Director of Public Prosecutions (Cth) v Gay - [2015] TASSC 15

[2015] TASSC 15

COURT: SUPREME COURT OF TASMANIA

CITATION: Director of Public Prosecutions (Cth) v Gay [2015] TASSC 15

PARTIES:  DIRECTOR OF PUBLIC PROSECUTIONS (Cth)
  v
  GAY, John Eugene

FILE NO:  409/2014
DELIVERED ON:  20 April 2015
DELIVERED AT:  Hobart
HEARING DATE:  30 March 2015
JUDGMENT OF:  Estcourt J

CATCHWORDS:

Criminal Law – Procedure – Confiscation of proceeds of crime and related matters – Pecuniary penalty and like orders - Crime of insider trading – Proceeds of Crime Act 2002 (Cth) – Application for pecuniary penalty order – Whether application for pecuniary penalty order made out of time - Whether offence serious offence for purposes of s 338 – Meaning of "causes" for the purposes of s 338(a)(iii) – Assessment of benefit derived from the commission of the crime – Whether benefit the gross proceeds of sale or not.

Proceeds of Crime Act 2002 (Cth), ss 116, 122, 124, 126,134, 338.
AFP v Fysh (2013) 224 A Crim R 523; DPP v Nieves [1992] 1 VR 257; R v Glynatsis (2013) 230 A Crim R 99; R v Pedersen [1995] 2 NZLR 386; R v Petersen [1992] 1 VR 297, considered.
DPP v Mansfield [2006] WASC 246, approved.
Lin v Tasmania [2012] TASSCA 9, distinguished.
Aust Dig Criminal Law [3230]

REPRESENTATION:

Counsel:
             Applicant:  D G Staehli SC and A J Buckland
             Respondent:  N J Clelland QC and J P Moore QC
Solicitors:
             Applicant:  Director of Public Prosecutions (Commonwealth)
             Respondent:  HWL Ebsworth Lawyers

Judgment Number: [2015] TASSC 15
Number of paragraphs: 97

Serial No 15/2015
File No 409/2014

DIRECTOR OF PUBLIC PROSECUTIONS (COMMONWEALTH) v
JOHN EUGENE GAY

REASONS FOR JUDGMENT ESTCOURT J

20 April 2015

The background

On 23 August 2013 the respondent, John Eugene Gay, was convicted of insider trading following the disposal by him of 3,404,178 Gunns Ltd ("Gunns") shares between 2 and 10 December 2009.
During that period, whilst the respondent was a director and the chairman of Gunns board, he possessed "price sensitive" information that was not available to the market. That information comprised key financial performance indicators contained in the Gunns 2009 October Management report, tabled at a meeting of the Gunns' board on 26 November 2009 at which the respondent was present.
The information revealed that sales revenue was 31.1% less than the previous corresponding period, as well as other falls in earnings before interest and tax, and profits before tax, in excess of 100% compared to the corresponding month and year to date periods in 2008.
Between 2 and 7 December 2009 the respondent instructed his broker to sell the shares at a limit of no less than 90c per share. The shares were sold accordingly and the gross proceeds amounted to $3,095,260.06.
Of relevance to the present application is that upon passing sentence on the respondent on 30 August 2013, the learned sentencing judge, Porter J, commented:
"The Crown submits that this offence retains the general characteristics of insider trading. It undermined the integrity of the market. At the same time the Crown accepts that the circumstances are different to what may be regarded as the more common form of insider trading. The offender's decision to sell the shares was not kept secret from the company, and there was no breach of trust in relation to it in that sense. The sale of shares was promptly reported to the ASX. In the offender's favour, and considerably so, is the fact that the sales were not triggered by the receipt of the information. That is to say, the trading was not caused by receiving the information. It is quite clear that the offender had for some time been considering selling a parcel of shares, and that the actual decision to do so was finalised in the weeks leading up to the November Board meeting. There is undisputed evidence that he discussed the sale with Mr Chapman. I infer that any concerns he may have had were allayed by Mr Chapman's response. I am asked to infer that he also derived comfort from the silence of the other directors who knew of his intentions. Even accepting that Mr Gay told at least two other directors of his intentions, I am not able to draw that inference, but the fact has some significance in that he was not told that he should not go ahead, and not warned that he needed to carefully consider his position. The sales took place when the offender was dealing with a recurrence of his serious and possibly life threatening illness. He thought his time was limited. He was likely to have been adversely affected by the treatment. Lastly, as noted earlier, the plea was entered and accepted on the basis that the offender ought to have known that the information was price sensitive and hence ought not to have gone ahead, not that he knew of the nature of the information and was conscious that he should not have sold the shares. Plainly enough, the offender, placed as he was with his knowledge and skills, ought to have adverted to the nature of the information."

The application

On 20 May 2014 the applicant, the Commonwealth Director of Public Prosecutions, filed an originating application seeking an order that the respondent pay the Commonwealth a pecuniary penalty in a sum to be determined by this Court under Div 2 of Pt 2-4 of the Proceeds of Crime Act 2002 (Cth) ("the Act").
The applicant seeks pecuniary penalty to be determined under s 121(3) of the Act in the amount of $3,095,260.06 being that which the applicant claims was the benefit derived by the respondent from the offence for which he was convicted, namely, what is generally known as "insider trading", contrary to ss 1043A(1) and 1311(1) of the Corporations Act 2001 (Cth).

A preliminary objection

Section 134 of the Act prescribes the time within which an application for a pecuniary penalty order must be made. Pursuant to that section an application must be made before the end of the period of six months after the "conviction day", unless the application relates to a person's conviction of a "serious offence" within the meaning of that term in s 338 of the Act. In that case, the application must be made before the end of the period of nine months after the conviction day.
The present application was commenced on 20 May 2014, namely, eight months, three weeks and six days after the respondent was convicted on 23 August 2013.
The respondent contends that the offence of which he was convicted was not a "serious offence" within the meaning of that term in s 338 of the Act with the consequence that the application is out of time.

The legislative provisions

The relevant provisions of the Act with respect to the applicant's preliminary objection are as follows:
"116     Making pecuniary penalty orders
(1)   A court with *proceeds jurisdiction must make an order requiring a person to pay an amount to the Commonwealth if:
(a)   a *proceeds of crime authority applies for the order; and
(b)   the court is satisfied of either or both of the following:
(i)the person has been convicted of an *indictable offence, and has derived *benefits from the commission of the offence;
(ii)          the person has committed a *serious offence.
…
134       Proceeds of crime authority may apply for a pecuniary penalty order
(1)   A *proceeds of crime authority may apply for a *pecuniary penalty order.
(2)   If the application relates to a person's conviction of a *serious        offence, the application must be made before:
(a)     the end of the period of 9 months after the *conviction day; or
(b)if an *extension order is in force at the end of that period — the end of the period of 3 months after the end of the extended period relating to that extension order.
(3)   If the application relates to a person's conviction of an *indictable offence that is not a *serious offence, the application must be made before the end of the period of 6 months after the *conviction day.
...
(6)   Despite subsections (2) and (3), the court hearing the application may give leave for the application to be made after the time before which an application would otherwise need to be made under those subsections if it is satisfied that it would be in the interests of justice to allow the application.
…
338       Dictionary
serious offence means:
(a)   an indictable offence punishable by imprisonment for 3 or more years, involving …
...
(iii)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."
For the purposes only of the preliminary objection, the respondent concedes that any relevant "benefit" would have a value of at least $10,000.

