The Director of Public Prosecutions for Western Australia v Mansfield
[2006] WASC 246
THE DIRECTOR OF PUBLIC PROSECUTIONS FOR WESTERN AUSTRALIA -v- MANSFIELD & ORS [2006] WASC 246
| Link to Appeal : | [2007] WASCA 39 |
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2006] WASC 246 | |
| Case No: | CIV:1977/2002 | 19 MAY & 14 AUGUST 2006 | |
| Coram: | BLAXELL J | 2/11/06 | |
| 14 | Judgment Part: | 1 of 1 | |
| Result: | Held that the criminal benefit is the gain acquired by way of avoiding a loss on sale | ||
| B | |||
| PDF Version |
| Parties: | THE DIRECTOR OF PUBLIC PROSECUTIONS FOR WESTERN AUSTRALIA NIGEL CUNNINGHAM MANSFIELD ROSALIND JANE MANSFIELD THE STATE OF WESTERN AUSTRALIA |
Catchwords: | Criminal law Confiscation of property Criminal benefits declaration Alleged acquisition of criminal benefits by way of "insider trading" in listed shares Whether the criminal benefits are the total proceeds of sale or the loss avoided because of the market being uninformed |
Legislation: | Criminal Property Confiscation Act 2000 (WA), s 16, s 18, s 19, s 145 Interpretation Act 1984 (WA), s 18 |
Case References: | Director of Public Prosecutions for Western Australia v Bridge [2005] WASC 36; [2005] 152 A Crim R 226 Director of Public Prosecutions for Western Australia v Mansfield & Ors [2006] WASC 72 Director of Public Prosecutions v Nieves & Ors [1992] 1 VR 257 Fox v H Wood (Harrow) Ltd [1963] 2 QB 601 Mansfield v Director of Public Prosecutions [2006] HCA 38 Mickelberg v 6PR Southern Cross Radio Pty Ltd & Ors [2002] WASCA 270 R v Pedersen [1995] 2 NZLR 386 "B" & Ors v State of Western Australia & Anor [2002] WASC 298 Castlemaine Perkins Ltd v Queen Street Hotels Pty Ltd [1968] Qd R 501 Commercial Development Pty Ltd v Mercantile Insurance (Workers Compensation) Ltd (1991) 5 WAR 208 Cornwell v Commissioner of Australian Federal Police (1990) 49 A Crim R 122 Dalgety Australia Ltd v Rubin, unreported; SCt of WA; Library No 5485; 24 August 1984 Davy v Garrett [1877] 1 Ch D 473 Director of Public Prosecutions for Western Australia v Mansfield [2003] WASC 173 Hooker Corp Ltd v Commonwealth (1986) 65 ACTR 32 Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365 Minister for Immigration and Multicultural Affairs v Dhingra (2000) 98 FCR 19 Oldfield Knott Architects Pty Ltd v Ortiz Investments Pty Ltd [2000] WASCA 255 R v Petersen [1992] 1 VR 297 Smith v Littlemore (1996) 15 WAR 289 Southern Equities v Western Australian Government Holdings Ltd (No 2) (1993) 10 WAR 351 Webb v Harris (1983) 47 ACTR 17 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Applicant
AND
NIGEL CUNNINGHAM MANSFIELD
Respondent
NIGEL CUNNINGHAM MANSFIELD
ROSALIND JANE MANSFIELD
First Objectors
THE STATE OF WESTERN AUSTRALIA
Respondent to the Objector
Catchwords:
Criminal law - Confiscation of property - Criminal benefits declaration - Alleged acquisition of criminal benefits by way of "insider trading" in listed shares - Whether the criminal benefits are the total proceeds of sale or the loss avoided because of the market being uninformed
(Page 2)
Legislation:
Criminal Property Confiscation Act 2000 (WA), s 16, s 18, s 19, s 145
Interpretation Act 1984 (WA), s 18
Result:
Held that the criminal benefit is the gain acquired by way of avoiding a loss on sale
Category: B
Representation:
Counsel:
Applicant : Mr N M McKerracher QC & Mr T A Staples
Respondent : Mr M L Bennett
First-named First Objector : Mr M L Bennett
Second-named First Objector : Mr C E Chenu
Respondent to the Objector : Mr N M McKerracher QC & Mr T A Staples
Solicitors:
Applicant : State Director of Public Prosecutions
Respondent : Lavan Legal
First-named First Objector : Lavan Legal
Second-named First Objector : Durack & Zilko
Respondent to the Objector : State Director of Public Prosecutions
Director of Public Prosecutions for Western Australia v Bridge [2005] WASC 36; [2005] 152 A Crim R 226
