Meskovski v DPP [2018] VSCA 293

STATUTORY INTERPRETATION - Legislative intention - Judicial interpretation of provision - Subsequent amendment - Whether legislature intended to change meaning.

Did the judge fail to consider and/or determine the application under s 38(2)? - Ground 1

Did the judge err in interpreting the meaning of 'undue hardship'? - Ground 2

Did the judge ignore Meskovski's individual circumstances? - Ground 3

1 The Confiscation Act 1997 ('the Act') confers a power on the court, when making a civil forfeiture order, to exclude certain property from the operation of the order if satisfied that otherwise the order may be reasonably likely to cause undue hardship to any person, pursuant to s 38(2) of the Act. The court also has the power to order that a specified amount be paid to a person out of the forfeited property if satisfied that undue hardship may reasonably be likely to be caused to any person by the order, pursuant to s 45(1) of the Act. This proceeding raises the issue of the relationship between these two sections of the Act and the powers they confer.

2 The proceeding also raises the issue of whether the judge erred, in the circumstances of the case, in refusing either to exclude the property or to order that a specified amount be paid out of the forfeited property.

3 For the reasons below, we consider that the powers conferred under s 38(2) and s 45(1) are alternative discretionary powers that a court may exercise, relevantly, upon the satisfaction of a single common precondition, namely, upon being satisfied that it is reasonably likely that a civil forfeiture order would cause undue hardship to any person.[1] The alternatives are excluding the property, or an interest in the property, from forfeiture, pursuant to s 38(2), or ordering a specific amount of money be paid to the person, derived from the forfeited property, to prevent undue hardship, pursuant to s 45(1).

4 We also consider that the judge did not err in concluding that, on the basis of the circumstances of the case, he was not satisfied that it was reasonably likely that undue hardship would be caused by the making of a civil forfeiture order. It follows that neither of the alternative discretions was enlivened and the judge was correct to refuse to make an order under either s 38(2) or s 45(1).

5 Vele Meskovski ('Meskovski') applies for leave to appeal[2] against a civil forfeiture order made in the County Court, pursuant to s 38(1) of the Act, on 22 November 2017, forfeiting to the Minister responsible for the administration of the Act, Meskovski's 50 per cent interest in his family home, 9 Minerva Crescent, Keilor Downs ('the property'). The civil forfeiture order was made in Ruling No 2.[3]

6 The judge had earlier rejected an application by Meskovski for exclusion of his half share of the property from a civil forfeiture restraining order. The rejection of the exclusion application was made in Ruling No 1.[4] There is no appeal against Ruling No 1. The civil forfeiture restraining order, which initiated the proceedings, was made on the basis that the property was tainted, namely, on the basis of the Court being satisfied that there were reasonable grounds to support a police member's suspicion that the property was tainted property in relation to the sch 2 offence of cultivating a commercial quantity of cannabis.[5]

7 The 'tainted' nature of the property was based upon evidence discovered following the execution of a search warrant whereby police found that three areas in the property were set up with a sophisticated and extensive system for cultivating cannabis using a hydroponic growing system.[6] The circumstances in which Meskovski was involved in the operation of an extensive cannabis cultivation system are described below. The police seized 37 kilograms of plants. The air dried weight was calculated to be five kilograms. Meskovski pleaded guilty in the Magistrates' Court to a charge of cultivating cannabis, and was convicted on that day and sentenced to a Community Correction Order ('CCO').[7] The original charge of cultivating a commercial quantity of cannabis was amended to remove the reference to 'commercial quantity' and the evidence led by the prosecution was based upon the air dried weight of five kilograms.

8 The Director of Public Prosecutions ('the DPP') applied for a civil forfeiture order pursuant to s 37(1) of the Act. Meskovski made a competing application under s 38(2) for an order excluding the property on the basis that a civil forfeiture order would be reasonably likely to cause him undue hardship. The competing applications were set down for hearing on 19 October 2017.

9 During the hearing Meskovski relied on s 45(1) by way of an alternative application for relief from undue hardship.

10 On 22 November 2017, in Ruling No 2, the judge granted the civil forfeiture order and dismissed Meskovski's applications.

11 There are three grounds of appeal on which Meskovski relies against Ruling No 2:

1. His Honour erred in failing to consider and/or determine the applicant's application pursuant to s 38(2) of the Act.
2. His Honour erred in interpreting that the term 'undue hardship' required:

(a) a result towards the extreme end of the likely result of an order for forfeiture;

(b) a consequence which would be 'financially crushing'; and

(c) something less than (a) and (b) would not warrant a finding of 'undue hardship.'

1. His Honour erred in failing to exercise his discretion, under s 38(2) or s 45(1) of the Act, to decline to make a forfeiture order or otherwise provide relief by failing to take into account, alternatively not placing sufficient weight on, the facts that:

(a) the applicant ultimately pleaded to cultivate simpliciter which was not a sch 2 offence;

(b) the personal circumstances of the applicant including his age and lack of employment, as well as the age and lack of employment of his wife;

(c) the history of the property, including that it had been purchased in 1986 with the offending taking place in 2014;

(d) that the applicant and his wife have no other assets of significance.

12 The civil forfeiture regime, to be found in pt 4 of the Act, provides for the confiscation of property suspected on reasonable grounds of being tainted property. 'Tainted property' includes, relevantly, being the proceeds or instruments of a sch 2 offence. Civil forfeiture orders are not premised on a criminal conviction. They are an alternative to the regime of forfeiture orders, or automatic forfeiture, of restrained property of persons convicted of certain offences, and the forfeiture of unexplained wealth.

3A Objects

The main objects of this Act are -

(a) to deprive persons of the proceeds of certain offences and of tainted property; and

(b) to deter persons from engaging in criminal activity; and

(c) to disrupt criminal activity by preventing the use of tainted property in further criminal activity; and

(d) to undermine the profitability of serious criminal activity.

14 The civil forfeiture regime provides a process for the DPP or a prescribed person to seek a civil forfeiture restraining order under div 1 in order to preserve property or an interest in property so that the property or interest may be available for any civil forfeiture order under div 2. Such an order may be sought where there are reasonable grounds for suspecting that the property is 'tainted property':

36K Application for civil forfeiture restraining order

(1) The DPP or a prescribed person, or a person belonging to a prescribed class of persons, may apply, without notice, to the Supreme Court or the County Court for a civil forfeiture restraining order in respect of property if a police officer or a person authorised by or under an Act to prosecute the relevant type of offence suspects on reasonable grounds that the property is tainted property.

15 The relevant definition of 'tainted property' is to be found in s 3(1) of the Act:

tainted property means -

(a) in the case of civil forfeiture, a civil forfeiture restraining order, a civil forfeiture order or a civil forfeiture exclusion order, property that -

(i) was used, or was intended to be used in, or in connection with, the commission of one or more Schedule 2 offences; or

(ii) was derived or realised, or substantially derived or realised, directly or indirectly, from property referred to in subparagraph (i); or

(iii) was derived or realised, or substantially derived or realised, directly or indirectly, from the commission of one or more Schedule 2 offences; or

(iiia) is, or has been, subject to a mortgage, lien, charge, security or other encumbrance wholly or partly discharged using property referred to in subparagraph (i), (ii) or (iii); or

(iv) is likely to be used, or intended to be used in, or in connection with, the future commission of one or more Schedule 2 offences; ...

1. An offence against any of the following provisions of the Drugs, Poisons and Controlled Substances Act 1981:

...

(ba) section 72A (cultivation of a narcotic plant in a quantity of a drug of dependence, being a narcotic plant, that is not less than the commercial quantity applicable to that narcotic plant);

...

17 In certain circumstances a person claiming an interest in the restrained property may apply for exclusion from a restraining order.[8] The circumstances in which a court may grant an exclusion from a civil forfeiture restraining order include where the court is satisfied that the applicant for exclusion was not in any way involved in the commission of any relevant sch 2 offence.[9]

18 A civil forfeiture restraining order expires 90 days after it is made unless an application for a civil forfeiture order is pending before the County Court or the Supreme Court.[10] The DPP or a prescribed person may apply for a civil forfeiture order under div 2 of the Act. The application is made under s 37(1):

37 Application for civil forfeiture order

(1) If a civil forfeiture restraining order is in force in respect of property, the DPP or a prescribed person, or a person belonging to a prescribed class of persons, may apply to the court which made the civil forfeiture restraining order for a civil forfeiture order in respect of the property.

Note

Only the Supreme Court or the County Court can make a civil forfeiture restraining order.

