Director of Public Prosecutions v Sienczewski - [2010] SASC 16

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
DPP v SIENCZEWSKI & ANOR
[2010] SASC 16
Judgment of The Honourable Justice Duggan
4 February 2010
CRIMINAL LAW - PROCEDURE - CONFISCATION OF PROCEEDS OF CRIME AND RELATED MATTERS - FORFEITURE OR CONFISCATION - DISCRETION TO MAKE ORDER - HARDSHIP
Appeal against decision of Magistrate to dismiss application for Pecuniary Penalty Order – whether the Magistrate erred in exercising the discretion arising under s 95(1) of the Criminal Assets Confiscation Act 2005 (SA) by reference to matters relevant to the exercise of the discretion under s76 – whether Magistrate erred by taking into account consideration of hardship to offender – appeal allowed-matter remitted for rehearing.
Criminal Assets Confiscation Act 1996 (SA) s 8, s 9, s 10, s 15(5); Criminal Assets Confiscation Act 2005 (SA) s 95, s 24(1), s 34(1), s 47(1), s 47(3), s 47(4), s 74, s 76, s 76(4)(c)(ii), referred to.
DPP v Alexander (2003) 86 SASR 577; DPP v George (2008) 102 SASR 246, applied.

DPP v SIENCZEWSKI & ANOR
[2010] SASC 16
Magistrates Appeal: Criminal

DUGGAN J: On 2 December 2005 the respondents, Mr and Mrs Sienczewski, were charged with producing cannabis at their house at Reynella.
Mr Sienczewski pleaded guilty to the offence on 12 January 2007. The charge against Mrs Sienczewski was withdrawn. After a disputed facts hearing a District Court Judge found that the cannabis had been produced for a commercial purpose. Mr Sienczewski was sentenced to imprisonment for 18 months with a non‑parole period of 12 months. The sentence was suspended upon him entering into a bond in the sum of $100 to be of good behaviour for two years.
In the meantime the DPP commenced proceedings under the Criminal Assets Confiscation Act 1996 (SA) (“the 1996 Act”). The first step was an application for a Restraining Order (“RO”) to prevent Mr and Mrs Sienczewski from dealing with their Reynella property which is held in their joint names. This application was made on 16 January 2006.
Negotiations between the DPP and the solicitor for Mr and Mrs Sienczewski followed. As a result of these discussions, Mr and Mrs Sienczewski gave an undertaking (“the undertaking”) not to deal with the Reynella property, monies seized by the police from the residence and the couple’s bank accounts. The undertaking was registered as an order of the Magistrates Court on 24 March 2006. As a result of the undertaking being made an order of the Court, the DPP did not press the application for a RO, at least not at that stage of the proceedings.
The 1996 Act was repealed and replaced by the Criminal Assets Confiscation Act 2005 (SA) (“the 2005 Act”) on 16 February 2006. On 20 July 2007 the DPP applied pursuant to s 95 of the 2005 Act for a Pecuniary Penalty Order (“PPO”) against Mr and Mrs Sienczewski. On 14 May 2009 Mr and Mrs Sienczewski applied for a revocation of the undertaking or, alternatively, an order that the Reynella property be released from the undertaking. They also applied for the dismissal of the DPP’s application for a PPO.
At a hearing before a Magistrate in the Adelaide Magistrates Court on 11 September 2009, the undertaking was revoked and the application for a PPO was dismissed. The DPP has appealed against these orders.
The 1996 and 2005 Acts
The relevant legislation is summarised in detail in DPP v Alexander[1] (the 1996 Act) and DPP v George[2] (the 2005 Act). A brief summary will suffice for present purposes.
[1] (2003) 86 SASR 577.
[2] (2008) 102 SASR 246.
The 2005 Act
As the title of the Act suggests its purpose is to provide for the confiscation of the proceeds and instruments of crime. Property is an instrument of crime if it is used in, or in connection with, the commission of an offence or intended to be used as such. It is not in dispute in the present case that the Reynella property was used as an instrument of crime. The DPP does not allege that the property is the proceeds of the offence.