Director of Public Prosecutions for Western Australia v Mansfield & Ors [2006] WASC 72
Director of Public Prosecutions v Nieves & Ors [1992] 1 VR 257
Fox v H Wood (Harrow) Ltd [1963] 2 QB 601
Mansfield v Director of Public Prosecutions [2006] HCA 38
Mickelberg v 6PR Southern Cross Radio Pty Ltd & Ors [2002] WASCA 270
R v Pedersen [1995] 2 NZLR 386
(Page 3)
Case(s) also cited:
"B" & Ors v State of Western Australia & Anor [2002] WASC 298
Castlemaine Perkins Ltd v Queen Street Hotels Pty Ltd [1968] Qd R 501
Commercial Development Pty Ltd v Mercantile Insurance (Workers Compensation) Ltd (1991) 5 WAR 208
Cornwell v Commissioner of Australian Federal Police (1990) 49 A Crim R 122
Dalgety Australia Ltd v Rubin, unreported; SCt of WA; Library No 5485; 24 August 1984
Davy v Garrett [1877] 1 Ch D 473
Director of Public Prosecutions for Western Australia v Mansfield [2003] WASC 173
Hooker Corp Ltd v Commonwealth (1986) 65 ACTR 32
Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365
Minister for Immigration and Multicultural Affairs v Dhingra (2000) 98 FCR 19
Oldfield Knott Architects Pty Ltd v Ortiz Investments Pty Ltd [2000] WASCA 255
R v Petersen [1992] 1 VR 297
Smith v Littlemore (1996) 15 WAR 289
Southern Equities v Western Australian Government Holdings Ltd (No 2) (1993) 10 WAR 351
Webb v Harris (1983) 47 ACTR 17
(Page 4)
1 BLAXELL J: The applicant in these long-running proceedings ("the DPP") claims a criminal benefits declaration against the respondent (Mr Mansfield") pursuant to s 15 of the Criminal Property Confiscation Act 2000 WA ("the Act"). Prior to making that application, the DPP on 12 July 2002 obtained an order under s 41 of the Act freezing all of Mr Mansfield's property. Pursuant to s 43(3) the property that was frozen included property belonging to the respondent's wife (the second-named first objector ("Mrs Mansfield")) which was allegedly under his "effective control".
2 Since then, there has been a great deal of interlocutory activity between the parties which has been almost entirely focused upon the freezing order rather than the application for a criminal benefits declaration. In this regard it is relevant to note that at all material times Mr Mansfield has also been subject to a criminal prosecution which ordinarily would have priority in disposition over the present civil proceedings. However, as a result of my decision on 28 April 2006 refusing a stay ([2006] WASC 72), the application for a criminal benefits declaration has been revived.
3 By a chamber summons dated 24 March 2006 the DPP has applied for leave to amend the statement of claim in the proceedings for a criminal benefits declaration. These are my reasons for decision in respect of that application.
The proposed amendments to the statement of claim
4 The DPP's statement of claim alleges that on 37 separate occasions between 13 June and 2 August 2000 Mr Mansfield committed a "confiscation offence" within the meaning of s 141 of the Act. On each occasion Mr Mansfield is said to have given instructions to various broking firms and to have procured the sale of shares in My Casino Ltd, a company listed on the Australian Stock Exchange.
5 It is also pleaded that during this period Mr Mansfield possessed information of an adverse nature concerning that company which he knew, or ought to have known, was not generally available and might have materially affected the value of the shares if it was generally available. In these circumstances it is said that on each of the 37 occasions he committed an offence (commonly known as "insider trading") in contravention of s 1002G(2) and s 1311 of the then Corporations Law (WA). The statement of claim goes on to plead the subsequent statutory framework which is said to lead to a "substituted liability" for those offences under the Corporations Act 2001 (Cth).
