R v Smithers; Ex parte McMillan

High Court of Australia|1982-01-18|Before: Dawson JJ, Stephen J, Smithers J

The application for an order that the prosecutor pay a pecuniary penalty requests that the Federal Court impose a penalty in such sum as that Court may assess in respect of the following:

(a) the sale dealing by the respondent of narcotic goods namely heroin imported into Australia in contravention of the Customs Act 1901 between 14 September 1979 and December 1981.

(b) the importation by the respondent of narcotic goods namely heroin into Australia in contravention of the Customs Act 1901 between 14 September 1979 and December 1981.

(c) the conspiring by the respondent with Clelia Theresa Vigano between 14 September 1979 and December 1981 and with Michael Sullivan and Mary Escolar-Castilo between the months of 1981 and December 1981 to import narcotic goods namely heroin in contravention of the Customs Act 1901.

(d) the respondent being knowingly concerned with the sale and/or dealing in narcotic goods namely heroin imported into Australia in contravention of the Customs Act 1901 between 14 September 1979 and December 1981.

Paragraph (c) of the application quoted above omits to state the month in which the relevant period began.

On 19 January 1982 Stephen J. granted an order nisi, directed to the respondents in the proceedings in this Court, Smithers J. (a judge of the Federal Court) and the Commissioner of Police, for a writ of prohibition prohibiting them from proceeding with the hearing of the application in the Federal Court on the grounds that ss. 243B and 243E are beyond the legislative powers of the Commonwealth Parliament.

Application is now made to make the order nisi absolute. There is also before the Court an application by the Attorney-General for the Commonwealth for an order under s. 40(1) of the Judiciary Act 1903 Cth, as amended, for an order that the application now pending in the Federal Court be removed into this Court. Why this application was presented at a time when this Court was already seized of the constitutional questions in consequence of the making of the order nisi remains an unexplained mystery.

(1) Subject to sub-section (7), the Minister, the Commissioner of Police or the Comptroller may institute a proceeding in the Court, on behalf of the Commonwealth, for an order that a person pay a pecuniary penalty to the Commonwealth in respect of -

(a) a particular prescribed narcotics dealing engaged in by him; or

(b) prescribed narcotics dealings engaged in by him during a particular period.

(2) If, in a proceeding instituted under sub-section (1), the Court is satisfied that the person in relation to whom the order is sought -

(a) has engaged in a particular prescribed narcotics dealing; or

(b) has, during a particular period, engaged in prescribed narcotics dealings,

the Court shall assess, in accordance with section 243C, the value of the benefits derived by the person by reason of his having engaged in that dealing, or in prescribed narcotics dealings during that period, as the case may be, and order the person to pay to the Commonwealth a pecuniary penalty equal to the value as so assessed.

(3) The Court may order a person to pay a pecuniary penalty under sub-section (2) in relation to a particular prescribed narcotics dealing, or prescribed narcotics dealings during a particular period, whether or not the person has been convicted of an offence, or proceedings have been instituted in respect of any offence, committed in relation to that dealing or any of those dealings and whether or not any moneys or other goods have been seized under section 229A in relation to that dealing or any of those dealings.

(4) An amount payable by a person to the Commonwealth in accordance with an order made under sub-section (2) shall, for all purposes, be deemed to be a civil debt due by the person to the Commonwealth.

(5) An order made by the Court under sub-section (2) may be enforced as if it were an order made by the Court in civil proceedings instituted by the Commonwealth against the person to recover a debt due by the person to the Commonwealth.

Section 243A(3), which, like ss. 243B and 243E, is contained in Div. 3 of Pt XIII of the Act, provides:

For the purposes of this Division, a person shall be taken to engage in a prescribed narcotics dealing if -

(a) he sells or otherwise deals in, or agrees to sell or otherwise deal in, narcotic goods imported into Australia in contravention of this Act;

(b) he imports, or agrees to import, narcotic goods into Australia in contravention of this Act;

(d) he keeps, or agrees to keep, in his possession narcotic goods imported into Australia in contravention of this Act;

(e) he conspires with another person or other persons to import any narcotic goods into Australia, or to export any narcotic goods from Australia, in contravention of this Act; or

(f) he aids, abets, counsels or procures, or is in any way knowingly concerned in, the sale of, or other dealing in, narcotic goods imported into Australia in contravention of this Act, the importation of narcotic goods into Australia, or the exportation of narcotic goods from Australia, in contravention of this Act, or the keeping in the possession of any person of narcotic goods imported into Australia in contravention of this Act.

