The King v Jacobs Group (Australia) Pty Ltd formerly known as Sinclair Knight Merz

[2023] HCATrans 41

[2023] HCATrans 041

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S148 of 2022

B e t w e e n -

THE KING

Appellant

and

JACOBS GROUP (AUSTRALIA) PTY LTD FORMERLY KNOWN AS SINCLAIR KNIGHT MERZ

Respondent

KIEFEL CJ
GAGELER J
GORDON J
EDELMAN J
STEWARD J
GLEESON J
JAGOT J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 12 APRIL 2023, AT 10.04 AM

Copyright in the High Court of Australia

MR J.T. GLEESON, SC:   May it please the Court, I appear with MR C.J. TRAN for the appellant.  (instructed by Commonwealth Director of Public Prosecutions)

MR B.W. WALKER, SC:   May it please the Court, I appear with my learned friend MR N.M. KIRBY for the respondent.  (instructed by Jones Day)

KIEFEL CJ:   Yes, Mr Gleeson.

MR GLEESON:   Thank you, your Honours.  The appeal concerns the proper construction of one aspect of the maximum penalty provision for foreign bribery under the Code.  The appeal will directly determine the construction of the equivalent provision for domestic bribery of public officials under the same Code, and it will indirectly determine the equivalent provision under various other Commonwealth statutes, such as, for example, the cartel provisions in the competition and consumer law and other provisions of that law.  Your Honours, we need to seek leave to amend the notice of appeal to correct a typographical error.  I seek that leave.

KIEFEL CJ:   Yes, the Court has been advised of that.  That is to correct the name of the ‑ ‑ ‑

MR GLEESON:   No, it is a typographical error, your Honour, in ‑ ‑ ‑

KIEFEL CJ:   I am sorry.

MR GLEESON:   ‑ ‑ ‑ the provision that is being dealt with.

KIEFEL CJ:   I see.  Yes.  Thank you very much.  Yes, you have that leave.

MR GLEESON:   Thank you, your Honours.  Your Honours, we seek to organise our oral submissions around six propositions.  The first is to pay some attention to the primary offense provision, section 70.2(1), to ascertain how the concept of benefit and the composite concept of value of the benefit is used in the primary offense provision, and for what statutory purpose.  That will provide a critical contextual point of reference for the ultimate construction question in the appeal.

In short, we will be submitting that value of the benefit when used both in the primary offense provision and in the maximum penalty is used in a way which values a receipt of money as currency, and is not concerned with corresponding burdens which the recipient may undertake to receive that benefit.  If money comes into one’s possession or control and use, it is a benefit and is valued as such without a further inquiry into corresponding burdens.

GLEESON J:   Do you accept that what you are referring to as corresponding burdens are relevant to be taken into account in sentencing either as a mitigating factor or as a factor going to the objective sentence seriousness of the offence?

MR GLEESON:   Yes, I do, your Honour.  They clearly come in at that stage and they will be relevant under section 16A.  In terms of the non‑exhaustive list of factors to which the Court may have regard, which is set out at page 9 of the authorities, it would be relevant to section 16A(2)(a):

the nature and circumstance of the offence –

It is potentially relevant to (e), which is the:

loss or damage resulting from the offence –

It will be relevant to (j) and to (ja) which is specific deterrence and general deterrence.  So, it is relevant at least to those specific matters.  So, your Honours, if the Court goes to the primary offence provision – and it is our submission that the Court of Appeal paid insufficient attention to the role it plays in the ultimate question – on page 23 of the book, you have the core definitions which relevantly include the definitions of “benefit”, “business advantage”, “foreign government body” and “foreign public official”.  There is no express definition of “business”, so it takes the full breadth of its ordinary meaning which can include transactions, contracts, work and the like.

Under the substantive offence, which is section 70.2 on page 26, observing that in the present case it was charged, of course, as conspiracy under section 11.5 – but conspiracy to commit this offence – the substantive offence involves as the first physical element, under paragraph (a), one of four species of conduct.  Providing:

a benefit to another person –

or three other variations on that conduct.  At the core of that first physical element is the provision “causes”, “offers” or “promises”:

to provide, a benefit to another person –

“benefit” having the broad open‑ended meaning set out in section 70.1 of:

any advantage and is not limited to property.

“Provision” is not given an express definition, so it also takes its ordinary meaning which will have some considerable breadth to it.  The second physical element in paragraph (b) is that:

benefit is not legitimately due to the other person –

That is a physical element of circumstance.  As to what is not legitimately due, that would be informed by a general conception, but it is made more specific in part through subsection (2).  There are three matters that are to be disregarded in deciding whether the benefit is not legitimately due in a particular case.  The second, which is important, is:

the value of the benefit –

Here we see in the first place in the primary offence provision where the composite expression “value of the benefit” emerges.  What is contemplated by this provision, we would submit, is that one looks to that which has flowed or is intended to flow from the first person to the other person by way of advantage and one asks:  what value can be placed upon the receipt of that advantage in the hands of the other person?

STEWARD J:   So your concept would include future receipts, value of an appropriate discount rate?

MR GLEESON:   Could include that as well, yes.

STEWARD J:   Yes.

MR GLEESON:   Because, as we will come to, the essential purpose or mischief of this entire set of provisions is to avoid the purchasing decisions of foreign governments being corrupted by money, rather than decisions being made on the merits of the competing products or services.  Your Honours, that appears in many places in the extrinsic material but, to take one example in the explanatory memorandum at page 192, that Parliament was told:

The main argument in favour of accepting the OECD Convention –

that is the Convention that the Court will find at page 239 and following:

is that if countries take action on a multilateral basis to criminalise foreign bribery, serious distortion of trade could be prevented that could otherwise occur if purchasing decisions are made on the basis of the size of the bribe, rather than on the merits of a product or service.

At the core of the primary offence provision, which is implementing this international obligation, is to criminalise conduct which has this character or objective – and that is one of the reasons why, in the provision I am currently addressing – the value of the benefit, back on page 27 – you cannot say the benefit was legitimately due because it was only small in size.  That would not be an answer at the primary stage of ascertaining whether the offence is made out.

Specifically, we would submit that where the benefit being provided to the other person – who may be the foreign official or may be the intermediary – is money, then the value of that is straightforward.  It is the value in currency of the money received or intended to be received by that person, which must be disregarded under this provision.  So, your Honours, we would give a simple example to illustrate this provision.

EDELMAN J:   When you refer to money, particularly money that is intended to be received, are you talking about actual receipts or are you extending the concept to a promise of payment of money, including, for example a conditional promise of the payment of money – conditional upon the performance of work or the provision of goods?

MR GLEESON:   It could be both, your Honour, it extends to both because under the first physical element in subsection (1) the simplest case will be providing the benefit, but other cases can be charged as promising to provide the benefit and the benefit could be absolute or it could be conditional, it could cover all of those.