Discussion

The respondent first submits that the word "causes" in the definition of the term "serious offence" in s 338(a)(iii) of the Act means "directly causes".
The submission continues that the actual unlawful conduct in the present case, namely the selling of shares, simply converts one asset of the trader (money or shares) into another asset (shares or money) and that both the old and the new asset have precisely the same market value. It is contended that no benefit is directly caused by the conversion, and that any benefit that flows from the conduct depends on future events over which the trader has no control, and which involve elements of chance.
Any benefit is said to be derived only indirectly from the conduct because other events in the market must occur in order for there to be any benefit at all.
To my mind, if that is so, it would be so in the majority of cases, or at least many cases, of insider trading.
As already noted, the respondent was convicted of an offence against s 1043A(1) of the Corporations Act, read with s 1311 of that Act. The conduct referred to in s 1043A(1) may be generally described as trading in circumstances where the relevant person possesses inside information. That conduct is unlawful if the person knows or ought reasonably to know that the information is inside information.
If the respondent's argument is correct, then it would follow that many cases of insider trading would not be classed as a "serious offence" for the purposes of the Act.
The question must therefore involve, in my view, at the least, a consideration of whether the legislature intended that not all insider trading was to be contemplated as within the definition of a "serious offence".
In R v Glynatsis (2013) 230 A Crim R 99 it was noted by Hoeben CJ at CL at [39] that the sentencing judge had reviewed why insider trading offences are regarded as a serious form of criminal activity. He observed that they served to undermine the integrity of the stock market and were difficult to detect, and that not only did insider trading have the capacity to undermine the integrity of the market, it also had the potential to undermine confidence in the commercial world generally, arising from breaches of trust.
The learned sentencing judge noted that the cases have emphasised the particular gravity of offences by a "true insider" who abuses the office or employment which he or she occupies, to take advantage of information acquired in the course of that employment. His Honour noted that insider trading was not a form of victimless crime, but was a form of cheating.
In my view it is extremely unlikely that the legislature deliberately chose the word "cause" – without defining it – in order to exclude the concept of indirect causation associated with the word "derive" with the intended result of excluding some crimes, otherwise ordinarily considered as serious, from the definition of "serious crime".
I accept that the provision being interpreted is penal as it interferes with common law rights and freedoms, and that if there is any ambiguity it should be resolved in favour of a requirement that "causes" means directly causes: NSW Crime Commission v Kelaita (2008) 75 NSWLR 564 at [16]; Potter v Minahan (1908) 7 CLR 277 at 304. However, I see no relevant ambiguity.
Moreover, I do not accept that the cases cited on behalf of the respondent require the conclusion that the use of the word "causes" in the definition of "serious crime" means only "directly" causes. The cases cited are all contextual and none parallel the present context.
I do not therefore accept the respondent's first submission.
It was next submitted on behalf of the respondent that the second limb of the definition of "serious offence", namely, "is intended to cause" would be satisfied where the offender possessed inside information and traded as a result of that information with the intention to benefit thereby.
It was thus accepted that while the question of whether any benefit is ultimately derived would still be determined by chance and by events beyond the offender's control occurring, or failing to occur, after the commission of the offence, the "serious offence" definition was nevertheless satisfied because, in intentional insider trading, the unlawful conduct was "intended to cause" the benefit.
Intention to cause a benefit of at least $10,000 qualifies the unlawful conduct as a serious offence and, as I have already noted, it was accepted for the purposes of the present argument that the respondent on any view derived a benefit of at least $10,000.
Despite this however, the respondent argues that, unusually, there was in the present case no intention on his part to cause any benefit for himself.
It is put that his unlawful conduct was disposing of shares in circumstances in which he ought to have known that he possessed inside information. That is, that it was not that he knew that he possessed the information, but that he ought to have known.
As is clear from the passage set out at [5], the learned sentencing judge dealt with the respondent on the basis that he ought to have known that the information in his possession was price sensitive, rather than he knew that it was, and there was no suggestion in the submissions of counsel for either party that I cannot assume that to be the fact of the matter for the purpose of determining the present question.

Outcome on the preliminary objection

I am inclined to think that this second submission of the respondent is correct but it is unnecessary for me to reach a final view about the matter given the opinion that I have formed as to the first limb of the definition of the words "serious offence", that is, that the word "causes" may embrace indirect causation.
Moreover, if I am wrong about the respondent's first submission, I would, in any event, exercise my discretion to extend the time for bringing the application so as to validate its filing at the time at which it was filed.
I would do so because I can see nothing in the respondent's circumstances that would allow it to be said that it was not in the interests of justice to permit the bringing of the application out of time.
I have no evidence about the circumstances but on the assumption that all that is said on the respondent's behalf in his written submissions is true; the only telling circumstance is his ill health.
However that fact is relied upon for a submission that in his condition the respondent should not be exposed to a claim brought against him out of time for $3m. For the reasons that follow as to the "gross proceeds of sale" issue, it will be apparent that he will not be so exposed. He will be required only to disgorge the assessed benefit derived by him from his unlawful conduct.
In my view, it would be in the interests of justice to grant an extension of time. The delay, while unexplained, was short and the objects of the legislation would be defeated if for no good reason the respondent should not be required to forfeit the proceeds of his crime.
Nor is the application uncertain in its outcome. The Court has no discretion as to whether a pecuniary penalty order is made once the preconditions to its making are demonstrated. Once they are, and I have found that they have been, then the respondent must pay a pecuniary penalty. The only question is how much and, free of the "gross proceeds of sale" issue, that is a relatively uncomplicated question of assessment.
Finally I should say that I would accept the applicant's submission that the position that may have been taken by the Australian Federal Police as to the pursuit of a pecuniary penalty order would not be a relevant consideration. Particularly where there is no evidence to suggest that the respondent altered his circumstances as a result of any decision by the Australian Federal Police not to pursue an application for a pecuniary penalty order.
It follows from the reasons that I have set out that the application is not out of time.

The "gross proceeds of sale" issue

The second preliminary issue that I have been asked to determine is as to whether the applicant's submission that the amount of the pecuniary penalty that the respondent must pay is the amount of the gross proceeds of the sale of the shares, namely $3,095,260.06.

The legislative provisions

The operative provisions of the Act on this issue are ss 122, 124 and 126, which relevantly provide:
"122 Evidence the court is to consider
(1)   In assessing the value of *benefits that a person has derived from the commission of an offence or offences (the illegal activity), the court is to have regard to the evidence before it concerning all or any of the following:
(a)   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;
(b)   the value of any other benefit that, because of the illegal activity, was provided to the person or another person …
…
(d)   the value of the person's property before, during and after the         illegal activity;
(e)   the person's income and expenditure before, during and after the illegal activity.
…
124 Value of benefits derived – serious offences
(1)   If:
(a)   an application is made for a *pecuniary penalty order against a person in relation to an offence or offences (the illegal activity; and
(b)   the offence is a *serious offence, or one or more of the offences are serious offences; and
(c)   at the hearing of the application, evidence is given that the value of the *person's property during or after:
(i)      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.
(2)   The amount treated as the value of the *benefits under subsection (1) is reduced to the extent (if any) that the court is satisfied that the excess was due to causes unrelated to:
(a)   the illegal activity; … or [certain other unlawful activity]
(3) If evidence is given, at the hearing of the application, of the person's expenditure during the period referred to in subsection (5), [a period of 6 years prior to the commencement of proceedings under the Act and since] the amount of the expenditure is presumed, unless the contrary is proved, to be the value of a *benefit that, because of the illegal activity, was provided to the person.
(4)   Subsection (3) does not apply to expenditure to the extent that it resulted in acquisition of property that is taken into account under subsection (1).
…
126 Matters that do not reduce the value of benefits
In assessing the value of *benefits that a person has derived from the commission of an offence or offences (the illegal activity), none of the following are to be subtracted:
(a)   expenses or outgoings the person incurred in relation to the illegal activity;
(b)   the value of any benefits that the person derives as *agent for, or otherwise on behalf of, another person (whether or not the other person receives any of the benefits)."

The applicant's submissions

The applicant submits, in written submissions filed on its behalf, that the value of the "benefits" derived by the respondent from the commission of the insider trading offences is the gross sale proceeds of $3,095,260.06 that the respondent, because of the offence, received from the disposal of his 3,404,178 Gunns shares. This money, it is submitted, was "a benefit derived directly or indirectly by the respondent from, and because of, the insider trading offence committed".