The expression "Narcotic goods" is defined by s. 4(1) of the Act as meaning "goods that consist of a narcotic substance". The expression "Narcotic substance" is defined by the same sub-section as meaning -

a substance or thing the name of which is specified in column 1 of Schedule VI or any other substance or thing for the time being declared by the regulations to be a narcotic substance. Heroin, which was the subject of the alleged dealings in which the prosecutor engaged, is a substance specified in column 1 of Sch. VI. Heroin is declared to be a prohibited import by the Customs (Prohibited Imports) Regulations (Item 41BB of the Fourth Schedule) made under s. 50 of the Act.

Section 243C makes provision for the assessment of a pecuniary penalty. Sub-section (2) provides that the value of the benefits derived by the defendant shall be assessed by the Court having regard to the evidence before the Court concerning all or any of a number of specified matters. They include - (a) the moneys or the value of the property that came into the possession or under the control of the defendant, or another person at his request or by his direction, by reason of the defendant's engaging in the dealing or dealings; (b) the value of any other benefit that was provided for the defendant or that other person; (c) the market value of similar narcotic goods at the time of any dealing in narcotic goods; (d) the amount that was ordinarily paid for the doing of the act or thing that amounted to the prescribed narcotics dealing; and (e) the value of the defendant's property before and after he engaged in the deal, or before and after the end of the period, as the case may be.

Where the Minister, the Commissioner of Police or the Comptroller has instituted a proceeding under section 243B for an order that a person (in this section referred to as the "defendant") pay a pecuniary penalty in relation to a particular prescribed narcotics dealing, or in relation to prescribed narcotics dealings during a particular period, the Minister, the Commissioner of Police or the Comptroller may make application to the Court, ex parte, for an order directing the Official Trustee to take control of property specified in the application or of all the property of the defendant.

Sub-section (2) then provides that where (a) such an application is supported by - (i) an affidavit of a member of the A.F.P. or an officer of Customs stating that he believes that - (A) the defendant has engaged in the dealing or dealings to which the proceeding under s. 243B relates, and (B) benefits were derived by the defendant by reason of his having engaged in the dealing or dealings; and (ii) if the application seeks an order directing the Official Trustee to take control of specified property - an affidavit by a member of the A.F.P. or an officer of Customs stating that he believes the property is the property of the defendant; and (b) the Court considers that, having regard to the matters contained in the affidavit, there are reasonable grounds for holding those beliefs, the Court -

(i) if the application seeks an order with respect to specified property - of all of that property or such part of that property as the Court thinks fit; or

(ii) in any other case - of all the property of the defendant; and

(d) may, subject to sub-section (3), include in the order such provision (if any) in relation to the operation of the order as the Court thinks fit.

(5) The Court may refuse to make an order under sub-section (2) directing the Official Trustee to take control of property if the Commonwealth refuses or fails to give to the Court such undertakings as the Court deems appropriate with respect to the payment of damages or costs, or both, in relation to the making and operation of the order.

(6) For the purposes of an application under sub-section (1), the Minister, the Commissioner of Police or the Comptroller may, on behalf of the Commonwealth, give to the Court such undertakings with respect to the payment of damages or costs, or both, as are required by the Court.

The prosecutor's first submission is that s. 243B is supported neither by the trade and commerce power (s. 51(i)) nor by the external affairs power (s. 51(xxix)). He argues that the purpose and effect of the provisions contained in Div. 3 of Pt XIII, in particular s. 243B, is to deny to a person who has engaged in a dealing or dealings in a narcotic substance any benefit that might otherwise flow from his participating in that dealing or those dealings. The prosecutor concedes that the Parliament has power, certainly under s. 51(i), to prohibit the importation of narcotic goods, to make it an offence to have possession of them or to deal with them when they have been imported in contravention of the Act and to make them liable to seizure and forfeiture. These steps may be taken legitimately in the exercise of the power because they are incidental to the enforcement of the prohibition against importation which itself falls fairly and squarely within the power. But, says the prosecutor, the denial or deprivation of benefits arising from participation in dealings in a prohibited import is another matter altogether; it relates to transactions which take place after the process of importation has come to an end and it stands outside the range of acts and actions which are incidental to enforcement of the prohibition.

We do not agree. It would be a legitimate exercise of the power - and this is conceded - to make it an offence to engage in dealing in narcotic goods, being prohibited imports, that have been imported in contravention of the Act and to impose severe penalties in respect of that offence. Similarly it would be a legitimate exercise of the power to make that conduct the occasion for liability to a civil action for penalties of the traditional kind. Section 243B, in providing for the imposition of pecuniary penalties of the class provided for in Div. 3, stands in no different position. It penalizes dealings in narcotic goods that have been imported in contravention of the Act. In so doing it constitutes a deterrent to importation in breach of the statutory provisions and provides a further sanction with a view to ensuring compliance with the statutory provisions governing importation. Its importance in this respect is that it seeks to deprive the dealing in narcotic goods of the considerable financial rewards which are the chief inducement for importing them into Australia and for dealing in them.

