Commissioner of the Australian Federal Police v Courtenay Investments Ltd

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE -v- COURTENAY INVESTMENTS LTD [2016] WASCA 194

CORAM: MARTIN CJ
NEWNES JA
MAZZA JA

HEARD: 18 APRIL 2016 & ON THE PAPERS 3, 17 & 24 MAY 2016

DELIVERED : 25 NOVEMBER 2016

FILE NO/S: CACV 66 of 2015

BETWEEN: COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE
Appellant
AND
COURTENAY INVESTMENTS LTD
HAPPLE LTD
DAVENRITE LTD
Respondents

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :EDELMAN J
Citation  :COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE -v- COURTENAY INVESTMENTS LTD [No 4] [2015] WASC 101
File No  :CIV 2702 of 2012

Catchwords:

Appeal against decision dismissing application for forfeiture order - Whether shares held by respondent companies were the instrument of a 'serious offence' as defined by the Proceeds of Crime Act 2002 (Cth) - Alleged offence of failing to act honestly in the discharge of duties as director of a company - Whether director intended to cause a benefit to the value of at least $10,000 by commission of that offence - Where appellant advanced a different case on appeal as to the director's intention - Appellant could not establish that respondents would not be prejudiced by advancement of a case not put at first instance - Appellant could not establish benefit to the value of $10,000 - Appeal dismissed

Legislation:

Australian Securities Commission Act 1989 (Cth)
Corporations Law (Cth)
Criminal Appeals Act 2004 (WA)
Proceeds of Crime Act 2002 (Cth)
Supreme Court Act 1935 (WA)

Result:

Application to adduce additional evidence dismissed
Appeal dismissed

Category: B

Representation:

Counsel:

Appellant: Ms W J Abraham QC & Mr E W L Greaves
Respondents : Mr H Dhanji SC & Mr C E Chenu

Solicitors:

Appellant: Australian Federal Police - Proceeds of Crime Litigation
Respondents : Bennett & Co, Barristers & Solicitors

Case(s) referred to in judgment(s):

Amaca Pty Ltd v Booth [2011] HCA 53; (2011) 246 CLR 36
Amaca Pty Ltd v Ellis [2010] HCA 5; (2010) 240 CLR 111
Commissioner of the Australian Federal Police v Courtenay Investments Ltd [No 4] [2015] WASC 101
Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1
Devereaux-Warnes v Hall [2006] WASCA 268
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298
R v Moffatt [2000] NSWCCA 174
Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd [2012] WASCA 50; (2012) 43 WAR 91
Royall v The Queen [1991] HCA 27; (1991) 172 CLR 378
University of Wollongong v Metwally [No 2] [1985] HCA 28; (1985) 59 ALJR 481
Whitlam v Australian Securities & Investment Commission [2003] NSWCA 183; (2003) 57 NSWLR 559
MARTIN CJ:

Summary

This is an appeal by the Commissioner of the Australian Federal Police (the Commissioner) against the decision of the judge at first instance dismissing the Commissioner's application for an order that the proceeds of the sale of shares held in a publicly‑listed company, Welcome Stranger Mining NL (WSM), by Courtenay Investments Ltd, Happle Ltd and Davenrite Ltd (the respondents), together with accumulated interest, be forfeited to the Commonwealth pursuant to the Proceeds of Crime Act 2002 (Cth) (the Act). The application was brought by the Commissioner pursuant to s 49 of the Act, on the ground that the shares in WSM had been used as an instrument in the commission of a 'serious offence'[1] committed by Mr Stuart Adrian Corp, who was, at all material times, a director of WSM.
[1] As defined by s 338 of the Act.
The judge at first instance found that the shares had been used by Mr Corp as an instrument in the commission of an indictable offence coming within the definition of 'serious offence' within the Act, but also found that the Commissioner had not established that Mr Corp either caused, or intended to cause, by his commission of that offence, a benefit to the value of at least $10,000 for himself or some other person as required by the relevant limb of that definition. It followed that the judge concluded that the Commissioner had failed to establish that the shares had been used as an instrument in the commission of a 'serious offence'[2] and the Commissioner's application was dismissed.
[2] As defined by s 338 of the Act.
The Commissioner contends that the primary judge erred in concluding that Mr Corp had not intended to cause a benefit to the value of at least $10,000 by the commission of the indictable offence which the judge found he had committed, for various reasons enunciated in the grounds of appeal. For the reasons which follow, those grounds, and the appeal, should be dismissed.
In the proceedings before the primary judge, the Commissioner contended that Mr Corp had intended to cause a benefit to the value of at least $10,000 by committing the offence of causing the shares in WSM held by the respondents to be voted against a motion that he be removed as a director of WSM, without disclosing that he held a relevant interest in those shares in breach of his duties as a director of WSM, including a duty to act honestly in the discharge of his duties. The Commissioner contended that the benefit of Mr Corp remaining on the board of WSM had a value of at least $10,000 by reason of three specific matters identified by the Commissioner in the course of submissions put to the judge.[3] The primary judge rejected that case for a number of reasons, including his conclusion that such an intention could not be attributed to Mr Corp's dishonest act of failing to disclose his relevant interest in the shares in WSM held by the respondents because that non‑disclosure had no effect on his capacity to cause those shares to be voted against the motion to remove him as a director.[4]
[3] Commissioner's written submissions [46] - [48], footnote 64.
[4] Commissioner of the Australian Federal Police v Courtenay Investments Ltd [No 4] [2015] WASC 101 [421] - [423], [439], [466] (primary reasons).
In the course of oral argument in support of the appeal, counsel for the Commissioner advanced, for the first time and without notice, a quite different case. That case, which was developed by written submissions filed subsequent to the hearing of the appeal, and which was supported by an application to adduce fresh evidence not tendered before the primary judge, was to the effect that the relevant intent should be attributed to Mr Corp because it should be found that he knew that disclosure of his relevant interest in those shares prior to the general meeting at which the motion was to be put would be likely to cause other shareholders in WSM to support the motion that he be removed as a director.
The Commissioner has proffered no explanation for his failure to advance the case which he now wishes to put at first instance, nor for his failure to tender at first instance the evidence upon which he now wishes to rely. The Commissioner has not formulated any ground of appeal to the effect that the judge erred by failing to find a case which was not put, nor has he made any application to amend the grounds of appeal. As the Commissioner has failed to establish that the respondents would not be prejudiced by his advancement on appeal of a case not put at first instance, the Commissioner should not be permitted to take that course and the application to adduce fresh evidence should be dismissed, together with the appeal.

The Act

Forfeiture order

Section 49 of the Act provides that a court with relevant jurisdiction[5] must make an order that property specified in the order is forfeited to the Commonwealth if the court is satisfied that, amongst other things,[6] 'the property is an instrument of one or more serious offences'.

Serious offence

[5] The Supreme Court of Western Australia is such a court: s 335 and s 338 of the Act.

[6] As it is common ground that all other relevant conditions for a s 49 forfeiture order were satisfied in this case, it is not necessary to specify them.

The expression 'serious offence' is defined by s 338 of the Act to include various offences and unlawful conduct. The only category of offence or conduct included within that definition relevant to the circumstances of this case is that which includes an indictable offence punishable by imprisonment for three or more years, involving 'unlawful conduct by a person that causes, or is intended to cause, a benefit to the value of at least $10,000 for that person or another person'.
The same section defines 'benefit' to include 'service or advantage'.

Instrument of an offence

Section 329(2)(a) of the Act provides, relevantly, that property is an 'instrument of an offence' if 'the property is used in, or in connection with, the commission of an offence'. Section 330(2)(a) of the Act provides that property becomes an instrument of an offence if it is 'wholly or partly derived or realised from the disposal or other dealing with an instrument of the offence'. By reason of that provision, if the shares in WSM held by the respondents were 'instruments' of an offence, when those shares were sold the funds realised by their sale became an 'instrument' of the offence.

Civil proceedings

Section 315 of the Act provides:
315Proceedings are civil, not criminal
(1)Proceedings on an application for a restraining order or a confiscation order are not criminal proceedings.
(2)Except in relation to an offence under this Act:
(a)the rules of construction applicable only in relation to the criminal law do not apply in the interpretation of this Act; and
(b)the rules of evidence applicable in civil proceedings apply, and those applicable only in criminal proceedings do not apply, to proceedings under this Act.
The Act defines 'confiscation order' to include a s 49 forfeiture order.[7]

Burden and standard of proof

[7] Section 338 of the Act.

Section 317 of the Act provides that the applicant in any proceedings under the Act bears the onus of proving the matters necessary to establish the grounds for making the order applied for, and that subject to certain exceptions not presently relevant, any question of fact to be decided by a court on an application made under the Act is to be decided on the balance of probabilities.

Evidence

Section 64(2) of the Act provides that a court considering an application for forfeiture may have regard to the transcript of any proceeding against a relevant person for an offence and the evidence given in any such proceeding.[8] The Commissioner relied on this provision to tender the transcript and a substantial body of the evidence adduced in criminal proceedings brought against Mr Corp and another director of WSM, Mr Brian Millwood Smith.
[8] Because of the defined terms used in the section, its effect is a little more limited than as enunciated in these general terms, but in this case none of those limitations apply.
Section 322(5) provides that the responsible authority[9] for an application for a forfeiture order may appeal against a refusal by a court to make such an order in the same way as if an order had been made and the authority were appealing against that order. The same subsection provides that the relevant responsible authority has the same right of appeal as a person referred to in subsection (1) of that section, which confers a right of appeal on, amongst others, anybody against whom a confiscation order[10] is made, to be exercised in the manner set out in the section. The section goes on to provide that if the relevant order is made in relation to a conviction of an offence, the person may appeal against the order in the same manner as if the order were part of a sentence imposed on the person in respect of the offence.[11] The section also provides that in any other case, including therefore cases in which there has been no conviction, an appeal may be brought in the same manner as if the relevant order had been part of a sentence imposed on the person in respect of the offence(s) to which the relevant order relates.[12]
[9] Which is defined to include the Commissioner: s 338 of the Act.
[10] Which includes a forfeiture order: s 338 of the Act.
[11] Section 322(2) of the Act.
[12] Section 322(3) of the Act.