EDELMAN J:   So, a contract that is entered where the promised payment of money was conditional upon the performance of work involves a benefit to the party who would receive the money even if the cost of performing the work or providing the goods far exceeded the money that would be paid for them?

MR GLEESON:   That is the Crown’s case, your Honour.

EDELMAN J:   Yes.

MR GLEESON:   The present case is about services, which complicate the facts a little, because you have seen the statement of facts about moneys which Mr Walker’s client said it had to pay into Vietnam to help it perform its obligations and it then says some of the moneys were tainted and other moneys were not tainted, some were doubtful, all of that.

But if one takes the simplest case from the explanatory memorandum – it is a foreign government, Vietnam, let us say, deciding to spend valuable money, a million dollars, on a purchase of a new computer network on goods, and if a contract is signed for $1 million under the force of the bribe, we would say what is being criminalised is the payment, or the agreement to provide that bribe, or the promise of the bribe, and whatever it costs you to provide the countervailing obligations is simply irrelevant – at the stage of maximum penalty could be of some relevance, or even significant relevance, when one looks at the ultimate sentence, but if one focuses just on the simplest case of a bribe which earns a contract to supply goods to, let us say Vietnam, the Crown’s case is it is irrelevant how the offender chooses to go about supplying that contract.

EDELMAN J:   That has the merit of treating benefit consistently, right from the point the contract is entered into through to the point that the actual money is received for the performance of the service.  But, I think, what I am just struggling with at the moment is how you characterise benefit in the case where the contract remains purely executory.  So, until the work or the service has been performed, there is no right to any payment.  There is no payment that has actually been received.  So, what actually is the benefit?

MR GLEESON:   First, as to the way your Honour has put that question to me – that is not our case because, in our case, the contract has been done and the money has been received.  So, we are testing a case, perhaps, the next step along, but I have drawn attention to the third element of the first physical element, which is a promise to provide a benefit.  So, a promise to provide $1 million as the payment of the purchase price for the computers.  The promise is the benefit, in that case.

EDELMAN J:   But that is where the party has the immediate benefit of the promise.

MR GLEESON:   Yes.

EDELMAN J:   But a promise that is conditional upon work that has not been performed, there is no entitlement to anything at that point in time.

GORDON J:   Mr Gleeson, can I ask a question about this construction, which – I have got a bit lost.  I had understood under clause 70.2(1), which is the primary and substantive offence, we are dealing with the bribe.

MR GLEESON:   Yes.

GORDON J:   We are not dealing with the consequence of the bribe.

MR GLEESON:   We are dealing with the bribe as the first of the two physical elements of the crime.

GORDON J:   And that is dealing with physical element (a)(i) “provides a benefit” – is the bribe?

MR GLEESON:   Yes.  So, I have not quite answered your Honour Justice Edelman’s question, but there are two concepts that I am trying to deal with.  The first is, in answer to your Honour’s question, if we look at the bribe, the bribe is that which is central to the offence, and as the bribe, we are saying, it is the money flow.  And what one does not ask at the bribe stage is:  I have paid $1,000 to Mr X in Vietnam and Mr X has made me a promise that he is going to pass on $950 to a relevant public official and he is going to spend $25 on incidental expenses to carry out the deal.  The value – the benefit which is being provided is the $1,000, and that was leading me to the second conception which was in subsection 2(b) when it says you are to “disregard”:

the value of the benefit –

so, at this point, “value of the benefit” is relevant to the primary offence.  The value of the benefit is the money provided from A to B, which is the $1,000; the value of the benefit is not $25.  So, what I am seeking to submit at that point is that the offender cannot say it is only a $25 benefit because I was bound to transfer $950 to the public official and I had to spend $25 in incidentals, so I only got $25, so the value is quite a low value.

KIEFEL CJ:   This is the beginning of your consistency of terminology argument?

MR GLEESON:   This is the consistency argument, yes.  Your Honour Justice Edelman, if I can continue this theme and not ignore what your Honour has put, where the consistency argument then really takes off is the facilitation payments defence in section 70.4, which was argued fully in the Court of Appeal but makes no appearance in the judgment.  Although the value of the benefit being minor does not of itself mean the benefit is not legitimately due, that is what we have seen, there is a special defence with the relevant onus on the accused if 70.4(1)(a):

the value of the benefit was of a minor nature –

and certain other conditions are satisfied, and particularly under (c), you must make a record of the conduct as soon as practicable after it occurs, and as to the record, which is subsection (3)(a), you must include the value of the benefit.  So, the idea of this provision is that if the bribe or the money which might be characterised as a bribe is minor in value and can be identified as such and put in the record and the other conditions are met, then the facilitation payments defence will be made out.  Our submission is that value of the benefit at this stage – and we are still in the primary offence, at least where we are dealing with money, it is about the money flow identified in currency and it has no interest in saying, are there any corresponding burdens which the recipient might be undertaking?

GORDON J:   Can I ask one question about that, and that is the definition of “benefit”.

MR GLEESON:   Yes.

GORDON J:   It is any advantage not limited to property, does that sit with your currency argument?

MR GLEESON:   Well, certainly, because the receipt into possession and use and control of the money as currency is a form of advantage.  It is the clearest and simplest form of advantage.  Many other advantages might be intangible and more complicated to put a value on, but the receipt of money is the simplest.

KIEFEL CJ:   I suppose, on one view, an advantage might be setting up a chain of communication with the person first bribed so that there is the potential for ongoing conduct, but the question would then be whether or not it could be valued.

MR GLEESON:   Yes.  So, the one crime might have a direct benefit flowing from it easily valued in money ‑ ‑ ‑

KIEFEL CJ:   Might have future implications.

MR GLEESON:   ‑ ‑ ‑ and future implications which may or may not be so easy to value.  That type of concept is discussed in the explanatory memorandum in relation to this facilitation payments defence, which the Court will see first on page 204.  So, this is the original explanatory memorandum for the primary offence provision.  On this page the EM is discussing, between 28 to 30, the difference between moneys – or conduct which is designed to influence the official to obtain or retain business – which is one limb that we are about to come to – and then it speaks about business advantages, which is the other limb.  Paragraph 30 gives us an example of a “business advantage”, which is:

a bribe paid in order to receive an operating permit for a factory where the person has failed to satisfy the statutory requirements for issue of such a permit.

So, the EM at this point is referring to section 70.2(1)(c), which is the first fault element that the – I will put it for short:  the bribe must be provided with the:

intention of influencing a foreign public official (who may be the other person) in the exercise of the official’s duties as a foreign public official in order to:

(i)obtain or retain business; or

(ii)obtain or retain a business advantage that is not legitimately due –

So, at paragraph 30 of the EM, an example of a business advantage is:

a bribe paid in order to receive an operating permit –

The permit is the advantage and then, in terms of your Honour the Chief Justice’s question, whether that can be valued, that will raise a factual question if it can be valued.  Then the benefit is trebled for the maximum.  If it cannot be valued, one can then consider the turnover limit.