19 The application is determined under s 38 of the Act. Pursuant to s 38(1), the court must order that the restrained property be forfeited if certain formal requirements are met:

38 Determination of application for civil forfeiture order

(1) On an application under section 37(1) for a civil forfeiture order, the court which made the civil forfeiture restraining order must order that the restrained property be forfeited to the Minister if the court is satisfied that -

(a) the requirements of section 37 as to notice of the application have been complied with; and

(b) not less than 30 days have elapsed since the last notice given in accordance with section 37; and

(c) there are no pending applications for a section 36V exclusion order in relation to the restrained property.

20 As noted above, the court has the power under s 38(2) to exclude property or an interest in property where it is satisfied that a civil forfeiture order would cause 'undue hardship'. This is one of the two primary powers the subject of this appeal:

(2) The court may exclude particular property or any particular interest in property from the operation of a civil forfeiture order if satisfied that otherwise undue hardship may reasonably be likely to be caused to any person by the order.

21 Once a civil forfeiture order is made, the effect is that, under s 41, immediately on the making of the order, the property vests in the Minister in equity subject to every mortgage, charge or encumbrance to which it was subject immediately before the order. The Minister then has a right to be registered at law once the applicable registration requirements are complied with:

41 Effect of forfeiture

(1) In this section registrable property means property title to which is passed by registration on a register kept by a relevant registration authority.

(2) If -

(a) a court makes a forfeiture order or a civil forfeiture order in respect of property then, immediately on the making of the order;

...

the property vests in the Minister subject to every mortgage, charge or encumbrance to which it was subject immediately before the order was made ...

...

(3) If registrable property is forfeited to the Minister under a forfeiture order or a civil forfeiture order ... -

(a) the property vests in equity in the Minister but does not vest in the Minister at law until the applicable registration requirements have been complied with; and

(b) the Minister is entitled to be registered as owner of the property; and

(c) the Minister or a prescribed person authorised by the Minister for the purposes of this subsection has power to do, or to authorise the doing of, anything necessary or convenient to obtain the registration of the Minister as owner, including but not limited to, the execution of any instrument required to be executed by a person transferring an interest in property of that kind.

22 A person may also seek relief from the operation of a civil forfeiture order, if it would be reasonably likely to cause 'undue hardship' to the person, in the form of a specified payment of an amount out of the forfeited property, pursuant to s 45(1). The order would take effect after the forfeited property is sold or otherwise disposed of. This is the second of the two primary powers the subject of this appeal:

45 Relief from undue hardship

(1) Subject to subsection (1A), if a court is satisfied that undue hardship may reasonably be likely to be caused to any person by a forfeiture order or a civil forfeiture order made by that court, the court -

(a) may order that the person is entitled to be paid a specified amount out of the forfeited property, being an amount that the court thinks is necessary to prevent undue hardship to the person; and

(b) may make ancillary orders for the purpose of ensuring the proper application of an amount so paid to a person who is under 18 years of age.

(1A) For the purposes of subsection (1), when determining whether undue hardship may be caused by a forfeiture order to the person convicted of the offence in relation to which the forfeiture order has been made, the court must not take into account the impact on that person of the sentence given for that offence.

23 Amendments were made to the Act by the Criminal Organisations Control and Other Acts Amendment Act 2014 ('the Amending Act') to substitute 'undue hardship' for 'hardship' in s 38(2) and s 45(1) and to insert sub-s (1A) to s 45. The explanatory memorandum for the Criminal Organisations Control and Other Acts Amendment Bill 2014 ('the Bill') set out the following:

Division 2 of Part 2 of the Bill amends the Confiscation Act 1997 to require the court to have regard to undue hardship in exercising its discretion to alleviate the hardship caused to a person from a forfeiture order or civil forfeiture order. Currently, the court has a broad discretion to alleviate hardship caused to any person from a forfeiture order or civil forfeiture order. The courts have interpreted this hardship discretion broadly as including hardship that ordinarily flows from the deprivation of property. This interpretation dilutes the purpose of the Confiscation Act 1997, which is to deprive people of the proceeds and instrumentalities of crime.

A requirement for undue hardship codifies the common law, which requires something more than ordinary hardship. The court will still be able to exercise its discretion to alleviate hardship where the hardship caused by forfeiture is unjust or excessive given the circumstances.[11]

24 In his second reading speech, the Attorney-General said:

The bill will also amend provisions in the Confiscation Act that deal with the civil forfeiture of the proceeds of crime. Civil forfeiture allows for the confiscation of property used in and derived from crime without a requirement that the person be convicted of a crime. While there is no need for the person to be convicted, the scheme requires proof of a connection between the property and the alleged crime.

...

The bill will also amend provisions in the Confiscation Act that allow persons to seek relief from the hardship caused by the forfeiture of property. Currently the Confiscation Act allows a person (such as a dependent spouse or child) who might suffer hardship due to the forfeiture of property to seek a payment out of the forfeited property to relieve such hardship. The amendments will clarify that in considering this question, the court should have regard to the level of undue hardship caused by forfeiture that is hardship above and beyond the ordinary hardship that can be expected to occur as a result of the forfeiture of assets. These amendments will ensure that the provisions operate as intended - that a person is not left destitute as a result of asset forfeiture, rather than restoring a person to the circumstances that existed prior to forfeiture.[12]

25 The offences with which Meskovski was charged came to be detected in a set of unusual circumstances. On 4 September 2013 Meskovski was seen driving around Taylors Hill in a car. The car was intercepted by the police and was found to contain a quantity of hydroponics equipment, including 22 electrical ballasts. Meskovski was interviewed by the police and in his record of interview he revealed that he was renting a residential property in Coppin Lane, Caroline Springs.

26 Police suspended the record of interview with Meskovski and executed a search warrant at 9 Coppin Lane, Caroline Springs ('the Coppin Lane property'), pursuant to s 81 of the Drugs, Poisons and Controlled Substances Act. Police seized further hydroponics equipment consistent with a cannabis cultivation operation.

27 When the police interview reconvened, Meskovski revealed that he had bought some second-hand equipment, electrical ballasts and lights and taken them to the Coppin Lane property for the purpose of growing marijuana hydroponically. After making an assessment of the electrical power supply at the Coppin Lane property, Meskovski considered that there was insufficient power to run the hydroponics equipment. He said it only had 10 amps and he would need 15 amps. He said that because there was not enough power he intended to take everything down and not go ahead with his plan. It appeared that the Coppin Lane property was owned by his nephew and Meskovski was renting it from him.

28 On 17 July 2014 police went to Meskovski's family home, the property, with a summons for Meskovski to appear for offences including attempting to cultivate cannabis. The front door was open and the police officer noticed a strong smell of cannabis coming from within the premises. The smell was consistent with mature cannabis plants. Meskovski's wife, Josephine Meskovska, explained that Meskovski was overseas and not expected to return for several weeks. On 21 October 2014 the police returned to the property to execute a search warrant.

29 The execution of the warrant revealed that two bedrooms were being used upstairs for the cultivation of cannabis. A shed was also being used for the same purpose. Meskovski was again interviewed by the police. There was an electricity bypass discovered. The police also found that there was an electricity bypass on Meskovski's son's house nearby. In his record of interview Meskovski explained that he was an electrician and he admitted doing both of the bypasses.

30 Thus, before the charge of attempting to cultivate cannabis could come before a court, Meskovski had set up an alternative operation for cultivating cannabis in his own house because the electricity supply at his nephew's house was not sufficient for the operation.

31 In his record of interview Meskovski denied having any reason to offend. However, when interviewed by Mr Jeffrey Cummins, consulting clinical and forensic psychologist, Meskovski explained that he had a gambling problem and he was intending to use the money he received from the cultivation of cannabis for the purpose of recouping his gambling losses. That is, he established the hydroponic operation to make money. Mr Cummins expressed the opinion that at the time of the offending Meskovski was suffering from a Gambling Disorder of mild/moderate severity which had developed against a background of persistent depression, and, at the time of the report, Meskosvki also had chronic pain syndrome and a chronic adjustment disorder with mixed anxiety and depressed mood. Mr Cummins further recorded that Meskovski 'acknowledged [the] offending behaviour was indicative of an attempt on his behalf to obtain additional funds which he could use to chase his gambling losses'.