The applicant further submits that the benefit so calculated cannot be reduced by any amount representing the value of the shares sold by the respondent in the course of the unlawful disposal, because they were an "expense or outgoing" incurred in the course of the illegal activity, and s 126(a) of the Act specifies that they are not to be subtracted so as to reduce the value of the benefit derived.
The applicant submits in its written submissions that the meaning of the term "benefits" includes the gross proceeds of illegal activity for the following reasons:
"a)By necessary implication the words in s122(1)(a) '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'; define a specific benefit within the meaning of Part 2-4 of the Act (whatever other meaning the term 'benefit' may be assumed to have or be given);
b)The words 'because of the illegal activity' in paragraph 122((1)(a) create a causal nexus with the offending. They do not justify reading into the paragraph additional words to the effect that the money or the value of the property received because of the illegal activity is only a benefit to the extent that it is a 'net gain', a 'profit' or represents a loss avoided;
c)There is no specific authorisation to reduce this benefit by (for example) the value of a person's money or property traded or expended in the course of the illegal activity or any previous expenditure;
d)To the contrary, s126(a) prohibits the assessed benefit being reduced by 'expenses or outgoings the person incurred in relation to the illegal activity'. This supports the conclusion that the 'gross proceeds' of illegal activity (as opposed to merely the 'net proceeds' or value of an advantage actually gained or loss avoided) is intended to be assessed as a benefit for the purpose of calculation of the PPO amount;
e)It is clear from s126 that the 'benefit' does not have to be the amount of money or advantage that the person actually received because of the illegal activity."
The applicant's written submissions continue as follows:
"43 It is to be noted that, through s122(1)(d) and (e), s123 and s124, an asset betterment type accounting exercise may alternatively be conducted to calculate a person's benefit. Increases in the value of a person's property holdings during and after illegal activity are to be treated as benefits derived by the person. Likewise, expenditure during the period is presumed (unless the contrary is proved) to be a benefit as well. However, under this accounting exercise these amounts may be reduced, albeit that the onus would shift to the Respondent to disassociate such increases in property or expenditure from the illegal activity.
44 It was open to parliament to specify a similar reduction for the benefit described in s122 (1)(a) but it did not do so.
45 The existence of the alternative 'betterment' approaches to the calculation of a benefit, does not derogate from the clear effect of s122(1)(a) that 'the money … that, because of the illegal activity, came into possession … of the person' is a benefit (the value of which must be assessed in the calculation required by s 121(3)(a)).
46 This interpretation is consistent with the objects of the Act set out above. While a consequence of the interpretation in this case may be that the Respondent loses the whole of the value of the shares sold in the unlawful transaction, there is no basis to conclude that would be an unintended effect of the legislation:
a) There is a clear legislative policy in s126(a) that expenses or outgoings incurred in relation to the illegal activity are not to be accounted for in valuing the benefit (hence PPO amount);
b) The policy of not excluding these kinds of expenses and outgoings in the calculation from benefits, is consistent with the related objects of depriving persons of the proceeds and instruments of offending (perhaps more generally this is a policy that persons are to be deprived of any property that is 'tainted' by the offending); and
c) The Respondent used his shares to commit the offence. The shares were thus tainted, as were the gross proceeds of the sale. The proceeds of the crime were the amount of money which flowed from the illegal (timing of the) disposal. If traced, the gross proceeds themselves could have been subject to forfeiture proceedings because those proceeds would be both 'proceeds' and 'instruments' of the offence.
47 The Act seeks to both punish and deter. Whilst there is an element of hardship in the result, such is the result also when a property is forfeited as a consequence of it being an instrument of the offence. In respect of PPOs, any concerns about double punishment are ameliorated or avoided by s132, which allows the Court to make a reduction in respect of the amount of any fine in relation to an offence to which the order relates.
48 Confirmation that PPOs are intended to reflect the gross amounts derived from offences is also provided by a comparison between the regime relating to PPOs with the more flexible provisions in the Act relating to 'literary proceeds orders'. For example, whereas a court 'must' make a PPO where the preconditions are satisfied (s116) and in determining the amount of a PPO is required to have regard to the matters in s122 and cannot subtract relevant expenses or outgoings (s126), in relation to literary proceeds orders: the court 'may' make an order where the preconditions are satisfied (s152) and 'may take into account [any] matters as it thinks fit' in deciding whether to do so (s154 (b); and the amount of any order is to be 'the amount that the court thinks appropriate' (s158), but in determining that amount the court 'must deduct' relevant expenses and outgoings (s159)."
The applicant in its written submissions then proceeded to argue by analogy with the wide meaning given to the term "benefits" in comparable legislation. The cases first relied on concerned the sale of illegal drugs. The submission was in the following terms:
"49 In relation to equivalent provisions of comparable legislation it has been repeatedly held that the term 'benefits' has a wide meaning and should be interpreted as including gross proceeds, not net profits, of an offence, having regard to the ordinary usage of the term and the objects of confiscation legislation. For example, in DPP v Nieves [1992] 1 VR 257 (at 262) and R v Peterson [1992] 1 VR 297 the Victorian Court of Appeal held that, for the purpose of determining the amount of a PPO under state legislation, the 'benefits' derived from selling illicit drugs are the payments received from the sales without any deduction for expenditure incurred in acquiring or selling the drugs. That was because the legislation in question was concerned with benefits derived from a criminal offence, not profits derived from a commercial transaction (Nieves at 262.28). This conclusion is all the more significant because the legislation in question there did not contain any equivalent to s126 of the Act. In Peterson Marks J stated, in a separate but concurring judgment (underlining added):
Parliament clearly did not intend that a 'benefit' is synonymous with 'net profit'. Its intention in my view was to have forfeited from an offender whatever it was that he got by way of 'income' (or an asset representing it) from the crime itself. There is no reason to draw back from an analogy between 'benefit' and 'income'. So understood there is no occasion to deduct 'expenses'. 'Income', for example, for the purposes of our tax legislation only has expenses deducted by virtue of express statutory provision.
'Income derived' and 'benefits derived' from a particular activity, here 'a crime', have no material distinction, save that the Act extends its reach beyond 'income' ... in the ordinary sense.
I am of the opinion that costs incurred by an offender to put himself or herself into a position to commit a crime, for example, the purchase price of the heroin which comes to be trafficked, the cost of petrol to drive to the rendezvous or meetings with co offenders to plan the crime, are irrelevant. It is not simply that they are illegally incurred. They are irrelevant as a matter of ordinary reasoning because they do not reduce 'benefits' derived from the crime itself but relate merely to making the crime possible. In any event, I am of the view that it was clearly the purpose and the intention of the Act not to have pre-crime costs of the offender brought to account."
The applicant submits that the reasoning in Nieves and Petersen was adopted by this Court in Lin v Tasmania [2012] TASCCA 9 at [3]-[22] per Crawford CJ, and at [223]-[247] per Tennent and Porter JJ.
Lin was not a case involving drug offences and it concerned in relation the Crime (Confiscation of Profits) Act 1993 (Tas) which is comparable to the Act.
In Lin, the appellant had effective control of a fish processing business which purchased 3,250.5kg of undeclared lobster, from a commercial fisherman pursuant to an illegal conspiracy over a four-year period. The Court of Criminal Appeal rejected an argument that the value of the benefit derived by the business from the offending was the savings it made from paying a discounted price for the undeclared lobster, and upheld the trial judge's finding that the benefit was the full wholesale value of the undeclared lobster which came into the possession of the business by reason of the offending.
The applicant notes that s 22(2)(a) and (6) of the Crime (Confiscation of Profits) Act are drafted in very similar terms to ss 122(1)(a) and 126(a) respectively of the Act, and contends that Crawford CJ confirmed the application of the provisions by the trial judge in the same manner as the applicant argues that the Act should be applied in the present case.
The applicant submits that what the learned trial judge did in Lin, consistently with s 22(2)(a), was to have regard to the value of the lobster that came into the possession or under the control of the appellant, or the business, at his request or direction, by reason of the commission of the conspiracy and in accordance with s 22(6), disregarded the expenses or outgoings in acquiring the lobster.
That meant, the applicant observes, that the amount paid by the business to the fisherman for the lobster was disregarded because it was found to be an "outgoing". The applicant notes that Crawford CJ in Lin rejected a contention that this amount was not an "outgoing". At [22] his Honour referred to the judgment of the Full Court of the Federal Court in Cornwell v Australian Federal Police (1990) 24 FCR 544 at 554, holding that for the purposes of the statutory equivalent of s 22(6) of the Crime (Confiscation of Profits) Act in the Customs Act 1901 (Cth), the purchase of a narcotic for importation into Australia was clearly an "outgoing" incurred in connection with the agreement to import.
Next, the applicant submits that the same reasoning was adopted by a majority of the Court of Appeal of New Zealand in R v Pedersen [1995] 2 NZLR 386, and that the relevant provisions of the Proceeds of Crime Act 1991 (NZ), s 27(2)(a) and (b) are indistinguishable from s 122(1)(a) and (b) of the Act.
The Court of Appeal in Pedersen held that even though the offender in that case had made a profit of merely $240 from dealing in illicit drugs, the full amount paid to him for the drugs of $8,800 should be the subject of a pecuniary penalty order as the "benefit" derived. Cooke P and Richardson J stated at 390-391:
"The Proceeds of Crime Act is not an income tax statute, nor is it one concerned with lawful commercial operations. There is no reason to suppose that it is limited to assessing net gains or trading profits ...
In ordinary usage 'benefits' is a wide expression. No doubt it was seen as appropriate in the Proceeds of Crime Act as a comprehensive term, since money, property and other benefits all fall to be valued under s 27. Words such as 'proceeds', 'receipts' or 'payments' would not have had the same breadth, or at least not so clearly. The wide and residual meaning of 'benefit' has long been recognised in the common law ...
Being a measure designed to deter serious crime by demonstrating emphatically that it does not pay, the Proceeds of Crime Act should be judicially administered in that spirit."
In a separate concurring judgment Casey J added at 391-392:
"[T]he Proceeds of Crime Act 1991 was enacted with effective deterrence as its aim, and the more effective the better ... 'Benefits' is a word of wide meaning, easily applicable without strain to the payment received by a drug supplier. Although a penalty assessed at that figure may be regarded as Draconian where the supplier buys from another, such severity accords with and gives maximum effect to the clear policy of the Act."
