Director of Public Prosecutions for Victoria v Le

[2007] HCATrans 411

[2007] HCATrans 411

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M65 of 2007

B e t w e e n -

DIRECTOR OF PUBLIC PROSECUTIONS FOR VICTORIA

Appellant

and

PHAN THI LE

Respondent

GLEESON CJ
GUMMOW J
KIRBY J
HAYNE J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT ADELAIDE ON MONDAY, 6 AUGUST 2007, AT 2.13 PM

Copyright in the High Court of Australia

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friend, MR N.J. O’BRYAN, SC, for the appellant.  (instructed by Solicitor for Public Prosecutions - Melbourne)

MR D. GRACE, QC:   If the Court pleases, I appear with MR D.C. HALLOWES and MR M.K. MOSHINSKY for the respondent.  (instructed by Melinda Walker & Co)

GLEESON CJ:   Yes, Mr Jackson.

MR JACKSON:   Thank you, your Honour.  Your Honours, the case, as the Court will have seen, is concerned with the operation of the Confiscation Act 1997 (Vic). There are four issues in the appeal, three of which we propose to pursue. I will indicate those now if I may. The first really is the principal issue in the case in a sense and that is the ambit of the order which may be made pursuant to section 52 of that Act and that is whether an order may be made excluding the whole of the property. Your Honour, I put that very shortly. I will come to explain it in a moment.

The second question is whether “natural love and affection” is in terms of the Act “sufficient consideration.”  The third is the reasonable suspicion that it was tainted property.  That issue again, I am putting it very shortly.  Your Honours, the issue that we do not pursue is a question which appears as ground 8 in the notice of appeal, page 213, namely, the question of effective control.  May I deal with the issues, your Honours, in the order in which I indicated and turn immediately to the first of those, the question of the ambit of the order which may be made pursuant to section 52. 

KIRBY J:   In a sense, there is the preliminary question as to how one approaches the interpretation of the statute.  On the one hand you rely on the Project Blue Sky approach, on the other hand the Court of Appeal seems to have relied on the fact that this is a confiscatory piece of legislation and with drastic consequences and, therefore, should be read with a certain degree of strictness.

MR JACKSON:   Your Honour, could I say in response to that first that our submission would be, even assuming the approach taken by the majority in the Court of Appeal on this issue and, your Honours, the extent to which the particular question to which your Honour averted actually affect that view, may be a matter that is perhaps a little debatable, one does have a situation where, in our submission, the conclusion arrived at by the majority simply does not accord with the actual terms of the Act.  I am going to come to that of course. 

Your Honours, the actual question which arises under this heading is whether, when an order is made under section 52 excluding property from forfeiture, the property excluded must be, if I can interpolate, as the majority in the Court of Appeal held ‑ ‑ ‑

GUMMOW J:   Section 52 seems to have been amended in 2004.  I have got a reprint No. 4.

MR JACKSON:   Yes, that should be it, your Honour.

GUMMOW J:   Which is the date of 10 March 2005.

MR JACKSON:   Yes.

GUMMOW J:   But the order was made in 2003, was it not?

MR JACKSON:   The order which is the restraining order, your Honour.  The exclusion order is November 2005.  The copy that your Honours have should be one that deals with the position as at that time.

GUMMOW J:   So it includes the 2004 amendment?

MR JACKSON:   Yes.

GUMMOW J:   Thank you.

MR JACKSON:   May I perhaps, with respect, start that again?  What I was going to say was that the question that arises under this heading is whether when an order is made pursuant to section 52 excluding property from forfeiture, the property excluded must be, as the majority held, the whole of the property, even though the applicant for exclusion has only a partial interest in it.  Your Honours, may I give your Honours a reference at this point to the central reasoning of the Court of Appeal on this issue.  Your Honours will find that, so far as the majority is concerned, commencing at page 199 and it goes from paragraphs 49 to 62.  I will come to the core of it in just a moment, if I may. 

I was going to say that the dissenting judgment on this point can be seen commencing at page 204, paragraphs 65 to 79.  Your Honours, I will come to the detail of the provisions in just a moment, if I may, but may we invite your Honours to note one feature at the start and it is a matter of some importance.  The heart of the Court of Appeal’s reasoning can be found at page 200 – when I say “the court” I mean the majority of the court – in paragraphs 54 and 55.  Your Honours will see at paragraph 54 that they observe that the Act is said to maintain:

the clearest of distinctions is drawn between “the property”, on the one hand, and “an interest in the property”, on the other.

Then, your Honours, in paragraph 55 it is said in the second sentence that it is clear that the Parliament’s intention was to empower exclusion of the property in its and nothing else.  May we say immediately, your Honours, that that conclusion does not sit at all well with some of the other provisions that have a direct relationship with the power conferred by the opening words of section 52.  Could I in that regard, your Honours, take your Honours to section 47.  I want to go to four provisions.  The first is section 47(1)(b) and it should be at page 85.  Your Honours will see that it is says:

(1)Automatic forfeiture under section 35 is discharged in respect of an interest in property . . . 

(b)if an exclusion order in respect of the interest is made –

I will come to the relationship between these provisions and section 52 in a moment, but it is clear, in our submission, with respect, that section 47(1)(b) works on the assumption that the orders that may be made under section 52 are exclusion orders in respect of an interest in property.  The second provision, your Honours, which is germane in this regard is section 55 at page 97.  Section 55(2) says:

If a court makes an exclusion order under section 50(1), 52(1) or 54(1) in respect of an interest in property –

and it goes on from there.  The third provision, your Honours, is section 51(4) at page 91 which says:

An application for an order under section 52 in relation to an interest in property ‑ ‑ ‑

KIRBY J:   That last subsection 55(2) is, of course “in respect of an interest in property”. 

MR JACKSON:   Yes, of course.

KIRBY J:   It would have been stronger for your case if it had been “concerning property” or something ‑ ‑ ‑

MR JACKSON:   No, the other way around, with respect, your Honour.  Our case is that the Court of Appeal in the majority was in error when it said – I will not repeat the words of paragraph 55 of their reasons – that it was clear that the intention was to empower the Court to exclude an interest in property in its entirety because – and one can see this reasoning – it was said, you cannot exclude an interest.  You have to exclude the property or not.

KIRBY J:   I appreciate that.  I did not express it very well.  I meant that an exclusion order in respect of the property is still an exclusion order in respect of an interest in property.

MR JACKSON:   It is, your Honour, but that does of course bring into play another aspect that is not given effect to in the Court of Appeal’s reasons and that is that the term “property” is itself defined to include interest in a property.  What your Honour has just put to me – and I will come to this in just a moment if I may – is that one can perfectly well actually read the definition into the opening words of section ‑ ‑ ‑

KIRBY J:   They seem to think it was very awkward, but it does not look all that awkward when you read the definition into the sections.

MR JACKSON:   It is not.  It is not, your Honour.  It is a term that covers a wide variety of things and again may I come to that – I am sorry, I keep putting things off, your Honour.  I do not mean to do that, but there are some matters that I will come to in just a moment, if I may.  The terms, if I could dwell for a moment ‑ ‑ ‑

HAYNE J:   Do you dwell only on 47(1)(b), 55(2) and 51(4) as the chief examples of the provisions of the Act which you say are running in the direction opposite to that identified by the court?

MR JACKSON:   Chief, your Honour, and, if I could put it slightly differently, stark.

HAYNE J:   I understand the point you make.  I wondered whether you sought to make anything of section 33 which is the provision that is engaged not automatically, as this forfeiture was, but may be engaged in respect of other offences.

MR JACKSON:   Your Honour, one sees, of course, in section 33(1) that it allows:

the court may order that the property, or such of the property as is specified by the court in the order, be forfeited –

and your Honours will see subsection (5)(c) which speaks of the court being able to have regard to:

the claim of any person to an interest in the property having regard to the matters specified in section 50(1).

HAYNE J:   Just so.

GLEESON CJ:   Mr Jackson, are the provisions of Part 2 relevant to this, and I have in mind in particular sections 19 and 19A.  One of the first things that happens when the authorities, if I can use that expression, take an interest in property is that a member of the police force is obliged, in effect, to find out who has interests in the property.

MR JACKSON:   Yes, that is so, your Honour.  I am going to come to restraining order provisions in a moment, your Honour, but your Honours will see, of course, that where a restraining order has been made – and the restraining order prevents dispositions in the property, but one sees that when that has been made pursuant to section 18 that then you have section 19 coming into effect and notice of the making of the order being given and that allows then persons to claim exclusion from the operation of the restraining order should they so choose.  But it all works, your Honour, on the assumption there may be a variety of interests in property which have to be dealt with.  Your Honours, the provision I am going to come to next in the fourth of the provisions to which I was referring is section 52(2) itself.  It says:

If the court makes an order under sub‑section (1), the court may also make an order declaring the nature, extent and value of the applicant’s interest in the property.

I suppose it is possible to say that could be done for a number of purposes, but it is rather against the notion that the only order that can be made when an applicant claims successfully an interest in a property is one saying the property is excluded from the forfeiture order.  Your Honours, there is a provision equivalent to section 52(2) in section 33(2), the provision that says:

A forfeiture order must specify the interests in property to which it applies.

Your Honours, could I go to the scheme of the Act insofar as presently relevant in perhaps a little more detail and may I commence with section 52(1) itself.  Your Honours will see that it commences with the words “On an application made under section 51”.  Section 51(1) commences by saying:

If property is forfeited to the Minister under section 35, a person (other than the defendant) who claims to have had an interest in the property immediately before it was forfeited may, subject to sub‑sections (2) and (4), apply to the court that made the relevant restraining order for an order under section 52.

