Commonwealth Director of Public Prosecutions v Dawson

[2006] WADC 55

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CIVIL

LOCATION:   PERTH

CITATION:   COMMONWEALTH DIRECTOR OF PUBLIC PROSECUTIONS -v- DAWSON [2006] WADC 55

CORAM:   EATON DCJ

HEARD:   3 & 31 MARCH 2006

DELIVERED          :   Delivered Extemporaneously on 31 MARCH 2006 typed from tape and edited by Trial Judge

FILE NO/S:   CIVO 232 of 2005

MATTER                :IN THE MATTER of an Application pursuant to s 116(1) of the Proceeds of Crime Act 2002

BETWEEN:   COMMONWEALTH DIRECTOR OF PUBLIC PROSECUTIONS

Applicant

AND

ALAN RAYMOND DAWSON
Respondent

Catchwords:

Proceeds of crime - Application by the Commonwealth following respondent's convictions for acting dishonestly as a director - Pecuniary penalty order

Legislation:

Corporations Law of Western Australia

Proceeds of Crime Act 2002 (C'wth)

Result:

Pecuniary penalty order in the sum of $3,740,237.62 made

Representation:

Counsel:

Applicant:     Ms E C J Needham and Mr E W L Greaves

Respondent:     Mr S B Watters

Solicitors:

Applicant:     Commonwealth Director of Public Prosecutions

Respondent:     Not known

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

Nil

Case(s) also cited:

Nil

1. EATON DCJ: On 19 December 2005 the Commonwealth Director of Public Prosecutions applied to this Court by way of originating summons for orders that pursuant to s 116(1) of the Proceeds of Crime Act 2002, Alan Raymond Dawson pay a pecuniary penalty to the Commonwealth of Australia in an amount to be determined by the Court in accordance with chapter 2 Parts II to IV of division 2 of the Act.

2. For the purposes of these reasons, whenever I refer to the Act that will be a reference to the Proceeds of Crime Act 2002.  When the application was filed, the respondent was to stand trial in this Court on two charges of failing to act honestly in the discharge of his duties as a director of Voicenet (Aust) Ltd, contrary to s 232(2) and s 1317FA(1) of the Corporations Law of Western Australia as it stood at the time.

3. The respondent to the application, Mr Dawson, was subsequently tried before a jury and convicted of both counts.  He was then remanded, initially on bail and later in custody, for sentencing.  The application was supported by the affidavit of Wayne John Eacott sworn 14 December 2005.  The deponent was, and probably still is, a member of the Australian Federal Police ("AFP") and a federal agent stationed in Perth.

4. He deposed to having been authorised by the Commissioner of the AFP for the purposes of the Act.  On 14 July 2003 he swore an affidavit in support of an application brought then before the Supreme Court of Western Australia for a restraining order in respect of the respondent's property, being a residence at 45 View Street, Peppermint Grove.        On 14 August 2003, Templeman J in the Supreme Court made a restraining order in respect of that property.

5. Mr Eacott deposed further that on 12 January 2005 Templeman J made a further order pursuant to section 39 of the Act to vary the restraining order to allow a mortgagee bank to sell that property on condition that the balance of the proceeds of sale remain under restraint and subject to the custody and control of the official trustee in bankruptcy. 

6. I am now asked to determine the application brought by the Commonwealth before this Court.  By s 314 of the Act, jurisdiction is vested in the several courts of the states and territories with respect to matters arising under it.  Section 117 of the Act provides that a court must not make a pecuniary penalty order in relation to a person's conviction of a serious offence until after the end of the period of six months commencing on the conviction day.  However, if the Court before which the person was convicted has proceeds jurisdiction, the Court may make a pecuniary penalty order in relation to the person's conviction when it passes sentence on the person.  It follows then that if I have proceeds jurisdiction, I may deal with the application for a pecuniary penalty order today, being the day on which sentence is to be imposed. 

7. The phrase "proceeds jurisdiction" has the meaning given by s 335 of the Act.  That section provides that if all or part of the conduct constituting an offence to which the order would relate occurred in a particular State, the courts that have proceeds jurisdiction for the order are those with jurisdiction to deal with criminal matters on indictment in that State.  The District Court of Western Australia certainly has jurisdiction to deal with criminal matters on indictment in Western Australia.

8. A court with proceeds jurisdiction must make an order requiring a person to pay an amount to the Commonwealth if the DPP applies for the order and the Court is satisfied that either or both of the following factors are present:  firstly, that the person has been convicted of an indictable offence and has derived benefits from the commission of the offence; and secondly, that the person has committed a serious offence.  "Indictable offence" means an offence against the law of the Commonwealth that may be dealt with as an indictable offence even if it may also be dealt with as a summary offence.  Quite clearly, the respondent was found guilty by a unanimous verdict of a jury of both counts in the indictment and was duly convicted of both. 

