Milne v The Queen
[2013] HCATrans 279
[2013] HCATrans 279
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry No S127 of 2013
Sydney No S128 of 2013
B e t w e e n -
MICHAEL JOHN MILNE
Applicant
and
THE QUEEN
Respondent
Applications for special leave to appeal
FRENCH CJ
HAYNE J
TRANSCRIPT OF PROCEEDINGS
AT SYDNEY ON FRIDAY, 8 NOVEMBER 2013, AT 10.23 AM
Copyright in the High Court of Australia
MR H.K. DHANJI, SC: May it please the Court, I appear for the applicant. (instructed by Michael Bowe)
MR T.A. GAME, SC: If the Court please, I appear with MR D. JORDON, SC for the respondent. (instructed by Commonwealth Director of Public Prosecutions)
FRENCH CJ: Yes.
MR DHANJI: Your Honours, the applicant requires an extension of time.
FRENCH CJ: Is that opposed?
MR GAME: It is, but we would say that you should hear the argument on its merits and if the Court is inclined to dismiss it then there should be a refusal of an extension of time.
FRENCH CJ: That is a kind of Clayton’s response.
MR GAME: Well, your Honour, I am sorry. We say there has not been an adequate explanation.
HAYNE J: It was Tuesday that betting was occurring on every horse in the race, Mr Game.
MR GAME: I just said that to take up some of Mr Dhanji’s time, your Honours.
FRENCH CJ: You have the extension, Mr Dhanji.
MR DHANJI: Thank you, your Honour. To be fair to Mr Game he disclosed that that was the course he proposed to take. Your Honours, there were two questions raised by this application and if I can begin with the first of those questions, it concerns a question with respect to the definition of “instrument of crime” in section 400.1 of the Criminal Code. The applicant submits that this raises a question of some real importance. Your Honours will appreciate that on any reading of the provisions, that is, the definition of “instrument of crime” and the provisions that pick up that definition, there will be application of what are generally termed the money‑laundering provisions to a wide range of circumstances.
HAYNE J: Before we dive into the statute can I just understand the transaction better than I do?
MR DHANJI: Yes.
HAYNE J: The taxpayer owns shares. The taxpayer swaps share with an offshore entity. Swapped shares swapped out go into offshore entity. What then happens, offshore entity realises the shares?
MR DHANJI: No, can I go back a step?
HAYNE J: Yes.
MR DHANJI: The taxpayer owns shares. Shares are transferred to offshore entity, whilst within the offshore entity those shares are exchanged for other shares. The exchange for other shares ‑ ‑ ‑
HAYNE J: Within the offshore entity?
MR DHANJI: Within the offshore entity but that was for capital gains tax purposes a disposal of the shares. Effectively, they were sold and what was ‑ ‑ ‑
HAYNE J: Yes.
FRENCH CJ: That was the relevant disposition.
MR DHANJI: That was the relevant disposition. If I can just perhaps go back a step, in terms of this case, there are these curious Dutch Stichtings and these particular structures ‑ ‑ ‑
FRENCH CJ: We do not need to get into the detail of it.
MR DHANJI: But none of that matters ‑ ‑ ‑
FRENCH CJ: The essential question is whether the concealment of the disposition, or the asserted concealment of the disposition can constitute an intended use of the property – a use of the property for – in relation to an intended offence.
MR DHANJI: Intended offence?
FRENCH CJ: Yes.
MR DHANJI: Yes.
FRENCH CJ: The intended offence being the nondisclosure of the capital gain.
MR DHANJI: That is right, your Honour, but more particularly whether that disposal was a disposal that could be termed a disposal with an intention that there would be the future use of the shares. If I can then perhaps take your Honours to the relevant provisions and your Honours will see in the applicant’s bundle of authorities provisions are set out. If I could begin at page 2 with section 400.3.
Your Honours no doubt appreciate that the applicant was charged under section 400.3. There are, of course, a number of provisions following 400.3 dealing with different amounts of money. Within section 400.3 and, indeed, within all of those parallel sections there are the different tiers in relation to the mental element but all of them pick up this definition of “instrument of crime” so the importance of this is maintained throughout the scheme with respect to money laundering. So when one goes to the provision what is required is that there be a - pursuant to (1)(a) - dealing with the “money or other property”. That was the shares. There is no issue that was able to be or had the capacity to be a relevant dealing.
HAYNE J: The dealing was the swap out?
MR DHANJI: The dealing was the swap out.
