Section 51 provides that any dealing with property that contravenes s 50 has no effect, whether at law, in equity or otherwise, on the rights of the State under the Act. By s 151, a reference in the Act to dealing with property includes a reference to doing or attempting to do any of the following:

"(a) sell the property or give it away;

(b) dispose of the property in any other way;

(c) move or use the property;

(d) accept the property as a gift;

(e) take any profit, benefit or proceeds from the property;

(f) create, increase or alter any legal or equitable right or obligation in relation to the property;

(g) effect a change in the effective control of the property."

13 As I read s 52, its purpose is that of making it plain that, in the case of a frozen mortgaged property which has not yet been confiscated, s 50 and s 51 (read with s 151) are not to prevent a mortgagor from making mortgage payments to a mortgagee, or to prevent a mortgagee from accepting those payments, if they are made with money that has not been seized or frozen. The reason for this is presumably that it may subsequently turn out that the basis for making the freezing order was flawed. So, for example, if the freezing order depended upon an application for a criminal benefits declaration (s 43(3)(b)) and the court ultimately declined to make that declaration, the order could not stand. In such an event either or both of the mortgagor and mortgagee might be prejudiced if the mortgage payments had not been made in the interim. (I should say, as regards the possibility of prejudice to the mortgagor, that I doubt, contrary to a submission made on behalf of the DPP in this respect, that the provisions of s 50 and s 151 have the effect of preventing a mortgagee from suing on personal covenants contained in the mortgage: see, in this respect, Industrial Acceptance Corporation Ltd v Tarulli [1974] WAR 125.) If the mortgage payments are made from unfrozen money there is no possible prejudice to the State. Consequently, no application to the court is necessary.

14 However, none of this seems to me to bear upon s 45(e). The payments contemplated by that section will necessarily be made from frozen funds. That is why an order of the court is required. Where, as in this case, the owner of a frozen, but as yet unconfiscated, mortgaged property lives in that property, it seems to me to be open to a court to regard mortgage payments required to be made in respect of that property as reasonable living expenses, just as it would be open to it to treat rental payments as reasonable living expenses. Section 52 plainly contemplates that there may be a need to make mortgage payments notwithstanding that the mortgaged property is frozen. Also s 50(2)(c) provides that s 50(1) (which, as I have said, prohibits a person from dealing with seized or frozen property) does not apply, in the case of frozen property, to a person acting in accordance with a freezing notice or freezing order and, once an order is made under s 45(e), it becomes part of the freezing order. The combined effect of s 52, s 45(e) and s 50(2)(c) seems to me to be only that, in a case in which the payments are made from unfrozen funds, the leave of the court is not required but that, where no unfrozen funds are available for that purpose, the payments can be made from frozen funds only with the leave of the court, which may only be given if the payments meet the description of reasonable living and business expenses.

15 Counsel for the DPP endeavoured to support the construction put on s 52 by the primary Judge by calling in aid, pursuant to s 19(2)(e) of the Interpretation Act 1984 (WA), the explanatory memorandum that accompanied the Criminal Confiscation Property Bill 2000. That memorandum said, of what was then cl 52, that it "enables mortgage payments to be paid on frozen property, as long as frozen property is not used to meet the payment". This seems to me to take the position no further. The explanatory memorandum is correct, as far as it goes. However, it does not address the question whether or not mortgage payments may be made out of frozen funds with the leave of the court where they satisfy the description of "reasonable living and business expenses of the owner of the property" in s 45(e).

16 Consequently, in my respectful opinion, the primary Judge was in error in the construction that he put upon the sections to which I have referred. It was open to the court, in this case, to provide for the payment of the mortgage payments under s 45(e) of the Act if satisfied that they were part of Mr Mansfield's reasonable living expenses. We were invited, if we should come to this conclusion, to remit the matter to the primary Judge as there are subsidiary issues that remain to be worked out.

17 I would consequently allow appeal CACV 104 of 2006, set aside that part of the decision of the primary Judge that is under challenge in the appeal and remit the matter to him for reconsideration in accordance with these reasons.

18 Appeal CACV 150 of 2006 requires some consideration of the scheme of the Act as it affects the making of criminal benefits declarations.

19 Section 4 provides that property of the kinds there referred to is confiscable to the extent provided by the Act. The second and fourth categories of confiscable property are:

"(b) certain property, services, advantages and benefits obtained by a person who has been involved in the commission of a confiscation offence ('criminal benefits' - see section 145);

...