On pages 208 to 211, the concept of the facilitation payments is further explained.  It appears that the OECD Convention did not expressly require facilitation payments defence, but it was Australia’s means of implementing the general obligations in the Convention.  That is apparent from paragraph 37 on page 209.  The idea is there will be a category of small payments which are otherwise to be left to the “domestic law” of the other country, rather than the focus of the Convention and Australian law, and the reason given at 37 harkens back to the earlier reason that the offence is:

international in nature and primarily aimed at larger scale bribes which may distort trade.

The concept is very much on the scale of the payment, either the bribe in one direction, or, ultimately, the benefits coming back in the other direction. Over on page 210, there is an explanation at 44 that the term “minor nature” within the facilitation payments defence is “similar” to the equivalent term used in section 58P of the Fringe Benefits Tax Assessment Act.  Your Honours, we have looked at those provisions of the FBT Act; we do not think that they directly provide the mystical answer to this question, although we hoped that they might.  We do not think they do.  They are a statutory scheme which, for its own purpose, explains what is minor and what is not minor.

So, to draw this point together, what I am seeking to put is that we not only have consistency in terms of benefit flowing through from the primary offence provision to the contested maximum penalty, but we have “value of the benefit” twice used in the first provision and then flowing through to the maximum penalty.  We would submit it is tolerably clear that, at least in the first case, it is being used in the sense we commend, and, for consistency, there is a strong reason to think it is used the same way in both cases. 

Now, your Honours, one of the points Mr Walker makes against us is that we have not established error in what the Court of Appeal has done.  As I go through my submissions, can I indicate how we frame this in terms of legal error.  On this first point, the Court of Appeal recorded our argument at paragraph 84 on page 118, and, as there recorded, focused only on one strand of our argument which is that benefit is used in both cases and, for consistency, you would expect it to be used in the same way.  Our fuller argument embraced that proposition but also focused on the composite term “value of the benefit” being used in both places.

When the Court of Appeal dismissed this argument, at paragraphs 98 to 99, it did not address at all our argument based on the facilitation payments defence or value of the benefit being used in both cases.  What the Court seems to have done is to, in the first couple of sentences of 99, say that the problem with our consistency argument is that the term being used in the primary offence provision is “benefit” and it is understandable why that would have a broader meaning:

By way of contrast –

that is the Court of Appeal’s language – the penalty provision is focused on:

“value of the benefit” –

which is something different and which calls up some different approach.  We would submit that has failed to grapple with the full way in which we are putting the consistency argument.

GAGELER J:   Mr Gleeson, can I just ask you another question about the definition of “benefit” in section 70.1.  One very simple reading of that is that it is saying that property is one form of advantage that amounts to a benefit, so that where you find property, that equals a benefit.  Is that the right way to read it?

MR GLEESON:   Yes.  It is a benefit.  It is a simple case of benefit.

GAGELER J:   So, you have cash, property – money in a bank account, chose in action, that is a benefit?

MR GLEESON:   Yes.

GAGELER J:   End of story.

MR GLEESON:   End of story.  And if it is money in a bank account, legally that is a chose in action.  If it is currency in a bag, that is property as well, whichever form it takes.  Then, beyond that, any advantage – so that is taking us into a much broader territory, and that is why I drew attention to the example of the licence or the permit to conduct the factory – that may be strictly an item of property depending on the relevant system of law.  It can clearly move into intangibles.  The example your Honour the Chief Justice gave is also within benefit, which is, I have built a favourable connection with a person which will give me an expectation of future reward.  That one will be fairly difficult to value.

EDELMAN J:   A promise is a benefit as well?

MR GLEESON:   Yes, yes.

EDELMAN J:   A conditional promise is a benefit but not divorced from the condition?

MR GLEESON:   Not divorced from that, and you would take that into account if it bore on value in the relevant sense and ‑ ‑ ‑

EDELMAN J:   If the condition had the effect of removing all of the value from the promise, then it would not be a benefit.

MR GLEESON:   Well, I would hesitate to go that far, your Honour.  It may be that the valuation ‑ ‑ ‑

EDELMAN J:   A promise that I will pay you $1 million if you pay me $2 million is not much of a benefit to you.

MR GLEESON:   Well, your Honour, that is one way of looking at it.  The other way is to say that at the stage of valuation the value is reduced to nil.

GORDON J:   Sorry, I did not hear what you just said, Mr Gleeson.

MR GLEESON:   The other way of looking at it is that at the stage of valuation the value is reduced to nil.

GORDON J:   The other way is to say that the stated valuation – that there may be other benefits arriving from the fact that you have received the income even though – the benefit of conditional promise.

MR GLEESON:   Yes, and that is an aspect which has slipped out of the respondent’s argument in the Court of Appeal’s approach, which is that the offender here received – so we are talking about actual receipts, not just your Honour’s example further down the spectrum ‑ ‑ ‑

EDELMAN J:   Well, that is true, but one would expect consistency, all of that, from the point in time the contract is made right through to the point in time when the cash and so on is received under the contract.

MR GLEESON:   Yes.  No, we are arguing for consistency.  I am saying that certainly in the case where you not only get the promise of $10 million but you get the $10 million in as money, as property under your control, which is this case.  From the moment you have received that money, the offender is free to do whatever it likes with that money.  It can use it anywhere in its business.  The offender can say, I won a $10 million contract from Vietnam.  It can record a $10 million contract on its balance sheet.  So, that is the sense in which money is the very simplest and most obvious form of property which will lead, we would submit, to a fairly straightforward valuation exercise.

Now, your Honours, that is what I wanted to say about our first proposition. The second proposition, which is a short one, but it is just to look at the penalty provision, the three‑tiered provision, to see what it is designed to do. As your Honours know, the original penalty provision when the offence was enacted – which is found at page 40 – was simply an application of section 4B of the Crimes Act 1914 to impose a fine in addition to the term of imprisonment for natural person offenders, the original fine was $66,000 for individual, $330,000 for a corporation.

Importantly, those concepts of value of the benefit and the facilitation payments defence were in the original provision.  The amending provision on page 27 – and the parties agree on this much – was obviously designed to significantly – we would say dramatically – increase the deterrent effect of the maximum penalty, both as to specific deterrence and general deterrence, because the previous was regarded as too low.

Under the three‑limbed maximum penalty – this is on page 28 – the minimum maximum, if one can use that clumsy term, is 100,000 penalty units, which is relevantly $11 million.  So, what that tells the potential offender beforehand and the court afterwards is whatever else be true about the circumstances of the offence, the offenders stands to face $11 million – this is the corporate offender, of course.  So, the penalty, previously $330,000, is now dramatically increased to at least $11 million.  That is one aspect of the deterrence which the maximum is designed to achieve, and everything the maximum is doing is designed to prevent the corporate offender treating this as a cost of doing business. 

