Leask v Commonwealth of Australia

[1996] HCATrans 61

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S136 of 1992

B e t w e e n -

STEPHEN ARTHUR LEASK

Plaintiff

and

THE COMMONWEALTH OF AUSTRALIA

Defendant

Case Stated

BRENNAN CJ
DAWSON J
TOOHEY J
GAUDRON J
McHUGH J
GUMMOW J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 8 MARCH 1996, AT 10.17 AM

Copyright in the High Court of Australia

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friend, MR I. MESCHER, for the plaintiff.  (instructed by Schrader & Associates)

MR G. GRIFFITH, QC, Solicitor-General for the Commonwealth:   If the Court pleases, I appear with my learned friends, MS M.A. PERRY and MR C.R. STAKER, for the Commonwealth.  (instructed by the Australian Government Solicitor)

BRENNAN CJ:   Yes, Mr Jackson.

MR JACKSON: Your Honours, this case is concerned of course with the validity of section 31(1) of the Financial Transaction Reports Act 1988. May I adopt this course, your Honours, to go as briefly as I can to the provisions of the Act which are significant for immediate purposes and then go to the arguments about validity.

TOOHEY J:   Mr Jackson, the title of the Act in the papers is the Cash Transaction Reports Act which I think was its original title and then it underwent a change subsequently.  So we are to read all references to the Cash Transaction Reports Act as the Financial Transaction Reports Act, are we?

MR JACKSON:   Yes, your Honour.  I cannot say offhand just when the change occurred, but it certainly ‑ ‑ ‑

TOOHEY J:   It was 1991, I think.

MR JACKSON:   Thank you, your Honour.  May I go as briefly as I can to the terms of the Act first of all which are germane and then to the bases for our contention of invalidity.  Your Honours, could I start by taking your Honours very briefly to section 4 of the Act.  By section 4 of the Act, the Act is expressed to have as its principal object the administration and enforcement of taxation laws and as a further object the administration and enforcement of other laws.

The provisions of the Act which are specifically relevant commence with section 31. Section 31(3) is the starting point. It provides for the penalty applicable if a person “commits an offence against this section”. Your Honours, the “offence against this section” which is relevant is that set out in section 31(1). Your Honours will see that the structure of section 31(1) involves several elements. First, there is a basic fact. That is the fact referred to in section 31(1)(a), in other words, that the person has been “a party to two or more non‑reportable cash transactions”. That term, “non‑reportable cash transactions”, is defined of course, the definitions being in section 3(1). Those transactions are transactions, as your Honours will see from the definitions:

(a) to which a cash dealer is a party; and

(b) that is not a significant cash transaction or is an exempt cash transaction -

There are three terms involved there which have some further definition.  Your Honours will see that the term “cash dealer” is very widely defined, running in effect from the banking chamber to the racecourse.  Next the term “significant cash transaction”, your Honours will see it means a cash transaction involving the transfer of not less than $10,000 in cash.  Could I refer your Honours to the definitions of “cash transaction” and “currency”.

The second aspect of the definition of “non‑reportable cash transaction” is exempt cash transaction.  That is defined by section 9(1).  However, your Honours, to make intelligible what is involved in that, one needs to go to the other provisions which are near it.  The starting point in a sense is section 12(1).  There is a need for a financial institution to maintain a register in which it enters transactions for the purposes of section 11.  Sections 11(1) and (2) give the financial institution the ability to enter transactions in its exemption register and subsections 10(1) to (5) list the various circumstances in which a significant cash transaction may be eligible for exemption.  Section 10(6), your Honours, gives, to put it shortly, a kind of portability to an exemption situation.

Could I go back then to section 31(1). As we submitted earlier, section 31(1)(a) sets out one element, namely the fact that a person was party to two or more non‑reportable transactions such as deposits of money under $10,000. The second element is that provided for by section 31(1)(b), namely the list of matters to which regard is to be had for the purpose of arriving at the conclusion to which I will come in a moment. Your Honours will see that those matters are first the manner and form in which the transactions were conducted, and that is elaborated upon a little, and secondly:

any explanation made by the person as to the manner or form in which the transactions were conducted.

Your Honours, “the person” is the person charged with the offence. That is made apparent by the opening words of section 31(1) and it is that person who must be the party to the transactions.

The third aspect of section 31(1) is to be found in the conclusion required. The conclusion required is not that, for example, the person conducted the transactions in “the manner and form”, et cetera, nor is it a more perhaps expanded version, for example, “The court is satisfied that the person conducted them”, et cetera, but rather that having regard to the matters referred to in paragraphs (b)(i) and (b)(ii), it would be reasonable to arrive at that conclusion.

The conclusion, as your Honours will see, is that the person conducted the transactions in the manner or form in which they were actually carried out for a particular purpose which is there identified.  Your Honours, it should be noted immediately that the person charged may not have been personally involved at all in the transfers of the currency.  Indeed, the transfers may have occurred without the consent of and contrary to the wishes of that person.

That is so because of the terms of section 34.  May I start with section 34(5) which says that:

A reference in this section to the state of mind of a person includes a reference to -

amongst other things, the -

purpose of the person and the reasons for the.....purpose.

Could I pause to say that the term “purpose” appears to refer particularly to section 31.  I say “particularly”, your Honours, not because there is an express reference to it but rather because, if one looks at the earlier provisions of this part of the Act, the one setting out the offences, it seems to be the one - and I think the only one - that has purpose as a relevant element of the offence.  So section 34 appears to be referring to section 31.

The next thing, your Honours, is this, that if one goes from section 34(5) to section 34(4) your Honours will see that:

Conduct engaged in on behalf of a person other than a body corporate:

(a) by a servant or agent of the person within the scope of his or her actual or apparent authority; or

(b) by any other person at the direction or with the consent or agreement.....of a servant or agent.....where the giving of the direction.....is within the scope of the actual or apparent authority of the servant or agent;

shall be deemed.....to have been engaged in by the first‑mentioned person.

That is the person charged with the offence.  Then, your Honours, the position in relation to the state of mind of a person in - I use the term a little inexactly - such circumstances is dealt with by subsection (3).  Your Honours will see that:

Where it is necessary.....to establish the state of mind -

which includes purpose because of subsection (5) -

of a person in relation to conduct deemed by subsection (4) to have been engaged in by the person, it is sufficient to show that a servant or agent of the person, being a servant or agent by whom the conduct was engaged in within the scope of his or her actual or apparent authority, had that state of mind.

It is perhaps a curiosity of the provision that subsection (3) does not seem directly to pick up (4)(b).

TOOHEY J:   Why would it be necessary to establish state of mind, having regard to the terms of section 31(1)(b) to which you took us which speaks of reasonably concluding something?

MR JACKSON:   Because, your Honour, what has to be demonstrated in the end is that it would be reasonable to conclude that the person conducted the transaction for a particular purpose.  In the case that section 34(3) is directed to, that seems to contemplate that if the act has been carried out by a servant or agent within actual or apparent authority, then it is sufficient to show that that person had the relevant purpose.

TOOHEY J:   But if you look at the elements that go to make up section 31(1)(b), other than the explanation made by the person, they seem to be objective facts, do they not?  I am just not sure at what point it would become relevant to inquire into the state of mind of anyone.

MR JACKSON:   Your Honour, all that 31(1)(b) says really is that those matters are to be had regard to and they are to be had regard to as matters germane to the formation of the ultimate conclusion required by the concluding words of it.  It would be evidence which would assist the Crown case, if I can put it that way, if the Crown were able to demonstrate that the person referred to in subsection (3) had the state of mind that constituted the relevant purpose.  That would be evidence, your Honour, that would be sufficient to demonstrate the existence of that state of mind.  No doubt other matters have to be regarded, but it would ‑ ‑ ‑

TOOHEY J:   I wonder about that.  I was going to ask you:  leaving aside for a moment (ii), the reference to explanation, if the Crown did nothing more than adduce evidence that fell within section 31(1)(b), would that not be enough to sustain a conviction if, having regard to those elements, it was reasonable to conclude in terms of the subsection?

MR JACKSON:   Yes, your Honour, it could.  What I was speaking of was the case - perhaps I can just go back one stage if I may.  I was referring your Honours to section 34 because it deals with the case where - I have not referred to the provision in relation to corporations in the earlier part of section 34 but I was referring to sections 34(3), (4) and (5) to indicate that even in the case where an individual is the person who participated in the transactions, that evidence may be adduced to indicate that, whilst that person, for example, did not have the purpose, some other person who acted within, say, the scope of apparent but not actual authority did have the purpose.  The terms of 34(3) would seem to suggest that that would be sufficient in such a case.

But if one leaves aside the complication of acts done by some other person other than the person charged, what your Honour has put to me is correct in the sense that if the evidence that was adduced by the Crown was evidence dealing only with matters referred to in section 31(1)(b)(i), then it would, depending on the particular case of course, be open to the tribunal of fact to reach a conclusion in terms of the paragraph.

TOOHEY J:   Yes, thank you.

MR JACKSON:   Your Honours, I think I have said it in fact now, but I was going to refer your Honours to the words “it is sufficient” in section 34(3), and one could imagine a direction being given to the jury that it was sufficient that the jury were satisfied of those matters.  I mentioned also section 34(1) which deals with the position of corporations, as does I think section 34(2).  Those are the provisions to which I wish to refer your Honours at this point.

May I then go to the two principal bases that appear to be relied on to support the validity of the provision in the submissions on behalf of the Commonwealth.  The first of those to which I refer is the taxation power, section 51(ii).  The second, to which I will come in a moment, is the currency power, section 51(xii).  Your Honours, the power under section 51(ii) is of course to make laws with respect to taxation.  Needless to say, the power goes beyond laws which impose taxation.  It extends to provisions which will make the imposition of taxation effective.

Those provisions may require notification to the Commonwealth of information - all information, for example, held - which is germane to the assessment or collection of the tax in question.  Failure to comply with provisions of that general kind may be made an offence.  But in the end the law must be a law with respect to taxation.  Could I just say three further things about that before coming more directly to the provision in this regard.

The first is that, whilst a law with respect to taxation might require, for example, that businesses of a particular kind maintain a set of records in a particular way in order to enable identification of, for example, income, it must be very doubtful, in our submission, whether a law prohibiting the keeping of another set as well, done in a different way, would be a law with respect to taxation.  Again, to the extent to which laws based on statutory fictions can be laws with respect to taxation is a matter of some doubt.

The third matter, your Honours, is related to the second.  It is that Parliament cannot give itself power, whether in relation to taxation or otherwise, by putting beyond examination compliance with the constitutional limits of the power.  Could I take your Honours in relation to that aspect of the matter for just a moment to the observations of four members of the Court in MacCormick v Federal Commissioner of Taxation (1984) 158 CLR 622 at page 639. Your Honours will find the relevant passage commencing at the last paragraph on page 639 and it goes through to about point 8 on the next page to the passage from Deputy Federal Commissioner of Taxation v Brown.

The matters to which I wish to refer particularly in the reasons are that which appears at about point 8 or point 9 on page 639, that:

The principle which lies behind the doctrine is a more general one of elementary constitutional law.  It is simply that the legislature cannot determine conclusive for itself its power to enact legislation -

et cetera.  Your Honours, again at page 640 in the first new paragraph on the page about point 3:

In other words, where, as is ordinarily the case under the Commonwealth Constitution, the validity of the law depends upon its characterization -

et cetera.  That goes down to the reference to “See also per Williams J”.