HAYNE J: Yes.
MR DHANJI: No, the dealing was the swap. So they were transferred into the overseas company.
HAYNE J: The transfer out.
MR DHANJI: No, not the transfer out, the exchange for the other shares. So, in other words, when they were sold, to put it in very simple terms, it was when they were sold.
HAYNE J: I am sorry to be so slow, but the taxpayer was alleged to deal with shares and the dealing asserted was the transfer to the offshore entity or the dealing by the offshore entity constituting a swap?
MR DHANJI: The second.
HAYNE J: Well, how was the taxpayer dealing with it at that point?
MR DHANJI: I appreciate that that was the company’s – that was the company’s dealing, or indeed the offshore company’s dealing.
HAYNE J: Yes.
MR DHANJI: The Crown case was that the applicant was in effect complicit in some ‑ ‑ ‑
HAYNE J: But he transferred shares into an offshore entity so that the offshore entity could subsequently engage in a transaction which would see a swap which was a CGT event which would never quite happen to meet the return.
MR DHANJI: No, your Honour, because ‑ ‑ ‑
HAYNE J: No?
MR DHANJI: No, because it was not the Crown case that the transfer into the offshore entity was the dealing. The dealing was clearly, on the Crown case, the disposal of shares.
FRENCH CJ: Can I just try and – in this little journey of exploration – formulate my understanding of what the question is and is it – tell me whether this is correct – whether the concealment by use of certain offshore corporate structures and a share swap transaction of the disposal of shares owned by the company controlled by the applicant, whether that concealment constituted the applicant’s intended use of the shares as an instrument of crime, the crime being that of obtaining a gain by subsequently failing to disclose the capital gain derived from the disposal.
MR DHANJI: The former part was all relevant to the circumstances but the dealing, your Honour, was the dealing on the disposal.
FRENCH CJ: Yes, I am sorry, my question was relating to what constituted the intended use?
MR DHANJI: The intended use was the use ‑ ‑ ‑
FRENCH CJ: Which is the term used in section 400.3(1)(b)(ii), I think?
MR DHANJI: Yes. What 400.3(1)(b)(ii) requires is obviously the intention “that the money or property will” ‑ that is in the future - “become an instrument of crime”.
FRENCH CJ: An instrument of – that is it will be used in the commission of or used to facilitate.
MR DHANJI: That is right. Now, the offence that was pointed to was the offence of filing the - or causing to be lodged the tax return down the track.
FRENCH CJ: That is down the track.
MR DHANJI: But fundamentally what the applicant submits is that what that provision requires is that the intention that there will be this future use, and not just that there will be this future use, but when one looks at the word “become”, that there will be some change in the status of that property whereby it will go in the future from being not an instrument of crime to an instrument of crime.
FRENCH CJ: Do you say the commission of the crime cannot be connected to a use of the property?
MR DHANJI: That is right. They are separate elements.
FRENCH CJ: Yes.
MR DHANJI: Indeed, I have put on the list of authorities the Court of Criminal Appeal’s decision in a case called Chen. Your Honours may not have had a chance to digest that but – I will not take your Honours to it – in essence that was a structuring offence and so the use of the property and the dealings were the same event and the majority in the Court of Criminal Appeal held they are separate things, the dealing and use cannot be one and the same thing.
If I can just take your Honours to that factual issue. The relevant dealing took place on 3 February. Your Honours, we accept that the indictment itself has a broader range of dates both predating and postdating that particular time but that is explained firstly in terms of the way the Crown put its case and - if I can take your Honours to application book 340 your Honours will see there the Crown case statement at about line 44 – it is paragraph 166 of the Crown case statement:
On or around 3 February [the applicant] dealt with property, namely –
the shares. That was where the Crown firmly pinned its case to the disposal of the shares as being the relevant dealing. Now, in terms of the dates within the indictment – if I can take your Honours to application book 372 your Honours will see there is reference at about line 21 to a passage of reasons of the primary judge referring to the dates within the indictment. Now, if I can just skip very quickly to line 32, paragraph 115, what the Court of Criminal Appeal there said was:
We do not consider that any error has been demonstrated in paragraph 35 of the trial judge’s decision. Read fairly, the comment recognises that the date of ultimate significance was the 3 February 2005, but that nevertheless it was appropriate to take into account the broader context in which the disposal took place.
So, in other words, the disposal is 3 February. It is the sale. The broader context is that the sale takes place within this particular structure that is there.