(d) property derived directly or indirectly from the commission of a confiscation offence ('crime-derived property' - see section 148) ... "

I have earlier set out the definition of a "confiscation offence" provided by s 141(1) of the Act.

20 Section 3 provides for a glossary of definitions which might be found at the end of the Act. The glossary provides that "criminal benefit" has the definition given in s 145 and that "criminal benefits declaration" means "a declaration under section 16 or 17".

21 Section 145 of the Act reads as follows, so far as it is presently relevant:

"145**. Acquiring criminal benefits**

(1) For the purposes of this Act, a person has acquired a criminal benefit if -

(a) any property, service, advantage or benefit that is a constituent of the person's wealth was directly or indirectly acquired as a result of the person's involvement in the commission of a confiscation offence, whether or not the property, service, advantage or benefit was lawfully acquired; or

(b) the person has been involved in the commission of a confiscation offence, and any property, service, advantage or benefit that is a constituent of the person's wealth was not lawfully acquired, whether or not the property, service, advantage or benefit was acquired as a result of the person's involvement in the commission of the offence.

(2) Without limiting subsection (1), the person has acquired a criminal benefit -

(a) whether the property, service, advantage or benefit was acquired before, during or after the confiscation offence was or is likely to have been committed;

... "

22 Section 143 defines what are the constituents of a person's wealth. So far as it is presently relevant, it reads as follows:

"143**. The constituents of a person's wealth**

(1) The following property, services, advantages and benefits together constitute a person's wealth -

(a) all property that the person owns, whether the property was acquired before or after the commencement of this Act;

(b) all property that the person effectively controls, whether the person acquired effective control of the property before or after the commencement of this Act;

...

(d) all other property acquired by the person at any time, whether before or after the commencement of this Act, including consumer goods and consumer durables that have been consumed or discarded;

(e) all services, advantages and benefits that the person has acquired at any time, whether before or after the commencement of this Act;

... "

23 "Crime-derived property" is defined in s 148 of the Act. It is essentially property "that is wholly or partly derived or realised, directly or indirectly, from the commission of a confiscation offence".

24 Section 15(1) of the Act provides that the DPP may apply to the court for a criminal benefits declaration. Sections 16 and 17 stipulate the circumstances in which a declaration of that kind must be made. Those sections read as follows:

"16**. Criminal benefits declarations** - crime-derived property

(1) On hearing an application under section 15(1), the court must declare that the respondent has acquired a criminal benefit if it is more likely than not that -

(a) the property, service, advantage or benefit described in the application is a constituent of the respondent's wealth;

(b) the respondent is or was involved in the commission of a confiscation offence; and

(c) the property, service, advantage or benefit was wholly or partly derived or realised, directly or indirectly, as a result of the respondent's involvement in the commission of the confiscation offence, whether or not it was lawfully acquired.

(2) For the purposes of subsection (1)(b), if the respondent has been convicted of the confiscation offence, the respondent is conclusively presumed to have been involved in the commission of the offence.

(3) The property, service, advantage or benefit is presumed to have been directly or indirectly acquired as a result of the respondent's involvement in a confiscation offence unless the respondent establishes otherwise.

17**. Criminal benefits declarations - unlawfully acquired property**

(1) On hearing an application under section 15(1), the court must declare that the respondent has acquired a criminal benefit if it is more likely than not that -

(a) the property, service, advantage or benefit described in the application is a constituent of the respondent's wealth; and

(b) the property, service, advantage or benefit was not lawfully acquired.

(2) If the respondent has been convicted of a confiscation offence, or it is more likely than not that the respondent is or has been involved in the commission of a confiscation offence, then it is presumed that the property, service, advantage or benefit was not lawfully acquired unless the respondent establishes the contrary."

25 Section 18(2) of the Act requires the court, when making a criminal benefits declaration, to assess the value of the criminal benefit acquired by the respondent in accordance with s 19 and to specify the assessed value of the criminal benefit in the declaration. Section 19(1) provides for assessment in the case of any property, service, advantage or benefit that is no longer available. Section 19(2) provides that:

"(2) The value of any other property, service, advantage or benefit is the greater of -

(a) its value at the time that it was acquired; and

(b) its value on the day that the application for the criminal benefits declaration was made."

26 I have earlier mentioned that, when a criminal benefits declaration is made, the respondent is liable, under s 20, to pay to the State an amount equal to the amount specified in the declaration as the assessed value of the criminal benefit acquired by the respondent.