Now, the second limb applies only if the court can determine the value of the benefit which the body corporate has.  Then, can I emphasise there are three elements.  They work together but they are three elements that have been built into this identification of the benefit.  The first is obtaining – that is, that it has come into the possession or control or use of the offender.  The second is it can be:

obtained directly or indirectly –

so, it is opening the frame in a very broad sense.  The third, which follows the conjunction “and”, is that it:

is reasonably attributable to the conduct constituting the offence –

Now, at the stage of reasonable attribution, the Crown submits that it is an undemanding standard that is being imposed.  It is not a standard of strict causation.  It does not require a but for test to be satisfied.  It is a question of reasonable attribution of the benefit to the offending conduct.

It is deliberately an undemanding standard for two reasons.  One is so that the offender beforehand does not engage in complex calculations of:  will I be able to isolate this potential benefit from the conduct and escape this limb?  The court afterwards is engaged in a straightforward exercise of attribution and is not faced with complex inquiries – in particular, inquiries auditing the accounts of the offender before one can just simply ascertain the maximum penalty. 

So, the combined force of the obtained directly or indirectly and reasonable attribution imposing an undemanding test allows one to link the benefit to the offending conduct, and then the court engages in the valuation exercise under which, as we would submit, receipt of money which is property is valued as currency without further inquiry.

One point that we have argued here in writing in-chief and in reply – and we put it very squarely in the Court of Appeal, but it receives little attention in the judgment – is that it is important that there is simply no mention in paragraph (b) of burden or expenses that may also flow from the offence, and there is certainly no mention of any standard by which burdens or expenses are to be taken into account to reduce the value.

I will come at the end of our submissions to the Proceeds of Crime Act provisions which, we submit, are at the margin of this appeal.  They are not irrelevant, but they are at the margin because there is similar language but in a different statutory context.

KIEFEL CJ:   Were they relevant in the sense they show you what not to do?

MR GLEESON:   Yes, yes.  And that type of mechanism of the Parliament simply has not been adopted here, and why, for good reason, that given the undemanding nature of the test, it ought to be a straightforward exercise for the offender beforehand and the court afterwards to say the bribe won you a $10 million contract.  You got paid the $10 million money as currency.  Its benefit, its value, is the currency.  That is the maximum.  We then treble that; if that is more than $11 million, that becomes the higher maximum, and that is part of the deterrence.  So, the deterrence to the offender is, well, if the benefit in that sense can be valued and trebled is above $11 million, I stand to face up to a figure more than $11 million, but if the benefit cannot be determined, I will then face the third limb paragraph (c), potentially, which is 10 per cent of annual turnover.

STEWARD J:   Mr Gleeson, on your view, does the word or the phrase “have obtained” mean that you would exclude the possibility of future payments being derived under executory contract as at the date of sentencing?

MR GLEESON:   No, because what is obtained there is that advantage in the form of those future payments.

STEWARD J:   So, as at the date of sentencing in the case of an executory contract, it is that which has come in in fact and that which is expected to be derived ‑ ‑ ‑ 

MR GLEESON:   Yes.  To the extent that can be sufficiently identified and then valued.

STEWARD J:   With appropriate discounts.

MR GLEESON:   With appropriate discounts.  And further to your Honour’s question, if one contrasts that approach which the Crown is commending with the Court of Appeal at paragraph 95 on page 121 – which we think is pretty close to the core of the positive textual argument of the Court of Appeal – the court reduces:

the value of the benefit from winning such a contract –

to:

the opportunity for monetary gain from its performance.

That, we submit, is an undue contraction of the value the benefit in the context we are in.  It has a flavour which, in some commercial contexts, might have some informational value, but it does not capture the purposes of the statute.  But then it goes further:

There simply will be no benefit to an offender if the body corporate which has engaged in the bribery breaks even or makes a loss from its contractual performance.  On either of these scenarios, it will not have obtained any advantage from its commission of the offence.

Now, coming back to your Honour Justice Edelman’s question, this is not your Honour’s example; this is closer to our case.  What it is saying is, if I win a $10 million contract and the Court is seeking to ascertain whether it can value the benefit for the maximum penalty, you cannot identify any advantage until the entire contract has played out.  So, this is not even an NPV or DCF type approach.  This is saying, even though I have won the $10 million contract – let us say I have been paid $5 million and I have got $5 million to come in, and the crime is interdicted and we are now sentencing – the answer on a Court of Appeal’s approach is no advantage, the benefit limb is neutralised because I would have to wait and see what happens as this entire contract plays out.

EDELMAN J:   I am not sure that is what paragraph 95 is saying.  It would be entirely consistent in paragraph 95 to say that there is value in the benefit of winning a contract if, for example, the rights in the contract were assignable, even without performance, for a large sum of money.  I think that the way I read paragraph 95 is just simply to say that where there is no immediate benefit in a purely executory contract, there is not going to be any other benefit unless the contract breaks even or makes a profit.

MR GLEESON:   Your Honour, if I have over‑read the paragraph and it is only to be read in that fashion, then it perhaps does not take the argument very far.  It is, as I have said, close to the heart of the positive textual argument of the Court of Appeal.  So, what we have to grapple with for error is 95, that most of the rest of these 12 paragraphs are dismissals of our construction.  It is hard to find a positive construction in here.  The only other positive construction ‑ ‑ ‑ 

GORDON J:   Maybe 99, Mr Gleeson.

MR GLEESON:   ‑ ‑ ‑ is 99.  Is 99.

GORDON J:   In a sense, I have a problem with comparing 95 and 99, because one starts at 99 with things which, I think, you accept, and that is that it is:

received or obtained . . . may be monetary or not, and it need not be proprietary –

it is:

the “value of the benefit” to be determined . . . connotes something that falls to be assessed if it can be.

Then, it is the last bit which seems to, then, in effect, reinforce what you have described as this positive construction in 95.

MR GLEESON:   Yes, your Honour.  It comes down to saying near the end that the value of the contract does not lie in the contract price per se.  We would say it does.  It relies on the contract price irrespective of further inquiry.  But the Court of Appeal says you need to look at the monetary advantage to be derived from performance, and that:

is not the contract price but the contract price less the costs of its performance.

That is the critical sentence.  We have read that as the Court of Appeal saying, you cannot stop at the contract price, you need to look at the costs of its performance, which appears to be the actual costs of performance of the contract as it is played out, not even some expectation as to future revenue versus future cost under the contract.  So, that is critical to our argument of error, which is where has the concept of subtracting the costs of performance come into the language of section 70.2(5)(b) and what is the standard ‑ ‑ ‑

GLEESON J:   It seems to almost be assuming that the contract can be assigned at market value, but why would you assume that a contract that had been procured through bribery would be assignable a contract value?

MR GLEESON:   Yes.  With respect, your Honour, we agree that that appears to be one of the assumptions and that is why I said earlier that some of these notions appear to have some reflection in some concepts of commerce in different contexts, that a contract may, in a particular case, have a capital value because of its ability to be assigned, but could this contract ever be recognised as assignable by law?

