Mine Exec Pty Ltd v Scott

[1990] HCATrans 262

_Ji,,r -!.I, AUSTRALIA, 1i:- ->},~)>$--««{'-'-

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Perth No P31 of 1990

B e t w e e n -

MINE EXC PTY LTD

Applicant

and

GRAEME FREDERICK SCOTT

First Respondent

and

JAMES JOHN DEL PIANO

Second Respondent

Application for special

leave to appeal

MASON CJ
DEANE J

TOOHEY J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON THURSDAY, 25 OCTOBER 1990, AT 3.03 PM

Copyright in the High Court of Australia

Mine 1 25/10/90

MR M. BENNETT: If it please Your Honours, I appear with my

friend, DR J.T. SCHOOMBE, on behalf of the

applicant. (instructed by Bennett & Co)

MR J.R. McKECHNIE, OC: If Your Honours please, with my

learned friend, MRS H.L. PORTER, I appear for the
first respondent. (instructed by the Crown

Solicitor for Western Australia)

MASON CJ:  The Acting Registrar has been advised by the

solicitors for the second respondent that the

second respondent does not intend to appear and

that the second respondent will abide by the

decision of the Court. Yes, Mr Bennett.

MR BENNETT:  I am grateful for Your Honour's indication of

th~t. I have provided an outline and might I start

by apologizing that the matter heading of that is

significantly in error as to the court it

describes.

Your Honours, this case, as far as we for the applicant can ascertain, raises a novel issue that has not come before this Court before of the

collision between third party rights and
legislation enacted not uniformly, regrettably, but
in similar principle throughout Australia

permitting expropriation of property that was either used in or derived from the profits of crimes.

In this case, as would inevitably arise at

some point of time, a third party's interest

collide with the legislative intent and it is the resolution of that collision that we say raises a

matter of public importance that ought to be the

subject of guidance from this Court.

Now, the facts of this case are ideally suited

for an appeal to this Court because they raise issues at almost every level of that collision including the conduct of the applicant victim

which, in this case, is a corporation that is both

innocent in every respect in its widest sense, in

the sense of the innocent contributories and

creditors and tainted, in so far as one of its
directors and a shareholder as agent for the

company, was found by the learned - not trial

judge, but the learned judge hearing the initial

application, His Honour Judge Sadleir in the district court, to have been involved in the

commissions of the offences which resulted in the

gaoling of Mr Del Piano.

Your Honours are appraised of the facts and

they are particularly necessary in this case

because we say that despite the fact that Del

Mine 2 25/10/90

Piano's ultimate convictions relevant for our

purposes was on receiving secret commissions as an

agent, there was an element throughout the facts of

extortionate conduct on the part of Del Piano who,

with regret, was a practitioner of the Supreme

Court of Western Australia and exercised a dominion

by reason of his authority as chief executive of

several mining companies over Caratti, the officer of Mine Exe, who sought and ultimately obtained to the detriment of Mine Exe the contract to engage in

work for the two mining companies.

Now, it is to be stressed that the company,

divorcing it from its agent and director, Caratti,

has suffered a double loss because it both paid

from its funds via the wrongful act of its agent

the secret commissions totalling some $335,000 to

Del Piano but it has also suffered self-help

remedies by the mining companies, who

surprisingly - and this is the explanation for what

would otherwise be a surprise - did not apply for

restitution or an order for payment of those secret

commissions. The mining companies effected a

self-help remedy by setting off against sums due

and owing to Mine Exe which, one infers, would have

gone to the benefit of Mine Exc's creditors for the

performance of work - the large bulk of the moneys

that have been paid to Del Piano.

So, the practical reality is the mining

companies have recovered the commissions. Del

Piano tendered before arraignment to his solicitors

the value of the gold bar and the moneys and said

in mitigation of penalty, a factor taken into

account in mitigation, "I've made restitution."

But he had not. He had maintained property in it.

He had simply put it with the Crown abiding the

outcome of what we say wrongly was viewed as a

competition between the Crown and Mine Exe as to

who should be entitled to this sum.

Now, that competition·arose starkly prior to

the sentencing of Del Piano and the Crown relied

for its principal evidence on the evidence of Caratti who, if the Full Court, upholding the

reasoning of the learned Judge Sadleir, be right,

the Crown was at that stage a competitor of Mine

Exe. Now, what happened was that the extortion

charges were not proceeded with against Del Piano.

Del Piano pleaded guilty to the 18 secret

commission charges; one of gold, 17 of cash, and

there were two cases of perverting the course of
justice which are not material to my client.