Your Honours, it gives the ability to apply and it notes that the occasion when that occurs is when the property has been forfeited to the Minister under section 35 to which I will come back.  Your Honours will see that it empowers the Court – and I am returning to section 52(1) – to:

make an order excluding property in which the applicant claims an interest from the operation of section 35 –

Section 3 of the Act defines such an order as being an exclusion order.  Your Honour, I do not think I need to go to the definition, but section 3(1).  The term “property,” your Honours, is itself defined by section 3(1) at page 9.  Your Honours will see, and not very surprisingly, perhaps, it includes:

real or personal property of every description, whether situated within or outside Victoria and whether tangible or intangible, and includes any interest in any such real or personal property –

So that it includes property in the fuller sense and interest in the property.  Your Honours, it may be a bit clumsy, perhaps, on one view but if one goes to section 52(1) and its opening words, there is no reason, in our submission, why the words of section 52(1) incorporating the definition do not mean excluding an interest in property in which the applicant claims an interest.  That, your Honours, is essentially what Justice Neave said at page 204, paragraphs 67 and 68.  Your Honours, I will not read it out.  Your Honours will see that there referred to.

GUMMOW J:   The majority seem to have treated property here as a portion of the earth’s surface.

MR JACKSON:   Yes, so far as land is concerned.

GUMMOW J:   Yes, which immediately runs into trouble with intangibles, that idea.

KIRBY J:   That is not really compatible with the use of personal property.

MR JACKSON:   Not all, your Honour.

GUMMOW J:   It would be a chattel so that would be an object.

MR JACKSON:   An object, yes, your Honour.

GLEESON CJ:   Blackacre.

MR JACKSON:   Yes, the unit Blackacre, if I can put it that way.  Your Honours, could I just say ‑ ‑ ‑

GUMMOW J:   The Act overcomes that through the critical use of interest which gets you back to legal.....states or interests.

MR JACKSON:   Indeed, your Honour, yes.

GUMMOW J:   That seems to be missed out by the majority.

MR JACKSON:   Your Honour, what their Honours say about that is, if I may say so, with respect, something that really seems to just skip over it and not provide any very satisfactory reason for leaving it out of account.  Your Honours, if one looks at the four provisions of the Act to which I referred to earlier, they do, if I may use the word again, provide stark illustrations of the fact that the very orders that are being spoken about by section 52(1) are orders which may be orders only in respect of interest in property.

GLEESON CJ:   The theory of the majority judgment seems to be that if you could use the word “innocent” to catch up in a single expression subparagraphs (i), (ii), (iii), (iv) and (v) of section 52(1), if you find real or personal property in which an innocent party has an interest, then that is to be excluded from the scheme of the legislation.

MR JACKSON:   Indeed, your Honour.  If you found, for example, an innocent but unregistered mortgagee – I say unregistered for a reason to which I will come in a moment that relates to section 41 – out goes the property from ‑ ‑ ‑

KIRBY J:   But in fairness to the majority, they based their view upon two steps.  First, that the drafter has, as they saw it, drawn a distinction between “property” and “interest in property” and had adhered to that through the Act.  Second, insofar as there was an ambiguity, this is confiscatory legislation taking away civil rights and therefore it should be given a fairly strict interpretation.  They said that they acknowledged that the explanatory memorandum tended to support your argument but that the terms of the statute were sufficiently clear as to force them to the other view because of the principle of construction.

MR JACKSON:   Your Honour, may I say in relation to that, it falters at the first step, because your Honours will not find a reference to three of the four provisions to which I first referred in the Court of Appeal majority’s reasons.  For them to say in the rather declamatory way, with respect, in which it is said in paragraph 55 of their reasons that the Act is clear on these matters and to leave out of account the provisions to which I have referred, just seems, with respect, erroneous.  Your Honours will see that if one looks at paragraph 55 at page 201 there is nothing in the language of section 52(1) which would permit, let alone require, the court to exclude anything less than the property the subject of the restraining order, et cetera. 

If one pauses at that point and says, well, perhaps that is right, but it does leave out of account, first, the definition of property; secondly, the fact that the ambit of section 52(1) cannot be taken like a slice of bread leaving the rest of the loaf.  The situation you have is that there are other provisions of the Act nearby relating directly to section 52(1) and the types of orders that may be made that make it pretty apparent that it is just wrong.  Your Honours, could I go back to section 52 ‑ ‑ ‑

KIRBY J:   What could possibly be the policy reason for the view that was supported by the Court of Appeal majority?  I can understand your submission and why you urge your submission which seems to be more comfortable to the overall objective of the Act, but I just ask myself what possible reason would Parliament immunise every interest in a property, including by inference that of the criminal, from confiscation simply because some other person has got an interest?  Then you say, well, maybe it is because if the interest is that of a mortgagee, you do not want the mortgagee burdened with having to sort things out with confiscated property that you, as it were, then immunise the property because someone else has an interest in it, but it is difficult to see how that was intended to work.

MR JACKSON:   It is very difficult, your Honour.  The registered mortgagee situation is dealt with by section 47.

KIRBY J:   Yes, I remember that was said on the special leave.  There is a special provision for that.

MR JACKSON:   It is very difficult indeed to see what consistently with the stated purposes of the Act in section 1 could be the adoption of the view adopted by the majority in the Court of Appeal.  Your Honours will see those set out at page 1, I will not go through them.  Your Honours will see nothing in there would tend to support the notion that if you have, to put it unnecessarily graphically perhaps, one good apple amongst the box of bad, all the boxes of bad are saved.  Your Honours, no doubt they would go rotten in due course but I leave that aside.  It is very difficult to find some policy that would support that.  Of course people whose interests are clean, if I might put it that way, and satisfied the section 52(1) test, are interests which are not, in a sense, taken, but having said that, why would one leave aside the other paths?  It is very difficult to see any very compelling reason at all.  It is one thing to say if you are going to take away interests you have got to do it specifically, but the Act does so pretty specifically.

KIRBY J:   On the face of things, you would think in legislation of this kind that Parliament would intend that Mrs Le’s interest maybe would be immunised but Mr Le’s would not be and that is not the result that the majority’s decision leads to.  Why should he be immunised?

MR JACKSON:   Her interest is immunised, your Honour.

KIRBY J:   It really attacks what seems to be the overall objective of the legislation that if he is involved in crime and has contaminated property, tainted property, that he then has that property or his interest in that property confiscated.  That is a natural scheme of the legislation.

MR JACKSON:   May I say two things, your Honour, one narrow, one wider.  The narrower one is to say – and the Act makes it very clear – that Mr Le could not himself have applied.  That is made clear by the words in parentheses in section 51(1) which says:

If property is forfeited to the Minister under section 35, a person (other than the defendant) –

can apply.  Your Honour asked me about policy.  There is some discussion by the Court of Appeal at paragraphs 61 and 62 at page 203 of the application book and, your Honours, really the reason seems to be the sentence commencing at about line 31 on page 203.

KIRBY J:   I can understand the court saying, if there is an ambiguity here, this is so drastic, this legislation, and there are pointers both ways, if Parliament wants to confiscate people’s interest in property it has to do it very clearly.  I can understand that.  But the problem is, when one actually looks at the language of the Act, it does not take huge surgery on the Act to make it work in a rational manner.

MR JACKSON:   Your Honour, could I just say that it is not actually clear that the Court of Appeal, the majority, did apply that consideration, because when you go to paragraph 62 they say “the question of policy is for Parliament” and the test they use is one of “clear and unambiguous” words “and maintain a distinction which is deployed consistently throughout the Act”.  The fact of the matter, with respect, is that it is not used consistently throughout the Act. 

Your Honours, may I move on a little to just go back to section 52 for a moment.  What I was going to say was this.  Your Honours will see that section 52(1) in the opening words of each of the subparagraphs deals with two situations.  In paragraph (a) where the property is “tainted property.”  Secondly, in paragraph (b) where it is not.  “Tainted property” is defined by section 3(1) and your Honours will see that at page 12, relevantly, it is property “used in, or in connection with, the commission of the offence” and, your Honours, it was accepted in this case that the unit property was tainted property.  If I could just give your Honours the reference to where that was made clear, that is page 155 about line 19.  It was not in issue.  Your Honours, if one goes from that to section 16(2)(c) and under that provision where, to put it shortly:

a person has been charged with a Schedule 2 offence and that person has an interest in the property or the property is tainted property –

then the Director of Public Prosecutions can apply for a restraining order in respect of the property.  Your Honours, as the majority set out at page 182, paragraph 3, an application had been made for a restraining order in respect of the unit in reliance on that provision.  A restraining order, your Honours, is made under section 18 and, your Honours, the nature of a restraining order appears from section 14(1):

A restraining order is an order that no property or interest in property, that is property or an interest to which the order applies, is to be disposed of, or otherwise dealt with by any person except in the manner and circumstances (if any) specified in the order.