27 In his judgment, the primary Judge said (at [26]) that the critical question is the proper characterisation of what it was that Mr Mansfield could reasonably be said to have acquired "as a result of" his alleged involvement in confiscation offences. He went on to say (at [27] - [29]):

"Self-evidently, any construction of the Act which characterises the total proceeds as 'criminal benefits' must accommodate the fact that the same total proceeds would have been produced if each sale had been unaccompanied by a confiscation offence. This poses the question of how it can be said that the total proceeds were acquired 'as a result of' the confiscation offence, if the same result would have occurred without the offence. To my mind this is a very compelling consideration which leads inevitably to the conclusion that it was the 'advantage or benefit' (as contended by Mr Mansfield) rather than the total proceeds of sale, which must constitute the alleged criminal benefits. This conclusion turns not so much on the question of construction as on the simple issue of causation.

In any event the construction as contended by the DPP must necessarily be based upon an underlying proposition that the contemporaneous commission of a confiscation offence tainted the whole of the proceeds and made them 'criminal benefits'. This proposition is consistent with the provisions in the Act concerning 'crime used property' (see s 146), but in my view is foreign to the concept of a 'criminal benefit' as defined in s 145. That definition speaks of a criminal benefit which is 'acquired' rather than simply 'obtained' or 'received'. Furthermore, the word 'benefit' itself (as relevantly defined in the Compact Oxford Dictionary) means a 'pecuniary advantage, profit, gain'. By using this terminology, Parliament would seem to have made it clear that the underlying purpose of the provisions concerning criminal benefits is to deprive criminals of the gains or profits that they have acquired as a result of their involvement in confiscation offences.

In the present instance, to the extent that the total proceeds included the true underlying value of the shares, then this was something that Mr Mansfield had owned or controlled beforehand. It necessarily follows that all that was 'acquired' as a result of Mr Mansfield's alleged involvement in each confiscation offence was the amount in excess of the true value which would have been lost if the market had been fully informed."

28 Then, after distinguishing the cases of Director of Public Prosecutions v Nieves [1992] VicRp 15; [1992] 1 VR 257 and R v Pedersen [1995] 2 NZLR 386 (each of which deals with broadly similar legislation in other jurisdictions) upon the grounds that there were many differences in the applicable legislation, the primary Judge went on to say (at [32]):

"For the reasons stated above I consider that the fundamental underlying purpose of the provisions in the Act concerning criminal benefits is to deprive criminals of their ill-gotten profits or gains. Even if I am wrong about this and an ambiguity remains, then the rule of construction as to penal provisions would lead to the same conclusion. In the end I am of the view that it is not reasonably open to the DPP to argue that on the facts alleged in the present matter the criminal benefits acquired were the total proceeds of the sale."

29 There is only one ground of appeal. It is that the primary Judge erred in finding that it is not reasonably arguable that Mr Mansfield acquired criminal benefits within the meaning of the Act "in respect of a sum representing the entire proceeds of the sale of My Casino Limited securities ... ". While this Court's task is only that of deciding whether or not the primary Judge erred in finding that the DPP's contention is not reasonably arguable, we have been requested by both parties to express our opinion with respect to the proper construction of the provisions in question.

30 The principal argument advanced on behalf of the DPP is essentially as follows. There is no contest concerning the applicability of s 16(1)(a) and s 16(1)(b) if the alleged confiscation offences can be proved. On that assumption, s 16(1) unambiguously requires the court to make a criminal benefits declaration if s 16(1)(c) is satisfied. As to that, the words "property, service, advantage or benefit" are disjunctive and, in this case, the "property" (and not "advantage" or "benefit") identified by the DPP in his application is the entire proceeds of the sale of the shares. The whole of that property was acquired as a result of Mr Mansfield's involvement in the commission of confiscation offences, being the sale of the shares with inside information. It is accordingly the value of the whole of the share sale proceeds which is required to be assessed under s 18(2)(a) and specified as the assessed value of the criminal benefit pursuant to s 18(2)(b).

31 Counsel for the DPP contended, in the course of advancing this argument, that the critical provision is s 16(1)(c) and not the definition of "criminal benefit" in s 145(1) of the Act. He said that this is because s 16 provides for the circumstances in which a criminal benefits declaration "must" be made and, if there is any inconsistency between s 16(1)(c) and s 145 (he suggests that there is not), s 16(1)(c) is "superimposed upon" s 145 and must consequently prevail. He took issue, in any event, with the distinction drawn by the primary Judge between the meaning of the word "acquired" in s 145 and the words "obtained" or "received". He submits that there is no relevant distinction between those words in the context in which the word "acquired" is used in s 145.