FRENCH CJ: Is this getting to anything more than a contention that the way the section has been applied against your client in this case, as it were, impermissibly smears out the concept of use, or extends the concept of use.
MR DHANJI: That is right. Two things might be said, I suppose. Your Honour’s question to me as a primary contention we would adopt, that the idea of use has, in essence, gone out the window. But it is also as part of that and perhaps subsidiary to that fundamental point that the words “will” and in particular “become” have also been overlooked. If it is convenient, I will take your Honours to how the Court of Criminal Appeal – in fact, before I do that it is perhaps convenient to look at the respondent’s position in relation to this and what your Honours will see – if I can take your Honours to application book 465, firstly at paragraph 9) on the page the respondent’s position is expressed as adopting or that there is a:
legislative intention that this category of offence be flexible and capable of application to a wide variety of circumstances and criminal activity.
The second part of that we take no issue with. On any view of these provisions, they are capable of application to a wide variety of circumstances and criminal activity. The question really is what is the full scope of that “wide variety” and insofar as it might be suggested that there ought to be some flexibility, well, we have answered that in our reply but to take up what your Honour the Chief Justice just put to me – if I can take your Honours over the page to paragraph 11) your Honours will see what is expressed there is:
In this case, the prosecution alleged that the applicant dealt with the Admerex shares . . . intending that, as a result of that dealing, the shares would facilitate the commission of a future offence involving the lodgement of a tax return –
Well, that, as your Honour the Chief Justice points out, just smears over the word ‑ ‑ ‑
FRENCH CJ: I did not point it out. I asked you whether that was your case.
MR DHANJI: I am sorry, I am trying to advance my position.
FRENCH CJ: Yes.
MR DHANJI: That ignores the word “use”. Indeed, I do not need to take your Honours to it but in fact the directions to the jury in this matter adopted a similar form of words and, as I say, I will not take your Honours to it but that can been seen, if necessary, at application book 45, 46 and 244. So, even in the directions to the jury the idea of the need that there would be this use and, in particular, the future use of the shares was lost. I might be repeating myself, but that is central to what we say. We are not just talking about some sort of use that is concomitant or what is in the mind of the particular person.
FRENCH CJ: The Crown case was put at 341, I think, was it not, in the judgment of the court, and there was a quote from the Crown case statement. That appears at paragraphs 168 and 169 of the Crown case statement.
MR DHANJI: Paragraphs 168 and 169?
FRENCH CJ: Yes.
MR DHANJI: That is right, but as we point out in our written submissions, 169, we say, just simply does not follow from 168. You see 169 begins with the words “As such”.
FRENCH CJ: That is just a characterisation exercise to bring it within the section.
MR DHANJI: Yes, that is right but it does not follow, in our submission, on the proper construction of the ‑ ‑ ‑
FRENCH CJ: You say the section does not go that far?
MR DHANJI: That is right.
FRENCH CJ: That is really all the point is.
MR DHANJI: It is not a complicated point, I accept that, but it is an important point and it is a point that leaves – on the Court of Criminal Appeal’s decision in the case – the situation is what might be described as very open‑ended. There is this capacity to, in effect, trace back some distance from any actual use of the particular property and you could go back through many, many transactions and the legislative intention that would permit a reading that would allow such a tracing back is, with respect, not at all clear.
If I can take your Honours then to the Court of Criminal Appeal’s reasons and on this subject they begin at 380 of the application book. Their Honours set out a passage from the primary judge in relation to general observations. There is no need for the applicant to take any issue with anything that is said there. At application book 381 in paragraph 135 their Honours set out, in a sense, the approach that they are going to take in terms of the solution to the problem and it is perhaps mostly in the last sentence of 135, “This novel extension” – that is talking about the provisions themselves:
to the traditional concept of money‑laundering, we consider, should be given a broad and purposive interpretation.
Now, one can take issue with whether that is an appropriate starting point in relation to a criminal statute and, indeed, not losing sight of the fact that this particular provision has a maximum penalty of imprisonment for 25 years. Now, in the context of a maximum of 25 years that is a curious starting point, in our submission, but even allowing for that starting point it does not then allow for the actual interpretation that was given.
FRENCH CJ: You are not suggesting it is a choice between a broad and purposive or a narrow construction, you are saying the text will not wear it.