The nature of the order is supported by, amongst other things, section 28 and section 28(1), your Honours, permits if it is property that can be registered, to put it shortly, then subsection (2) “a caveat may be lodged under section 89 of” the Transfer of Land Act.  Your Honours, where a restraining order has been made under section 18 “any person claiming an interest in the property (including the defendant) may apply” for orders excluding the property from the restraining order.  That is section 20.  Sections 21, 22 and 24 deal with the various circumstances in which that might happen.  Your Honours, coming more relevantly to the instant circumstances, one goes from there to section 35(1), which is the provision for forfeiture.  Section 35 says, relevantly, that:

(1)If –

(a)a person is convicted of a Schedule 2 offence; and

(b)a restraining order –

to put it shortly, had been made because of the charging, and –

(c)the restrained property is not the subject of an exclusion order under section 22 –

the restrained property is forfeited to the Minister on the expiry of 60 days after . . . 

(e)the defendant’s conviction –

Your Honours, that provides for an automatic forfeiture, but one goes then to identify the effect of forfeiture and ‑ ‑ ‑

GLEESON CJ:   Just before you pass on there, the way it would become the subject of an exclusion order under section 22 comprehends the provisions of section 21(b)(ii), does it not?

MR JACKSON:   Yes.

GLEESON CJ:   On an application of a person who has an interest in the property.

MR JACKSON:   Yes.  Your Honour, I think it might be section 22 in a case of this kind.

GLEESON CJ:   Section 22.  In all events, this same problem of construction or question of construction arises at the anterior stage.

MR JACKSON:   Yes, your Honour.  It arises at a number of stages in the Act, it does.  Where similar considerations and similar subsections apply, there might have been applications made of this at an earlier time, but there were not.  Your Honours, one comes then to section 35 which provides for an automatic forfeiture of the restrained property, but to see the effect of an order of that kind one goes to section 41, automatic forfeiture.  You will see that in section 41(2) at page 79, it says that:

If . . . 

(b)property is forfeited to the Minster by automatic forfeiture under section 35 –

the property vests in the Minister subject to every mortgage, charge or encumbrance to which it was subject immediately before the order was made or the automatic forfeiture occurred (as the case may be) and to –

(c)in the case of land, every interest registered, notified or saved under the Transfer of Land Act –

Your Honours, that means, if I can interpolate, that because the respondent in this case had achieved registration of her interest before the forfeiture and before the making of the restraining order, her interests could not be affected by the automatic forfeiture and so her application was unnecessary to protect her interests, but the vice of it and what gives rise to the present issue is that she sought and, of course, obtained an order that the whole of the property be excluded.  Your Honours, if I could return to section ‑ ‑ ‑

HAYNE J:   Can I just follow the way in which that last proposition you made about her interest not being caught by 41(2) because the operation of (c) stands with 41(3) and, in particular, 41(3)(a) and (3)(b).

MR JACKSON:   Your Honour, the position with those ‑ ‑ ‑

HAYNE J:   What is the property spoken of in (3)(a) and (3)(b)?

MR JACKSON:   Your Honour, the property spoken of in (3)(a) and (3)(b) is, as your Honours will see, “registrable property” as defined in subsection (1).  That being so, you will see that an equitable interest is granted by virtue of the registration of it “the Minister is entitled to be registered as owner of the property”.

HAYNE J:   Is that owner of the whole estate in fee simple or is that owner of that which Mr Roy Le had?

MR JACKSON:   Mr Roy Le.

HAYNE J:   Why?  When?  Does that not depend upon a differential understanding of the word “property” as between 41(2) and 41(3)?

MR JACKSON:   Yes, it does, your Honour, in a sense.  Section 41(3) can pick up 41(1) but, your Honour, if that be so, then the only result of that – and I accept what your Honour put to me as a possible view of the Act – but if that occurs, then the only difference is that it is pursuant to section 52 that there has to be an application to exclude the interests of the present respondent.

HAYNE J:   Just so, absent positive application for exclusion.  It seemed to me, at least at first blush, that 41 had the effect that if no exclusion order was made, the Minister was entitled to be registered in respect of the whole of the fee simple interest in the land, not just a severed co-interest referable ultimately to Mr Le’s joint tenancy.

MR JACKSON:   Your Honour, I accept the possibility of that view, but there is a difficulty with it and the difficulty with it is that it seems to give relatively little effect to subsection (2).

HAYNE J:   To see every interest registered, I agree, is a difficulty but I am not sure that 41 read as a whole is tractable.

MR JACKSON:   Your Honour, it is a difficult provision but in the end the – perhaps I went too far in saying that she did not need to do it – same question arises, really, and that is one as to the ambit of section 52.  It is the same question under section 52, in essence, namely, whether the order that is to be made under section 52 is to apply to all or none or whether it can apply to some.

HAYNE J:   It would seem to me that a view of the Act may be that whether the forfeiture is compulsory as in this case or the forfeiture is made under section 33 in consequence of application made, that what gives coherence to the provisions through the operation of 51 is that you take out that which is the subject of exclusion.  You do that in 33 through the combination of 33(2) and (5), particularly (5)(c) and you do it in respect of compulsory forfeiture solely through the operation of section 51.  Perhaps that is not a view of the Act that you would advance.

MR JACKSON:   Your Honour, it is a view I certainly would advance as a possible view.  It does not, in the end, with respect, affect the conclusion which we would seek.  Your Honours, I do not think there is a reference to section 41 at all in our written submissions but our learned friends do in theirs.

HAYNE J:   Just to delay one moment more, the Act’s use of the word “property” is perhaps slipping and sliding a bit where you see in paragraph (a) of the definition of “tainted property” the use of the word in a context in which it refers to a tangible thing or a piece of land or perhaps some intangible rights but, in effect, treats property as the object of the rights rather than the bundle of rights or whatever the rights may be.  Once you have that you have a difficulty.  Whether it is a difficulty that is insuperable for your case is a separate question, but there is at least a difficulty.

MR JACKSON:   Your Honour, the property that could be the subject of paragraph (a) of the definition of “tainted property” may itself be an interest in something, cases involving some kinds of fraud and so on.  Your Honour said intangible interest, yes.

HAYNE J:   Plainly so, but if A lends Blackacre to B knowing that B is going to grow a crop of cannabis on Blackacre, the property Blackacre is used in connection with a crime though B may have nothing more than a licence in respect of Blackacre.

MR JACKSON:   Yes, but, your Honour, accepting that, when one comes to section 51, your Honours will see that section 51(1) allows a person to apply to the court for an order under section 52.  The person who does so is a person claiming an interest in property.  You go then to section 51(4).  It says:

An application for an order under section 52 in relation to an interest in property must not be made by a person who was given notice of –

You come to section 52 and:

the court may make an order excluding property –

and then 52(2) allows the definition of that.  Your Honours, the point we would seek to make is that if one looks at the result arrived at by the majority, namely, that the whole of the property was excluded including the husband’s interest in it, that does encounter some difficulties, we would submit.  In the first place, as we have submitted earlier, the defendant had no entitlement himself to apply for that.  You see the words “other than the defendant” in section 51(1).  He is excluded from applying for that.  The second thing, your Honours, is that it brings about the result that a third person in cases where there is, say, a third person has an interest in the property but who could not satisfy the tests in section 52(1)(a) may yet have his or her interests excluded because another person with an interest in the property can satisfy those tests. 

The third thing is that if one goes back to the provisions to which I earlier referred, sections 47(1)(b), 51(4), 52(2) and 55(2) really appear in very clear terms to recognise that an order under section 52(1) may be made in respect of an interest in property as distinct from the whole of the property to which the interest relates.  In our submission, the views of the majority do not sit well with those provisions nor do the views of the majority sit well with the definition of “property” in section 3(1).  Your Honours, those are our submissions on that issue.

KIRBY J:   Could I ask, how did Justice Neave reason to the different conclusion?  It looks as though in the latter part of her reasons she thought it led to an absurd result, but she does refer to some of the provisions of the Act which ‑ ‑ ‑

MR JACKSON:   She had a number of reasons.  The first one commences at paragraph 65.  She refers to the definition of “property”, page 204, your Honour.  The second commences at paragraph 69 where she deals with the various sections of the Act and the argument about those.  Thirdly, commencing at paragraph 73, the rather absurd result.  Fourthly, paragraph 78, she relies on the explanatory memorandum to a degree.  So it is those four reasons ‑ ‑ ‑

KIRBY J:   If you were to win on this point, you do not need any of the other points, do you?

MR JACKSON:   No.  Your Honour, could I come then to the second point and that is the question of sufficient consideration.  Your Honours, the issue arises under section 52(1)(a)(v).  Your Honours will see that it provides that:

(a)if the court is not satisfied that the property in which the applicant claims an interest is not tainted property but is satisfied that . . . 

(v)where the applicant acquired the interest from the defendant, directly or indirectly, that it was acquired for sufficient consideration –

Your Honours will see that “sufficient consideration” is a term which is not defined.  The term used is not “valuable consideration” or “adequate consideration” but rather the question is, as stated, whether “it was acquired for sufficient consideration”.  In this case there was no financial consideration but the stated consideration was “natural love and affection”.  Your Honours, we would accept that as a general proposition “natural love and affection” is, as has been described, good consideration for a conveyance.  If I could go to the majority’s reasons, your Honours, at page 196, they refer in the opening part of paragraph 41 to “sufficient consideration” being:

sometimes used it as a synonym for adequate or “valuable” consideration . . . “Valuable consideration” ordinarily encompasses a benefit capable of being valued, although it does not include “good consideration” which, in conveyancing transactions, includes natural love and affection.

GUMMOW J:   It depends on the purpose for which you are asking the question.

MR JACKSON:   Yes, of course, your Honour.

GLEESON CJ:   We are not here trying to get rid of a possibility of resulting trust.