Caratti's evidence or his tape recordings of the meetings that he had had with Del Piano were

before the sentencing judge. The hand-up brief was

Mine 25/10/90

before the sentencing judge. And the sentencing

judge heard evidence led by Del Piano in mitigation

of sentence for Del Piano which was essentially an

attack on Caratti. Now, at that stage there is an

important point of general procedure in the public

interest that arises because the Crown say and

perhaps as a matter of strict law they might be

right but that is a matter that ought to be

adjudged upon, they owed no duty to Caratti.	They
were a competitor of Caratti. Caratti had no

opportunity to test that evidence but, more
significantly, neither did Min Exe. It did not
have the opportunity to cross-examine the witnesses
who attacked Caratti; it did not have the
opportunity to participate in that reception of
material by the judge who ultimately ruled upon

Mine Exc's application based, we would say, if the judge be right in his assessment that the conduct

of the victim is relevant, upon that secondary
material.

Now, the evidence that Mine Exe put in established without contradiction, and it could not

be otherwise that Caratti was not its alter ego.

Mine Exe was an earth-moving company, a large going

concern trading in the gold-fields, digging out

open-cut gold-mines. It was not a mere shell put

up for the convenience of John Michael Caratti. In

fact, the other director and contributory, his

brother Alan Caratti, gave evidence in affidavit
form and was not cross-examined to that effect.

Now, the learned judge made two important findings which we say reflected grave errors and the

first wa~ that he found that Caratti was an alter

ego of Mine Exe so he attributed to Mine Exe the

conduct of its agent and said, "Mine Exe has been,

in effect" - because, as you know Caratti had sought
and obtained immunity from the Crown - but, "Mine

Exe is guilty as a principal offender or an

accomplice to Del Piano. The restitution provisions

cannot be invoked by Mine Exe." That was an error

because the company, in its widest sense, involved -	in attributing the conduct of Caratti to the company
and it would be settled law by this Court and - in
Australia - involved the wider interests of the
creditors and the contributories generally.

DEANE J: If your argument be correct as to Caratti not

being relevantly Mine Exe, why could not Mine Exe

recover the amounts withheld by the joint

venturers?

MR BENNETT:  The answer to that is that, firstly, civil

proceedings are pending between the mining

companies and Mine Exe and we would say that that

should not, as a matter of principle, deprive

Mine 4 25/10/90

Mine Exe of its opportunity pursuant to the

Criminal Code and the Crimes (Confiscation of

Profits) Act for applying for restitution to the

Court.

DEANE J: But you are asking us to deal with this on the

basis that Mine Exe has been doubly prejudiced.

Well now, that assumes that Mine Exe cannot recover

the relevant amounts which have been withheld by the joint venturers. Now, I could understand if

Caratti was relevantly Mine Exe how there might be

a defence of illegality but if your argument be

correct that Mine Exe is relevantly distinct from

Caratti, I do not understand, if the payments are otherwise due, why Mine Exe could not recover them.

MR BENNETT: It is said against us that a party, whose

employee or agent receives a secret commission, can

elect to sue for the recovery of assumed

irrebuttable damages equivalent to the secret

commission from either its agent or the person who

paid the secret commission. The mining companies

have elected not to sue their former chief

executive but to advance that claim against Mine

Exe. They say the payments were made by Mine Exc's

director and we then fall into an area of a
distinction between apparent authority or presumed

authority pursuant to section 68A of, in this

State, the Western Australian Companies Code and

the actual authority of Caratti.

We say that the court, in dealing with an

application either under section 538, section 717

of the Criminal Code of Western Australia, or

section 12 of the Crimes (Confiscation of Profits)

Act looks to the actual conduct of the victim.	We,
the company Mine Exe, are not limited and constrained by arguments which are open to the
mining companies as to the apparent authority of

our principal director, the engagement director in

this case, who dealt with them.

DEANE J: But if, in those proceedings, it be that Mine Exe

is bound by Caratti's actions, how could a court

hold that Mine Exe was not in any way involved in

the payments?

MR BENNETT: Well, the question of involvement arises only

under section 12 of the (Confiscation of Profits)

Act and the express provision is at section 12.	It
is not a bar against relief under section 717 or

538.       We would say that there is a - - -

DEANE J: Well, does that put to one side then half of the

legislation?

Mine	25/10/90
MR BENNETT:	We would say, with respect, no, because the

involvement then by the company would be dealt with

in a criminal sense where it would have to be

found, we would say in this case, as it was by the

learned judge, we say, against the weight of all

evidence - against the weight of uncontradicted

evidence - that the company was merely the alter

ego of Caratti. And that finding by Judge Sadleir

cannot be explained as a slip.

DEANE J: But that is not what the Act says. Does not the

Act say that the judge has to be satisfied of the

negative, the judge has to be satisfied that Mine

Exe was not in any way involved?

MR BENNETT: If Your Honour's point is limited to the

(Confiscation of Profits) Act - - -

DEANE J: Well, that is all I am asking you about.