It is with those matters in mind, in our submission, that one returns to section 31(1). What is immediately apparent about section 31(1) is that it does not mention any matter directly, if I could start with that, related to taxation. It does not require, for example, that the conduct have had the effect of avoiding taxation. It does not look at all at any intention to avoid taxation or to reduce the incidence of taxation, nor does it have any other direct nexus with taxation. So that it turns on remoter connections, but the remoter connection relied on is not even that the person conducted - that is, in the sense of did conduct - the transactions in question for the purpose of avoiding the reporting requirement. It is simply that it would be reasonable so to conclude. That might occur, as we submitted earlier, in circumstances where, to take one example, section 34(3) would operate and the mind of an agent with no actual but only apparent authority to do it would be decisive. Of course, one also has the conduct of the agent, again with apparent but not actual authority, being attributed to the person in question.

The terms of section 31(1) require no more than that the tribunal of fact be satisfied that it would be reasonable to conclude, et cetera, whatever might be the true fact. So, in our submission, it does not in those circumstances fall within the terms of section 51(ii) or the powers to make laws incidental to the execution of that power.

TOOHEY J:   How crucial is it to your argument that this is an offence‑creating section?  Say, for instance, that it was a section that called for some particular conduct without necessarily attributing an offence to the failure to comply with the provision?

MR JACKSON:   Well, your Honour, it is not critical, if I can put it that way, but of course one does have a situation where the nature of the law and the operation of the law is of course relevant to the question of its connection with the power, to put it loosely, and the fact that what one has is a provision creating an offence with some serious penalties to engage in conduct in relation to which it might reasonably be concluded is of a particular kind, if that not be the fact, is, in our submission, relevant in showing the degree of connection, to put it shortly.  I do not think I can take it beyond that, your Honour, unless there was a particular aspect your Honour was referring to.

DAWSON J:   Mr Jackson, can you put it in concrete terms by saying the legislature obviously was not concerned for purposes of taxation with transactions under $10,000 except where they were in effect a means of evading the provisions.  That was where in total they might amount to above $10,000.  But where you had a person who had no intention to evade the provisions of the Act but merely happened to have a number of transactions which in aggregate amounted to more than $10,000, which is what you do get perhaps under section 31, obviously even in the terms of its own legislation the legislature was not concerned with those for the purposes of taxation.

MR JACKSON:   Your Honour has put it better than I have, but that is what we are endeavouring to say.  The absence of any direct relationship between the imposition of taxation on the one hand and the terms of the provision means that to establish validity one does have to go to what I expressed a moment ago as being remoter connections.  Our submission is that the remoter connections really just do not exist.

DAWSON J:   On the other hand, you would concede, would you, that if it were part of the offence that there was an intention to avoid the provisions with relation to significant cash transactions, it would be within power?

MR JACKSON:   I think I would have to, your Honour, yes.

KIRBY J:   I suppose you have to ask yourself why is this information needed.  I imagine one possibility is it is needed just for idle curiosity.  Another is that it is needed for general information of a statistical kind.  But one of the common places is that for taxation you need to check against evasion and it does not take too much of a leap of imagination to see the utility of this kind of information for taxation purposes, given that in many transactions of a cash kind there is a possibility that it will slip outside the net.

MR JACKSON:   Your Honour, undoubtedly the provision of information that may be relevant to the assessment of income tax in the case of individuals is a matter that is within the ambit of the powers under 51(ii) and 51(xxxix).  But, having said that in the broadest fashion, what one then has to look at is to see what the particular provision does.  If one is looking at a provision that does not tie itself in any way to either an intention or a purpose or an effect of evading tax, none of those things - and no doubt there are other connections that are of the same genre that could be mentioned - then one just has a situation where the question which then arises is whether there might be a provision that, without looking at any such intention, without having any such connection, simply says that if you behave in a certain way, in such a way that it would be reasonable to conclude that you had this intention, whether you did or you did not, in those circumstances it really goes, in our submission, beyond the power.

TOOHEY J:   Take section 30, Mr Jackson, which is another offence‑committing section in the case of a cash dealer who does not furnish complete information in regard to a transaction.  Is there any issue that such a provision might be beyond power?

MR JACKSON:   What your Honour will see is that at least one has in those circumstances - that the requirement is that there be a knowing contravention of the Act.

TOOHEY J:   Then that is really pointing up something that Justice Dawson put to you, that the crux of the complaint against 31 seems to lie not in the object that the section is endeavouring to achieve but in the means by which it seeks to achieve it.  In other words, call it a strict liability provision or what you will.

MR JACKSON:   Yes.  I think “smurfing” is the word that for some reason is used.

DAWSON J:   What does “smurfing” mean, Mr Jackson?

MR JACKSON:   I have no idea; it seems an extraordinary word.

DAWSON J:   It is in your written submission, Mr Jackson.

MR JACKSON:   Your Honour would not hang me for that.  It is the description given to these generic types of transactions.  Precisely where it comes from I am not sure.  There seems to be an obligation to give every statutory provision some other name like third‑line forcing and all those sorts of things one sees in the Trade Practices Act.  To return to what your Honour Justice Toohey put to me, in relation to the provision and in relation both to the taxation power and other powers, our submission is that the structure of it is such that it does contravene the general principle that one sees, for example, in the passage to which I referred a moment ago.

TOOHEY J:   The problem seems to me that once it narrows to that point where it turns upon the absence of a requirement of knowledge or some such requirement in section 31, that it perhaps becomes more difficult then to dissociate it from the taxation power.

MR JACKSON:   My answer to your Honour was in the context of where it does not contain any provision such as the intent to avoid tax or any of those things.  So that is really saying one first of all has no such express connection, then one goes to a stage removed from that to say this is the provision which in some way is to assist in the administration of the relevant taxation laws.  Then, when one looks at the provision, it is not a provision which has any direct connection of that kind.  It is simply one that says if transactions of this kind are engaged in, there is an offence.  But, your Honour, where there is no tying up to the taxation law and where what is done is simply to create an offence where it is reasonable to conclude that you engaged in particular conduct, that, in our submission, goes beyond the limit.

BRENNAN CJ:   Mr Jackson, would section 7 fall outside the taxation power?

MR JACKSON:   Your Honour, if one were to consider section 7 in isolation, probably the answer is no.

BRENNAN CJ:   If that be so, that must be because the information that might be derived from section 7 may be relevant to the exacting of a tax imposed by other laws.  Is that right?

MR JACKSON:   That would be so, your Honour, yes.

BRENNAN CJ:   If that is right, in the exercise of exacting tax, would the commissioner be required to prove anything more than the conclusion referred to in 31(1)(b)?

MR JACKSON:   I am sorry, I did not really catch the last part of what your Honour said.  I understood the first part of it.

BRENNAN CJ:   In other words, if section 7 is within power because it is going to yield the information that is going to allow the commissioner to get the tax that is imposed, if the commissioner was looking at a transaction in order to bring it to account in somebody’s assessable income, would he have to prove anything more than the conclusion which is referred to in 31(1)(b)?

MR JACKSON:   Your Honour, there are a couple of features about that.  One, if I can go immediately to it, is that the conclusion that the purpose was there would not be one that was relevantly incontestable, of course.  That is the first thing.  The second thing is that what the commissioner would be doing would be to look at the circumstances, including the circumstances that your Honour has referred to and that are set out in (b), with a view to arriving at what the income was.  No doubt the transactions that had occurred would be of some assistance in that regard, but the fact that they had been carried out by money being put into accounts - say, $9,000 ten times into accounts rather than $90,000 being put into one - would not alter the character of the amount one way or the other.  So that he would be engaged in the task.  As so often happens, things can be done for a number of purposes and the same considerations are relevant to them, but it would not have the same conclusion.

BRENNAN CJ:   Yes, I see.

MR JACKSON:   Your Honours, could I move then to the other provision to which I wish to refer, and that is section 51(xii).  Your Honours will see that section 51(xii) empowers the making of laws with respect to currency, coinage and legal tender.  This is the other provision which is specifically relied on in the Commonwealth’s submissions.  May we pause to say that the law in question in this case refers of course to currency and coinage and legal tender.  Your Honours will see that from the definition of “currency” in section 3(1) of the Act.  But the Act, in our submission, does not have any effect in relation to such currency.  All that relevantly occurs is that transactions involving $10,000 or more give rise to an obligation to report the fact of the transaction to a government agency.  The fact of the transaction has nothing to do with currency, nor has the reporting of the transaction.

Transactions above $100,000 or transactions below $100,000 are not prohibited, nor, if one goes to the list of reportable details that are required pursuant to section 7 - and they are set out in Schedule 1 to the Act - if one goes to Schedule 1, the burden of the matters there set out appears to be concerned with a different topic, namely the details relating to the parties involved and details to tie up the moneys to the parties as distinct from matters relating to the currency itself.

I should add also, your Honours, that the provision with which the Court is concerned does not involve suspect transactions. They are dealt with by section 16 of the Act. I say that because, with a degree of enthusiasm, suspect transactions are referred to in the Commonwealth’s submissions in a number of places, for example, paragraph 3.7. But this case is not concerned with that at all. The provisions of section 31(1), in our submission, which are in a sense in support of the provision for reporting, do not, we would submit, rise above the reporting provision itself. By that I mean, your Honours, that if the reporting requirement is not a law with respect to currency, coinage or legal tender, a provision intended to ensure that the reporting provision was triggered would not itself fall within section 51(xii).

Your Honours, could I say that reliance is placed by our learned friends, upon the Court’s decision in Watson v Lee (1979) 144 CLR 374 on a dictum of Justice Mason in that case. Your Honours, that case was concerned with two issues, the principal one of which was the validity of regulations, notwithstanding that copies of them could not be obtained.

The second issue was whether the term “currency”, in section 51(xii), included foreign currency.  And it was held that it did.  If I could take your Honours to page 382, Chief Justice Barwick, in the third last paragraph of his reasons, your Honours will see the issue is disposed of very quickly there.  Your Honours, Justice Gibbs agreed with Justices Stephen and Mason.  Justice Stephen discussed the question at page 397, about point 7, going through to page 401, about point 2, and your Honours will see that after His Honour’s discussion of the history of currency and so on, he then proceeded to say on page 400, at about point 8:

As to it there can, of course, be no doubt concerning Australian currency and, for the reasons already advanced, I have no doubt that power exists under section 51 (xii) to restrict the export of foreign currency.

Your Honours will appreciate that this was a case involving a restriction of export of currency.  Justice Mason’s view is at page 409.  Your Honours will see, at about point 8, he refers to the regulations.  The relevant regulation, your Honours, is regulation 6, which appears at page 401.  Your Honours will see that at about point 7 on the page”

A person shall not.....send out of Australia.....foreign currency -

et cetera.  The observation which his Honour makes at page 410, commence really about five lines down the page.  He said that:

The plaintiffs sought to restrict the subject matter of the legislative power to Australian currency.

And then, your Honours will see the part that I think is relied on by the Commonwealth.  Your Honours will see at about point 3 on the page:

To my mind this is a quite inadequate reason for importing into the Constitution the suggested limitation on the subject matter of the power -

that limitation being.....

a limitation which would, subject to the uncertain ambit of other powers, leave the Parliament without power to control and regulate the receipt and use of foreign currency in Australia.

No doubt, the reference to foreign currency is to be treated as a reference also to Australian currency.  But, his Honour’s observations should be read in the light of the issue with which the court was dealing.  The provisions in question here, do not, in our submission, or are not, in our submission, intended to prevent currency transactions of any kind for any currency‑related purpose.  By that I mean that they are not intended to prevent the use of currency or anything of that kind or to affect in any way what currency is to be used.  They are simply to support a reporting requirement.