MR JACKSON:   No, I accept that, your Honour.  What I am going to say is two things.  The majority makes something of a leap, in our submission, at paragraph 44 by pooling four of their reasons by joining together the two concepts of “adequate consideration” and “good consideration”.  The critical question, in our submission, is what does the term mean in the Act?  They say, as your Honours will see at the concluding words of paragraph 44, that “no such contrary intention can be gleamed from the Act.” 

Your Honours, the underlying policy of the Act, we would submit, is what we have endeavoured to state in our written submissions-in-chief in paragraph 29 at page 6 of our written submissions, that the legislative policy is that criminals, their associates, those who depend on them for their situation, should not obtain any of the proceeds of a crime on the one hand.  Instead, those proceeds should be forfeited or otherwise dealt with in the public interest.  On the other hand, that whether the particular things be or be not proceeds of crime that in a broad sense the assets of those who are engaged in criminal activities should be available to satisfy the public.  Your Honours, we would refer also to the purposes of the Act in section 1 to which I have been already.

Your Honours, we would refer also very much in passing, I have to say, to what was said in New South Wales when Justice Grove in New South Wales Crime Commission v Mahoney.  It is a case behind tab 20 of our materials.

KIRBY J:   The language was different there though, was it not?  The language being considered was not “sufficient consideration”.

MR JACKSON:   Not very different, your Honour. Could I just take your Honour to the reference. It is (2003) 142 A Crim R 409 at page 419. You will see in paragraph 51 that the relevant provision was section 9(5) and it said:

An interest in property ceases to be serious crime derived property or illegally acquired property:

(a)when it is acquired by a person for sufficient consideration without knowing –

and so on.  In other words, follow another paragraph of the Victorian provision.  Then in paragraph 52 his Honour said it was:

argued that the phrase “sufficient consideration” should be construed in accordance with the general law of contract and he contended that, for example, a peppercorn would suffice.  In my view if such, or merely nominal, consideration were contemplated by the legislature, the description “sufficient” would be surplus.  As a matter of construction I am of opinion that it must be given meaning and, in context, this should be a sense of adequacy and reality, that is to say, something more than nominal.

GLEESON CJ:   What, if any, stamp duty implications attached to this description of the consideration?

MR JACKSON:   The “natural love and affection” or the ‑ ‑ ‑

GLEESON CJ:   I do not know if there is a sixth schedule that brings it to a higher rate of duty conveyances or agreements for conveyance for inadequate consideration but ‑ ‑ ‑

MR JACKSON:   Your Honour, I cannot give you an answer straight away.

HAYNE J:   My recollection is that it was duty free, Mr Jackson, but that recollection may well be imperfect.

MR JACKSON:   Yes, your Honour.  May we give your Honours a short note on that?

GLEESON CJ:   Thank you.

MR JACKSON:   Your Honours, we would simply say that the Act contemplates in relation to sufficient consideration something that involves either money or moneys worth.  As I say that, your Honours, I understand that it may be said on one view “natural love and affection” is at least moneys worth but, in our submission, the nature of the Act is contemplating something that does involve money or some more tangible property style consideration, your Honour.

GUMMOW J:   The person could still be a volunteer.....at any rate.

MR JACKSON:   Yes, your Honour.

HAYNE J:   Section 10 of the Act would be engaged, would it not? 

MR JACKSON:   Your Honour, section 10 deals with the definition, I think, of “goods” ‑ ‑ ‑

HAYNE J:   No, “property in which the defendant has an interest includes” gifts and property given away.

MR JACKSON:   I am sorry, your Honour.  Yes, your Honour.

GLEESON CJ:   What if it had recited that she had a claim under the Family Law Act or something like that and that this was in satisfaction of that?

MR JACKSON:   Your Honour, it may be, depending on the nature of the order that was in contemplation, that that would be regarded as sufficient consideration.  That is a possibility. 

GLEESON CJ:   That is probably the modern counterpart of “natural love and affection” in some cases, curiously.

MR JACKSON:   Yes.  Your Honour, I do not know that the expression “natural love and affection” in conveyances was always intended in the past to reflect the current situation.

KIRBY J:   There is a footnote in the joint reasons which refers to equitable interests, but they say they do not have to explore that question.

MR JACKSON:   Yes.

KIRBY J:   But against you is the fact that Parliament has used the word “sufficient consideration”.  There are terms that could have been used borrowed from bankruptcy law about “valuable” or some variation on that, that if it is good enough in resulting trust and for tax minimisation to recognise the distinction between this form of consideration and others, it is good enough in this area of the law and if you wanted to make it clear that it had to be valuable consideration, you could have easily done that by using that type of expression.

MR JACKSON:   Your Honour, there is not used in the provision a term which has a particular legal meaning.  It is not as if “valuable consideration” was used.  It is not as if “good consideration” was used.  A term that was used was “sufficient consideration” and that is something which, in a sense, takes its meaning from the Act and the Act is talking about questions of money.

GLEESON CJ:   As a matter of ordinary language, what is the difference between the meaning of “sufficient” and the meaning of “adequate”?

MR JACKSON:   There is not much difference, your Honour, but “adequate consideration” in the ordinary course of events does not cover “natural love and affection”.

GLEESON CJ:   No, exactly.

GUMMOW J:   “Adequate consideration” is an equitable notion.

MR JACKSON:   Yes, that is so.

KIRBY J:   Do you accept that for certain purposes in the law “natural love and affection” will amount to “sufficient consideration”?

MR JACKSON:   I accept that for certain purposes excluding the Confiscation Act, yes.

KIRBY J:   So your argument is that in this context used for the purposes of this Act that you do not give that the full meaning you might in some other context?

MR JACKSON:   No, your Honour, I do not.  I accept the premise, in a sense, but the consequence I do not, with respect, because this is not a provision, “sufficient consideration”, that one ordinarily sees other than in its closeness as perhaps a synonym for “adequate consideration” which would not cover “natural love and affection”.

GUMMOW J:   The question is, is this woman other than a volunteer?  She is a volunteer.  What are we then debating, I wonder?

MR JACKSON:   Your Honour, I think I made our submissions on that point.

KIRBY J:   If the only issue in the case were this issue, then it may be that when one has the confiscatory operation of the Act you would not struggle to give the words “sufficient consideration” a meaning that excluded the consideration as between spouses or people in similar relationships.

MR JACKSON:   Exclude the considerations between perhaps, your Honour, but one does have to bear in mind that insofar as the possible applications of the provision may be seen by looking at the spectrum of events that it might cover, if you take a case of the present kind where you have the transfer occurring at a time when there already had been a search of the house, the charging and so on with the serious offence, it might well lead you, in our submission, to the view that there should not be a meaning given to “sufficient consideration” which covered “natural love and affection” in every circumstance.  Your Honours, I do not know that I can advance that argument further.

Could I come to the final aspect, your Honours, and that is the question which arises under section 52(1)(a)(iii) and that is reasonable suspicion that it was tainted property.  The question which arises under section 52(1)(a)(iii) more specifically is whether the respondent acquired her interests in circumstances such as not to arouse a reasonable suspicion, that the property was used in connection with the commission of the offence, which was trafficking a commercial quantity of a drug of dependence?  Your Honours, the essential question, in a sense, is that if one looks at the other part of that provision, it was found that she did not know that the property was tainted property.  That was a finding about her which we would have difficulty in challenging. 

Your Honours, when one comes then to the other part of section 52(1)(a)(iii) which says whether she acquired her interest at the time she acquired it “in circumstances such as not to arouse a reasonable suspicion, that the property was tainted property”, our submission is that it is not a question of just knowing what the respondent knew and asking whether a person in those circumstances would have a reasonable suspicion but, rather, one looks to see whether a reasonable person viewing the actual circumstances would have such a suspicion.  We have referred to this, your Honours, in paragraph 37 of our written submissions, page 7.  Your Honours will see that the Court of Appeal at page 191 in the last few sentences of paragraph 24 said:

There is no warrant in the statutory language, or in authority, to import into the analysis some fictitious “reasonable person” to whom must be attributed some (arbitrary) state of knowledge of the relevant circumstances . . . 

In our view, the language of s 52(1)(a)(iii) is in substance equivalent to the phrase “knew or had reason to suspect”, considered by the High Court in Queensland Bacon Pty Ltd v Rees.

Your Honours, the relevant provision is at the top of page 192 of the appeal book:

“under such circumstances as to lead to the inference that the creditor knew or had reason to suspect –

Their Honours adopted what was said by Justice Kitto where he had said:

“The notion which ‘reason to suspect’ expresses… is, I think, of something which in all the circumstances would create in the mind of a reasonable person in the position of the payee an actual apprehension or fear –

et cetera.  Your Honours will note that their Honours have emphasised, as you will see from the footnote, the words “in the position of the payee.”  Even taking that for the moment, your Honours will also see that the words that were used by Justice Kitto in the same paragraph, the words were “which in all the circumstances”.  So if I can just emphasise that as well.  The terms of section 52(1)(a)(iii), in our submission, speak more objectively.  If one looks at the actual words:

where the applicant acquired the interest . . . in circumstances such as not to arouse a reasonable suspicion –

That, in our submission, prima facie, states a test which should be regarded as objective.  Could we refer, your Honours, in a sense by analogy, to what was said by Justice Barrett in the New South Wales Supreme Court in Australian Securities and Investment Commission v Edwards, which is (2005) 220 ALR 148 at page 208, paragraphs [248] to [251]. Your Honours should have this as a loose case, I think. Could I pause to say, your Honours, that the relevant provision is at page 153 in paragraph [6]. You will see in the first few lines of that page:

(1)      This section applies if . . . 