(Page 5)
6 The statement of claim further pleads that on various dates Mr Mansfield directed that the net proceeds of sale from the 37 transactions (after deduction of brokers' commissions) be deposited in particular accounts. Accordingly, each sum is said to be a "constituent of his wealth" as well as a criminal benefit that was acquired by him.
7 The DPP applies for leave to amend the statement of claim and it is fair to describe most of the proposed amendments as being of a minor or technical nature. However, there is one very substantial issue that I need to determine, and that concerns the quantum of the alleged criminal benefits (which quantum is also the subject of proposed amendment).
8 If amended, the statement of claim will plead that Mr Mansfield acquired criminal benefits totalling $3,321,527.60. This sum represents the total proceeds of sale in respect of the 37 transactions, and makes no allowance for the true market value that the shares would have had if the information that Mr Mansfield allegedly possessed had been generally available.
9 The DPP contends that on a proper construction of the Act, it is the whole of the sale proceeds that in each instance constitutes a "criminal benefit". Mr Mansfield, on the other hand, understandably submits that it is the difference between the true value of the shares and the sale proceeds that should be liable to confiscation in the event that the claim is proved.
The statutory provisions as to "criminal benefits"
10 The overall scheme of the Act is for the confiscation of property falling within any of the categories as set out in s 4 (viz.: "unexplained wealth", "criminal benefits", "crime-used property", "crime-derived property", and the property of any "declared drug trafficker"). In the present instance, Mr Mansfield is alleged to have acquired "criminal benefits", which are defined by s 145 as follows:
"(1) For the purpose of this Act, a person has acquired a criminal benefit if -
(a) any property, service, advantage or benefit that is a constituent of the person's wealth was directly or indirectly acquired as a result of the person's involvement in the commission of a confiscation offence, whether or not the property, service, advantage or benefit was lawfully acquired; or
- (b) the person has been involved in the commission of a confiscation offence, and any property, service, advantage or benefit that is a constituent of the person's wealth was not lawfully acquired, whether or not the property, service, advantage or benefit was acquired as a result of the person's involvement in the commission of the offence.
- (2) Without limiting subsection (1), the person has acquired a criminal benefit -
(a) whether the property, service, advantage or benefit was acquired before, during or after the confiscation offence was or is likely to have been committed; ... "
12 The statutory mechanism for confiscation is that the DPP may apply to the court for a criminal benefits declaration pursuant to s 15(1). Sections 16 and 17 set out the circumstances in which the court must grant a declaration in respect of either crime derived property (s 16), or unlawfully acquired property (s 17). It is s 16 that is relevant to the present case, and it provides:
"(1) On hearing an application under section 15(1), the court must declare that the respondent has acquired a criminal benefit if it is more likely than not that -
(a) the property, service, advantage or benefit described in the application is a constituent of the respondent's wealth;
(b) the respondent is or was involved in the commission of a confiscation offence; and
(c) the property, service, advantage or benefit was wholly or partly derived or realised, directly or indirectly, as a result of the respondent's involvement in the commission of the
- confiscation offence, whether or not it was lawfully acquired.
- (2) For the purposes of subsection (1)(b), if the respondent has been convicted of the confiscation offence, the respondent is conclusively presumed to have been involved in the commission of the offence.
(3) The property, service, advantage or benefit is presumed to have been directly or indirectly acquired as a result of the respondent's involvement in a confiscation offence unless the respondent establishes otherwise."
13 In the event of the court making a criminal benefits declaration, it must assess and specify the value of the criminal benefit acquired by the respondent (s 18(2)). That assessment is to be made in accordance with s 19 which provides:
"(1) The value of any property, service, advantage or benefit that has been given away, used, consumed or discarded, or that is for any other reason no longer available, is the greater of -
(a) its value at the time that it was acquired; and
(b) its value at the time that it was given away, or was used, consumed or discarded, or stopped being available.
(2) The value of any other property, service, advantage or benefit is the greater of -
(a) its value at the time that it was acquired; and
(b) its value on the day that the application for the criminal benefits declaration was made."