MR BENNETT: - - - then that is, I think, right. It is in

the materials that I have handed up - the

supplementary book. It is at flag No 4 and it is

at page 12 of the statute which is

section 12(5)(a):

If on an application under subsection (1) the

court is satisfied -

(a) that the applicant was not in any way

involved in the commission of the offence -

Perhaps I should withdraw my comment if I be

seen to have conceded to Your Honour's point - we

say that the involvement there cannot be a deemed

involvement via the act of an agent in the sense

that Caratti, on the contradicted evidence, was

acting without the authority of the company -

beyond the scope of any authority of the company.

He was then, we say, in his conduct, acting

separately from Mine Exe and Mine Exe was not in

any way involved in the commission of the offence.

But, if we are wrong on the construction of it then	I would accept Your Honour's point but urge that it
is not a relevant consideration for section 538 and
717 of the Criminal Code.
We say that there can be discerned errors in principle in the way in which the appeal court,
upholding His Honour Judge Sadleir, dealt with the
various applications. We say that those errors in
principle resolved themselves into three categories
each of which involves issues of general importance
in so far as they raise questions of general principle that would be applicable to similar legislation although we concede that the other
State's legislation in Australia is not identical.

Mine 6 25/10/90

For example, in New South Wales, there is a

statutory limit on the amount of compensation.

We say that the three areas of error are in the principles to resolve issues of priority: what

should be dealt with first. Secondly, if we are

wrong in the sense that we say that the restitution

claims are not competitive with the forfeiture

claims, if we be wrong on that primary submission,

there needs to be authoritative statement of the

principles to be applied in determining that

competition. There are errors in so far as

His Honour Judge Sadleir dealt with those. The

third area are procedural questions. That involves
the applicant's right to make a fair application

and to have a fair opportunity to be heard in

respect of materials. We believe there should be

guidance as to the use of secondary materials that

have been put before the sentencing judge outside
the control and participation of an applicant

victim.

DEANE J: Well, was objection taken at first instance on

behalf of your client to either the judge dealing

with its application or referring to the material

that you now object to?

MR BENNETT: There was no objection, Your Honour, to the

judge dealing with the application. There was,

before the judge, primary evidence in the form of

affidavits on behalf of the parties and

cross-examination of some of the applicant's

deponents. There was certainly an argument

advanced before the learned judge that his

attention ought to be confined to the primary

materials that were before him on the application and not go into the secondary material which were depositions and the like and uncross-examined

testimony of witnesses put forward in mitigation of

sentence by Del Piano.

DEANE J:  What did His Honour say about that?

MR BENNETT:	That is not dealt with directly in His Honour's reasons for decision but it is plain, we would say,
from His Honour's dealing with the conduct of the
victim - perhaps most materially at page 25 of the
application book, at about line SO, in his finding
that:

Caratti was the alter ego of Mine Exe.

We would say that that was directly contrary to the
evidence of the other director and contributory

that was not the subject of cross-examination

before the judge on the application.	Does
Your Honour have that: page 25?

Mine 7 25/10/90

DEANE J: Yes.

MR BENNETT:  About line 50. It is at the commencement of

that paragraph. I should add that

Professor Lanham's article that is referred to

there I have had inserted in the back of our book

of materials; it does not appear in the index.

DEANE J: But is there any dispute that this Mr Caratti was

a half owner, one of the directors and, for

practical purposes, the general manager of

Mine Exe?

MR BENNETT:  No. We would say, as a matter of law, that

cannot amount to an alter ego, to making the

company an alter ego to himself.

DEANE J: But that is obviously what His Honour had in mind,

is it not?

MR BENNETT:  We are entitled, as we said to the Full Court

and that submission was rejected by Their Honours

there, to rely upon what His Honour wrote.

His Honour chose to describe the situation as being

and chose to make the finding of alter ego - it is

a term well-settled amongst lawyers and we do not

take His Honour to have used imprecision in his

language in that case. We say that we are entitled

to appeal against that as a finding and not to have

that expression of finding watered down to some

lesser statement.

DEANE J: But, if you be right on that there is nothing in

the other material that bears on it, is there? I

mean, all the other material shows us that he was

the general manager who purported to exercise

unrestrained control over what the company did in

relation to this matter.

MR BENNETT:  We do not say it was unrestrained control in

this matter. There had been a deliberate decision

to go into this contract, not to go into a course

of conduct involving payment of extorted secret

commissions and, to that extent, we would not

accept what Your Honour puts. Really, it goes to
the characterization of the conduct of the company

as victim and once that material as admitted and

used as it obviously was by the learned judge, it

has coloured, we say, the learned judge's finding

throughout of the conduct of the company. We urge

upon Your Honours that the company involves a much

wider consideration than simply one director and
one shareholder.

I should say that to complete that factual analysis, the mining companies have got back the

money; Del Piano put up his money and had it taken

Mine 25/10/90

into account to his benefit in his sentencing and

the company, Mine Exe, has put it up, in essence,

twice.

