Siafakas v R - [2016] NSWCCA 100

Court of Criminal Appeal

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Siafakas v R [2016] NSWCCA 100
Hearing dates: 22 April 2016
Decision date: 23 June 2016
Before: Leeming JA at [1];
Harrison J at [109];
Schmidt J at [113]
Decision:
1. Grant leave to appeal in respect of grounds 1 and 4.

2. Appeal allowed in part.

3. Set aside the verdict of guilty on count 1.

4. Set aside the sentence imposed on 9 May 2014, and in lieu thereof, sentence the appellant:

(a) in respect of count 3, to a term of imprisonment of 9 years with a non-parole period of 5 years and 5 months;

(b) in respect of count 5, to a fixed term of imprisonment of 4 years.
Each of those sentences will commence on 3 January 2012. The earliest date on which the appellant would be eligible for release on parole will be 3 June 2017.
Catchwords: CRIMINAL LAW – appeal against conviction – trial before judge sitting without a jury – two counts of knowingly taking part in manufacture of prohibited drug – appellant leased premises and participated in manufacture of precursors and prohibited drugs – appellant accepted that he was involved in the manufacture of a precursor – in one count, the precursor was also a prohibited drug – whether trial judge erred in formulating mental element of offence – whether trial judge failed to provide adequate reasons for finding that appellant was aware of the actual substance being manufactured – whether verdicts unreasonable or could not be supported by the evidence – Drug Misuse and Trafficking Act 1985 (NSW), s 24(2)
Legislation Cited: Crimes (Sentencing Procedure) Act 1999 (NSW), s 53A
Criminal Code (WA), ss 22, 24
Criminal Procedure Act 1986 (NSW), s 133
Fish Resources Management Act 1994 (WA)
Drug Misuse and Trafficking Regulation 2011 (NSW), Sch 1, 2, 4
Criminal Appeal Act 1912 (NSW), ss 5, 6
Drug Misuse and Trafficking Act 1985 (NSW), ss 3, 10, 23, 24, 24A, 24B, 25, 29, 30, 33; Sch 1
Cases Cited: AK v State of Western Australia [2008] HCA 8; 232 CLR 438
Bahri Kural v The Queen (1987) 162 CLR 502
Filippou v The Queen [2015] HCA 29; 89 ALJR 776
Fleming v The Queen [1998] HCA 68; 197 CLR 250
He Kaw Teh v The Queen (1985) 157 CLR 523
M v The Queen (1994) 181 CLR 487
Ostrowski v Palmer [2004] HCA 30; 218 CLR 493
R v CWW (1993) 32 NSWLR 348; 70 A Crim R 517
R v Hendricks [2011] NSWCCA 203
R v Lau (1998) 105 A Crim R 167
R v Ruiz-Avila [2003] NSWCCA 264; 142 A Crim R 459
R v Van Xuan Bui [2005] VSCA 300
SKA v The Queen [2011] HCA 13; 243 CLR 400
Tabe v The Queen [2005] HCA 59; 225 CLR 418
W v R [2014] NSWCCA 110
Yousef Jidah v R [2014] NSWCCA 270
Zaburoni v The Queen [2016] HCA 12
Category: Principal judgment
Parties: Mr Vasilios Siafakas (Appellant)
Crown (Respondent)
Representation:
Counsel:
H Dhanji SC, A Djemal (Appellant)
V Lydiard (Crown)
Solicitors:
Matouk Joyner Lawyers (Appellant)
Office of the Director of Public Prosecutions (Crown)

File Number(s): 2008/259791
Publication restriction: Nil
Decision under appeal

Court or tribunal:

District Court of New South Wales

Jurisdiction:

Criminal

Date of Decision:

12 November 2013

Before:

Frearson DCJ

File Number(s):

2008/259791

Judgment

LEEMING JA: Mr Vasilios Siafakas, also known as William, was convicted following a trial lasting some 24 days before a judge of the District Court, sitting without a jury, of two counts of knowingly taking part in the manufacture of a prohibited drug contrary to s 24(2) of the Drug Misuse and Trafficking Act 1985 (NSW) (the Act) and one count of possessing a precursor intended for use in the manufacture of a prohibited drug contrary to s 24A(1) of the Act. The primary judge imposed an aggregate sentence of 10 years imprisonment with a non-parole period of 6 years, commencing on 3 January 2012. The indicative individual sentences for the purposes of s 53A of the Crimes (Sentencing Procedure) Act 1999 (NSW) were:

“Count 1: Imprisonment for 10 years with a non-parole period of 6 years
Count 3: Imprisonment for 9 years with a non-parole period of 5 years 5 months
Count 5: Fixed term of imprisonment of 4 years”.

It will be seen that although an aggregate sentence was imposed, the indicative sentences relating to counts 3 and 5 were wholly subsumed within the indicative sentence for count 1, with the latter corresponding with the aggregate sentence.
The appeal is confined to Mr Siafakas’ convictions on counts 1 and 3 pursuant to s 24(2) of the Act. There is no challenge to the conviction on count 5 pursuant to s 24A(1) of possession of a precursor. Nor is any separate appeal sought to be brought from the sentence.
The grounds of appeal are as follows:

“1. The verdict in relation to count 1 is unreasonable or cannot be supported by the evidence.
2. With respect to count 1, the learned trial judge erred in law in finding that proof that the applicant was aware that what he was engaged in was criminal was sufficient to satisfy the mental element relating to the physical element that the substance was a prohibited drug.
3. The learned trial judge erred in law in failing to provide adequate reasons for his finding that the applicant was aware that the substance, the subject of count 1, was 3,4-Methylenedioxy-phenyl-2-propanone or ‘MDP2P’.
4. The verdict in relation to count 3 is unreasonable or cannot be supported by the evidence.”

Grounds 1 and 4 invoke the first limb of s 6(1) of the Criminal Appeal Act 1912 (NSW) (“unreasonable, or cannot be supported, having regard to the evidence”) while grounds 2 and 3 invoke the second limb (“wrong decision of any question of law”). The appeal is as of right in relation to grounds 2 and 3, and with leave in relation to grounds 1 and 4: Criminal Appeal Act 1912 (NSW), s 5(1)(a) and (b). Even so, it will be convenient to refer to Mr Siafakas as the appellant.
For the reasons which follow, I have concluded that grounds 2 and 3 of the appeal have been made out, but that grounds 1 and 4 should be dismissed. My judgment takes the following form. First, I deal with the basic facts and legislative provisions. Secondly, I give an overview of the appellant’s case at trial, which, although incomplete, is sufficient to address grounds 2 and 3. Thirdly, I turn to each of grounds 1 and 4, which will require returning to the evidence in more detail. Fourthly, I deal with the orders which in my view should be made.

The precursors and prohibited drugs found in the appellant’s factory

The appellant (by a company controlled by him) entered into a lease of factory premises in Padstow in south western Sydney in July 2007. In August 2007 police installed three fixed camera surveillance devices in the factory. An important contributor to the length of the trial was the extensive video surveillance evidence tendered in the Crown case (no audio surveillance was tendered). There was no dispute that substantial quantities of precursors and prohibited drugs were manufactured in the Padstow premises in the second half of 2007. On 9 December 2007, in the execution of a warrant, police seized, inter alia:

268,958 grams of Isosafrole;

1,645 grams of 3,4-Methylenedioxy-phenyl-2-propanone (also known as MDP2P); and

3,694 grams of 3,4-Methylenedioxy-amphetamine (also known as MDA).

At the time those substances were seized, the appellant was the only person present in the premises. The video surveillance demonstrated that he had been in the premises for some hours on each of the ten preceding days, including staying overnight from 17:53 on the afternoon of 3 December until 7:18 on 4 December, as well as from 8:46 until 17:39 on 4 December.
Each of the three counts on which the appellant was convicted related to one of the three different substances seized at the premises.
Isosafrole is a precursor for the prohibited drug MDP2P. It was the Isosafrole which was the subject of count 5, the charge of possession of a precursor with intent to manufacture a prohibited drug, which was not challenged in this appeal.
Section 24(2) makes it an offence to manufacture or produce, or knowingly take part in the manufacture or production of, an amount of a prohibited drug which is not less than the commercial quantity of that drug.
Count 1 was that the appellant had knowingly taken part in the manufacture of the prohibited drug MDP2P in an amount not less than the large commercial quantity for that drug.
Count 3 was that the appellant had knowingly taken part in the manufacture of the prohibited drug MDA in an amount not less than the large commercial quantity for that drug.
The commercial quantities of MDP2P and MDA are, in each case, 125 grams. The large commercial quantities of MDP2P and MDA are, in each case, 500 grams. The offence created by s 24(2) refers only to taking part in the manufacturing of a commercial quantity. Section 33(2)(a) provides that the maximum penalty for the offence created by s 24(2) is a fine of 3,500 penalty units or imprisonment for 20 years. However, in the event that the court is satisfied that the offence involved not less than a large commercial quantity, then s 33(3)(a) provides that the maximum penalty is a fine of 5,000 penalty units or imprisonment for life.
The amounts of MDP2P and MDA seized at the Padstow premises were considerably more than the large commercial quantities of those substances specified in the Act.
As well as being a prohibited drug, MDP2P is also a precursor. That is to say, MDP2P is listed in Schedule 1 of the Act and also in Schedules 1 and 4 of the Drug Misuse and Trafficking Regulation 2011 (NSW), which is where the definitions of “precursor” in subss 24A(3) and 24B(3)(b) direct attention. The fact that MDP2P is both a precursor and a prohibited drug underlies each of grounds 1, 2 and 3 of the appeal. That is not, of itself, unusual; pseudoephedrine is likewise a precursor for the purposes of s 24A as well as being a prohibited drug.
What was unusual, so it was said, is that there was evidence to suggest, and the trial and the appeal proceeded on the basis that, MDP2P was not itself readily consumable for any narcotic effect. Rather, MDP2P is typically used to make a prohibited drug (normally, either MDA or the chemical which is abbreviated as MDMA, both of which are sold under the name “ecstasy”).

Overview of appellant’s case at trial

The appellant gave evidence that he was knowingly involved in the manufacture of a precursor. He said that he had been introduced, through a financier, to Mr John Robert Bemand, who was also a good friend of the godfather of his eldest child. He said that Mr Bemand had approached him and expressed concern regarding money he owed to friends of Mr Charles Cassar. His evidence in chief was as follows:

“Q. Can you detail the conversation in a sort of he said, you said type scenario, the best as you can?
A. Yes. John Bemand said, ‘Look, William, we’re in a bit of a bother at the moment. We’re in debt to some people and I need your factory to manufacture some ketone.’ I’d never head of what ketone was before. I asked him, ‘What is ketone?’ He said to me, ‘William, it’s a chemical,’ and I said, ‘Fine.’ I said, ‘Is it illegal?’ He said to me, ‘Unfortunately, yes, it is, William.’ I said –
DJEMAL: He said, ‘Unfortunately, yes, it is illegal,’ is what Bemand said to him.
HIS HONOUR: Yes, I heard that. I was listening for that, yes.
WITNESS: He said, ‘Look’ – I became a little apprehensive. He said, ‘Look, it’s only a precursor chemical,’ and I said, ‘Look, how long will it take you to do this? What does it involve?’ and he said, ‘Look, William, it’ll only take us three weeks to do it,’ and I said, ‘Well, look, if you say it only takes three weeks, I’ll allow you to use a factory for that purpose and if it gets you out of trouble, because I can see that you’re really concerned about it, I will help you,’ and I allowed him to use the premises for that purpose.”

The appellant accepted that he was to receive $50,000 of the proceeds of the sale of the precursors manufactured in his premises. He said that he did not in fact receive any money.
MDP2P falls within the class of organic chemicals known as ketones. The simplest ketone is acetone, which is readily available at hardware stores. It was uncontroversial that some, but obviously not all, ketones were precursors. However, the testimonial evidence at trial, as well as some transcripts from telephone intercepts, had participants referring to the precursor being manufactured as “ketone”.
MDP2P is structurally similar to, and may be converted to, MDA in a variety of ways. One way of doing so involves a process known as a Leuckart reaction. Mr Bemand, who gave evidence in the Crown case, described the reaction as follows:

“It’s a reaction using … ammonium formate, a mixture of ammonia and formic acid. The two are mixed together and then they’re slowly heated up to a maximum temperature of about 160 degrees, over a period, as I said 24 to 36 hours”.