The context of the forfeiture proceedings

For reasons which will become clear, the forfeiture proceedings must be viewed in the context of a series of significant circumstances and events which preceded their determination.
The acts and omissions which are said by the Commissioner to have given rise to an entitlement to the forfeiture order occurred in connection with an extraordinary general meeting of WSM which was held on 23 January 1998. Notice had been given of resolutions which were to be put at that meeting for the removal of Mr Corp and Mr Smith as directors of WSM. Although those motions were defeated at the meeting, some months later, in late May 1998, Mr Corp and Mr Smith resigned as directors of WSM. Shortly thereafter, on 4 June 1998, the Australian Securities Commission (ASC) executed freezing orders under s 73 of the Australian Securities Commission Act 1989 (Cth) in respect of the shares in WSM held by the respondent companies. Between May and June 1999 those orders were varied to allow the shares to be sold and the proceeds of sale to be deposited into a trust account. As I have noted, under the Act, if the shares were relevantly 'instruments' of an offence within the meaning of the Act at the time they were sold, the proceeds of their sale became an 'instrument'. The proceeds of sale are still held on trust, and with accumulated interest now exceed $1,000,000.
On 5 January 2004, a restraining order was made by the District Court of Western Australia pursuant to s 17 of the Act. That order was based on charges which were to be laid against Mr Corp, and which were in fact laid the following day, 6 January 2004. Those charges included an alleged offence of failing to act honestly in the exercise of his powers and in the discharge of his duties as a director of WSM arising from the same acts and omissions as those relied upon by the Commissioner in the forfeiture application. Those matters were tried in the District Court by a judge and jury during 2007, and on 4 October 2007 Mr Corp was convicted of various offences including the relevant offence of failing to act honestly in the exercise of his powers and in the discharge of his duties as a director of WSM. The day after Mr Corp's conviction a forfeiture application was made in the criminal proceedings based upon the conviction. That application was left in abeyance pending an appeal by Mr Corp against his conviction.
In June 2008, the Court of Appeal upheld Mr Corp's appeal against conviction, quashed the convictions on all counts, and ordered a retrial on various counts, including the relevant count of failing to act honestly in the exercise of his powers and in the discharge of his duties as a director of WSM. However, on 22 August 2008, the Commonwealth Director of Public Prosecutions discontinued the indictment against Mr Corp in respect of all counts, including the count of failing to act honestly in the exercise of his powers and in the discharge of his duties as a director of WSM.
On 19 February 2010, amendments to the Act came into operation which had the effect of permitting applications for forfeiture in cases in which no conviction had been recorded. Shortly thereafter, on 23 April 2010, proceedings for the forfeiture of the proceeds of the sale of the shares in WSM held by the respondent companies were commenced by the Commonwealth Director of Public Prosecutions in the District Court of Western Australia. In June 2010, an order was made in the District Court pursuant to s 19 of the Act restraining any disposal of the proceeds of the sale of the shares in WSM, which were still being held by the Official Trustee.
In December 2010, the respondent companies brought an application for an order excluding the proceeds of the sale of the shares in WSM from the forfeiture order sought.
In March 2012, the Commissioner took over responsibility for the conduct of the forfeiture application from the Commonwealth Director of Public Prosecutions. In September 2012, the proceedings were remitted from the District Court to the Supreme Court. During 2014, preliminary issues relating to the scope and application of s 64 of the Act were heard and determined by the primary judge in favour of the Commissioner. The consequence of those determinations was that the Commissioner was permitted to tender any parts of the transcript or evidence adduced in the criminal proceedings brought against Mr Corp without objection from the respondents, other than on grounds of relevance. No appeal was brought from those determinations.

The hearing of the forfeiture application

Because of the position adopted by the Commissioner during and after the hearing of his appeal, it is necessary to recount the course taken at the hearing of the forfeiture application in some detail for the purpose of identifying the precise manner in which the Commissioner put the case for forfeiture.

Joint statement of facts, issues and contentions

The application proceeded to hearing without pleadings in the conventional sense. However, prior to the hearing directions were made for the identification of the facts and issues to be determined at the hearing through the preparation of a joint statement of facts, issues and contentions (JSFIC). Those directions resulted in the preparation of a document taking the form of a matrix to which both parties contributed. The document has a number of sections. One section contains facts agreed or not disputed by the parties. Another section contains facts asserted by the Commissioner which were either disputed or not agreed by the respondents. Another section is concerned with contentions made by the Commissioner which were disputed by the respondents. Another section sets out contentions made by the respondents which were disputed by the Commissioner. The document was signed by the legal representatives of the parties.

The Commissioner's assertions as to facts which were either agreed or not disputed

Portions of that part of the JSFIC setting out assertions made by the Commissioner which were either agreed or not disputed by the respondents relevant to the issues raised in the appeal include the following:[13]
[13] JSFIC 5 - 16.
14WSM retained BMS Consultants Pty Ltd … (BMS) to provide management, office administration services to WSM from 1987 to 1998.
15BMS was incorporated in Western Australia on 30 May 1985 and deregistered on 15 December 1999. The share structure of BMS was 20 fully paid ordinary shares. Mr Corp held 9 shares. Mr Smith and his wife held the balance of the shares. Mr Corp was a director of BMS for the period 19 August 1985 to 15 December 1999. Smith was a director of BMS … for the period 24 June 1985 to 15 December 1999.
16WSM and BMS signed a Management Agreement (Management Agreement) on 1 September 1991 for a period of 48 months whereby BMS provided management and office administration services to WSM. This Agreement was extended to expire on 1 September 1999. (Expiry Date)
17In the year to 31 May 1996 pursuant to the Management Agreement WSM paid and:
17.1BMS received $90,000 for management fees;
17.2BMS received $93,531 for office administration fees.
18Similar, albeit in some cases slightly lower amounts were paid by WSM to BMS pursuant to the Management Agreement for the same purposes in the years 1991 to 1998.
19At or about the time of the resignation of Mr Corp and Mr Smith as directors of WSM, WSM terminated the Management Agreement, and paid BMS the sum of $225,000, in satisfaction of the amount BMS was entitled to receive, and would have received under the Management Agreement in the period from date of termination to the Expiry Date, had WSM not terminated the Management Agreement prior to the Expiry Date (Settlement Sum).
…
26Mr Corp had given a signed Notice (Form 603) pursuant to Section 709 (3) of Corporations Law, to the Manager of the Australian Stock Exchange Limited on 23 December 1997, declaring a substantial shareholding in WSM of
•2,424,722 held in the name of Ecrofete Pty Ltd, and
•200,000 held in the name of Claw Pty Ltd.
No other shares were declared.
…
27On or about 2 January 1998 a 'Notice of General Meeting & Proxy Form' was distributed by WSM to its shareholders. …
28The Notice stated, in part:
'Notice is hereby given that a General Meeting of the Shareholders of Welcome Stranger Mining Company NL will be held at Unit 2, 1050 Hay Street, West Perth, Western Australia, on Friday 23 January 1998, at 10.00am.
BUSINESS
…
RESOLUTION 2 - REMOVAL OF DIRECTOR
To consider and, if thought fit, to pass the following as an ordinary resolution:
'that pursuant to and in accordance with the Company's Articles of Association, Brian Millwood Smith be and is hereby removed from office as a director of the Company.'
RESOLUTION 3 - REMOVAL OF DIRECTOR
To consider and, if thought fit, to pass the following as an ordinary resolution:
'that pursuant to and in accordance with the Company's Articles of Association, Stuart Adrian Corp be and is hereby removed from office as a director of the Company.'
29As at the date of the general meeting referred to in paragraphs 27 and 28 above (23 January 1998) BMS was contracted by WSM until 1 September 1999.
…
32At the WSM general meeting on 23 January 1998 there were 23,351,570 votes cast for resolutions 2 and 3, and 23,489,738 votes cast against, that is to say the resolutions referred to at paragraph 28 above were defeated and Mr Corp and Mr Smith remained directors of WSM after the meeting.
…
35At the WSM general meeting on 23 January 1998:
35.1National Nominees Limited voted against resolutions 1 to 3 in respect of 4,166,250 shares held for Davenrite and 600,000 shares held on behalf of Courtenay; and
35.2ANZ Nominees Limited voted against resolutions 1 to 3 in respect of 2,195,000 shares held on behalf of Happle.
…
43As at the date the offence is alleged to have been committed, being 23 January 1998, the following persons were also directors of WSM:
43.1Rex Francis Bevan, who was appointed a director on 25 March 1997 and ceased to be a director on 24 January 2000;
43.2Michael Ruane, who commenced as a director on 25 March 1997 and ceased as a director on 5 May 1999;
43.3David James Porter, who commenced as a director on 23 December 1997 and ceased as a director on 27 May 1998.

Agreed issues

In the portion of the document entitled 'Agreed Issues', the parties record their agreement that the issues to be determined were:[14]
A.Whether the offence described in paragraph 66 below (Alleged Offence) was committed by Mr Corp.
B.If the Alleged Offence was committed by Mr Corp, whether the Alleged Offence constitutes a serious offence within the meaning of that term in the Act.
C.If the Alleged Offence was committed by Mr Corp and was a serious offence within the meaning of that term in the Act, whether the property is an instrument of the Alleged Offence.
[14] JSFIC 21.
Paragraph 66 of the document contains the assertion that Mr Corp committed an indictable offence, namely:[15]
On or about 23 January 1998 at Perth in the State of Western Australia, Stuart Adrian CORP did commit an offence against subsection 1317FA of the Corporations Law (as taken to be included in the Corporations Act 2001 (Cth) by section 1401 of that Act), in that being an officer of Welcome Stranger Mining Company NL, he knowingly contravened subsection 232(2) of the Corporations Law (as taken to be included in the Corporations Act 2001 (Cth) by section 1401 of that Act), in that he intentionally deceived Welcome Stranger Mining Company NL and its members, thereby failing to act honestly in the exercise of his powers and the discharge of his duties of office. (the Alleged Offence)

The Commissioner's assertions which were disputed

[15] JSFIC 24.

Paragraph 66 is contained in the portion of the document setting out contentions made by the Commissioner which were disputed by the respondents. The following assertions are contained in that portion of the document:[16]
[16] JSFIC 25 - 29.
68By reason of the matters set out in 69 herein, the Alleged Offence was a serious offence.
69 By reason of the facts set out at paragraphs 9, 14 to 18, 29 and 32:
69.1BMS had little prospect of renewing its contract with WSM beyond 1999 if Mr Corp and Mr Smith were removed from the board of WSM at the 23 January 1998 meeting;
69.2the voting of the Courtenay, Davenrite and Happle shares against the resolutions seeking Mr Corp's removal was intended by Mr Corp to preserve his and Mr Smith's positions on the board of WSM;
69.3it can be inferred that at least in part the intention of Mr Corp in preserving his position on the board of WSM was to ensure that BMS did not lose the opportunity of renewing its contract with WSM.
69.4the offence was a 'serious offence' pursuant to paragraph (a)(iii) of the definition of that term in s 338.
69AMr Corp used the Defendants to hold interests in WSM that he could control.
69BMr Corp could have controlled such interests by holding the same in his own name.
69CBy electing to hold the interests in the name of the Defendants, rather than his own name:
(a)Considerable complexity arose; and
(b)Considerable additional costs were incurred … The costs are further particularised in attachment 'B'.
69DThe costs of using the Defendants to hold the interests in WSM was thus substantially more than $10,000.
69EBy reason of the cost and the complexity, there must have been a benefit, whether an advantage or otherwise, to Mr Corp or another in using the Defendants to hold the interests in WSM.
69FThat benefit, whether an advantage or otherwise, would have been lost had Mr Corp disclosed his relevant interest in the shares.
69GThat benefit, whether an advantage or otherwise, must have been at least $10,000.
…
70The property is an 'instrument' of the offence (as defined in ss 329(2), and pursuant to the operation of ss 330(2) and (3)). More particularly, by reason of the facts set out at paragraphs 33 to 40 above:
70.1the relevant shares were instruments of the offence. More particularly, the relevant shares were an instrument of the offence by reason that Mr Corp allowed the proxy votes referred to in paragraph 35 above, to be counted in circumstances where he knew that his relevant interest in the relevant shares had not been disclosed. He thereby 'used' the shares in, or in connection with, the commission of the offence, even if only indirectly; as to which see s 329(2);
…