9. I must be satisfied that the respondent has derived benefits from the commission of the offence.  By the Act, "benefit" includes service or advantage.  By s 336, a reference to a person having derived proceeds or a benefit includes a reference to the person or another person at the request or direction of the first person having derived the proceeds or benefits directly or indirectly. 

10. Section 138 provides that the person who would be the subject of the pecuniary penalty order if it were made may appear and adduce evidence at the hearing of the application.  If the application relates to a person's conviction of an indictable offence, the court may in determining the application have regard to the transcript of any proceeding against the person or the offence and the evidence given in any such proceeding. 

11. It follows that I may have regard to the evidence given at trial leading to the convictions referred to.  On the last occasion that this matter was before me, I gave directions as to the filing of affidavits by both the applicant and the respondent.  The applicant has, pursuant to those directions, filed a further affidavit, the respondent has not.

12. Section 122 provides that in assessing the value of benefits that a person has derived from the commission of an offence or offences, the Court is to have regard to the evidence before it concerning all or any of the following:

    (1)the money or the value of the property other than money that, because of the illegal activity, came into the possession or under the control of the person or another person at the person's request or direction; 

    (2)the value of any other benefit that, because of the illegal activity, was provided to the person or another person at the person's request or direction;

    (3)the value of the person's property before, during and after the illegal activity;

    (4)the person's income and expenditure before, during and after the illegal activity. 

    Those four factors are pertinent to this application.  There are other factors referred to in the section which are not pertinent to this application.  I have not made reference to them.

13. The Commonwealth submits that the relevant amount for the pecuniary penalty order is the value of the property received by the respondent or by an entity under his control as a result of the offence.  That benefit, says the Commonwealth, was 2 million shares in Voicenet (Aust) Ltd and 1 million bonus options in that company.  In fact, the evidence demonstrated that the benefit derived by the respondent's dishonesty was that a company controlled by him, namely, Property Corp International Pty Ltd, received 2 million shares in Voicenet Australia Limited and subsequently 1 million bonus options.

14. The evidence clearly demonstrated that the respondent brought about the issue of those shares and therefore the bonus options by dishonestly in, and the misuse of, his position of managing director of Voicenet (Aust) Ltd.

15. Having obtained those shares and options, he then began selling in small parcels so as not to disturb the market price of the shares and options of Voicenet (Aust) Ltd.  Eventually the proceeds of those various sales were paid into the bank account of Property Corp International Pty Ltd in November and December 1999.

16. It is the case that from those proceeds, the sum of $1  million was paid to Voicenet (Aust) Ltd in belated payment for the exercise of the options which were converted into shares as a result of the respondent's dishonestly.

17. By s 116(3) of the Act, in determining whether a person has derived a benefit, I may treat as property of the person any property that, in the Court's opinion, is subject to the person's effective control.  It is clear that the proceeds of the sale of the various shares and options held by Property Corp International Pty Ltd were in the respondent's effective control as was that company itself.

18. Section 123 provides that at the hearing of the application, if evidence is given that the value of the person's property during or after the illegal activity exceeded the value of the person's property before the illegal activity, the Court is to treat the value of the benefits derived by the person from the commission of the illegal activity as being not less than the amount of the greatest excess.

19. The amount treated as the value of the benefits under that section is reduced to the extent, if any, that the court is satisfied that the excess was due to causes unrelated to the illegal activity.  During the trial, counsel for the respondent admitted that at all material times the respondent had effective control of Property Corp International Pty Ltd.  That company was the registered owner of the dishonestly obtained shares and options and the proceeds of the sale of those shares and options were paid into that company's bank account.

20. The bank statements of the Property Corp International Pty Ltd account held with the Australian and New Zealand Banking Group Ltd at its branch at 21 Adelaide Street, Fremantle, show that as at 1 July 1999 there was a credit balance of $44,028.76.  On 10 November 1999 there was a deposit of $2,189,825.28.  On 23 November 1999 there was a further deposit of $188,063.04.  On 8 December 1999 there was a deposit of $1,380,390.40 and on 17 December 1999 there was a further deposit of $302,140.74.  All of those deposits came from the respondent's stockbroker, D.J. Carmichael & Co, and were the proceeds of the sale of the various shares and options dishonestly obtained.

21. On 26 March 2000 the respondent and his wife, as trustees of the Dawson Family Trust, made an offer to purchase 45 View Street, Peppermint Grove, in Western Australia for $3,010,000.  The offer was a cash offer.  It was accepted on that day.  Settlement was effected on 16 June 2000 when the respondent and his wife, Carol Lorraine Dawson, became registered proprietors of that property, being the whole of the land comprised in certificate of title volume 1929, folio 835.  On that day the property was, after settlement, unencumbered.  It is clear that it later became encumbered by a mortgage to St George Bank Ltd.