The applicant submits that the position adopted by the majority in R v Pedersen "has been consistently followed ever since" in New Zealand (McQuade v The Queen [2010] NZCA 226 at [6]) and has been cited with approval by Australian courts in cases such as, for example: Re WorkCover Queensland [2000] 1 Qd R 107, 114-115; Moylan v State of Western Australia (2007) 169 A Crim R 302, 314; Bolitho v State of Western Australia (2007) 171 A Crim R 108, 133.
The applicant further submits that the same approach has been adopted in the United Kingdom. In the applicant's written submissions it is contended as follows:
"57    The same approach has also been adopted in the United Kingdom. Under confiscation legislation in that jurisdiction courts are required to make orders comparable to PPOs reflecting the extent to which a defendant 'benefited' from a relevant offence (not limited to drug offences) and it has consistently been held that the correct quantum of such orders is the 'gross' proceeds of the offence, rather than the 'net profit' actually made by the defendant (see Mitchell, Taylor & Talbot, Confiscation and the Proceeds of Crime (2nd ed, 1997), 89-90 & 118-124.) The House of Lords has remarked that such a result 'is entirely consistent with the legitimate objects of the legislation' and 'involves no injustice or lack of proportionality', stating the law as follows:
'The legislation is intended to deprive defendants of the benefit they have gained from relevant criminal conduct … The benefit gained is the total value of the property or advantage obtained, not the defendant's net profit after deduction of expenses … ( R v May [2008] UKHL 28; [2008] 1 AC 1028 at [46] & [48]. Also see R v Smith [2001] UKHL 68; [2002] 1 ALL ER 366 at [23]-[29])'.
58     The English Court of Appeal has expressed similar sentiments, stating:
'The confiscatory jurisdiction has consistently been interpreted as deliberately draconian. It is not restitutionary. One consequence of that is that it will not infrequently happen that a defendant is obliged by a confiscation order to pay more than the profit he has made from his crime. The books are littered with examples ... (R v Morgan; R v Bygrave [2008] EWCA 1323 at [18]. Also see R v Aujla [2008] EWCA Crim 637 at [15]-[17]; R v Waller [2008] EWCA 2037 at [16]-[23].'
59     These principles were applied to insider trading offences in R v Rollins ([2011] EWCA Crim 1825), which involved a person in possession of inside information illicitly selling shares in order to avoid an anticipated loss. The defendant was ordered to pay a confiscation order in the amount of 'the total value of the shares sold' (£197,000), rather than merely the loss avoided which was in the order of £50,000-60,000"
The applicant in its written submissions then turned to two cases actually dealing with insider trading as opposed to illicit drugs and lobsters. The first of these was R v Doff [2005] NSWSC 51. The applicant's submissions are as follows:
"61    In an insider trading case R v Doff, the accused (via a company) purchased 20,000 shares with inside information for $55,855.05 and later sold them for $67,255.75, making a net profit of $11,400.70. He was convicted of insider trading and Barr J of the Supreme Court of NSW made a PPO under the Act reflecting the total sale proceeds ($67,255.75), rather than his net profit, although the PPO was ultimately made in the amount of $37,255.75 to take into account a $30,000 fine that had been imposed on the defendant (as permitted under s132 of the Act). In making the PPO Barr J stated, although there is no reference to whether the point was argued:
'The manner of determining the amount of any pecuniary penalty order is prescribed by Chapter 2, Part 2-4 Division 2 of the Act [within which s126 is contained]. As that Division applies to the present case the amount of the order is the total amount of benefits received by the defendant, without deduction of outgoings. It is agreed that the total proceeds derived by the defendant's company ... upon the sale of the shares was $67,255.75.'
62     Doff appealed against his conviction and the Crown appealed against his sentence but the PPO was not an issue in those proceedings.
63     A similar approach to that adopted in Doff was taken by Eaton DCJ in the District Court of Western Australia in CDPP v Dawson [2006] WADC 55."
The second insider trading case cited by the applicant is AFP v Fysh (2013) 224 A Crim R 523. The position adopted in that case was contrary to that contended for by the applicant, with McCallum J adopting a "net proceeds of sale" approach which allowed for the deduction of the purchase price of the shares. Whilst accepting that the decision is the "most comparable authority" to the present matter, the applicant argues at length that her Honour's decision was plainly wrong and ought not to be followed. The applicant's submissions in this regard are as follows:
"65    Commissioner of Australian Federal Police v Fysh, a decision of McCallum J of the NSW Supreme Court, is the most comparable authority to this matter, albeit that it involved the acquisition of shares    with inside information, rather than the disposal (and is capable of being distinguished for that reason).
66     The AFP argued that the benefit for the purposes of the PPO sought was the whole amount received by Dr Fysh upon the subsequent sale of the shares ($1,437,500). However, her Honour held that the 'benefits' derived from the commission of the offence was the net amount received upon the sale of the shares (a profit of $640,857.18) after deducting the purchase price ($796,642.18).
67 In her judgment, after outlining applicable principles of statutory interpretation and the relevant provisions of the Act, her Honour began her analysis at [21] of her judgment:
'Based on the ordinary usage of the language of those provisions, I would have little difficulty in concluding that the value of the benefit derived from the sale of shares purchased unlawfully with inside information was the net amount received upon sale of the shares after deducting the original purchase price. In its ordinary meaning, the term 'benefits' means the good or gain received. In the present context, the term may be understood to refer to the amount by which Dr Fysh's financial position had improved at the conclusion of the transaction as a result of his having sold the shares for more than he paid for them. If he had sold the shares for the price for which he bought then (or less), one would readily accept that he derived no 'benefit' from his offending.'
68 In paragraph [22] to [25], her Honour went on to consider s122(1)(a) and found support for her conclusion from the words 'because of the illegal activity' and s122(d) and (e) and s124 to support a conclusion that '[t]he starting point is the net increase in the person's position.'
69 In respect of s126 her Honour noted at [29]:
'Considered in the context of the Act as a whole, s 126 may be understood to foreclose the unseemly prospect of the court's assessment of the value of the relevant benefits being hijacked by accounting issues and expanded to become a complex, costly auditing exercise.'
70     However, her Honour did not consider the 'capital' invested to buy the shares as an expense or outgoing:
'In my view, it is doubtful whether the term 'expenses or outgoings' comprehends the investment made by Dr Fysh in purchasing the shares. Nothing in the Act suggests that the term 'expenses or outgoings' should be understood other than in its ordinary meaning. In the context of investment and share trading, that term would ordinarily be understood to refer to the occasional amounts required to be spent in the course of an undertaking or transaction, such as brokerage or transaction fees, banking fees for the transfer of funds, perhaps accounting or bookkeeping fees, employee or consultant fees or the cost of a telephone or internet connection. In the context of share trading, the capital invested to buy the shares would not ordinarily be described as an expense or outgoing of the transaction.'
71     Her Honour considered a number of the authorities referred to above and declined to follow them, at [53]-[54] (underlining added):
'None of the authorities relied upon by the Commissioner has dissuaded me from the construction of the Act which I consider to be correct in the present context. The decisions in drug trafficking cases do not determine the meaning of the term 'benefit' or 'expenses or outgoings' in the present context. This judgment should not be understood to derogate from the principles stated in those cases. It would plainly be inimical to the objects of the Act to require the court to audit the accounts of drug offenders in order to determine the benefits of their drug transactions. I am concerned only with the narrow task of determining the 'benefits' (within the meaning of the Act) of unlawful share transactions. A plain reading of the Proceeds of Crime Act as applied to the facts of this case leads me to conclude that the investment made by Dr Fysh should be deducted from the proceeds of the sale of the shares in determining the benefits derived from his illegal activity.
For those reasons, I determined that the 'benefit' derived by Dr Fysh from the offences for which I sentenced him did not include the amount paid by him from his own assets when he purchased the shares. In accordance with s 126 of the Act, I did not deduct the amounts paid by Dr Fysh in brokerage fees, even though the payment of those fees in fact reduced the amount derived by him from his own assets when he purchased the shares. In accordance with s 126 of the Act, I did not deduct the amounts paid by Dr Fysh in brokerage fees, even though the payment of those fees in fact reduced the amount derived by him from the transaction, since in my view those fees represented an expense or outgoing within the meaning of that section.'
72 It is submitted that her Honour's interpretation and application of these provisions of the Act was, with respect, plainly wrong and ought not be followed by this court:
a)Her Honour reached her determination of the meaning of the terms 'benefit' and 'expenses or outgoings' by reference only to the context of unlawful share transactions (and only the purchase of shares with inside information). The interpretation of the Act should be consistent in all applicable contexts. The result is thus inconsistent with not only with drug trafficking cases but also (for example) the decision of the Court of Appeal in Lin. There is no conceptual difference between the purchase of the (market undervalued) shares with inside information and the (discounted) undeclared lobster purchased in that case.
b)Her Honour limited the application of the clear words in s121(1)(a), by effectively reading in words to curtail the benefit described in that paragraph to 'net benefit' (this went beyond the mere causal nexus created by the words 'because of the illegal activity'). In the first passage quoted above from [21] of her judgment, her Honour wrongly, with respect did not contemplate that the value of the shares themselves was a 'benefit' within the meaning of part 2-4 of the Act.
c)Her Honour did not support her interpretation of the words 'expenses' and 'outgoings' in s126(a) (to exclude capital invested) with any authority.
73 The problem of her Honour's interpretation of the Act in the limited circumstances of the unlawful purchase of shares with insider trading is illustrated in the facts of this case: If the same interpretation of s122(1)(a) and s126(a) is adopted, the process of assessing the benefit will be hijacked by a complex valuation exercise, the type of process her. Honour noted that s126(a) was intended to avoid.
74 Finally, it is to be noted that one of her Honour's concerns was double punishment. This is illustrated by her Honour's concern to read down the objective of the Act stated in s5(c) to 'to punish and deter persons from breaching laws of the Commonwealth …'
To construe the Act as having, as an object, punishment and deterrence beyond confiscation or the denial of profits unlawfully earned would duplicate the objects of sentencing in criminal proceedings and so expose offenders to double punishment.
75 That concern has already been dealt with in these submissions at [47] above." (Footnotes omitted.)