(c)at that time, there are reasonable grounds for suspecting that the company is insolvent, or would so become insolvent, as the case may be ‑ ‑ ‑

KIRBY J:   That is a quite different context, is it not?  Here we are talking about the statutory provision that is focused “without knowing”, that is definitely the knowledge of, in this case, Mrs Le, “and in circumstances such as not to arouse a reasonable suspicion”.  So you have got to read those words “in circumstances such as not to arouse a reasonable suspicion” in the context of something that is focusing on her knowledge, do you not?

MR JACKSON:   Your Honour, that is really so if one is talking about the provisions that deal with the position of anyone having grounds to suspect, because there will always be someone nominated or to whom the section applies.  What I was simply going to say about this case was that it was dealt with at paragraph [248] at page 205, the last few lines, “It remains to consider the question posed by para (c)”.  Then it was said in paragraph [249], and we would really adopt this as analogous:

The inquiry relevant to s 588G(1)(c) is not an inquiry concerning the particular director whose conduct is under scrutiny.  It is an inquiry into the objectively formed state of mind of a person of ordinary competence.

Then paragraph [251], third line:

A director of ordinary competence, viewing objectively the whole of the circumstances –

The point we would seek to make, your Honours, is that if you go to 52(1)(a)(iii) you are looking at the situation of someone who acquires an interest and acquires in circumstances, which it is said have to be “such as not to arouse a reasonable suspicion, that the property is tainted property”.  Could I say that, your Honours, if one is looking at this case, they are in a small two bedroom unit, there was a collection of materials, equipment, cash, drugs, open or concealed.  If you look at the collection of materials at page 112 – in the top paragraph they are put together – you will see the large silver-ish looking item, also where it was found, in his dressing cupboard, page 109 in the bottom photograph and also in the top photograph.  It hardly looks like material for making sponge cakes.

HAYNE J:   It is a car jack, is it not?

MR JACKSON:   It is, but the collection of materials is, your Honour, a somewhat unusual ‑ ‑ ‑

HAYNE J:   Not everybody keeps a car jack in their clothes cupboard, I will go that far with you, Mr Jackson.

MR JACKSON:   Very few, your Honour.  All sorts of things.  There was something above the rangehood in the – but the point I am seeking to make, your Honours, is that if your Honours look at the matters we have set out in our written submissions in paragraphs 35, 37 and 38, we would submit that at the time when the interest was passed to her and she acquired the interest there must have been a reasonable suspicion in relation to the property.

KIRBY J:   One might be suspicious and think that a reasonable person would be suspicious.  If you sit in court you become suspicious over time, but the primary judge here reached a view, he had the advantage of seeing the present respondent and the Court of Appeal, in explaining why they accepted his view, repeatedly refer to the fact – I am referring to paragraph 30 at line 30 and paragraph 36 and paragraph 33 – that on certain points there was no cross‑examination and the contrary was not put to the respondent.  On that basis it is a bit hard to come to the final court where the primary judge has found it, the Court of Appeal majority has not disturbed it, the Court of Appeal unanimously would not disturb it, and then to ask us because we are more suspicious people to substitute a different view.  That is not ordinarily our role.

MR JACKSON:   Your Honour, may I deal with those things.  Everything your Honour has said I would accept in relation to the first limb of section 52(1)(a)(iii). That is why we do not attack “actual knowledge”.  But if you are looking at the question whether this was done in circumstances such as not to arouse a reasonable suspicion and you are talking about a test which is objective, then this Court is in as good a position as any, of course.  But the way in which the Court of Appeal appears to have approached it is to have moved from the first limb to the second and talking in the second one about there not being evidence of this or that, or cross-examination, but the extent to which that might have been germane to dealing with the second limb is a different question. 

KIRBY J:   Anyway, I repeat that, if you win on the first point, this Court does not have to become involved in those other points.

MR JACKSON:   Perhaps I answered your Honour a little too quickly on that, bearing in mind what your Honour Justice Hayne was putting to me earlier about the role to be played by section 52.  If the effect of the several provisions is that all the interests are forfeited unless section 52 is complied with, then if we succeed on the principal question, the order should not have been made excluding the whole of the property but there would still be the question dealing with the position of the respondent, which is the one encompassed by the concluding provisions of section 52(1)(a). 

The orders that we seek at page 214 paragraph (3)(c) are that the respondent’s application to the County Court be dismissed and the application in its amended form commences at page 8 and you will see that it was in the alternative, that the whole property go, on the one hand – that is page 8 lines 35 to 40 – and, alternatively, that her interests be excluded.  That is at page 9 between lines 18 and 20. 

GUMMOW J:   Then the order is at 177, which was to hold the property. 

MR JACKSON:   Yes.  Your Honour, those are our submissions. 

GLEESON CJ:   Thank you, Mr Jackson. 

KIRBY J:   Just before you sit down, Mr Jackson, I am now a little bit lost.  I thought I had read in the submissions – it may, of course, have been in the respondent’s submissions – that if you were to win on the first point the matter would have to go back to the County Court to have an order made.  You ask that the application to the County Court for exclusion be dismissed.  Does that therefore mean you qualify your answer to me earlier that it is enough for you to win on the first point?  Do you need as well to win on the second or third points in order to get the order of dismissal, because all the first point says is that you do not, just by getting up on the property, exclude the entire property; you only exclude the interest.  Then you would presumably have to work out what interest and what order should be made in the light of that interest.

MR JACKSON:   There are several aspects involved in what your Honour has put to me.  First of all, what your Honour is thinking about, I think, is an observation made in our learned friend’s written submissions, which is I think paragraph 19 of those submissions at page 5.  That posits the possibility that we are arguing for a discretion in section 52, and we are not.  So the going back to another court issue does not really arise.  That is the issue you raise but it is a point we are not raising, in fact, so it does not arise. 

Coming back to the main point your Honour was putting to me, I think I did answer too quickly your Honour’s earlier question.  The position would be this.  If it is right to say that the way in which the Act is to be interpreted is that the interest of the respondent is not protected by section 41, then the position would be that, if our first argument were successful, the result would be that, by its operation, the order which excluded the whole of the property would be set aside.  The next question would be what would follow from that.  The respondent would have established an entitlement to have her interest excluded unless we succeeded on one of the two other arguments which I advanced. 

KIRBY J:   Both of the two or one of the two other arguments?

MR JACKSON:   If we succeeded on either of those.

KIRBY J:   Yes.  I think I understand it now.

GLEESON CJ:   Thank you, Mr Jackson. 

MR GRACE:   Your Honours, one of the keys to understanding the context of the legislation may, in fact, be section 41.  If I could take your Honours to that section at the outset, your Honours have had read to you subsection (2) and subsection (3), but subsection (1) is deserving of some note.  It defines “registrable property” as meaning:

property title to which is passed by registration on a register kept by a relevant registration authority.

The effect of the automatic forfeiture under the Act is that the registrable property is forfeited to the Minister and, pursuant to the provisions of section 41, it is submitted that the registrable property means the whole property – the undivided property.  That property vests in equity.  It does not vest in law until the registration occurs.

If I could go back to section 41(2), my learned friend, Mr Jackson, made reference to the provisions of subsection (2)(c) and postulated the possible interpretation that the interest of the respondent could there be recognised or allowed for in the vesting of the property in the Minister. 

GLEESON CJ:   This section, section 41, may operate in circumstances where there has already been an exclusion order under Part 2, may it not?

MR GRACE:   Yes.  That is my understanding, your Honour.

GLEESON CJ:   If there has been such an exclusion, does that have any bearing on the construction of section 41 that you are advancing?

MR GRACE:   It has to be married with – I am not sure if we are on the same wavelength there, your Honour, but section 55 talks about return of property.  You will see there provisions for property forfeited in section 55(1) for:

any person who claims to have had an interest in the property immediately before it was forfeited may apply in writing to the Minister for the transfer of the interest to the person.

(2)If a court makes an exclusion order under section 50(1), 52(1) or 54(1) in respect of an interest in property, the applicant for the exclusion order may apply in writing to the Minister for the transfer of the interest to the person.

I do not know if that assists. 

GUMMOW J:   The property that vests in the Minister in this case would not be identical, would it, with the interest as joint tenant your client had?

MR GRACE:   It would include but would not be identical.

GUMMOW J:   That is not right, either.  Does not the forfeiture destroy the jointure?

MR GRACE:   The forfeiture of the whole ‑ ‑ ‑

GUMMOW J:   And render them tenants in common?  I do not know; that is something one needs to think about.

MR GRACE:   The forfeiture of the whole, absent any exclusion order, would destroy all interests.

GUMMOW J:   Yes, but if you are wrong about that, it just forfeits the interest as joint tenant.

MR GRACE:   Then the Minister would survive as a tenant in common with the remaining interest holder. 

KIRBY J:   Why does forfeiture of its own character destroy all interest?  Why is there not simply forfeited to the Minister either the interest that can be forfeited or the whole of the interest in a property subject to the interest of some person who is entitled to an exclusion order?