22. On 22 December 1999, $3,116,000 was withdrawn from the ANZ account of Property Corp International Pty Ltd.  That account was left with a debit balance of $2164.15.  On 22 December 1999, the amount of $3,116,000 was paid to the St George Bank account of Property Corp International Pty Ltd.  It appears from the offer and acceptance that, when the offer was made to purchase the Peppermint Grove property, a deposit of $250,000 was paid then or shortly after.  At settlement, two bank cheques drawn by St George Bank Ltd in the total sum of $2,760,136.39 payable to the vendors were handed over.  The total amount paid to the vendors, the sum of $3,010,135 represented the total purchase price plus, presumably, an adjustment of one sort or another, possibly with respect to rates and taxes.  It is quite clear that the Peppermint Grove property was purchased entirely from the proceeds of the sale of the dishonestly obtained shares and options.  That property became the respondent's family home.  He set about refurbishment and furnishing it.

23. Section 126 of the act provides that in assessing the value of benefits a person has derived from the commission of an offence or offences a court is not to deduct expenses or outgoings incurred by the person in relation to the illegal activity or the value of any benefits derived by that person as agent for or otherwise on behalf of another person, whether or not the other person receives any of the benefits.

24. The Commonwealth submits that by reason of that section I should not have regard to or deduct the amount of $1 million paid by Property Corp International Pty Ltd to Voicenet (Aust) Ltd, being the belated payment for the dishonest exercise of the options held by Property Corp International Pty Ltd or on its behalf.  The illegal activity itself comprised the dishonest exercise of the options.  Had there been no dishonesty, the options would never have been exercised and would have lapsed.  The only reason why Property Corp International Pty Ltd was able later to pay the exercise price was the respondent's dishonesty.  The benefit derived by the respondent from his dishonest activity was not only the ability to pay belatedly for the cost of the exercise of the options but also the profit derived from the sale of various shares and options derived from that dishonesty.

25. It does seem to me that I should not subtract the expenses or outgoings incurred by Property Corp International Pty Ltd in relation to the activity which was illegal and which would, of course, have included the belated payment of $1 million when the three cheques drawn on the account of Property Corp International Pty Ltd were eventually banked in the account of Voicenet (Aust) Ltd on or about 12 November 1999.

26. Section 131 of the act obliges me to reduce the penalty amount under the pecuniary penalty order against the respondent by an amount that in the Court's opinion represents the extent to which tax that person has paid is attributable to the benefits to which the order relates.  Counsel for the Commonwealth, Ms Needham, advised me on 28 February 2006, that the amount repaid to the Tax Office to the present time is $689,719.98.

27. The Commonwealth then said that the gross amount derived from the sale of the dishonestly obtained options and shares was $4,430,017.60.  It submitted then that I should deduct the amount mentioned as being tax paid leaving an amount of $3,740,297.62.  Following submissions as to this application and as to sentence in the criminal matter on 28 February 2006, I adjourned the hearing of this application until today directing, as I said earlier, that the parties have further time within which to file, in the case of the applicant, a supplementary affidavit, and in the case of the respondent, an affidavit.

28. Pursuant to that direction Wayne John Eacott swore a further affidavit on 8 March 2006.  In doing so he deposed to having made inquiries of the Australian Taxation Office regarding any tax paid in respect of the benefits derived from the commission of the offences charged in the indictment brought against the respondent.  He deposed to having been informed that the Australian Taxation Office had issued a debit notice of assessment against Property Corp International Pty Ltd in an amount of $1,205,869.64 for the financial year ended 30 June 2000, being the year in which that company accounted for the income derived from the dishonest activity. 

29. Mr Eacott deposes further to having been informed that an amount of tax was subsequently paid to the Australian Taxation Office in respect of that assessment during the period March 2000 to February 2005, the amount being $689,779.98.  Finally he deposed to having been informed that Property Corp International Pty Ltd had subsequently been wound up and that the balance of tax owing, the sum of $1,014,343 had been written off by the Australian Taxation Office.

30. Section 131 of the act provides that I must reduce the amount under a pecuniary penalty order against the respondent by any amount that in my opinion represents the extent to which tax that the respondent has paid is attributable to the benefits to which the order relates.  Given that, so far as I am aware, the only income received by Property Corp International Pty Ltd was derived from the activities of the respondent I consider that I can safely infer that the source of the funds paid by Property Corp International Pty Ltd or on its behalf to the Australian Taxation Office was the respondent.

31. The amount paid was certainly attributable to the benefits to which the order relates being paid pursuant to the assessment referred to in the affidavit of Wayne John Eacott sworn 8 March 2006.  Ms Needham for the Commonwealth has today accepted that the amount referred to as being the amount of tax paid for or on behalf of Property Corp International Pty Ltd is as set out in the later affidavit of Mr Eacott. 

32. I am told that the residual amount after deduction of the amount of taxation paid is therefore $3,740,237.62.  In accordance with the provisions of the Act I find that that amount is the amount which ought to be the subject of the proposed pecuniary penalty order.  Accordingly, I make an order in terms of the minute which has been tendered to me, that being that pursuant to s 116 of the Act, Alan Raymond Dawson pay a pecuniary penalty in the amount of $3,740,237.62 to the Commonwealth of Australia.