The respondents' assertions which were disputed

The portion of the document setting out contentions made by the respondents which were disputed by the Commissioner includes the following:[17]
[17] JSFIC 32 - 34.
72.4Even if (which is denied) Mr Corp had a relevant interest within the meaning of that term in the Corporations Law (as it was) in the shares of the Defendants in WSM which Mr Corp was required to disclose:
72.4.1Mr Corp and WSM were not required to make a disclosure of such interest for the purpose of the resolutions considered by shareholders at the 23 January 1998 general meeting;
72.4.2[t]here was, as a matter of law, no reason why the shares in WSM held by the Defendants could not be voted against the resolution to remove Mr Corp;
72.4.3there is no evidence that any omission by Mr Corp to disclose an interest in the shares held by the Defendants in WSM did not cause any other shareholder of WSM who voted on the resolution to vote differently to the manner in which the shareholder would have voted if disclosure had been made;
72.4.4the omission to disclose the alleged interest of Mr Corp in shares held by the Defendants in WSM did not, and was not capable of causing, the invalidity of votes cast against the resolution;
72.4.5In the circumstances described in this paragraph:
(a)no conflict between Mr Corp's duty and interest arose, and Mr Corp did not act dishonestly, in allowing or failing to prevent the votes attaching to the Defendants' shares being counted, even if (which is denied) Mr Corp had an interest in those shares;
(b)the omission to disclose an alleged interest (which is denied) of Mr Corp in the shares of the Defendants in WSM did not deceive WSM or its members in connection with the resolution for the removal of Mr Corp as a director of WSM, the ballot in relation to that resolution or the voting of WSM members in relation to that resolution, and was not and could not have been intended to do so.
The document records the Commissioner's response to these assertions in the following terms:[18]
The Applicant generally disputes [72.4] and;
The Applicant agrees with [72.4.2].
The Applicant contends that [72.4.3] is speculative.
The Applicant contends that [72.4.4] is irrelevant.
[18] JSFIC 32 - 33.
The same portion of the JSFIC sets out other contentions made by the respondents which were disputed by the Commissioner in the following terms:[19]
[19] JSFIC 34 - 38.
73The conduct said to constitute the Alleged Offence did not cause, was not capable of causing, was not intended, and could not have been intended to cause Mr Corp or any other person to obtain or derive the benefit alleged by the Applicant, being an improvement in the prospect of BMS having its … Management Agreement with WSM renewed following the expiry of the Management Agreement in September 1999, as a consequence of Mr Corp, by such conduct remaining a director of WSM following the general meeting on 23 January 1998. The Defendants rely on the following contentions:
73.1disclosure to WSM and to its shareholders that Mr Corp held an interest in the Defendants' shares in WSM (which is denied) would not have altered, and was not capable of altering the outcome of the vote on the resolution for the removal of Mr Corp as a director of WSM;
73.2any benefit to BMS by the renewal of its … Management Agreement in or after September 1999 would be caused only by the renewal of the Management Agreement at that time, and not by the defeat of a resolution seeking the removal of Mr Corp as a director made 18 months prior to the Expiry Date;
73.3the conduct alleged to constitute a serious offence did not preserve, and could not have been intended to preserve the position of Mr Corp … on the board of WSM in order to improve the prospect of WSM renewing the contract with [BMS] after September 2009, because:
73.3.1under the articles of association of WSM, one‑third of the directors of WSM were required to resign as directors, or if their number was not a multiple of 3 then such number as was required so as to ensure no director (other than alternates and the managing director) held office for more than 3 years;
73.3.2in accordance with the requirements of the articles of association and the ASX listing rules, Mr Corp retired, and was re-elected at a general meeting of shareholders of WSM held on 23 August 1995, and therefore would have been required to retire by 23 August 1998, or immediately prior to the annual general meeting of WSM held in October 1998, but in any event prior to the expiration of WSM's contract with BMS on 1 September 1999 unless Mr Corp was at the relevant time the managing director of WSM;
73.3.3In accordance with the requirements of the articles of association and the ASX Listing Rules, Mr Smith retired, and was re‑elected at a general meeting of shareholders of WSM held on 21 August 1996, and therefore would have been required to retire by 23 August 1999.
73.4[E]ven if (which is denied) the consequence of the defeat of the resolution in January 1998 to remove Mr Corp as a director of WSM was to cause, or was capable of causing, Mr Corp to remain as a director of WSM until September 1999, or at such later time the board of WSM might have considered whether to renew and resolved to renew the contract of BMS, the fact of Mr Corp's directorship of WSM would not have been capable of causing, or of being intended to cause, WSM to renew its contract with BMS because:
73.4.1as a shareholder of BMS, both Mr Corp and Mr Smith had material interests in any decision by the board of WSM to renew BMS's contract;
73.4.2by section 232A of the Corporations Law (as it was in and about September 1999) neither Mr Smith nor Mr Corp could vote on any resolution to renew … BMS's contract and could not be present while the matter of renewing the contract, or a resolution to do so, was being considered;
73.4.3even if, by September 1999, Mr Corp was able as a member of the board of WSM to vote on or be present whilst a resolution to renew the BMS contract was being considered, Mr Corp was one of 5 directors on the board of WSM at the date he is alleged to have formed the dishonest intention, and could not, as one of 5 directors, have caused the benefit to be given, and therefore could not have intended to do so;
73.5In any event, the defendants deny that any benefit in the nature of an improved prospect of renewal of the Management Agreement following its expiry in September 1999 (which benefit is denied) has a value of at least $10,000.
74The conduct alleged to constitute the Alleged Offence:
74.1was not capable of causing the 'benefit' of the costs referred to in paragraph 69C where the costs were incurred prior to the alleged commission of the Alleged Offence.
…
The following matters relevant to the disposition of this appeal can be drawn from the portions of the JSFIC which I have set out above:
(1)The Commissioner's case was conducted on the basis that Mr Corp had committed the relevant offence on or about 23 January 1998.
(2)The offence allegedly committed by Mr Corp is that defined in paragraph 66 of the document, being a breach of Mr Corp's duty to act honestly in the exercise of his powers and in the discharge of the duties of his office as a director of WSM in that he intentionally deceived WSM and its members.
(3)The benefit which the Commissioner contended that Mr Corp intended to achieve by his commission of the alleged offence was to be derived by the voting of the respondents' shares against the motion to remove him and Mr Smith as directors of WSM.[20]
[20] JSFIC [69.2].
(4)The Commissioner contended that the value of the benefit of Mr Corp and Mr Smith remaining on the board of WSM was at least $10,000 because the value of the opportunity to renew the management contract was at least that amount; and further because an inference could be drawn that the value of Mr Corp holding an interest in the shares held by the respondent companies without disclosing that interest was at least $10,000, given the costs incurred and the complexities involved in achieving that arrangement.[21]
[21] JSFIC [69C] - [69G].
(5)The Commissioner asserted that the shares in WSM held by the respondents were instruments of the alleged offence because Mr Corp allowed the proxy votes cast in respect of those shares to be counted in circumstances in which he knew that his relevant interest in those shares had not been disclosed.[22]
[22] JSFIC [70.1].
(6)The respondents asserted that any dishonest non‑disclosure of Mr Corp's relevant interest in the respondents' shares in WSM did not have any impact upon the capacity for those shares to be voted against the resolutions at the general meeting, and therefore had no effect upon the capacity of Mr Corp and Mr Smith to remain on the board of WSM.
(7)The respondents further contended that Mr Smith and Mr Corp remaining on the board of WSM would not enhance the prospects of the management contract being renewed in September 1999 because:
(a)Mr Smith would in any event be required to retire as a director before the contract came up for renewal;
(b)Neither Mr Smith nor Mr Corp could vote on any resolution of the board with respect to the renewal of the management contract because of their personal interests in BMS; and
(c)Mr Smith and Mr Corp were not a majority of the board of WSM in any event.
(8)The respondents further contended that any benefit in the form of an improved prospect of renewing the management contract was not worth at least $10,000.
(9)The respondents further contended that no inference of benefit could be drawn from past costs incurred.
(10)The respondents asserted that there was no evidence that any non‑disclosure of interest by Mr Corp caused any other shareholder who voted on the resolution with respect to his removal from the board to vote differently than they would have had the disclosure been made.
Given the submissions made by the Commissioner in the course of the appeal, the last matter merits particular attention. In the JSFIC, the respondents did not assert, as a positive fact, that disclosure by Mr Corp of his relevant interest in the respondents' shares had no effect upon the manner in which other shareholders voted. Rather, the respondents asserted a negative proposition to the effect that there was no evidence capable of supporting the proposition that disclosure would have affected the manner in which other shareholders voted.[23] Put another way, the respondents were not asserting a positive case - rather, they were drawing attention to a deficiency in the evidence adduced by the Commissioner, as a result of which it was said that no conclusion could be drawn to the effect that disclosure would have affected the manner in which other shareholders voted. In response to that assertion, the Commissioner did not advance any positive assertion to the effect that disclosure would have affected the vote of other shareholders, or identify or tender any evidence bearing on the topic. Rather, he responded, somewhat cryptically, with an observation to the effect that the respondents' assertion was 'speculative'.[24]
[23] JSFIC [72.4.3].
[24] JSFIC 33.

The written submissions

Prior to the hearing of the application, the parties exchanged written submissions with respect to the issues to be determined at the hearing. The positions adopted by the parties in those submissions are consistent with the positions enunciated in the JSFIC.

The Commissioner's written submissions

In his written submissions, the Commissioner defined the unlawful activity of Mr Corp upon which the application was based in terms identical to those used in the JSFIC, which were taken from the indictment in the criminal proceedings brought against Mr Corp.[25] In his written submissions, the Commissioner described the unlawful activity upon which he relied in these terms:
20.The unlawful activity relates to an alleged breach of director's duties by Mr Corp pursuant to s 232(2) of the Corporations Law which arise out of his conduct at a general meeting of WSM held on 23 January 1998, at which there was a resolution to remove him as a director of WSM. At that time Mr Corp had accumulated a relevant interest (as defined in Part 1.2 of Division 5 of the Corporations Law) in shares in WSM which were held in the names of Davenrite Limited, Happle Limited and Courtenay Investments Limited. Mr Corp issued instructions that those shares he held in WSM, be voted to his advantage at that meeting in circumstances where he had failed to disclose his interest in them. The proxies voted, in accordance with those instructions, against a resolution to remove Mr Corp and Mr Smith as directors. Mr Corp failed to disclose his interests in those shares as required under the Corporations Law.
21.Mr Corp acted dishonestly in allowing the proxy votes voted by ANZ Nominees Limited (Happle shares) and National Nominees Limited (Davenrite and Courtenay shares) to be voted in the way they did, in circumstances where Mr Corp was in a conflict of interest between his personal interests as a director of Welcome Stranger Mining and a director of BSM Consultants Limited and the interests of the company Welcome Stranger Mining as a whole.
[25] Commissioner's submissions [18].
Later in his written submissions, the Commissioner described Mr Corp's conduct in these terms:
37.As an officer of the company Mr Corp allowed the proxy votes to be counted in circumstances where he knew that his interest in the shares held on behalf of Davenrite, Courtenay and Happle had not been disclosed, thereby intentionally deceiving the company and its members. In doing so, Corp acted in circumstances where his personal interests were in conflict with his duty to the company. In allowing the votes to be counted in these circumstances Corp used his position for the purpose of protecting his own (and Smith's interests) without regard for his duty to act in the best interests of the company and its members.
In support of his contention that the shares had been used as an instrument of crime, the Commissioner asserted in his written submissions:
50.Mr Corp breached his duty as a director by allowing the shares held in the names of Davenrite, Happle and Courtenay to be voted in the meeting in circumstances where his interest in the shares had not been declared. The shares are the vehicle by which Mr Corp committed the offence …
In his written submissions, the Commissioner advanced a number of alternative means by which it could be inferred that Mr Corp intended to cause a benefit of at least $10,000 to himself or another. Each alternative had, as its starting point, the proposition that it should be inferred that Mr Corp intended that his unlawful activity would result in him and Mr Smith remaining on the board of WSM. The Commissioner submitted that it should be inferred that Mr Corp and Mr Smith remaining on the board of WSM had a value of at least $10,000 because:
(1)if Mr Corp and Mr Smith were removed from the board, BMS would have little prospect of renewing its management contract when it expired on 1 September 1999;[26]
(2)the benefit to Mr Corp of remaining on the board of WSM (with Mr Smith), in circumstances where he held warehoused shares in the respondents, was greater than the sum of the fees involved in so doing. The result was he retained control of a public-listed company without having to pay a take‑over premium;[27]
(3)as Mr Corp argued in a letter to the shareholders of WSM prior to the extraordinary general meeting, if he and Mr Smith remained on the board of WSM the financial prospects of the company would be improved, thereby conferring a benefit upon the shareholders, including the shareholders in which Mr Corp had an interest.[28]
[26] Commissioner's written submissions [46].
[27] Commissioner's written submissions [47].
[28] Commissioner's written submissions [45], footnote 64.