The applicant's written submissions in relation to the method of the calculation of the "benefits" derived by the respondent from the commission of his crime culminate in the following conclusion:
"76 It should be concluded that the value of the 'benefits' derived by the Respondent from the commission of the insider trading offence is the gross sale proceeds amounting to $3,095,260.06 that the Respondent, because of the offence, received from the unlawful disposal of his shares. The gross sum was plainly what the Respondent sought to receive as a result of the commission of the offence. This money was a benefit derived (directly or indirectly) by the Respondent from, and because of, the insider trading offence. There is no specified reduction available to take into account the value of the shares sold by the Respondent in the unlawful transactions. The shares sold in the course of the unlawful disposal were an 'expense or outgoing' the Respondent 'incurred in the course of the illegal activity' within the meaning of s126.
77 Such a conclusion reflects the ordinary meaning of the text of the Act, promotes the principal objects expressed in s5 (including punishment and deterrence) and does not produce a result that is unduly harsh or disproportionate.
78 It also reflects the fact that the Respondent received all of these sale proceeds because of the illegal activity, at a time when he was not entitled to dispose of the shares or, it follows, receive the sale proceeds. Those proceeds presumably enabled him to consequently use the funds to reduce his debts by approximately $3 million. He obtained that full benefit before 22 February 2010 when the market was informed of extent of the deterioration of the Gunn's financial performance.
79 Applying this approach to the facts of this case would result in the making of a PPO against the Respondent in the amount of the total proceeds derived from the sale of the shares, namely, $3,095,260.06.
80 For the purpose of s132 of the Act, the court may reduce this penalty amount by the amount that the Respondent was ordered to pay by way of fine in relation to the offence, being the sum of $50,000.00."