(1) Cultivating a narcotic plant (cannabis) in a quantity not less than a commercial quantity (under s 72A of the Drugs Poisons and Controlled Substances Act);

(2) Trafficking a drug of dependence (cannabis) (under s 71AC of the Drugs Poisons and Controlled Substances Act);

(3) Possession of a drug of dependence (cannabis) (under s 73 of the Drugs Poisons and Controlled Substances Act);

(4) Two charges of theft of electricity (under s 74 of the Crimes Act);

(5) Possession of a prohibited weapon (extendable baton) (under s 5AA of the Control of Weapons Act 1990); and

(6) Possession of cartridge ammunition (under s 124(1) of the Control of Weapons Act).

33 At a committal hearing on 3 June 2015, the prosecutor obtained leave to amend the first charge made against Meskovski to cultivating cannabis simpliciter, and not cultivating a commercial quantity of cannabis. Meskovski pleaded guilty to this amended charge, as well as to one of the theft charges, the weapon charge and the ammunition charge. It appears that the remaining charges were withdrawn and struck out by the court.

34 On 10 August 2015 Meskovski was sentenced for the four offences in the Magistrates' Court to a CCO with supervision and treatment conditions, including a condition that he perform 200 hours of unpaid community work over a two year period. Meskovski completed the work hours component of the CCO by 11 December 2015.

35 In an affidavit sworn by Meskovski on 28 July 2017 in support of his (unsuccessful) application for exclusion from the civil forfeiture restraining order, he deposed that he was born on 30 January 1952, and was 65 years old. He came to Australia on his own in about 1970, just before he turned 18. He met his wife in 1976 and they were married in 1979. He and his wife purchased land in 1986 for $30,000 and in 1989 completed building the family house on the land (the property) for a further $170,000. He deposed that they fully re-paid the mortgage on the property. In August 2006 they refinanced the property to fund the acquisition of a restaurant Meskovski bought.

36 He also deposed that all funds used to pay the mortgage in relation to the property had been from the money he and his wife had received from their incomes while their son and his wife had assisted and continued to assist in the servicing of those mortgages.

37 At the time of the offending Meskovski was retired. He deposed that his only form of income was his pension. Meskovski summarised his assets and liabilities as at that date as follows:

(1) on the basis of the DPP's valuation of the property at $675,000 as at 6 October 2016, his half share was $337,500;

(2) the property was subject to two mortgage accounts in favour of the Commonwealth Bank totalling $252,769.67;

(3) he had 'nominal funds' in his bank accounts;

(4) he owned a Mazda motor vehicle worth about $6,000;

(5) he had personal property of no real value;

(6) he held a Commonwealth Bank credit card; and

(7) he held an ANZ credit card in respect of which he owed approximately $7,000, but he had reached an agreement with the ANZ to pay $20 per month.

38 Meskovski deposed that he had spent approximately $100,000 on his legal fees for the criminal proceedings drawn from monies his wife had been provided with by her mother. He stated that if he were to lose his interest in the property, given that neither he nor his wife worked and were both reliant on Centrelink benefits, they would lose their home. Their children were not in a position to assist. He said it would be unlikely that he and his wife would be able to purchase another property, and would need to find a property to rent within their budget.

39 Meskovski's wife, Josephine Meskovska, also applied for the exclusion of her interest in the property from a civil forfeiture order.[13] She was successful. On 6 March 2017, Judge Cohen made consent orders to the effect that upon the payment by Josephine Meskovska of $41,200 to Asset Confiscation Operations ('ACO'), her interest in the property (50 per cent) was excluded.[14]

40 Josephine Meskovska deposed that she had received $240,000 from her mother as an 'early inheritance'. It would appear that this represents the funds from which Meskovski drew $100,000 to finance his defence to the criminal prosecution. Josephine Meskovska gave $10,000 each to their three children and deposited $200,000 into a CBA account on which she earned interest. She used the funds to make payments towards the mortgage, household bills, living expenses and to spend on her children and grandchildren.

41 As the first ground of appeal challenges whether the judge determined Meskovski's hardship application under s 38(2), it is necessary to consider what occurred at the hearing.

42 The hearing began with senior counsel for the DPP formally applying for a civil forfeiture order of the property while noting that 50 per cent of the property was to be excluded from forfeiture in favour of Josephine Meskovska, pursuant to the order of Judge Cohen. He also applied for a forfeiture order of the payment of $41,200 which Josephine Meskovska had made to the ACO.

43 Amongst the affidavits the judge indicated he had read was an affidavit sworn by Paul Dimitros, Assistant Director of the ACO. This explained the role of the ACO in respect of real property where part of a property has been forfeited to the State under the Act but part of the property is, as here, excluded from forfeiture. Mr Dimitros deposed to the steps that are taken first to determine if there can be a negotiation of the buy-back of the forfeited interest,[15] before the ACO takes any steps for a joint sale, and, only as a last resort, applies to VCAT under the Property Law Act 1958 for the sale of the whole of the land by public auction. He said:

1. In the context of this matter and partial forfeiture of the property, once forfeiture of the property occurs, ACO will endeavour to establish communication with the legal representative of the applicant/s or the applicant himself.
2. ACO will liaise closely with the applicant and his family and establish their intentions in regards to the non-forfeited interest in the property.
3. In the first instance, ACO will offer suggestions to the applicant as to whether he will consider ... making [an] application for a buy back under Part 7, particularly section 56 of the Act.
4. ACO will seek to establish with the registered proprietor of the non-forfeited interest in the property as to whether that person will be making application for a buy out of the Minister's interest in the property under Part 7, particularly section 57 of the Act.
5. If neither of the options under Part 7 of the Act are adopted, ACO will then work cooperatively with the occupants to consider a joint sale of the whole property.

1. ACO will at all times be mindful of the needs of the occupants of the property and our practices are designed to minimise any inconvenience that may be caused to the occupants.
2. My policy is to provide the occupants of the property a reasonable and realistic time frame, and every opportunity to find and secure alternative accommodation if the options under Part 7 of the Act are not viable.
3. Of last resort, if no amicable resolution can be reached in regards to the partially forfeited interest in the property, I will instruct our solicitors to make application in the Victorian Civil and Administrative Tribunal (VCAT) for orders under the Property Law Act 1958 (Vic) for the whole of the relevant land to be sold by public auction.

44 Senior counsel for the DPP also indicated that the formal requirements for the making of a civil forfeiture order had all been made out. These are the pre-conditions of s 38(1) referred to above.[16] He indicated that what remained for the judge to determine was the hardship application by Meskovski.

45 Counsel for Meskovski began by indicating that the matter for the consideration of the Court was: '[D]oes the forfeiture of Mr Meskovski's interest in his house amount to undue hardship?' Meskovski's written submissions made it clear that the application was made under s 38(2). However, there was no identification before the judge that s 38(2) was the source of the hardship application until the hearing was well under way. Indeed, the first reference to s 38(2) was after counsel for Meskovski had completed his submissions; senior counsel for the DPP noted that s 38(2) 'is what we're really debating today'.

46 In an earlier exchange with counsel for Meskovski, the judge also noted that he thought he was dealing with an application relating to a sum of money but senior counsel for the DPP clarified that what was at issue was the property. It was said that the issue of a sum of money 'related only to the warrant', which appears to be a reference to the forfeiture order of the payment Josephine Meskovska had made to the ACO.

47 At several points in the hearing the judge asked for further assistance in relation to the operation of the Act. Little assistance was forthcoming. The judge indicated that he was aware that in the exercise of his discretion consideration would need to be given to the age of the individual affected by the forfeiture order; whether the individual is working; whether the individual might be rendered homeless; and the gravity of the offending. Having been taken to some pre-2014 authorities, before the Act was amended,[17] for example, R v Winand,[18] the judge asked whether the assessment required for an exercise of discretion had been affected by the insertion of the word 'undue' before 'hardship'. Counsel for Meskovski continued to refer to the pre-2014 authorities on the basis that in substance they examined what is undue hardship. When asked if there was a capacity for the Court to make an order demonstrating 'some level' of forfeiture, counsel for Meskovski referred to s 45(1).[19]

48 In response to Meskovski's submissions in support of excluding the property on grounds of hardship, senior counsel for the DPP submitted that he did not object to reliance being placed upon the pre-amendment authorities as an indication of the factors to be taken into account, providing that the judge did not confine himself to those authorities. He emphasised that every word in a statute has to be given meaning. He also emphasised that when the formal requirements under s 38(1) are met, property should be forfeited subject to the discretion vested in the court in appropriate circumstances to alleviate any undue hardship. He emphasised that the civil forfeiture order he sought related only to Meskovski's half-interest in the property, Josephine Meskovska's half-interest remaining under her ownership. He indicated that the net value of Meskovski's interest would be about $212,000, the net value of the excluded interest of Josephine Meskovska would be about $212,000, and the remaining mortgage about $250,000 (the gross value of the property being about $675,000).[20] He acknowledged that as both Meskovski and his wife are dependent on Centrelink, almost their entire Centrelink income is spent paying the mortgage.