In short, the case enunciated by the Commissioner in his written submissions was based upon an assertion that Mr Corp had committed an indictable offence by causing the shares in WSM held by the respondent companies to be voted against the resolutions to remove him and Mr Smith from the board of WSM, and by allowing those votes to be counted in circumstances in which he had not disclosed his interest in those shares as required by the Corporations Law. Because the offence was committed by causing the shares to be voted at the meeting, the Commissioner contended that the shares were an instrument of the crime. The Commissioner contended that it should be concluded that Mr Corp intended to cause a benefit of at least $10,000 to accrue to himself or another because he intended that the offence would prevent the resolutions to remove him and Mr Smith from the board from being passed, and that it should be inferred that maintaining the composition of the board had a value of at least $10,000 in one or other or all of the three respects identified by the Commissioner in his submissions. In the Commissioner's written submissions, the only basis upon which it was contended that it should be inferred that Mr Corp intended that his unlawful activity should result in him and Mr Smith remaining on the board of WSM was through his actions in causing the shares in the respondent companies to be voted against the resolutions to remove him and Mr Smith from the board, and by allowing those votes to be counted. At no point in his written submissions did the Commissioner contend that it should be inferred that Mr Corp intended that his conduct should affect the manner in which other shareholders in WSM voted at the extraordinary general meeting.

The respondents' written submissions

The respondents' written submissions were filed and served after the Commissioner's written submissions, and respond to the case enunciated by the Commissioner. So, in paragraph 81 of those submissions the respondents identified the issues arising from the Commissioner's allegation that Mr Corp had committed the alleged offence in the following terms:
81.1whether … Mr Corp had a relevant interest (within the meaning of that term in the Corporations Law) in the shares held by the defendants at the relevant time (on or about 23 January 1998);
81.2whether Mr Corp 'allowed' votes attaching to the defendants' shares to be counted on a poll in respect of the resolution to remove him;
81.3whether Mr Corp 'allowed' the votes attaching to shares held on behalf of the defendants to be counted, knowing that his relevant interest in the shares had not been disclosed to WSM or its shareholders;
81.4whether by 'allowing' the votes to be counted knowing his relevant interest had not been disclosed Mr Corp:
81.4.1failed to act honestly in the exercise of his powers and the discharge of his duties of offices;
81.4.2used his position as an officer of WSM in circumstances where his personal interests were in conflict with his duty to WSM;
81.4.3did so for the purpose of protecting his and Mr Smith's own interests;
81.4.4did so without regard for his duty to act in the best interests of WSM and its members;
81.5if so, whether the conduct alleged was engaged in by Mr Corp intentionally, intending to deceive WSM and its members.
Later in the submissions, the respondents emphasised that it was necessary for the Commissioner to establish that Mr Corp's alleged dishonesty occurred in the exercise of his powers or the discharge of his duties as a director. The respondents submitted that not everything a director does that affects his or her company is an exercise of a director's powers or a discharge of a director's duties - relying upon Whitlam v Australian Securities & Investment Commission.[29] In that context, the respondents reiterated that the Commissioner's case was to the effect that Mr Corp's unlawful conduct was 'allowing the proxy votes to be counted in circumstances where he knew that his relevant interest in the WSM shares held on behalf of the [respondents] had not been disclosed'.[30] The respondents pointed out that Mr Smith was chairman of the general meeting held on 23 January 1998, and therefore it was Mr Smith, not Mr Corp, who exercised the proxy rights of the respondent companies.[31] The respondents also submitted that there was no basis upon which it could be contended that the votes cast by the respondent companies were invalid, or that the respondent companies were not entitled to vote the shares that they held in respect of the resolutions put before the meeting on 23 January 1998.[32] The respondents also submitted that it was not open to Mr Corp, as a director, to interfere in the process of the poll, nor was it the exercise of Mr Corp's function as a director of the company to either 'allow' or 'disallow' the counting of votes.[33]
[29] Whitlam v Australian Securities & Investment Commission [2003] NSWCA 183; (2003) 57 NSWLR 559 [149] ‑ [150] (Hodgson, Ipp & Tobias JJA).
[30] Respondents' submissions [113], citing JSFIC [65B].
[31] Respondents' submissions [117].
[32] Respondents' submissions [118].
[33] Respondents' submissions [123].
On the topic of Mr Corp's intention to cause a benefit, the respondents submitted that on the Commissioner's case, the shareholding structure had been in place for a long time, and thus it could not be inferred that the structure had been put in place for the purposes of the meeting on 23 January 1998 or for the purpose of dealing with the issues put before the shareholders at that meeting. The respondents submitted that it could not therefore be inferred that:[34]
… any failure by Mr Corp to declare his interest in the [respondents] was done with the intention of securing his re-election. There is no evidence of any belief on the part of Mr Corp that declaring his interest in the [respondents] would have any impact, one way or the other, as to his prospects of re‑election. In these circumstances, it cannot be inferred any failure on his part was done with the intention of securing his re‑election.
[34] Respondents' submissions [139].
I digress to observe that, as with the position enunciated in the JSFIC, the respondents did not assert a positive case to the effect that Mr Corp did not intend that his omission to declare his interest in the relevant shares would have an impact upon the prospects of other shareholders supporting or opposing the resolutions to remove him and Mr Smith from the board of WSM. Rather, the case was put in the negative - that is, to the effect that there was no evidence from which an inference of such an intention could be drawn.
In relation to the issue of the value of the benefit which Mr Corp intended to cause by his unlawful activity, in their written submissions the respondents pointed out that the BMS management agreement was to remain in force for 18 months after the general meeting, irrespective of the outcome of the resolutions put before that meeting. The respondents contended that it could not be inferred that Mr Corp had matters relating to the renewal of the management agreement in mind at the time of the alleged offence.[35] The respondents further submitted that it could not be assumed that the board of WSM would remain the same over that 18 month period, and that even if it did, the board would not be controlled by Mr Corp even if Mr Smith was still on the board, as there were five directors. Further, in any event neither Mr Smith nor Mr Corp would be permitted to vote on issues related to the BMS management contract because of their conflicts of interest.[36] The respondents also submitted that the provisions in the constitution of WSM requiring the rotational retirement of directors would also have the consequence that Mr Smith would have had to retire from the board at the annual general meeting of the company in 1998, with the result that his position as a member of the board when the management agreement came up for review in 1999 would depend upon his re‑election at the 1998 annual general meeting, and not upon the outcome of the resolutions put to the extraordinary general meeting.[37] The respondents further submitted that there was no evidence from which an inference could be drawn to the effect that the value of an improved prospect of renewing the management agreement was at least $10,000.[38]
[35] Respondents' submissions [144] - [145].
[36] Respondents' submissions [147] - [149].
[37] Respondents' submissions [150] - [157].
[38] Respondents' submissions [164].
Also in the context of the issue relating to Mr Corp's intention to cause a benefit by the commission of the offence, the respondents pointed out that the Commissioner's case was based upon the commission of an offence by Mr Corp on or about 23 January 1998.[39] The respondents submitted that it could not be said that costs incurred well prior to that date gave rise to an inference of the value of the benefit which Mr Corp intended to cause by his conduct on or about 23 January 1998. In the same context, the respondents submitted that any benefit derived indirectly by Mr Corp as a shareholder of WSM as a result of the company being better managed financially as a result of Mr Corp and Mr Smith remaining on the board was 'plainly not a benefit that is caused or intended to be caused by any unlawful conduct'.[40]
[39] Respondents' submissions [170].
[40] Respondents' submissions [174].
In summary, in their written submissions the respondents joined issue with various aspects of the case advanced by the Commissioner in the JSFIC and the Commissioner's written submissions. Although the respondents submitted that there was no evidence from which it could be inferred that Mr Corp intended that his omission to declare his interest in the relevant shares would have an impact upon the outcome of the resolutions to be put to the meeting on 23 January 1998, the respondents made no submissions in relation to any inference that might be drawn with respect to the effect which Mr Corp's failure to declare his interest might have had on the votes cast by other shareholders. No doubt that was because the Commissioner did not advance a case based upon the effect of Mr Corp's non‑disclosure on the votes cast by other shareholders in either the JSFIC or his written submissions.