It is a case, in our submission, where the words of your Honour Justice Toohey in Re Dingjan: Ex Parte Wagner 183 CLR 323 at 353 are apposite, where your Honour, in the first new paragraph on the page - the case is one dealing with the corporations power - but your Honour went on to say at about point 2 on the page:

It emphasises that the connection must be substantial, not merely tenuous.  The law must be one which “in reality and substance” is a law upon the subject matter -

That is so whether it is, in effect, a section 51(xx) or not.  Your Honours, I would refer to the remainder of that paragraph.  In our submission, the case is one where the currency power does not support the provision.

Could I go then to the two other bases relied on by the Commonwealth?  May I take your Honours in that regard to their written submissions; first to paragraph 3.8 at page 9.  That relies on the fact that access may be given to the information to law enforcement agencies and the customs service.  It would seem extraordinary, in our submission, if the legislature could require the information just in case a person might commit an offence against the law of the Commonwealth and so on.  In each case, one would have to look at the particular substantive provision that was in question.  The use that may be made of it is something that needs to be justified by reference to some other power.

Your Honours, the second thing that is referred to is that in paragraph 3.9, which relates to the Mutual Assistance in Criminal Matters Act.  Section 37A of that Act simply says no more than that when a foreign country to which the Act applies asks the Attorney to give information to it, the Attorney may direct the Director of AUSTRAC to give the information for the purpose of enabling the Attorney‑General to deal with the request, and the information is the information in the Financial Transaction Reports Act.

Your Honours, the external affairs power is not the basis for the law requiring the information in the first place, it just empowers the passing over of information otherwise validly obtained.  Your Honours, subject to that, we rely on the matters in our written submissions in relation to any other powers.  We would refer your Honours also to a summary of views in relation to other powers contained in the judgment of the Full Court of South Australia in relation to section 24 of the Act in Rogers v The Queen (1995) 130 ALR 635 at page 642. The judgment of the court was that of Chief Justice Doyle.

Your Honours, section 24 of the Act is the provision which is set out at page 636 of that report.  You are not to open or operate accounts “with a cash dealer in a false name”.  Your Honours will see, at page 642, about line 9, in a paragraph there commencing , his Honour deals with arguments about the various heads of power which had been relied on, as set out in the preceding paragraph. 

Your Honours, those are the submissions I wish to make in addition to our written submissions.  May we say also that apparently the name “smurfing”, your Honours, derives from an American - United States cartoon character called, I think, “Smurf”.

TOOHEY J:   It depends on the age of your children, Mr Jackson, whether it is familiar or not.

BRENNAN CJ:   Thank you, Mr Jackson.  Mr Solicitor?

MR GRIFFITH:   Well, your Honour, I have younger children than my learned friend and, in fact, we understand it is.....American generation.  I went home last night, your Honour, and asked my youngest child did he have any smurfs and he produced four for me.

GUMMOW J:   You have only produced four.

GAUDRON J:   Do you know the connection though, with this Act?

MR GRIFFITH:   I do, yes, your Honour.  I was going to explain that first up.  It was common in the United States when the United States first enacted legislation in 1970 to counter tax evasion and money laundering by requiring financial institutions to report cash transactions over $10,000.  Many people sought to avoid this requirement by conducting multiple cash transactions below the reporting threshold and according to Welling, whose article is tab B in the Commonwealth’s supplementary written submissions, at page 296 to 297 of the article the term “smurf” was used to describe the army of persons who scurried from bank to bank to accomplish these transactions because, like their little blue cartoon namesakes, they are pandemic.

So, the imagery was that there were a lot of little blue people going from bank to bank with just under $10,000 in their hands for the purpose of avoiding the requirements of the transaction.  In that way, the term “smurfing” came to apply to the very sort of activity to which section 31 of the Commonwealth Act is directed.  Pages 288 to 289 and 295 to 298 and also the example provided in footnote 50 of that article by Welling give a general background to the scale and opportunities to involve in “smurfing”.

It was the case in the United States that prior to 1986 the United States’ courts were not agreed as to whether or not “smurfing” was impliedly made illegal by the US laws which did not have an equivalent to section 31 in it at that time.  This is a matter which is mentioned in footnote 57 of our submissions and, also, the Court will see that there is an addendum to footnote 57 which is part of the Commonwealth’s supplementary submissions.

GUMMOW J:   Mr Solicitor, in these United States decisions, is there any discussion of the legislative footing in the powers of Congress?

MR GRIFFITH:   Yes, there is, your Honour.  We have attached in our supplementary submissions a long examination of the United States’ position and also attached ‑ ‑ ‑

GUMMOW J:   Well, there was a lot of discussion about mens rea and so on in terms of Congressional head of power.

MR GRIFFITH:   Your Honour, it seems to be no issue about that, so far as the authorities would indicate.  The issue was really the question of whether or not it was, first of all, implicit in the law and that was resolved, your Honour, by passing particular provisions.  Then on the mens rea issue, your Honours, the Supreme Court decision in Ratzlaf which appears under tab F was regarded by Congress as not reflecting what the intention of Congress was with respect to the issue of whether there was such a requirement.

KIRBY J:   What did you say about Ratzlaf?

MR GRIFFITH:   In Ratzlaf, your Honour, the United States Supreme Court took a very protective view as to the extent to which intention must be shown for a conviction.  That was a view which Congress apparently disagreed with and amended the provisions of the United States law to provide a lower threshold of intention to be shown.  This really goes to the mens rea issue, as Justice Gummow mentioned to me.

KIRBY J:   I took your written submissions to indicate that though you were not necessarily conceding that you did not exclude the argument that mens rea was required under the Australian standards.

MR GRIFFITH:   Your Honours, our view, in our submission, if we could summarise them, is that in essence there is a requirement for mens rea and we would express it perhaps simply by saying it would seem to be along the lines of the dissenting judgment in Ratzlaf which was the approach which was supported by the amendment to the United States law after the Ratzlaf decision.  So, your Honours, our position is that section 31 does impose a mens rea requirement and, indeed, the expressions, we would submit, in section 31, the phrase “it would be reasonable to conclude that”, is probably no more than an evidentiary provision giving rise, for example, in the absence of any explanation - and there is no requirement to give explanation as is required by paragraph (b)(ii) of that section - give rise to, if you like, a rebuttable inference, but at the end of the day we would accept that the proper construction of this provision is that.....to the extent of absence of mens rea is an answer to proceedings for an offence under this section.

DAWSON J:   I am not sure that I understand that, Mr Solicitor.  Where does reasonable doubt play any part in section 31?

MR GRIFFITH:   Your Honours, as we understand the point by my learned friend, Mr Jackson, it is that an offence could be committed irrespective of whether or not there was any guilty intent on the part of the person.  We would submit, your Honour, that if a person was wholly innocent so far as their mens rea was concerned in carrying out a transaction such as this sort, then in that case that would be an answer to a prosecution for that offence, but they would not be convicted merely because one would say objectively, notwithstanding your explanation it would be reasonable to conclude, et cetera, in the terms of the provision.

KIRBY J:   Do you concede that if the Court were of a view that possibly mens rea were not required that, the Commonwealth cannot, under the powers that have been invoked, enact ‑ a Parliament cannot enact a law that imposes an absolute offence?

MR GRIFFITH:   Certainly not, your Honours.  We would say, firstly, that this legislation can be simply supported under the currency power.  An offence of strict liability could there be created.  Secondly, we submit that in the circumstances - and we have regard to supporting materials which were filed by the Court - such a provision could be supported under the taxation power as incidental to the taxation power.  But, further, we would say in answer to your Honour’s proposition that, if that were the issue ‑ if that were the determinative power ‑ that would mandate, in effect, the construction in favour of validity rather than against validity. 

So, for that reason our submission would be that if there were then doubt in the Court as to whether or not there was importation of a requirement of mens rea, however defined, then the proper course of construction would be for the Court to adopt a view, firstly, which represents, of course, the obvious balancing of the position of the individual and, secondly, one which would give rise to the law being regarded within power.

DAWSON J:   But, Mr Solicitor, the Act itself proceeds on the basis that non-reportable cash transactions, or the reporting of non-reportable cash transactions, is unnecessary for currency or taxation purposes.

MR GRIFFITH:   Unless, your Honour, there is evasion of the requirement to report.

DAWSON J:   That is right, and what section 31(b) picks up ‑ or possibly picks up ‑ are transactions which are, indeed, non-reportable cash transactions, which were not entered into with the intention of evading or avoiding reporting or anything of that sort; were genuine, and it may penalise those.

MR GRIFFITH:   We would submit, your Honour, it would not penalise them.

DAWSON J:   Why not?

MR GRIFFITH:   Your Honour, the requirement is to, when one has a transaction of non-reportable, namely less then $10,000, and has regard to the factors which are set out in paragraph (b), then, your Honour, there is an obligation to report.  And, your Honour, it only deals with the case where there are, in total, more than one transaction.  It does not deal with the single transactions ‑ ‑ ‑

DAWSON J:   But it does envisage someone being convicted where that person did not have the intention of evading the provisions of the Act.  Perhaps that is what this “wholly reasonable to conclude” formula is to do.

MR GRIFFITH:   Yes, your Honour.  Well, that really points to the issue where the Commonwealth says its preferred construction is to accept that it ‑ in the case which your Honour demonstrates, that the person did not so intend ‑ ‑ ‑

DAWSON J:   It is a simple proposition:  “I may have not intended to evade the Act, but it may be reasonable to conclude that I did”.  In that case I would be convicted.

MR GRIFFITH:   If you have, in fact, not intended, your Honour, our submission would be then in that case, you would not be.

DAWSON J:   Well then, why was not the Act framed in such a way as to say a person who attempts to evade the Act, with the intention of so doing, shall be guilty of offence?

MR GRIFFITH:   Well, your Honour, that is always a difficult question to answer.  These cases come to the Court on the Acts as they are framed rather than as they might have been framed.

DAWSON J:   The only conclusion one could come to, I suggest, is that the Act was cast more broadly so as to encompass the sort of situation that I have put to you because it was thought that that would, maybe, discourage people from attempting to evade the Act or, maybe, to make proof easier; that it brings in people who engage in transactions which the Act itself says have no relationship, or which the Act does not attempt to cover for purposes of currency or taxation.

MR GRIFFITH:   Your Honours, on the second point that your Honour mentions to me, we have filed in our submissions two volumes of materials which contain various reports, in effect, leading to the enactment of this Act and explaining its function and I was intending to take the Court briefly to those matters ‑ ‑ ‑

DAWSON J:   Before we get to that, I just want to understand the proposition.  You say, it is a law with respect to taxation to convict both people who attempting to evade taxation and those who are not of an offence and that is necessary because it is very difficult to sift them out.

MR GRIFFITH:   Exactly, your Honour.

DAWSON J:   Yes.

MR GRIFFITH:   And what we do is we rely upon the legislative materials to indicate the matter that your Honour touched upon in the question you just asked me, that it is very difficult to establish the facts and to detect people in these circumstances and that is the reason, following the experience of the United States legislation and practices, that this legislation is cast in a form which does impose, as it were, obligations on persons objectively because they engage in transactions.

The case of section 31, it is because they engaged in two more transactions.  So, we would submit that that takes them, on the face of things, outside your Honour Justice Dawson’s first premise that it is not concerned with transactions less than the 10,000 amount because in the case of where there is two or more transactions, one does have, in the aggregate transaction, more than $10,000 and in circumstances where, by the mere conduct itself, one has a circumstance where taxation implications are obvious.

DAWSON J:   And you could have done it quite simply by saying, for instance, that if a person has transactions which in the aggregate are more than $10,000 within a certain period, then they will fall within the provisions of the Act whether it was an attempt to evade tax or not.

MR GRIFFITH:   Well, your Honour, that might be even more strict than the present ‑ ‑ ‑

DAWSON J:   That is what I am saying, that you can have an offence created which imposed strict liability and you would say, “Well, that would be valid”, and this is a retreat from that to some extent.