Mr Bemand said that the ammonium formate came from a cylinder and that “William bubbled that ammonia into the formic acid for me”. Mr Bemand gave a deal of other evidence, to which it will be necessary to turn when addressing ground 4, to the effect that the appellant was personally involved in the decision to convert MDP2P to MDA and the process which was followed implementing that decision.
The appellant denied he had the level of involvement stated by Mr Bemand. He accepted that he knew that a precursor could be used to make a prohibited drug, but maintained that he was only involved in the manufacture of a precursor. In support of this, Mr Bemand’s statement dated 28 April 2010 (and therefore made much closer to the events in question) said that:

“At no stage did [the appellant] know we were manufacturing ecstasy as I knew he was against it ... [The appellant] only agreed to the manufacture of Ketone and other precursors”.

Ground 2 – the mental element of count 1

The Crown submitted at trial that the mental element of the offence created by s 24(2) was satisfied by knowledge that a precursor was being manufactured. As it was put at trial:

“The Accused was at all times [aware] that he was taking part in the process that would lead to the manufacture of a prohibited drug, either MDA, MDMA or Methylamphetamine. The Accused was merely mistaken in his belief that MDP2P was only a precursor.”

That submission was accepted by the primary judge. The critical aspect of his Honour’s reasons was as follows:

“In my view someone who knowingly takes part in the manufacture of the precursor ketone substance MDP2P, believing it to be a ketone precursor chemical and believing the manufacture to be illegal and prohibited by law, where the substance manufactured was in fact a scheduled prohibited drug, the mental element is satisfied even if the substance has none of the typical characteristics of a drug. The mental element could not include a belief that the substance was in fact some type of drug when the scheduled substance had none of the characteristics of a typical drug. The schedule includes substances that are drugs typically and substances that are not drugs as such.
It is sufficient in my view that the accused has knowledge or belief in the wrongfulness of the act that he is knowingly taking part in, that is the illegal and prohibited manufacture of the substance which in fact is a scheduled prohibited drug. He needs to know all the facts constituting the ingredients necessary to make the act criminal.”

On appeal, the Crown propounded an even broader submission, which was that it was sufficient that a person know that what he or she was doing was unlawful. To use the example raised in argument, if a person believed he or she was taking part in the unlawful manufacture of distilled spirits, but in fact was taking part in the manufacture of a prohibited drug, then that would, according to the Crown, suffice to satisfy the mental element of s 24(2).
In contrast, the appellant submitted that, given that the precursor MDP2P was itself a prohibited drug, there were two, and only two, possible ways for the Crown to prove the mental element of the offence created by s 24(2):

by proving that the person knew he or she was manufacturing a prohibited drug (although without necessarily knowing precisely which prohibited drug was being manufactured); or

by proving that the person knew he or she was manufacturing MDP2P specifically, where a belief that MDP2P was only a precursor and not a prohibited drug would not stand in the way of satisfaction of this element of the offence.

For the reasons which follow, I would accept the appellant’s submissions.
The starting point is statute. As Gleeson CJ said in this context in Tabe v The Queen [2005] HCA 59; 225 CLR 418 at [24], the issue is ultimately one of legislative intention as to what are the elements of an offence created by statute.
It is plain from the words in s 24(2), “knowingly takes part in the manufacture or production of … a prohibited drug”, that there is a mental element in the offence. As much was common ground. The Crown would fail if it could not displace a reasonable doubt that an accused believed that he or she was taking part in the production of, say, paracetamol.
But is it sufficient, as the Crown submitted on appeal, that the Crown establish beyond reasonable doubt that the accused believed he or she was taking part in the production of some substance which was unlawful? Alternatively, is it sufficient, as the Crown submitted at trial, that the Crown establish beyond reasonable doubt that the accused believed he or she was taking part in the production of a precursor which in turn would lead to the manufacture of a prohibited drug? Or is it necessary, as the appellant submitted, for the Crown to establish beyond reasonable doubt that the accused believed that he or she was taking part in the production of either a prohibited drug or MDP2P specifically?
A natural reading of the statutory language suggests that the Crown would have to establish beyond reasonable doubt that the accused believed that he or she was taking part in the manufacture of something which is within the class of chemicals defined as prohibited drugs. A natural reading does not confine the word “knowingly” to taking part in some process of manufacture generally, but to taking part in the manufacture of a prohibited drug.
I do not think it is necessary in order to resolve this appeal to review in any detail the principles authoritatively stated by the High Court in He Kaw Teh v The Queen (1985) 157 CLR 523 and subsequent cases in relation to the approach to the mental element of offences created by statute. Instead, it is convenient to proceed directly to the analysis by Sheller JA (with whom Smart and Allen JJ agreed) in R v CWW (1993) 32 NSWLR 348; 70 A Crim R 517 at 355, on which the appellant relied. That decision answered a question submitted to the Court of Criminal Appeal pursuant to (former) s 5A of the Criminal Appeal Act, following the acquittal of CWW, concerning the mental element of the offence created by s 23(2) of the Act, which relevantly provided:

“A person who ... cultivates, or knowingly takes part in the cultivation of, a number of prohibited plants which is not less than the commercial quantity applicable to prohibited plants ... is guilty of an offence.”

After consideration of the judgments in He Kaw Teh v The Queen and Bahri Kural v The Queen (1987) 162 CLR 502, Sheller JA said in CWW:

“In my opinion, s 23(2) is structured so that the number of prohibited plants cultivated is a circumstance which attends the physical act of cultivation or supply to create the offences under the subsection. The offences are not established unless it is shown that the number of plants cultivated was not less than the commercial quantity. This gives character to the physical act involved to create the offence under the subsection. To adapt the language of Brennan J there is a presumption that the intention that must be proved is an intention of doing an act of the defined kind which constitutes the offence namely, in this case, cultivating a number of plants not less than the commercial quantity. Consistent with He Kaw Teh and Bahri Kural in my opinion the question asked must be answered in the affirmative.”

That passage was cited and applied by Nettle JA, with which Buchanan JA agreed, in R v Van Xuan Bui [2005] VSCA 300 at [62]. It is entirely orthodox, and, although seeking to distinguish it, the Crown did not submit to the contrary.
In CWW the mental element posed by s 23(2) was an intention of cultivating a sufficiently large number of plants. The Crown was required to prove beyond reasonable doubt that the accused had an intention of cultivating not less than the commercial quantity (250) of plants in order to secure a conviction.
The Crown submitted, with a view to distinguishing CWW, that its reasoning applied only to an intention as to the quantity of the prohibited substance (which in the present case was not in issue) and did not extend to its quality.
However, in my view the reasoning in CWW on the elements of the offence created by s 23(2) readily applies to that created by s 24(2). Just as the mental element of s 23(2) was an intention to cultivate not less than the commercial quantity of prohibited plants (as opposed to an intention to cultivate some quantity of prohibited plants, which happened as it turned out to exceed the commercial quantity), the mental element in s 24(2) was an intention of manufacturing a substance which was a prohibited drug (as opposed to an intention to manufacture some substance, which happened as it turned out to be a prohibited drug). That is to say, I see no reason to depart from the presumption to which Sheller JA referred in CWW that the intention which must be proved is an intention of doing an act of the defined kind which constitutes the offence.
The degree of specificity in the mental element of the offence suggested by CWW is confirmed by authority. This Court’s decision in Yousef Jidah v R [2014] NSWCCA 270 is highly persuasive on this issue, because of the similarity of the statutory language and the fact that in that appeal, as in the present, the substance was both a precursor and a prohibited drug and so there was necessarily a degree of precision in the formulation of principle.
Yousef Jidah included an appeal against conviction on two counts, one of supplying not less than the commercial quantity of a prohibited drug contrary to s 25(2) of the Act, and one count of attempting to possess a precursor intended for use in the manufacture or production of a prohibited drug, contrary to s 24A(1) of the Act. In respect of each count, the prohibited drug and the precursor was the same chemical (pseudoephedrine). The appeal against conviction required the Court to consider closely the interrelationship between the two offences and the elements of each.
The joint judgment of Bathurst CJ, Fullerton and Davies JJ stated at [34]-[36]:

“The elements of the offence under s 25(2) of the DMT Act, applicable to this case, were that the appellant attempted to obtain possession of what he believed to be a prohibited drug, for the purposes of supply in an amount not less than the large commercial quantity applicable to that drug. To establish the count, it was necessary for the prosecution to prove that the appellant attempted to take possession of the drug for the purposes of supply, knowing or believing that the substance in the 45 boxes was a prohibited drug of not less than a large commercial quantity.
By contrast, the elements of the offence under s 24A of the DMT Act, as applicable to this case, were that the appellant attempted to possess a precursor, intending it to be used by another person in the manufacture of a prohibited drug. As we have observed, it was not contended by the Crown that the appellant intended to use the precursor for the manufacture of such a drug. The identity of that person (or those people) and where and when and how they were to be given access to the precursor was left open by the Crown.
Thus, to establish the offence under s 24A of the DMT Act, the prosecution was required to prove that the appellant attempted to possess a substance he knew or believed to be a precursor with the intention of it being used by another person to manufacture a prohibited drug”. (emphasis added)

Of course, their Honours were dealing with different offences from those with which the appellant was charged. But the structure of s 25(2) and s 24(2) are very similar. Compare:

“24(2) A person who manufactures or produces, or who knowingly takes part in the manufacture or production of, an amount of a prohibited drug which is not less than the commercial quantity applicable to the prohibited drug is guilty of an offence”

with:

“25(2) A person who supplies, or who knowingly takes part in the supply of, an amount of a prohibited drug which is not less than the commercial quantity applicable to the prohibited drug is guilty of an offence.”

Given the relevantly identical language, I think it is clear that the offence created by s 24(2) must have the same mental element in relation to the quality of the substance as that created by s 25(2).
There is a further reason for concluding that the mental element of the offence created by s 24(2) requires a knowledge or belief concerning a prohibited drug, and that a knowledge or belief concerning a precursor is insufficient. This Part of the Act creates different offences, with different penalties, distinguishing between chemicals which are precursors and chemicals which are prohibited drugs. That is seen most clearly by comparing ss 24B and 25. Section 24B creates an offence of the possession of more than a prescribed quantity of precursor, with a maximum penalty of 1000 penalty units or 5 years imprisonment. That is a different offence from the offence of (deemed) supply of not less than the traffickable quantity of a prohibited drug created by s 25 (read with the deeming provision in s 29), which carries a maximum penalty of 2000 penalty units or 15 years imprisonment.
Test the matter this way. Suppose an accused possessed 100g of MDP2P, but without knowing what precisely the substance was. The traffickable quantity of MDP2P, considered as a prohibited drug, is 0.75g. The prescribed quantity of MDP2P, considered as a precursor, is 50g. There is every reason to conclude that if it were shown that the accused believed only that the substance in his or her possession was a precursor, he or she would be guilty of an offence under s 24B, and that in order for the accused to be guilty of an offence under the more serious offence created by s 25, it would need to be shown that he or she believed that the substance in his or her possession was a prohibited drug.
If the approach adopted by the primary judge was correct, then it would suffice for the Crown to establish either offence, in the example given above, that the accused believed that the substance in his or her possession was a precursor. I regard that as so improbable a result that I would strain against a construction of the statute that would give rise to it.
True it is, as Schmidt J has observed, there is no offence of manufacturing a precursor. If there were such an offence, as well as an offence of manufacturing a prohibited drug, then it would be tolerably clear that the mental elements of the offences would be distinct. However, in my view the absence of an offence of manufacturing a precursor does not mean that the distinction between precursors and prohibited drugs is inapplicable to the offence with which the appellant was charged, nor does it render inapplicable the reasoning in CWW and Yousef Jidah.
For completeness, I note that the same considerations lead me to reject the Crown’s narrower submission at trial, to the effect that knowing involvement in the manufacture of a precursor, itself intended to be converted into a prohibited drug, was sufficient without more to satisfy the mental element of “knowingly takes part” in the manufacture of a prohibited drug. The Act draws a distinction between prohibited drugs and precursors, and goes so far as to create, by s 24A, a separate offence of possessing a precursor intended by the person for use in the manufacture of a prohibited drug. If an intention to take part in the manufacture of a precursor sufficed to satisfy the mental element of the offence of taking part in the manufacture of a prohibited drug, merely because the precursor might in the future be converted into a prohibited drug, then once again the distinctions drawn by the Act between offences based on precursors and offences based on prohibited drugs would be elided.
The Crown’s broader submission on appeal was that proof of a knowledge or belief that the substance was unlawful was sufficient. It was put thus in oral submissions:

“The Crown proved that what he manufactured was a prohibited drug, he was knowingly manufacturing it and the fact that at law what he was manufacturing was illegal or a prohibited drug, he can’t rely on that defence because it is as a matter of law that the product is a prohibited drug. It’s not a question of fact.”