A court is empowered to make a RO in respect of property suspected of being the proceeds of crime or an instrument of crime. Section 24(1) of the 2005 Act provides as follows:
24—Restraining orders
(1)A court must, on application by the DPP, make an order (a restraining order) that specified property must not be disposed of or otherwise dealt with by any person (except in the manner and circumstances, if any, specified in the order) if satisfied that—
(a)     a person has been convicted of, or has been charged with, a serious offence, or it is proposed that the person be charged with a serious offence; or
(b)     a person is suspected on reasonable grounds of having committed a serious offence; or
(c)     there are reasonable grounds to suspect that the property is the proceeds of, or is an instrument of, a serious offence (whether or not the identity of the person who committed the offence is known); or
(d)     there are reasonable grounds to suspect that a person has committed a serious offence and has derived literary proceeds in relation to the offence.
The 2005 Act provides for the exclusion of property from a RO. Section 34(1) states:
34—Court may exclude property from a restraining order
(1)The court to which an application for a restraining order under section 24(1)(a) or (b) was made may, when the order is made or at a later time, exclude specified property from the order if—
(a) an application is made under section 35 or 36; and
(b) the court is satisfied that—
(i)the property is neither proceeds nor an instrument of unlawful activity; and
(ii)the owner's interest in the property was lawfully acquired; and
(iii)it would not be contrary to the public interest for the property to be excluded from the order.
Section 74 of the 2005 Act provides that at the end of the “relevant period” property the subject of a RO may be forfeited to the Crown. The “relevant period” is six months from the day that a person is convicted of a serious offence, unless an extension order is in force. It is not disputed that the present offence is a “serious offence” for the purposes of the legislation.
In certain circumstances an order of the Court is not necessary and forfeiture may occur automatically by operation of the Act. Section 74 provides:
74 -Forfeiting restrained property without a forfeiture order if a person has been convicted of a serious offence
(1)Property is forfeited to the Crown at the end of the relevant period if—
(a)     a person is convicted of a serious offence; and
(b)     either—
(i)at the end of the relevant period, the property is covered by a restraining order that relates to the offence; or
(ii)the property was covered by a restraining order that relates to the offence, but the property was excluded, or the order revoked, under section 38 or section 44; and
(c) the property is not subject to an order under section 76 excluding the property from forfeiture under this Division.
(2)For the purposes of this section, it does not matter whether—
(a)     the restraining order was made before or after the person’s conviction of the serious offence; or
(b)     immediately before forfeiture, the property is the person’s property or another person’s property.
Pursuant to s 76 property may be excluded from forfeiture. Section 76 provides:
76—Excluding property from forfeiture under this Division
(1)The court that made the restraining order referred to in section 74(1)(b) may make an order excluding particular property from forfeiture under this Division if —
(a) the person referred to in section 74(1)(a) —
(i)applies for the order; and
(ii)owns the property; and
(iii)has been convicted of a serious offence to which the restraining order relates; and
(b) the property is covered by the restraining order; and
(c) the court is satisfied that —
(i)the property is not proceeds of unlawful activity; and
(ii)the defendant’s interest in the property was lawfully acquired; and
(iii)it would not be contrary to the public interest for the property to be excluded from such forfeiture.
(2)To avoid doubt, an order under this section cannot be made in relation to property if the property has already been forfeited under this Division.