Your Honour’s question does, with respect, pose an area where the parties disagree, perhaps significantly, about the nature of the crime and the purpose of this sentencing provision.  Your Honours will see that in the respondent’s submissions between paragraphs 34 to 37 where, in answer to our proposition that there is simply no guidance in the statute as to whether costs are to be subtracted or which costs are to be subtracted, the answer at 36 is, well, on the facts of the particular case the parties agreed certain figures – I will come that – but that cannot govern construction.  But 37, the main answer seems to be, legally, that by analogy with the proceeds of crime cases:

the parties’ methodology of allowing legitimate expenses and excluding tainted costs has a sound basis in principle.

Well, the proceeds of crime cases have a statute which does allow for subtractions.  It tells you what to subtract or not.  But the concept here seems to be that this statute is recognising that it is perfectly legitimate for Mr Walker’s client to have won the contract with Vietnam; they just won it by the wrong means.  So, their conduct was all directed to a lawful end and their payments away can then be divided up into legitimate payments and illegitimate payments, and the statute says they can have the benefit of subtracting some, but not others.

Now, the Crown would say in response, simply, this statute treats the whole of this contract as a tainted contract.  It has been acquired by a means which the law says is criminal, and when I took your Honours to the explanatory memorandum, it is criminal because the purchasing decision of Vietnam has been corrupted by the scale of the bribe.  The whole of the contract is tainted.  The benefit under the contract – that is, the money – that feeds into the maximum penalty.  The burdens of carrying out the tainted contract are irrelevant to the setting of the maximum penalty.  Your Honours will see the same ‑ ‑ ‑

JAGOT J:   Could I just ask one – sorry to interrupt you.  You embraced a proposition from Justice Steward about if the amount for the contract price has not been paid in whole or part as at the date of sentencing, then you would discount the unpaid contract price, to the extent of its future.  Ordinarily, in discounting that, you would take into account the burdens if someone were performing that valuation exercise.  But I do not think you are saying that at all.

To get to, say, a net present value of a contract with an amount payable over a period of 10 years, and you are only two years in and you have eight to go and that is when the case comes up for sentence, what are you – what are you saying?  So, assume it is a $10 million contract, you have received $2 million and you have eight to go but you have to perform in order to get your eight, what are you saying is the value of the benefit in that case?  What discounting did you embrace?  I am just not clear.

MR GLEESON:   The fault is mine, your Honour.  The Crown’s primary position is that there is no discounting involved in that circumstance.  The value of the contract is the contract price.

JAGOT J:   Right.  But I thought you did say to Justice – I thought, in answer, you clearly embraced a net present value, a discounted cash flow approach.  This is why I got a bit lost at that point.

MR GLEESON:  The fault is mine, your Honour.  The Crown’s position is the ultimate simplicity in this area – if the contract is worth the $10 million – if that is what has been obtained through the bribe, that is the benefit.

JAGOT J:   Even if it is purely a promise to pay in exchange for performance.

MR GLEESON:   Yes.

JAGOT J:   It is paid over time and it might be a five or – whatever, 10‑year period – you do not go around doing evaluation exercises.

MR GLEESON:   No.

JAGOT J:   Sorry, I thought you had said that.  I am pretty sure on the record you embraced a proposition contrary to that.

MR GLEESON:   Your Honour Justice Steward’s question was too good.  My answer was too weak.  The Crown’s position – what was trying to accept was that, because the concept of advantage can be very broad and can cover many things, there could be cases where one might have to look into the future as to what one is doing.  But I do want to be clear, in terms of the cost and the burdens of performing what we say is a tainted contract and they are not the concern of this ‑ ‑ ‑

JAGOT J:   It is just look at the contract price, that is it?

MR GLEESON:   Yes, that is it.

JAGOT J:   Okay, I understand that, then.

GORDON J:   Can I jump to the other end?  So, I had understood that was your position – that would not prevent, would it, the corporation leading evidence consistent with sentencing principles seeking to obtain a discount on the maximum penalty by reference to other matters in order to reduce the sentence?

MR GLEESON:   That is correct.

GORDON J:   And that is because, as I understand your submissions, they are the party that have the benefit of the knowledge able to adduce that evidence?

MR GLEESON:   Yes, and they have the knowledge of what they say the costs were.  Critically, they have the knowledge of whether they say the costs were tainted or not tainted – or how they were tainted.  It would be an anathema that the Crown would bear the onus at sentencing to explore that question of costs about which it does not have any ready means within the criminal trial to obtain discovery and interrogatories and the like.  It is simply a matter at the ultimate sentencing stage whether the offender wishes to seek to bring those ‑ ‑ ‑

STEWARD J:   So, issues such as the time, value of money, the risk of non‑performance – they will all go to mitigation?

MR GLEESON:   Yes, your Honour.  I might also say tax, because one of the things, of course ‑ ‑ ‑

STEWARD J:   Yes.

MR GLEESON:   - - - in the Proceeds ofCrime Act is that it expressly tells us how you take tax into account when you are stripping the benefit – it is around section 132 of the Proceeds ofCrime Act.

STEWARD J:   So, we are looking, really, at what I have called the headline contractual figures at this stage for maximum sentences, and all of the other unknowns coming later.

MR GLEESON:   Yes.

STEWARD J:   Okay.

EDELMAN J:   What is the contract price when the positions are flipped – so, where the party paying the bribe is paying the bribe in order to receive services in exchange for which an amount of contract or a price will be paid?  Is the benefit to them the amount that they are paying for the services?

MR GLEESON:   No, the benefit there, which has to be the advantage, whether property or otherwise, is the services which they are getting.  So, one has to – we are now valuing services, we are not valuing money received as currency ‑ ‑ ‑ 

EDELMAN J:   And you value those services at the market value rather than the price that is being paid for them?

MR GLEESON:   Well, the Court has to ask, am I capable of valuing those services?  So, what are the options?  Market value presents as one option, the price may or may not be a guide to market value.  The price may be inflated – probably is inflated in order to get the services.  So, if you had evidence of market value that may be the direction you head, but all those problems are not there in the typical case.  The typical case, as I have tried to show from the EM, is it is the foreign government under influence of the bribe, buying goods from a person, which the law says should not have happened – or buying services from such a person.

There is one further example given in the EM, there is the grant of the licence or the permit for the factory, and the final example that is given is that we are often dealing with aid money here.  It is not Vietnam, for example, it is the IMF, perhaps, who is given the aid money.  Vietnam is making the decision whether to spend that money on project A or project B.  If the bribe has diverted the money to project A rather than project B, that is the wrong that is being criminalized and it is being addressed by this maximum penalty.