The respondent's submissions

The respondent submits that the applicant's contentions should be rejected as they misconstrue the Act and its operation, and rely upon a number of cases decided in starkly different contexts. The respondent argues that those cases are distinguishable. The respondent notes in particular that the applicant's submissions pay no regard to a decision of the Western Australian Court of Appeal dealing with the very question raised in the present case, namely, how to value the benefit derived by a person who sold shares with inside information, when the shares had been previously acquired lawfully. That decision is Mansfield v DPP (2007) 33 WAR 227 (CA). Finally, the respondent contends that the applicant's criticism of the reasoning of McCallum J in DPP v Fysh (above), is misplaced.
The respondent submits that besides the "gross proceeds of sale" approach contended for by the applicant, there are two alternative approaches to be considered. They are:
(a)the amount of profit (if any) made by the person, calculated by deducting the cost price of the shares from the price for which the shares were sold; or
(b)the difference between the price that the person achieved on the sale of the shares and that which he would have achieved had the market been fully informed by reason of the inside information being generally available.
The respondent notes that alternative approach (a) is based on the reasoning of McCallum J in Fysh, and alternative approach (b) was adopted in Mansfield.
The respondent criticises the applicant's reading of s 122(1)(a) of the Act as if the provision itself determined the value of the benefits that a person derived from an offence. It does not, the respondent contends.
The respondent submits that the task of a court on an application for a pecuniary penalty order is to assess, if it can, "the value of the benefits the person derived from the commission of the offence", and that such assessment is to be undertaken "under Subdivision B". That subdivision includes s 122, which relevantly provides as follows:
"122     Evidence the court is to consider
(1)   In assessing the value of *benefits that a person has derived from the commission of an offence or offences (the illegal activity), the court is to have regard to the evidence before it concerning all or any of the following:
(a)   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;
(b)   the value of any other benefit that, because of the illegal activity, was provided to the person or another person …
...
(d)   the value of the person's property before, during and after the illegal activity;
(e)   the person's income and expenditure before, during and after the illegal activity."
The respondent submits that evidence of the matters referred to in sub-pars (a) to (e) of s 122(1) is evidence that the Court "is to have regard to" and that the construction contended for by the applicant overlooks those words, and reads the section as if satisfaction of the circumstance described in s 122(1)(a) determines the value of the relevant benefit. In other words, it is said by the respondent that the applicant is in effect saying that the words in s 122(1)(a) define a specific benefit within the meaning of Pt 2-4 of the Act, and that such a construction is incorrect. The respondent says that s 122(1)(a) does not define what the relevant benefit is or includes.
The respondent's submission is that the Act does not require the Court, after having "regard to" evidence concerning the money that came into the possession of the person because of the illegal activity, to assess the benefit derived by the person as being or including the amount of that money. Instead, the respondent says, the Court must have regard to evidence of the matters in s 122(1)(a) to (e), and after doing so, assess "the value of the benefits the person derived from the commission of the offence".
I accept the respondent's submission as plainly correct.
I pause in recounting the respondent's submissions to note that the objects of the Act are relevantly set out in s 5 of the Act as follows:
"The Principal objects of this Act are:
(a)   to deprive persons of the proceeds of offences, the instruments of offences and benefits derived from offences, against the laws of the Commonwealth ...
(c)   to punish and deter persons from breaching laws of the Commonwealth ... ; and
(d)   to prevent the reinvestment of proceeds, instruments [and] benefits ... in further criminal activities ...".
In the second reading speech for the Proceeds of Crime Bill 2002 on 13 March 2002 in the House of Representatives, the Attorney-General said, amongst other things:
"The need for strong and effective laws for the confiscation of proceeds of crime is self-evident. The purpose of such laws is to discourage and deter crime by reducing profits; to prevent crime by diminishing the capacity of offenders to finance future criminal activities and to remedy the unjust enrichment of criminals who profit at society's expense .... The provisions are all about accounting for unlawful enrichment in civil proceedings, not the imposition of criminal sanctions. The object or focus of the proceeding is the recovery of assets and profits, not putting people in jail." (Emphasis added.)
The respondent submits that the approach adopted in Mansfield is consistent with the objects of the Act. As will appear, that is a submission that I accept.
The respondent in his written submissions distinguishes the drug cases relied upon by the applicant. The respondent's submissions are as follows:
"27 The DPP relies heavily on a series of cases involving the forfeiture of proceeds generated by the sale of drugs. That reliance is misplaced. The context of those cases is significantly different. It is not surprising that the Act operates differently in different contexts.
28     The differences in context between the drug cases and a case such as the present are two-fold. First, in the drug cases, the original purchase of the drugs was itself illegal. In a case like the present, the original purchase of shares was lawful. It is not difficult to see why, in assessing the benefit obtained from the unlawful sale of narcotics, confiscation legislation has been interpreted and applied so as to exclude from the          assessment the cost incurred in an earlier, equally unlawful act: the purchase by the offender of the drugs he or she later sold. So to do would be contrary to public policy.   As Marks J made clear, the cost of the drugs is ignored both because the cost was 'illegally incurred', and because the cost 'relate[d] merely to making the crime possible': R v Peterson [1992] 1 VR 297 at 303. Neither description can be sensibly applied to the cost Mr Gay incurred in lawfully acquiring the shares sold in December 2009. That cost was not illegally incurred. And it did not relate to making the crime possible. The acquisition of the shares bore no relevant relationship to the offending conduct.
29     To the extent the DPP suggests that the offence committed by Mr Gay would not have been possible unless he had earlier purchased the shares, and that therefore the shares made the crime possible, the suggestion must be rejected as circular. Marks J's reference to costs that 'relate merely to making the crime possible' was to costs incurred for the purpose of making the crime possible, and in the course of committing         the crime. A car used 10 years after it was purchased in a bank robbery might be forfeited because it is tainted. But in no sensible way could the cost of purchasing the car be said to 'relate merely to making the [bank robbery] possible'.
30     The second difference between the drug cases and the present is that the sale of shares is not prohibited. Such a sale is only prohibited if the seller possesses inside information that he knows (or ought to know) is inside information. In contrast, the sale of heroin is always illegal. That point was made in Mansfield at [49]."
For the reasons which follow, I accept that submission as correct and I adopt the reasoning of the Court of Appeal in Mansfield that whilst in a typical case involving the supply of drugs for money the whole of the purchase price will be the benefit that has been derived, that will not necessarily be so in cases in which the sale of an item is not absolutely prohibited, but is only prohibited in specified circumstances.
The respondent's submissions next seek to distinguish Lin (above). The respondent says:
"31    There are at least three significant points of distinction between the circumstances in this case, and those in Lin v Tasmania [2012] TASCCA 9.
32     First, Lin involved a purchase, not a sale. It is one thing to disregard in assessing the value of benefits the cost incurred in           purchasing an asset, when it is the very purchase of the asset that is being valued. It is quite another thing, in a case involving the valuation of the benefit of the sale of an asset, to disregard the cost incurred in the earlier, separate purchase of the asset. In such a case, the original cost of the shares cannot sensibly be said to form part of the benefit derived from unlawful conduct. In Lin, by contrast, there was no question of disregarding the cost incurred in some earlier transaction. There was, in Lin, only one relevant transaction: the purchase.
33     Second, as with the drug cases, the very act of purchasing 'off-book' seafood was illegal in Lin. As noted above, the act of buying or selling shares is lawful, unless the buyer or seller has inside information that he or she knows is inside information.
34     Thirdly, the Court observed in Lin that one of the advantages the defendant gained was the ability to obtain more lobster than was available lawfully to him: at [11]. There is no such advantage in insider trading cases. Shares are available lawfully to buy or sell. It is the timing that is prohibited.
35     In addition to the advantage of being able to buy more lobster than lawfully available, it was also suggested in Lin that the defendant    obtained lobster more cheaply by reason of his offending than he otherwise would. If that was the only benefit obtained, it is conceivable that the Court might have approached valuation differently.
36     There was no matter of law determined in Lin, including as to the construction of statutory words, that may be applied here. The three differences mentioned above, whether considered collectively or individually, mean that the gross proceeds approach suggested by the DPP in this case can be rejected quite consistently with the facts and reasoning in that decision."
I accept each of those submissions. In particular I accept the submission that the "gross proceeds of sale" approach contended for by the applicant in the present case can be rejected consistently with the facts and reasoning of this Court in Lin.
The respondent also submits that the English cases relied upon by the applicant can be distinguished. The respondent's written submissions are as follows:
"37 The DPP refers, in paragraphs 58 and 59 of his submissions, to some English cases to support two propositions: that confiscation legislation 'has consistently been interpreted as deliberately draconian'; and that 'these principles' have been applied to insider trading offences so as to confiscate from an inside seller the total value of shares sold, rather than the loss avoided.
38 The first point to note about the English cases is that they concerned legislation that is in very different terms to the Act. Under the English Proceeds of Crime Act 2002, a person is said to benefit from conduct 'if he obtains property as a result of or in connection with the conduct', and the Act provides that 'If a person benefits from conduct his benefit is the value of the property obtained': s 76(4) and (7).
39 Secondly, Rollins is of no persuasive value here at all, quite apart from the different legislation it involved. The confiscation order was not the subject of appeal. For all that is known, it may have been consented to in the Crown Court below."
I agree. I find the English cases unpersuasive.
The respondent next turns in his written submissions to the applicant's reliance on Doff and says:
"40 Doff was another acquisition case (an insider purchase), not a sale case (insider disposal). Moreover, it has no precedential value in relation to the Act, because the pecuniary penalty order was 'not opposed' by the defendant at trial and the defendant 'co-operated' with the DPP in relation to the order: R v Doff [2005] NSWSC 50 at [45].
41 To the extent that the reasons of Barr J suggest that the cost of acquiring is to be disregarded in assessing the benefit the defendant made from the offence, those reasons are inconsistent with the decision of McCallum J in Fysh (2013) 224 A Crim R 523, where the point was specifically argued and decided. For the reasons given below, Fysh is to be preferred. In any event, both Fysh and Doff arose in the different context of an unlawful share purchase, rather than the unlawful sale of a share previously acquired lawfully. The DPP agrees that this is a distinguishing feature: see the concluding words of para 65 of the DPP's submissions."
In my view, Doff is of no assistance to me whatsoever.
In the passage from the respondent's written submissions set out above the respondent refers the reasons given in his submissions as to why the decision of McCallum J in Fysh is in any event to be preferred to that of Barr J in Doff. Those reasons, which in my view, fully and effectively refute the criticism of McCallum J's reasoning levelled by the applicant, are as follows:
"42 Fysh and Mansfield are the only two cases to have resolved the contested issue of how the benefit derived by an insider trader is to be assessed in comparable legislation.
43 In Fysh, the AFP argued that the benefit derived from an inside purchase of shares that had been subsequently sold for a profit was the gross proceeds obtained on the sale, rather than the amount of the profit. McCallum J rejected that argument. Her Honour held that true value of the 'benefit' derived from the insider trading within the meaning of that word in the Act was the amount of profit made by the insider trading."
After setting out the terms of s 121, her Honour said at [21]:
"'Based on the ordinary usage of the language of those provisions, I would have little difficulty in concluding that the value of the benefit derived from the sale of shares purchased unlawfully with inside information was the net amount received upon sale of the shares after deducting the original purchase price. In its ordinary meaning, the term "benefits" means the good or gain received. In the present context, the term may be understood to refer to the amount by which Dr Fysh's financial position had improved at the conclusion of the transaction as a result of his having sold the shares for more than he paid for them. If he had sold the shares for the price for which he bought them (or less), one would readily accept that he derived no "benefit" from his offending.'
44 McCallum J also held that this interpretation and application of the Act was not prohibited by s 126. That section provides that, in assessing the value of benefits a person has derived from an offence, 'expenses or outgoings the person incurred in relation to the illegal activity' were not to be subtracted. Her Honour held that 'expenses or outgoings' did not comprehend the investment made by the defendant in purchasing the shares. That term instead applied to occasional amounts required to be spent in the course of undertaking the transactions, such as brokerage or transaction fees: at [31].
45     The DPP mounts various arguments to suggest that the decision in Fysh is plainly wrong. First, the DPP contends that 'the result' is inconsistent with the drug cases and with the decision in Lin: para 72(a). That contention is not correct. As explained above, the context of the drug cases and of Lin, on the one hand, is very different to the context of an insider trading case. Different results may follow from different facts consistently with the proper construction of the Act.
46     The suggestion that 'there is no conceptual difference between the purchase of the (market undervalued) shares with inside information [Fysh] and the (discounted) undeclared lobster purchased in [Lin]' (para 72(a)) is to pose the wrong question. The right question is whether there is any difference in the benefits (and the assessment of the value of those benefits) derived by persons who
(a)     on the one hand, commit the offence of acquiring shares when in possession of inside information; and
(b) on the other hand, engage in a conspiracy to keep false records and understate the amount of lobster purchased.
47     Assuming it is right to say, in (b), that the value of the benefits is the total gross price paid for the lobster, there is no conceptual reason why it must follow that the value of the benefits in (a) is the gross sale proceeds received when the shares are later sold.
48     Second, the DPP contends that McCallum J in Fysh 'limited the application of the clear words in s121(1)(a), by effectively reading in words to curtail the benefit described in that paragraph to "net benefit" ': para 72(b). That is not correct. What McCallum J did was to assess 'the value of the benefits derived'. As explained above, it is wrong to suggest, as the DPP does in para 72(b), that s 121(1)(a) deems the value of the benefits to be (or to include) the value of the money that came into the possession of the person because of the illegal activity. That is not what the Act does: see paragraphs 17 to 25 above.
49     Thirdly, the DPP says that there is no authority that supported McCallum J's interpretation of the words 'expenses' and 'outgoings' so as to exclude the capital investment. In fact, R v Fagher [(1989) 16 NSWLR 67] supported that reasoning at 81. In that case, Allen J in the Court of Appeal said:
'All that subs (5) does is to provide, in effect, that the Court shall value the profit, "the benefits", as the gross profit rather than the net profit. Thus, in the present case, the Court would disregard the cost to the defendant of the petrol which he used in picking up and bringing back the drug.'
50     Similarly, the New Zealand Court of Appeal, in a case relied on by the DPP (R v Pedersen [1995] 2 NZLR 386 at 390), doubted whether payment to a supplier was an expense or outgoing in connection with the commission of an offence of sale within the meaning of those words in the Act there being considered. Instead, those words were, the Court said, probably directed at expenses and outgoings incurred in actually committing the offence, such as the costs of petrol, packaging, posting, fertilisers.
51 Fourthly, the DPP suggests that 'the problem' with McCallum J's interpretation, as applied to the present case, is that 'the process of assessing the benefit will be hijacked by a complex valuation exercise', which McCallum J said s 126 was intended to avoid. It is wrong to suggest that, because it might be thought desirable to avoid a complex valuation exercise, the Act should be construed and applied so as to always avoid that necessity. There is no warrant for reading the Act so as to always make it easy for the DPP to value the benefit derived from the commission of the offence. In every case, the task for the Court remains to assess the value of the benefit (the profit or advantage) that was derived from the commission of the offence. The ease or difficulty of that assessment cannot alter the nature of the task." (Footnotes omitted.)