MASON CJ:	What do you mean by the statement that, "The company is much more than one director and one
shareholder."?
MR BENNETT:	In that regard, Your Honour, we would say that

if it be right as the Full Court appears to have

found, which we say is in error, that the conduct

of a victim is relevant to the exercise of

discretion under section 538 and 717, the fact that

the victim is a corporation whose solvency is
imperilled raises a wider consideration as to the

identity of a victim than if it were a solvent

company wholly owned, for example, by John Michael

Caratti. We say that it is settled. Your Honour's

judgment, for example - and it is not either in

Mr Flynn's affidavit or outline but in Walker v

Wimborne, Your Honour will recollect - - -

MASON CJ:  I did not utter the proposition for which you are

contending. What I said was that in certain

circumstances directors are required to take into

account the interests of creditors. That was in a

situation where a company was becoming insolvent

and it was a question of incurring debts with no

reasonable prospect of paying them. But that is
not to say that the interests of creditors are part

of the company.

MR BENNETT:  Your Honour is right to correct that; I

withdraw it and accept that point. Perhaps the

proper expression is this:  Mine Exe, at the

relevant time, had a board of directors who owed a

duty, the beneficiaries of that duty, in part,

being the creditors. The creditors, as Your Honour

found in Walker v Wimborne, must look to the

company for payment. In so far as the company as

the victim applies to the court and says with an

undertaking from an official liquidator on the role

of the Supreme Court of Western Australia if

restitution be made to the company then that money

in its entirety goes to the company's creditors and

the contributory who may be tainted by complicity

in the offence - and even his brother, to that

extent - do not participate at all in the

restitution. We would say that any taint on the

victim by the conduct of its director agent is

removed.

It is appropriate for the court to consider,

in its characterization of an insolvent or on the

verge of insolvency corporation - it is proper for

it to take into its assessment of that the position

of creditors who must look to the company for

Mine 9 25/10/90

payment and whose ability to receive payment has
been imperilled and will be imperilled by the

forfeiture of these moneys.

I think it is settled on all parts that the

money ought not to remain Del Piano's; it ought to

go to someone - the mining companies do not ask for

the money. We say that the only other victim of

the crime, in that sense, to whom restitution ought

to be made of an identified fund put up by the

wrongdoer himself as an identified fund being the

proceeds of the crime, or to go to the benefit of

the creditors. That was the second error, we say,

that His Honour Judge Sadleir made when he said he

had no power to accept the undertaking.

TOOHEY J:  Is that the way he put it? He says, at page 29

line 30, that:

such an undertaking is certainly not one which

the Court can entertain.

MR BENNETT:  We say that goes to power and does not go to an

exercise of discretion that he declines the

undertaking.

TOOHEY J:  How did the Full Court deal with that aspect, if

it did deal with it, Mr Bennett?

MR BENNETT:  It did deal with that and as His Honour

Mr Justice Wallace, in his reasons for decision, at

page 64 of the application book, as Your Honours

see, at about line 40, says:

His Honour's reference to the fact that

the court could not entertain the undertaking

given, is again attacked by the appellant as

being entirely wrong if what his Honour meant

was there was no power for him to accept such

an undertaking. In my opinion, the learned Judge's words have been misconstrued. What his Honour was saying was that the acceptance

of such an undertaking without court

supervision was unacceptable, but in any
event, the circumstances did not come within
the statutory criterion. His Honour's comment
thereon was:

"The fact that the funds in question ..... was

due ..... that misconduct which has no doubt had

its effects upon the ..... employees. But that

is not the kind of 'hardship' which is

contemplated by the legislation."

That is a finding under section 12 of the

(Confiscation of Profits Act) which looks to the

hardship upon parties. We say that is an error in

Mine 10 25/10/90

the construction of the word "hardship" in the

Crimes (Confiscation of Profits) Act.

TOOHEY J:  Did either of the other judges deal with that

matter?

MR BENNETT:  Yes, if Your Honour will bear with me. My

friend, Mr McKechnie, helps me by saying,

"Page 88". I think, from memory, it is a passage

in the decision of His Honour Mr Justice Rowland.

About line 30 - I am grateful to my friend.	As
Your Honours see there, His Honour
Mr Justice Rowland says:

In my view, his Honour's remarks have been

misconstrued. He was not, in my respectful

submission, suggesting that he had no power to
accept an undertaking; he was simply saying
that, in these circumstances, he should not

accept that undertaking -

We do not read the words "it was an

undertaking the court could not entertain" as

meaning that he would not accept that undertaking

or he should not accept the undertaking. The

legislation in all States suffers from a common

defect in that it grants to judges the widest

discretion and gives no guidance whatsoever. In

fact, in this State, there is no procedure that
stipulated for making an application under the Code

or the (Confiscation of Profits Act). So we have a

complete lacunae as to procedure but in this wide

discretion we take His Honour to be saying that he

could not entertain an undertaking as a matter of

power and it goes to the question of whether the

court could supervise it.