MR GRACE:   It is not just persons who are entitled to exclusion order.  Under the terms of section 41(2)(b), anyone who holds a registered mortgage, charge or encumbrance or:

in the case of land, every interest registered, notified or saved under the Transfer of Land Act1958 or the Property Law Act 1958 –

has an interest continuing, and the Minister takes title subject to all of those interests.  In this case, indeed, there was a mortgage to the bank – I think it was the Westpac Bank – and they would be protected under the terms of section 41(2).  If I could take your Honours to section 52 ‑ ‑ ‑

HAYNE J:   Before you depart from 41, the effect of the forfeiture is prescribed relevantly by 41(3), and it is necessary to identify what is “the property”, which is the hinge about which section 41(3)(a) and section 41(3)(b) turn.

MR GRACE:   In our respectful submission, the property is all the property because that allows then section 55 to have an operation whereby the person who is the successful applicant for exclusion can then apply to the Minister to have the property transferred into that person’s name.  That is the mechanism that the Act contemplates.

If I could turn to the terms of section 52 and could I remind your Honours that the preamble in subsection (1) is repeated in terms in the preamble to subsection (1)(a), so the words:

the court may make an order excluding property in which the applicant claims an interest from the operation of section 35 –

are repeated when, in subsection (a), the legislation says –

if the Court is not satisfied that the property in which the applicant claims an interest is not tainted property –

So the same phraseology is used in the preamble in those two parts of the section. 

Had the legislature intended the subject matter of an exclusion order to be the applicant’s interest in the property, it would have been a simple matter for the legislature to have used those words rather than the words “property in which the applicant claims an interest”.  The legislature has drawn a distinction.  I want to take your Honours to the explanatory memorandum that is relied upon by the appellant because it is not as conclusive as the appellant or indeed, with respect, Justice Neave would have us accept.

GLEESON CJ:   Mr Grace, in my print of the Act, in section 35 there seems to be a footnote.  In subsection (1)(c) there are the words “the restrained property” and then there is footnote 1.  What is that a reference to?

MR GRACE:   Footnote 1 reads:

Section 23 enables a court to declare that a restraining order, to the extent to which it relates to certain property, shall be disregarded for the purposes of section 35.

GLEESON CJ:   Where do we find that footnote?

MR GRACE:   It is in my version. 

GLEESON CJ:   What page of the print?

MR GRACE:   No.  I have one of the Law Book Company publications.  I am told it is page 266 of the reprint.

GLEESON CJ:   Thank you.

MR GRACE:   In section 52, as I have explained, the legislature has formed a distinction between property on the one hand and the applicant’s interest in the property on the other.  Subparagraphs (1)(a)(ii) and (iii) refer to the property.  They do not refer to the interest in the property.  On the other hand there are references to the applicant’s interest in subparagraphs (1)(a)(ii), (iii), (iv) and (v).  The same distinction is made in subsection (52)(1)(b).

Your Honour Justice Kirby has already commented in relation to the draconian nature of the legislation.  The provisions of the Act that extend to property in which the defendant has an interest which is defined broadly and tainted property, which is defined broadly, give a very wide ambit to the extent and coverage of the legislation.

One important aspect which may have gone slightly unnoticed by your Honours is this, that notwithstanding the exclusion from forfeiture of the property, it remains restrained.  It is not as if the intent of the Act is necessarily thwarted by the interpretation given by the majority of their Honours in the Court of Appeal.  That is because there are in the Act extensive provisions that deal with pecuniary penalties that may be imposed upon a person in the position of Roy Le who has profited from drug trafficking and the property, at least his interest in the property would remain restrained to the extent of allowing the Director to apply for a pecuniary penalty order to reflect the compensation due to the State for his drug trafficking activities.

Similarly – not in this case – in other cases the restrained property would remain available to satisfy any applications for compensation or restitution to any victims of crime.  It is not true to say that the effect of this reasoning of the Court of Appeal would have the adverse effect which is being submitted as being totally contrary to the intent of legislature. 

KIRBY J:   Justice Neave thought it was absurd but, even if you do not put it quite so high, it does seem to offend the general scheme of the Act.  It means that, because Mrs Le has an interest, Mr Le’s interest in the property is immune from confiscation, which is an odd outcome.

MR GRACE:   It is not immune.

KIRBY J:   She is completely innocent but, by inference, if he is convicted he is not.  It seems odd that his interest is completely immunised from being confiscated.  That is odd, given the overall purpose of the Act.

MR GRACE:   It is not immunised if he has made profits from drug trafficking.  His interest can be attached to satisfy a pecuniary penalty order under the Act because his interest remains restrained, so notwithstanding the whole of the property being excluded from automatic forfeiture that is not the end of the problems for the Le family.

GLEESON CJ:   Is that the point of section 52(2)?

MR GRACE:   Yes.  We say that is the point of section 52(2) in the circumstances of this case. 

GUMMOW J:   What is the significance of the definition of “property” in terms of meaning something and including something else?  It is a definition that says “means Blackacre and includes any interest in Blackacre”.  There is authority on the significance of a definition framed in that way, is there not?

MR GRACE:   It is merely, in our submission ‑ ‑ ‑

GUMMOW J:   Ocean Marine, I think – one of the money‑lending cases dealt with that. 

MR GRACE:   Yes.

GUMMOW J:   It means this, does it not?  It means Blackacre if all you are talking about is one person with Blackacre.  If Blackacre has several persons with an interest in it, then you have to give “property” wherever it occurs this distributive meaning and that solves the problem.  In the great run of the mill of cases maybe the miscreant will own Blackacre without any other interested party being involved at all.  You do not have to worry then.

MR GRACE:   No, you do not.

GUMMOW J:   But you do in this case because there was a joint tenancy.  That brings further problems with it as to forfeiting the interest in the joint tenancy which, it seems to me, creates a tenancy in common.  It is hard to understand it, but that is a problem for Mr Jackson, not for you.  It is a problem. 

MR GRACE:   Yes.  Your Honours may be assisted with an extract from the text by Professor Butt of the Sydney University Law School, which I have provided to the Court which indicates that at least in an involuntary alienation in bankruptcy or sequestration there is a severance of the joint tenancy. 

GUMMOW J:   We had a case called Peldan last year on this very question, I thought. 

MR GRACE:   Yes.  It is in the appellant’s authorities.  Your Honours, I wanted to take you to the explanatory memorandum upon which reliance has been placed.  That is behind tab 3 in the appellant’s book of authorities.  You will find at page 30 where there is a reference to clause 52 of the Bill and the reference in the explanatory memorandum commences on page 30 in relation to clause 52 as follows:  

Clause 52 deals with the determination of an application under clause 51.  An interest in property may be excluded from the operation automatic forfeiture in certain circumstances. 

It then sets out the various circumstances.  At the bottom of the page:

If the applicant is able to prove the matters referred to in paragraphs (d) and (e), this will prove that the defendant does not have an interest in the property.

That bears rereading, your Honours might think, because it makes little sense.  Over the page:

If the court is satisfied that the property in which the applicant claims an interest is not tainted property, then the Court may exclude that property or interest in property if it is satisfied the applicant’s interest in the property is not subject to the effective control of the defendant and that the applicant acquired the interest in the property -

That should be “for” –

sufficient consideration.  Again, by proving these two matters, the applicant is proving that the defendant does not have an interest in the property.  If the defendant did have an interest in the property then such property was liable to automatic forfeiture.

If the court is satisfied that the property or interest in the property should be excluded from the operation of forfeiture, the court may also make a declaration concerning the nature, extent and value of the applicant’s interest in the property. 

It is hard to marry the reasoning contained in the explanatory memorandum with the submissions made by the appellant as providing a basis for the interpretation that it seeks. 

GUMMOW J:   All I get out of the memorandum is that the person who wrote it had never read what Hohfeld said about this, which is set out in Yanner v Eaton 201 CLR 351 at 389 paragraph 86 – namely that there is a lot of confusion that goes on when you are talking about the physical object or the aggregate of legal relations which pertain in respect of that physical object or in some blended sense. Those who draft statutes tend not to have these things in mind, unfortunately.

MR GRACE:   Yes.  The short point is that the explanatory memorandum does not give the support that the appellant seeks to gain from it.  Your Honours, there were four particular sections that my learned friend, Mr Jackson, commenced to outline in detail as being supportive of the conclusion the appellant ultimately seeks.  Those sections were sections 47(1)(b), 55(2), 51(4) and 52(2).

If I could just briefly address the issues raised by Mr Jackson.  Firstly, in respect of section 47(1)(b), an order excluding property under section 52 can also be described as an exclusion order in respect of the applicant’s interest in the property.  That, it is submitted, is the answer to the conundrum that Mr Jackson presented to your Honours in respect of that particular subsection.

Section 55(2) I have already addressed in part.  That is the mechanical provision that allows for what would transpire if the order of the court below was not disturbed by this Court.  That is that the applicant, the respondent, Mrs Le, would apply in writing to the Minister for the transfer of her interest to her, unencumbered subject to the mortgage to the bank.  Section 51(4) really, in our submission, does not take the matter any further.  It is again a mechanical provision and it does not add to the substantive argument.  In respect of section 52(2), I have already answered your Honour the Chief Justice in relation to what is effected by that particular subsection. 

KIRBY J:   Are you going to draw the threads together and say how you say the Act works quite rationally?

MR GRACE:   Yes, your Honour.

KIRBY J:   Have you finished the lengthening of the individual sections?

MR GRACE:   Yes, I have.  The Act works in a way in which all the respective interests of the State and the innocent and guilty parties are protected and recognised.  The State seeks to impose this legislation on the community where it has been described as draconian; where it has as its purpose general deterrence and to ensure that persons who are engaged in serious crime do not profit from its proceeds.