MR DHANJI: That is right, absolutely. Indeed, whilst the respondent characterises the applicant’s construction as a narrow construction – as I said at the outset, any construction is actually broad in the sense that it is going to cover a very wide range of circumstances. The submissions deal – I notice that time is passing – the applicant’s submissions deal with the reasoning of the Court of Criminal Appeal and take issue with the example in terms of the house that was given and I will just quickly pick up that.
The disposal of a house is not going to cause any difficulty in terms of wanting to perhaps attach criminality because of course what will happen in any transaction like that is that there will be proceeds received. The other point to be made is that it is not the applicant’s case, as might have been intimated by the respondent, that disposal cannot result in future use. Disposal still has plenty of work to do. It is part of the definition.
But the point is, disposal in many instances, will be disposal to another person knowing that that other person is going to use that particular property to commit a particular type of offence and in that situation disposal clearly works as a dealing with property intending that it will in the future become – that is be transformed from not an instrument of crime to an instrument of crime off into the future.
Your Honours, if I am to say anything about ground 2 I need to move to it. Ground 2, in our submission, raises the issues set out in our submissions but more particularly it is a matter that raises the interests of justice in the particular case. In very short compass this transaction was a transaction that was set up by a solicitor, Ms Harley. The Crown case was that Ms Harley – there was no impugning of Ms Harley’s evidence. The transactions were entered into by companies.
A direction was given that the applicant was the controlling mind but it was not sufficient to give a simple direction that the applicant was the controlling mind of these companies in circumstances where what really had to happened was and what the Crown really had to prove was the applicant knew that these companies or the effect of the transactions entered in by these companies would be contrary to the advice that he had been given by Ms Harley. So there was a need.
There was a request for a direction as to sham, whether it was a direction as to sham or whether it was a direction as to knowledge that Ms Harley was – advice was wrong. It does not matter but the direction needed to be given for the question to be properly understood by the jury. I have gone over time.
FRENCH CJ: Yes, thank you. Mr Game, we will hear you in relation to the first ground of the orders.
MR GAME: If the Court pleases. The applicant has given you a little book of documents. Could I just take you to the definitions and the provisions. In the definitions we see the definition of “instrument of crime” and property:
if it is used in the commission of, or used to facilitate ‑ ‑ ‑
HAYNE J: Which of those limbs was engaged – “used to facilitate”?
MR GAME: Facilitate. It is in the indictment. That is right, yes.
HAYNE J: What was the use to facilitate?
MR GAME: Your Honour, if you turn over two pages you will see the section 135 offence. Mr Robberds made a big argument about how could it facilitate that offence. Actually, it does not matter particularly, but the Crown particularised a section 134 offence which is obtaining by deception. Let us just call it defrauding the Commonwealth. So the offence of defrauding the Commonwealth contemplates the idea of concealment or the use of dishonest means to hide the transaction and that is what happened in this case. If you have a look at paragraph 60 on ‑ ‑ ‑
HAYNE J: Be it so, what was the use of property, the shares? How were the shares used to facilitate?
MR GAME: So the Crown’s case was – I hope I am answering this question but the ‑ ‑ ‑
HAYNE J: I will tell you if you are not, Mr Game.
MR GAME: They were used in this way. They were used to – as part of the hiding of the transaction because what happened – can I just explain some factual things to answer that question. They go into the Stichting companies which are owned by other Stichting companies. The shares are sitting in a Swiss account in an ANZ nominee account. It is all secret from the accountant who asks questions about the tax position. So the Admerex shares sit in the Stichting account – in the - Stichting is effectively the legal owner but the first movement was a capital gains event. The second movement is the exchange for the Temenos shares. That is neutral in terms of costs so what he is doing is he is exchanging them for other shares but they are of equal value. So Admerex shares have gone ‑ ‑ ‑
FRENCH CJ: The other shares are characterised as some sort of curtain of concealment, I think.
MR GAME: That is right. Then what he does is, the money goes back into the company, Barat. Some of it does. He tells his accountant that those are – some of the money gets syphoned off overseas for expenditure on personal items. Some goes back into the Barat – and his accountant says, “What’s this?” and he says, “That’s loans from Challinor.”
HAYNE J: But that is money from what? From realising ‑ ‑ ‑
MR GAME: From realisation of the Admerex shares which is the dealing. So the deal is the swap. The deal enables the offence to be committed. It is the fulcrum of the offence but we say the point that is being raised does not really run because of the things, at least, that happened after that which is that the Admerex shares sit in the Stichting accounts from February until September of that year. The ownership of them has already gone to Mr Goodall but they sit there. Mr Milne controls the Stichting company which is owned by another Stichting company.