The form of Mr Herbert's undertaking that was

tendered to the Full Court to supplement the

undertaking of the directors of Mine Exe was to

demonstrate that such an undertaking could be

accepted within the power of a superior court and

enforced because an official liquidator could file	reports, affidavits with a court, to confirm that	he had administered a fund in accordance with the
direction, or an undertaking, that it would only go
to a certain class of beneficiary, namely, the creditors of Mine Exe and that a certain class of
claimant, the contributory shareholder directors,
would not benefit or participate in this fund.

DEANE J: But if this money can be identified as the gold

bar and the money involved in the bribe, why are

not the joint venturers beneficially entitled to

it?

Mine 11 25/10/90

MR BENNETT:  Because they must elect between taking their -

they cannot get double recovery; they cannot both

sue their own agent and sue the briber of the agent

and say, "We demand from each of you what the law
irrefutably presumes to be our damage" - namely the

amount of the bribe - and they have elected. They

have gone against Mine Exe rather than their agent.

In fact we say that the material before the trial

judge was that the companies came along and

supported Del Piano in mitigation of sentence

saying that in fact the deal that he extracted from

Mine Exe was an extremely advantageous one and they had suffered no loss. They gave evidence in

support of him in reduction of penalty. They have

elected to pursue their recovery against Mine Exe; exercised self-help by setting-off sums which were

due and owing from them to Mine Exe and have

obtained their relief. You cannot double recover.

There was a suggestion at one stage, in the laws of

agency, that one could entertain double recovery.

That, we would say, is not the current position of

the law of agency.

His Honour Mr Justice Pigeon, at page 73,

dealt with that aspect of our submission, in our

submission, to the Full Court and accepted our
submission that the relationship between the

principal as one of debtor and creditor and the

satisfaction of the claim by the set-off would

extinguish the debt.

We would say that the facts in this matter

would assist the Court in stating issues of general principle for all Australian States. The issues it raises are of such general nature they are

applicable notwithstanding the fact that

legislation differs. We would say that the

decision of the Full Court is attended by doubt as

to these important areas, there being no guidance

whatsoever from this Court on any aspect of the

collision between the forfeiture rights,
expropriation powers and third party interests and

it is appropriate that Your Honours grant the

special leave that is sought. If it please

Your Honours.

MASON CJ: Yes, Mr Bennett, thank you. Yes, Mr McKechnie.

MR McKECHNIE:  If Your Honours please. Can I take

Your Honours - to correct one matter which is in

the materials, could I just tender a copy of the
complaints. I am sorry there are so many of them

but in the materials before Your Honours it is in

some way asserted, although my friend has not

relied on it today, that the charges were in some

way changed and the purpose of tendering the

complaints is simply to show that one charge of

Mine 12 25/10/90

extortion was laid on 7 March. The

Attorney-General, whose consent is required for the laying of charges of the secret commission was on

8 March and the secret commission charges which subsequently formed the indictment were laid on

9 March. It was not a question, as may be

suggested by the papers, that the Crown changed the

charges at a later time.

That being said, there is no doubt, as

His Honour the trial judge held and Their Honours

in the Full Court held, that there was an element

of extortionate conduct in this arrangement. There

was no doubt that as it has progressed the squeeze

was put on Mr Caratti.

I deal with one other matter briefly and that

is the matter now raised and said to be a matter of

importance: the use of the secondary material, as

my friend puts it, by the judge. I am advised by

my learned junior that this matter was not dealt

with or raised by His Honour and, more

particularly, so far as I can see from the grounds

of appeal to the Full Court it was not a challenge

to the Full Court in the grounds that secondary

material was used. In fact His Honour had regard

to the depositions and section 9 of the

(Confiscation of Profits) Act provides for a judge

to have available to him the transcript of the

proceedings against the person for the offence

which would suggest and would make sense in this

sort of legislation both for restitution under the

Code and for confiscation of profits that

His Honour is, as it were, factually informed.

Notwithstanding that, there was a hearing at

which the applicant company was represented,

witnesses were called and material was put and, in

our respectful submission, in the particular facts

of this case there is no error in His Honour's

appreciation or use of the material.

The second matter which is said to be raised

by my friends as a matter of importance and,

indeed, the others depend centrally, in our

respectful submission, on the finding of fact - and

it is crucial, we would submit, to my friend's

argument - that Mine Exe was the alter ego of

Caratti. In our respectful submission, that

finding was inevitable having regard to the

material before His Honour.