MR GRIFFITH:   Yes, your Honour.  We accept that this is a lesser one with strict liability.  Your Honours, our position is that if a person did not have the intention, then we say it cannot be reasonable to conclude that they did so that if at the end of the trial of the matter one is left in the position where one can say, “Well, that person did not have the intention”, our submission is then that that person cannot properly be convicted notwithstanding the phrase “it would be reasonable to conclude” as part of the suffix to the requirements of paragraph (b).

DAWSON J:   That is why I say what it does really is to remove the reasonable doubt requirement which is normally part of the criminal law because you may reasonably conclude that a person conducted the transactions and still have a doubt about it.

MR GRIFFITH:   Our submission is, your Honour, having regard to the matter that this Act intends to remedy, and that is established by the materials in our two volumes which we have summarised in their operation in the appendix to our first written submissions, that it is incidental, at least to the taxation power, and our alternative argument the currency power, for a provision such as this sort to support the requirement of section 7.

DAWSON J:   I follow.  You could have imposed strict liability.  You did not.  It is something less than strict liability but it is not the full requirements that are normally imposed by the criminal law.

MR GRIFFITH:   That is so, your Honour, but we do not wish to stand or fall on the point that the plaintiff’s pleadings and submissions to the Court make, namely, that there is a difference between us on this issue of whether or not there is an ingredient of mens rea because there is not.  Our submission is this provision does have such an ingredient, modified from the normal principles but nonetheless it does have it.  So that to put it shortly, if the person does not have the intention, we say that is an answer, there is no offence.

BRENNAN CJ:   But is there a prospect of vicarious criminal liability pursuant to section 34?

MR GRIFFITH:   Your Honours, section 34 as it were is a new matter raised by my learned friends in that it had not been raised hitherto.  We do not yet see it, your Honour, as being raised in this case because the question is confined to section 31.  There is no challenge to the Act as a whole.  Your Honour says that there is a prospect that section 34(3) may be used to track in in that way.  Our submission nonetheless, your Honours, would be in that case nonetheless, your Honour, in the case of a person charged in fact not having the intent, we would say that must still constitute an answer and that there would be no offence by a person charged under section 31.

BRENNAN CJ:   If your first response is accurate it may not matter but I must say it is a little difficult to reconcile with 34(3).

MR GRIFFITH:   Your Honours, these matters must be put in context and a section such as section 34 is really the smurfing provision.  It is intended to catch up these little people running from bank to bank, so that if one can establish that these runners are out there acting for someone it enables, we submit, obvious inferences to be made and the Ratzlaf Case is a useful example of the position if one does not have provisions of that sort.  In that case Mr Ratzlaf had gambling debts I think of $194,000 to settle in Las Vegas.  He produced the money in a paper bag at the casino and was told, “No, we will have to report it.”  He then spent the next week travelling from bank to bank in Nevada trying to obtain cashiers cheques of $9,500 and eventually he was charged and his wife was charged also with smurfing and the decision of the Supreme Court was that those facts were not sufficient to establish that the accused had the requisite intention.

The result of that, as I mentioned, is that the United States law was amended and one can pick up the provisions of the amendments which we summarise in paragraphs 3.18a to 3.18i in our volume of supplementary material.  I will not take the Court in detail to the course of that, but what that does indicate is that to deal adequately with this practice it is necessary to have provisions by way of extension of the sort of section 31 and particularly of the sort of section 34.  That is really the essence of smurfing. 

Now, when it comes to the case where one has in effect the Mr Big, the one who sent the smurfs out, our submission is that section 34 may be relied upon even as a deeming provision but it would still be the case that if a person demonstrated, the person charged, the person who is proven to have organised these runners in effect to the banks, that that person did not have the intention, in our submission, that would be an answer nonetheless to a section 31 prosecution, but having said that, it is still our principal submission that in any event such a provision would be supported under the currency power and also, if needs be, under the taxation power.

GUMMOW J:   You do not rely on the powers as to statistics, do you?

MR GRIFFITH:   We do not rely on the power as to statistics.

GUMMOW J:   As to, yes, the creation of statistics.

MR GRIFFITH:   Well, we do not, your Honour.  It is the case that this legislation in its drafting does refer principally to the taxation power.  It also necessarily picks up, we submit, the currency power.  One could seek to mount an argument, but to this point it has not been mounted and it might be difficult with the discriminatory aspect of it.  But it just goes to show, your Honour’s question, how one must think laterally about these things as one approaches the Court.

DAWSON J:   You are going to develop your argument about currency, I take it.

GAUDRON J:   Yes, of course.  I was confining myself at the moment to smurfing and putting the matters in context.  Could I, however, refer the Court to the detail of our appendix, commencing at page 18 of our written submissions, that is the small volume, wherein we seek to summarise the legislative materials which we have annexed in volumes 1 and 2 and, in particular, refer the Court to the extract from the second reading speech which is contained in paragraph 3 on page 18 of our materials.  I will not read that to the Court now, but rely upon it as drawing together the threads of the various reports which are attached in our volumes 1 and 2 and arising, of course, from such reports as the Stewart Royal Commission and Costigan Royal Commission as is - - -

GUMMOW J:   Mr Solicitor, can I just go back to that Welling article in the Florida Law Review?  We have been given only part of it.

MR GRIFFITH:   Your Honour, we will give you the entire - - -

GUMMOW J:   And, in particular, page 320 deals with constitutionality, it seems.

MR GRIFFITH:   Yes, your Honour.

GUMMOW J:   We do not seem to have that part of it.

MR GRIFFITH:   We really extracted it for the smurfing part.

GUMMOW J:   Well, that is all very interesting.  I would like to know why the US law is valid.

MR GRIFFITH:   Yes, your Honour, we will give the Court the entire article.  But the Welling article, inasmuch as it is extracted, makes, in the American context, very much the same points which we seek to make here with respect to the manner in which the cash commonly can be used for the purposes of tax evasion and money laundering, as is referred to.  We do summarise - then to paragraph 8 of this appendix - - -

KIRBY J:   Does the article reveal whether the purpose of the United States legislation, which seems to have been the inspiration of this, was for taxation purposes, or control of drug‑related money and the enforcement of the criminal law, or some other purpose?

MR GRIFFITH:   The article confirms very much the both.  On page 291, at tab B - perhaps it is better to be start on page 290 of tab B, the author says:

Money laundering begins with dirty money.  Money can get dirty in two ways.  One way is through tax evasion; people make money legally, but they make more than they report to the government.  Money also gets dirty through illegal generation.....Once money is dirty, it must be converted into an apparently legitimate form, or “laundered” before it can be invested or spent.

And then there is a note.  Next paragraph, page 291:

Laundering has several goals.  One is to hide or sanitize the property so the tax collector does not get it.....Another goal is to convert the cash into a physically manageable and inconspicuous form.

The next paragraph:

Whatever its goal, money laundering is harmful.  Underground money absorbs no portion of the tax burden.  More importantly, laundering is harmful because it allows the underlying criminal activity to thrive.

KIRBY J:    You referred to two Royal Commissions - the Williams and Costigan. Are the passages where they deal with this problem reproduced anywhere?

MR GRIFFITH:   Yes they are, your Honour.  I refer to the summary in our appendix because we there footnote the extracted parts which are included in length in the two volumes.

KIRBY J:   That does not seem to be related to taxation.  That seems to be related to the enforcement of the customs law, the criminal law.

MR GRIFFITH:   Your Honour, we would say that it was concerned with taxation.  The Costigan Commission was particularly directed to taxation matters. But we rely upon this material in summation to establish that, to summarise it, the position in Australia is very much as the position was in America as summarised by Welling, that there is this requirement to ensure that there is not money laundering.  We say it is sufficient to say a significant reason for that is taxation reasons, but we also refer to the aspects of other criminality which is involved.

KIRBY J:   My notes of your submissions were that you relied on the taxation power, the currency power, the banking and corporations power, but did not relate to other heads of power that you relied on.

MR GRIFFITH:   Your Honours, our submission are that in particular cases one can say, well, this is incidental - if it is a drug case this is incidental to - but we do not, in the totality, seek to pick up each of the Commonwealth powers to rely upon in that way.  But, your Honours, our principal submission remains, this is really within currency, and that is that.  But we say, also, inasmuch as it is incidental to taxation, it is wholly supported and we ‑ ‑ ‑

KIRBY J:   Has currency been held to relate to electronic transmission of funds, because currency conjures up, in my mind, a notion of either gold or paper money, coinage or paper money.

MR GRIFFITH:   Your Honours, for our purpose it is sufficient to rely upon the currency powers dealing with legal tender, notes and coins.  This is what this Act is mainly concerned about - notes and coins.  It is not concerned about shifting money.  The point also made in Welling is that it is the important part of the process to detect these transactions when they are notes and coins, because once they go further, then detection becomes more difficult.  And that is one reason that Welling puts forward as to the fact that has been such a matter of debate in America to amend the Act, to ensure that this aspect is pursued so far as it may be to effect this detection.

Your Honours, to put our submissions in context, we say that the answer to the question at the beginning of section 31 is clearly yes, because the Act falls within the square of the power under currency and this is a point we make in our submissions on pages 3 and 4 of our written submissions.  The section makes it an offence for a person to be a party to, or conduct certain types of cash transaction with currency in certain circumstances so, as such, it directly prohibits the physical transfer of currency from one person to another in prescribed circumstances.

Our submission is that this is the clearest case falling within the currency power.  It deals with the use of currency.  For example, we would postulate that it would be permissible under currency power to say that only transactions up to $10,000 would be conducted in currency.  Beyond that, they should be conducted by bill of exchange or barter, or some other method.  Of course it might be a matter of conjecture whether under currency power we could prohibit all currency and require the economy to return to a situation of barter, but that is not something which we may pursue.  We submit that once the section is said to deal with the transfer of currency, it falls within the core of the power, and that is the end of the matter - strict liability or not.

The plaintiffs’ arguments for invalidity does, as they admitted in an exchange with the Bench, hinge on its construction of section 31(1) as creating an offence of strict liability. The plaintiffs, in effect, assert that the section does not satisfy, as we see it, some test of proportionality. We deal with this - our answer to this in paragraphs 3.13 to 3.21 of our submissions, and our submission is that this is untenable construction.

DAWSON J:   Mr Jackson did not mention, thankfully, proportionality anywhere in his arguments.

MR GRIFFITH:   We sort of saw it in his written submissions, your Honour, which he adopted.

DAWSON J:   There are a lot of mutually inconsistent statements in the written submissions about the subject but - - -

MR GRIFFITH:   Yes, that was our impression of them, too, but we have sought in our written submissions to answer what we saw there, but your Honour is right to say that in the end it comes back to the matter of construction that my learned friend makes on the section, and having made it he says that must then fall out of what might be regarded as incidental taxation.  As far as we can see his submission broadly says it must fall out of currency.  At the moment, dealing with currency, we submit that we are not even getting to an issue of incidental aspect of argument within the power.  We say there is no issue then of the capacity of the Commonwealth to make primary provision with respect to the use which we made of currency.

Your Honours, we could, for the purpose of our submission, stand on the currency power and not deal with taxation.  So, if I can deal briefly with that but, nonetheless, go on and deal alternatively with taxation, but it being a matter which we have, in our submission, dealt with at length in our written submissions, and as I have referred to in our supplementary submissions, dealt with the issue that my learned friend, Mr Jackson, raises on the issue of mens rea in regard to the situation as to how it is regarded in the United States.  It is not necessary to do so but, for our purposes, we are prepared to accept that the construction, as I have already said to the Court, of section 31 should be regarded more or less along the same lines as the dissenting opinion of the Court in Ratzlaf’s Case, the majority decision being overruled by the amending legislation of Congress.