The interpretation accommodating the draconian nature of the legislation allows for the exclusion of the property under section 52 without a derogation or a prejudice to the State’s interest in circumstances where section 41 operates in conjunction and protects all the innocent third party interests and in which the applicant, such as the respondent in this case, can satisfy the Court of her innocence of wrongdoing and of her ability to satisfy the various conditions set out in section 52.

If you take it all in context, all the parties’ interests are protected if the interpretation we advance in our written submissions and in the oral submissions are accepted.  I accept that the appellant’s arguments provide one view of an interpretation of the legislation but it is not the only view.  The legislation had the opportunity at the time of the passing of this Act to incorporate the provisions that would have put this issue beyond doubt, but they chose to use the word “property” instead of “interest in property” repeatedly in the various sections and it was a conscious decision, in our submission.

GLEESON CJ:   You said earlier that, if your construction is correct, then Mr Le’s interest in the property nevertheless remains available to meet the civil penalty provisions.

MR GRACE:   Yes.

GLEESON CJ:   But if your construction is correct, there has been no forfeiture and therefore no severance of the joint tenancy.

MR GRACE:   Yes.

GLEESON CJ:   What is the value of Mr Le’s interest as a joint tenant?

MR GRACE:   That would have to be determined.  It can only be determined by ‑ ‑ ‑

GLEESON CJ:   And how would that value be realised in order to satisfy his obligations under the civil penalty provisions?

MR GRACE:   The provisions are provided for in section 55.

GLEESON CJ:   Would that involve a severance of the joint tenancy?

MR GRACE:   The Act is silent on that, your Honour.

GLEESON CJ:   To put it bluntly, who would want to become a joint tenant with Mrs Le?

MR GRACE:   No one. 

GLEESON CJ:   Which is no doubt why the solicitor conveyed it to them as joint tenants and not tenants in common in the first place.

MR GRACE:   Yes.  Section 55(6) provides that:

If a person applies under sub‑section (1) or (2) in respect of an interest in property, which is no longer vested in the Minister and the Minister is satisfied the interest was vested in the applicant immediately before the forfeiture ‑ ‑ ‑

GUMMOW J:   No longer vested.

MR GRACE:   If an order has not been made, the Minister may make a declaration of the value as at the time of making the declaration of the interest and there is payable to the applicant an amount equal to the value determined by the court or declared under paragraph (a) less any other amounts that may have been due by the applicant under various other sections of the Act.

You will see that in section 55(9) there is provision that the Minister can determine not to transfer an interest.  In that case, the Minister has to pay to the applicant the value the Minister determines as the value of that interest.  So there are mechanical provisions that determine that.  The court has a role to play under section 52(2) to determine the nature, extent and value of the applicant’s interest. 

Your Honours, could I move on to the issue of sufficient consideration.  Now, if the appellant’s argument holds true, then if the property had been transferred to the respondent 10 years ago for natural love and affection, the operation of the Act would defeat that transfer.  That is the effect of the acceptance of that argument.

KIRBY J:   The appellant quotes a passage I wrote 20 years ago – or it might have been in Cannane 10 years ago – in which I pointed out that it is not a little uncommon in bankruptcy law to have people trying to divest their property to their family.  That is what happened here.  The sequence of events was the crime, the police visit, I think two weeks later the steps to create this interest in Mrs Le.

MR GRACE:   Yes.  There is an answer to that. 

KIRBY J:   It would be very defeating of the policy of the Act, one would think, if that can happen.  Maybe it is lawful, but ‑ ‑ ‑

MR GRACE:   Your Honour, there was no challenge to the respondent’s evidence before his Honour Judge Campbell. 

KIRBY J:   Yes, but you do not leave your common sense outside the court when you are going to hear evidence of this kind.  Just look at the sequence of events.

MR GRACE:   Yes; I accept that, your Honour. 

KIRBY J:   If this can happen, then every time you have a confiscation application, people will just rush off and create these interests for love and affection and walk, in respect of that interest, out of the Act.

MR GRACE:   His Honour Judge Campbell postulated a further basis that was a marital obligation in accordance with the unchallenged evidence given by the respondent before him.  You will find that at page 170 of the appeal book at paragraph 38.  His Honour said this: 

The Applicant has given a reasonable, and in the circumstances, plausible, reason for “her” requests as she put it.  Whilst natural love and affection may not be sufficient to justify a commercial contract between people at arms length, it is a common “consideration” in respect to the alteration of property interests between husband and wife, as is the case here.  In any event, it would seem to me to be arguable that what Le was doing in transferring a moiety of his interest in the property was no more than fulfilling a matrimonial obligation.  The implication that Mr Le did effect the transfer to avoid the consequences of his wrongdoing rests upon supposition, which supposition might have been more attractive had he sought to transfer the whole of his interest in the property to the Applicant. 

I am satisfied, in the circumstances, that the Applicant, as his wife, acquired her interests in the property for a sufficient consideration.

It is submitted that that, with respect, answers your Honour Justice Kirby’s query.  The other point that I seek to raise at this juncture is, could I refer your Honours to the respondent’s book of materials behind tab 11.  There you will see an extract from the Bankruptcy Act (Cth).  Section 121(6) reads: 

For the purposes of subsections (4) and (5), the following have no value as consideration . . . 

(d)      the transferee’s love and affection for the transferor.

There you have a piece of legislation which is specific in excluding love or affection as a consideration for a transfer.

GLEESON CJ:   Mr Grace, it is put against you that, in this context, “sufficient” means much the same as “adequate”.  What do you say it means?

MR GRACE:   We submit that it means the transfer for a consideration which is accepted as being a mode of consideration for the transfer of property at law. 

GLEESON CJ:   You mean lawful?

MR GRACE:   Lawful.

GLEESON CJ:   A peppercorn would do?

MR GRACE:   A peppercorn may not do because that may be reflective of a fraud on the Minister within the context of this Act.  We are talking about transfer of land, a conveyance of land between spouses or interests in land between spouses.

GLEESON CJ:   A dollar?

MR GRACE:   The same.  In the context of this legislation it may not be sufficient consideration because if one is postulating a dollar or a peppercorn, one is postulating a commercial transaction at arm’s length.  This is not a commercial transaction, this is a marital obligation, as his Honour found, which justified the transfer for natural love and affection, and there was good reason why his Honour found that.  The good reason was this, that in the event that Mr Le, who was of unsound health, who was aged approximately 65 or 66 years at the time of his conviction, were to die then Mrs Le would not be protected in terms of survivorship. 

GLEESON CJ:   How old was Mrs Le at the time?

MR GRACE:   Fifty one.

GUMMOW J:   In your submission, a dollar would be valuable consideration, would it not?

MR GRACE:   Yes.

GLEESON CJ:   But it would not be sufficient?

MR GRACE:   No.

GLEESON CJ:   Why not?

MR GRACE:   Because one would presume that the dollar consideration was at arm’s length and subject to a contractual obligation by both parties.  If it was a $1 transaction that was presumably entered into as a design to defeat the purpose of the Act ‑ ‑ ‑

GLEESON CJ:   I am not talking about a sham.  I am postulating that she handed over a dollar, or assumed an obligation to pay a dollar, for the serious reason that they both wanted this to be a transaction for valuable consideration.

MR GRACE:   In those circumstances, it may be.

GLEESON CJ:   Sufficient?

MR GRACE:   Yes.

GLEESON CJ:   How would you know whether it was or it was not?

MR GRACE:   An examination by evidence, by viva voce evidence and, given the ability of the Director to cross-examine the claimant, who was claiming that it was for sufficient consideration, the onus being on the applicant – the respondent in this case.

GLEESON CJ:   You seem to mean by “sufficient consideration” something that is not a sham. 

MR GRACE:   That is the whole thrust of the submission. 

GLEESON CJ:   But if it is a sham, no question arises.

MR GRACE:   That is right. 

GLEESON CJ:   It is no transaction.

MR GRACE:   That is right.

GLEESON CJ:   So that all the legislation means, when it refers to “sufficient consideration” is a transaction that is not a sham transaction.

MR GRACE:   Yes.

KIRBY J:   “Sufficient” seems to postulate the word “sufficient” by a ratio between that which passes and the value of the property.

MR GRACE:   Yes.

KIRBY J:   If you are in the business of looking at the ratio, then how do you measure love and affection? It may in law be a consideration but, in this context, is it sufficient, given that the statute is looking at some relationship to the value of the property?

MR GRACE:   But the statute is not looking at that necessarily.  The statute has not excluded in terms the types of circumstances that his Honour the Chief Justice raised.  The statute has not excluded natural love and affection as being a form of consideration, which the Bankruptcy Act has specifically excluded.

KIRBY J:   You read “sufficient” to be legally sufficient?

MR GRACE:   Yes.

GLEESON CJ:   Mr Grace, did the primary judge conclude that this was sufficient consideration because he found as a fact that the transaction was in discharge of a matrimonial obligation?

MR GRACE:   I want to be absolutely precise with the words he used, your Honour.  It is at page 170.  He put it no higher than to say: 

it would seem to me to be arguable that what Le was doing in transferring a moiety . . . was no more than fulfilling a matrimonial obligation.

GLEESON CJ:   I understand that he said that, but what is the status of what he said?  Is it a finding of fact of some kind, or is it a sort of footnote to his judgment – a sort of passing comment, as it were?