All of that tends to confirm – coming back to your Honour Justice Gleeson’s question – our approach is that the whole of the contract is tainted by this method by which it has been obtained.  Your Honours, as our outline suggests, we say it will work exactly the same way for domestic bribery, that is, bribery of domestic officials, and it will work the same way if one is in the area of cartel provisions under the CCA.  That, if three competitors get together and fix a price and then they each go out and sign up customers to contracts at that price, the benefit they are obtaining is the contract price, and that is obtained because the whole of that contract has been tainted through the criminal conduct.

In the CCA area you would not turn around and say, but we all agreed to charge $100 for product X, but it cost me $70 to make product X, it cost my next person $50, it cost the next one $30 – we each made different benefits from that.  You would simply say $100 is the contract price – that is the benefit.  So, while the present case is about, strictly, foreign bribery and, directly, domestic bribery, we would submit the same approach would comfortably follow through to the areas where this provision is likely to come before the courts in the future.

Your Honours, I have completed the second – sorry, there is one final aspect of the second proposition, which is the turnover limb.  That is the default limb in the sense that if the Court cannot determine the value of the benefit, then you go to the turnover limb, which is 10 per cent of annual turnover.

That limb emerged in the Court of Appeal’s reasoning, even if very, very briefly, in two ways as being used against our argument.  The first way in which it was used was that the Court of Appeal in the last sentence at paragraph 99 embraced what the primary judge had said at paragraph 130, which is repeated on page 110, that our argument somehow collapses the benefit limb into the turnover limb.

The second way the turnover limb came into the case was, again in that paragraph 130 of the primary judge, which appears to be embraced by the Court of Appeal, the way the limbs work together is that there is an incentive for large companies to avoid the turnover limb, which could be catastrophic for them, by disclosing their costs in order to get the benefit down, and that, it is said, is an answer to what your Honour Justice Gordon raised with me, that the Crown does not have the detailed knowledge of the cost, the answer is said to be well, this statute structurally has created the incentive that the offender is going to disgorge all the information about its costs in order to get the benefit down and therefore avoid the turnover limb.

GLEESON J:   But there is an incentive for them to disclose the benefit.

MR GLEESON:   Well, our short point is that you cannot get anything of these incentives out of the way this provision is structured.  The whole argument assumes something about large companies and does not say anything about other companies, but it also assumes some relativity between the benefit from the particular crime and where 10 per cent of annual turnover is, and that simply cannot be known in advance.  So, if this point is pressed by Mr Walker, perhaps the onus is on him to show how this scheme, structurally, has created an incentive to disclose costs or benefits.  We would submit you cannot detect anything of that from the provision.

The other aspect of what the court was saying we would also dispute, namely, that we have collapsed benefit into turnover, which we have not.  That is for three reasons.  If your Honours go back to section 70.2(5), while the benefit – which we identify in our case as the contract price – may, in some cases, feed into annual turnover, the benefit will not always feed into annual turnover because it could be a non‑revenue sum.

Secondly, of course, the annual turnover is wholly unrelated to the crime. It is annual turnover from any source. So, it is designed to create a maximum through a different prism. But, thirdly, if your Honours – we do not ask you to spend much time on this, but if you cast your eyes over subsections (6) and (7), the Parliament has, in fact, given a very specific approach to how annual turnover is to be calculated, and it primarily is the sum of the values of the supplies of the body corporate made or likely to make over the period, so it includes present and future supplies. It then excludes four categories of supplies, and under subsection (7), it used the terms in the GST Act to flesh this out.

So, what you get from that is a highly specific definition of annual turnover. For example, the concept of the value of the supply in subsection (6) will be informed by section 97-5 and equivalent provisions of the GST Act. So, all of that is a highly specific regime and does not tell you anything about how benefit is being valued under the other limb. So, our short point is each of the benefit limb and the turnover limb operate to establish their own potential maximum, and one does not read anything from the turnover limb, which contradicts our argument.

Your Honours, as to our third proposition, I have gone to the key provisions already from the 1999 explanatory memorandum.  The other aspect of the history leading to the mischief is found in the 2010 memorandum, which the Court will have at pages 222 and following.  So, I go to this in terms of ascertaining the mischief for the introduction of the new triple‑tiered maximum.  As a matter of context, this is the point which the Court of Appeal gave primary and great weight to between paragraphs 90 to 94 of the judgment, because the Court said that once one understands this EM, and understands proportionality, our argument must fail.  So, commencing at 222, in the second last paragraph ‑ ‑ ‑

JAGOT J:   Which paragraph number, please?

MR GLEESON:   Page 222 of the book, second last paragraph.

JAGOT J:   I do not think I have got the page number, so I am ‑ ‑ ‑

MR GLEESON:   So, this document is tab 15 ‑ ‑ ‑

JAGOT J:   Thanks, I am just on an electronic version.

MR GLEESON:   It is internal page 188.  So, the substantial increase in the penalty for individuals is explained to avoid this being:

perceived as “a mere cost of doing business” when international transactions worth millions of dollars occur.

So, the language being used in the 2010 EM, very much consistent with the original EM, is to look at the size or the scale of the bribe on the one hand and the transaction being obtained wrongly on the other hand.  We are very much looking at headline prices.

GORDON J:   Another way of putting it, I think, if you read this EM is just to say that profit from bribery is irrelevant to the harm caused to a foreign system.  You would also say a domestic system?

MR GLEESON:   Yes.

GORDON J:   And reputation?

MR GLEESON:   Yes.  It is wholly irrelevant to the statutory purposes of these provisions being enacted under the external affairs power and the overseas trade and commerce power, and the profit calculation itself being wholly dependent on business decisions made by the offender, which may be efficient, inefficient, good, bad or indifferent.  They are just not within the purview of the provision.

GORDON J:   One of the reasons why that sort of analysis might be necessary, I wonder, is because, of course, you would have loss leaders and so that if you are looking at profit, in effect, you are skewing the inquiry.  The reason why I raise that is because that seemed to be what underpins 95 and 99, that the only benefit was, in effect, the profit.

MR GLEESON:   Yes.  Now, Mr Walker’s answer to that question may be, well, if it is a loss leading contract, then that might be a different benefit and so that might be a different valuation exercise and the Crown did not do such an exercise in the present case, so the Crown fails on this limb.  But our answer would be the simpler one, that that possibility, which is a realistic one, is a confirmation that the identification of the contract price as the value is wholly consistent with the statutory purposes, because it would be even more complex than inquiring into costs and expenses to start inquiring into the consequences of the contract being a loss leader.

So I will just draw attention at the foot of that page of the 2010 EM, which is 222 of the book and 188 internally, that the existing fine for the individual is dramatically increased because the $66,000 was:

not ‘effective, proportionate and dissuasive.’

and that is the language of Article 3(1) of the Convention on page 242 in the final tab.  Now, I pause there, because that tells us the sense in which proportionality is being used in the Convention and being used in the thinking leading up to these amendments.  It is not proportionality in the sense of the ultimate sentence being proportionate to the wrongdoing having regard to all relevant factors.  That will occur at the final stage of sentencing.  It is rather saying, if an individual knows in advance, I can never face more than $66,000 for the crime, that is not going to be effective, proportionate and dissuasive in the cost‑benefit analysis of the individual, and yet the Court of Appeal read this proportionality very differently.