32 He also contended that s 18(2) and s 19 deal with the assessment of the value of the benefit declared under s 16(1), being the property, service, advantage or benefit described in the DPP's application. This is said to follow from the fact that the relevant property, service, advantage or benefit identified in s 16(1)(a) is that described by the DPP and from the fact that the property, service, advantage or benefit referred to in s 16(1)(c) is that referred to in s 16(1)(a).

33 Finally, counsel for the DPP suggests that the construction for which he contends is supported by the policy underlying the Act. This, he says, is that of deterring criminals through the imposition of severe financial sanctions rather than that of simply preventing offenders from profiting from their crimes. He draws support, in this respect, from Nieves and Pedersen, each of which, he suggests, was wrongly distinguished by the primary Judge, and also from the case of R v Peterson [1992] VicRp 20; [1992] 1 VR 297.

34 Each of Nieves and Peterson (decided within a couple of months of each other) dealt with the Crimes (Confiscation of Profits) Act 1986 (Vic). Section 5(1)(b) of that Act provided that, if a person had been convicted of a serious offence, the DPP could apply for a pecuniary penalty order. Section 12(1) and s 13 read as follows:

"12. (1) If an application is made to a court under section 5(1)(b) for an order in respect of the benefits derived by the person as the result of committing the offence, the court may -

(a) assess the value of those benefits; and

(b) order the person to pay to the Crown a pecuniary penalty equal to the value as so assessed less -

(i) the value (as at the time of making the order under this sub-section) of any property in respect of which a forfeiture order is made in reliance on the same conviction; and

(ii) if the court thinks it desirable to take it into account, any amount payable by way of restitution or compensation in relation to the same conviction.

13. In assessing, on an application for a pecuniary penalty order, the value of the benefits derived by a person as the result of committing an offence, the court may treat as benefits such things as it thinks fit including -

(a) any property ... that was derived or realised, directly or indirectly, by that person ... as the result of the commission of the offence;

(b) any benefit, service or financial advantage provided ... for that person ... as the result of the commission of the offence;

(c) any increase in the total value of that person's property ... in the period beginning immediately before the commission of the offence and ending at some time after the commission of the offence that the court is not satisfied was due to causes unrelated to the commission of the offence."

35 In Nieves, the Victorian Court of Criminal Appeal (Kaye, Fullagar and Hampel JJ) was of the opinion that there were compelling reasons for giving to the word "benefits" in s 12 a meaning different from the word "profits". They relied (at 262), in part, on the fact that s 12 speaks of "benefits" and not "profits" and on the fact that it does not inevitably follow that a benefit includes a profit to the recipient. They also said that the legislation was concerned with the benefits derived from a criminal offence and not with profits derived from a lawful commercial transaction. They went on to say (at 262):

"The receipt of a sum of money is the benefit which a convicted person derives from the commission of the offence of which he or she has been convicted. The value of the benefit is the amount of money the convicted person has so received.

It may be necessary to make an assessment of the value of the benefit derived where the convicted person has received property or service or a financial advantage for the drugs or goods supplied in the commission of the crime: see s. 13(a), (b) and (c)."

36 In Peterson, the Court dealt with a situation in which a drug trafficker, Peterson, had received a quantity of heroin from a man named Ilade. Peterson sold the heroin for a price of $29,500. The Court accepted that the full amount of $29,500 was passed on by Peterson to Ilade and that Peterson received only a quantity of heroin as payment for his participation in the transaction. Crockett and Murphy JJ said (at 301) that it followed from Nieves that the actual recipient of money paid in exchange for drugs does not necessarily derive a benefit in the sum of money received and that, in a disputed case, "an inquiry should be made ... to ascertain the value of the benefit actually derived by the particular person 'as the result of committing the offence'". The benefit was found to have been the heroin supplied by Ilade to Peterson.

37 The third judge in this case, Marks J, substantially agreed with Crockett and Murphy JJ. However, he added the following comments (at 302 - 303):

"Parliament clearly did not intend that a 'benefit' is synonymous with 'nett profit'. Its intention in my view was to have forfeited from an offender whatever it was that he got by way of 'income' (or an asset representing it) from the crime itself. There is no reason to draw back from an analogy between 'benefit' and 'income'. So understood there is no occasion to deduct 'expenses'. 'Income', for example, for the purposes of our tax legislation only has expenses deducted by virtue of express statutory provision.

