Flying Fighters Pty Ltd & Ors v Commonwealth Director of Public Prosecutions

[2005] HCATrans 788

[2005] HCATrans 788

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B18 of 2005

B e t w e e n -

FLYING FIGHTERS PTY LTD AS TRUSTEE FOR FLYING FIGHTERS DISCRETIONARY TRUST

First Applicant

NEMESIS AUSTRALIA PTY LTD

Second Applicant

YAK 3 INVESTMENTS PTY LTD AS TRUSTEE FOR YAK 3 DISCRETIONARY TRUST

Third Applicant

BUBBLING SPRINGS OLIVE GROVE PTY LTD AS TRUSTEE FOR BUBBLING SPRINGS DISCRETIONARY TRUST

Fourth Applicant

and

COMMONWEALTH DIRECTOR OF PUBLIC PROSECUTIONS

Respondent

Application for special leave to appeal

GUMMOW J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

FROM BRISBANE BY VIDEO LINK TO CANBERRA

ON FRIDAY, 30 SEPTEMBER 2005, AT 12.16 PM

Copyright in the High Court of Australia

__________________

MR W. SOFRONOFF, QC:   May it please the Court, I appear with my learned friend, MR P.J. DAVIS, for the applicant.  (instructed by James Conomos Lawyers)

MR P.J. FLANAGAN, SC:   May it please the Court, I appear with my learned friend, MS L.W. MORSE, for the respondent.  (instructed by Commonwealth Director of Public Prosecutions)

GUMMOW J:   Yes, Mr Sofronoff.

MR SOFRONOFF:   Your Honours, may I take you to page 50 of the book.  Your Honours will see at page 50, paragraph [165] the reasons of the learned trial judge.  Could I invite your Honours to read the four subparagraphs of [165] and paragraph [166]. 

GUMMOW J:   Yes.

MR SOFRONOFF:   Your Honours, the Proceeds of Crime Act 2002, states as its objects, or as some of its objects, to deprive persons of the proceeds of crime. In achieving those objects it permits the Commonwealth, in some circumstances, to attack the property, property that is owned by third parties against whom no allegation of criminal conduct is made and it places property of that kind at risk of forfeiture or at risk of being sold to satisfy a pecuniary penalty order.

What the learned trial judge found, and what the Court of Appeal confirmed, was that conduct by Mr Hart, who was the suspect who was the subject of the restraining order in this case, of the kind described in 165 is sufficient to justify conclusion of effective control of him by property, the legal title of which at least is owned by the applicant companies.  In our submission, a finding that control of the governance of the companies who are the applicants is equivalent to the suspect being in effective control of all of the property of the companies is a very bold extension of the operation of the Act, if it is correct. 

GUMMOW J:   What do you say about Justice McPherson’s judgment on page 87, paragraph [31] about line 30:

But the evidence leaves no doubt that he was in effective control of the property as well as the affairs ‑ ‑ ‑

MR SOFRONOFF:   Your Honour, that finding of his Honour’s appears to flow from what his Honour said at page 84, paragraph [22].  What his Honour Justice McPherson did, in our submission, as did the trial judge, is to equate the dominance of Mr Hart in the affairs of the company with effective control for the purposes of the statute, a statute which is concerned not with the question who controls property of the company for the benefit of the company, but who controls property, albeit property owned by another person, in circumstances where, under the statute, it would be right to have access to that property to satisfy the obligations owed to the Commonwealth.

In our respectful submission, it is not correct to take dramatic findings of the kind in 165 at page 50 of the appeal book, and to equate those with a conclusion that Mr Hart had effective control within the meaning of the statute of that property.  Your Honours, the statute coalesces to some degree, conflates to some degree the concept of effective control and of property and we would respectfully agree with the view of the trial judge and of Justice McPherson that first, one must identify the property before one can determine who has effective control of it.

If we take one of these aircraft, and the evidence was that with respect to some of these aircraft Mr Hart flew them from place to place, if we take one of those aircraft, legal title of which – and let us assume beneficial title of which – is in the company and Mr Hart is free to exercise effective control by, for example, deciding at will to fly that aircraft whenever he wishes from one place to another, then what Mr Hart has effective control over, in our submission, is that licence, for what it is worth.

He does not have effective control over the property in the aircraft in the sense of the right to dispose of it and pocket the proceeds.  As the findings in [165](c) show, there is no suggestion on the evidence that Hart was ever at liberty to, or felt at liberty to, sell a piece of property of the company and take the money for himself or to buy something else with it and to keep it.  The findings go no further than this, that he was the de facto managing director, governing director, life governing director if one wishes, of the company but there is no evidence that in that role he operated in a way that enabled him to have effective control, in the sense that we advocate it, of the legal title or the beneficial title in any of the assets of the companies.

That is the focal point of the case that, in our submission, ought to justify the grant of special leave.  It is something that has not been dealt with by this Court before and if one looks at paragraph [22] of Justice McPherson’s reasons, at page 84, for example, his Honour points out, and I would respectfully say correctly points out:

that any control exercised by a corporate officer over property of a corporation would be considered the control of the corporation itself.

His Honour points out that is because that person might be subject to the control of the board of directors.  But that does not help us in determining the scope of the legislation because the board of directors then cannot be said to be in effective control of the property of the company so as to make the property of the company amenable for the statute.

But if we are wrong about that, if it is possible to say then the board of directors is in effective control of the company, if that board collectively is made the subject of a restraining order, then it would follow that the property of the company could be restrained and the consequences of that are, as your Honours appreciate, potentially serious.  So, in our submission, [22], while correct, does not answer the problem.  If a person ‑ ‑ ‑

GUMMOW J:   Paragraph [22] followed [21] and [21], not surprisingly, fixed on section 337(1) of the statute.

MR SOFRONOFF:   Yes.  Your Honour, 337 sets out some indicia of effective control.  It provides some deeming provisions and it provides, I think, in one case that if something exists it does not mean that property is not under the effective control of a person so it does not, in terms, define “effective control”, it simply provides for ease of proof by the DPP and addresses the factors that the court may take into account or may disregard. 

So that section does not assist, in our respectful submission, because if we take a company, it might be the case that a person like Mr Hart is not

merely the de facto governing director of the company but in truth treats the property as his own, to use entirely as his own as if it were his own.  What the statute adjures us to do is to disregard all of that and to treat that, in appropriate cases, as though it were his property.  There are sections in the statute that permit the court to treat property under the effective control of a suspect as property of the suspect.

In our submission, it cannot be a right reading of the statute to subject property of a company, merely because it happens to be under “control” of a person in his office as director or de facto director, as property that might be the subject of a confiscation or forfeiture order.  That is the question that we raise.  We might be wrong about it but, in our submission, the Court of Appeal has not, we respectfully submit, adequately dug to bedrock on that question and the High Court has not considered it at all.  Those are our submissions, your Honours.

GUMMOW J:   Yes, thank you, Mr Sofronoff.  We do not need to call on you, Mr Flanagan.

In our view the decision of the Queensland Court of Appeal was correct.  Accordingly, there are no prospects of success in any appeal to this Court.  Accordingly, special leave is refused with costs.

AT 12.27 PM THE MATTER WAS CONCLUDED