The hearing of the forfeiture application

At the hearing of the application, the Commissioner relied entirely upon the transcript of the trial of the criminal proceedings brought against Mr Corp and Mr Smith, and the tender of some of the evidence admitted during the course of that trial. The respondents adduced no evidence in response to the application. Accordingly, after the Commissioner tendered the evidence upon which he relied, the hearing essentially consisted of argument with respect to the inferences which might be drawn from that evidence.
The oral submissions advanced on behalf of the Commissioner were consistent with the case enunciated on his behalf in the JSFIC and written submissions, although greater emphasis was placed in oral submissions upon Mr Corp's failure to disclose his relevant interest in the shares in the respondent companies.[41] However, reliance upon Mr Corp's actions in causing the shares to be voted against the resolutions put to the meeting on 23 January 1998 was not unequivocally abandoned,[42] although senior counsel did apparently resile from any reliance upon Mr Corp having 'allowed' the votes to be counted.[43] On the subject of Mr Corp's intention to cause a benefit, senior counsel for the Commissioner reiterated the propositions contained in the written submissions, to the effect that an inference of the value to be derived from remaining on the board of WSM arose from the value of the management agreement and the prospect of it being renewed or extended, and from the amounts that had been paid by Mr Corp by way of fees in order to implement the shareholding arrangements.[44]
[41] ts 293.
[42] See, for example, ts 278 ‑ 279.
[43] ts 294.
[44] ts 307, 311 - 312.
When dealing with the question of whether the shares had been used as an instrument of crime, senior counsel for the Commissioner repeated the proposition contained in the Commissioner's written submissions to the effect that it was the use of the shares to vote against the resolutions to remove Mr Corp and Mr Smith from the board that supported the proposition that they were an instrument of crime, and to that extent relied upon Mr Corp causing the shares to be voted against the resolutions as a component of the unlawful activity upon which the application for forfeiture was based. When asked by the judge how the Commissioner would frame his case if the unlawful activity was limited to the failure of Mr Corp to disclose his interest, and did not include the voting of the shares, senior counsel submitted that, but for the shares, there would be no obligation to disclose and therefore the shares came within the expanded definition of 'instrument' in the Act.[45] However, senior counsel went on to reiterate her earlier submission to the effect that the unlawful activity was using the shares, by causing them to be voted, in circumstances in which Mr Corp had not disclosed his interest in them.[46] In that context, senior counsel submitted:[47]
… [t]he voting is part and parcel of the offence because if it wasn't, we wouldn't be here, with respect. There's a reason why a meeting is chosen as this is what's said to be the unlawful activity. It's not just that he failed to disclose. He has been failing to disclose for donkeys years but in this time in January when there was a meeting where he was supposed to be voted off - they wanted him off the board - with the shares he held, which gave him a right to vote, and without telling anybody he had an interest, he directed or instructed that they be voted in his favour and they were voted in his favour and he retained his position as a result of those votes.
[45] ts 316 - 317.
[46] ts 320, 322.
[47] ts 322 - 323.
However, the judge appeared to think that the unlawful conduct was limited to non‑disclosure. The following interchange took place:[48]
EDELMAN J:   So you say that the commission of the offence is not merely the failure to disclose. The commission of the offence involves the positive acts of voting of the shares as well.
ABRAHAM, MS:   Yes.
EDELMAN J:   Even though the positive acts of voting of the shares are not essential ingredients of the offence. The offence is committed by, not just its essential ingredients, but also by all of the surrounding connected facts.
ABRAHAM, MS:   Yes. I mean, he gets the benefit because the shares were voted as he instructed. He got to stay on the board.
[48] ts 324.
Senior counsel for the respondents raised the issue of the apparent ambivalence in the position adopted by the Commissioner with respect to the precise ambit of the unlawful activity upon which he relied as soon as he was called upon to address the court. When, in that context, he observed that 'the offence itself is all about the voting of the shares', the following interchange took place:[49]
[49] ts 327 - 328.
EDELMAN J:   I'm not sure that's right. I think - as I understood what Ms Abraham's submission is to be, is that the offence is the non-disclosure.
DHANJI, MR:   Yes.
EDELMAN J:   But in 329(2)(a), commission of an offence is not concerned merely with the act of non-disclosure or the required disclosure by law. The commission of the offence picks up all of the surrounding circumstances.
DHANJI, MR:   Yes. Well, in that case, it may be that the problem lies in terms of endeavouring - - -
EDELMAN J:   And then consistently with that, the benefit would also be the benefit from the voting of the shares, not merely the benefit from the non-disclosure or the intended benefit from the voting of the shares, not merely the intended benefit from the non-disclosure.
DHANJI, MR:   Well, if it's understood in that way, and that is that the benefit in relation to the non-disclosure is, in fact, the benefit specific to what has been particularised as the offence - and I’ve got no difficulty - - -
EDELMAN J:   It would have to be, wouldn't it?
DHANJI, MR:   Well, I would have thought so. I - - -
EDELMAN J:   Because how could one ever derive any benefit from the mere fact of non-disclosure?
DHANJI, MR:   Yes.
EDELMAN J:   [The] mere fact or the mere absence of disclosure itself is neutral. The intended benefit must be from something that occurs as a result of that non-disclosure.
DHANJI, MR:   Perhaps it's an unnecessary concern on my part, but I had understood my friend to be moving away from the idea of a benefit that was particular to an omission on January 1998. But if she's not moving away from that, I don't have a problem. Obviously, in my submission, the applicant's case has a problem in terms of benefits - as a result of an omission on 23 January …
So, although the final position adopted by the Commissioner with respect to the precise ambit of the unlawful activity upon which he relied was somewhat opaque, there is no doubt that the Commissioner's case was presented on the basis that even if the voting of the shares was not an element of the 'serious offence', it was the mechanism by which Mr Corp intended to derive the benefit of remaining on the board of WSM, with Mr Smith, and that maintaining the composition of the board had a value of at least $10,000 measured in one or other or all of the ways proposed by the Commissioner. At no point did the Commissioner contend that Mr Corp intended to derive a benefit by doing or not doing any acts which would influence or have an effect upon the votes cast by other shareholders in WSM.
On the second day of the hearing, senior counsel for the respondents presented his submissions on the assumption that the voting of the shares was an essential element of the unlawful activity upon which the Commissioner relied,[50] and the judge took up that contention.[51] In that context, the following interchange took place:[52]
[50] ts 394.
[51] ts 395.
[52] ts 397 - 398.
EDELMAN J:   People would be deceived but what is the fact that people are being deceived about?
DHANJI, MR:   The absence of his interest in the shares. That's the applicant's case.
EDELMAN J:   Yes. Is it - there's a - what's the provision which prevents a person with a relevant interest from voting or - prevents shares from being voted if a person has a relevant interest in the shares?
DHANJI, MR:   Without it being declared?
EDELMAN J:   Yes.
DHANJI, MR:   I mean, if a person has got an interest - I mean, the shares can be voted. There's no problem with voting the shares.
EDELMAN J:   Provided the relevant interest is declared.
DHANJI, MR:   Yes. I think it's - - -
EDELMAN J:   Is there a provision that provides for - or that prevents the voting of the shares without a declaration or is it just the provision which makes an offence not to declare?
DHANJI, MR:   I think it's the latter.
EDELMAN J:   So what's the counterfactual then? So if one were to assume against you that there had been an intention to deceive by allowing proxies to be voted, had that not occurred, in other words, had the required declaration been made, the shares would have been voted anyway.
DHANJI, MR:   Yes.
EDELMAN J:   But the result might have been different.
DHANJI, MR:   Well, no, not in the absence of - well, one couldn't draw any inference that the result would be different in the other - - -
EDELMAN J:   That's why I said it might. It might have been different - - -
DHANJI, MR:   Yes.
EDELMAN J:   - - - because the declaration might have affected how other persons cast their votes.
DHANJI, MR:   Yes. Well, it perhaps doesn't much matter for my purposes but it's - that's illustrative of the fact that you don't get above recklessness.
This appears to be the only point at which there was any reference to the possibility that disclosure might have affected the way in which other shareholders voted during the hearing. That possibility was raised by the judge and not pursued by either counsel.

When senior counsel for the respondents turned to the issue of whether the shares had been used as an instrument of crime, the judge asked a question based on the assumption that the voting of the shares was an element of the unlawful activity.[53]
[53] ts 414.
Finally, in the context of submissions with respect to matters not relevant to the issues raised by the appeal, senior counsel for the respondents submitted that the JSFIC had taken the place of pleadings and had been treated as pleadings - a proposition which the judge appeared to accept.[54] The judge made an observation to that effect in his reasons for decision.[55]
[54] ts 452, 454.
[55] Primary reasons [20].

The decision at first instance

In the summary of his decision at the commencement of his reasons, the judge described the Commissioner's case in these terms:[56]
Mr Corp was said to have acted deceitfully and dishonestly by allowing proxy votes to be counted at a general meeting of WSM on 23 January 1998 in circumstances in which he knew that he had not disclosed a relevant interest in WSM shares.

The Jones v Dunkel point

[56] Primary reasons [6].

After dealing with various preliminary matters and setting out the facts which were not in dispute, the judge dealt with the Commissioner's reliance upon the 'rule' in Jones v Dunkel[57] as a result of the respondents' failure to call any witnesses, particularly Mr Corp. The judge expressed the view that the rule should not be applied for three reasons. First, the Commissioner's case relied entirely upon the written transcript and exhibits from Mr Corp's criminal trial, and the Commissioner did not call any witnesses to give evidence of 'facts requiring an answer'. Second, the decision not to call Mr Corp as a witness for the respondents may have been made quite late and in response to the Commissioner's decision not to call any witnesses. Third, because the focus of the respondent companies' case was on the assertion that Mr Corp had divested himself of any interest in the WSM shares by the time of the general meeting on 23 January 1998, the underlying facts did not require an answer.[58]

Was an offence committed?

[57] Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298.

[58] Primary reasons [167] - [175].

The judge then addressed the question of whether the Commissioner had established that Mr Corp had committed an offence. The judge repeated the description of the offence given by the Commissioner in the JSFIC which I have set out above.[59] The judge referred also to the written submissions in which the same propositions had been advanced, and then observed:[60]
In oral submissions, the Commissioner shifted ground. The offence upon which the Commissioner relied did not involve any conduct by Mr Corp in allowing proxy votes to be counted. This point is considered in detail below.
[59] JSFIC [66].
[60] Primary reasons [185].
The judge then addressed at length the evidence relating to the question of whether Mr Corp had a relevant interest in the shares held by the respondent companies at the time of the general meeting on 23 January 1998. It is unnecessary to refer to those matters in any detail, as the judge's conclusion on that question is not challenged in the appeal. He concluded that although Mr Corp divested himself of his beneficial ownership in the respondent companies prior to the meeting in January 1998, the person who was responsible for giving instructions with respect to the voting of the shares, a Ms Wickerson, was accustomed to acting upon Mr Corp's instructions in relation to those shares as at January 1998, with the result that Mr Corp thereby had a relevant interest in those shares.
After expressing those conclusions, the judge returned to the question of whether the Commissioner's case involved an assertion that Mr Corp had allowed the proxy votes cast in respect of the shares in the respondent companies to be counted. On that subject he observed:[61]
In oral submissions, senior counsel for the Commissioner conceded that the Commissioner's case would not rely upon Mr Corp having allowed anything to be done in relation to the counting of the proxy votes. She effectively treated this element of the allegation as surplusage. The only relevant matters relied upon by the Commissioner in oral submissions were that Mr Corp had knowingly failed to disclose his relevant interest and that he had done so with an intent to deceive the members. (footnotes omitted)
[61] Primary reasons [362].
As I have noted, in the course of her oral submissions senior counsel for the Commissioner disavowed reliance upon that part of the Commissioner's case to the effect that Mr Corp's unlawful activity included allowing the votes cast by the respondent companies to be counted. However, the judge's formulation of the Commissioner's revised case at this portion of his reasons omits any reference to Mr Corp having caused the shares to be voted against the resolutions which was, as I have noted, a critical component of the Commissioner's case.[62]

Dishonesty

[62] Despite the apparent ambivalence of the Commissioner's position on the question of whether the voting of the shares was an element of the offence or a circumstance associated with the commission of the offence during the course of oral argument.