MR GRACE:   I cannot say he put it as highly as a finding, but I can certainly say that the submission by the Director before him that the transfer was a sham was rejected.  What was left after the rejection of that submission was the evidence of the respondent which was unequivocal and clear that that was her way of protecting herself for the future in the event that he died. 

GLEESON CJ:   Yes.  There seems to be hanging in the air an unresolved suggestion that if push came to shove she could have forced him to do this. 

MR GRACE:   She may have had some interests under the Family Law Act, or indeed she might have been able to seek a declaration in the Supreme Court to have her interest declared.  That might have been another alternative, but it seems that this was the way in which his advisers decided to proceed at the time. 

GLEESON CJ:   It may be that what he was doing was nothing more than a recognition of some legitimate right or interest that she had.

MR GRACE:   Yes.

GLEESON CJ:   But there does not seem to be a finding about that. 

MR GRACE:   No, there is not.  Your Honours, could I move on to the issue of reasonable suspicion.   Before I move on to discuss and submit certain matters in reply to my learned friend, could I remind your Honours what a number of members of this Court, including your Honour the Chief Justice, had to say in Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540. You will find a copy of that case in the respondent’s book of authorities behind tab 6. At paragraph 48 in the judgment of your Honour the Chief Justice, which appears at page 567 of the report, your Honour said this:

The course of proceedings raises a question as to the approach this Court should take in an appeal where there are concurrent findings of negligence (or absence of negligence) at a trial and in an intermediate appellate court . . . 

As Hayne J pointed out in Woods, although a finding of negligence (or absence of negligence) is conventionally described as a finding of fact, it also involves a normative judgment.  The reasons given by the minority in Woods in favour of reversing the decision of the Western Australian courts illustrate the point . . . 

Concurrent findings may exist at different levels of particularity, and either with or without an element of normative judgment.  In Bridgewater v Leahy, a case concerning an allegation of unconscionable conduct, there were concurrent findings that a transferor of land was not under any special disability, and that a transaction was not unconscionable.  Both findings were reversed, by majority, in this Court. 

Over the page, in paragraph 51, an extract from the judgment of Justice Deane in Waltons Stores v Maher is there set out and I quote: 

This Court should not, in the absence of special reason such as plain injustice or clear error, disturb them.  In a context [in which] the cost of litigation has gone a long way towards effectively denying access to the courts to the ordinary citizen who lacks access to government or corporate funding, it is in the overall interests of the administration of justice and of the preservation of at least some vestige of practical equality before the law that, in the absence of special circumstances, there should be an end to the litigation of an issue of fact at least when the stage is reached that one party has succeeded upon it both on the hearing before the court of first instance and on a rehearing before the court of first appeal. 

GLEESON CJ:   Mr Jackson has told us that he is not trying to disturb the finding that your client did not have knowledge.

MR GRACE:   He is trying to disturb the finding that the court found that she did not have a reasonable suspicion.

GLEESON CJ:   I think there is a dispute between the two of you, is there not, as to what that means.  I thought there was a dispute between the subjective and the objective approaches to that.  Mr Jackson says, rightly or wrongly, that what the expression “circumstances such as not to arouse a reasonable suspicion” means is that the court has to consider what she actually knew and then ask itself whether what she actually knew was such as to arouse a reasonable suspicion in a reasonable person.

MR GRACE:   Yes; I accept that, but it seems to be suggested by Mr Jackson that the court applied the wrong test – that is, it did not apply an objective test, it applied some sort of subjective test – and, further, that the court conflated the two tests that apply to the issue of knowledge and the reasonable suspicion.

GLEESON CJ:   The question is whether it was tainted property or the question is whether the circumstances were such as not to arouse a reasonable suspicion that the property was tainted property.

MR GRACE:   Yes.

GLEESON CJ:   Then if you go over to the definition of “tainted property”, that relevantly is property that was used in connection with the commission of an offence.  What other primary facts that were found in your favour on what she knew about what was going on on the part of her husband?

MR GRACE:   In her affidavit, which you will find at page 10 of the appeal book, page 11 at the top of the page, paragraph 6: 

I had no knowledge that there was heroin bought to the house -

That should be “brought” -

or that it remained in the house.  I had no involvement with any heroin or drugs and I had no knowledge at the time that my husband was involved.  I have never been charged with any offence. 

GLEESON CJ:   Was that accepted in the appellate court as well as the primary court?

MR GRACE:   Yes, and she was not challenged in cross‑examination by one single question that sought to challenge that statement.  That is the factual substratum upon which his Honour Judge Campbell reached the conclusion, after accepting her as a witness of truth, that she ‑ ‑ ‑

KIRBY J:   But Mr Jackson looks at us and says, “Get real.  This is a tiny unit.  We have seen the photographs, cramped circumstances, husband and wife, a different country originally, living in close confines.  Is that a realistic conclusion?” I must say that I feel uncomfortable saying it is a realistic conclusion. 

MR GRACE:   Your Honour, these proceedings were conducted as adversarial proceedings.  The respondent was directed to place on affidavit her evidence, which was to be used as evidence-in-chief.  If she sought to proceed in her application to exclude the property, she had to place herself as being open for cross-examination, which she did.  She was cross‑examined, but she was never challenged either as to her knowledge or as to her suspicion.

KIRBY J:   She also said somewhere here that on that day she was feeling ill when the police arrived. 

MR GRACE:   Yes.  She was lying down. 

KIRBY J:   It is such a tiny unit and these are substantial pieces of equipment.  They are living there together.

MR GRACE:   The equipment was secreted in part.

KIRBY J:   It may be that people have secrets and do not reveal them, but it is very hard to accept in those very small confines. 

MR GRACE:   Yes.  The items were secreted in part. 

KIRBY J:   This is not a large mansion in the eastern suburbs of Sydney.

MR GRACE:   Mr Jackson, with some frivolity, suggested how would she not know that there was some powder in the range hood? It was secreted in the range hood; it was not visible to the naked eye.  There was an item of equipment secreted behind the fridge; there was an item – scales ‑ ‑ ‑

KIRBY J:   Presumably that is not to secrete it from, or may not be to secrete it from a wife or spouse, but to secrete it from the unwelcomed eyes of any stray people who come into the house, including policemen.

MR GRACE:   One saw the photograph of the jack in the cupboard.  There was hardly secretion of that.  In any event, there was no factual basis upon which a finding ‑ ‑ ‑

KIRBY J:   I called that to Mr Jackson’s attention because it said three times in the joint majority reasons in the Court of Appeal, and on this point Justice Neave has agreed with the majority.  In effect, he said, “That is just hard.  You should not accept that. 

MR GRACE:   I am sorry.  Justice Neave was unanimous on ‑ ‑ ‑

KIRBY J:   No.  I am saying that Mr Jackson urges on us that it just is not really realistic to say that she objectively – the test is not what was in her mind.  Let it be accepted that it is accepted in your favour that she did not have it actually in her mind but that a reasonable person would be suspicious in the circumstances of these large pieces of equipment in a small unit.

MR GRACE:   If she had knowledge of them.  There was no evidence that she had knowledge of them.  This was the factual basis upon which his Honour Judge Campbell had to reach his judgment and upon which the Court of Appeal was asked to interfere.  In our submission, for the reasons that the Court of Appeal indicated, the reasoning of his Honour the trial judge was unimpeachable on this aspect.  As your Honours know, Justice Neave agreed on that particular issue. 

GLEESON CJ:   There is a slight difficulty, Mr Grace.  It may not be fatal to you on this argument.  It may be just the way it fell out.  There is a way of giving a literal reading to paragraph 6 of your client’s affidavit which is not inconsistent with there having been circumstances that were such as to arouse a reasonable suspicion.  She swears to what she had knowledge of.  A person can honestly swear to what they had knowledge of, even if they are operating in circumstances that are such as to arouse a reasonable suspicion.

MR GRACE:   Yes.

GLEESON CJ:   In other words, this affidavit does not purport to be an account of the whole circumstances in which she was living.  She does not say, for example, where her husband got his money from, or where she thought he got his money from.

MR GRACE:   In the circumstances of this case, your Honour, the reasonable suspicion could only have been based upon some knowledge on her part of what her husband was doing, of which there was no evidence.  There could be no other factual basis for the forming of the reasonable suspicion.  To import into the circumstances a suggestion of a finding that she must have known is to contradict the evidence that remained uncontradicted despite full opportunity by the Director to challenge it.

GLEESON CJ:   It may be that if it has been left in a somewhat unsatisfactory evidentiary position at this point, you are the beneficiary of that.

MR GRACE:   Yes, perhaps. 

KIRBY J:   That did seem to play a part in the majority reasoning in the Court of Appeal.  They say three times that she was not challenged, was not cross‑examined, on these matters.

MR GRACE:   Yes, and it might be somewhat seen as an unjust outcome if there were to be an adverse finding made against her in circumstances where she was not challenged on the version she gave. 

KIRBY J:   One might add to the concurrent findings issue, which is never absolute, the fact that the trial judge saw her give oral testimony and had to form some view of her truthfulness on such a matter where one would think there would be a natural suspicion about it, given the sequence of events and the size of the home unit.

MR GRACE:   Yes.

GLEESON CJ:   Mr Grace, is that a convenient time?

MR GRACE:   Yes, it is. 

GLEESON CJ:   We will adjourn until 10.15 tomorrow morning.  I assume that this will be finished within 10 or 15 minutes, Mr Jackson. 

MR JACKSON:   Yes.

AT 4.17 PM THE MATTER WAS ADJOURNED
UNTIL TUESDAY, 7 AUGUST 2007