49 With respect to the meaning of 'undue hardship', senior counsel for the DPP submitted that what has to be established is that the making of the civil forfeiture order 'is unwarranted, excessive or too great'; for example, if the flow-on effects of the forfeiture order have such serious consequences to the owner that they would be too great to inflict or unjustified. It was submitted that, ultimately, it is a matter of whether the civil forfeiture order would be 'severely disproportionate' to the circumstances of the offence and the nature and degree of offending. At this point senior counsel for the DPP indicated he had dealt with each of the matters put by Meskovski 'under s 38(2)' and maintained that it was appropriate that the whole of Meskovski's interest should be forfeited but acknowledged that the judge had 'a discretion to do less than that under s 45'. He later indicated that an order under s 45 for an applicant to be paid a specified amount out of the forfeited property appeared to operate on the basis that it assumed that the money was paid after a sale of the property had taken place.

50 The judge asked counsel for Meskovski whether there was anything he wished to say on the 'alternative' approach, while noting that this was not what the 'primary submission' was directed to. Counsel relied on Meskovski's age, his poor health, his poor employment prospects and his not insignificant mortgage. He had earlier relied on these same facts for his primary submission. He then submitted that the tests under s 38(2) and s 45(1) are 'different tests' and that pre-amendment authorities, including Winand, remain relevant to s 38(2). The submission that s 38(2) and s 45(1) involved 'different tests' was re-agitated on the appeal. He urged the judge to find that the forfeiture of Meskovski's interest would be severely disproportionate to the offending.

51 The judge commenced his reasons by referring to his earlier dismissal of Meskovski's application for exclusion in Ruling No 1. In Ruling No 1 the judge had made the following findings, relevantly:[21]

(1) All of the evidence points to a clear intention on the part of Meskovski to use the property to cultivate cannabis;

(2) The property became 'tainted property' consistent with the definition of that expression in s 3(1), and in particular, paragraph (a)(i),[22] because it was used in connection with the commission of a sch 2 offence;

(3) It is the gross weight of 37 kilograms which is relevant in determining whether the offence committed by Meskovski is a sch 2 offence and not the air-dried weight of 5 kilograms. The judge referred to s 72A and pt 2 of sch 11 to the Drugs, Poisons and Controlled Substances Act;[23]

(4) The gross weight of 37 kilograms brings the applicant's offending within the offence of cultivating a commercial quantity of cannabis.

52 Having adverted to Ruling No 1, the judge acknowledged all the formal elements of s 38(1) were satisfied and there was no dispute in relation to any of them. At this point he said, in a passage relied upon by Meskovski on the appeal as revealing error, that it was only the application of s 45(1) that was in dispute:

Counsel for the respondent referred me to what must be proved under s 38(1) of the Confiscation Act. No issue was taken by counsel for the applicant that those matters had not been proved satisfactorily. Indeed, the only issue raised by counsel for the applicant was whether I should exercise the discretion under s 45(1) to make an order for forfeiture or not.[24]

53 The judge considered the amendments to the Act in 2014 and set out s 45(1) highlighting the addition of the word 'undue'.[25] He also referred to the second reading speech for the Bill that introduced the amendments and the objects of the Act in s 3A.[26] Against that background, he said that it was necessary for him to consider 'what the qualifying word "undue" is intended to achieve'.[27]

54 He recorded that a concession had been made by counsel for Meskovski 'that the word "undue" has altered the test ... [t]he question is to what extent'.[28] On the appeal it was accepted by both parties that this concession had not been made. It appeared that counsel for Meskovski had argued, consistently, that the pre-amendment authorities continued to apply and that the qualification of the word 'undue' did not introduce a test of greater stringency.

55 The judge referred to various dictionary definitions of 'undue' as 'unwarranted', 'excessive', 'too great', 'inappropriate', and 'disproportionate'. He indicated that it was clear that what 'the legislature intended is for the applicant to demonstrate that an order for forfeiture will result in something more than hardship'.[29] However, the judge was well aware that it would be wrong to substitute any synonym for the statutory language of 'undue'. He said:

[W]hilst there is an attraction to finding synonyms which aid in giving the flavour to the meaning of 'undue', caution must be exercised in not applying the words of interpretation to the actual test. The test is plainly whether forfeiture of the applicant's interest in the property would result in undue hardship.[30]

56 He referred to a number of the pre-amendment authorities, including Lake v The Queen,[31] Winand, Taylor v Attorney-General (SA),[32] and R v Tran.[33]

57 He noted that 'the starting point is to recognise that the forfeiture provisions of the [Act] are intended to result in a measure of hardship'[34] and that Kirby P had said as much in Lake when he observed:

In considering hardship, it is necessary to bear in mind that, of necessity, in achieving its objects, the Act will cause a measure of hardship in the deprivation of property. Indeed that is its intention. It is not that kind of hardship, therefore, that can give rise to the relief under s 5(1)(b)(ii) [of the Crimes (Confiscation of Profits) Act 1985 (NSW)]. The provision for relief on that ground must not be so interpreted as to frustrate the achieving of the purpose of Parliament in enacting the exceptional provisions of the Act. Something more than ordinary hardship in the operation of the Act is therefore meant. Otherwise the Act would have, within it, the seeds of its own [in]effectiveness in every case.[35]

58 The judge also noted that in Winand the Court of Appeal, in the context of conviction-based forfeiture, identified a number of considerations relevant to the determination to make a forfeiture order. These included:

the value of the subject property, the nature and gravity of the offence, the use made of the property, the degree of the offender's involvement, the offender's antecedents, the value of any other property confiscated and the penalty imposed, the nature of the offender's interest in the property, the value of the drugs involved or the size of the crop, whether the property was acquired with the proceeds of the sale of drugs, the utility of the property to the offender, the length of ownership of the property, the extent to which the property was connected with the commission of the offence, the fact that forfeiture is intended as a deterrent, the interest of innocent parties in the property and the extent (if any) to which the retention of the property might bear on the offender's rehabilitation.[36]

59 He noted that in Winand the Court of Appeal refused to make the forfeiture order.[37] The appellant in Winand had been convicted of trafficking in a drug of dependence, possession of a drug of dependence, and cultivating a narcotic plant (cannabis) and was sentenced in the Magistrates' Court to an effective term of nine months' imprisonment of which six months was suspended for a period of 12 months and fined $500 on the possession charge. The DPP had made an application for forfeiture of land which had been used for the growing and processing of cannabis and a forfeiture order was made at first instance. The judge had described the sentence imposed as being a 'clement' disposition. The Court of Appeal disagreed with that description because there were matters of some significance that could attract leniency. The Court considered that the forfeiture order sought would cause 'unacceptable hardship'. In a passage quoted by the judge, the Court said:

On the different view we take of this matter namely, the characterisation of the penalty imposed, we are left in no doubt that by reason of such error the making of the order did, to an unacceptable degree, operate disproportionately to the nature and gravity of the offence. To order the taking from the appellant of his only asset of any significant value and which is his home the equity in which is worth $65,000 to $75,000 is in all the circumstances of this case to make an order which would cause unacceptable hardship and thus we believe to be manifestly unfair.[38]

60 The judge observed that Warren CJ in Tran relied on Winand and used similar language in describing the relevant hardship:

Weighing these and other matters up, as distilled in Winand, I cannot be satisfied that it is appropriate to make the orders sought. However, the most significant factor in this case is the extent of hardship to the defendant. He would be rendered, as it was put on his behalf, 'homeless'. I cannot be satisfied, in particular weighing up the factors of deterrence, impact on innocent parties and the defendant's rehabilitation, that the order should be made. I consider that, in the circumstances of this matter, the making of the order would cause, in the words of the Court of Appeal in Winand '... unacceptable hardship and ... be manifestly unfair'.[39]

61 The judge also referred to Taylor where Debelle J had 'used the expressions "severely disproportionate" when referring to the circumstances of the offence and the nature and degree of offending as relevant, and the word "unnecessary" as qualifying hardship which he considered might justify the court in refusing an order'.[40]

62 Against that background, the judge considered how he should interpret the word 'undue' in qualifying the hardship that might support the refusal to make a civil forfeiture order:

Where these observations are of interest and become relevant are because of the use of the words 'unacceptable', 'disproportionate' (referring to the nature and gravity of the offence) and 'manifestly unfair' to demonstrate that the result of an order for forfeiture was more than what was contemplated by the test of hardship. Those particular words are consistent with the words of interpretation to which counsel for the respondent referred me to in the assistance he gave me to arrive at what the legislature intended by the addition of the qualifying word 'undue'.