Forfeiture can also occur when a Forfeiture Order (“FO”) is made by the Court. Pursuant to s 47(1) the making of a FO is mandatory in some circumstances upon application by the DPP. Section 47(1) applies, for example, if the relevant property is the proceeds of the offence. In other circumstances the making of a FO is discretionary. Section 47(3) provides for the making of a FO where, as in the present case, the property is an instrument of an offence. It provides:
47(3)A court may, on application by the DPP, make an order (a forfeiture order) that property specified in the order is forfeited to the Crown, if—
(a)     a person has been convicted of one or more serious offences the court is satisfied that the property is an instrument of one or more of the offences or is subject to an instrument substitution declaration under section 48; or
(b)     the property to be specified in the order is covered by a restraining order made under section 24(1)(b) that has been in force for at least 6 months and the court is satisfied that the property is an instrument of one or more serious offences committed by the person whose conduct (or suspected conduct) formed the basis of the restraining order; or
(c)     the property to be specified in the order is covered by a restraining order made under section 24(1)(c) that has been in force for at least 6 months and the court is satisfied that—
(i)the application for the order alleges that the property is an instrument of one or more serious offences; and
(ii)no application has been made under Part 3 Division 3 for the property to be excluded from the restraining order, or that any such application has been withdrawn; and
(iii)the DPP has taken reasonable steps to identify and notify persons with an interest in the property.
Section 47(4) sets out the matters to be taken into account when considering whether it is appropriate to make a FO under s 47(3). Section 47(4) provides:
47(4)In considering whether it is appropriate to make a forfeiture order under subsection (3) in respect of particular property, the court may have regard to—
(a)     any hardship that may reasonably be expected to be caused to any person (other than the suspect) by the operation of the order; and
(b)     the use that is ordinarily made, or was intended to be made, of the property; and
(c)     the gravity of the offence or offences concerned; and
(d)     any other matter the court thinks fit.
As stated above, in the present case, the DPP applied for a PPO. A PPO is an alternative to an order requiring forfeiture of the relevant property whereby instead of forfeiting the property, the offender is required to pay to the Crown a pecuniary penalty calculated, as in the present case, by reference to the value of the property. This was the principal application made by the DPP in this matter.
The making of PPOs is regulated by s 95. Section 95(1) provides:
95—Making pecuniary penalty orders
(1)A court must, on application by the DPP, make an order (a pecuniary penalty order) requiring a specified person to pay an amount determined under Subdivision 2 to the Crown if satisfied that the person has been convicted of, or has committed, a serious offence and—
(a) the person has derived benefits from the commission of the offence; or
(b) an instrument of the offence is owned by the person or is under his or her effective control.
The 1996 Act
Only brief reference to this Act is required for present purposes.
One of the categories of property liable to forfeiture under the 1996 Act was “tainted property” which included property used in, or in connection with, the commission of a “forfeiture offence” as defined in s 3 of the 1996 Act. The 1996 Act empowered a court to make a FO if satisfied that forfeiture was necessary to prevent a defendant from retaining the profits of criminal activity (s 9). ROs could be made under s 15.
Section 8 empowered the Court to order the forfeiture of tainted property. Section 10 provided:
(1)A court must make an appropriate forfeiture order under this Part if the court is satisfied that forfeiture is necessary to prevent the defendant from retaining the profits of criminal activity.
(2)The court's power to order forfeiture of property beyond what is required under subsection (1) is discretionary.
(3)In deciding whether to impose a discretionary forfeiture and, if so, the extent of the forfeiture, the court may take into account any penalty imposed on the defendant for the forfeiture offence and, conversely, the court may take a discretionary forfeiture into account in fixing penalty for the relevant forfeiture offence.
However, pursuant to s 15(5) special provisions applied where the forfeiture offence was a serious drug offence. Section 15(5) provided:
(5)However, the following special provisions apply where the forfeiture offence or the suspected forfeiture offence in relation to which the restraining order is made is a serious drug offence:
(a)     the Director of Public Prosecutions must take reasonable care to ensure that the offender (or alleged offender) and all persons who may have an interest in the property are given notice of the order and of the implications of this subsection;
(b)     the order cannot (subject to the following exceptions) be revoked or varied so that it ceases to apply to property within its ambit;
(c)     the order does not lapse because of an interval of inactivity following the conviction of the offender for a serious drug offence;
(d)     if the offender is convicted of the serious drug offence, then 6 months after all rights of appeal are exhausted or expire or 6 months after the order is made (whichever is the later) the order is automatically converted into a forfeiture order for the forfeiture of all the property to which it then applies.