I accept the validity of the arguments advanced by the respondent and I reject the applicant's submission that the decision in Fysh is plainly wrong and should not be followed.
As has been earlier observed the applicant did not refer to the decision in Mansfield (above) in any way in its written submissions, and in oral argument counsel for the applicant asserted simply that the decision was distinguishable because the legislation under consideration by the Western Australian Court of Appeal was different. The respondent, on the other hand, embraces the decision in Mansfield, and goes to some length to explain how the decision is squarely of application in the present case. The respondent in his written submissions contends as follows:
"52    Mansfield is the most directly relevant case. In that case, the WA DPP sought a 'criminal benefits' order on the basis that Mansfield had sold shares in a company when in possession of inside information that, if generally available, would have had a material adverse effect on the price of the shares. That is the identical circumstance to this case.
53     The WA DPP in Mansfield said that the appropriate value of the benefit of the order was the gross proceeds of sale received by Mansfield, rather than the benefit being the difference between the true price of the shares (assuming the inside information was generally available) and the sale proceeds. That is the identical argument being mounted by the DPP in this case.
54     While the actual decision in Mansfield related only to the DPP's pleading, the Court of Appeal noted that both parties wanted the Court of Appeal to express its opinion as to the proper construction of the relevant statutory provisions: see at [29].
55     The legislation in Mansfield was not materially different to the Act. Section 15(1) of the Criminal Property Confiscation Act 2000 (WA) provided that the DPP could apply to the Court for a criminal benefits declaration. Relevantly, s 16 stipulated the circumstances in which a declaration of that kind must be made. That section read as follows:
'16     Criminal benefits declarations – crime-derived property
(1) On hearing an application under section 15(1), the court must declare that the respondent has acquired a criminal benefit if it is more likely than not that
(a)     the property, service, advantage or benefit described in the application is a constituent of the respondent's wealth;
(b) the respondent is or was involved in the commission of a confiscation offence; and
(c) the property, service, advantage or benefit was wholly or partly derived or realised, directly or indirectly, as a result of the respondent's involvement in the commission of the confiscation offence, whether or not it was lawfully acquired.
(2)          For the purposes of subsection (1)(b), if the respondent has been convicted of the confiscation offence, the respondent is conclusively presumed to have been involved in the commission of the offence.
(3)     The property, service, advantage or benefit is presumed to have been directly or indirectly acquired as a result of the respondent's involvement in a confiscation offence unless the respondent establishes otherwise.
56     Section 19 provides that the value of the relevant property, service advantage of benefit is the greater of its value at the time it was acquired, its value at the time it was given away or consumed (if it has been) or its value on the day of the application. When the court makes a criminal benefits declaration, the respondent is liable to pay to the State an amount equal to the amount specified in the declaration as the assessed value of the criminal benefit acquired by the respondent: s 20.
57 If anything, the terms of s 16 of the WA Act are wider than sections 121 and 122 of the Act in this case. Both Acts require the court to assess the value of benefits derived directly or indirectly from the commission of an offence. But the WA ACT also permits 'property' which is 'wholly or partly realised, directly or indirectly, as a result of the respondent's involvement in the commission of [the offence]' to be the subject of a criminal benefits declaration.
58 The WA Act did not contain a provision equivalent to s 126, prohibiting deduction of expenses or outgoings occurred in relation to the illegal activity. But that is not a relevant difference. First, as noted above, the purchase of shares that are later, and quite independently, sold when the seller is in possession of inside information cannot sensibly be said to be an expense or outgoing incurred in relation to the illegal activity. The purchase and the sale, at least on the present facts, are quite distinct. Secondly, the WA Court of Appeal interpreted the legislation so as to exclude from the calculation of benefit 'expenses incurred in the course of committing a crime': at [49].
59     Accordingly, the statutory task that required interpretation and application in Mansfield was relevantly the same as that which exists in this case. The Act in Mansfield, and the Act here, requires the assessment of the value of the 'benefit' 'derived' 'directly or indirectly' by a person who, with inside information, sells shares that had been previously acquired lawfully and independently of the insider disposal.
60 The answer given by the Court of Appeal was that the true amount of the benefit was the difference between the price achieved on the sale of the shares and that which would have been achieved had the inside information been generally available: at [50]. That was, in essence, the same decision as that made by Blaxell J below, although his Honour said that the proper comparison was between the amount for which the shares were sold and the price of the shares 'if there had been a fully informed market at the relevant time': see DPP v Mansfield (2006) 166 A Crim R 525; [2006] WASC 246 at [26].
61     In so holding, the Court of Appeal distinguished the drug cases in the following terms (at [50]-[51]:
'I accept, as did the courts in Nieves, Peterson and Pedersen that the relevant provisions of the Act are concerned with benefits and not with net profits, with the consequence that expenses incurred in the course of committing a crime will not ordinarily be taken into account in assessing the value of the benefit obtained. But the point remains that the assessed value of the benefit (whether it be in the form of property, a service, an advantage or something else) must be no more than what was acquired (or presumed to have been acquired in the absence of proof to the contrary) as a result of the person's involvement in the commission of the offence (in a case falling within s 145(1)(a)). In a case involving the supply of drugs for money, rather than in return for some other property, service, advantage or benefit, the whole of the money will be the benefit derived (if the offender is not merely a conduit, as in Peterson) because the whole of the purchase price will be the benefit that has been derived, or acquired by the offender as a result of involvement in the commission of the transaction giving rise to the offence. However, that will not necessarily be so in cases in which the sale of an item is not absolutely prohibited, but is only prohibited in specified circumstances. In such a case, depending upon the nature of the prohibition, and the effect of its breach, the property, advantage or benefit that is acquired by the offender may be different to, or less than, the sale price.
This case provides an example. Mr Mansfield lawfully owned the shares in My Casino Ltd. He was entitled to sell them whenever he chose, thereby converting them into money. What he was not entitled to do was sell the shares at a time when he had inside information as defined in s 1002G(1) of the Corporations Law (now s 1042A of the Corporations Act). His gain arising out of his involvement in the commission of that confiscation offence (if that involvement is proved) was only part of what he received and was constituted by the difference between the price that he achieved on the sale of the shares and that which he would have achieved had the inside information been generally available (a matter which, no doubt, would be the subject of expert evidence). In my opinion, that was the "property, service, advantage or benefit" that was acquired by Mr Mansfield for the purpose of s 16(1)(c) of the Act and, hence, for that of each of s 18(2)(a), s 19 and s 20. Consequently, if he is able to establish what those differences in price were, and accordingly that the balance of the money was acquired by him otherwise than as a result of his involvement in the confiscation offence, then the assessed value of the benefit will be the total of those differences.'
That reasoning applies with equal force here.
62     The reference to Mr Mansfield having to prove what the difference was between the price he sold his shares for and the price the shares would have sold for had the inside information been generally available, flowed from the peculiar terms of the WA legislation quoted above. The WA Act deems the property in the DPP's application for a criminal benefits declaration to be derived by the respondent unless he or she proves otherwise: s 16(3). See too DPP v Mansfield (2006) 166 A Crim R 525; [2006] WASC 246 at [20]-[22].
63     In reaching its conclusion, the WA Court of Appeal pointed to the gross injustice of the result for which the DPP contended. At [51]-[52], the Court said:
'If the legislation was to be applied in the manner contended for on behalf of the DPP, this would produce quite extraordinary results. Insider trading provides an illustration. If the offender invested life savings, lawfully obtained, of $1 million in the acquisition of shares bought with the benefit of inside information, and if the offender was able to establish that the purchase price was 10 per cent less than it would have been had the information been generally available, then, on the construction contended for by the DPP, the State would nevertheless be entitled to forfeit all of the shares acquired by the offender rather than assets to the value of $100,000, being the accretion to the offender's wealth as a consequence of the purchase made with the benefit of the inside information. Other illustrations might be provided. So, for example, if the sale of a vessel without adequate safety equipment amounted to a confiscation offence, on the construction advanced on behalf of the DPP, the State would be entitled to recover the whole of the purchase price received by the vendor of the vessel even if it was established by the vendor to have been no greater than it would have been if the appropriate safety equipment had been included. Moreover, the construction advocated by the DPP would have the result that, by choosing whether to apply for a criminal benefits declaration in respect of identified "property" of the respondent (the shares and the vessel in the two examples I have given), rather than the "advantage" or "benefit" achieved      by the respondent through his or her receipt of a higher price, the DPP would be able to dictate what property is to be valued.
In my opinion, manifest injustices of this kind could not have been intended and, in circumstances in which the relevant provisions are capable of being read consistently with what I have taken to be their evident purpose, it is appropriate that they be read so as to avoid these injustices: Public Transport Commission of New South Wales v J Murray More (NSW) Pty Ltd (1975) 132 CLR 336 at 350 per Gibbs J; Federal Commissioner of Taxation v Smorgon (1977) 16 ALR 721 at 729 per Stephen J.'
Again, that reasoning applies with equal force here.
64 The DPP may point to the absence in the WA legislation of an objects clause stating that the objects of the Act include punishment and deterrence. That difference is not material Confiscation legislation is often construed as being punitive, even without the objects clause. The High Court said that of the very legislation considered in Mansfield: Mansfield v DPP (2006) 226 CLR 486 at [50]. That part of the objects clause relied on by the DPP does not support construing and applying the legislation as to produce reasoning and results different to Mansfield." (Footnotes omitted.)
I accept and respectfully adopt the analysis of Mansfield as just set out, and I reject the applicant's submission that the legislation under consideration was materially different. In my view, as submitted by the respondent, the statutory task that required interpretation and application in Mansfield was relevantly the same as that which exists in this case.
Finally in something of a "mopping-up" exercise the respondent dealt in his written submission with what was referred to as a number of errors made by the applicant in its submissions. The respondent's submissions in this regard are as follows:
"Other errors in the DPP's approach
(a) 'Any concerns about double punishment are avoided'
65 Paragraph 47 of the DPP's submissions contends that any concerns about double punishment as a consequence of a pecuniary penalty order are 'ameliorated or avoided' by s 132. Section 132 allows the Court to make a reduction in respect of the amount of any fine in relation to an offence to which the order relates.
66     That submission should be rejected. In almost all insider trading cases, the defendant is sentenced to a term of imprisonment. Sometimes, there is no accompanying fine: see R v Glynatsis [2013] NSWCCA 131. If a person is convicted of insider disposing of shares and jailed without fine, there is no scope for s 132 in a later pecuniary penalty application to operate to avoid double punishment. It would plainly involve unjustifiable double punishment if the Act were construed so as to expose the defendant to a pecuniary penalty equal to the gross proceeds of the sale of the shares.
67 The proper approach in such a case, as in this, is to construe the Act so as to require the respondent to pay a penalty reflecting only the true gain he or she provably derived from the commission of the offence and no more.
(b)     'No specific authorisation to deduct prior expenditure'
68     The DPP advances, as one of the suggested reasons why 'benefits' must include 'gross proceeds', the suggestion that
There is no specific authorisation to reduce this benefit by (for example) the value of a person's money or property traded or expended in the course of the illegal activity or any previous expenditure.
69     As explained above, this misses the point. The task is to assess the value of the benefit derived from the commission of the offence. On      identical facts to this case, four judges of the Supreme Court of Western Australia in Mansfield considered that the benefit gained from the offence of insider disposal of shares was to be valued as the difference between            the price that he achieved on the sale of the shares and that which he would have achieved had the inside information been generally available (or the market been fully informed). There is no benefit other than to this extent (assuming the approach in Fysh does not apply to an insider disposal of shares). It is not a matter of deducting anything from some benefit. Rather, the difference between price obtained and true value is an inherent part of an assessment of what the benefit actually is. The price difference is the advantage that flowed from the insider trading.
(c) 'Section 126 prohibits reference to value of shares sold'
70 In paragraph 42(d) of the DPP's submissions, it is suggested that s 126 supports the contention that, in a case such as the present, the benefit derived is the amount of the gross proceeds of sale, rather than 'the value of an advantage actually gained or loss avoided'. According to the DPP, s 126 prevents 'the assessed benefit' from being reduced from the amount of gross proceeds. Section 126 is irrelevant in this case, because on no sensible view can it be said that the costs Mr Gay incurred in originally acquiring the shares were 'expenses or outgoings [he] incurred in relation to the illegal activity'.
71 Even in a case of an inside purchase of shares, s 126 does not have the effect for which the DPP contends. As noted above, the task is to assess the benefit derived from the offending. That benefit necessarily involves, in such a case, a comparison between the cost of the shares and the price for which the shares were later sold. The 'assessed benefit' is the actual gain made as a result of the unlawful conduct, not the gross proceeds of sale. It is not a matter of deducting the cost price of the shares from the 'assessed benefit'. The 'assessed benefit' is the gain made over the cost price of the shares. That is true benefit (the advantage) derived from the inside trading.
72     Moreover, and again as noted above, it is possible to construe 'outgoings' so as to exclude capital costs in purchasing the shares, as McCallum J did in Fysh.
(d)     'Not unduly harsh or disproportionate'
73     At paragraph 77, the DPP suggests that the application being pressed on his behalf 'does not produce a result that is unduly harsh or disproportionate'. That suggestion must be rejected. The result for which the DPP contends is the very same result that the Court of Appeal in Mansfield described as a manifest injustice: see the passage extracted in paragraph 64 above. The DPP acknowledges that, if Mr Gay had waited until 22 or 23 February 2010, he could have lawfully disposed of his shares for approximately $2.5m. Yet the DPP asks the Court to impose a penalty of $3m, which of necessity includes the $2.5m that the DPP agrees Mr Gay could lawfully have sold his shares for. That is plainly a result that is unduly harsh, disproportionate and manifestly unjust."
I accept each of those submissions.