The judge noted that it was common ground that if Mr Corp had a relevant interest in the shares held by the respondent companies, he was required to disclose that interest.[63] Later in his reasons the judge identified the source of that obligation as the obligation imposed upon directors of companies by s 235 of the Corporations Law.[64] In that context the judge noted that the duty of disclosure arose many years before 23 January 1998, when Mr Corp acquired his relevant interest in the respondent companies. However, he noted that 'the Commissioner's case on this application only ever alleged that the offence of non‑disclosure occurred on 23 January 1998 …'.[65]
[63] Primary reasons [365].
[64] Primary reasons [400] - [402].
[65] Primary reasons [403].
On the question of whether Mr Corp's non‑disclosure was dishonest and therefore a contravention of the duty imposed by s 232 of the Corporations Law, the judge found that Mr Corp 'had maintained an elaborate web of subterfuge one purpose of which was to ensure that his relevant interest in the defendant companies was concealed'.[66] Against that background, the judge found that Mr Corp's failure to disclose any relevant interest involved a deceit upon WSM and its members on 23 January 1998, the deceit lying in the belief induced, by his non‑disclosure, that he had no interest in the shares held in WSM by the respondent companies.[67] Because the obligation of disclosure was imposed upon Mr Corp in his capacity as a director of WSM, the judge concluded that his actions involved dishonesty in the exercise of his powers and in the discharge of his duties of the office of director of WSM.[68]
[66] Primary reasons [392].
[67] Primary reasons [394].
[68] Primary reasons [406].
In the context of considering the Commissioner's contention that dishonesty could also be inferred from the conflict between Mr Corp's personal interests and his duties as a director of WSM, the judge observed:[69]
The Commissioner did not submit that disclosure would have affected other votes but even if it were to [be] assumed that disclosure could affect other votes, would this be in a positive manner for Mr Corp or a negative manner?

Was Mr Corp's unlawful conduct intended to cause a benefit to the value of at least $10,000?

[69] Primary reasons [405].

The judge then turned to the question of whether Mr Corp's unlawful acts were committed with the intention of causing a benefit to the value of at least $10,000 to accrue to either him or some other person, thereby satisfying the relevant aspect of the definition of 'serious offence' in s 338 of the Act. In that context, the judge observed:[70]
… [T]he Commissioner's case at all times was that the failure to disclose was on 23 January 1998 and the benefits were those that derived from the defeat of the resolutions to remove Mr Corp and Mr Smith as directors. This was also the explicit basis upon which the Commissioner's application had been set out in the [JSFIC]. It was also the basis that the defendant companies had understood the Commissioner's case to have been brought. They defended the case on that basis.
[70] Primary reasons [415].
The judge identified the three alternative ways in which the Commissioner asserted that the benefits deriving from the defeat of the resolutions to remove Mr Corp and Mr Smith as directors had a value of at least $10,000, being:
(1)the improved prospect of the renewal of the BMS management contract;
(2)an inference to be drawn from the cost of establishing and maintaining the scheme of non‑disclosure; and
(3)the benefits to be derived by Mr Corp as a substantial shareholder in WSM if he and Mr Smith remained as directors and thereby improved the company's financial fortunes.

The BMS management contract

The judge rejected the Commissioner's contention that the value of defeating the resolutions to remove Mr Smith and Mr Corp from the board of WSM was at least $10,000 because of the prospect that the BMS management contract would be renewed when it expired on 1 September 1999 for three reasons. He expressed the first reason in these terms:[71]
The reason why the Commissioner's submission fails on the issue of causation is because there was no dispute that the defendant companies could still have voted on 23 January 1998 if Mr Corp had disclosed his interest. In other words, Mr Corp's failure to disclose his interest in WSM through the defendant companies made no difference to the outcome of the vote. Mr Corp must have known this: he disclosed his interest in companies such as [Ecrofete] Pty Ltd and Claw Pty Ltd and those companies exercised a vote against the resolutions to remove Mr Corp and Mr Smith. Nor was there any evidence that disclosure by Mr Corp might have affected any of the other votes. For instance, there is no direct evidence that any of the 8.48% of shareholders who did not vote on the resolution would have been motivated to vote as a result of Mr Corp's disclosure (see Appendix 3 to these reasons). Nor was there any submission made that an inference could be drawn that Mr Corp intended that his non-disclosure would have this effect. (foonotes omitted)
[71] Primary reasons [423].
The second reason given by the judge for rejecting the Commissioner's submission based upon the renewal of the management agreement was his conclusion that there was an insufficient basis for an inference to the effect that Mr Corp's non‑disclosure on or about 23 January 1998 was motivated by a desire to increase the prospects of renewing the management agreement in September 1999. He noted that on the evidence Mr Corp's non‑disclosure did not cause renewal of the management agreement, nor did it lead to any increased prospect of renewal. The judge noted that the Commissioner's case was not based upon the offence having caused a benefit, but rather having been committed with the intention of causing a benefit. However, the judge identified two particular obstacles in the path of attributing such an intention to Mr Corp, namely:[72]
(1)it was not reasonable to attribute to Mr Corp an expectation that both he and Mr Smith would have remained directors in 1999 when the renewal of the management agreement would come up for consideration having regard to the provisions in the constitution of WSM which required the rotational retirement of directors; and
(2)neither Mr Smith nor Mr Corp could vote on any resolution of the board relating to renewal of the management agreement because of their conflict of interest, and it could not be inferred that Mr Corp, as a director, would have expected that he would be able to influence the other members of the board to support the renewal of the agreement, given the disharmony which had erupted at board level and which was manifest in the resolutions put to the general meeting in January 1998.
[72] Primary reasons [430].
The third reason given by the judge for rejecting the Commissioner's submission based upon the increased prospect of renewing the BMS management agreement if the resolutions to remove Mr Smith and Mr Corp from the board of WSM were defeated was the lack of any evidence to establish the net benefit to BMS arising from the management contract. In this respect the judge held:[73]
In this case, a fundamental difficulty exists in the assessment of the expected income to BMS from the Management Contract. There was no evidence of the net benefit to BMS in any past or future year. It was an agreed fact that in the years from 1991 until 1998, WSM paid to BMS slightly less than, on average, $90,000 for management fees and $93,531 for office administration fees. But there was no evidence of the costs incurred by BMS for management and office administration. These should legitimately be deducted when calculating the benefit arising from a lawful activity (a contract with BMS) which is remote from the immediate unlawful conduct (the non-disclosure).
In summary of this third point, the evidence of the value of the contract to BMS was not sufficient to draw an inference that the increased prospect of renewal of the BMS contract (for an undefined period) was a benefit of more than $10,000. (footnotes omitted)

The costs of the 'web of subterfuge'

[73] Primary reasons [434] ‑ [435].

The judge gave four reasons for rejecting the Commissioner's submission to the effect that an inference that the defeat of the resolutions to remove Mr Smith and Mr Corp from the board of WSM had a value of at least $10,000 could be drawn from the costs incurred by Mr Corp in establishing and maintaining the scheme to conceal his interest in the respondent companies over the years since he acquired that interest. First, he reiterated his conclusion that Mr Corp's non‑disclosure of his relevant interest in the shares had no effect upon the outcome of the vote with respect to the removal of Mr Smith and Mr Corp from the board. He expressed that conclusion in these terms:[74]
First, as I have explained at [421] - [423] above, the submission must fail for reasons of causation. There was no dispute that the defendant companies could still have voted on 23 January 1998 if Mr Corp had disclosed his interest. And there was no evidence sufficient to support the conclusion that Mr Corp's non-disclosure would have caused the reversal of any vote against his removal or shareholders who did not vote to exercise a vote to remove Mr Corp.
In other words, Mr Corp's failure to disclose his interest in WSM through the defendant companies made no difference to the outcome of the vote and any benefits that arose from it.
[74] Primary reasons [439] ‑ [440].
I digress to observe that the judge's observation that there was no evidence to support the contention that Mr Corp's non-disclosure of his interest would have affected the votes cast (or not cast) by other shareholders was consistent with the position adopted by the respondent companies - a position which was not challenged by the Commissioner at any point in the JSFIC or in written or oral submissions.
The second reason given by the judge for rejecting this aspect of the Commissioner's submissions was that he did not consider that, as a matter of logic, it could be concluded that the benefit of Mr Corp not disclosing his interest in the respondent companies exceeded the cost of the scheme which obscured that interest. In that context he observed:[75]
No submissions were made concerning the different reasons why shareholders would not want their names disclosed. There might be many different reasons why such secrecy would be desired which are independent of financial motivations. Indeed, as I have explained, in late December 1997 or early 1998, Mr Corp gave away his interests in the defendant companies for no consideration. This indicates that his exclusive motive for secrecy and his conscious non-disclosure of his relevant interest might have been non-financial (for instance, avoiding a criminal prosecution), at least by the time the WSM proxies were prepared for the 23 January 1998 general meeting.
[75] Primary reasons [442].
The third reason given by the judge for rejecting this aspect of the Commissioner's submissions focused upon the fact that the Commissioner's case was based upon Mr Corp's non‑disclosure of his relevant interest in the shares at or about the time of the meeting in January 1998. However, the judge held that the costs and expenses incurred by Mr Corp in obscuring his interest in those shares over the years which preceded that meeting could not be attributed, even in part, to the meeting. The judge observed that the costs and expenses upon which the Commissioner relied were all incurred between January 1992 and December 1996, with the exception of the final two payments of around $2000. So, as he observed, the payments were incurred more than a year, and in some cases many years before the January 1998 meeting. In his view, no inference could be drawn that any or all of those costs were incurred with the intention of providing a benefit from the vote at a general meeting that could be called years after the expenses were incurred.[76]
[76] Primary reasons [447].
The fourth reason given by the judge for rejecting the Commissioner's submissions on this aspect of the case was the lack of evidence to establish that the costs and expenses upon which the Commissioner relied were incurred as part of Mr Corp's scheme to conceal his relevant interest, rather than as costs and expenses which would have had to be incurred by the respondent companies themselves.[77] In particular, the judge noted that many of the costs and expenses may well have been attributable to the formation of the respondent companies. He did not accept that the respondent companies were established by Mr Corp with the intention of them being used to conceal his relevant interest. Although the judge accepted that Mr Corp may have later formed that intention, the costs and expenses incurred in relation to the companies prior to the time at which that intention was formed cannot be attributed to the scheme by which he concealed his relevant interest in the companies.

Enhancement of the value of WSM

[77] Primary reasons [448].

The judge gave three reasons for rejecting the Commissioner's submission that it should be inferred that Mr Corp intended that a benefit to the value of at least $10,000 would be derived from the defeat of the resolutions to remove him and Mr Smith from the board of WSM because the financial health of the company would be improved by them remaining on the board.
The first reason given by the judge was a repetition of his conclusion that Mr Corp's failure to disclose his interests in the relevant shares made no difference to the outcome of the resolutions put to the meeting on 23 January 1998.[78]
[78] Primary reasons [466].
The second reason given by the judge for rejecting this aspect of the Commissioner's contentions was his conclusion that no inference could be drawn to the effect that Mr Corp's non‑disclosure of his relevant interest was driven by a desire to improve the financial health of WSM. The judge considered that there was a far more compelling inference to the effect that his motivation for non‑disclosure was a desire to avoid the discovery of his continuing breach of the obligation of disclosure.[79]
[79] Primary reasons [468].
The third reason given by the judge for rejecting this aspect of the Commissioner's submissions was the lack of any evidence as to the likely consequences to the financial health of WSM if the resolutions to remove Mr Smith and Mr Corp had succeeded, with the result that it was not possible to draw an inference to the effect that it was Mr Corp's intent to improve the company's financial health by defeating the resolutions.[80]

Although I have expressed this view out of deference to the submissions provided by the parties on the topic, it does not appear to me that anything turns upon this issue in the circumstances of this appeal. Notwithstanding the somewhat ambivalent and inconsistent manner in which the Commissioner has presented his case for forfeiture, no issue of multiple or alternative causes[116] is involved. Rather, for reasons which will be developed, the case turns critically upon the identification of the conduct which constituted the offence committed by Mr Corp. If that offence was committed by Mr Corp's failure to disclose his relevant interest in the shares held by the respondent companies, which is the way in which the Commissioner enunciated his case for the purposes of the appeal, the question which must be addressed is whether it can be inferred that Mr Corp intended that his non-disclosure would cause the resolutions which were to be put to the extraordinary general meeting to remove him and Mr Smith from the board to be defeated. It is not necessary to address nuanced issues of causation in order to resolve that straightforward issue.