There were exceptions to this provision which are irrelevant to the present case. The offence in the present case would have been a “serious drug offence” under the 1996 Act.
The transitional provisions in the 2005 Act provide that an order in force under the 1996 Act immediately before the commencement of the 2005 Act continues in force, subject to the 2005 Act, as if the later Act had been in force when the order was made and the order had been made under the later Act.
The 2005 Act came into operation on 16 February 2006 and the first step taken by the DPP in this matter was the application for a RO made on 16 January 2006. As mentioned above, this application was not pursued as an order was made in terms of the undertaking by Mr and Mrs Sienczewski agreeing not to deal with the Reynella property.
The giving of an undertaking was not dealt with in the 1996 Act; nor is such a procedure provided for in the 2005 Act. However, Mullighan J, in his judgment in DPP v Alexander (Gray J concurring), said:[3]
If the respondent and the mortgagee undertake that no steps will be taken to sell, transfer, otherwise dispose of, further mortgage, charge or encumber the property without seven days' notice in writing being given to the appellant, I would exercise the discretion under s 15(1) by refusing the application for a restraining order. I would hear the parties as to the terms of such undertakings.
The effect of giving an undertaking in lieu of the Court making a RO was to prevent an automatic forfeiture of the property pursuant s 15(5)(d) of the 1996 Act in a case where automatic forfeiture would be disproportionate to the conduct involved in committing the offence.
[3] (2003) 86 SASR 577 at [41].
As stated above the DPP applied to the Magistrates Court for a PPO pursuant to s 95 of the 2005 Act. In DPP v George, White J held that, despite the opening words of s 95(1) that “a court must on application by the DPP” make a PPO, the Act, properly construed, confers a discretionary and not mandatory power to make the order.[4] Doyle CJ agreed with these observations by White J.[5]
[4] (2008) 102 SASR 246 at [244], [245].
[5] (2008) 102 SASR 246 at [80].
Central to White J’s reasoning was that certain provisions in the 2005 Act relating to the forfeiture of property are discretionary and not mandatory. Although the making of a FO is automatic in certain cases, such as where the property is the proceeds of an offence, this is only so where the property is more than an instrument of the offence. Applications for a FO where the property is merely an instrument of the offence are regulated by s 47(3). White J referred to the matters relevant to the exercise of the discretion in such cases which are set out in s 47(4). He also referred to s 76 which gives the Court a discretion when deciding whether to make an order excluding particular property from a FO.
His Honour pointed out that a PPO is a subordinate alternative to forfeiture.[6] He observed that it would be a strange result if a defendant was able to avoid forfeiture under s 47(4) or be successful in an application to exclude property from forfeiture pursuant to s 76(1), only to have the result negated by a mandatory PPO under s 95(1). His Honour’s reasoning was considerably more extensive than the aspects which I have emphasised. However, enough has been said to indicate that the nature of the applications under these provisions relating to forfeiture was held to be relevant in reaching the conclusion that the power in s 95(1) to make a PPO was discretionary and not mandatory. His Honour concluded:[7]
I referred earlier to the absence of any provision in the CAC Act which would enable a court to take account of, or to ameliorate, the harsh consequences of a PPO or the interests of others in the subject property. Nor is there any provision enabling the court to take account of the public interest in the way in which s 76(1)(c) requires in relation to statutory forfeiture. The absence of such provisions is stark if s 95(1) is construed as obliging a court, upon satisfaction of the specified matters, to make a PPO. It is difficult to identify any reason why Parliament should have considered provisions to that effect to be appropriate in relation to forfeiture orders, but not in relation to PPOs. Similarly, it is difficult to identify any reason why Parliament should have intended consideration of the public interest to be relevant in relation to applications for exemption from statutory forfeiture, but not in relation to PPOs. The absence of provisions permitting a court to ameliorate the harsh consequences of a PPO, or to consider the public interest, loses much of its significance, however, if s 95(1) is construed as vesting a discretionary power, rather than imposing an obligation. The considerations relevant under s 47(4) or under s 76 may then be taken into account by the court in the exercise of its discretionary power.