I can readily appreciate that the entire loss of an asset, such as a home, rendering someone homeless, could be characterised as going beyond 'hardship'. Although, I do not read these authorities as creating a hard and fast rule that homelessness or being rendered penniless necessarily equate with undue hardship. No doubt much will depend upon the individual circumstances of each case in weighing up competing considerations.

It would appear that a result of the kind referred to in Winand and Tran is toward the extreme end of the likely result of an order for forfeiture, and indeed, one which would be financially crushing. It stands as a matter of reason that something less than a result of that kind may not warrant the descriptors of the quality of the hardship which were used by the courts in each of those cases. [41]

63 He then proceeded to determine the hardship application by reference to the gravity of the offending and Meskovski's personal circumstances. Without referring to either s 38(2) or s 45(1) he made the finding that he was 'not satisfied that the making of a forfeiture order in the circumstances of the applicant would amount to undue hardship.'[42]

65 He elaborated on the critical finding by saying:

No evidence was adduced by the applicant which demonstrates that if an order was made for forfeiture, resulting in a loss of his half share of the net equity in the property, that he will be rendered homeless or penniless. He may suffer financial hardship in having to refinance or sell the property, but that result falls short of the language in Winand and Tran. I do not accept that the applicant will suffer 'unacceptable hardship' or that an order for forfeiture will be 'manifestly unfair'.

The offence ... is a serious example of the cultivation of a large crop of cannabis, and ... by use of a sophisticated and extensive system of cultivation from which the applicant intended to reap a significant financial reward. I do not accept that making an order for forfeiture is, therefore, disproportionate to the level of his offending conduct.[43]

66 Finally, he distinguished Director of Public Prosecutions v Cini[44] where the Court held that it would not be just, in the circumstances of the case, for the appellant to lose his home as well as be imprisoned. He observed that Meskovski's offending was in all respects serious and he was not persuaded that the liability for forfeiture, if considered by the Chief Magistrate at the time of sentencing, would necessarily have led to any greater leniency.[45]

67 Accordingly, he rejected Meskovski's hardship application and made the civil forfeiture order sought by the DPP.

Did the judge fail to consider and/or determine the application under s 38(2) - Ground 1

68 On the appeal, Meskovski submits that the judge failed to consider s 38(2) entirely. This was despite the clear statement in the written submissions before the judge that Meskovski was relying on s 38(2). Meskovski submits that the judge wrongly identified the discretion under s 45(1) as being the only issue to be determined. He submits that the error was material in that the two discretions, s 38(2) and s 45(1), are different. The way this difference is characterised in Meskovski's written case in support of his appeal differed from the oral submissions made at the hearing of the appeal. In the applicant's written case the difference in the two discretions is identified as carrying the implication that what amounted to 'undue hardship' reflected a lower threshold in s 45(1) than in s 38(2).

Whilst each provision requires the application of the 'undue hardship' test, the discretion being exercised is extremely different. Under s 38(2), the court may exclude particular property or [a] particular interest as a whole. Under s 45(1), it may instead order a specified amount be paid to a person. The Applicant submits that notwithstanding the same test might be applied, given the discretionary nature of the provisions, a court may consider that it ought apply one provision over the other. Such a discretion must be exercised judicially. By the inclusion of the same test in each of the provisions, the legislature must have intended the discretion be exercised differently. Under s 45(1) of the Act, there must be a lower threshold of 'undue hardship' as otherwise the provision would have little work to do.

His Honour, in failing to consider s 38(2) of the Act entirely, denied the Applicant the opportunity of the court considering which, if any, of the discretions should be exercised in this matter. Having jurisdiction under the Act, his Honour was obliged to determine the application. The Applicant submits that in entirely failing to consider s 38(2), his Honour erred.[46]

70 In our view, there are multiple difficulties in this submission, the first of which is that if s 45(1) carries a lower threshold of 'undue hardship', then s 38(2), upon which Meskovski primarily relies, carries a higher threshold of 'undue hardship'. If the judge concluded, as he did, that Meskovski's circumstances did not meet the lower threshold for s 45(1) then, as the DPP submits, there is no chance of Meskovski succeeding under s 38(2). That is, it is self-evident and a fortiori, that the circumstances do not meet the higher threshold of s 38(2).

71 The second difficulty is the assumption Meskovski makes. He submits that because s 38(2) and s 45(1) use the same statutory language, 'undue hardship', s 45(1) would have little utility if the same threshold is to apply. But this submission ignores the other differences that exist between the two discretions. Most importantly, s 38(2) and s 45(1) empower a judge to do two quite different things. Under s 38(2) a judge can exclude property, or a person's particular interest in the property, from the operation of the civil forfeiture order. The discretion does not extend to permitting a judge to divide up the property or protect a portion of an interest in property from the effect of forfeiture. It is an 'all or nothing' discretion, as Hargrave J described it in Director of Public Prosecutions v Ali.[47] In referring to the pre-amendment version of s 38(2), he said:

[T]he words of the subsection ... provide for an all or nothing approach to any identified 'particular interest' in the relevant property. If hardship is established, the Court has a discretion to exclude all of the particular interest or none of it. There is no middle ground in the discretion, authorising the Court to exclude part only of an interest from the operation of a civil forfeiture order.[48]

72 The effect of an order made under s 38(2) is that property, or a particular interest in property, is protected from forfeiture. By contrast, the discretion conferred by s 45(1) empowers a judge to require that a specified amount of money be paid to a person to prevent undue hardship; a 'middle course' as Hargrave J described it. As noted, the order takes effect after the sale of the forfeited property. Hargrave J described the difference between the two discretions in this way:

In exercising the Court's discretion, the fact that it [s 38(2)] is an all or nothing discretion is an important matter to be taken into account. There will be cases where the Court takes the view that total forfeiture would be unduly harsh in all the circumstances, but the conduct of the owner of the relevant interest is such that the ends of the civil forfeiture regime would be defeated if the whole of the property was excluded from the operation of a civil forfeiture order. In such cases, the further discretion arising under s 45(1) of the Act, which permits the Court to order payment of a specified amount out of the forfeited property in order to avoid hardship to any person, is enlivened. Section 45(1) gives the Court power to adopt a middle course; involving recognition of the seriousness of the conduct of the property owner on the one hand and relieving, at least in part, against hardship on the other.[49]

73 The discretion under s 45(1) is thus an alternative discretion to s 38(2). It is to be exercised, as Hargrave J indicates, when the circumstances of the case reveal that, although a civil forfeiture order may be reasonably likely to cause undue hardship, there are other considerations that point against exercising the discretion under s 38(2) to exclude the whole of the property, or the whole of an interest in the property, from forfeiture. Those considerations may include the need to ensure that the objects of the Act are not defeated, in particular the need to deter persons from engaging in criminal activity.[50] If property is excluded from forfeiture despite a court having been satisfied that there were reasonable grounds to support a police member's suspicion that the property was 'tainted property',[51] an offender may not be specifically deterred and the object of general deterrence may not be achieved. Much may depend on the gravity of the offending, or the circumstances that indicate that an offender is unlikely to be deterred without the consequences of the criminal conduct having a concrete and practical effect on his or her assets.[52]

74 There may be many other reasons, drawn from the circumstances of a case, that support the refusal of a judge to exercise the discretion under s 38(2), for example, by the need to prevent the use of the tainted property in another criminal offence. The Act still allows the judge to recognise that, in effect on compassionate grounds, a certain sum of money ought be paid from the proceeds of the sale or disposal of the forfeited property, pursuant to s 45(1), to an applicant, to prevent undue hardship.

75 Understood in this way, the two discretions, s 38(2) and s 45(1), are quite different in their purpose and effect. While s 38(2) removes the property, or the relevant interest in the property, from the forfeiture regime, s 45(1)

authorises the Court to mould orders appropriate to the particular circumstances of the case, and thus recognise the need to balance between the deterrent effect of the civil forfeiture regime on the one hand and the power to ameliorate proven hardship on the other.[53]

76 Given the differences between the discretions under s 38(2) and s 45(1) in purpose and effect, there is no need to posit, as Meskovski does, that their difference lies in the application of higher and lower thresholds. Rather, the two discretions are both enlivened by the same threshold test, namely, that the civil forfeiture order would be reasonably likely to cause 'undue hardship' to a person. It follows from the critical finding[54] that the judge took the view that neither of the discretions was enlivened in the circumstances of the case. It was thus immaterial that the judge failed to focus specifically on s 38(2). The critical finding reveals that the judge was unpersuaded that the circumstances of the case satisfy the single common pre-condition for the exercise of either discretion.