Turning then, shortly, to the currency power, in our submission, this Act is amenable to being supported entirely by the currency power and that that is sufficient, if that be the case, for validity, notwithstanding the copious references, both in the supporting materials and the Act, itself, to, for example, the taxation power.  If I may, as authority for that, give the Court a reference to Re F: Ex parte F 161 CLR at page 387 to 388, the Chief Justice and Justice Deane.  Also, if I could give the Court a reference to Ex Parte Walsh and Johnson; In Re: Yates 37 CLR 36, in particular at page 135 where Justice Starke said:

law enacted by a Parliament with power to enact it, cannot be unlawful.  The question is not one of intention but of power, from whatever source derived.

So, our submission is that section 31 is within the core of the currency power and that being so there is no need to consider whether or not it is the ambit of any incidental power.

McHUGH J:   That is rather difficult to accept, Mr Solicitor; I mean, it really has nothing to do with currency as such.  It is legislation which is designed to ensure that people will report their dealings in currency, but can you put it any higher than that?  I have no doubt, for example, that under the currency power, the Commonwealth if it could, could require every individual to report to some central agency the number on every banknote that they used.  That would be a law with respect to currency.  But this is not a law with respect to currency as such; it is a law with respect to conduct.

MR GRIFFITH:   Your Honour, our submission is that a law which says that if a person transfers currency in a certain way, then this is a consequence; X follows, is a law with respect to currency because it imposes a liability and obligation by reference to currency.

McHUGH J:   That is not what it does.  It does not have anything to do with transferring currency.  It makes it an offence if it is reasonable to conclude that you did it for a particular purpose.  Now, it may or may not be valid but it seems to me it must be valid under the incidental power.  It is not a matter that goes to the core or the currency power.

MR GRIFFITH:   Your Honour might be referring to the incidental power of currency, as well as the incidental power of taxation, which would get you to the same point, in that submission, and our submission which we also wish to elide as to that is that that is sufficient without engaging in any inquiry as to proportionality, which we are not sure at the moment to what extent our learned friend, Mr Jackson, touches on it but once, in our submission, one has a law which, by reference to currency, by reference to the transfer of currency, says a consequence follows, we submit that that is a law which is supported by the currency..

DAWSON J:   Well, that must be too wide, Mr Solicitor.  The law imposing price control would be a law with respect to currency on that argument.

MR GRIFFITH:   We would submit that would not be so, your Honour, because it would not ‑ ‑ ‑

DAWSON J:   It is dealing with the transfer of currency and placing a limit on it.

MR GRIFFITH:   Well, your Honour, price control may involve sales in various aspects other than payment for currency. 

DAWSON J:   All right, price control is involving the transfer of currency.

MR GRIFFITH:   Your Honour, what this provision does, in our submission, is to provide specifically that you may use currency in a transaction only with a particular consequence and if you engage in a transaction of this sort, then there is a legislative requirement ‑ must in its totality be regarded as a law with respect to currency, in our submission, and, if it is that, your Honours, the fact that it may be oppressive, as in the case of the example of Justice McHugh, in our submission, is a matter of no consequence.  That is part of the exercise of the power where, we submit, there is no aspect of consideration as to whether or not the requirement is one which facilitates or does not facilitate the use of currency as such. 

A law does not have to be with respect to a currency-related purpose.   This is not a purposive power, it is a power with respect to currency.  If one can characterise a law with respect to currency, we would submit, well, that is the end of the inquiry. One does not consider whether or not the particular aspect here has something particularly to do with the currency as such, or some other consequence.

DAWSON J:   You accept the proposition that proportionality only has relevance as a test of constitutional validity where you are dealing with a purposive power, which may include the incidental power?

MR GRIFFITH:   Even then, your Honour, we accept it with a qualification, namely that “purposive” does not mean that it is for the Court to determine - or “proportionality”, whether or not, in the Court’s view, there is a proportionality.

DAWSON J:   I am not talking about the purpose of the legislation.  I am talking about the purpose of the printed legislative power.

MR GRIFFITH:   Yes.  Your Honours, we would submit that proportionality may even then have a limited role but, at the very least, as your Honour said in Cunliffe, we submit, your Honour, it is limited to that extent.  We accept what your Honour Justice Brennan and what your Honour Justice Dawson said in Cunliffe as indicating that limitation.

BRENNAN CJ:   Am I right in thinking that your proposition on the currency power has two branches to is; one is that if a transaction of currency is a criterion of another liability, that is sufficient to stamp the Act as a law with respect to currency?

MR GRIFFITH:   Yes, your Honour.

BRENNAN CJ:   And the second proposition is that the law precludes the use of currency in a way that can facilitate large scale evasion of tax?

MR GRIFFITH:   Yes, your Honour, but we would submit that ‑ ‑ ‑

BRENNAN CJ:   And those are two quite distinct bases, are they not?

MR GRIFFITH:   Yes, your Honour.  At the moment we are talking about currency but your Honour’s second proposition deals with the issue supporting it under the taxation ‑ ‑ ‑

BRENNAN CJ:   Well, supports it under both, I would have thought.  If you are saying that you are limiting the way in which currency can be used for a purpose, it is a law with respect to currency.

MR GRIFFITH:   On reflection your Honour is probably right, but we still say the first proposition is sufficient for our purposes.  We say that the character of the law is to be ascertained from its legal operation by reference to the rights, duties, obligations, powers and privilege which it creates.  Section 31 imposes criminal liability in certain circumstances.  The circumstances here by reference to which that liability is imposed is a transaction involving the physical transfer of currency in particular circumstances. 

In effect, this law prevents the physical transfer of currency from one person to another in the circumstances specified in section 31(1)(b) and we say that is the effect of the law.  As such, it must be regarded as the law with respect to currency.  We note that there does not seem to be any relevant learning from the currency and coining provision in Canada and, of course, United States’ powers are different because they deal with “to coin money, regulate the value thereof and foreign coin” and also to provide for the punishment of counterfeiting and securities and current coin of the United States, so there is no relevant assistance from there.

TOOHEY J:   When you speak of “currency”, Mr Solicitor, is that just a compendious reference to placitum (xii) or are you isolating currency from coinage in legal tender?

MR GRIFFITH:   Your Honours, “currency”, of course, in this Act in section 3(1) is defined to mean the coin and paper money of ‑ ‑ ‑

TOOHEY J:   Yes, I appreciate that the definition in the Act might be said to be narrower than the constitutional head of power, but when you look to the constitutional head of power, are you referring to currency as an element in that power and as if coinage and legal tender may mean something else?

MR GRIFFITH:   Your Honour, “currency” would seem to be sufficient to cover it, but “coinage”, we would suppose, would include definitely coins.

TOOHEY J:   Well, that is partly behind the question.

MR GRIFFITH:   And probably, your Honour, arguably could include paper money because one can - one with the other.  Another construction could be that “currency” is the paper money and “coins” is the coins, non‑paper money, and there seems to be no authority on that that we have turned up but, your Honour, it could be that the constitutional power dealing with legal tender as well is wider than the definition of section 31 but for our purpose it is sufficient to say that the definition of currency in the Act is certainly no wider than the constitutional definition.  So that in that way there is no difficulty in reaching back, we would submit, to the constitutional power.

GUMMOW J:   Well, the notion of currency has various legal aspects, does it not, as Dr Mann explained to us in great length and subtlety?  Some of them are economic mediums of exchange and so on.  Those ideas suggest a fairly broad content for 51(xii).

MR GRIFFITH:   Of the power?

GUMMOW J:   Yes, of the power.

GUMMOW J:   Yes, we would incline to think so, your Honour, but, of course, some aspects such as bills of exchange are particularly dealt with under other parts of section 51.  As to whether then one could argue that also they could be subsumed into placitum (xii) would be a matter perhaps of anxious inquiry another time.  We do not seek to limit the currency power in any way.

DAWSON J:   Currency is a means of transferring value from one person to another, is it not?

MR GRIFFITH:   Yes, your Honour.

DAWSON J:   But there may be means of doing that which are not currency and that is the problem.

MR GRIFFITH:   Of course, your Honours, and as is made clear by the decision of the High Court, of course, the currency power includes foreign currency.  It is not limited to Australian currency or Australian coinage.  It may be expression that if pursued one of a particularly wide meaning.

GUMMOW J:   But it does not just say money.

MR GRIFFITH:   It does not say money.

GUMMOW J:   No.

MR GRIFFITH:   We accept that, your Honour, but perhaps we have taken the short way by going back from the.....to say whatever is currency, coinage and legal tender for the purpose of the section 51 power.  The definition of the Act must fall within it and if the Court would permit me to say that is sufficient for our purposes.  In our written submissions in paragraphs 2.1 to 2.5 we make them the propositions that I have already summarised and the point made in paragraphs 2.3 and 2.5 is the essence of what we put on this.  We say if the law directly has a term in effect to prohibit the physical transfer of currency from one person to another in prescribed circumstances that is within power, and once that is determined we submit that there is no inquiry as to whether or not it is proportionate and refer footnote 9 to your Honours the Chief Justice and Justice Brennan in Cunliffe.

If that is not sufficient, of course we would also call in aid the incidental aspect of the currency power, but really for our purposes that is not adding much more to the principal submission already made.  Turning then to the question of going beyond the currency power, we do submit in paragraphs 3.1 to 3.10 of our written submissions that this provision falls plainly within the implied incidental power under the taxation power by reason of its operation and effect and we refer to other powers such as the territories power.  Secondly, we make the propositions in paragraphs 3.11 to 3.21 that even if it was considered necessary to have resort to the purpose of the section in order to establish a sufficient connection, on any view that purpose would be in the section within power and we say any proportionality test if required would be satisfied.

We appreciate, to some extent, we were answering arguments which we saw being made by the written submissions, and perhaps we anticipated something which is not in my learned friend’s submissions today.  But we do look at the incidental power in this aspect of saying that one should not here regard it as separate from the grant of power itself.  It should be regarded as an aspect, with a single grant of power, the taxation power.  In paragraph 3.4 of our submissions we make it clear that the test of validity is the same whether the argument is whether it falls within the core of the power or whether it falls to be supported by the incidentals aspect of that power.  And this seems to be conceded by the plaintiff’s written submissions, paragraph 12.

TOOHEY J:   If you just picked up the Act and read it; leaving aside the objects provisions, is there anything that would say to you, “This is an Act that has some relationship with taxation.”?

MR GRIFFITH:   Well, your Honours, there may well be, if one was influenced by the knowledge of the materials to which we have given to the Court.

TOOHEY J:   Yes, but I put the question a particular way.  If you just picked up the Act and read it cold, as it were?

MR GRIFFITH:   Well, your Honour, we would say “cold” it is self‑evident that law dealing with the disclosure of informations of the movements of substantial moneys in cash form might be regarded as having relevance with taxation but perhaps that is a particularly naked inquiry, given the course of development leading to the passing of this law, modelled as it is on the American experience and supported by the materials ‑ particularly the materials which we have annexed in volumes one and two, and we would say, your Honour, perhaps it is a false inquiry not to put the law in its context in that way, even ignoring the objects clause - the purpose clause in section 4.

McHUGH J:   It looks very much like a rerun of the Communist Party Case; an attempt by the Commonwealth to recite itself into a head of power.

MR GRIFFITH:   Well, your Honours, we would stoutly deny that.  It is a question of what the Act does.

McHUGH J:   If this argument is right about taxation, under the taxation power, the Commonwealth could require anybody to do just about anything, in terms of reporting.