His Honour's use of the words, at page 25

line 50, was not in any sense, as Their Honours in

the Full Court found, to define it legally but to
describe the relationship where, on the facts

before the Court, granted the other Caratti

Mine 13 25/10/90

director and brother knew nothing of the corrupt
bargain, but John Caratti, who entered into the

bargain, did all the trading, all the arrangements,

all the negotiations, all the organizing, all the

management and did it in relation to a company of

which he and his brother were the sole

shareholders. In our respectful submission, the
finding of fact that the company was the alter ego

of Caratti within the sense of this corrupt bargain

was incontrovertible.

TOOHEY J: But is it relevant, Mr McKechnie, to have regard

to the interests of creditors and contributories?

MR McKECHNIE:	No, Your Honour, it is not and I would like to develop that. If I may, just for 30 seconds,
before I do go to that say that His Honour, in dealing with it although it has been put that there
was a competition between the Crown and Mine Exe
that is not the way that His Honour dealt with it.
His Honour first looked at the question of
restitution under the Code, both under section 538
which relates to secret commissions and more
generally under section 717, held that there was a
discretion - and the use of the word "may" would seem to comprehend a discretion - and held that he
could take account of the victim's conduct - and I
will come back to "victim" in a second - in
relation to that and concluded that he would not
order restitution.
Having determined that he then addressed the question of the Crimes {Confiscation of Profits)
Act and the second respondent's application. Now,
the question of hardship is raised within that,
particularly within section 10. Although - and there was some argument addressed to the Full
Court - it may be a matter of some timing in the instance of which order is made, section 10
speaks about the application and:

if it considers it appropriate, order that the

property be forfeited to the State -

and -

(2) In considering whether to make an

order ..... the court may have regard to -

(b) any hardship that may reasonably be likely to be caused to any person by the

order.

Then, section 12 deals particularly with the effect

of forfeiture on third parties.	Now, section 12
does not have asground questions of hardship.	I am

Mine 14 25/10/90

not intending to split hairs because it is

obviously relevant under section 10.

TOOHEY J: Before you leave section 10: do you say, as a

matter of construction of section 10, that

creditors and contributories may not or do not fall

for consideration or that on the facts of this case

they do not, or perhaps both?

MR McKECHNIE: Both, because in this case what is sought to

be confiscated is the amount of money received by

the briber which he has offered up for

restitution - $300,000-odd with the gold bar. That

is what is sought to be confiscated; not Mine Exe.

Mine Exc's claim does not arise under section 10 at

all. The purpose of the Act is confiscation of

profits but that does not mean an automatic

enrichment to the State. Its primary thrust is to
confiscate the profits of crime. Here the profits

of the crime were the corrupt bargain - the

$335,000 in total - and His Honour ruled that it

was appropriate there, under section 10, to

confiscate that from Del Piano.

The next question is whether an innocent

party - to use that loose expression - under

section 12 had a claim? If, under section 12(5), the applicant was not involved and he acquired an

interest in the property,the court must make an

order. So, the Act does provide a scheme whereby

the State will confiscate the profits but may well

be confiscating the profits on behalf of others.

That is to be determined on a fact-by-fact basis.

DEANE J: But if Mine Exe is insolvent, assume that Mine

Exc's receiver appointed sued Del Piano and

Caratti - - -

MR MCKECHNIE: Jointly.

DEANE J: - - - for this $300,000. It is difficult to see

how Del Piano could resist. There may be an answer

but, obviously there is something to be said for

the view that it could get judgment against Del

Piano. Now, that seems to be a way of claiming an

entitlement that just has not been examined in the

courts below.

MR McKECHNIE:  I would not dissent from the general

proposition, Your Honour, but in the particular

facts of this case, and that is why, in our
respectful submission, this case does turn on its

facts and we really rely on the finding of alter

ego where the guiding mind of Mine Exe, at all

times, the entering into the bargain, everything in

fact that was done corruptly was done by Caratti

and he and Mine Exe were indistinguishable. Now,

Mine 15 25/10/90

of course, it has sought to keep them at arm's
length but I would, with respect, on the facts of
this case, query whether Mine Exe could recover

against Del Piano for that reason.

The creditors, very arguably, in our

respectful submission, as I think Their Honours may

have held, when one looks at the consequences of the criminal conduct and why there are creditors

who are, it is because of the actions of Caratti,

in entering into the bargains and in hiring

machinery and the like, rather than the actions of

Del Piano. Now, I do not want to be too firm on

that; that is a factual matter in this case. In

our respectful submission, it is the actions of

Caratti, as I think His Honour held, towards the

end of his judgment, that in truth created the

creditors.

TOOHEY J: But that is part of the difficulty, I think, that

when you stress, as you properly do, the facts of interests of other person associated with the
this case and, as I think the judge did and the

company, namely, creditors and contributories. It

is almost an inevitable conclusion that because of

the role that Caratti had to play in the matter

that, really, that is the end of it. He was the

company; he was the alter ego of the company.