As is clear from that submission, the Crown was at pains to deny the availability of a defence of honest and reasonable mistake of fact, and made elaborate submissions based on Ostrowski v Palmer [2004] HCA 30; 218 CLR 493. Those submissions fall away once it is seen that the issue is not the availability of a defence, but instead the nature of the mental element of the offence which the Crown must prove beyond reasonable doubt. I would reject the Crown’s broader submission for the reasons already given.
One thing should be made clear. The Act defines two classes of chemicals – prohibited drugs and precursors – and creates different offences with different elements by reference to those classes. For the reasons already given, the mental element of those offences involves an intention which relates to those classes of chemicals. However, it does not follow from any of the foregoing that it is necessary for the Crown to prove beyond reasonable doubt that an accused believed that the substance being manufactured or supplied was some particular prohibited drug. That follows from Dunn (1986) 32 A Crim R 203, where a conviction of possession of a prohibited drug with intent to supply was upheld, notwithstanding that the accused believed he was acquiring methamphetamine but in fact obtained cocaine; both drugs were “prohibited drugs”. Dunn was applied in this Court in R v Ruiz-Avila [2003] NSWCCA 264; 142 A Crim R 459 at [14], where it was said that:

“[I]f the appellant’s knowledge of the presence of the tablets were proved, it would not be necessary to prove that he knew that they contained the drug ecstasy. Knowledge, or even belief, on his part that they contained a prohibited drug would be sufficient.”

I have concluded that the primary judge applied an erroneous test. If that were the only basis on which the conviction for count 1 could be sustained, the conviction would have to be set aside pursuant to the second limb of s 6(1) of the Criminal Appeal Act (“on the ground of the wrong decision on any question of law”), noting that no reliance was placed by the Crown on the proviso. However, it is now necessary to turn to an alternative basis available on the findings made by the primary judge, which is challenged by ground 3 of the appeal.

Ground 3 – adequacy of reasons

As noted above, the appellant acknowledged that the mental element of the offence in count 1 was satisfied if the Crown proved beyond reasonable doubt that the appellant knew he was involved in the manufacture of MDP2P, even if he believed that MDP2P was only a precursor. He accepted that ignorance of the law (namely, that MDP2P appeared in Schedule 1 of the Act making it a prohibited drug) was no defence.
Notwithstanding the error of law in the legal test formulated and applied by the primary judge, which has been addressed above, the findings made by the primary judge were sufficient to satisfy the correct legal test. Towards the end of his Honour’s reasons, the primary judge said (emphasis added):

“I also reject [the appellant’s] evidence beyond reasonable doubt that he equated ketone only to the epoxide. It is one thing to have no particular knowledge of chemistry. It is another thing to be completely oblivious to the fundamental steps in making the ketone. I find beyond reasonable doubt that the accused was aware of the fundamental steps in making the ketone and he was aware that the ketone was indeed MDP2P.” (emphasis added)

His Honour made the same point shortly thereafter:

“The third finding beyond reasonable doubt is that the accused was aware of the general steps involved in making the ketone. He did not believe that an epoxide was the ketone that was to be sold. He was aware of the required step that [was] involved in converting the Isosafrole epoxide into a ketone, indeed, MDP2P. I accept beyond reasonable doubt Bemand’s evidence that he did discuss that phase with the accused.” (emphasis added)

Ground 3 challenged the adequacy of this aspect of the primary judge’s reasons. It should be said at the outset, in fairness to the primary judge, that the findings emphasised above were not, on the approach taken by his Honour, necessary to establish the mental element on count 1. On the approach taken by his Honour, a belief that a precursor was being manufactured was sufficient. Such a belief was common ground throughout the trial. Had the finding that the appellant knew that MDP2P was being manufactured been necessary to establish guilt, I expect that his Honour would have given much more elaborate reasons in support of it.

Conflicting evidence as to the appellant’s knowledge

There was a deal of inconsistent evidence as to whether the appellant knew or believed he was involved in the manufacture not just of some precursor, but of MDP2P.
On the one hand, the appellant denied that he knew precisely what was being made, save that it was “ketone”. He gave the following evidence:

“Q. Have you ever heard the term MDP2P back then, I’m talking about, in 2007?
A. No.
Q. Back then, did you ever read any literature that indicated what MDP2P was?
A. No.”

The appellant maintained that he had no knowledge of chemistry. That was consistent with Mr Bemand’s statement dated 28 April 2010. That statement made no reference to MDP2P, confirmed that the appellant was involved in the manufacture of “ketone” and that “[the appellant] was only present to assist me as he was not aware then of the chemical process to manufacture the Ketone”. It was also consistent with the Agreed Facts tendered at trial, which referred to the appellant agreeing to produce a precursor from sassafras oil.
Mr Bemand gave evidence which bore upon this issue. He said when describing the agreement he reached with the appellant:

“Q. But are you saying that there was just an agreement to make this MDP2P or ketone?
A. Originally, yes.”

However, that is equivocal when considered in its context, and reflects the fact that the participants tended to use the word “ketone” to describe the MDP2P being manufactured. For that reason, for example, there were separate containers in the premises marked as “ketone” and “epoxide”. The force of Mr Bemand’s evidence was that initially, he and the appellant had agreed only to making a precursor, not a prohibited drug.
Likewise, the (plausible) evidence that Mr Bemand, in the hours and days during the various processes, discussed with the appellant “what was going on” is insufficient of itself to demonstrate that the appellant knew that he was involved in the manufacture of MDP2P (as opposed to some other precursor).
However, it was open to the primary judge to reject the appellant’s evidence, and there were documents linked with him which pointed squarely to a better knowledge of MDP2P. Literature was found at the appellant’s home, including a book titled “Uncle Fester’s Guide to the Secrets of Methamphetamine Manufacture”. Mr Bemand agreed that the book was his, and that he thought he had brought it and other materials to the appellant for him to read.
Further, literature found in the factory premises included documents describing the processes formally with chemical diagrams and IUPAC names. It also included more colloquial literature (there was a suggestion in the evidence that some had been copied out of “Uncle Fester’s” guide). Especially from the material at the factory, a reader would become aware of the precise chemical being produced, and that because of the complexity of its formal scientific name, it was convenient to call it “ketone” or an acronym. For example, one page read:

“STEP 3
Isosafrol Epoxide to Ketone (Ketone is 3, 4 Methylenedioxphenyl-2- Propanone ie MDPP). Do this rearrangement in 10 to 12 Kilo batches only. This is a potentially explosive step being a very exothermic reaction ...” (sic)

The appellant denied reading the material, although he accepted that his fingerprint was found on one page in a bundle of these documents in the factory (a page headed “Reaction of Methamphetamine with Tartaric Acid”). The video surveillance showed the appellant at various times holding a page as if he was reading it.

The obligation to give reasons

Section 132(2) of the Criminal Procedure Act 1986 (NSW) provided that, in criminal proceedings without a jury:

“A judgment by a Judge in any such case must include the principles of law applied by the Judge and the findings of fact on which the Judge relied.”

In Fleming v The Queen [1998] HCA 68; 197 CLR 250 at [28], the High Court addressed that provision (then located in s 33(2) of the Criminal Procedure Act) as follows:

“[W]hilst s 33(2), when specifying that which a ‘judgment’ must include, does not use the expression ‘reasons for judgment’, it should not be taken as intending that the requirements of s 33(2) be satisfied merely by a bare statement of the principles of law that the judge has applied and the findings of fact that the judge has made. Rather, there must be exposed the reasoning process linking them and justifying the latter and, ultimately, the verdict that is reached.”

It is not necessary for the purposes of this appeal to give a precise analysis of the content of the obligation to give reasons, although I respectfully agree that they need not be lengthy or elaborate, especially when based on credibility: see W v R [2014] NSWCCA 110 at [147]. There is much to be said, given the seriousness of a finding of guilt (exposing the appellant in this case to a maximum sentence of life imprisonment) that the obligation is no less than is required from a civil court (cf R v Hendricks [2011] NSWCCA 203 at [7]-[9]). However, it suffices to resolve this ground by direct application of what was held in Fleming. The finding that the appellant was aware, beyond reasonable doubt, that he was involved in the manufacture not just of any precursor, but of MDP2P, was unsupported by any reasons connecting the appellant’s knowledge to what he had been told or what he had read, and did not address the far from implausible evidence that he had no detailed knowledge of chemistry. Nor was there any reconciliation between that finding and the agreed facts.
It is true that, prior to making the finding that the appellant knew he was involved in the manufacture of MDP2P, the primary judge directed himself to “have regard to the submissions in the light of the totality of the evidence.” I am conscious that his Honour described the appellant’s evidence as “inherently implausible on a number of aspects” and subsequently rejected the appellant’s evidence that he equated ketone only with epoxide, and that he accepted the evidence of Mr Bemand to the effect that he told the appellant about the steps involved in the manufacturing process. However, I do not regard that as sufficient to discharge the obligation to give reasons if a knowledge or belief that the appellant was involved in the manufacture of MDP2P was necessary to establish his guilt. While the primary judge found that the appellant was aware of the “fundamental steps” in manufacturing the ketone, there is no reasoning linking that finding with the finding that the appellant was aware of the particular ketone being manufactured. Given the lack of direct evidence that the appellant knew the substance was MDP2P specifically, the appellant’s lack of knowledge of chemistry, and the way in which the term “ketone” was used by the participants, I do not consider that the reasons of the primary judge justified the conclusion that the Crown proved beyond reasonable doubt that the appellant knew it was MDP2P which was being manufactured.

In reaching that conclusion, it is to be recalled that the question is not whether the Crown had demonstrated that the appellant believed he was doing something unlawful. Nor is it whether the Crown demonstrated that the appellant believed he was making a precursor. Both those matters were undisputed. The very narrow issue arises because count 1 of the indictment charges the appellant with involvement in the manufacture of a prohibited drug, namely, MDP2P, and this ground of the appeal proceeds on the basis that the appellant’s conviction on that count required proving that he knew or believed that he was involved in manufacturing a particular chemical. There is, in this respect, force in the appellant’s submission noted at the outset that this is an unusual case.
The failure to provide any reasoning process linking the finding as to the appellant’s state of mind with the evidence which supported that conclusion was an error. As Gageler J indicated in Filippou v The Queen [2015] HCA 29; 89 ALJR 776 at [81], the reasoning in Fleming at [31]-[33] means that the failure is an error of law which engages the second limb of s 6(1) of the Criminal Appeal Act. I conclude that ground 3 is made out.
At one point in the hearing of the appeal it appeared that the Crown submitted that this Court should conclude that the appellant knew he was taking part in the manufacture of MDP2P. I disagree. In light of the competing evidence on this point, I do not consider that this Court is able to make a positive finding that the appellant knew the substance was MDP2P.