'Income derived' and 'benefits derived' from a particular activity, here 'a crime', have no material distinction, save that the Act extends its reach beyond 'income' (see for example s. 13) in the ordinary sense.

I am of the opinion that costs incurred by an offender to put himself or herself into a position to commit a crime, for example, the purchase price of the heroin which comes to be trafficked, the cost of petrol to drive to the rendezvous or meetings with co-offenders to plan the crime, are irrelevant. It is not simply that they are illegally incurred. They are irrelevant as a matter of ordinary reasoning because they do not reduce 'benefits' derived from the crime itself but relate merely to making the crime possible. In any event, I am of the view that it was clearly the purpose and the intention of the Act not to have pre-crime costs of the offender brought to account. The Act expressly provides by s. 12(1) what deductions are to be made from the 'benefits'.

...

It must be emphasised ... that the description of the order as a 'penalty' does not obscure the requirement of the statute that the order is to be based solely on satisfaction 'on the balance of probabilities' (s. 49(1)) as to the value of the benefit derived by the offender against whom the order is sought from the crime (my emphasis).

The court imposing the penalty must therefore be satisfied what it was that the offender derived. What fruits of the crime the offender 'handled' is not necessarily what he or she 'derived'. But evidence without more (as in Nieves) that the offender did handle the money or part of it yielded by the criminal transaction might be sufficient 'prima facie' to support an order. It will depend on the circumstances.

Even so, it is open to the person against whom an order is sought to rebut such prima facie evidence by evidence or reference to existing material or Crown concession ... to the effect that what was handled was not derived as a benefit from the crime."

38 These cases were considered by the Court of Appeal in New Zealand in R v Pedersen [1995] 2 NZLR 386. In that case the respondent had purchased one pound of cannabis for $3000. He removed a handful of cannabis as his "cut" before selling it to an undercover police officer for the same amount. This was followed by similar transactions in which the sale and purchase price was $3800. He also sold cannabis oil to the undercover officer for $2000, having himself paid $1800 for it. The Crown applied, under the Proceeds of Crime Act 1991 (NZ) ("PC Act"), for a pecuniary penalty order in the amount of $8800 but the primary Judge held that, within the meaning of s 25 of the PC Act, the "benefits" derived by the respondent from his offences were his actual gain, which was assessed at $240. The Solicitor-General appealed.

(1) On the hearing of an application for a pecuniary penalty order in respect of benefits derived by a person from the commission of a serious offence, the Court may, if it is satisfied that the person derived benefits from the commission of that offence, -

(a) Assess in accordance with sections 27 and 28 of this Act, the value of the benefits so derived; and

(b) Order the person to pay to the Crown a pecuniary penalty not greater than the penalty amount.

(2) The penalty amount is the value of the benefits assessed under sections 27 and 28 of this Act, reduced by -

(a) An amount equal to the value of any property that has been forfeited, or is proposed to be forfeited, to the Crown under this Part of this Act as proceeds of the relevant serious offence; and

(b) An amount equal to the value of any pecuniary penalty that has already been imposed, in respect of the benefit, under this Act or any other enactment; and

(c) Any further amount which the Court considers appropriate to take into account, after having regard to the matter referred to in section 14(1)(b) of this Act.

"(2) For the purposes of an application for a pecuniary penalty order, the value of the benefits derived by a person (in this subsection referred to as the 'defendant') from the commission of an offence or offences shall be assessed by the Court having regard to evidence before the Court concerning all or any of the following matters:

(a) The money, or the value of the property other than money, that came into the possession or under the control of -

by reason of the commission of the offence or any of the offences:

(b) The value of any other benefit provided to -

by reason of the commission of the offence or any of the offences:

(i) Where the application relates to a single offence, before and after the commission of the offence; or

(ii) Where the application relates to 2 or more offences, before, during and after the offence period.

(3) In calculating, for the purposes of a pecuniary penalty order, the value of benefits derived by a person from the commission of an offence or offences, any expenses or outgoings of that person in connection with the commission of the offence or offences shall be disregarded."