That may be right, but just on a quick reading

of the Act, it does seem to range rather more
widely in the sense that it allows the court to

take into account the interests of anyone to whom hardship may be caused by the making of an order.

MR MCKECHNIE:  If an order were not made, under section 10,

Your Honour, the result would be that the $335,000 profit would then remain with Del Piano.

Your Honours will see that Justice Rowland had some

trouble with that. It wou.ld then, no doubt, be available for the action which may be taken, as

Your Honour suggested, by Mine Exe or Mine Exc's
receiver appointed.	It may be the subject of other
action as well.

TOOHEY J: That is right. There would be no practical

difficulty there in the sense that the court could

control the disposition of the money and the bar

until the rights of the parties had been resolved

by whatever form of litigation was embarked on.

MR McKECHNIE: Certainly if Del Piano, as it were,

interpleaded, that is correct. Here the matter,

however, as we say, does not fall for - in our

respectful submission, that is not the type of

order that is contemplated by the question of

Mine 16 25/10/90

hardship under section 10. Indeed, in a sense -

and this is as His Honour held, I think, at page 29

- the hardship of the company, Mine Exe, is

irrelevant in that if there should be confiscation

under section 10 and Mine Exe were a company who

could comply with section 12 then it would receive

the benefit of an order. The reason is does not

comply is because of the finding of alter ego and

so its entitlement to the money is not dependent on

its hardship but on its innocence - using that

comprehensive expression.

That is probably as far as I should develop

that matter on the question of special leave.

Obviously if Your Honours see more in it then it is

an appropriate case for special leave but, in our

respectful submission, in the circumstances of this

case and these facts the finding was inevitable

that Caratti was the alter ego and things flowed

from that.

The one question which does not seem to have been the subject of much great judicial authority

is the exercise of the discretion under

section 717 - there is an undoubted discretion.

His Honour took into account the conduct of the

victim. There is authority for that, although less

in the fraud area. That was a view which was

supported by the Full Court and, in our respectful

submission, correctly so. We would say it is

obvious that the conduct of the supposed victim is

relevant to the exercise of the discretion.

Whether or not Mine Exe was the victim depends on

the finding as to its relationship with Caratti.

DEANE J:  Mr McKechnie, one problem about all this is one

cannot escape the impression that the orders in

relation to this money and gold bar should have

awaited, as it were, the sorting out of the

positions as between the parties. Is it possible,

depending on what happens in these proceedings and

possible proceedings and so on, for the matter to

be raised again?

MR McKECHNIE:  I am not sure of the answer to that question,

Your Honour.	Under the (Confiscation of Profits)
Act application must be made within six months.	I
appreciate that is not a total answer to
Your Honour's question because the matter - - -

DEANE J: Well, it is a partial answer, yes.

MR McKECHNIE: - - - can wait and, indeed, with restitution

there are authorities to suggest that delay is a

matter within the discretion. More particularly,

however, at the hearing before His Honour, as

Your Honours will see from the introductory setting

Mine 17 25/10/90

out of the history, everybody was there; everybody

who could possibly have had a claim.

DEANE J: Yes, except assume, just for the sake of the

argument, that Mine Exe goes into liquidation and

the liquidator brings proceedings and obtains the

judgment against Del Piano, it would be a little

bit strange if, having disgorged the money to make

restitution, he was then placed in the position

where he had to meet a judgment. Well, now, it may

well be that there is a good answer because he has

tried to make restitution or what have you but it

is not self-evident that that is so.

MR McKECHNIE: There are two answers to Your Honour's

proposition, of course. Del Piano has indicated
his intention to abide the decision of this Court

and those interesting questions which might well

arise do not, in my submission, arise in these

proceedings. Secondly, with great respect, it is

the point that my friend is making, with great

respect to him, that there is a relevant difference

between Mine Exe, whether Mine Exe in liquidation

and Mine Exe and all its creditors and Mine Exe as

represented by Caratti in the entering into and

carrying out of the corrupt bargain. In my

respectful submission, that is, with great respect

to him, the error of approach given the finding - I
know he challenges the finding, but if the finding

is correct that Mine Exe was the alter ego of

Caratti it is really bound by its earlier judgments

and decisions.

DEANE J: But sometimes companies can obtain damages from

all their directors and those who dealt with all

their directors if it is, for example, a conspiracy

involving its assets.

MR McKECHNIE:  Yes, and that is correct. I am not

dissenting from that view; nor am I dissenting in

general terms from the views that Your Honour is

expressing.	I am perhaps trying to say that in
this case, given - as the facts are unfolded in

His Honour's judgment - the close relationship and

the identity of the controlling mind and Mine Exe,
there is no difference. That is the only answer,

Your Honour, as a matter of fact.

TOOHEY J: But at the moment there is an order of the

district court forfeiting the gold bar and the

$300,000 to the State.