MR GRIFFITH:   With respect, your Honour, that is a long jump ‑ ‑ ‑

McHUGH J:   I know it is a long jump ‑ ‑ ‑

MR GRIFFITH:   ‑ ‑ ‑ a rational approach to this law dealing with a perceived social view, as it were.

McHUGH J:   They could be required to report all their property; all the members of their family; relatives.

MR GRIFFITH:   There is no doubt, your Honour, that the taxation power would justify reporting all one’s property.  If we had a wealth tax that would be the essence of it.

McHUGH J:   If you had a wealth tax.

MR GRIFFITH:   What other matters, your Honour, it is a matter of inquiry.  It could well be the case that within the taxation power one can require someone to report all their spouses and children legitimate and illegitimate and other matters.

KIRBY J:   It does not seem to have the hallmarks of a tax Act or an Act for taxation.  There is no reference to tax number; no reference to the Commissioner, there is no indication that it is a tax Act.  The only way you can get at that is ask, “What is the purpose of this?”, and the purpose of it is to, as you put it, avoid the cash economy and matters falling outside the net of taxable declared income.

MR GRIFFITH:   Your Honour, of course there are references to taxation because it is to the Commissioner of Taxation that matters of information may be transmitted, and it is not a taxing Act, your Honour ‑ ‑ ‑

KIRBY J:   No, well, I meant, it is not an Act that appears to relate closely to taxation.  Do you say that there are references to the Commissioner in the Act?

MR GRIFFITH:   Well, yes ‑ ‑ ‑

TOOHEY J:   There was a definition of “taxation law” in the definition section, so there must be some references to taxation law in the Act itself.

MR GRIFFITH:   Well, your Honours, section 27 deals with the matter of access to the information, and that provides for the information to come to a central authority.  Now, it would have been possible, one would have supposed, to have made this authority part of the Commissioner of Taxation’s responsibility, but that has not been the course adopted by the Act; it has established a separate authority.  But then, section 27(1) says that the Commissioner of Taxation - the other taxation officer - is entitled to access this information.

TOOHEY J:   Can you tell us where the expression “taxation law” occurs in the Act, Mr Solicitor?

MR GRIFFITH:   May I take that one on notice, your Honour?

TOOHEY J:   Yes, later will do, thank you.

MR GRIFFITH:   Your Honours, I am told that section 16 - the suspect transaction - they are those where, unless it is categorised as a suspect transaction, the transaction would not otherwise be one to fall within the net of the Act.

TOOHEY J:   Thank you.

MR GRIFFITH:   In our submission, when one approaches this from the point of view of having regard to the taxation power and, particularly, whether it is incidental to the power - because we do not put it, of course, that this is a taxation Act - then these matters of the supporting material do have a relevance to establish the factual substratum enabling the Court to accept the characterisation of being in this enactment - particularly section 31 - incidental to the taxation power.

KIRBY J:   Is there any other reference than 16 and 27 to taxation?

MR GRIFFITH:   Again, may I take that on notice, your Honour?

KIRBY J:   Yes.

MR GRIFFITH:   Now, dealing with this issue of practical operation and effect, which is the point we desire to make in the exercise of the incidentals power from the question of proportionality, we submit that once it is admitted that the same test of validity applies, irrespective of whether or not it is sought to support a law as one within the core of the head.....or is incidental to the power, then the practical operation.....of the law may be sufficient to support the law, in our submission, under the incidentals aspect of that power.

We submit that there is no necessity to demonstrate that a connection be there by reference to a purpose.  So long as the law, by its operation and effect can be said to be necessary or appropriate to affect the subject matter within the power - and in making that submission we do seek to rely on what your Honour the present Chief Justice said in Cunliffe 182 CLR 272, at page 319, where your Honour Justice Brennan said:

The “reasonable connexion” is not between the law and the incidental power or the incidental aspect of a power but between the law and “the subject of the power”; in other words, the ordinary test of validity is applicable.  But a connexion with a head of power may be revealed more clearly by stating the purpose or object which the law is appropriate and adapted to achieve than by describing the law’s effect and operation on particular rights, duties, powers and privileges.  A law may reveal a reasonable connexion with a head of power either by reference to its effect and operation or by ascertaining that the purpose or object of the law is a purpose or object within the power.

So, in relation to section 31(1), our submission is that this - the operation and effect of this provision establishes a sufficient connection with taxation and, if needs be, other relevant heads of power, and it is not necessary for the Court to have reference to the purpose of the section in order to characterise it; nor is it necessary to consider any question of proportionality. Your Honour, the Chief Justice, in Cunliffe, at page 317, had already stated:

When, by reference to the effect and operation of a law, it is found to bear the character of a law with respect to the subject matter of a head of power, there is no occasion to examine its purpose or object in order to determine whether it is supported by that power.  The purpose of the law is subsumed in the inquiry into its effect and operation.  It is for that reason that it is immaterial to ascertain whether the law has some other purpose lying outside the scope of the power.

In our submissions, paragraph 3.7, we seek to demonstrate that in practical operation and effect the reporting scheme created by the Act demonstrates a sufficient connection we say with the taxation power and that its practical operation in effect is to identify and to deter tax evasion, in particular that effected by the concealment of income through the cash economy.  I have referred to the brief remarks by Welling on that in the American context which are made generally and also to the references to our volume of materials which we say demonstrate ‑ ‑ ‑

DAWSON J:   On this aspect what you say is, as I understand you, a reporting system is obviously something that is connected with taxation and it does not matter if this provision, if it is part of the reporting system, is inappropriate, ill‑adapted, disproportionate to the view that we might take, that is to say that it is too harsh or too burdensome, that it is not to the point, it deals with the reporting system and the reporting system is incidental to the taxation.

MR GRIFFITH:   Indeed, your Honour, and that is really the point of our references to Cunliffe to say this is the appropriate approach - shades of Herald and Weekly Times, as it were, that that is that and that is where we stand on this point, but we do add by reference to our materials, we submit it is abundantly clear that a provision of this sort - and it has been demonstrated by America by the course of a law which did not have a provision of this sort - is that there is a practical necessity to have an anti‑smurfing provision such as this to stop the breakup of cash moneys, otherwise these little people will be running around the streets with paper bags, so many little people as you need to get your sum under the reporting requirement.  That is the very matter that the Act is directed to.

So that we do refer to the evidence of the relationship between the cash economy and tax evasion contained in our materials and may I again refer the Court to the extract which appears at pages 18 and 19 of our materials which is the summary of the Minister’s second reading speech - perhaps I should read it to your Honours because this really gets to the ‑ ‑ ‑

BRENNAN CJ:   Which volume are we looking at?

MR GRIFFITH:   I am sorry, the little volume, your Honour, the appendix which starts at page 18, the principal written submission.  There the Minister said:

“The Bill represents one of the most significant initiatives to counter the underground cash economy, tax evasion and money laundering.  It is notorious that the underground cash economy provides great scope for tax evasion both domestically and internationally.  It is clear that traditional investigative techniques have been ineffective in identifying financiers of major crime, because of the ease with which such persons are able to distance themselves from the actual criminal conduct.  However, experience both in Australia and overseas has shown that criminal financiers associate more closely with the profits of crime.

And, of course, Al Capone went to gaol for tax evasion rather than his other criminal.....

That experience also shows that cash is an important part of financial criminal activity.

Recent investigations have confirmed that numerous accounts have continued to be opened in false names and millions of dollars in cash have been laundered through those accounts.  The financial institutions have sought an avenue for reporting suspect transactions, of any kind, to law enforcement agencies.  This Bill provides that avenue. ...

This Bill give law enforcement agencies the ability to monitor the movement of large amounts of cash and thus to identify tax evaders and the recipients of proceeds of crime.  The legislation is consistent with calls by a number of royal commissions and other inquiries in recent years for stronger measures to deal with the widespread abuse of the facilities of financial institutions in relation to tax fraud and other criminal activities.”

We do refer in paragraph 4 to the parts of the Stewart and Costigan Royal Commissions with citations to parts of those reports which are included in our volumes of materials. In paragraph 5 of our submissions, we demonstrate the relationship between the use of cash and major crime. Our submission is that section 31(1) is thus shown to be integral to the effectiveness of the reporting system relating to cash transactions over $10,000. You need to couple such reporting of crimes with a prohibition of structuring transactions, so as to ensure the reporting requirements are not evaded, .....as we have shown, amply demonstrated by the American experience and refer back to the Welling article, tab B, in our second volume of material. From that we conclude that in its practical operation, in effect, this is, we submit, a law with respect to taxation and any other heads of power under which laws of enforcement it may facilitate may be made.

Perhaps, once again, we could stop there, but should the court consider it necessary to determine whether there is a sufficient connection, by reference to the objects of section 31, we submit that the objects of the section are clearly within the taxation power, and incidental aspects of that power, and other heads of power in respect of assisting in the enforcement of Commonwealth laws.

As such, if it becomes a matter of inquiry, the Commonwealth says there could be no doubt if the law is appropriate and adapted to a legitimate end, and our submission is that there is nothing to be gained here by looking at proportionality.  Once it is accepted that the purposes of the section are legitimate, we submit that there is no issue here of saying that there is such great disproportionality to sever the connection between the exercise of the power and a relevant head of power.  This is not a case such as Davis where that characterisation could be made.

We also make the point that the issue of construction made by my learned friend, we submit, is untenable and we deal with this in paragraphs 3.13 to 3.21 of our submissions and we understand my learned friend as accepting that if that construction is made against him, that is sufficient to dispose of the case.  Now, we submit that, in essence, there is no disagreement on the issue of whether or not the Court should approach a provision such as this sort from the point of view of accepting that there should not be strict liability unless it is clearly made out as a necessary intendment of the provision and notwithstanding the phrase which we have referred to earlier in the first part of the suffix to paragraph (b), it is our submission that a plain construction is one which, as was by reference to the dissenting opinions in the American decision, accepts, in our opinion, the concept that if there is no intent, there is no offence.

We submit that that being an obvious view of construction, one, if you like, against Commonwealth interest because it makes it more difficult for the Commonwealth to prosecute, that is an approach the Court should adopt and, indeed, we submit - I said in answer to Justice Kirby, our submission is one that the Court must adopt if it were to get to the stage that either construction were fairly open because to adopt that construction would be to hold the provision within power; to adopt a contrary construction, if one got to this point of inquiry which we submit the Court does not do, would be to hold it is beyond power.

TOOHEY J:   But your argument must contemplate the possibility that the Court reaches a different view of section 31.

MR GRIFFITH:   On the mens rea point, your Honour?

TOOHEY J:   Yes.

MR GRIFFITH:   Your Honour, we have already, in effect, done the hard argument to say that even if the Court does, we say it is within power for the reasons we have said.

TOOHEY J:   Yes, I understand that.

MR GRIFFITH:   So we are now going to the further point that if the Court is against that on the high point, we deny that it becomes a matter of proportionality but we do say on this mens rea point - our submission is that mens rea is an element of the offence and that there is a requirement that it be reasonable to conclude that prescribed purposes as held simply lowers the burden of proof upon the prosecution.  That is all that provision does.     In our submission, it does not exclude the aspect of mens rea as an element. 

We have referred to the reasons why it is appropriate to lower that burden because, as we have summarised in the material already referred to, the difficulty of proof in this area. Another construction which gets to much the same result would be to say that section 31(1) does no more than create a rebuttable presumption that a person has an impermissible purpose when these facts are made out and it would be reasonable to conclude from those facts, as specified, in that provision.

We summarise our approach on this in our submissions at paragraph 3.18 and, as I have indicated, they are subject to further extension in our supplementary submissions - that is the thicker volume - under tab A of those submissions, dealing with the mens rea element particularly by reference to the United States cases because of the ambulatory history in the United States and because of the acceptance throughout that part that equivalent provisions in the United States did have an aspect of mens rea with, however, the Supreme Court putting the bar at a higher level than that which Congress by its subsequent legislation indicated was appropriate.