Conclusion

I readily accept that the objects of the Act are to punish and deter and to deprive persons of the proceeds of offences. Equally I accept that it has been frequently observed that the Act and its predecessor the Proceeds of Crime Act 1987 are deliberately draconian. Obviously it is no aid to construction therefore to observe that the outcome of the requirement that the expenses or outgoings a person incurs in relation to an illegal activity are to be ignored may be harsh.
Having said that however, the single minded pursuit of a draconian outcome is equally not a proper approach to construction.
Clearly in the drug cases such as Nieve, Peterson and Pederson there is validity in regarding the gross proceeds of the offence as the value of the offender's benefit, with no account taken of the acquisition costs of illegal drugs. The purchase of the drugs and thus the money used to make the purchase was as tainted with criminality as was their sale. Similar considerations apply to Lin where the lobsters were, from the outset, purchased pursuant to a criminal conspiracy. But to my mind there is no parallel to be extrapolated from those cases to one such as the present where the shares sold illegally were legally purchased several years prior to their illegal sale, and may have been legally sold at other than at certain times.
Those drug cases and Lin are distinguishable on the bases identified by the respondent and accepted by me, and there is no compulsion to hold otherwise brought about by any need for consistency in the treatment of the notion of acquisition costs. Not all acquisition costs will be expenses or outgoings "incurred in relation to the illegal activity". In my view, the acquisition of the shares, as submitted by the respondent, bore no relevant relationship to his later unlawful conduct. It would be quite irrational to ignore that fact in order to achieve some consistency in outcome in other contexts. The Act can legitimately be applied so as to achieve different results in different contexts.

Like McCallum J in Fysh, based on the ordinary usage of the language of the provisions I am here considering, I have no difficulty in concluding that the value of the benefit derived from the unlawful sale by the respondent of shares purchased lawfully, must involve bringing into account the cost price of the shares as against the gross proceeds of their sale. I see no ambiguity about that in the words of the relevant sections.
Whilst acknowledging that the actual decision in Mansfield concerned only the applicant's pleadings in that case, I accept the submission made on behalf of the respondent that the opinion expressed by the West Australian Court of Appeal as to the proper construction of the relevant statutory provisions is correct. It is an opinion that I respectfully adopt and one which I apply in the present case.
As already noted, I also accept the submission made on behalf of the respondent, and set out earlier in these reasons, that the differences in the provisions of the legislation under consideration in Mansfield are not material differences, and do not in any way militate against a similar approach being taken under the Act in the present case.
As pointed out on behalf of the respondent and acknowledged by the applicant, if the respondent had waited until 22 or 23 February 2010 to sell his shares lawfully he could have disposed of them for approximately $2.5m. The "gross proceeds of sale" approach contended for by the applicant would result in a pecuniary penalty of almost $3.1m which would include that notional $2.5m. I respectfully agree with the observation of Steyler P in Mansfield (above) at [52] that "manifest injustices of this kind cannot have been intended and, in circumstances in which the relevant provisions are capable of being read consistently with what I have taken to be their evident purpose, it is appropriate that they be read so as to avoid these injustices".
It follows that I reject the applicant's submission that the amount of the pecuniary penalty that I must order is the total amount of $3,095,260.06 being the sum for which the shares were sold by the respondent between 2 and 7 December 2009.
Which of the two hypothetical "loss avoided" approaches to the assessment of the benefit derived by the respondent from his unlawful conduct is a question for further argument and evidence.