77 At the hearing of the appeal, counsel for Meskovski sought to put a different complexion on ground 1. He argued for a construction of s 38(2) which rendered it mandatory for a court to exclude property, or an interest in property, upon being satisfied that the civil forfeiture order would be reasonably likely to cause a person undue hardship. He submitted that the word 'may' before 'exclude' in s 38(2) should be read as 'must'. According to the submission, it was only if this construction was adopted that there was an appreciable difference between the discretion under s 38(2) and s 45(1). Otherwise, s 45(1) would have little work to do.

78 This submission was not made before the judge. It relies upon a long line of authority including Julius v Lord Bishop of Oxford[55] and Finance Facilities Pty Ltd v Federal Commissioner of Taxation[56] which recognises that the conferral of a power may in some circumstances be coupled with a duty to exercise that power. This approach to the construction of a statutory discretion was explained in ACN 005 057 349 Pty Ltd v Commissioner of State Revenue[57] as arising where a discretionary power can be lawfully exercised only in one way:

Finance Facilities Pty Ltd v Federal Commissioner of Taxation holds that where a discretionary power can be exercised lawfully only in one way, mandamus can be ordered to compel the exercise of the discretion in the way in which it must be exercised; the 'may' becomes a 'must'.[58]

79 ACN explained the form of reasoning adopted in this line of authority in this way:

Finance Facilities concerned the construction of s 46(3) of the Income Tax Assessment Act 1936-68 (Cth) which conferred a discretionary power on the Commissioner to allow a further rebate in certain circumstances.

Section 46(3) relevantly provided:

Subject to the succeeding provisions of this section, the Commissioner may allow a shareholder, being a company that is a private company in relation to the year of income and is a resident, a further rebate ... if the Commissioner is satisfied that -

(a) the shareholder has not paid, and will not pay, a dividend during the period commencing at the beginning of the year of income of the shareholder and ending at the expiration of ten months after that year of income to another private company;

(b) where the shareholder has paid, or may pay, a dividend during the period -

(i) commencing at the beginning of the year of income of the shareholders; and

(ii) ending at the expiration of ten months after that year of income, to a company, being a private company in relation to the year of income of the company in which the dividend was, or may be, paid, the company has not paid, and will not pay, a dividend during the period -

(iii) commencing at the beginning of the year of income of the company in which the dividend has been, or may be, paid by the shareholder; and

(iv) ending at the expiration of ten months after that year of income, to another private company; or

(c) having regard to all the circumstances, it would be reasonable to allow the further rebate.

The High Court held that when any of the alternative circumstances specified in the section were met, the Commissioner was under a duty to exercise the power. This depended not on the abstract meaning of the word 'may' but on whether the particular context of the words and circumstances converted the word 'may' from that of an empowering or facilitative word to a word capable of having mandatory force. Windeyer J famously said:

Here the scope of the permission or power given is circumscribed. Conditions precedent for its exercise are specified as alternatives. The question then is, must the permitted power be exercised if one of those conditions be fulfilled?

This does not depend on the abstract meaning of the word 'may' but of whether the particular context of words and circumstance make it not only an empowering word but indicate circumstances in which the power is to be exercised - so that in those events the 'may' becomes a 'must'. Illustrative cases go back to 1663: R v Barlow. Today it is enough to cite Julius v Lord Bishop of Oxford; and add in this Court Ward v Williams. But I select one other reference out of a multitude: Macdougall v Paterson. There Jervis CJ said in the course of the argument 'The word "may" is merely used to confer the authority: and the authority must be exercised, if the circumstances are such as to call for its exercise'. And, giving judgment, he said:

We are of opinion that the word 'may' is not used to give a discretion, but to confer a power upon the court and judges; and that the exercise of such power depends, not upon the discretion of the court or judge, but upon the proof of the particular case out of which such power arises.

I consider that to be directly applicable to the present case. If the Commissioner, having considered the matter, is satisfied of facts out of which the power to allow a rebate arises, he cannot nevertheless refuse to allow it. That is obvious in the case of condition (c): and it seems to me to be so also in the case of the alternatives (a) and (b).[59]

80 The question whether the apparently facilitative word 'may' should be construed as having mandatory force depends, as ACN explains, on the particular context of the words and circumstances. It depends upon the context indicating that upon the satisfaction of the pre-condition for the exercise of the power the repository of the power has no alternative but to exercise it.

81 In our view, this approach has no application here. As Hargrave J explained in Ali, when a court is satisfied that undue hardship may be reasonably likely to be caused to any person by a civil forfeiture order, the court has available to it alternative courses. It may exercise the 'all or nothing' discretion in s 38(2) to exclude the property, or the interest, from forfeiture or, in the alternative, it may choose to adopt the 'middle course' to 'mould orders appropriate to the particular circumstances of the case'.[60] The court has a genuine choice to make. The facilitative language used of 'may' is entirely appropriate to reflect the availability of a choice.

82 We have already sought to explain that the two discretions, in s 38(2) and s 45(1), are different in purpose and effect. The interpretation of s 45(1), as an alternative to s 38(2), clearly shows it has work to do. In our view, there is no substance in the submission that s 38(2) has mandatory force.

83 It is regrettable that at the hearing before the judge it was not made plain at the outset that the hardship application was made pursuant to s 38(2). This ought to have been the starting point of the application. It is also regrettable that when the judge repeatedly sought assistance from counsel on the operation of the Act, that assistance was not forthcoming. At times the judge seemed to understand that the primary application was made pursuant to s 38(2), although his focus appears to have remained on s 45(1). Nevertheless, in our view, any mistaken understanding by the judge was not material to the outcome. As we have said, the critical finding he made precluded the exercise of either discretion.

Did the judge err in interpreting the meaning of 'undue hardship'? - Ground 2

85 It is clear that the words 'undue hardship' must be construed starting and ending with the text, considering the expression in its context and with its statutory purpose in mind.[61] It is also permissible to rely upon extrinsic materials, including legislative history.[62]

86 The principal submission made by Meskovski under ground 2 is that, in amending the Act to include the word 'undue' before the word 'hardship', the legislature did not intend that the previous judicial authority on hardship be overtaken. Meskovski submits that the guiding principles in Lake, Winand, Taylor, and Tran, continue to apply. He submits that those decisions reveal that the courts have not simply decided whether to exercise the s 38(2) discretion by considering whether a person will suffer hardship by forfeiture; rather, the courts have consistently looked for something more than mere hardship; something which takes the facts found as rendering the hardship 'unacceptable', 'disproportionate', 'manifestly unfair' or 'more than ordinary'.

87 Meskovski contends that the judge departed from the pre-amendment authorities by interpreting the term 'undue hardship' as requiring a consequence towards the extreme end of the likely result of an order for forfeiture. On that approach, it was said, if the result of an order was likely to produce something less than an extreme or financially crushing result, it would not amount to 'undue hardship'.

88 Meskovski submits that the second reading speech of the Bill, set out above,[63] illustrates that the amendment was intended to 'clarify that in considering this question [that of 'hardship'], the court should have regard to the level of undue hardship caused by the forfeiture, that is, hardship above and beyond the ordinary hardship that can be expected to occur as a result of the forfeiture of assets'. Meskovski submits that the purpose as identified is in effect a combination of the principles espoused in Lake, and applied in Winand and Tran. He submits that there is nothing in the context of the provision nor in the second reading speech that indicates any necessity to depart from earlier judicial authority on the appropriate test to be applied.