MR MCKECHNIE:	Yes.
TOOHEY J:	Now, while that order stands there is no way, I

take it, in which anyone associated with these

Mine 18 25/10/90

proceedings can recover any of that money or that

bar.

MR McKECHNIE:  Not unless they apply under section 12(1) and

as a third party who may be entitled to it and are

successful. The applicant here has done that and

has been unsuccessful.

TOOHEY J: Well, there is a judgment against the present

applicant in that respect so the doors are closed

to it.

MR McKECHNIE: Yes, that is a necessary consequence of the

hearing at which it was represented and asked for

that determination.

TOOHEY J:  And one would think that resort to the money and

the bar is closed to anyone else by reason of its

forfeiture to the State, although that is not to

say that there may not be money claims available to

other parties.

MR McKECHNIE: Yes, there may be moneys. Section 12, as I

said earlier, the two thrusts of the (Confiscations

of Profits) Act are, firstly, to confiscate the

profits of crime, that is, as a penalty or whatever

and, secondly, to provide an alternative mechanism

to restitution and, in some places, where

restitution per se would not cover it, to restore

those profits, as it were, to persons entitled to

them. That is the course that Mine Exe has chosen

and failed. If Your Honours please, those would be

our submissions in reply

MASON CJ: Thank you, Mr McKechnie. Yes, Mr Bennett.

MR BENNETT:  Shortly by way of reply, Your Honours: my

friend said that the learned judge in the district

court did not deal with these as competing claims

and that, with respect, my friend errs. At page 27

of the application book, at about line 42,

His Honour Judge Sadleir says:

This is a case in which there are

competing claims, including the application

for forfeiture to the State.

And then in a passage that goes over to page 28,

His Honour, we say, in error, takes into the

assessment of the restitutionary claims pursuant to

the Criminal Code the fact that there is a

competing claim by the State for forfeiture.	So,
he did deal with these matters, we say, as

competing claims and not as my friend suggested to

you, as a series of priority decisions to obtain

restitution, if not we fall through to a

confiscation issue.

Mine 19 25/10/90

My friend concedes, secondly, if his

submissions on hardship are not accepted by

Your Honours, then there is a matter that ought to be the subject of leave. And hardship, we take my

friend, to be reading down in some way to say that

the interests of the company who now stands to pay

creditors and is on the verge of insolvency, does

not amount relevantly to hardship. Now, it is not

correct, with respect, to say, "Ignore hardship at

the confiscation stage, section 10 of the Crimes

(Confiscation of Profits) Act, drop it through to

section 12 when you are dealing with an application

by a third party." That is not where the

legislature says that hardship is relevant.

There is no basis for an order for

confiscation being made if it would cause hardship

and there is nothing within the scheme or the

policy of the Act to prevent hardship being given a

wider meaning. Say, a drug dealer or a bank robber

uses in his crimes a vehicle that has been

specially adapted to carry a wheelchair because a

member of his family suffers from quadriplegia.	We
would say that the person suffering the
quadriplegia could say to the State, "Don't
confiscate the car;	it will cause hardship to me."

It is not a proprietary right; it is hardship in

its general, natural and ordinary meaning and their

claim should relevantly be heard on the issue of

confiscation.

The plain words of the statute do not admit

much doubt on that. The plain words are:

any hardship that may reasonably be likely to

be caused to any person by the order.

Now, we say here, if the director, without the authority of the company, strips the company of an

asset the company can relevantly say, "If you

confiscate that property we.will suffer hardship."

Your Honour Mr Justice Deane's questions to my

order by His Honour Judge Sadleir and the	friend illustrate that, that the making of the
confirmation on appeal must affect Mine Exc's civil
rights against Del Piano and the mining companies.
It must at least affect those equitable claims that
trace the property because the property ceases,
relevantly, to be capable of tracing. So, any action against Del Piano as a constructive trustee
of the company's assets must be avoided, must be
finalized by this order. That, we say, is
relevantly a legal hardship and it may or may not
be significant in the long run if a liquidator, if
a receiver, or even if the company desiring to pay its creditors ultimately seeks to enforce a

Mine 20 25/10/90

judgment against Del Piano.	They are our matters
by way of reply, Your Honours.

MASON CJ:  Thank you, Mr Bennett. What I am about to say

reflects the view of a majority of the Court. On

the basis on which this case was fought and argued

in the courts below we are not persuaded that the

proposed appeal from the decision of the Full Court

is a suitable vehicle for the determination of any

question of general principle. The case is

therefore not appropriate to the grant of special

leave and the application is refused.

MR McKECHNIE:	We seek an order for costs.
MASON CJ:	You do not oppose that, do you, Mr Bennett?
MR BENNETT:	No.
MASON CJ:	The application is refused, with costs.

AT 4.00 PM THE MATTER WAS ADJOURNED SINE DIE

Mine 21 25/10/905