In this case it is first alleged that the prosecutor participated in transactions which fell within s. 243A(3)(a), i.e., that he sold or otherwise dealt in, or agreed to sell or otherwise deal in, narcotic goods imported into Australia in contravention of the Act. Indeed, all the paragraphs in s. 243A(3) relate to goods imported or exported in contravention of the Act, but it is not a necessary element in all of the situations that the person who is taken to engage in a prescribed narcotics dealing should have knowledge that importation or exportation is in contravention of the Act. The descriptions of the particular situations in sub-s. (3) do not precisely correspond with the description of the circumstances giving rise to offences in s. 233B(1). One offence created by that sub-section commences with the words "without any reasonable excuse" (par. (a)) and two others with the words "without reasonable excuse" (pars. (c) and (ca)). And it is a defence to a charge under par. (c) if the defendant proves that he did not know that the goods had been imported into Australia in contravention of the Act (sub-s. (1A)). Whatever significance these differences may have in relation to par. (d) of s. 243A (3) they have no significance in determining the validity of par. (a) of that sub-section which stands on its own feet and is plainly severable. Paragraph (a) of s. 243A(3) has no counterpart in s. 233B(1). The latter sub-section does not make it an offence to sell or deal in narcotic goods. In some situations it may be that a person who sells narcotic goods has committed an offence under s. 233B(1), e.g., having possession without reasonable excuse under pars. (c) and (ca). In other situations it may be that a person who sells narcotic goods can establish a defence of reasonable excuse to charges under pars. (c) and (ca). But it does not follow that s. 243A(3)(a) is beyond power because the person commits no criminal offence under the Act. As we have seen, the imposition of civil liability under par. (a) is a sanction which assists in securing compliance with the Act.

It is further alleged that the prosecutor participated in transactions within s. 243A(3)(b), (e) and (f). What has been said with regard to par. (a) of the sub-section is equally applicable to par. (f), in so far as it refers to a person knowingly concerned with the sale of or other dealing in narcotics imported into Australia in contravention of the Act - that being the part of the paragraph relevant to the present case. Paragraphs (b) and (e) of the sub-section, which deal respectively with the importing, or agreeing to import, narcotic goods and with conspiring to import or export narcotic goods, are even more clearly within the power conferred by s. 51(i).

The prosecutor's second submission is that s. 243B, read in conjunction with s. 243C, confers an administrative function on a federal court in which the judicial power of the Commonwealth is reposed, contrary to the decision in Reg. v. Kirby; Ex parte Boilermakers' Society of Australia [1] . The argument is based on the lack of precision in the expression "benefits derived" in s. 243B(2) and s. 243C(2), that expression not being defined by the Act, and on the absence of any limitation upon the amount of the pecuniary penalty which the Court is obliged to award. What the Court is required to do by the provisions to which we have referred is to "assess", in accordance with s. 243C, "the value of the benefits derived by the person by reason of his having engaged in" the dealing or dealings. Section 243C(2) provides some guidance to the Court in assessing the value of the benefits derived because it requires the Court to have regard to evidence before the Court concerning the matters that are listed in that sub-section. And s. 243C(6) requires the Court to disregard "any expenses or outgoings of the defendant" in connexion with the dealing or dealings. In other words, the Court is assessing gross, rather than net, benefits.

The statutory provisions, in requiring the Court to assess the value of the benefits derived, do not impose upon the Court an administrative discretion. The concept of gross benefits, like that of net benefits, is sufficiently certain. In essence the function reposed in the Court is closely analogous to the task undertaken by a court when, in the exercise of judicial power, it is called upon to assess the damages sustained by a plaintiff in tort or contract. In that case the court assesses detriment. In this case the Court is required to assess benefits. Of course, it has been said that the assessment of damages involves the making of a sound discretionary judgment. No doubt the same comment may be made about the Court's function under s. 243B(2). But the making of a sound discretionary judgment is entirely consistent with the exercise of judicial power. The exercise of that power often calls for the exercise of a judicial discretion.

The absence of a limitation upon the amount of the pecuniary penalty for which the sections provide is of no significance. There is, of course, an implied limitation - the amount of the penalty is not to exceed the Court's assessment of the value of the gross benefits which the person has derived from engaging in the relevant transaction or transactions.

The prosecutor's final submission is that s. 243B is in truth a law with respect to the acquisition of property other than on just terms. In support of this ground he says that the section does not make the specified conduct an offence, that the civil cause of action which the section creates is not for the recovery of a fine and that the unlimited pecuniary penalty is an expropriation amounting to an acquisition of property not on just terms.