89 This submission was developed in oral submissions on the appeal to suggest that the insertion of the word 'undue' was a codification of the earlier judicial authority. The submission was based on the observation in the explanatory memorandum that a 'requirement for undue hardship codifies the common law, which requires something more than ordinary hardship'.[64]

90 It was submitted that such a practice is reflected in other legislation, for example, the Income Tax Assessment Act 1997 (Cth) ('the 1997 Act') which relevantly provides that assessable income includes 'income according to ordinary concepts'.[65] The statutory expression 'income according to ordinary concepts' draws on a statement made by Sir Frederick Jordan in Scott v Federal Commissioner of Taxation[66] in respect of the meaning of the word 'income' in the Income Tax (Management) Act 1928 (NSW).[67] This understanding was retained with respect to the Income Tax Assessment Act 1936 (Cth) ('the 1936 Act').[68] In Stone the High Court observed that the 1997 Act had introduced different language from that used in the 1936 Act but nevertheless held that the meaning remained unchanged. However, the basis upon which the Court arrived at this conclusion was an express statutory directive not to treat the rewritten provisions as expressing a different idea simply because a different form of words was used. The plurality said:

The various provisions of the 1997 Act ... must be understood in the light of its stated relationship with the Income Tax Assessment Act 1936 (Cth) (the 1936 Act). Section 1-3(1) of the 1997 Act provides that the 1997 Act contains provisions of the 1936 Act 'in a rewritten form'. Sub-section (2) of that section provides that:

If:

(a) that Act expressed an idea in a particular form of words; and

(b) this Act appears to have expressed the same idea in a different form of words in order to use a clearer or simpler style;

the ideas are not to be taken to be different just because different forms of words were used.'[69]

91 In our view, there is no parallel between the statutory context of the 1997 Act and that of the Act. There is no analogous statutory directive in the Act which provides that 'undue hardship' is not to be taken to express a different idea from 'hardship' standing alone. The statutory context does not support the proposition that the insertion of 'undue' before hardship is to reflect a codification of the existing judicial understanding.

92 The DPP submits that the construction urged by Meskovski fails to reflect the presumption at common law that Parliament is taken to know the existing state of the law when it amends a statutory provision and that, except where there is an express statutory directive as included in the 1997 Act, when it inserts different language it is presumed to have intended a different meaning. As Gageler J stated in Baini v The Queen,[70] by reference to CIC Insurance Ltd v Bankstown Football Club Ltd[71] and Alcan:[72]

The 'modern approach to statutory interpretation':

(a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses 'context' in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means ... one may discern the statute was intended to remedy. ...

That modern contextual approach ordinarily requires that statutory language re-enacted in an identical form after it has acquired a settled judicial meaning be taken to have the same meaning. It equally requires that, changes of drafting style aside, statutory language re-enacted in an altered form after it has acquired a settled judicial meaning be taken to have a different meaning. Were it otherwise, legislative policy choices would be blurred and orderly legislative reform would be impeded.[73]

93 Gageler J went on to support the presumption by reference to the decision of the Supreme Court of Canada in City of Ottawa v Hunter:[74]

The Supreme Court of Canada reflected that concern, even before the modern era of statutory interpretation, when it explained:

[W]hen we see in statutes in pari materiâ, by the very same legislature, additional words ... to a prior enactment, we would be setting at naught the very clear intention of the legislature if we gave to the last enactment the same construction that had been judicially given to the prior one ... We cannot so read out of a statute expressions that must be held to have deliberately been inserted so as to make the new statute different from the prior one.[75]

94 On the basis of that presumption, the DPP submits that the insertion of the qualifying word 'undue' before 'hardship' must be read as demonstrating that Parliament intended to change the meaning given to s 38(2) and s 45(1), to establish a requirement of greater stringency than the requirement of 'hardship'.

96 While, as mentioned, it is permissible to refer to an explanatory memorandum, it is undeniable that extrinsic materials, including an explanatory memorandum, cannot contradict or displace the clear words of a statutory provision.[76] Moreover, the explanatory memorandum for the Bill[77] is confusing and equivocal - on the one hand, it says that a 'requirement for undue hardship codifies the common law' but, on the other hand, it says that existing judicial authority 'dilutes the purpose' of the Act. The amendment clearly does not seek to codify an understanding which 'dilutes' the Act's purpose.

97 The most sensible way of reading the explanatory memorandum for the Bill is as seeking to explain that the amendment intended to depart from those authorities where the court treated the ordinary consequences that flow from the deprivation of property as amounting to 'hardship'. The requirement that the hardship must be 'undue' introduces greater stringency, in that it underscores that the ordinary consequences of deprivation of property are not sufficient for the exercise of the discretion. There must be more in the circumstances of the case to warrant the exercise of a discretion under either s 38(2) or s 45(1). But it is the statutory test, that of 'undue hardship', that must prevail and not a linguistic substitute or synonym such as 'unacceptable', or 'disproportionate', or 'manifestly unfair'. The words 'undue hardship' are ordinary English words and their application will depend upon the individual circumstances of each case.

98 This is not to say that the observations made in Lake, Winand, Tran, and Taylor are wholly irrelevant. It may be that the circumstances of some of the cases would have satisfied a requirement of 'undue hardship' had the requirement applied. For example, being left penniless and homeless as the result of a civil forfeiture order would ordinarily count as 'undue hardship' and there will be other circumstances, short of being penniless and homeless, that will satisfy a court that an order would result in 'undue hardship'.

99 Here, the judge was well aware that the starting point is that some hardship will result from any civil forfeiture order.[78] He understood it would render the legislation ineffective if any hardship would suffice for the exercise of discretion.[79] Although in considering the meaning of 'undue hardship' he used expressions such as 'extreme' circumstances and 'financially crushing', he did so in the context of explaining the result reached in Winand and Tran.[80] Most importantly, he was aware that neither a synonym nor a judicial gloss could supplant the statutory language.[81] He made it plain that there could be no substitute for the plain words of the text.[82]

100 In our view, the judge did not err in interpreting the term 'undue hardship'.

Did the judge ignore Meskovski's individual circumstances? - Ground 3

101 The third ground of appeal raises the issue whether the judge erred in applying the 'undue hardship' test to Meskovski's individual circumstances.

102 The circumstances relied upon include, according to Meskovski, that:

• The offending took place some 28 years after the acquisition of the property;

• The property is subject to a mortgage of approximately $250,000;

• Meskovski and his wife rely on Centrelink benefits and would likely lose the property if Meskovski's interest in the property were forfeited;

• Apart from the property Meskovski has no significant assets;

• His plea of guilty was to the offence of 'cultivate simpliciter' and the sentence of a CCO cannot be regarded as 'clement' disposition;

• The offending was accepted to have taken place over a period of three months, a short period compared to 28 years of ownership of the property;

• Meskovski did not benefit financially from the offending;

• The cannabis was examined by a forensic scientist with Victoria Police who expressed the opinion that the plants seized could be broken down into four categories:

• Items 1 and 2, consisting of 33 plants, having a net weight of 20.1 kg and an air-dried weight of about 5.0 kg;

• Item 3, likely to be 'mother plants' and unlikely to become mature; and

103 Meskovski does not submit that the judge failed to take account of the various factors. He clearly took them into account.[83] The submission is that these factors, taken in combination, and properly balanced, reveal that the judge erred in determining that the forfeiture was not disproportionate to the offending. In other words, the judge failed to properly balance the various factors. It is submitted that the miscarriage of the discretion is plain on its face given that Meskovski received no financial benefit from the offending, which was of short duration, by comparison with the significance of the loss of the family home.

104 In response, the DPP emphasises that the civil forfeiture regime does not depend upon a conviction. The fact that the offence to which Meskovski pleaded guilty was not a sch 2 offence is therefore irrelevant to the making of the civil forfeiture order. It was sufficient that there were reasonable grounds for the suspicion that the property was to be used in connection with a sch 2 offence. Proof that there were such reasonable grounds was the basis of the earlier civil forfeiture restraining order.[84] As noted, once a civil forfeiture restraining order is made, a court must make a civil forfeiture order under s 38(1) when the formal requirements are met save for the discretion to exclude property or an interest in property from the operation of the order pursuant to s 38(2).

105 The DPP also emphasises that Meskovski's personal circumstances have to be weighed against the gravity of the offending. It is the seriousness of the organisation involved in the criminality that the judge correctly took into account as significant in the balancing process.

107 We have described at some length the deliberate and systematic nature of the offending in which Meskovski engaged.[85] The seriousness of the offending is underscored by the fact that he had intended to set up hydroponic systems in the Coppin Lane property but those premises did not have a sufficient power supply to run the system he wanted to operate. He therefore deliberately chose to move the operations from the Coppin Lane property to his own home which had an adequate power supply. The choice of his home was deliberate and based on the needs of the criminal enterprise he was engaging in. There was a substantial crop and large parts of the property were used, including two bedrooms and a shed. The fact that he had been detected by police in relation to the Coppin Lane operation, and was about to be charged with attempting to cultivate cannabis, did not deter him from transferring the criminal enterprise to his own home.[86]

108 In those circumstances, there is a real risk that the objects of the Act would not be met if either of the discretions, in s 38(2) or s 45(1), was exercised in Meskovski's favour. This is particularly so with respect to the objects of deterring persons from engaging in criminal activity and disrupting criminal activity by preventing the use of the property in further criminal activity.[87]

109 The failure by Meskovski to make a profit assumes no importance when the criminal operation was established with the intention of profitability. It was intended as a money-making operation, the profits of which were to be used by Meskovski for gambling, in particular, for the purpose of recouping his gambling losses.[88]

110 We do not consider that the civil forfeiture order made operates disproportionately to the nature and gravity of the offence.