STEWARD J:   Do you get anything out of the language of Article 3(3)?  The reference to:

proceeds of the bribery . . . or property the value of which corresponds to that of such proceeds – 

MR GLEESON:   It is probably of limited assistance to the present argument because that is the obligation implemented in the Proceeds of Crime Act ‑ ‑ ‑ 

STEWARD J:   Does that include the last line:

monetary sanctions of comparable effect –

MR GLEESON:   Yes.  Sorry, your Honour.  I had overlooked the last line:

or that monetary sanctions of comparable effect are applicable.

That is perhaps closer to what is occurring here with monetary sanctions.

STEWARD J:   Well, it is not inconsistent with what you are putting.

MR GLEESON:   No, no.  So, effectively, Australia has done both.  We have Proceeds of Crime trying to strip the direct proceeds and then we have penal sanctions which are setting a maximum which is targeting the proceeds, but not, of course, necessarily the ultimate sentence.  So, your Honours, the key bit is on page 223.  After setting out the proposed provision, there is a statement that it is based on the:

penalty available under section 76 of the Trade Practices Act 1974 –

Which came in following the Dawson report, as we have set out in our submissions in‑chief.  Then the next paragraph says, near the end:

This increase will have a significant deterrent effect on those bodies corporate tempted to bribe a foreign public official.

So, deterrence is at the heart of the increase.  And then the next paragraph is the one the at the Court of Appeal has said is the end of our argument – between paragraphs 90 to 94 of the Court of Appeal – but breaking it down, all it says is this:

The temptation to bribe a foreign public official increases with the size of a potential transaction/benefit.

Now, that appears to be focusing on the headline price.  If it is a $50 million contract, the temptation to resort to bribery to win it is greater, and because it is greater, the maximum penalty must target that urge in an appropriate manner.  The second sentence says:

The alternative sanctions available under 70.2(5) have the effect of penalising a body corporate proportionately to either the benefit obtained, or 10% of the annual turnover –

just pausing there.  So, here we have got proportionality being used in what I will call the looser or more general sense – proportionate to the benefit or proportionate to 10 per cent of the annual turnover.  All it really means is by reference to the benefit, or by reference to 10 per cent of turnover, “so that”, and here is the objective:

the risk of being successfully prosecuted for this offence outweighs the potential benefit from the transaction/benefit procured through the bribe.

Everything seems to be focused on the headline or contract price and the size of the bribe.  There is just no interest at all in expenses or profit.  Is that a convenient time, your Honours?

KIEFEL CJ:   Yes, thank you.  The Court will adjourn for 15 minutes.

AT 11.17 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.32 AM:

KIEFEL CJ:   Yes, Mr Gleeson.

MR GLEESON:   Thank you, your Honours.  Could your Honours then compare what the EM said with the Court of Appeal’s reading of it – which is paragraphs 90 to 94 of the Court of Appeal.  The Court set out the key passage of the EM at paragraph 90, and there is nothing in paragraph 91 that is objectionable, but then in paragraph 92 the respondent’s submission – which is described as “important” – had a submission:

by reference to the language of proportionality in the Explanatory Memorandum –

asserts that:

“the “three times multiplier” in the provision only works proportionately if –

it is applied in the respondent’s manner.  Then, the example is given that if a contract has a price of $50 million and it is compared to a contract with a price of $5 million, on the respondent’s view, each has the same benefit of $1 million if the expenses happen to be $49 million for one and $4 million for the other.

Now, on our view, the expenses are irrelevant in each case.  The first contract with a headline price of $50 million produces a benefit of $50 million, and in terms of the objective seriousness of the offence, it makes perfect sense to regard paying a bribe to get a $50 million contract as much more serious than paying a bribe to get a $5 million contract, and that is what the benefit limb identifies.  But this submission goes on argue the contrary, and says:

It does not reflect the relevant criminality –

and the last sentence is the most problematic one:

The competitively priced contactor is penalised, proportionately, more than the rapacious one.”

What seems to be asserted there is that you cannot take the Crown’s approach because the contractor who charged $50 million – expenses $49 million – should be treated as a competitive contractor, whereas that which charges $5 million – $4 million in expenses – is “rapacious”.

Now, there are so many things wrong with that last sentence, and so many assumptions built into it that the submission ought to have been simply dismissed by the Court of Appeal.  It may be that the competitor with the $50 million contract was grossly inefficient running up expenses of $49 million.  It may be that it was pouring vast expenses into the contract to try and establish a loss leader position and further benefits down the track.  There could be any number of reasons why the relationship between expenses and revenue was different between the two competitors, and yet it is that example which the Court of Appeal at 94 says is a powerful one and accords with the primary judge’s reasoning at paragraph 130.

GORDON J:   The thing that seems to underpin all of this is an assumption – as a matter of construction, I think – the benefit, criminality, is in effect a profit.  It seemed to underpin the passages you have just taken us to in 92.  It underpins the no advantage, benefit or value in 99 which is repeated in 95.

MR GLEESON:   Benefit equals profit or it equals some indeterminate step on the way to ascertaining profit.

GORDON J:   Why do you say that?

MR GLEESON:   Because the speech which Mr Walker’s side gave below and gave here is that they are not profit people.  What they are wanting to subtract is not every item that would go into a proper profit calculation.

GORDON J:   I see.  I understand.

MR GLEESON:  They just want to subtract, and it is important, they want to subtract enough items so they can comfortably get the net benefit trebled below the $11 million, and once they have got enough items to do that job, they do not care whether, on a net profit approach, they would get the benefit even lower.

GORDON J:   Am I right to read relevant criminality in that submission to be a reference to the profit?

MR GLEESON:   The short answer is yes, your Honour.  Profit and/or some quasi-profit calculation.  I am only qualifying it to be fair to Mr Walker’s argument or trying to be fair.  But what is wrong with it is to say that the maximum is about reflecting a criminality – and the criminality can only come from the primary offence provision – which is where I have started, where you must in some way take into account at least some expenses that would be relevant to a net profit calculation.

KIEFEL CJ:   Mr Gleeson, do you put any weight in terms of the terminology of subsection (5) and other provisions of section 70 on the word “value” as distinct from other choices?  And so, value of the benefit as say, distinct from a benefit calculated.

MR GLEESON:   Yes, your Honour.  It has the weight that, provided you have accurately identified the benefit, which in this case is just the money secured by the contract, then – can I put a figure on it?  Not, do I have a complex process governed by statute for how I then ascertain a number for it.  So, the clearest contrast at this point, perhaps I will just mention this, is in the Proceeds of Crime Act 2002 (Cth) which is tab 7, commencing at page 46 of the bundle.