Grounds 1 and 4 – the verdict in relation to counts 1 and 3

Unlike the grounds addressed above, grounds 1 and 4 of the appeal invoked the first limb of s 6(1) of the Criminal Appeal Act. Each ground contended that the verdict in relation to count 1 or count 3 was unreasonable or could not be supported by the evidence.
However, in light of what has already been said, the issues posed by these two grounds are quite different.
I have concluded that the guilty verdict in respect of count 1 must be set aside. The only question remaining on this count is whether the evidence is so weak that a guilty verdict was not open and an acquittal should be ordered.
That question is readily answered. The primary judge accepted that the appellant “was not aware that the ketone was scheduled as a [prohibited] drug” and I proceed on that basis. Even so, I think it was quite open to the trier of fact to conclude beyond reasonable doubt that a man who had been personally involved in the manufacture of a precursor or “ketone”, who had worked for many hours under the direction of Mr Bemand as part of that process, and who had access to literature identifying the precursor being manufactured as MDP2P, knew or believed that he was involved in the manufacture of MDP2P. The Crown case was not nearly so weak as to permit this ground to be made out.
On the other hand, ground 4 is the only basis upon which the conviction on count 3 is challenged. The applicable principles were and are uncontroversial. It is necessary for this Court to undertake its own independent assessment of the evidence, both as to its sufficiency and its quality. Even if there is sufficient evidence upon which the trier of fact might convict, this Court must also determine whether “nonetheless it would be dangerous in all the circumstances to allow the verdict of guilty to stand”: see M v The Queen (1994) 181 CLR 487 at 492-493 and SKA v The Queen [2011] HCA 13; 243 CLR 400 at [14].
The primary judge relied upon the following evidence to find the appellant guilty of count 3:

the evidence of Mr Bemand;

the video surveillance device footage;

the agreed statement of facts;

the transcripts of certain telephone intercepts contained in the agreed statement of facts;

the video recorded assessment of the factory unit when entered by police;

photographs of items seized at the factory;

photographs of items found at the appellant’s house, including a pill press;

expert certificates; and

the documents found at the factory premises, some of which have been mentioned above.

Overview of Crown case on Count 3

In written submissions on appeal, the Crown outlined its case against the appellant as follows:

“The case against the [appellant] on all counts was circumstantial, plus the direct evidence of Bemand who gave evidence of what he had told the [appellant] about the nature of the substances that were manufactured by him others and in which the applicant knowingly took part. Although the trial judge was constrained to some extent by the agreed facts, there was other evidence in the case which allowed his Honour to build on those agreed facts.”

The Crown’s case against the appellant on this count relied on Mr Bemand’s evidence that he had told the appellant that he was going to make MDA at the Padstow factory, in addition to the “overwhelming circumstantial” evidence, including the video surveillance footage, the items found at the Padstow factory and the appellant’s home, and the fact that the appellant was not only present during the various manufacturing stages, but was also the only person present when the police raided the factory and seized MDA.
In light of the way in which the appellant advanced this ground, it is necessary to provide some further details of the evidence given by Mr Bemand. His Honour summarised his evidence, referred to various inconsistencies or contradictions in it, and gave himself the relevant warnings for such a witness. No complaint is made about the nature or adequacy of those warnings.
Mr Bemand’s evidence unequivocally tied the appellant to the manufacture of MDA. He said that “I had to make some product to recover the money … that we owed, that I owed” and that he had discussed his intention to make MDA, originally with Mr Cassar and then with the appellant. He gave this evidence:

“Q. Did Mr Siafakas react in any way to what you said?
A. He wasn’t – wasn’t particularly happy about it.
HIS HONOUR
Q. What was said, what was said?
A. It wasn’t the original agreement.
Q. He said that did he?
A. He said that to me, yes.
Q. Yes, and what did you say?
A. I said I had no choice.”

Mr Bemand then described the reaction to convert the MDP2P to MDA. When asked how long that step actually took, he said, “That took by the time you do you the cook, which is say a couple of days, and then you have to clean it up and so on, about two to three days.” He then gave this evidence:

“Q. When you were making that MDA, was anyone else present?
A. Cassar was in the premises and William was in the – in the premises.
Q. Did you speak with Mr Siafakas while you were doing that?
A. Yes, I did.
Q. Did you tell him what you were doing?
A. Yes, I did.
Q. What was his reaction to that?
A. At that stage, he had agreed to stay, so it wasn’t any reaction to that at that time. So I didn’t do it without first telling him that I was going to do it.”

Mr Bemand gave further evidence that Mr Siafakas was present while Mr Bemand was performing certain steps in the process, and participated in other steps.
In addition to the evidence of Mr Bemand, the primary judge said that “there is powerful circumstantial support for much of the evidence of John Bemand”. His reasons proceeded to say:

“On 9 December the accused was in charge of a fully functioning drug factory. He leased the premises. He had spent hundreds of hours there, was there alone for almost a day before the police raid. There were large quantities of drugs present covering all the aspect in the manufacture of MDA, namely Isosafrole, MDP2P, MDA, ovens for the drying of MDA as salt, five trays containing MDA in the oven, pill press, materials for the conversion of the salt into tablets, instructions manual at the premises. Bemand’s evidence is supported by the very fact that the accused was there for all that time in this fully functioning factory. On the 9th he assisted in the crystallisation of the MDA, transferring the tartaric acid, and scraping the trays.”

Overview of the defence case on Count 3

The defence case at trial was that Mr Siafakas accepted that on 4 December there had been a conversation which went beyond making the ketone precursor chemical and involved making a prohibited drug. He said that “John Bemand made me aware that he was considering making some prohibited drugs”. He said that Mr Bemand “was considering to make some prohibited drugs to try and pay for some of the debts that he and Charlie [Cassar] owed to some people”. He said that his response was:

“I was upset, and I said that that’s not to happen in my factory. That’s not the agreement that we had.”

Mr Siafakas gave the following explanation for the pill presses located in his house:

“I was asked to see if I could repair them and, for convenience’s sake, so I wasn’t going backwards and forwards to the factory in respect to the pill presses, I agreed and maybe even asked if they could be taken to my home.”

He denied believing that the pill presses were going to be used to press prohibited drugs. He said that the pill presses were taken to his home purely to repair and then to be onsold.
In cross-examination, he was asked:

“Q. Didn’t you ever make any connection between those pill presses and prohibited drugs?
A. No, because it was never the agreement.
Q. Are you saying you thought at all times those pill presses were going to be used for purely lawful activities?
A. I said I was asked to repair them for the purpose of them being on-sold …”

The appellant’s submissions on ground 4

The appellant’s submissions on this ground have two aspects. The first is that “[a]cceptance of Bemand’s evidence that he informed the [appellant] that there was a change of plan and MDA was to be produced was essential to the finding of guilt on count 3”. That was said to follow from the fact that “there had been an explicit agreement between the [appellant] and Bemand to produce only ketone combined with the fact that the [appellant] had no particular knowledge of chemistry” (appellant’s written submissions, para 56).
Secondly, it was submitted that because there were “three major inconsistencies” in Mr Bemand’s evidence, and limitations upon the utility of the surveillance footage, that the evidence could not sustain the conviction on this count.
Quite elaborate submissions were made concerning the three major inconsistencies. The first was based on timing. Mr Bemand gave evidence that the process of “cooking” the MDP2P to produce MDA oil “went most of the night”. Mr Bemand said he was present during that process. The video surveillance evidence established that the only time Mr Bemand was in the factory overnight was the night of 1-2 December 2007.
The appellant submitted that Mr Bemand’s evidence that the appellant was present during the process, and that Mr Bemand told him what was being done during that time, was inconsistent with the video surveillance evidence, which demonstrated that the appellant was not present at the factory on the night of 1-2 December 2007. Rather, the appellant was present in the factory between 9:42 and 15:38 on 1 December and 12:45 to 14:54 on 2 December. (The appellant was present in the factory on the night of 3-4 December 2007.)
A further inconsistency based on timing was said to emerge from the evidence Mr Bemand gave about the crystallisation process, by which MDA oil was converted to powder. Mr Bemand said that the appellant was present during this process. Again, by reference to the video surveillance evidence, this process was established as occurring on the morning of 8 December 2007, prior to the arrival of the appellant on that day (which was at 10:49).
The appellant submitted that “[n]either of these inconsistencies were the subject of comment in his Honour’s reasons”.
The “second major inconsistency” related to whether the appellant was present when trays of MDA were put in the oven. Mr Bemand’s evidence in chief was unequivocal:

“Q. Can you recall how many of the trays you saw Mr Siafakas with?
A. I think all up we packed about four trays to dry, something like that.
Q. How many of those would you have seen Mr Siafakas with?
A. We were all handling the trays at the time. So we all handled the trays, yes.”

However, the video surveillance evidence demonstrated that Mr Bemand and Mr Cassar were at the factory, in the absence of the appellant, when the trays of powder were placed in the oven. The five trays were placed in the oven between 10:19 and 10:29 on 8 December 2007, while the appellant did not enter the factory until 10:49. This was described as a “significant lie”, and Mr Bemand was cross-examined at trial on the basis that during the committal he had given evidence that the appellant was not present when the trays were placed in the oven. The appellant made this submission:

“When regard is had to his committal evidence it is difficult to attribute it to a simple mistake. Of perhaps greater significance, is that Bemand’s evidence at trial in this respect attempted to falsely involve the applicant in one of the final stages of the manufacture of the MDA.”

Again, the appellant submitted that this incongruence was not dealt with by the primary judge.
The “third major inconsistency” was conceded by the appellant to be less important. Mr Bemand gave evidence that on the afternoon of 8 December 2007, the video surveillance showed that “it looks like he’s turning powder on the tray”. In cross-examination, Mr Bemand accepted that the footage was more consistent with the appellant cleaning a tray, as opposed to turning over powder.

Resolution of ground 4

I would reject both aspects of the appellant’s submissions on ground 4. In relation to the inconsistencies, the third was minor, as counsel for the appellant acknowledged (“certainly we wouldn’t suggest that it’s as significant as the earlier matters that I’ve taken your Honours to”). But I would regard the first and second inconsistencies as also being relatively minor. Mr Bemand was giving evidence about what occurred during the production of MDA some six years earlier. It is true that he made errors about when he was overnight in the factory premises, and that he wrongly said that the appellant was present in the factory on the morning before the police executed a search warrant when the trays of powder were placed in the oven, whereas in fact he arrived 20 minutes later. However, those errors of recollection did not, in my view, disentitle the trier of fact from believing the gravamen of Mr Bemand’s evidence – namely, that the man who had been working closely with him knew that he was involved in the manufacture of a prohibited drug.
It is to be recalled that this was not a typical case of participants having different recollections of events many years previously. This was a case where Mr Bemand and the appellant gave extensive evidence (in the case of Mr Bemand’s, in chief and in cross-examination) by reference to the video surveillance. Both men gave explanations of what they were doing six years previously by reference to images showing precisely what they were in fact doing six years previously. Those explanations had considerable force, because the video surveillance of necessity circumscribed the denials which could plausibly be maintained, and enhanced the probative value of the positive evidence. The fact that the testimonial evidence was linked in this way to an objective record of events in the factory premises six years earlier very much diminished the usual concerns of the fallibility of human memory and the fact that Mr Bemand was an accomplice who had accepted a discount on his own sentence in exchange for assisting the Crown prove its case against the appellant. Especially in those circumstances, I consider that it was open to the trier of fact to accept the evidence of Mr Bemand when he said that what was occurring was the production of MDA, and to reject the appellant’s denials that he was aware of that fact.
Secondly and independently of the foregoing, I do not consider that the Crown case depended upon acceptance of Mr Bemand’s evidence. To the contrary, the Crown case was one which was very powerful, and parts of the appellant’s case were highly implausible. The Crown case contained the following elements independent of Mr Bemand’s evidence:

The appellant was caught red-handed in a fully functioning drug factory. He was alone, and had been there alone for some hours, in the presence of very large quantities of precursors and MDA.

According to the appellant, and although it was not in the original agreement, there was discussion of which he was aware that the “ketone” would be converted into a prohibited drug.