What we say is the use is, the use to facilitate is – I hope I answer your Honour Justice Hayne’s question - to help hide the transaction from his accountant, to help conceal the actual true state of affairs in respect of his dealings. That is how “facilitate” works because it is making easier the defrauding on the Commonwealth. It is enabling him to defraud the Commonwealth. We say that that does work in terms of how the statutory provisions apply. If I could just show your Honours paragraph 150. That is at page 385. So, paragraph 150, about four lines down:
First, the share swap created the CGT event which provided the basis for the commission of the future crime.
That is to say it facilitates in the process of the swap. Now, if that was the only point it may be that a question of general importance would arise but the second point we say makes the applicant’s – the second reason:
it provided a facilitating mechanism for the commission of the offence in that it provided a further cloak or curtain behind which the act of ultimate deception (the lodgement of a return) would be more likely to succeed.
We say that the point does not really run because of the second one at least because the defrauding the Commonwealth offence has either as a constituent element or as a central aspect the use of means or dishonest means or a deception, and the deception involves the concealment of the conduct. We say that section 400.3 can sustain that quite comfortably.
HAYNE J: But the “obtain by deception”, the relevant deception is not revealing the occurrence of the CGT event that occurred on swap?
MR GAME: That is right – sorry, not revealing the transaction, the sale of the shares, in effect. Yes, I agree with your Honour, not revealing the transaction.
HAYNE J: That there had been a disposition in return for moneys worth of whatever it was.
MR GAME: That is right, yes. Could I just say this, the Crown case was that the whole structure was set up for the purpose of – no, it does not matter, no, but it does matter in one way because it shows what actually the Crown says is happening in terms of use.
HAYNE J: No doubt many points of prejudice are jury points.
MR GAME: No, I did not say that just to be horrible.
HAYNE J: No, but the ‑ ‑ ‑
MR GAME: I just said that ‑ ‑ ‑
HAYNE J: The basic deception was not returning a capital gain. The capital gain occurred on swap. That was not returned. How were the shares used to facilitate the commission of the offence of defraud the Commonwealth?
MR GAME: They were used because they continued to sit in the Stichting account from February until September when they were, as it were, quietly authorised to be sent elsewhere by Mr Goodall during which time the disposition of the Temenos shares was – the funds were filtered out starting immediately after 3 February, or I put it another way, they helped in hiding what happened with the Temenos disposition.
This was one of the critical points that Ms Harley’s advice was not followed which is that he could not access funds in the Stichting accounts, he could not dispose them to himself, yet what he was doing as soon as he exchanged one lot of shares with the other he starts getting the funds out of the Stichting account and some of it goes back in the loan – into the loan into Barat – into what is called the loan but it is not, it is in fact the bringing back of the funds.
FRENCH CJ: Has the Crown case always remained throughout the proceedings as set out at page 341 of the application book, that is in paragraphs 168 and 169 of the Crown case statement?
MR GAME: Yes, subject to what appears at paragraph 60, your Honour.
FRENCH CJ: Sorry?
MR GAME: Subject to just this – if your Honour looks at paragraph 60 on page 354.
FRENCH CJ: Yes. What, that is a detail of the transaction?
MR GAME: That is a detail, yes, but the ‑ ‑ ‑
FRENCH CJ: But the characterisation approach taken by the Crown is that at all times reflected in 168 and 169.
MR GAME: That is correct, yes. So, it is the hiding.
FRENCH CJ: Yes.
MR GAME: I think in respect of – that is all I wanted to say about this ground.
FRENCH CJ: We do not need to hear from you on the others.
MR GAME: All right. If the Court pleases.
FRENCH CJ: Mr Dhanji, there will be a grant of special leave in respect of ground 1 in your draft notice of appeal but that ground is singularly uninformative and would need, I think, to reflect the first special leave question which raises the construction point, so you will need to attend to that.
MR DHANJI: We can attend to that.
FRENCH CJ: Do you expect that this will take longer than a day?
MR DHANJI: No, your Honour.
FRENCH CJ: Mr Game?
MR GAME: No, your Honour.
FRENCH CJ: All right. Thank you.
MR DHANJI: Thank you, your Honours.
FRENCH CJ: The Court will adjourn to reconstitute.
AT 10.54 PM THE MATTERS WERE CONCLUDED
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