Ground 1 - Jones v Dunkel

[116] Of the kind considered in Amaca Pty Ltd v Booth or Amaca Pty Ltd v Ellis [2010] HCA 5; (2010) 240 CLR 111.

The Commissioner contends that the judge erred by not applying the principles enunciated in Jones v Dunkel in respect of the inference to be drawn from the respondents' failure to call any witnesses at first instance. However, the Commissioner concedes, correctly, that success on this ground is, of itself, insufficient to result in his appeal being allowed.[117] That concession is properly made because the principles in Jones v Dunkel have little or no part to play in the resolution of the issues to be determined on this appeal. Those principles only come into play when an inference is open from facts proved by direct evidence and the question is whether that inference should be drawn. In such circumstances, the failure of a party who might have called evidence to disprove the matter to be inferred to call that evidence can be taken into account as a circumstance in favour of drawing the inference.[118]
[117] Appellant's written submissions [27].
[118] Jones v Dunkel (312) (Menzies J).
For reasons which I will develop, this appeal turns upon the question of whether an inference as to Mr Corp's intent can be drawn from the evidence - not whether it should be drawn - and upon the question of whether there was evidence that could have sustained a finding to the effect that the value, assessed objectively, of any benefit which Mr Corp intended to derive by committing the relevant offence equalled or exceeded $10,000.
Because the issue raised by the Commissioner with respect to the applicability of the principles in Jones v Dunkel is of little or no significance to the disposition of this appeal, it can and should be dealt with briefly. In my respectful view, the reasons given by the judge at first instance do not support the conclusion that the principles enunciated in Jones v Dunkel had no application to the case. First, the fact that the Commissioner's case relied upon written transcript and documentary exhibits, rather than oral evidence, is not relevant to the question of whether the principles in Jones v Dunkel apply. If a party has adduced evidence, in whatever form, from which an inference can be drawn and the question is whether it should be drawn, the principles are applicable. Second, the fact that the Commissioner made a decision not to call witnesses to give oral evidence shortly before the commencement of the trial is also irrelevant to the application of the principles in Jones v Dunkel. The respondent companies had served a witness statement with respect to evidence that might be given by Mr Corp and there was no reason why they could not have called him at the hearing if they had wished to do so. Third, the fact that the focus of the case of the respondent companies was upon the assertion that Mr Corp had divested himself of any interest in the WSM shares by the time of the general meeting on 23 January 1998 is also irrelevant to the question of whether the failure to call Mr Corp should be taken into account in assessing whether an inference should be drawn in relation to the Commissioner's case with respect to Mr Corp's intent.
So, if this was a case in which there was a question as to whether an inference open from facts proved by direct evidence with respect to Mr Corp's intent should be drawn, the failure of the respondent companies to call Mr Corp to give evidence could and should be taken into account as a circumstance in favour of drawing the inference.
The question of whether this is such a case, and in particular whether any inference with respect to Mr Corp's intent to cause a benefit of the kind asserted by the Commissioner is open on the evidence, is a matter properly considered in the context of the other grounds of appeal.

Grounds 2 and 3 - did Mr Corp intend to cause a benefit with a value of at least $10,000 by committing the alleged offence?

As I have noted, although the judge found that the Commissioner had established that Mr Corp had committed the alleged offence, he dismissed the Commissioner's application for a forfeiture order because he found that:
(1)Mr Corp did not intend, by committing the offence, that the resolutions to remove him and Mr Smith from the board of WSM would be defeated; and
(2)the Commissioner had failed to establish that the value of defeating the resolutions to remove Mr Corp and Mr Smith from the board of WSM was at least $10,000.
As senior counsel for the Commissioner conceded, in order to succeed on the appeal the Commissioner must overturn both findings. In those circumstances, it is regrettable that neither the grounds of appeal nor the submissions advanced in support of those grounds separately address each of those critical findings. Rather, grounds 2 and 3 each attack separate aspects of each finding, on various different grounds. It is, nevertheless, desirable to focus upon each of those critical findings and, in that context, to endeavour to glean from each of grounds 2 and 3, and the submissions made in their support, the issues relevant to each finding.

Did Mr Corp intend to defeat the resolutions to remove him and Mr Smith from the board of WSM by committing the alleged offence?

As I have noted, at different times in the course of these proceedings the Commissioner's case with respect to the elements of the offence committed by Mr Corp and the nature of the intention which should be attributed to Mr Corp has been ambulatory and ambivalent.
The Commissioner's case was originally brought on the basis that the offence was committed by Mr Corp allowing the votes cast by the respondent companies to be counted without disclosing his relevant interest in those companies. However, during the course of the hearing at first instance, the Commissioner abandoned that aspect of the case which relied upon Mr Corp having allowed the votes to be counted (no doubt because there was nothing Mr Corp could have done to prevent the votes from being counted) and, instead, initially asserted that Mr Corp's actions in causing the votes to be cast were an element of the offence which he committed. However, during the course of the hearing at first instance, the Commissioner's position became somewhat ambivalent and, by the conclusion of that hearing, it was not at all clear whether or not the Commissioner's case was limited to an offence committed by failing to disclose Mr Corp's relevant interest in the shares held by the respondent companies in circumstances in which those shares were then used 'in connection with' that offence, when they were voted. The judge at first instance dealt with the Commissioner's case as if it were so limited, and there is no ground of appeal which asserts that he was wrong to do so. Moreover, by the time the appeal came to be heard, as I have noted, senior counsel for the Commissioner made it quite clear, and in emphatic terms at a number of points in the course of her address, that the Commissioner's case was based upon the proposition that the offence was committed by Mr Corp failing to disclose his relevant interest in the shares held by the respondent companies. Senior counsel did not assert that there was any other element of the relevant offence.
The Commissioner's case with respect to the intention to be attributed to Mr Corp has changed in line with the various changes to the Commissioner's position with respect to the nature of the offence committed by Mr Corp. Initially, the Commissioner's case was to the effect that it should be inferred that Mr Corp intended to defeat the resolutions to remove him and Mr Smith from the board of WSM by allowing the votes cast by the respondent companies to be counted and then, after that case had been abandoned, by causing the votes to be cast by the respondent companies. However, after the Commissioner apparently abandoned reliance upon Mr Corp's acts in causing the respondent companies to cast their votes as an element of the offence he committed, and confined the element of the offence to non‑disclosure, the Commissioner then sought to advance, for the first time, the proposition that Mr Corp intended to defeat the resolutions to remove him and Mr Smith from the board of WSM by not disclosing his interest in the shares held by the respondent companies because disclosure of that interest would have had an adverse effect upon the votes cast by other shareholders. That is the proposition which I have concluded the Commissioner should not be permitted to put.
As the Commissioner has, since the time of the appeal hearing at least, cast his case exclusively on the basis that the relevant offence committed by Mr Corp was committed by his failure to disclose a relevant interest in the shares in WSM held by the respondent companies on or about 23 August 1998, in order to succeed in the appeal it is necessary for the Commissioner to identify a means by which it can be inferred that Mr Corp intended to cause, by that non‑disclosure, a benefit in the form of the defeat of the resolutions to remove himself and Mr Smith from the board of WSM. However, Mr Corp's failure to disclose his relevant interest in the shares held by the respondent companies had no effect upon his capacity to cause those companies to vote against the resolutions to remove him and Mr Smith from the board of WSM. It follows that there is no logical basis for an inference to the effect that Mr Corp intended that his failure to disclose a relevant interest in the shares held by the respondent companies should cause a benefit in the form of the defeat of the resolutions to remove him and Mr Smith from the board of WSM by causing the respondent companies to cast their vote against the resolutions, as non‑disclosure was entirely irrelevant to Mr Corp's capacity to cause those votes to be cast as they were.
So, this is not a case in which there is a question whether an inference left open by direct evidence should be drawn to the effect that Mr Corp intended that, by non‑disclosure of his relevant interest, he could cause the defeat of the resolutions to remove him and Mr Smith from the board of WSM by causing the shares in the respondent companies to be cast as they were. Rather, this is a case in which an inference to that effect is simply not open on the evidence. The same proposition can be put another way. Irrespective of whether Mr Smith complied with the obligation imposed by s 235 of the Corporations Law to disclose his relevant interest in the shares held by the respondent companies, or committed the alleged offence by not disclosing that interest, he would in either case have had the capacity to cause the respondent companies to vote against the resolutions to remove him and Mr Smith from the board of WSM. It follows that it cannot be inferred that Mr Corp intended to cause a benefit by non‑disclosure of his relevant interest in the shares held by the respondent companies as a result of the manner in which those companies exercised their voting powers. That is essentially what the judge at first instance held.
Once the Commissioner's case was clearly and unequivocally confined to an application for forfeiture based on an offence committed by Mr Corp's failure to disclose his relevant interest in the shares held by the respondent companies, the only way in which it could be inferred that Mr Corp intended that his non‑disclosure would influence the outcome of the resolutions to remove him and Mr Smith from the board of WSM was if he intended that non‑disclosure would affect the votes cast by other shareholders. Presumably that is why senior counsel for the Commissioner was ultimately driven to advance that proposition. That is also why I have spent so much of these reasons addressing the question of whether the Commissioner should now be permitted to advance that case. As I have concluded that the Commissioner should not be permitted to now advance that case, it follows that the Commissioner's appeal cannot succeed.
For the sake of completeness, I will address the specific contentions which the Commissioner has advanced in his challenge to the judge's conclusion on the question of causation. The first is the Commissioner's contention that the judge erred by mistakenly approaching the Commissioner's case as if it was brought on the basis that Mr Corp's conduct had caused a benefit, rather than on the basis of Mr Corp's intent. That proposition must be rejected. When the judge's reasons are read as a whole, there cannot be any doubt that he was well aware that the Commissioner's case was based upon Mr Corp's intent at the time he committed the alleged offence, and he dealt with the Commissioner's case on that basis. There are portions of the reasons in which reference is made to the effect which Mr Corp's conduct might have had. However, those observations are made for the purpose of ascertaining whether an inference of intent can be drawn from the acts or omissions in question, in the same way as I have reasoned that no inference as to Mr Corp's intent to cause a benefit from the offence he committed can be drawn because the offence which he committed was incapable of affecting the manner in which votes were cast by the respondent companies.
The Commissioner also asserts that the judge erred by implicitly approaching the question of Mr Corp's intent on the basis that the Commissioner had to establish that the derivation of the relevant benefit was Mr Corp's sole or dominant intention. Again, if the reasons given by the judge at first instance are read as a whole, no inference of the kind asserted by the Commissioner can be drawn from their terms. But, in any event, the process of reasoning adopted by the judge, which I have paraphrased above, is entirely unaffected by the question of whether the derivation of benefit in the form of defeat of the resolutions to remove him and Mr Smith from the board of WSM was Mr Corp's sole or dominant intention, or merely one of a number of objectives. Rather, the process of reasoning is to the effect that it cannot be inferred that Mr Corp had any such intention, whether minor, dominant or exclusive, because his failure to disclose his relevant interest in the shares held by the respondent companies was irrelevant to the outcome of the resolutions to be put to the extraordinary general meeting.[119]
[119] Unless Mr Corp intended that non-disclosure would have an effect upon the votes cast by other shareholders - a position which the Commissioner should not now be permitted to advance.
Although the Commissioner has advanced various alternative and perhaps cumulative mechanisms by which it can be inferred that the benefit which Mr Corp intended to cause by his commission of the alleged offence had a value of at least $10,000, all depend upon the proposition that the relevant benefit was to be derived by causing the defeat of the resolutions to remove him and Mr Smith from the board of WSM. Because the Commissioner has failed to establish that Mr Corp intended to derive a benefit in that form by his commission of the alleged offence, it follows that the Commissioner's appeal, and the application for forfeiture, must be dismissed, irrespective of the arguments advanced with respect to the valuation of the benefit which Mr Corp intended to cause. Nevertheless, for the sake of completeness and out of deference to the arguments advanced, I will deal with the Commissioner's contentions on those issues. It is convenient to do so by reference to the three alternative, or perhaps cumulative, ways in which the Commissioner contends that it should have been found, objectively, that the defeat of the resolutions to remove Mr Corp and Mr Smith from the board of WSM had a value of at least $10,000.