In late November 2007, the appellant acknowledged that he had prepared ammonium formate, a substance which was used in the process of converting MDP2P to MDA.

On 7 December 2007, the surveillance cameras showed the appellant scooping some powder from a bin into a measuring flask. The evidence established that it was tartaric acid. The appellant accepted that “there needed to be a degree of precision in relation to the amount of tartaric acid” which was used in crystallising out the MDA, although denying that he had any awareness of why he was doing what he was doing.

The appellant’s fingerprint was found on one of the pages found at the factory premises, a page headed “Reaction of Methamphetamine with Tartaric Acid”.

The appellant agreed that the surveillance cameras on 7 December 2007 showed the appellant taking a white powder from a tray, and “scraping it up into a nice, neat little heap”. He explained that “We put it in the bag, and we put it aside for John Bemand to have a look at and to see how successful the salvage was”. The explanation that, at this stage in the process, he believed he was recovering isosafrole epoxide, is implausible.

There were pill presses found in the factory and in the appellant’s home. Pill presses have no role in the production of precursor. Also found at the appellant’s home, in the basement with the pill presses, were documents relating to the manufacture of pills. The appellant’s evidence that he had taken the presses home to repair them with a view to their being on-sold is implausible.

It is not necessary to summarise the whole of what was plainly a strong circumstantial Crown case. The foregoing suffices to demonstrate that this ground is not made out.

Orders

There was no challenge to the conviction on count 5, and the challenge to the conviction on count 3 has failed. It follows that the indicative sentences for those offences should remain in place, but the conviction for count 1 and the aggregate sentence which was, in part, based upon that conviction, must be set aside.
In the absence of any challenge to (a) the finding of special circumstances, (b) the approach inherent in the aggregate sentence that the individual sentences should be wholly concurrent and (c) the backdating to 3 January 2012 having regard to pre-sentence custody, the approach adopted by the primary judge should apply on resentencing, although I would not impose an aggregate sentence. In lieu of the existing aggregate sentence, the sentences for the convictions on counts 3 and 5 should be imposed in the way indicated by the primary judge.
There has been considerable delay in the commencement of the appeal. The sentence was imposed on 9 May 2014, but a notice of appeal was only filed on 6 November 2015. I mention that to explain why it is that more than two thirds of the non-parole period had already been served, something which may bear upon the decision whether there is to be a retrial.
The formal orders I propose are:

Grant leave to appeal in respect of grounds 1 and 4.

Appeal allowed in part.

Set aside the verdict of guilty on count 1.

Set aside the sentence imposed on 9 May 2014, and in lieu thereof, sentence the appellant:

in respect of count 3, to a term of imprisonment of 9 years with a non-parole period of 5 years and 5 months;

in respect of count 5, to a fixed term of imprisonment of 4 years.

Each of those sentences will commence on 3 January 2012. The earliest date on which the appellant would be eligible for release on parole will be 3 June 2017.

In accordance with what was said in AK v State of Western Australia [2008] HCA 8; 232 CLR 438 at [60], whether there is a new trial on counts 1 and 2 is a matter for the prosecuting authorities.
HARRISON J: I have had the benefit of reading the draft judgments of Leeming JA and Schmidt J. I agree with Leeming JA that grounds 2 and 3 of the appeal have been made out but that the remaining grounds should be dismissed. I also agree with the formal orders proposed by his Honour in the circumstances in order to dispose of the appeal.
I agree that, given MDP2P was itself a prohibited drug, there were only two ways in which the Crown could prove the requisite mental element of the offence created by s 24(2) of the Act, namely by proving either that the person knew he or she was manufacturing a prohibited drug or by proving that the person knew that he or she was manufacturing MDP2P. It was in this case necessary for the Crown to establish beyond reasonable doubt that the appellant believed that he was taking part in the production of either a prohibited drug in general or MDP2P in particular.
I agree that the mental element in s 24(2) of the Act is an intention to manufacture a substance that is a prohibited drug, not merely an intention to manufacture some substance that turns out to be a prohibited drug. I do not accept that proof that a person has been involved in some coincidental but general illegal activity suffices to displace the Crown’s obligation to prove the specific illegality of which the section requires proof.
With respect to the adequacy of the trial judge’s reasons, I agree that his Honour’s approach was influenced by his acceptance that a belief that a precursor was being manufactured was all that was necessary. However, to the extent that a finding that the appellant knew that MDP2P was being manufactured was sufficient to establish his guilt, it should necessarily have been supported by reasons that clearly exposed and reconciled the conflicting evidence that bore upon the issue.
SCHMIDT J: I have had the benefit of reading Leeming JA’s reasons. I agree with his Honour’s conclusions and reasons as to ground 4 of the appeal, concerning the s 24 manufacture of MDA offence (count 3), but find myself in disagreement with his Honour as to grounds 1, 2 and 3. Those grounds concern count 1, the s 24 manufacture of MDP2P offence.
In my view the appellant has not established grounds 1, 2 and 3. Accordingly, they should be dismissed, with the result that the appeal should be dismissed in its entirety. These are my reasons for those conclusions.
The appellant accepted that if he did not succeed on ground 2, he could not succeed on ground 1. Ground 3 is also closely connected to the other two grounds. They are:

“1.    The verdict in relation to count 1 is unreasonable or cannot be supported by the evidence.
2.    With respect to count 1, the learned trial judge erred in law in finding that proof that the applicant was aware that what he was engaged in was criminal was sufficient to satisfy the mental element relating to the physical element that the substance was a prohibited drug.
3.   The learned trial judge erred in law in failing to provide adequate reasons for his finding that the applicant was aware that the substance, the subject of count 1, was 3,4-Methylenedioxy-phenyl1-2-propanone or ‘MDP2P’.”

The appellant was charged with six counts, three of which were in the alternative. He was convicted of counts 1, 3 and 5. Count 5 was an offence under s 24A, of possessing the precursor, isosafrole, with the requisite intent. The appellant does not appeal that conviction.
The appellant’s case on appeal turns on the finding that he did not know that the substance MDP2P, the subject of count 1, was a prohibited drug.
There was no issue that in law that substance is both a precursor and a prohibited drug. It is not normally ingested. That was submitted on appeal to be significant, because:

“… of course in the ordinary course of being in a laboratory, making a prohibited drug, if you’re in the process of actually producing something that you know is going to be ingested by somebody else for the psycho active effect then you are going to have the relevant intention with respect to producing something that is in the class prohibited drugs. The fact that you’re not producing something that is to be ingested does not then carry with it the necessary inference that you are within the class of prohibited drugs.”

In written submissions it was put that:

“In the present case there was no issue that the applicant knowingly took part in the manufacture of a substance which, as it happens, was a prohibited drug. Nor was there any issue as to his knowledge that the quantity was in excess of the large commercial quantity. The issue at trial was whether he did so knowing the manufacture was of a prohibited drug. It was open to the Crown to prove this element in one of two ways:
a. By proving the applicant knew he was manufacturing a prohibited drug of some sort (without necessarily knowing which particular drug he was manufacturing). In this event the applicant would have the requisite mental element for the manufacture of a prohibited drug that being the element of the charge; the precise identity of that drug being a particular, which, in the circumstances of a case such as this, would not need to be proved.
b. Alternatively, the element would be satisfied by proof the applicant knew he was manufacturing MDP2P. In this event, the applicant would be manufacturing a prohibited drug. Any lack of knowledge that MDP2P was a prohibited drug would be ignorance of the law and no excuse.”

The evidence

The evidence established that the appellant, an intelligent man, who was successfully operating a radiography business, agreed to provide the premises at which the drug laboratory in which he worked with his two co-accused, was established. There they manufactured the three substances the subject of the charges, the appellant well understanding that what they were doing involved breaches of applicable drug laws. On his own evidence he expected that the production he had initially agreed to participate in would take two to three weeks; that the substance to be produced was illegal; that it would be sold to others to be used to manufacture prohibited drugs; and that in return, he would be paid $50,000.
There was an agreed statement of facts tendered at trial (ex 1). What was there agreed included that:

“10.   Between 17 August 2007 and 3 September 2007 John Bemand, Charles Cassar, Michael Cassar, Michael Fuller carried out various tasks inside the factory, which included: attending to a 600L boiler, unloading drums and containers of liquid from vehicles, reading paperwork contained in folders, conducting chemical reactions, monitoring chemical reactions, draining liquid from buckets, handling glassware, transferring liquid between glassware and moving various buckets, glassware and drums around the Factory.
11.   The Accused attended the Factory on a few occasions during this period 17 August 2007 and 3 September 2007 but did not physically participate in any of the activities of the others inside the Factory.
12.    Some time in the later part of August 2007 early September 2007, the accused agreed to participate with Mr John Bemand, Charles Cassar, Michael Cassar and Michael Fuller to produce a precursor from sassafras oil.
…
14.   On 3 September 2007 to 22 September 2007 the Accused, along with Charles Cassar and John Bemand participates in activities inside the Factory which included: mixing substances, moving buckets, handling glassware, transferring liquid between glassware, emptying drums, watching reactions, stacking shelves, scraping containers, monitoring the contents of the 600L boiler and monitoring the GLC machine.
15.   From 22 September 2007 to 5 November 2007 no chemical processing activity takes place at the factory. Charles Cassar and John Bemand do not attend the Factory as they were both overseas. The Accused attends the Factory form time to time but does not participate in any chemical processing activity.
16.   From 6 November 2007 to 29 November 2007 the Accused and John Bemand attend the Factory and participate in activities inside the Factory.
17.   From 30 November 2007 to 9 December 2007 the Accused, along with Charles Cassar and John Bemand participated in activities inside the Factory which included: mixing substances, moving buckets, handling glassware, transferring liquid between glassware, emptying drums, watching reactions, stacking shelves, scrapping containers, monitoring the contents of the 600L boiler and moving trays.
18.   On 9 December 2007 police entered the factory and found various chemicals including a quantity of drug precursor, namely 268,958 grams of Isosafrole. Isosafrole is a precursor for the prohibited drug MDP2P. Police also found a quantity of prohibited drugs, namely 1,645 grams of MDP2P and 3,694 grams of MDA. MDP2P is both a prohibited drug and a precursor for MDA.”

The Crown’s case was otherwise circumstantial. It depended on the surveillance videos which showed the appellant working in the lab over this period; various physical evidence found at the lab and at the appellant’s home, including pill presses, various documents about what was being manufactured and the “Uncle Fester’s Guide to the Secrets of Methamphetamine Manufacture” book, which belonged to Mr Bemand, but was found at the appellant’s home; as well as the evidence called from witnesses, including Mr Bemand. It was he who had the necessary knowledge for the production of the substances which the co-accused manufactured.
Mr Bemand had given evidence on committal, which was, in part, exculpatory of the appellant’s involvement. He received a discount on his sentence in return for giving evidence at the appellant’s trial. He was cross-examined extensively as to the truth of the evidence he then gave, which inculpated the appellant, as well as about other relevant aspects of his evidence, by reference to what could be seen on the surveillance videos.
Mr Bemand’s explanation for giving a different account at committal as to the appellant’s involvement in the operation was that he had then been dishonest, because he didn’t want to cause the appellant trouble and he felt bad about saying anything against the appellant. That he gave truthful evidence at trial, was in issue. That he did give truthful evidence was revealed not only by the agreed statement of facts, but also by what could be seen on the surveillance videos and the evidence which the appellant himself gave, including in cross-examination, as to what he had agreed to do and what he could be seen doing on the videos.
In the appellant’s evidence in chief he made various admissions, that is, representations which were adverse to his interest in the outcome of the proceedings. He made further admissions in cross-examination. In large measure those admissions corroborated evidence which had been given by Mr Bemand. There is no question that the Crown was entitled to rely on those admissions to meet the onus which fell upon it, to establish its case on all three counts beyond reasonable doubt.
What still finally remained in issue at trial included whether, on critical matters, Mr Bemand’s evidence would be accepted over that of the appellant. As Leeming JA has explained, there was good reason for the appellant’s evidence to be rejected on those matters. No error has been shown in his Honour’s preference of Mr Bemand’s evidence over that of the appellant, including as to the state of the appellant’s knowledge as to what was being manufactured in the laboratory.
As to count 1, Mr Bemand’s evidence was that he had approached the appellant to assist him make a ketone, by which he meant “a ketone that makes MDA. So 3,4 (methylenedioxyphenyl acetone)”, which he agreed was sometimes known as MDP2P, after he had received a threat. Without objection he was asked:

“Q. But are you saying that there was just an agreement to make this MD2P2[sic] or ketone?
A. Originally, yes”

Mr Bemand’s evidence was that it was initially agreed that appellant was to be paid $50,000 and later, that the profits were to be shared between the three offenders; the initial agreement was that the appellant was to obtain the premises, Mr Cassar the chemicals and a fair bit of the equipment, and that Mr Bemand would provide other equipment and would work with the appellant and Mr Cassar to do the cook, he having the requisite knowledge. Mr Bemand expected to make 50 to 60 kilos of the ketone in the first production, which he knew was to be used in the manufacture of ecstasy, MDMA or MDA, it being intended to sell the ketone to Mr Cassar’s contacts, who would pay a fee for each litre of the MDP2P supplied. Later it was agreed that MDA would be manufactured.
Mr Bemand described the manufacture process, which began with turning sassafras oil into isosafrole. That took about four to five days. The isosafrole then had to be converted into isosafrole epoxide, but it overheated, with the result that nearly all of the product was destroyed. Only 4 litres, or 4 kilos isosafrole epoxide was then obtained.
Mr Bemand said that he then had to think about how he could extract anything more. He went overseas and on his return, he worked with Mr Cassar and the appellant for a considerable period, in order to pursue a number of processes, which he described, to convert the overheated substance into isosafrole epoxide and then into MDP2P. That latter process took a further two to three days. Mr Bemand said that it was when he had converted about half of the 4 litres of epoxide, that he decided that he had to make some “product” to recover the money that he owed. He explained that product to be MDA. His evidence was that he discussed this with the appellant, who not only agreed, but then assisted in its manufacture.
The evidence in chief which the appellant gave as to the initial agreement was:

“Q. Can you detail the conversation in a sort of he said, you said type scenario, the best as you can?
A. Yes. John Bemand said, “Look, William, we’re in a bit of a bother at the moment. We’re in debt to some people and I need your factory to manufacture some ketone.” I’d never heard of what ketone was before. I asked him, “What is ketone?” He said to me, “William, it’s a chemical,” and I said, “Fine.” I said, “Is it illegal?” He said to me, “Unfortunately, yes, it is, William.” I said--
DJEMAL: He said, “Unfortunately, yes, it is illegal,” is what Bemand said to him.
HIS HONOUR: Yes, I heard that. I was listening for that, yes.
WITNESS: He said, “Look” - I became a little bit apprehensive. He said, “Look, it’s only a precursor chemical,” and I said, “Look, how long will it take you to do this? What does it involve?” and he said, “Look, William, it’ll only take us three weeks to do it,” and I said, “Well, look, if you say it only takes three weeks, I’ll allow you to use a factory for that purpose and if it gets you out of trouble, because I can see that you’re really concerned about it, I will help you,” and I allowed him to use the premises for that purpose.
HIS HONOUR
Q. Sorry, was there discussion about precursor for what?
A. No, it was a - no, not at that time.
Q. You didn’t ask?
A. Didn’t ask, no.
HIS HONOUR: Continue.
DJEMAL
Q. At that time, you didn’t know what it was a precursor for, you knew it was a precursor?
A. A precursor chemical. That’s all I established.
Q. You know it wasn’t legal?
A. That’s correct, yes.
Q. Is that all he explained to you about the illegality then?
A. As time progressed, I probed a little bit further. It may have been when I assisted on the 3rd or 4th of September, and thereabouts there might have been a conversation regarding the legality of it.
Q. When you say the legality, what that precursor could do or what the precursor chemical was?
A. No. He explained to me it was a chemical, because I said, “Why can’t you just buy it?” He said to me, “Look, William, it is a restricted chemical. You do need a licence, and it’s difficult to get.”
Q. Did he explain to you that it can be used to make a prohibited drug?
A. It would have been about that time, yes.
Q. That you know that from that time?
A. That’s correct.
Q. What was your understanding about prohibited drugs being made at the factory, though, at that time?
A. That was never an agreement. That--
Q. Was that a clear understanding?
A. That’s correct. It was never raised. It was never questioned. It was never an agreement.
Q. Have you ever heard the term MDP2P back then, I’m talking about, in 2007?
A. No.
Q. Back then, did you ever read any literature that indicated what MDP2P was?
A. No.
Q. Back then, if you understood you were going to be making ketone, if you were informed that ketone was a prohibited drug, would you have let your factory be used?
A. No.
HIS HONOUR
Q. But you thought it was something illegal?
A. Yes, I did, your Honour.
Q. And you let your factory be used?
A. Yes, I did, your Honour.”

In cross-examination the appellant agreed that he knew that it was illegal to manufacture the ketone, which could be used to manufacture prohibited drugs and that up until 9 December, he had assisted in its manufacture. He denied knowing, however, that from 4 December it was prohibited drugs that the ketone was being used to manufacture, which he identified to be ecstasy. Given that MDP2P is a liquid and that what was finally produced was a solid capable of being used to make pills with the pill presses found at the laboratory and the appellant’s home, this evidence was simply unbelievable, as his Honour found and Leeming JA has explained.
His Honour also found that the appellant knew that it was MDP2P which was being manufactured. In his evidence in chief the appellant denied knowing at the time of manufacture, that the substance was MDP2P, he claimed to have only known that it was a ketone, which he also described as a “precursor chemical”. He also described what he had been involved in, when attempts were made to salvage the epoxide in the ruined process which he also described. In cross-examination, however, the appellant made further admissions. He there said:

“Q. Let’s get some things straight. Now, in August of 2007, you had some discussions with Mr Bemand. Is that correct?
A. Yes. I had many discussions.
Q. During that discussion, it came up that he wanted to manufacture ketone. Is that correct?
A. Yes, that’s correct.
Q. You knew, at that stage, that it was illegal to manufacture ketone?
A. Yes.
Q. You know that ketone would go onto be used to manufacture prohibited drugs. Is that correct?
A. That’s correct.
Q. You knew that from August of 2007?
A. No, I said 3rd - possible 3rd of 4th of September.
Q. But from at least the 3rd or 4th of September 2007 you knew--
A. Thereabouts.
Q. You knew that there were going to be manufacture of ketone which is now known to MDP2P. That’s correct?
A. That’s correct.
Q. You know at that stage that it was something which would be or could be used in the manufacture of prohibited drugs. Is that correct?
A. You asked that question, yes.”

Ground 2 – the mental element of a s 24(2) offence

The statutory scheme

The Act deals with both precursors and prohibited drugs. Relevantly, the scheme of Division 2 Indictable Offences of the Act, is to create offences for the manufacture and production of prohibited drugs (s 24) and for supply of prohibited drugs (s 25). In the case of certain specified quantities of prohibited drugs, there is a deemed supply offence (s 29). A cascading regime of penalties for Division 2 offences is provided in s 30 - s 33A.
Whether evidence has established the requisite intention for offences of supply, manufacture or production of a prohibited drug must be approached in light of the requirements of s 6, which provides:

“6    Meaning of “take part in”
For the purposes of this Act and the regulations, a person takes part in the cultivation or supply of a prohibited plant or the manufacture, production or supply of a prohibited drug or psychoactive substance if:
(a)    the person takes, or participates in, any step, or causes any step to be taken, in the process of that cultivation, manufacture, production or supply,
(b)    the person provides or arranges finance for any such step in that process, or
(c)    the person provides the premises in which any such step in that process is taken, or suffers or permits any such step in that process to be taken in premises of which the person is the owner, lessee or occupier or in the management of which the person participates.”

Possession of prohibited drugs is dealt with in s 10 of Division 1 Summary offences. Section 21 Penalties prescribes that:

“The penalty for an offence under this Division is a fine of 20 penalty units or imprisonment for a term of 2 years, or both, except as otherwise expressly provided by this Division.”

Division 2 also creates offences for possession of precursors and certain apparatus for manufacture or production of prohibited drugs (s 24A) and for possession of prescribed quantities of prohibited drug precursors (s 24B). There is no offence for the manufacture of precursors. That reflects that it is not illegal under the Act merely to possess precursors.
Possession can result from acts of an offender, including acts such as manufacture, purchase or theft. It can also result from the acts of others. Manufacture, however, requires positive steps to be taken by the offender.
Counts 1 and 3 both involved offences under s 24(2). The maximum penalty for count 1 was life imprisonment, because the amount of MDP2P manufactured was 1.645 kilograms, more than the commercial quantity (s 33). The standard non-parole period for that offence was 15 years. Section 24(2) provides:

“(2) A person who manufactures or produces, or who knowingly takes part in the manufacture or production of, an amount of a prohibited drug which is not less than the commercial quantity applicable to the prohibited drug is guilty of an offence.”

A “prohibited drug” is defined in s 3 to mean “any substance, other than a prohibited plant, specified in Schedule 1.” The substances there specified include substances which, like MDP2P, are not usually ingested.
Count 5 was an offence against s 24A(1), the maximum penalty for which was 10 years imprisonment (s 33AB). Section 24A(1) provides:

“24A    Possession of precursors and certain apparatus for manufacture or production of prohibited drugs
(1)    A person who has possession of:
(a)     a precursor, or
(b)     a drug manufacture apparatus,
intended by the person for use in the manufacture or production, by that person or another person, of a prohibited drug is guilty of an offence.”

A “precursor” is defined in s 24A(3) to mean “a substance specified or described in the regulations as a precursor for the purposes of this section.” They are specified in Schedules 1 and 2 of the Drug Misuse and Trafficking Regulation 2011 (NSW). In the case of such substances, it is not their manufacture which constitutes an offence. Possession of such a precursor only amounts to an offence under s 24, when the person in possession intends that it be used to manufacture or produce a prohibited drug.
Possession of specified amounts of a precursor can also be an offence under s 24B. Those amounts appear in Schedule 4 to the Regulation. There are, however, defences to such an offence specified in s 24B (2), if the defendant establishes:

“(a) that the defendant is in possession of the precursor for the purposes of an activity that is not unlawful, or
(b) that the defendant otherwise has a reasonable excuse for possessing the precursor.”

It follows that the Act contemplates both lawful manufacture and possession of precursors. It is the purpose for which a precursor is possessed, which makes its possession unlawful.
Some substances are, however, both precursors and prohibited drugs under the Act. It is in their cases that both manufacture and possession can involve offending. The Act does not contemplate either lawful manufacture or possession of such substances.
That is why it was the possession, rather than the manufacture of isosafrole, which constituted the appellant’s offence under s 24A, it being only a precursor under the Act and not also a prohibited drug. The appellant accepted on appeal that the evidence established that he had committed the offence charged in respect of the isosafrole found at the laboratory, it establishing as it did both his possession of the isosafrole and his intention that it be used for the production of another prohibited drug.
It was the manufacture of MDP2P and MDA which formed the basis of the appellant’s alleged s 24 offences, counts 1 and 3 respectively. The mental element required to be established in relation to both those offences was “to knowingly take part in the manufacture or production of a prohibited drug”.

Issues on appeal

On appeal there was no issue that the appellant was involved in the manufacture of the three substances the subject of the charges. Each is a chemical substance, isosafrole and MDP2P being liquids and MDA a solid. Both MDP2P and isosafrole are precursors under the regulations for the purpose of s 24A. MDP2P is also a prohibited drug listed in Schedule 1, as is MDA. Neither isosafrole and MDP2P are ingested for narcotic effect. They can both be used to manufacture prohibited drugs. The isosafrole was used by the appellant and his co-accused to manufacture MDP2P. It, in turn, was used to manufacture MDA.
It was the appellant’s knowledge as to what was being manufactured which was in issue at trial. On appeal it was only his knowledge that the substance the subject of count 1, MD2P2, was a prohibited drug and that he was involved in the manufacture of MDA, as well as isosafrole and MDP2P, which were in issue.