BRENNAN CJ:   Mr Solicitor, could I just ask you a question.  I do not think it matters very much for the purposes of this argument, but when is the offence under section 31 complete?

MR GRIFFITH:   Your Honour, it could be completed on the making of the second transaction.  If there were further transactions they would become part of the offence, but for the purpose of prosecution only two transactions would be required.

McHUGH J:   That is difficult to accept, is it not, because one thought that has occurred to me is that the offence may not be complete until the jury’s verdict or until the accused makes a statement from the dock, because the section requires you to take into account any explanation.

MR GRIFFITH:   Your Honour, the answer to that is, explanation if any.  There is no requirement to give an explanation, so that silence is the right.  The consequence of silence may have an effect on this question of intent.  That, in our submission, in analysis is nothing new.  In any offence requiring intent, if there is no evidence from the accused, then inferences may be drawn from conduct and other circumstances.  If there is evidence, then that evidence can be taken into account to accept it or reject it or to colour what otherwise could be concluded from the other circumstances.

TOOHEY J:   Are you reading “explanation” as confined to evidence given?

MR GRIFFITH:   Certainly not, your Honour.

TOOHEY J:   You would embrace something said in answer to an investigating officer?

MR GRIFFITH:   One obvious way of explanation, and that came up in the American decision itself was that when the person is asked by the bank that they go to, “Why are you doing this?”, and they give an explanation to say - perhaps two examples that my learned friend gave, I think, in paragraph 19 of his submissions.  Those two examples would seem to us to come within the case where there would be a requirement to report.  It does not matter that the transaction itself is innocent.  The requirement of the Act is that you should report because there are two or more reportable cash transactions - non‑reportable cash transactions - that if the various factors are satisfied there may be a requirement to report.

If the person has a non‑tax evasion reason for doing this, that does not mean that constitutionally there is not a power to require that person nonetheless to report.  If the person does not know about the reporting requirement because of the innocence of the transaction and because there is no tax avoidance element and they did not turn their mind to the fact that they were avoiding this requirement, then they would have a defence.  But the question of whether they would have a defence in that circumstance, in our submission, has nothing to do with constitutional power.  It is the engaging in the transactions - two or more non‑reportable transactions in circumstances as provided for in (b) -  which create the offence.  That you can do even if you are engaged in a non‑tax avoidance, non‑otherwise criminal transaction.

Your Honour the Chief Justice, we would say the offence, if committed, could be committed at the second such offence or no later than the last such engagement in a non‑reportable cash transaction, but conviction would be determined on the  matters referred to being established in the prosecution and that would include any explanations made on the way at the particular financial institution involved in the transactions, in explanation of any interview, which one would expect one would have from, perhaps, taxation officers, and exercise of one’s right to give or not to give evidence at the trial.  Those are all matters to be thrown in.  It is part of the inquiry whether, at the end of the day there is this intent that what the provision does in its operation to say that if there is no explanation given then you may be at risk but inferences will be drawn, as is required by the provisions, if it is reasonable to conclude, for example, that you had such intent.

Now, having got to this point, in our submission, it is not necessary to articulate precisely what the mens rea element is for the purposes of this case, but we do make submissions in paragraph 3.18(i) ‑ that is in our second volume of materials - as to what we say is the requisite mens rea here and, basically, our view is that it would seem to be much the same as that identified by the minority in Ratzlaf.  It is sufficient to meet the plaintiff’s complaints here, to say that on any view of the requirement of mens rea, we submit, it is clear that a person could not be convicted if they did not, in fact, have this proscribed purpose. 

We say that it is clear from the face of the section ‑ the provision as to “it would be reasonable to conclude” is not dealing with an inquiry as to a hypothetical person, it is by reference to the particular accused in the prosecution.  That that intention is clear, we submit, is demonstrated, as a matter of parliamentary intention, from the extract which we have included in paragraph 3.17 from the explanatory memorandum ‑ that is of our thin volume of materials.  This explanatory memorandum is included under tab 2 of our materials.  We have extract, at page 13 of the thin volume, half of that explanatory memorandum dealing with section 31, and that says that the sections:

give a number of indicators which may give rise to the inference that transactions have been conducted for the purpose of avoiding the reporting requirements. ... For example, if a person who did not normally conduct large cash transactions was to conduct two transactions involving currency of $9,000 within a short space of time either at the same branch, or at branches located nearby, and the person was able to offer no reasonable explanation for such conduct, the inference could be drawn that the transactions were conducted separately in an effort to keep the transaction value below the threshold for reporting of cash transactions ‑

And then, and this we rely on particularly:

Of course, where a person is able to provide a reasonable explanation (subparagraphs 31(1)(b)(ii) or 31(2)(b)(ii)) for conducting transactions in such a manner, no offence would be committed.

Now, the only construction which can give effect to that statement of section 31 is one which accepts that there is an element of mens rea.  I mean, that sentence is, we submit, flatly inconsistent with the construction with the strict liability that my learned friend argues for, and this structure for section 31, we submit, is wholly rational when one approaches its construction with the knowledge of the history, including the American history, which has given rise to provisions of this sort.  Not just provisions such as section 7, requiring reporting, but as shown by America, shown by the creation of this industry of smurfing, given rise to a particular necessity to support a provision such as section 7, with an anti-smurfing provision such as section 31, and we would say further provision such as section 34.

So that we would submit that my learned friend has a hurdle in this last sentence extracted in this paragraph of 3.17.  He has to persuade the Court, in our submission, in his reply that that statement is an incorrect summary of any possible construction which can be put on section 31.  And we emphasise any possible construction because our last submission, of course, on this is to say, if there are one of two constructions the Court should not only have in regard to the traditional aspect of inclining towards a construction which protects the rights of the individual, particularly concerning serious criminal offences, in insisting that there be statement of clear intention that there should be strict liability.

KIRBY J:   Leave aside the Minister’s statement and the explanatory memorandum, what is there in the section, say, for the general bias of the law to require that mens rea be found that supports the proposition that mens rea is there?  Is it the explanation provision?  Is it reasonable to conclude?  What is it in the actual section?

MR GRIFFITH:   Your Honours, we have sought to list the matters we rely upon in paragraph 3.16 on pages 12 to 13 of our materials as indicating, from a textual point of view, that such is a construction but we would add to that to the generality of your Honour’s question - and I adopt what is there -  we add to that, your Honours, that absent the phrase “it would be reasonable to conclude”, there could be no doubt that, as with any other provision creating a criminal offence, there would be an implication of a requirement for mens rea.  So the question is not so much what is there to show it is there; we submit, it is, is what is there sufficient to get over that high threshold that one must get as a prosecutor to establish to the satisfaction of the Court that it is not there?  It is really to that approach we have been addressing ourselves and we submit that we have answered that by reference to the factors we have referred to.  We submit we have answered it textually by reference to the combination of the requirement of (b)(ii), with the operation of the suffix to paragraph (b) and, we submit, we have established, as a matter of construction, one sees a relationship to say what the section is saying at the end of the day, it may establish a position that if there are such transactions, and paragraph (b)(i) is all satisfied, it may well be that in the absence of an explanation the person being charged may have difficulties in establishing that the charge is not made out.  They have the right not to give an explanation but if they do then the barrier that they must overcome to be successful in obtaining an acquittal is a little bit higher than the normal one, and we have emphasised the particular reasons why the Parliament may take the view that that was appropriate in dealing with ‑ ‑ ‑

DAWSON J:   It has nothing to do with validity the way you are putting it.

MR GRIFFITH:   It was just a long-winded answer to the question, your Honour, so perhaps I should stop doing that, yes.  Your Honours, we do come back to the fact to say what seems to be the presumption of the court in construing the section, which seems to be a rational construction of the words themselves, we say, is absolutely supported by the second reading speech and my learned friend, in effect, has to, we submit, confound that and say, “No that is not so”.  But, even if we got to a point of debate on that, our submission would remain that, nonetheless, if there is a choice, the choice should be in favour of a construction which, if one gets to that level of inquiry, results in validity.  If the Court pleases.

BRENNAN CJ:   Thank you, Mr Solicitor.  Mr Jackson.

MR JACKSON: Your Honour, I would endeavour to confound the second reading speeches. My learned friend puts it so forcefully by saying that as so often happens the instructions that the Minister was reading from at the time appear to have been based in some respects on either an abbreviated summary of the Act or else perhaps a misconstruction of its terms. Your Honours, in that regard, a great difficulty with the argument on behalf of the Commonwealth in relation to the benign interpretation of section 31(1) is that it does not sit very well with the notion contained in section 34(3) to say that one somehow puts in the word “knowingly” or some other word which is a synonym for mens rea in the expression “it would be reasonable to conclude that the person conducted”, for example, the term “knowingly” because, if one goes to section 34(3), it is the provision that says it is sufficient if some other person has the relevant state of mind, so that the person who is the person charged might well be in a situation where if one imports the notion of mens rea the importation is entirely academic and it is very difficult, your Honours, to have the notion of mens rea consistently with the provisions of section 34. That is the first thing, your Honours. The second thing is that much has been made ‑ ‑ ‑

BRENNAN CJ:   Section 34 is a vicarious liability provision, is it not?

MR JACKSON:   Yes, it is.

BRENNAN CJ:   So that if you have got an attack based on 34, your real attack would be on the availability of a power to create vicarious liability.

MR JACKSON: Your Honour, to call it a vicarious liability provision is a convenient brief description of it but the difficulty in endeavouring to separate out the two and to say, for example, that section 34(3) might be invalid but that would not affect the operation of section 31(1) is this, that when one looks at section 34(3) it is obviously directed to the provisions of, amongst other provisions, section 31 and I gave your Honours the reasons for that earlier, the particular reference to purpose and purpose seems to be the section 31 offence. It is very difficult, your Honours, to see, we would submit, in circumstances where one has that reference directed to section 31, that one can say one of these things goes but the other does not and to separate out the two and what we would submit is that the operation of section 31(1) was intended to be an operation read with section 34.

No doubt, it is possible to identify the several different circumstances to which the provisions will apply where there are or are not agents or servants but the provision, your Honours, in our submission, is one that where one cannot say that the legislative intent should be devined, that if 34 was no good, then 31 remained.

BRENNAN CJ:   But 34(3) is hinged upon the application of 34(4).

MR JACKSON:   Yes, your Honour.

BRENNAN CJ:   So that 34(3) and (4) only arise when liability is being sheeted home to the person referred to in 31(1) by reason of the conduct and state of mind of a servant or agent.

MR JACKSON:   Yes, your Honour.  I am not suggesting otherwise, with respect, but what your Honour will appreciate also is that section 34 - and I have not taken your Honours to subsection (1) and (2) in detail which deal with the position of bodies corporate - will cover a very large proportion of any possible case covered by it because most of the conduct that could possibly be engaged in is conduct that in the case of bodies corporate would inevitably be carried out by persons who are natural persons and whose conduct is attributed then to the corporation.

In the case of individuals, many cases would be ones, one would expect, where the banking or withdrawal of the money, as the case might be, is carried on by some person on behalf of, or purporting to act on behalf of, the person in question.  So that, your Honours, it is not really the rump, as it were; what one is really talking about is a provision that is the main part of the horse.  So that, your Honours, we would submit one cannot just treat section 34 as one to put to the side.

Your Honours, the second thing I wish to mention is this, that when one looks at the terms in which section 31(1) is expressed, one does not find any words like “attempting”, except in the expression “ensuring or attempting to ensure”. Your Honours, the presence of the words “it would be reasonable to conclude” really suggest, in our submission, that a fundamentally objective test is to be applied.