(Page 8)
15 Proceedings on an application for a criminal benefits declaration are taken to be civil proceedings for all purposes, and all questions of fact are to be decided on the balance of probabilities (s 102).
The quantification of criminal benefits in the present case
16 The essential question is the proper construction of the relevant provisions when applied to the facts which would be alleged in an amended statement of claim. In carrying out that task, the court must do its best to ascertain the wishes of Parliament, which will usually be manifested by the natural and ordinary meaning of the words that are used. However, if the language of the Act is susceptible to more than one meaning, then s 18 of the Interpretation Act 1984 requires the court to adopt that construction which best promotes the underlying purpose or object of the legislation.
17 If this purposive approach to interpretation fails to resolve an ambiguity, then the court may have regard to the traditional rule of construction that applies to legislation of a penal nature. In this regard, McLure J in DPP (WA) v Bridge [2005] 152 A Crim R 226 at 229 said in relation to the Act:
" Statutory provisions dealing with confiscation of property in connection with criminal activity have been equated with penal provisions and thus any ambiguity remaining after the ordinary rules of construction have been applied ought therefore to be construed in favour of the owner of goods: Beckwith v The Queen (1976) 135 CLR 569 at 576; Palfrey v Macphail (2004) 149 A Crim R 542 at [34]."
- Of course, in the context of the present application, I should not finally determine the question of construction if the issue is reasonably open to argument. As the Full Court held in Mickelberg v 6PR Southern Cross Radio Pty Ltd & Ors [2002] WASCA 270 at [29] per Steytler J:
" ... as a general rule, a plaintiff is entitled as of right to have her case heard, to have the facts found and then to argue the question of law as it arises before the trial Judge upon the facts as found. The pleading should only be struck out where it can be seen from the outset that, however the facts might be found, there is no basis for the legal conclusion contended for by the plaintiff (see Dalgety Australia Ltd v Rubin, unreported; FCt SCt of WA; Library No 5485; 24 August 1984). The Court at first instance should be careful not to risk stifling the
- development of the law by the summary rejection of a claim which might raise the possibility that, as the law develops, a cause of action will be found to lie (Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365 at 373)."
18 The present statement of claim does not expressly plead that Mr Mansfield lawfully owned or controlled the subject shares in My Casino Ltd, but this would seem to be an underlying assumption of the pleading. Accordingly, and as a matter of simple logic, one can understand Mr Mansfield's argument that the proper measure of the alleged criminal benefits is not the total proceeds of sale, but the difference between those proceeds and the true value of the shares if the market had been properly informed. However, it cannot be assumed that the Act necessarily reflects this logic, because the statute clearly overturns many long-established legal principles as to personal and property rights and is "draconian in its operation" (Mansfield v Director of Public Prosecutions [2006] HCA 38 at [50]).
19 The DPP's contention as to the proper measure of criminal benefits is similarly based upon a simple proposition, namely that all of the proceeds from each sale resulted from the transaction which constituted the particular offence. Accordingly, and in terms of s 16(1)(c) the proceeds were "derived or realised, directly or indirectly, as a result of the respondent's involvement in the commission of the confiscation offence".
20 The DPP also relies upon the deeming provision in s 16(3) namely that:
"(3) the property, service, advantage or benefit is presumed to have been directly or indirectly acquired as a result of the respondent's involvement in a confiscation offence unless the respondent establishes otherwise."
21 Accordingly, the DPP submits that once the applicant succeeds in proving the offence and identifies the property that was obtained as a result of the commission of the offence, the onus then shifts to the respondent to prove that not all of the property was acquired as a result of the offence.
22 It might be thought that this submission begs the question of what particular "property, service, advantage or benefit" is subject to the presumption in s 16(3). The answer is provided by par 16(1)(a) which makes it clear that the relevant property, service, advantage or benefit, is that "described in the application".
(Page 10)
23 In the present instance, the application (being the notice of motion dated 12 July 2002) fails to describe any "property, service, advantage or benefit". However, no issue has been raised as to this, and the deficiency can be easily remedied by way of amendment. In any event the statement of claim (as presently pleaded and as proposed to be amended) identifies the total proceeds of sale as the subject of the application. Accordingly, it is those total proceeds to which the presumption in s 16(3) applies.