111 If the discretion under s 38(2) were exercised in Meskovski's favour in respect of his interest in the property, this would in effect restore him to the circumstances existing prior to forfeiture. This is precisely the mischief to which the Amending Act was directed.[89]

112 Moreover, as the DPP emphasised at the hearing of the appeal, Meskovski bore the onus of establishing that a civil forfeiture order would be reasonably likely to cause undue hardship to him. Yet there was no evidence that established that he would lose the property. Josephine Meskovska's 50 per cent interest in the property had been excluded from the operation of a civil forfeiture order[90] and she also took the benefit of an 'early inheritance' from her mother.[91] There was no independent evidence that the value of that interest, as supplemented by the inheritance, would be insufficient to lead to a buy-back[92] of Meskovski's interest or the purchase of alternative accommodation upon the sale of the property. There was no evidence of the price of alternative and appropriate real estate. The onus was not discharged.

113 In those circumstances, we consider that no error has been shown in the making of the civil forfeiture order. Nor has error been shown in the making of the critical finding by the judge that he was not satisfied that the making of a civil forfeiture order in the circumstances would amount to undue hardship, with the consequence that neither the discretion under s 38(2) nor that under s 45(1) was enlivened.

114 We would grant leave to appeal but dismiss the appeal.

[1] The power under s 45(1) can also be exercised upon a court being satisfied that a 'forfeiture order' would be reasonably likely to cause undue hardship; see [22] below.

[2] For convenience, in what follows, we refer simply to 'the appeal'.

[3] Meskovski v DPP [No 2] [2017] VCC 1686 ('Ruling No 2').

[4] This was made on 17 March 2017: Meskovski v DPP [2017] VCC 228. The application for exclusion from the restraining order was made pursuant to s 36U of the Act.

[5] The civil forfeiture restraining order was made by Judge Murphy on 20 January 2015 pursuant to s 36M of the Act. On the same day Judge Murphy also made a restraining order pursuant to s 18 of the Act but on 6 November 2015 this was set aside by consent.

[6] The warrant was executed on 21 October 2014.

[11] Explanatory Memorandum, Criminal Organisations Control and Other Acts Amendment Bill 2014, 8-9.

[12] Victoria, Parliamentary Debates, Legislative Assembly, 26 June 2014, 2384 (Robert Clark, Attorney-General).

[13] The application was made pursuant to s 36U of the Act.

[14] The order was made pursuant to s 36V of the Act.

[15] Buy-backs are provided for under ss 56 and 57 of the Act.

[16] See [19] above.

[17] See [23] above.

[18] (1994) 73 A Crim R 497 ('Winand').

[19] See [22] above.

[20] See [37(1)] above.

[22] See [15] above.

1. [23] See [104] below. On the issue of whether it should be the gross weight of 37 kilograms or the air-dried weight of five kilograms which is relevant, the judge said:

Counsel for the applicant submitted that I am bound by the Prosecution case before the Chief Magistrate and am estopped from proceeding to make any findings of fact inconsistent with those made by the Chief Magistrate. Therefore, the applicant has not committed a Schedule 2 offence.

That submission cannot succeed. There are many reasons why that is so, but principally it is because the Confiscation Act is a legislative scheme designed to meet each of the purposes referred to in s 1 of the Act. It deals with what applications can be made, what evidence can be admitted and describes the proceeding as civil in nature, governed by the civil standard of proof.

No authority was advanced by counsel for the applicant which has satisfied me that an estoppel can operate to circumvent the application of a statutory scheme of this kind. Counsel for the respondent referred me to authority going the other way: Ruling No 1 [17]-[19].

[25] Ibid [6]-[7]. See [22] above.

[26] Ibid [9]. See [24] and [13] above.

[27] Ibid [10]. He also commented that he needed to consider 'the addition of subs (1A) which obliges me to ignore the sentence imposed on the applicant': Ruling No 2 [10].

[31] (1989) 44 A Crim R 63 ('Lake').

[32] (1991) 55 SASR 462 ('Taylor').

[33] [2004] VSC 218 ('Tran').

[35] Ibid [11], quoting Lake (1989) 44 A Crim R 63, 66-7. The judge noted that J Forrest J in Kinealy v DPP (2013) 224 A Crim R 553 observed that the last line, which in the original read as 'effectiveness', must have been intended to be read as 'ineffectiveness'.

[36] Winand (1994) 73 A Crim R 497, 500-1.

[38] Ruling No 2 [16], quoting Winand (1994) 73 A Crim R 497, 503 (emphasis added).

[39] Ruling No 2 [17], quoting Tran [2004] VSC 218 [15] (emphasis added).

[44] [2013] VSCA 103; (2013) 38 VR 83 ('Cini').

[45] He also discounted the relevance of s 45(1A) on the basis that there was no evidence of the impact of the sentence upon Meskovski.

[46] Emphasis in original. Citations omitted.

[47] [2010] VSC 503 ('Ali').

[50] Section 3A. See [13] above.

[51] As here. See [6] above.

[52] As here. See [30] above.

[53] Ali [2010] VSC 503 [95].

[54] See [63] above.

[55] (1880) 5 App Cas 214.

[56] [1971] HCA 12; (1971) 127 CLR 106 ('Finance Facilities').

[57] (2015) 102 ATR 281 (Victorian Court of Appeal) ('ACN').

[59] Ibid 326-7 [128]-[130] (emphasis in original) (citations omitted). See also DPP v Le [2007] VSCA 18; (2007) 15 VR 352, 358 [16] where Maxwell P and Chernov JA construed 'may' in the context of s 52(1) of the Act to mean 'must'. Section 52(1) provided: (1) On an application made under s 51, the court may make an order excluding property in which the applicant claims an interest from the operation of [automatic forfeiture] - (a) if the court is not satisfied that the property in which the applicant claims an interest is not tainted property but is satisfied that - '. This was followed by a list of five matters. The power to make an exclusion order was only enlivened upon the court being satisfied as to each of the five matters. Their Honours held that the structure of the provision indicated that the power was to be exercised upon the Court being satisfied of the five factors and there was no discretion not to make an order once satisfied of the five factors. This construction was not in dispute on the appeal to the High Court: DPP v Le [2007] HCA 52; (2007) 232 CLR 562.

[60] See [75] above.

[61] Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) [2009] HCA 41; (2009) 239 CLR 27, 46-7 [47] ('Alcan'); Thiess v Collector of Customs [2014] HCA 12; (2014) 250 CLR 664, 671 [22]; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, 384 [78].

[62] Interpretation of Legislation Act 1984 s 35(b). There is no need to identify a threshold ambiguity.

[63] See [24] above.

[64] See [23] above (emphasis added).

[65] Section 6-5(1).

[66] [1935] NSWStRp 9; (1935) 35 SR (NSW) 215, 219 ('Scott').

[67] See Federal Commissioner of Taxation v Stone (2005) 222 CLR 289, 294 [8], 310 [73] ('Stone').

[68] Federal Commissioner of Taxation v Myer Emporium Ltd [1987] HCA 18; (1987) 163 CLR 199, 209-10; Federal Commissioner of Taxation v Montgomery [1999] HCA 34; (1999) 198 CLR 639, 660-662 [62]-[66].

[69] Stone (2005) 222 CLR 289, 294 [9] (Gleeson CJ, Gummow, Hayne and Heydon JJ) (emphasis added).

[70] [2012] HCA 59; (2012) 246 CLR 469 ('Baini').

[72] [1994] HCA 34; (1994) 181 CLR 96, 106.

[73] Baini [2012] HCA 59; (2012) 246 CLR 469, 484-5 [42]-[43] (emphasis added).

[74] (1990) 31 SCR 7, 10.

[75] Baini [2012] HCA 59; (2012) 246 CLR 469, 485 [44].

[76] Alcan [2009] HCA 41; (2009) 239 CLR 27, 46-7 [47]; Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 250 CLR 503, 519 [39].

[77] See [23] above.

[78] See [57] above.

[80] See [62] above.

[81] See [55] above.

[84] See [6] above.

[85] See [25]-[30] above.

[86] See [28] above.

[87] The Act s 3(b) and (c). See [13] above.

[88] See [31] above.

[89] See [24] above.

[90] See [39] above.

[91] See [40] above.

[92] See [43] above.