41 The appeal was allowed, McKay J dissenting. Cooke P and Richardson J found that, in each transaction, the whole price charged and received by the respondent was a benefit derived by him from the commission of the offence of selling. They said (at 390) that, because the PC Act is neither an income tax statute nor one concerned with lawful commercial operations, there is no reason to suppose that it is limited to assessing net gains or trading profits. They regarded that as being confirmed by s 27(3) which prohibited the deduction of expenses or outgoings (although they doubted whether payment to a supplier was an expense or outgoing in connection with the commission of an offence of sale). They said that s 27(3) was probably directed at expenses and outgoings incurred in actually committing the offence. They also considered that, in ordinary usage, "benefits" is a wide expression and that words such as "proceeds", "receipts" or "payments" would not have had the same breadth, or at least not so clearly.

42 Casey and Hardie Boys JJ agreed with Cooke P and Richardson J, save that Hardie Boys J was inclined to accept the argument that the cost of purchasing drugs for sale was an expense or outgoing in connection with the commission of the offence of sale. He added, in any event, that whatever else "benefits" means, it must include the proceeds of sale of the vendor's own property (at 392). All of the judges forming the majority relied, to some extent, on what they regarded as the clearly deterrent purpose of the statute.

43 The construction advanced on behalf of the DPP in the present case is not without its attractions. That is so for a number of reasons. Starting with what seems to me to be the point of least significance, I agree that it is difficult to draw any significant distinction between the meaning of the word "acquired" in s 145 (the word is also used in s 16, s 17, s 18(2)(a), s 19(2)(a) and s 20), on the one hand, and the words "obtained", or "received", on the other. Indeed, s 4(b), dealing with the category of "criminal benefits", refers to property, services, advantages and benefits "obtained by" a person who was involved in the commission of a confiscation offence while at the same time referring the reader to s 145 of the Act. Next, I agree that the relevant provisions use the words "property, service, advantage or benefit" disjunctively (as to which see s 17 of the Interpretation Act) and do not, as they might have, simply use the word "benefit". Thirdly, and most importantly, because each sale of the shares was itself a confiscation offence, there is something to be said for the proposition that the sale proceeds, in their entirety, were "property ... acquired as a result of ... [Mr Mansfield's] involvement in the commission of ... [the] confiscation offence", within s 145(1)(a), given that the whole of the proceeds was derived from that offence. However, for the reasons that follow I doubt that this can have been the intention of the legislature.

44 There is no doubt that the legislation is, and was intended to be, draconian in its effect: Mansfield v Director of Public Prosecutions (WA) [2006] HCA 38; (2006) 80 ALJR 1366 at [50]. However, the division of the Act dealing with criminal benefits (Pt 3, Div 2) seems to me to be designed to ensure that criminals do not benefit from their crimes rather than to impose upon them penalties over and above those that might be expected from the courts acting in their ordinary criminal jurisdiction. That seems to me to be apparent from the whole notion of a criminal benefit (even accepting that that notion is broadly conveyed by the words "property, service, advantage or benefit"). It is also supported by the explanatory memorandum. That document says, of what was then cl 16, that, because a criminal benefits declaration "is aimed at removing ill-gotten gains (and benefits acquired lawfully via criminal activity), it is not appropriate that there be any discretion". The explanatory memorandum also says that cl 16 "is directed to wealth acquired as a result of a crime". A similar objective seems to me to be pursued by the provisions of Pt 3, Div 1, which enable the State to require a person to pay to it his or her "unexplained wealth", being the difference between the total value of that person's wealth and the value of that person's lawfully acquired wealth: s 4(a), s 11 - s 14 and s 144 of the Act. The explanatory memorandum says, of what was then cl 12, that an unexplained wealth declaration "is aimed at removing ill-gotten gains".

45 On the other hand, the provisions of the Act dealing with property used in or in connection with the commission of a confiscation offence ("crime-used property") and those dealing with the property of declared drug traffickers fall into a different category. The "crime-used property" provisions of Pt 3, Div 3 provide for the confiscation of property which is, amongst other things, used or intended for use in connection with the commission of a confiscation offence (s 146 of the Act). If that property is not available for confiscation, the respondent is liable to pay to the State an amount equal to its assessed value: s 21 - s 24 of the Act. In the case of a person declared to be a drug trafficker as a result of being convicted of a confiscation offence committed after the commencement of the Act, all of the property that the person owns or effectively controls at the time the declaration is made is confiscated, as is all property that that person gave away at any time before the declaration was made: s 8(1) of the Act.