24 It follows that Mr Mansfield bears the burden of establishing that it is not the total proceeds, but those proceeds less the true underlying value of the shares, that constitute the alleged criminal benefits. In order to discharge this burden Mr Mansfield does not have to wait until trial. He can discharge the burden at the present time if he can establish as a matter of law that on the facts as proposed to be pleaded, it is not reasonably open for the DPP to claim the greater sum.
25 This involves a consideration whether there is any reasonable construction of the relevant provisions which when applied to the alleged facts would support the proposed amended statement of claim. If it is reasonably arguable that the Act should be construed so as to capture the total proceeds as criminal benefits then the DPP should be permitted to claim those sums.
26 In my view the critical question is the proper characterisation of what it was that Mr Mansfield can reasonably be said to have acquired "as a result of" his alleged involvement in confiscation offences. In terms of s 16(1)(c), the DPP claims that it was the "property" in the deposits derived from the total proceeds of sale. Mr Mansfield on the other hand contends that what he allegedly acquired was an "advantage or benefit" in avoiding the loss in value of the shares that would have occurred if there had been a fully informed market at the relevant time.
27 Self-evidently, any construction of the Act which characterises the total proceeds as "criminal benefits" must accommodate the fact that the same total proceeds would have been produced if each sale had been unaccompanied by a confiscation offence. This poses the question of how it can be said that the total proceeds were acquired "as a result of" the confiscation offence, if the same result would have occurred without the offence. To my mind this is a very compelling consideration which leads inevitably to the conclusion that it was the "advantage or benefit" (as contended by Mr Mansfield) rather than the total proceeds of sale, which must constitute the alleged criminal benefits. This conclusion turns not so much on the question of construction as on the simple issue of causation.
(Page 11)
28 In any event the construction as contended by the DPP must necessarily be based upon an underlying proposition that the contemporaneous commission of a confiscation offence tainted the whole of the proceeds and made them "criminal benefits". This proposition is consistent with the provisions in the Act concerning "crime used property" (see s 146), but in my view is foreign to the concept of a "criminal benefit" as defined in s 145. That definition speaks of a criminal benefit which is "acquired" rather than simply "obtained" or "received". Furthermore, the word "benefit" itself (as relevantly defined in the Compact Oxford Dictionary) means a "pecuniary advantage, profit, gain". By using this terminology, Parliament would seem to have made it clear that the underlying purpose of the provisions concerning criminal benefits is to deprive criminals of the gains or profits that they have acquired as a result of their involvement in confiscation offences.
29 In the present instance, to the extent that the total proceeds included the true underlying value of the shares, then this was something that Mr Mansfield had owned or controlled beforehand. It necessarily follows that all that was "acquired" as a result of Mr Mansfield's alleged involvement in each confiscation offence was the amount in excess of the true value which would have been lost if the market had been fully informed.
30 In coming to this conclusion I have had regard to the line of authorities including Director of Public Prosecutions v Nieves & Ors [1992] 1 VR 257 and R v Pedersen [1995] 2 NZLR 386 which interpret legislation in other jurisdictions concerning proceeds of crime. Each of these cases was concerned with the question whether convicted drug dealers could have the costs and expenses of acquiring illicit drugs deducted from the "pecuniary penalty orders" that were made. In the New Zealand case (at 389) it is clear that legislation expressly confiscated "the money ... that came into the possession of the defendant". The decision in DPP v Nieves (supra) concerned the proper construction of the Crimes (Confiscation of Profits) Act 1986 of Victoria. The Court of Criminal Appeal in that State determined that the word "benefits" as used in that legislation did not have the same meaning as "profits". The reasons for that decision (at 262) were as follows:
" ... in our view, there are compelling reasons for giving to the word 'benefits' in s 12 a meaning different from the word 'profits'. First, it is significant that the word 'profits' does not appear elsewhere in the statute other than in s 1(b), and more particularly, s 12 speaks of 'benefits' and not 'profits'. Secondly,
(Page 12)
- while profits involve benefits to a person, it does not inevitably follow that a benefit includes a profit to the recipient. Thirdly, an arrangement made between convicted persons with one another or with others for sharing the proceeds of a crime is tainted with illegality; similarly, agreements by a convicted person to pay another person a sum of money for drugs used in the commission of the crime charged are illegal. It is inconceivable, therefore, that a court of law should engage itself in the procedure of calculating and setting off against the amount derived from the commission of a crime the expenditures incurred or sharing arrangements made between the convicted persons or between themselves and others: cf R v Smith [1989] 1 WLR 765, at p 769. Furthermore, the legislation is concerned with the benefits derived from a criminal offence, not profits derived from a lawful commercial transaction."