The trial judge’s approach to intention

His Honour’s unchallenged reasons in respect of count 5 may not be overlooked in resolving the issues lying between the parties in relation to count 1.
This was a judge alone trial. In his conviction judgment, after dealing with the issues as to the appellant’s possession of the isosafrole, his Honour turned to the resolution of what lay in issue as to his intention. His Honour said:

“Before I leave this count, the accused submissions focus principally upon the second element, the intention element. The contention on behalf of the accused is that the evidence only establishes that the accused understood that a chemical precursor could be used by others to make a prohibited drug. It has not established that the accused intended the making of a prohibited drug. That involves some interesting questions. According to Jackwitz v Franklin [2006] NSWCCA 419 at para 29 the essential element of the offence is possession of the precursor accompanied by the relevant intention. It is not essential to the proof of the charge that the person in possession have a specific intent as to the identity of the individual or individuals who will manufacture or produce the prohibited drug. That is merely incidental. It may well be that the offender has possession of the precursor with an intent that it be made into a prohibited drug without a final intention as to by whom the prohibited drug is to be made.
Clearly an intention involves questions of fact and degree. Clearly the accused expected that Bemand would use the isosafrole to make the chemical ketone precursor, indeed to make MDP2P which is itself a prohibited drug which was to be provided to others, namely associates of Cassar because of its capacity for use in the manufacture of ecstasy. That is in fact why it was valuable. The accused expected and in my view he intended for that to take place. He intended the isosafrole to be converted into the ketone chemical precursor MDP2P and he knew that conversion was illegal and he intended it then to be on sold and used in the manufacture by others of ecstasy.
I do not consider that it is necessary for the accused to have a particular interest in the manufacture of the final product. It is a question of intention rather than interest. He needs to possess a precursor with the intention that others will use it in the manufacture of a prohibited drug. He had an interest that the ketone will be manufactured and purchased by those who consider it of value because it could and would be used to manufacture ecstasy. According to exhibit 27 which was adopted by the accused in evidence, the accused became involved at the behest of John Bemand because Charles had borrowed money from some people to manufacture ketone and now they have threatened to kill him: “He has got me in a lot of trouble, William I need to use the premises.” The whole venture was designed to make ketone perhaps with some haste, to have it given to somebody who would turn it into ecstasy.”

His Honour then turned to the evidence on which the issue as to intention in relation to count 5 was resolved. There is no appeal from those conclusions.
His Honour the turned to count 1. As to intent, he took the view that:

“… it is sufficient in my view that the accused has knowledge or belief in the wrongfulness of the act that he is knowingly taking part in, that is the illegal and prohibited manufacture of the substance which in fact is a scheduled prohibited drug. He needs to know all the facts constituting the ingredients necessary to make the act criminal.”

His Honour concluded on the evidence that the original agreement was to make the ketone the subject of count 1, MDP2P, the appellant believing that manufacture to be illegal and prohibited by law, accepting Mr Bemand’s evidence about those matters. He also found, however, that the appellant was not aware that MDP2P was scheduled as a prohibited drug under the Act. His Honour took the view, nevertheless, that the appellant’s knowledge was sufficient to establish the mental element of the s 24 offence.
It was those conclusions which were submitted on appeal to involve error.

The appellant’s case on count 1

The case the appellant advanced at trial as to count 1 was that it had to be shown beyond reasonable doubt not only that he knew that the ketone he had agreed to manufacture was MDP2P, but also that it was prohibited, not in “the schedule sense”, but that it was a drug, having the qualities of a drug. Knowledge that the substance was illegal, was argued to be not enough.
On appeal in relation to count 1 it was submitted that:

“What makes this case unusual, particularly in relation to count 1, is firstly, there is express agreement as between the parties, but the original agreement to which the applicant was a party was to make no more than a precursor, variously described as a ketone, precursor and P2P. So that’s the first curious aspect but obviously it sets the tone in relation to the evidence that follows, the other aspect is that that particular substance despite being a prohibited drug is not a product that is ingested by the end user.”

On the appellant’s case proof of intention to manufacture a substance which was a prohibited drug was necessary, in the case of the s 24 offences. Proof of an intention to manufacture a substance of a different quality was not sufficient, because that would not prove intention of doing an act of the defined kind (see R v CWW (1993) 32 NSWLR 348; (1993) 70 A Crim R 517 at 351.) What was thus necessary was proof of the appellant’s knowledge that what was being manufactured, was not only illegal, but that it was a prohibited drug. Given the express finding that the appellant did not have such knowledge, it followed that ground 2 had to be upheld.

The appellant’s case must fail

The appellant accepted that ignorance that MDP2P appeared in Schedule 1 was no defence to this charge. Whether it was proven that he knew that the substance was MDP2P was in issue. That issue is raised by ground 3, his Honour having concluded that he was aware that the substance he knew to be a precursor, was MDP2P. The appellant also argued that the evidence was incapable of proving that he had the requisite intention.
If the appellant’s ignorance that the substance manufactured was actually MDP2P is not a defence to a charge under s 24, as the appellant conceded, it is difficult to see why the appellant’s ignorance of the reason why the manufacture of the substance he knew to be illegal, namely because it is a prohibited drug under the Act, is also not a defence to a s 24 manufacture charge.
Contrary to the case he advanced on appeal, the original agreement was not merely to make a precursor, but to do so knowing that its manufacture was illegal, intending that it be used for the production of another prohibited drug.
The intention provided for in s 24 is not an intention to manufacture a substance which “was a drug, having the qualities of a drug”, as was argued at trial. The Act does not make the manufacture of substances which have “the qualities of a drug” illegal. Section 24 makes the manufacture of substances falling into the definition of a “prohibited drug” which appear in Schedule 1 to the Act, illegal.
Some of those substances are also precursors, as defined in s 24A and s 24B. Manufacture of precursors is not illegal. It is rather possession of such precursors, with specified intent, which is made illegal by s 24A. Possession of traffickable quantities is made illegal by s 24B, subject to the defences there specified, which provide lawful excuse for their possession.
The existence of the requisite intention in a statutory offence such as s 24 is a question of fact which, absent admission, must be decided as a matter of inference on the basis of the facts established by the evidence. His Honour found that while the appellant knew that the substance was MDP2P; that it was a precursor; and that its manufacture was illegal, he did not know that it was also a prohibited drug. In the circumstances, his knowledge was found to have been sufficient to establish the requisite intention for the s 24 offence. That conclusion has to be understood in the context of the statutory regime, which does not make manufacture of a precursor illegal.
The circumstances which arose for consideration on the evidence included that the appellant was shown on the surveillance footage to have worked extensively in the drug laboratory which he and his two co-accused had established, participating in the manufacture of the three chemical substances the subject of the three offences of which he was convicted. Documents found there to which he had access described those processes.
On his own evidence, so far as the MDP2P was concerned, he knew not only that it was a precursor, but also that its manufacture was illegal. That understanding was correct, not because what was being manufactured was a precursor. It was because the substance was a prohibited drug under the Act, which made its manufacture illegal under s 24. That was also why the manufacture of MDA was illegal.
In Yousef Jidah v R [2014] NSWCCA 270 it was held at [36] that to establish a possession offence under s 24A “the prosecution was required to prove that the appellant attempted to possess a substance he knew or believed to be a precursor with the intention of it being used by another person to manufacture a prohibited drug.” In that case the appellant had also been charged with a s 25(2) of the Drug Misuse and Trafficking Act 1985 (NSW), of attempt to obtain possession of a prohibited drug, for the purposes of supply. There it was observed at [39] that:

“... at least theoretically, the appellant could have been aware that the substance was a precursor but not a prohibited drug, perhaps because he was told it was not and believed that to be the case. It is true that this possibility would be highly unlikely where the drug was within both categories but nevertheless it does illustrate the different elements of the counts and, most critically, the different mental elements.”

In this case, while the appellant knew that MDP2P was a precursor and did not know that it was a prohibited drug, he did know that its manufacture, like the manufacture of MDA, was illegal.
In Kural v R [1987] HCA 16; (1987) 162 CLR 502 it was observed:

“3. Where, as here, it is necessary to show an intention on the part of the accused to import a narcotic drug, that intent is established if the accused knew or was aware that an article which he intentionally brought into Australia comprised or contained narcotic drugs. But that is not to say that actual knowledge or awareness is an essential element in the guilty mind required for the commission of the offence. It is only to say that knowledge or awareness is relevant to the existence of the necessary intent. Belief, falling short of actual knowledge, that the article comprised or contained narcotic drugs would obviously sustain an inference of intention. So also would proof that the forbidden act was done in circumstances where it appears beyond reasonable doubt that the accused was aware of the likelihood, in the sense that there was a significant or real chance, that his conduct involved that act and nevertheless persisted in that conduct. As a practical matter, the inference of mens rea or a guilty mind will ordinarily be irresistible in cases involving the importation of narcotic drugs if it is proved beyond reasonable doubt that the accused actually imported the drugs and that he was aware, at the time of the alleged commission of the offence, of the likelihood of the existence of the substance in question in what he was importing and of the likelihood that it was a narcotic drug. What we have said is designed to emphasize that the existence of the requisite intention is a question of fact and that in most cases the outcome will depend on an inference to be drawn from primary facts found by the tribunal of fact. In this, as in other areas of the law, it is important not to succumb to the temptation of transforming matters of fact into propositions of law. In that regard, we would emphasize that the foregoing comments are not designed as a direction or instruction to be read by trial judges to juries. They are intended to give guidance to trial judges in order to enable them to formulate such directions as may be appropriate to the facts and circumstances of particular cases.”

In CWW Sheller JA discussed (at 524) the need for proof “of an intention of doing an act of the defined kind which constitutes the offence”. That depends on the nature of the act in question, in this case manufacture. In R v Lau (1998) 105 A Crim R 167, it was intention in a supply of prohibited drug offence, which arose for consideration. There it was concluded that intention to supply could be established by proof of actual knowledge that what was supplied was a prohibited drug, or by proof of actual knowledge of what was probable, that is, knowledge that there was a significant or real chance that what was supplied was drugs. In Regina v Ruiz-Avila [2003] NSWCCA 264; (2003) 142 A Crim R 459 knowledge or belief that the tablets in question contained the drug ecstasy, or a prohibited drug, was held to be sufficient for a supply offence.
In this case the evidence established, as a matter of fact, that the appellant, knowing that the manufacture of the MDP2P was illegal, not only continued to manufacture that substance up to his arrest, intending that it be used to manufacture prohibited drugs, he actually used it to manufacture MDA, another prohibited drug. He did not know that MDP2P was itself a prohibited drug, but he did know that the manufacture of both MDP2P and MDA involved offences under the laws which regulate the manufacture of prohibited drugs. That his knowledge fell short of actual knowledge of the reason for the illegality of the manufacture of MDP2P, did not preclude the inference that thereby, he knowingly took part in the manufacture of a prohibited drug.

On his own evidence the appellant was told both that the MDP2P was a precursor and that its manufacture was illegal. He was not also told that the reason was because it was a prohibited drug. That left him in ignorance of an aspect of the law, but that did not result in him being incapable of forming the necessary intention for the offence with which he was charged.
Contrary to the appellant’s case, what was decided in Ostrowski v Palmer [2004] HCA 30; (2004) 218 CLR 493 is relevant to a resolution of the issue lying between the parties. That case was concerned with a contravention of a regulation made under the Fish Resources Management Act 1994 (WA) which prohibited the holder of a commercial fishing licence from fishing for rock lobsters in an area defined in a table to the regulation. That offence did not require a particular intention to be formed, it was committed simply by being the holder of a commercial fishing licence; fishing for rock lobsters; and doing so in specified waters. What the respondent did not know in that case was that there was a regulation prohibiting his conduct. In the result he argued that he had not committed any offence.
What was in issue turned on the operation of the rule that ignorance of the law does not afford an excuse, encapsulated in s 22 of the West Australian Criminal Code and on a defence provided by s 24, for a person who does an act under an honest and reasonable, but mistaken, belief in the existence of any state of things, who is then not criminally responsible for the act to any greater extent than if the real state of things had been such as he believed to exist.
It was concluded that the only mistake the respondent had made was a mistake that resulted from his ignorance of the law and that what his argument amounted to was that if he had not been ignorant of the law, he would not have done the acts which constituted the offence. In the result it was observed by Gleeson CJ and Kirby J at [13]:

“This is not a case that gives rise to the difficulties that are sometimes involved in distinguishing between mistakes of law and mistakes of fact, or in applying the common law, or ss 22 and 24, to what are sometimes described as mixed questions of fact and law. Here the mistake that was made, however it is characterised, was not relevant to any element of the offence charged. Rather, it was a mistake that resulted in ignorance of the existence of the prohibition contained in reg 34, that is to say, ignorance of the law.”