46 Returning to the criminal benefits provisions, I accept that s 16(1) requires the court to declare that the respondent has acquired a criminal benefit if it is more likely than not that the property, service, advantage or benefit was wholly or partly derived or realised as a result of the respondent's involvement in the commission of the confiscation offence, if, of course, the provisions of s 16(1)(a) and (b) are also satisfied. Also, s 16(3) raises a presumption that the property, service, advantage or benefit was directly or indirectly acquired as a result of the respondent's involvement in a confiscation offence unless the respondent establishes otherwise. However, s 16 and s 17 are concerned only with the circumstances in which the court must declare that the respondent has acquired a criminal benefit. They do not require, in a case in which a respondent is able to discharge its onus under s 16(3) or s 17(2) only in respect of part of the property, that the benefit to be declared will be the whole of the property identified. Rather, s 16 seems to me to contemplate that, in a case in which the onus under s 16(3) has been discharged in respect of only a part of the property identified in the application, in the sense that he or she has been able to establish only that part of the property has not been derived or realised "as a result of" the involvement in the confiscation offence, the benefit to be declared, and valued pursuant to s 18(2), will be only that part in respect of which the onus has not been discharged. That construction is consistent with the definition of "criminal benefit" in s 145 of the Act being (in a case such as this, in which s 145(1)(a) is relied upon) the constituent of the respondent's wealth, falling within the description of "property, service, advantage or benefit", that was acquired as a result of the respondent's involvement in the commission of a confiscation offence.

47 Consequently, the legislative scheme in this respect seems to me to be as follows. Where the requirements of s 16(1)(a) and (b) are shown by the DPP to have been satisfied, the court is obliged to make a declaration concerning the property, service, advantage or benefit identified in the application unless the respondent establishes, pursuant to s 16(3), that it was not acquired as a result of his or her involvement in the commission of the confiscation offence. If the respondent is able to establish that only part of the property, service, advantage or benefit was not acquired as a result of his or her involvement in the confiscation offence, there will still be a criminal benefits declaration. However, in such a case, when the court assesses the value of the benefit it will assess the value of only that part of the property, service, advantage or benefit that the respondent did not establish was acquired otherwise than as a result of his or her involvement in the confiscation offence.

48 A similar scheme operates in respect of s 17 of the Act (set out earlier in these reasons), which has the effect that, if the DPP is able to establish that s 17(1)(a) has been satisfied and that the respondent has been convicted of, or is more likely than not to have been involved in the commission of, a confiscation offence, then a declaration will be made unless the respondent is able to establish that the identified property, service, advantage or benefit was lawfully acquired. The scheme of the Act, as I have understood it to be, is also consistent with the procedure adopted in respect of unexplained wealth declarations: see, in particular, s 12(2) of the Act.

49 I accept, as did the courts in Nieves, Peterson and Pedersen that the relevant provisions of the Act are concerned with benefits and not with net profits, with the consequence that expenses incurred in the course of committing a crime will not ordinarily be taken into account in assessing the value of the benefit obtained. But the point remains that the assessed value of the benefit (whether it be in the form of property, a service, an advantage or something else) must be no more than what was acquired (or presumed to have been acquired in the absence of proof to the contrary) as a result of the person's involvement in the commission of the offence (in a case falling within s 145(1)(a)). In a case involving the supply of drugs for money, rather than in return for some other property, service, advantage or benefit, the whole of the money will be the benefit derived (if the offender is not merely a conduit, as in Peterson) because the whole of the purchase price will be the benefit that has been derived, or acquired by the offender as a result of involvement in the commission of the transaction giving rise to the offence. However, that will not necessarily be so in cases in which the sale of an item is not absolutely prohibited, but is only prohibited in specified circumstances. In such a case, depending upon the nature of the prohibition, and the effect of its breach, the property, advantage or benefit that is acquired by the offender may be different to, or less than, the sale price.

50 This case provides an example. Mr Mansfield lawfully owned the shares in My Casino Ltd. He was entitled to sell them whenever he chose, thereby converting them into money. What he was not entitled to do was sell the shares at a time when he had inside information as defined in s 1002G(1) of the Corporations Law (now s 1042A of the Corporations Act). His gain arising out of his involvement in the commission of that confiscation offence (if that involvement is proved) was only part of what he received and was constituted by the difference between the price that he achieved on the sale of the shares and that which he would have achieved had the inside information been generally available (a matter which, no doubt, would be the subject of expert evidence). In my opinion, that was the "property, service, advantage or benefit" that was acquired by Mr Mansfield for the purpose of s 16(1)(c) of the Act and, hence, for that of each of s 18(2)(a), s 19 and s 20. Consequently, if he is able to establish what those differences in price were, and accordingly that the balance of the money was acquired by him otherwise than as a result of his involvement in the confiscation offence, then the assessed value of the benefit will be the total of those differences.