It has never been considered that a civil action for penalties involves an acquisition of property by the Commonwealth, let alone an acquisition of property otherwise than on just terms. Just as the imposition of a penalty or fine by way of punishment for a criminal offence involves no acquisition of property, so also with the imposition of a civil liability for pecuniary penalties, whether they be of the kind found or provided for in s. 76 of the Trade Practices Act 1974 Cth or of the kind imposed by Div. 3 of Pt XIII. The discussion in the judgment of Dixon C.J. in Burton v. Honan [2] , is instructive. There his Honour considered the validity of s. 262 of the Act in its application to s. 229. His Honour said:

But it has always been treated as obvious that if the purpose of the forfeiture is to bring a penalty upon the offender it could not come within s. 51(xxxi.), it not being an acquisition of property for any purpose in respect of which the Parliament has power to make laws within that provision. Alternatively it has been said that even if it was within s. 51(xxxi.) there is nothing unjust in a provision forfeiting the property of the offender as part of the punishment for the offence. 1. (1952) 86 C.L.R. 169, at p. 180.

In response to the objection that s. 262 dispossesses an innocent party who has a possessory title to goods liable to forfeiture, without giving him just terms because he has no right to contest the forfeiture, his Honour went on to say [3] :

The short answer to this contention is that the whole matter lies outside the power given by s. 51(xxxi.). It is not an acquisition of property for any purpose in respect of which Parliament has power to make laws. It is nothing but forfeiture imposed on all persons in derogation of any rights such persons might otherwise have in relation to the goods, a forfeiture imposed as part of the incidental power for the purpose of vindicating the Customs laws. 1. (1952) 86 C.L.R., at pp. 180-181.

Subsequently, in Attorney-General (Cth) v. Schmidt [4] , Dixon C.J., after stating that the phrase "for any purpose" in s. 51(xxxi) of the Constitution "refers to the use or application of the property in or towards carrying out or furthering a purpose comprised in some other legislative power", went on to say:

How much further it goes may not perhaps be settled but it does not affect acquisition by way of forfeiture or penalty or for the purpose of provisional tax (Federal Commissioner of Taxation v. Clyne [5] ), by the condemnation of prize or indeed anything which lies outside the very general conception expressed by the phrase "use and service of the Crown". 1. (1961) 105 C.L.R. 361, at pp. 372-373. 2. (1958) 100 C.L.R. 246.

More recently in Trade Practices Commission v. Tooth & Co. Ltd. [6] , Gibbs J., after questioning whether Dixon C.J.'s remarks in Schmidt fully expressed the ground of distinction, said:

It appears to me that there are cases in which s. 51 authorizes the compulsory divesting of property in circumstances in which no question of just terms could sensibly arise - for example, it would be absurd to say that the legislature could make provision for the exaction of a fine, or for the imposition of a forfeiture of property used in the commission of a crime, only on just terms. In the same case Aickin J. [7] concluded that Dixon C.J. in Burton v. Honan thought "that in so far as the application of the Customs Act involves the passing of property to the Commonwealth it is not by "acquisition" within the meaning of that term in s. 51(xxxi.)" and that "The same would be true of fines imposed by the courts for breaches of Acts of the Commonwealth Parliament and of various statutory penalties, including those referred to in s. 76 of the Act." The section to which Aickin J. referred was s. 76 of the Trade Practices Act which makes provision for a civil action for penalties not associated with conviction for a criminal offence. 1. (1979) 142 C.L.R. 397, at p. 408. 2. (1979) 142 C.L.R., at pp. 454-455.

Accordingly, we conclude that the third ground also is without substance.

In the course of argument attention was directed to s. 243E(2)(c)(ii) which appears to require the Court to make an order directing the Official Trustee to take control of all the property of the defendant when the application does not seek an order with respect to specified property. Obviously this provision has the potential for a harsh or unjust operation. A person who innocently derived a small benefit from a dealing in narcotic goods, not knowing the goods the subject of the dealing contained a narcotic substance, may find all his property placed under the control of the Official Trustee because the application seeks no order with respect to specified property. Whether this possibility bears on the validity of s. 243E(2)(c)(ii) does not, however, presently call for discussion. The application in this case seeks an order with respect to specified property under s. 243E(2)(c)(i), a provision which is severable from par. (c)(ii).

For these reasons we would discharge the order nisi and make no order on the Attorney-General's application.

High Court of Australia Gibbs C.J. Mason, Murphy, Wilson, Brennan, Deane and Dawson JJ. R v Smithers; Ex parte McMillan [1982] HCA 76

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