Did the defeat of the resolutions to remove Mr Smith and Mr Corp from the board of WSM have a value of at least $10,000?

Improved prospect of renewal of the BMS management agreement

The Commissioner contends that the judge should have found that the improved prospect of renewing the BMS management agreement when it came up for renewal in the latter half of 1999 had a value of at least $10,000.
It should first be observed that once it is accepted, as both parties did, that the valuation of the benefit intended to be derived by the commission of the relevant offence is undertaken objectively, in the circumstances of this case the question to be addressed is the objective value of the defeat of the resolutions to remove Mr Corp and Mr Smith from the board of WSM. So, once it is accepted that the relevant benefit was the defeat of the resolutions to remove Mr Corp and Mr Smith from the board of WSM, the question is not whether Mr Corp intended that the achievement of that benefit would improve the prospects of renewal of the BMS management agreement and would thereby result in the derivation of benefit. Rather, the question is whether, as a matter of objective fact, defeat of the resolutions would have that effect and, if so, whether the value of the improved prospect of renewal of the BMS management agreement exceeded $10,000. It further follows that the respondent companies' submissions, which were accepted by the judge at first instance, to the effect that it should not be inferred that Mr Corp had renewal of the BMS management agreement in mind when he committed the alleged offence on or about 23 January 1998 are irrelevant because the critical question is whether he intended to cause the resolutions to be defeated and, if so, what is the value, objectively assessed, of the defeat of those resolutions.
The primary judge also found that it could not be inferred that Mr Corp intended that the defeat of the resolutions to remove him and Mr Smith from the board of WSM would improve the prospects of the BMS management agreement being renewed after 1 September 1999 because Mr Corp and Mr Smith remaining on the board of WSM would not have that effect for a number of reasons. First, Mr Smith would have to retire from the board of WSM and seek re-election prior to the time at which the BMS management contract would have to be renewed, as would Mr Corp if he was no longer the managing director of WSM. Second, Mr Corp and Mr Smith would not be able to vote on any proposal put to the board of WSM for the renewal of the BMS management contract because of their conflict of interest. Third, given Mr Smith and Mr Corp were only two of the five directors of WSM, and given the disharmony at the board level reflected in the resolutions which were put to the January 1998 meeting, it could not be inferred that Mr Smith and Mr Corp were in a position to control the actions of the other directors of WSM, or the board of WSM.

The Commissioner has not expressly challenged any of these findings in his grounds of appeal. Nor has any argument been advanced on his behalf which would undermine those findings. The Commissioner has been content to advance his case on the basis of a general proposition to the effect that it was obvious that if Mr Corp and Mr Smith remained on the board of WSM the prospects of the BMS management agreement being renewed were greater. With respect, in light of the specific findings made by the judge and which have not been challenged, it is not at all 'obvious' that the defeat of the resolutions to remove Mr Corp and Mr Smith from the board of WSM would have any effect upon the prospects of the BMS management agreement being renewed and, therefore, would cause something of value to be derived in relation to that management agreement by either Mr Corp, Mr Smith, or somebody else.
That conclusion is sufficient to dispose of the Commissioner's reliance upon the BMS management agreement in support of the proposition that the value of Mr Corp and Mr Smith remaining on the board of WSM was at least $10,000. However, for the sake of completeness, it is appropriate to deal briefly with two other issues the Commissioner raised in this context.
First, the Commissioner contends that the judge was wrong to conclude that the evidence did not establish that the BMS management agreement had a value of at least $10,000 because there was no evidence which established the cost of providing the services which were provided pursuant to the agreement. The evidence only established the revenue derived, with the result that it had not been established that the management agreement was profitable. The Commissioner contends that the derivation of revenue is itself a benefit, even if the costs incurred are greater than the benefit derived.
This contention must be rejected. An improvement in the prospects of renewing an unprofitable contract has no positive value at all, and cannot be said to have a value of at least $10,000. It follows that the judge was correct to conclude that the lack of any evidence with respect to the costs incurred in order to derive the revenue paid under the BMS management agreement precludes any finding that an improved prospect of renewing the management agreement had a value of at least $10,000.
In the written submissions filed after the appeal hearing, the Commissioner referred to a portion of the 1998 Annual Report of WSM in which reference is made to the terms of the BMS management agreement providing for remuneration at the directors' discretion of an amount not more than a monthly retainer of $7,500 and reimbursement of administration expenses as they relate to the company. However, this evidence does not support the Commissioner's case. First, the fact that the agreement provided for remuneration up to a certain monthly amount does not establish that BMS in fact received remuneration at that level. Second, the reference to reimbursement of administration expenses is, on the face of it, a reference to expenses incurred in the administration of the company, not in the provision of management services generally, which may well have been significantly broader in compass than clerical administration and so the evidence does not establish that all costs in the provision of management services were to be reimbursed.
The Commissioner also relies upon the fact that BMS was paid $225,000 when, in May 1998, the management agreement was terminated prior to its expiry on 1 September 1999. The Commissioner submits that an inference as to the value of the management agreement can be drawn from that payment. There are, however, a number of reasons why this proposition must be rejected.
First, there is no evidence of the circumstances in which the amount to be paid upon termination of the BMS management agreement was negotiated and agreed and, in particular, whether those negotiations were undertaken at arm's length. Second, the defeat of the resolutions to remove Mr Corp and Mr Smith from the board of WSM could not have had any impact upon the management agreement which was terminated in May 1998, and the Commissioner's case was not put on that basis. Rather, the Commissioner's case was put on the basis of the impact which the defeat of those resolutions had upon the prospect of the agreement being renewed when it expired in 1999. There was no evidence as to the likely terms which would have been negotiated and agreed if the management agreement had, in fact, been renewed. Third, in the absence of any evidence with respect to obligations which BMS may have incurred in relation to those who were providing the management services, it cannot be inferred that the payment of $225,000 reflected the profit derived under the management agreement by BMS, as BMS may well have incurred liabilities with respect to the provision of services pursuant to the agreement.

The costs incurred by Mr Corp

The Commissioner challenges the judge's rejection of the proposition that an inference to the effect that the defeat of the resolutions to remove Mr Corp and Mr Smith from the board of WSM had a value of at least $10,000 can be drawn from the substantial costs incurred by Mr Corp with respect to the establishment and maintenance of the respondent companies through which the relevant shares in WSM were held. In essence, the Commissioner argues that no businessman, like Mr Corp, would have incurred those costs unless he expected to derive benefits which had a value greater than the costs arising from the warehousing scheme.
A fundamental difficulty with the Commissioner's proposition is that identified by the judge - namely, the costs upon which the Commissioner relies were incurred by Mr Corp many years before any notice was given of the resolutions to remove Mr Corp and Mr Smith from the board of WSM, so that it cannot be inferred that those costs had any connection whatsoever with Mr Corp's desire to defeat those resolutions. Further, and for the same reason, as the judge observed, the costs may have been incurred with a view to the derivation of other benefits entirely unconnected with the retention of Mr Smith's and Mr Corp's directorships. The judge was correct to reject the Commissioner's reliance upon the costs incurred many years earlier for these reasons.

The improved prosperity of WSM

The Commissioner also challenges the judge's rejection of the Commissioner's contention that it can be inferred that Mr Corp intended that the defeat of the resolutions to remove him and Mr Smith from the board of WSM would cause a benefit to be derived by the shareholders of WSM, including companies in which he had an interest, because Mr Corp and Mr Smith would improve the company's financial prospects.
The judge rejected the Commissioner's contention for a number of reasons to which I have referred, including the lack of any evidence as to the likely impact upon the financial prosperity of WSM if the resolutions to remove Mr Corp and Mr Smith from the board had succeeded. In the absence of such evidence, it cannot be inferred that the benefit which the Commissioner contended Mr Corp intended to derive from the commission of the alleged offence, namely, the defeat of the resolutions to remove him and Mr Smith from the board of WSM, had a value of at least $10,000, assessed objectively. The judge was correct to reject the Commissioner's contentions in this respect.

Summary and conclusion

The judge at first instance was correct to conclude that the offence committed by Mr Corp by not disclosing his relevant interest in the shares in WSM held by the respondent companies could not have been intended by Mr Corp to have any effect upon the votes cast by those companies, which were instrumental in the defeat of those resolutions. The only way in which Mr Corp could have intended that the offence which he committed would affect the outcome of those resolutions was if he intended that the non‑disclosure of his relevant interest would have affected the votes of other shareholders. However, that case was not put

by the Commissioner at first instance, and the Commissioner should not be allowed to advance that case on appeal.

Further, even if the Commissioner had established that the judge was wrong to conclude that Mr Corp did not intend to derive a benefit in the form of the defeat of the resolutions to remove him and Mr Smith from the board of WSM by the commission of the relevant offence, the Commissioner has not shown that the judge was wrong to conclude that the Commissioner failed to establish that the benefit which he contended that Mr Corp had intended to derive had a value of at least $10,000.
Accordingly, the judge was correct to conclude that the Commissioner had failed to establish that the shares in WSM held by the relevant companies had been used as an instrument of the commission of a 'serious offence', with the result that the Commissioner's application for forfeiture had to be dismissed. The Commissioner's appeal from that decision must also be dismissed.
NEWNES JA: I agree with Martin CJ.
MAZZA JA: I agree with Martin CJ.

[2016] WASCA 194

25 NOVEMBER 2016

Key Legal Topics

Areas of Law

Proceeds of Crime Law

Legal Concepts

Appeal

Proceeds of Crime Act

Serious Offence

Director's Duties