Could I come then, your Honours to what was said first of all about the American position and the Australian position.  The United States provision, your Honours, is not a provision which contains any form of strict liability.  Both in its current and in its earlier form, the provision contained the expression “for the purpose of evading” - and your Honours will see that in section 5324 of the relevant statute, which your Honours have.  The expression is “no person shall, for the purpose of evading the reporting requirements” do the various things.  So it is clear that an element of that is, and always has been, the possession, in reality, of the purpose.

What happened after the Supreme Court’s decision was that another provision, which had provided also that the violation of the section must be a wilful violation, the penalty imposing provision, the wilful part of it was removed, still leaving, of course, the requirement that the purpose actually exists.  So that, your Honours, the ‑ ‑ ‑

KIRBY J:   That had happened by the time the case came to the Supreme Court - the “wilful” had been removed by the time the matter came to the Supreme Court, or did that follow?

MR JACKSON:   Following, your Honour.

KIRBY J:   I see.  That was designed to cure the Supreme Court’s majority ruling?

MR JACKSON:   Yes.

KIRBY J:   I follow.

MR JACKSON:   Yes, and the Supreme Court’s decision was based on the presence of the word “wilfully.”  Your Honours, the next thing we would seek to say is that if one looks at the American material, and if one looks also at the Australian material - and, your Honours, we have referred in our submissions to some of the material which your Honours will see has been put together in the Commonwealth’s material and also some other matters we have supplied to the Court - what is apparent is not that there is support for a provision for strict liability.  Indeed, the Senate Committee Report - the one that is described Checking the Cash - your Honours will see it in the Commonwealth’s fatter book at pages 120 through to 122, as well as in the summary at page xviii, your Honours, the particular document is in volume 2 of those materials, and you will see it is the first document in there after the index.

I wanted to refer your Honours to page 120, the first paragraph is 10.32, and your Honours will see at the bottom of the page 10.34.(iii). Now, that goes through to the top of page 122, and your Honours will see some discussion of the present provision, including particularly the last sentence on page 121 and the recommendation at the top of page 122. Your Honours, it is easy to endeavour to elide various observations that have been made about the worst excesses of money laundering and so on with the present provisions, but, your Honours, we are not concerned, of course, with provisions such as section 16 in the present case, or provisions of that kind. One is concerned simply with the provisions of section 31(1) and those picked up by it.

Could I come then, your Honours, to an observation that was made by your Honour Justice Dawson in relation to the ability to create an offence of strict liability and, therefore, to say this is something less and that is within power.

Your Honours, if I may say so with respect, it is not quite correct, in our submission, to say that this is really just a lesser version of strict liability and may I seek to indicate what I mean by that.  Your Honours, one can understand an offence of strict liability being created pursuant to a Commonwealth legislative power in the sense that the provision may say if a person does something it is an offence to do it and that is that, whatever the state of mind might be, but there has to be something which can be so identified as being something which is something itself within power. 

The present provision does not say that, your Honours.  What it does, rather, is to pick up the possibility that a person may or may not have done something and it legislates in a strict way as to the possibility and, your Honours, if one ‑ ‑ ‑

DAWSON J:   You do not say it brings within its ambit people whose activities may have nothing to do with tax evasion.

MR JACKSON:   Yes, your Honour, and one can then put that in two ways:  one is to describe it by saying there is no sufficient connection with the subject of the power and the other way to put it is to say - and this is perhaps the other side of the same coin - as was said in MacCormick that by selecting things that are not within the subject of the power and making what happens something that is - and I use the expression loosely - incontestable.  What is done is that the Parliament is endeavouring to define itself or recite itself into power which it does not have.

DAWSON J:   The counter argument to that is it was necessary to set up a system of reporting which embraces people who are not, as well as those who are, engaged in tax evasion in order to provide a proper and competent system.

MR JACKSON:   Well, your Honour, if one goes to the historical materials relied upon and then looks to see that issue, that issue is not, in our submission, made out and when the precise issue is one that is being looked at, when one looks at the position in the United States there is no such provision of the nature in question.  There is provision for an offence which is committed when something is done for the particular purpose and when one sees someone looking actually at the issue in Australia as, for example, in the Checking the Cash Report by the Senate, one really does not get support for the notion that it is in any way necessary, or there is a sufficient connection to pull into the net and then put the trident in those who are not as well as those who are, persons who have, in fact, engaged in the conduct, to put it shortly.

BRENNAN CJ:   But that is not the relevant question for this Court.  This Court does not consider whether or not it is a wise or prudent move.  The question is whether this Court can say that the Parliament cannot deem it to be a relevant or prudent move or, putting it more accurately, appropriate and adapted.

MR JACKSON:   Your Honour, the point I have no doubt answered in a kind of global way.  What I am seeking to convey is that if one is looking to see if the proposition made out by the Commonwealth, namely that by looking at the history of these matters and the materials, one can see that the subject matter is of such a nature that it includes, in order to make it effective, people who do not engage in the conduct, in fact, as well as those who do.  What I was seeking to say was that the material did not make out that proposition.

BRENNAN CJ:   Well, that might well be right but it is not very relevant to the question we have to determine.

MR JACKSON:   Well, your Honour, if one is looking to see is there a sufficient connection with the power, for example, it is germane to that, with respect.

BRENNAN CJ:   It has never been put before, has it, that the question of the sufficiency of the connection depends upon the Court’s appreciation of the wisdom or imperative necessity to enact a piece of legislation?

MR JACKSON:   Your Honour, one is looking at present ‑ the legislation your Honours are looking at at the moment is legislation which is sought relevantly to be justified as within power by saying, “Look not to matters within the Act, but look to circumstances outside the Act.  Those circumstances demonstrate that there is a need for this legislation, or that it is desirable to have legislation of this kind, because it is part of the incidental theme.”

BRENNAN CJ:   I can understand how you would seek to meet the argument which itself may have been irrelevant.

MR JACKSON:   yes.

DAWSON J:   But that is the only way you can approach proportionality in this context.  You say this is an ill‑adapted law to do what Parliament wanted to do.  Well, that does not matter.  But, if it is so ill‑adapted as to demonstrate there is no connection, then that does matter.  And that is what you say, you say there is no connection here, it is non-incidental to the power, because it goes so far beyond anything it could be.

MR JACKSON:   Yes.  I think I have said what I wanted to say about that, really.

KIRBY J:   Was the Bill, as enacted, the same as the Bill that was addressed in Checking the Cash? 

MR JACKSON:   I am sorry, your Honour.

KIRBY J:   In this respect, was the Bill, as enacted ‑ the recommendation of the Senate was not taken up, it was left as it was, was it?

MR JACKSON: Yes. Your Honour may have made that observation because the Senate report says nothing about - paragraph (b)(ii), I think. It does not refer to it but, in fact, the provision being considered then was the same as the current section 31(1).

Your Honours, could I say in relation to the question of reliance upon the power to make laws with respect to currency, and so on, your Honours, whatever might be the large claims made for the ambit of the power for other cases in the future, one does have a situation where, at the end of the day, it is not just a question of hanging a hat on the peg of section 51(xxii) ‑ to use an expression your Honour Justice Dawson used in Dingjan - but one really has to describe the law in the end as being a law with respect to currency and so on.

Your Honours, in doing that one does not look just at the fact that the word “currency” is to be found somewhere. What one looks to see, for example, is to see what is said about it and if your Honours look at the terms of section 31(1) including the provisions “it would be reasonable to conclude” and so on, in our submission, when one looks at that, there is really no connection of the relevant kind in relation to currency.

TOOHEY J:   I do not follow that because on that line of argument you really cannot divorce section 31 from the other sections.  That argument seems to me to at the end seek to bring down the whole of the Act.  I mean, if the Act is valid in so far as it requires the recording of certain cash transactions, why is it that section 31 is not equally a law in relation to currency in so far as it gives some sort of consequence to persons who act in a particular manner in relation to currency?

MR JACKSON:   Your Honour, to the extent to which the Act is based on section 51(xii), in our submission, many of the provisions have very doubtful relationships with section 51(xii).

TOOHEY J:   That seems to me to be where your argument takes you really.  It is a wholesale attack on the Act rather than on section 31.  I know you do not have to make that attack, but it rather points up some of the difficulties in the way of isolating section 31 and saying it is not a law in relation to currency.

MR JACKSON:   Your Honour, may I say two things.  As your Honour said, undoubtedly one has to in the end look at the particular provision, but there are really two aspects to it I suppose.  One aspect is that when one comes to the actual provision which has to be looked at, what I was seeking to say was that the provision to which it relates is a provision which does not itself prevent or regulate any transaction in relation to currency.  What it does is to say that if a transaction of a particular kind takes place it has to be reported.

I referred, in effect to what section 7 says, but section 7 itself does not touch in any way the use of currency. It simply provides for there to be a reporting once currency of a particular kind has been used. Now, in those circumstances when one goes to section 31(1) what we would submit is that one has to look at it in the light of the provision to which it relates, namely section 7, and when one does that, and adds to that the way in which section 31(1) is expressed, and by that I mean, “it would be reasonable to conclude” et cetera, one is one stage further removed from a law with respect to currency and, your Honour, that is the argument we would seek to make because all it is saying is that whether a person did or did not do this with a purpose or not, if it is reasonable to conclude that they did so, that is then an offence and that is where, we would submit, it falls into the same difficulty that MacCormick’s Case would suggest.  Your Honours, those are our submissions.

BRENNAN CJ:   Thank you, Mr Jackson.  Mr Solicitor ‑ ‑ ‑

MR JACKSON:   Sorry, your Honour, may I say just say one
 ‑ ‑ ‑

BRENNAN CJ:   It seems that more of you want to say more than one ‑ ‑ ‑

MR JACKSON:   Your Honour, I am sorry.  I wish to say our learned friend’s latest submissions, we received shortly before coming to Court this morning.  I do not think there is anything more we would want to put in in relation to them but perhaps we could indicate by the end of the day if the Court were minded to reserve judgment in the matter.

BRENNAN CJ:   Which do you refer to as his latest submissions?

MR JACKSON:   The ones dated 8 March on the front; supplementary materials.

BRENNAN CJ:   Yes.

MR GRIFFITH:   Your Honours, I do not want a last word, I just wish leave to answer Justice Kirby’s question about references in the Act to taxation matters.

BRENNAN CJ:   Yes.

MR GRIFFITH:   Your Honour, on my learned friend’s reservation, we handed up those submissions in that volume as alternative to making them orally.  We are quite happy for my learned friend to reserve his position.  In answer to your Honour Justice Kirby’s question we refer to section 26, the definition of “investigating officer” definded in section 16(6) as including “taxation officer”. -

Section 27 dealing with access to FTR information ‑ ‑ ‑

KIRBY J:   Yes, we previously got 16 and 27.

MR GRIFFITH:   Yes, sorry, your Honour, I am trying to be comprehensive now.  Your Honours, we would refer to sections such as section 25 which, for example, in section 25(2) and 25(3) refers for doing things:

except.....for the purposes of carrying into effect the provisions of the Act.

And we say that picks up provisions such as section 27 and I refer now to section 38, providing for the functions under the Act, but that is not a specific but implicit reference.  Section 38, dealing with the “Functions of

Director”, particularly paragraphs (1)(b) and (d), and also section 38(3)(a) to (d), referring for example in (c) in “taxation purposes” and section 41 does not limit the Commissioner’s powers “to obtain information”elsewhere.  They are the references.

BRENNAN CJ:   Thank you, Mr Solicitor.  The Court will consider its decision in this matter and will adjourn until 10.15 on Monday next.

AT 12.50 PM THE MATTER WAS ADJOURNED