Finally, I refer again to the inference that Parliament must have contemplated that the fate of applications under ss 47 and 76 would be known by the time a court considers an application for a PPO. If this be correct, it is but a short step to infer that Parliament also contemplated that a court could (and, in appropriate circumstances, should) take account of the earlier decision in its determination of an application for a PPO. This can be done if s 95(1) is regarded as vesting a discretionary power, and not imposing a mandatory obligation.
The various matters to which I have referred indicate, in my opinion, real doubts that s 95(1) should be construed as being mandatory in nature. These same matters incline me to the view that s 95(1) can, and should, be construed as vesting in courts a discretionary power to make PPOs.
[6] (2008) 102 SASR 246 at [225].
[7] (2008) 102 SASR 246 at [237].

In the present case there has been no application for forfeiture; nor has there been an application under s 76 to exclude property from forfeiture. This can only occur if the property has been made the subject of a RO. However, as the making of a PPO under s 95(1) is discretionary, it would seem that the best guide to the exercise of the discretion is to be found in s 47(4). If the considerations in this subsection are relevant to the exercise of the discretion in the making of a FO in the case of property which is an instrument of an offence, then they should also be relevant when considering whether a PPO should be made in relation to the same property.
The Magistrate acknowledged that he was required to exercise a discretion when deciding the Crown application pursuant to s 95(1). He said:[8]
In my view, the defendant has a strong argument that it would not be contrary to public interest to exclude the property (as set out in Ms Downey’s submissions on pp.7 and 8 of her outline dated 5 August 2009) had the matter proceeded under S.76.
In the same way that White J found the operation of a PPO in the circumstances of DPP v George would be ‘unfair, if not cruel’, I am satisfied that in this case, having regard to the effect of the PPO trumping the public interest argument, it would also be unfair, if not cruel, to impose a PPO. The atypical nature of the undertaking should not defeat the opportunities that all litigants in the defendant’s position would normally have available to them; namely to seek an exemption of his property for public interest reasons.
In light of my decision, it would be unnecessary and oppressive to have the undertaking continue to operate. The defendant has been punished for his offence. It has not been shown that he derived benefit from his offending behaviour.
Had the defendant had the opportunity of applying to have his property exempted from a forfeiture order he would, in my view, have succeeded. Consequently, pursuant to DPP v George, a PPO would in such circumstances be inappropriate.
My understanding is that there was only a handful of undertakings into which parties entered and this is the only one that has precipitated as a contentious application. The ruling I make therefore is confined to the circumstances of the case which will rarely, if ever, resurface.
The undertaking shall be dismissed and no PPO will be made. The defendant shall have his costs to be agreed or taxed.
The grounds of appeal relate to statements made in this passage.
[8] [2009] SAMC 85 at [21]-[26].
The Magistrate purported to exercise the discretion arising under s 95(1) by reference to matters which he considered would be relevant to the exercise of the discretion under s 76. However, although the wording of s 76(1) is such as to import a discretion, the matters which are relevant to its exercise are not set out in s 76. The section does prescribe a number of conditions precedent to the exercise of the discretion. I have expressed the view that the criteria for the exercise of the discretion under s 47(4) is more appropriate as a guide to the exercise of the discretion under s 95(1).
Section 76(4)(c)(iii) provides that one of the conditions precedent to the exercise of the discretion to exclude property from forfeiture is the requirement for the Court to be satisfied that it would not be contrary to the public interest for the property to be so excluded. It is apparent that the Magistrate regarded this as being the most important consideration in the exercise of his discretion.