31 It might be thought that this reasoning could be readily adopted to the question of construction in the present case. However, this would ignore the many differences in the legislation including s 12(1) of the Victorian Act which required a deduction from the pecuniary penalty order of "the value of any property in respect of which a forfeiture order is made in reliance on the same conviction". The Victorian Act also did not include any provision similar to our s 8 confiscating all of the property of a declared drug trafficker. Section 5 of the Victorian Act provided for confiscation of only "tainted property".
32 For the reasons stated above I consider that the fundamental underlying purpose of the provisions in the Act concerning criminal benefits is to deprive criminals of their ill-gotten profits or gains. Even if I am wrong about this and an ambiguity remains, then the rule of construction as to penal provisions would lead to the same conclusion. In the end I am of the view that it is not reasonably open to the DPP to argue that on the facts alleged in the present matter the criminal benefits acquired were the total proceeds of the sale.
Residual issues as to the statement of claim
33 The above finding resolves the major issue raised by the application for leave to reamend the statement of claim. As to the remaining issues, I have not heard oral submissions but have been provided with written submissions by the parties. Some of the objections in Mr Mansfield's submissions have already been met by an amended minute of the proposed reamended statement of claim.
(Page 13)
34 As to the issues that continue to be unresolved, I consider that there is only one objection that should be upheld. This concerns par 6 of the proposed amended statement of claim which pleads that Mr Mansfield "knew or ought reasonably to have known" that if the information was generally available it might have had a material effect on the price of the shares. Fox v H Wood (Harrow) Ltd [1963] 2 QB 601, 604 is authority for the proposition that:
"An allegation that a person ought to have known something has implicit in it ... an allegation that facts and circumstances existed from which he ought to have acquired, either by observation or by inference, the knowledge of which he was deficient ... "
35 The particulars in par 6 do not include any such facts or circumstances but instead state that "Mansfield, as a reasonable person is deemed to have expected that the information would have the material effect". The particulars also rely on s 1002C of the Corporations Law (WA), which in my view does not assist the applicant. Accordingly, par 6 will need to plead particulars of the objective facts and circumstances from which it is said that Mr Mansfield "ought to have known".
36 Although Mrs Mansfield is not a party to the proceedings for a criminal benefits declaration, she was permitted to appear and make submissions on the application for leave to amend the statement of claim. The reason for allowing her to appear is that she owns property amongst that subject to the freezing order which may be liable to confiscation if a criminal benefits declaration is made.
37 Mrs Mansfield contends that the DPP should be required to plead which frozen property is owned by Mr Mansfield, and which of it falls within s 28 by reason of it being under his effective control or because he has given it away. The background to this submission is that the DPP may at any time during the proceedings for a criminal benefits declaration, also apply (under s 27) for a "confiscable property declaration". This is the mechanism by which Mrs Mansfield's property might become liable to confiscation, but it is clear from s 28 that such a declaration can only be made after a criminal benefits declaration is made against Mr Mansfield.
38 The simple answer to Mrs Mansfield's submission is that the information she requires to be pleaded does not form part of the DPP's cause of action for a criminal benefits declaration. The only elements that
(Page 14)
- the DPP must prove to obtain a criminal benefits declaration are those set out in s 16.
39 Needless to say, in the event that the DPP does ultimately apply for a confiscable property declaration then it will at that time be required to plead which of the frozen property is owned by Mr Mansfield, which was allegedly under his "effective control", and which was allegedly given away.
Conclusions
40 For the above reasons the DPP cannot be granted leave to amend its statement of claim in terms of its current minute of proposed amendments. The application for leave will need to be adjourned, and I will hear submissions from the DPP and Mr Mansfield as to the appropriate orders in all of the circumstances.
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