Here, the appellant’s case at trial was that if he had known that the substance he manufactured was a prohibited drug, he would not have manufactured it. But on his own evidence the appellant made no mistake. He not only manufactured MDP2P, despite knowing that to be illegal, the evidence also established that he then used that substance to manufacture MDA, another substance the manufacture of which he knew to be illegal. It was not manufacture of precursors which was illegal under the Act, but manufacture of substances specified to be prohibited drugs by inclusion in Schedule 1 to the Act. Ignorance of that aspect of the law could not prevent him from forming the requisite intention in relation to either MDP2P or MDA. The proper inference was that he had the requisite intention in relation to both substances.
Consistently with the approach in Zaburoni v The Queen [2016] HCA 12, (there in the context of the Queensland Criminal Code), the existence of the requisite intention could be inferred from the evidence of all that the appellant knew and did in relation to the manufacture of the MDP2P and the use to which it was intended to be and was actually put. As there discussed at [14] – [17]:

“14    Where proof of the intention to produce a particular result is made an element of liability for an offence under the Code, the prosecution is required to establish that the accused meant to produce that result by his or her conduct. As the respondent correctly submits, knowledge or foresight of result, whether possible, probable or certain, is not a substitute in law for proof of a specific intent under the Code. In the last-mentioned respect, the Code is distinguished from its Commonwealth counterpart, which allows that a person has intention with respect to a result if the person is aware that the result will occur in the ordinary course of events.
15    Where the accused is aware that, save for some supervening event, his or her conduct will certainly produce a particular result, the inference that the accused intended, by engaging in that conduct, to produce that particular result is compelling. Nonetheless, foresight that conduct will produce a particular result as a “virtual certainty” is of evidential significance and under the Code it remains that the trier of fact must be satisfied that the accused meant to produce the particular result.
16    It is necessary to say something in this context about the concepts of purpose, desire and motive. Discussions of proof of intention sometimes equate desire with motive. The respondent’s submissions treat motive and purpose as synonyms. This is in aid of the submission that motive is irrelevant to criminal responsibility under the Code.
17    In ordinary parlance, purpose, desire and motive may be used interchangeably. However, in law motive describes the reason that prompts the formation of the accused’s intention. The accused may fire a pistol at his business partner. His intention or purpose in pulling the trigger may be to kill. His motive for forming that intention may be to avoid repaying a debt he owes to his partner. Where liability for an offence requires proof of the intention to produce a particular result, the prosecution must establish that the accused had that result as his or her purpose or object at the time of engaging in the conduct. Purpose here is not to be equated with motive.” (footnotes omitted)

Here, on his own evidence, the result which the appellant not only intended, but actually achieved, was the manufacture of two substances which he knew to be illegal under the legislative scheme. That he did not know that the actual reason why the manufacture of one of them, MDP2P, was illegal, namely, because it was a substance falling into the definition of “prohibited drug” in the Act, as did the third substance manufactured, MDA, did not preclude the inference that he had formed the requisite intention for the offence involving the manufacture of MDP2P.
The appellant’s approach to the mental element specified in s 24 in fact requires proof of actual knowledge of the reason why the manufacture of a substance understood to be illegal, was illegal at law. Such ignorance of the law is no defence. Such actual knowledge, namely that the substance being manufactured is a “prohibited drug” as defined under the Act, should it exist, would unarguably establish the requisite intention. That, however, is not the only way that such intention can be proven. The evidence earlier discussed was capable of proving that the appellant had the requisite intention, as his Honour correctly found.
Further, as I will explain, the evidence also permitted his Honour to conclude that the appellant knew that the substance was MDP2P. That, alone, the appellant conceded was a basis on which a finding as to intention could rest.
It follows that his Honour did not err in his conclusion that the mental element of the s 24 offence was established on the evidence.

Ground 1

The appellant conceded that if Ground 2 did not succeed that this ground must also fail. It is accordingly unnecessary to consider it further.

Ground 3

On sentence, the obligation to give reasons discussed in Fleming v The Queen [1998] HCA 68; (1998) 197 CLR 250 as [28] is to expose the findings of fact required by s 133(1) of the Criminal Procedure Act 1986 (NSW) and the principles of law applied, together with the reasons which link them, to justify the conclusions reached, including as to the ultimate verdict.
I consider that his Honour met that obligation. He found on the agreed facts that the purpose of the original agreement was to manufacture the ketone the subject of count 1, noting that was also the evidence of both of Mr Bemand and the appellant. He outlined the arguments advanced for the appellant as to why it would be concluded that the Crown had not established that he knew that the ketone was MDP2P. That depended on acceptance of the appellant’s evidence that he did not have such knowledge. His Honour preferred Mr Bemand’s evidence, which he found to have been truthful and essentially accurate, supported as it was by the other evidence on which the Crown relied.
I have earlier outlined relevant aspects of the appellant’s evidence. The appellant denied knowing that the precursor was MDP2P, said that its manufacture continued until 9 December, but denied knowing that from 4 December, he was also involved in the manufacture of MDA. He also denied knowing what was involved in the manufacture of MDA from MDP2P from 21 November, or that he had participated in any agreement to its manufacture. This evidence was challenged, but it is not necessary to further detail the answers which he gave.
His Honour found the appellant’s evidence to have been implausible in a number of respects, the first being that he did not realise from the time of his initial conversation with Mr Bemand, that the ketone was to be made with the objective of someone making a prohibited drug and that he made no enquiry about what it could be used for.
His Honour rejected various other aspects of the appellant’s evidence, for reasons which he explained, including that the appellant equated the ketone only to the epoxide. In the result he found beyond reasonable doubt that the appellant was aware both of the fundamental steps involved in making the ketone and that it was MDP2P. On that basis, his Honour found the following facts to be established beyond reasonable doubt:

“(1) The accused was approached by Bemand in the latter part of 2007. He agreed to the factory being used to make precursors including the ketone precursor re count 1. (2) He permitted the factory to be used to manufacture ketone precursor believing the manufacture to be illegal and prohibited by law. I accept that he was not aware that the ketone was scheduled as a prohibitive drug and in the Drug Misuse and Trafficking Act.
(3) The third finding beyond reasonable doubt is that the accused was aware of the general steps involved in making the ketone. He did not believe that an epoxide was the ketone that was to be sold. He was aware of the required step that involved in converting the Isosafrole epoxide into a ketone, indeed, MDP2P. I accept beyond reasonable doubt Bemand’s evidence that he did discuss that phase with the accused.
(4) I find beyond reasonable doubt that the accused was, as well as permitting in the factory to be used illegally to manufacture the ketone MDP2P he was physically involved in some of the steps in the manufacture of the ketone and he well knew he was assisting in the illegal manufacture of the ketone MDP2P. The accused also knew of the approximate quantity to be manufactured.”

Mr Bemand’s evidence, when considered with the appellant’s admissions in relation to what he had agreed with Mr Bemand and what he had done in pursuit of their agreement; the documents he had had access to in the laboratory and at home; the nature of his ongoing involvement in the manufacture; and his knowledge that what was being manufactured was illegal, I consider provided a proper basis for his Honour’s conclusion as to his knowledge that it was MDP2P which was being manufactured. That was an issue of fact the resolution of which was also adequately explained by the reasons which his Honour gave.
It follows that this ground of appeal must be dismissed.

Orders

The orders I would make are:

Leave to appeal is granted.

The appeal is dismissed.

**********

Amendments

23 June 2016 - [174] - "in" inserted after "encapsulated"

[175] - "Gleeson CJ and Kirby J" inserted after "observed by"

[177] - "Commonwealth" replaced with "Queensland"

Decision last updated: 23 June 2016

Medium Neutral Citation:	Siafakas v R [2016] NSWCCA 100
Hearing dates:	22 April 2016
Decision date:	23 June 2016
Before:	Leeming JA at [1]; Harrison J at [109]; Schmidt J at [113]
Decision:	1. Grant leave to appeal in respect of grounds 1 and 4. 2. Appeal allowed in part. 3. Set aside the verdict of guilty on count 1. 4. Set aside the sentence imposed on 9 May 2014, and in lieu thereof, sentence the appellant: (a) in respect of count 3, to a term of imprisonment of 9 years with a non-parole period of 5 years and 5 months; (b) in respect of count 5, to a fixed term of imprisonment of 4 years. Each of those sentences will commence on 3 January 2012. The earliest date on which the appellant would be eligible for release on parole will be 3 June 2017.
Catchwords:	CRIMINAL LAW – appeal against conviction – trial before judge sitting without a jury – two counts of knowingly taking part in manufacture of prohibited drug – appellant leased premises and participated in manufacture of precursors and prohibited drugs – appellant accepted that he was involved in the manufacture of a precursor – in one count, the precursor was also a prohibited drug – whether trial judge erred in formulating mental element of offence – whether trial judge failed to provide adequate reasons for finding that appellant was aware of the actual substance being manufactured – whether verdicts unreasonable or could not be supported by the evidence – Drug Misuse and Trafficking Act 1985 (NSW), s 24(2)
Legislation Cited:	Crimes (Sentencing Procedure) Act 1999 (NSW), s 53A Criminal Code (WA), ss 22, 24 Criminal Procedure Act 1986 (NSW), s 133 Fish Resources Management Act 1994 (WA) Drug Misuse and Trafficking Regulation 2011 (NSW), Sch 1, 2, 4 Criminal Appeal Act 1912 (NSW), ss 5, 6 Drug Misuse and Trafficking Act 1985 (NSW), ss 3, 10, 23, 24, 24A, 24B, 25, 29, 30, 33; Sch 1
Cases Cited:	AK v State of Western Australia [2008] HCA 8; 232 CLR 438 Bahri Kural v The Queen (1987) 162 CLR 502 Filippou v The Queen [2015] HCA 29; 89 ALJR 776 Fleming v The Queen [1998] HCA 68; 197 CLR 250 He Kaw Teh v The Queen (1985) 157 CLR 523 M v The Queen (1994) 181 CLR 487 Ostrowski v Palmer [2004] HCA 30; 218 CLR 493 R v CWW (1993) 32 NSWLR 348; 70 A Crim R 517 R v Hendricks [2011] NSWCCA 203 R v Lau (1998) 105 A Crim R 167 R v Ruiz-Avila [2003] NSWCCA 264; 142 A Crim R 459 R v Van Xuan Bui [2005] VSCA 300 SKA v The Queen [2011] HCA 13; 243 CLR 400 Tabe v The Queen [2005] HCA 59; 225 CLR 418 W v R [2014] NSWCCA 110 Yousef Jidah v R [2014] NSWCCA 270 Zaburoni v The Queen [2016] HCA 12
Category:	Principal judgment
Parties:	Mr Vasilios Siafakas (Appellant) Crown (Respondent)
Representation:	Counsel: H Dhanji SC, A Djemal (Appellant) V Lydiard (Crown) Solicitors: Matouk Joyner Lawyers (Appellant) Office of the Director of Public Prosecutions (Crown)
File Number(s):	2008/259791
Publication restriction:	Nil
Decision under appeal	Court or tribunal: District Court of New South Wales Jurisdiction: Criminal Date of Decision: 12 November 2013 Before: Frearson DCJ File Number(s): 2008/259791