51 If the legislation was to be applied in the manner contended for on behalf of the DPP, this would produce quite extraordinary results. Insider trading provides an illustration. If the offender invested life savings, lawfully obtained, of $1 million in the acquisition of shares bought with the benefit of inside information, and if the offender was able to establish that the purchase price was 10 per cent less than it would have been had the information been generally available, then, on the construction contended for by the DPP, the State would nevertheless be entitled to forfeit all of the shares acquired by the offender rather than assets to the value of $100,000, being the accretion to the offender's wealth as a consequence of the purchase made with the benefit of the inside information. Other illustrations might be provided. So, for example, if the sale of a vessel without adequate safety equipment amounted to a confiscation offence, on the construction advanced on behalf of the DPP, the State would be entitled to recover the whole of the purchase price received by the vendor of the vessel even if it was established by the vendor to have been no greater than it would have been if the appropriate safety equipment had been included. Moreover, the construction advocated by the DPP would have the result that, by choosing whether to apply for a criminal benefits declaration in respect of identified "property" of the respondent (the shares and the vessel in the two examples I have given), rather than the "advantage" or "benefit" achieved by the respondent through his or her receipt of a higher price, the DPP would be able to dictate what property is to be valued.

52 In my opinion, manifest injustices of this kind could not have been intended and, in circumstances in which the relevant provisions are capable of being read consistently with what I have taken to be their evident purpose, it is appropriate that they be read so as to avoid these injustices: Public Transport Commission of New South Wales v J Murray-More (NSW) Pty Ltd [1975] HCA 28; (1975) 132 CLR 336 at 350 per Gibbs J; Federal Commissioner of Taxation v Smorgon (1977) 16 ALR 721 at 729 per Stephen J.

53 The alternative contention advanced on behalf of the DPP is that, if the criminal benefit is only the difference between the value of the shares if the inside information had been generally available, on the one hand, and the price for which they were sold, on the other, the assessed value of the criminal benefit acquired should nevertheless be the full amount of the sale proceeds, even if Mr Mansfield is able to prove what that difference was. This was said to be so because s 16(1) requires the court to declare that the respondent has acquired a criminal benefit if the property, service, advantage or benefit was "wholly or partly derived or realised" as a result of the respondent's involvement in the commission of the confiscation offence (and, of course, if the other requirements of that section are satisfied).

54 I am not persuaded by this argument. For the reasons given above, I very much doubt that this could have been the intention of the legislature. All that seems to me to have been intended by the use of the words "or partly" in the phrase to which I have referred (which mirrors that appearing in the definition of "crime-derived property" in s 148(1)) is that it should not be a defence to an application for a criminal benefits declaration that the benefit in question was only partly derived or realised as a result of the respondent's involvement in the commission of the confiscation offence. Moreover, as I have said above, these words seem to me to be consistent with the proposition that, if the respondent's onus under s 16(3) has been discharged in respect of only part of the property identified in the application, the benefit declared and valued will be only that part in respect of which the onus was not discharged. In such a case, as I have already explained, it would be for the court to value only that part of the property, service, advantage or benefit that was not established by the respondent to have been derived or realised otherwise than as a result of the respondent's involvement in the confiscation offence.

55 I would consequently allow the appeal. In my respectful opinion the position contended for in the amendments to the DPP's statement of claim was reasonably arguable and the amendments should have been permitted (see, in this respect, General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 130), especially in circumstances in which the DPP has, in his pleading, relied expressly upon the presumption contained in s 16(3) of the Act (par 14 of the amended statement of claim). However, on my preferred construction of the relevant provisions, it remains open to Mr Mansfield to plead in his defence and establish at the trial that only part of the money identified by the DPP was acquired by him as a result of his involvement in the confiscation offence (if that involvement is proved) and, if he does so, only that part of the money will be the assessed value of the criminal benefit acquired.

56 I would hear further from the parties in respect of the orders which should be made in the light of these conclusions.

• CACV 104 of 2006
• CACV 150 of 2006