The Magistrate accepted an argument put on behalf of the respondents that there was no public interest in “asking a person on a disability pension to pay the State $173,000”. The argument, which included reference to the inevitability of evictions from the property if the PPO was made, was based squarely on conditions of hardship.
Apart from being a condition precedent and not a discretionary consideration, I do not consider that considerations of public interest in this context can be turned into an argument based on hardship. In my view, the public interest considerations referred to in s 76 are those which are closely connected with the purpose of the legislation. The order for exclusion of property is not to be made if it would be contrary to those interests.
The Magistrate took this concept of individual hardship further. He said that White J had found that the operation of a PPO in the circumstances of DPP v George would be “unfair, if not cruel” and he applied that to the present case. He referred to the “trumping” effect which the imposition of a PPO would have on the public interest argument.
White J’s observations must be read in context. His Honour was referring to the situation which would occur if a defendant was successful in avoiding forfeiture, only to be met by a PPO subsequently. He said:[9]
But if, on an application under s 47, the court determines that a forfeiture order is inappropriate, it would be curious if the effect of that determination must be negated (once the relatively undemanding requirements for a PPO are established) by the imposition of the alternative but subordinate sanction of a PPO in relation to the very same instrument. It would be similarly curious that the effect of a determination of a court, after considering the public interest, that property should be excluded from statutory forfeiture must be negated by the imposition of the alternative sanction of a PPO in respect of the same instrument. Far from being a subordinate alternative, PPOs would then assume a much more significant role in the confiscation regime established by the CAC Act.
If a court is obliged by s 95(1) to make a PPO once satisfied of the specified matters, it would mean that the PPO would operate, in effect, as the equivalent of a trump card. Even if a person is successful under s 47 or s 76 in avoiding forfeiture, the effect of that success could be "trumped" by a PPO application. The whole of the forensic endeavour under s 47 or s 76 would then have been for no good purpose.
It is implicit in s 95(3)(b) that an application for a PPO may be pending simultaneously with an application for forfeiture under s 47. In many cases the parties, and perhaps the court itself, will know, at the time of the hearing of the application under s 74 or s 76, of the pending application for a PPO. They may then know that the proceedings are pointless. But the different time-limitation provisions will mean that in many cases the persons resisting forfeiture, or seeking the exclusion of property from statutory forfeiture, will not know whether or not an application for a PPO will be brought. There is something unfair, if not cruel, in the prospect of a person being allowed to invoke the detailed regime provided by the CAC Act to avoid forfeiture, only to have the effect of a successful result later negated by a PPO.
[9] (2008) 102 SASR 246 at [231]-[233].
Counsel for the DPP has explained that the Crown is confining its attention to Mr Sienczewski’s half interest in the property. However, it would be relevant to take into consideration that, as an innocent party, Mrs Sienczewski would suffer hardship if the matrimonial home had to be sold in order for Mr Sienczewski to satisfy a PPO made against him.
Apart from the prohibition against taking into account hardship to the offender, the matters relevant to the exercise of the discretion in s 47(4) are expressed in wide terms. The Court could take into account the period of time the property was owned by the respondents, whether it had been lawfully obtained, the extent to which the property was used for the unlawful purpose and the gravity of the offence.
In my view the Magistrate erred in the exercise of the discretion by deciding the matter principally by reference to an irrelevant consideration. In making these remarks I imply no view as to what the result should be after a proper exercise of the discretion. I do not have sufficient material before me to make such a decision. It might well involve further evidence being called.
Criticism is made of the Magistrate’s reasons for revoking the undertaking. It followed from the Magistrate’s decision to refuse the application for a PPO, that the undertaking should be revoked. It is unnecessary for me to consider the criticisms made in relation to His Honour’s treatment of the undertaking in view of my decision that there should be a rehearing on the main issue as to whether a PPO should be made. It is appropriate for the order based on the undertaking to remain in force pending the final resolution of the matter.
The appeal is allowed and the orders of the Magistrate are set aside. The matter is remitted for rehearing before another Magistrate conformably with these reasons.