While the objects in section 5 are clearly not identical to the objects of setting a maximum sentence and then setting a final sentence, the relevant objects include (a) deprivation of the proceeds of the offence and (d) punishment but, in giving effect to those objects, under section 121, if it is “not a serious offence” for the moment, the penalty amount is to be determined through a fairly rigorous statutory formula.  One assesses:

Under Subdivision B the value of the *benefits the person derived from:

(i)the commission of that offence –

So, it is derivation rather than obtain directly or indirectly, it is not reasonable attribution, and it is an assessment done under Subdivision B.  That takes us to section 122.  Under the statutory assessment, the court must have regard to such evidence as is placed before it concerning any or all of the matters that follow.  So, through that statutory process of assessment, the court comes up with a figure for the value of the benefit.

KIEFEL CJ:   That is because the proceeds of crime legislation is concerned with the disgorgement of benefits from crime.

MR GLEESON:   Yes, and it is trying to get an assessment as accurate as possible of ‑ ‑ ‑

KIEFEL CJ:   What the actual benefit was.

MR GLEESON:   Yes.  So, one can see the different focus and the statutory mandate.  Within that focus, interestingly in paragraph (1)(a), the first matter is you can have regard to:

money, or the value of the property other than money, that, because of the illegal activity, came into –

your possession or control.  Now, that, within its own different context, is a recognition that money coming into your possession or control by reason of crime can be valued as currency.  So, it is a similar notion to the one we advance but in this context.

Then what happens is – passing over various details in section 126 – you are told there are various things that “do not reduce the value of benefits”. That is expressly dealt with. Then, at section 131, which is cut off – if I could hand to the Court the missing page 164 of the reprint, this is the provision telling you how you take tax into account, when you take into account, and for what purpose, and when you take into account penalties paid under other laws. Section 132 is to the same effect.

So, that is the type of mechanism one sees if one is engaged in an attempt to fairly precisely identify the proceeds of the crime and strip them from the person, and none of that is seen in the present provision for good reason.  Yet, in these paragraphs of the Court of Appeal, this is at the heart of why our argument has failed.

Could I just come back to your Honour Justice Gordon’s question and the reason I was quibbling with profit, only to be doubly fair to Mr Walker.  He does not laugh.  I did want to just go to the statement of agreed facts to make the point, which is in paragraph 4(c) of our outline, that the fact the parties agreed numbers here tells the Court very little about the construction exercise.  The agreement was a convenient one for the respondent’s purposes, and I say that because, if your Honours have the book of further materials, at page 51, paragraph 5 records that the respondent:

was awarded and proceeded with three projects in respect of Sequence 3 –

Paragraph 6:

The gross amount paid –

totalled various amounts, producing $10.1 million.  Just pausing there, what we know about those amounts is explained in two places.  Firstly, back on page 13 of the book, paragraphs 45 to 49 identify the conspiracy, the benefits, the officials’ duties and the business.  That cross‑refers back to page 9, paragraphs 20 to 24, and the benefits in particular identified in 21 – these are the bribes – they are the payments of moneys to enable the company to be considered for the tenders for the contracts and then to ensure that the relevant Vietnamese project management unit performed its obligations under the contract.  You see that concept that the purpose of the bribes was both to win the contract and then to make sure that the foreign public officials continued in their corrupt state to pay their moneys under the contracts.  You see that in particular in paragraph 24.  Paragraph a is euphemistically worded:

in order to ensure that a project ran smoothly once awarded, it was necessary to make payments to the relevant Vietnamese municipal PMU client –

Then they were made in the corrupt fashion thereafter described in order to keep them hidden.  So, the conspiracy is to cause payments to be made – a flow of payments over time which are to win the contracts and then to make sure that the public officials do the right thing and keep performing them and do not blow the whistle on the corrupt contracts.

So then, returning to page 52, that flow of payments by way of bribe in one direction produced $10 million under the contracts.  That, we submit, is the benefit.  Then you see in paragraphs 8 and 9 a descent into the internal accounts of the offender and those accounts record payments made to third parties for what are described as in‑country engineering and project delivery services in performance of the contractual obligations, passed through costs, and you see there they total about $8.5 million.

So, this is the exercise which the respondent is commending as appropriate under statute.  We deny it.  The first step is to go into the accounts of the offender and you find things which on their face appear to be costs paid in performance of the contract – that is 8 and 9.  Then you do the exercise in 10 and 11, which is this particular offender has volunteered and agreed that within those passed‑through costs an amount totalling in excess of $200,000 was in fact the bribes paid to the middle man, Mr Thang.

So, the exercise the respondent is contending for is you descend into the accounts, you find things that are recorded as genuine third‑party payments, you, then, through the volunteer offer of the respondent or by some means which is not available to the Crown within the sentencing process, you interrogate those accounts and you find that some of them are, in fact, the bribes. 

Then, paragraphs 12 to 14, you further interrogate the accounts and you find things which are called additional agent expenses.  These are, again, paid to Mr Thang, but there is a dispute between the parties whether these were tainted or not.  The offender says, in paragraph 13: 

that, for abundant caution –

again, that is a little euphemistic:

no payments made to Thang, including for lawful services, should be deducted –

from the pass‑through.  So, the amount in 14, which is an additional $100,000 of the alleged pass‑through costs, does not get deducted.  Then, you have not yet finished it – and this is where I come your Honour Justice Gordon’s question.  In paragraph 15, they say but we spent more; we spent incidental expenses to third party providers.  There is a question whether they are tainted or not, and:

Jacob agrees that, for abundant caution –

that it will not deduct those expenses.  At the stage of those what they call incidental expenses, we are starting to look at matters which may be characterised as indirect expenses – are starting to look like overhead expenses, depending on how you do your net profit calculation.  For instance, finance charges, FOREX losses.  They are certainly more indirectly connected to the transaction.

GORDON J:   Am I right that the wages were not deducted?

MR GLEESON:   They do not seem to have deducted.  So, some of the things which you would bring to account in a full net profit calculation do not seem to have been deducted at all, because 15 seems to be about in‑country expenses as opposed to head office expenses in Australia.  So, then, in 16, we get to the formula:  revised total expenses equals pass‑through costs – that is paragraph 9 – less additional agent expenses – that is paragraph 11 – sorry, add back illegitimate expenses – that is paragraph 11.  Sorry, let me start again.

GORDON J:   Is it not just revised total expenses is the total less pass‑through costs?

MR GLEESON:   It is the total less pass‑through costs, but then it is add back, because the pass‑through costs in 9 include 11 and 14.  So, subtract 9, add back 11, add back 14, and do not subtract 15, and then do not go any further into net profit.  Lo and behold, you get $7.449 million.

So, when you subtract $7.449 million, in paragraph 16 you get what is called the “SKM Retained Amount”, in paragraph 17, $2.68 million, which, when trebled, is comfortably below $11 million.  So, what does all that tell you?  That tells you, firstly, there is no guidance in the statute for any of this exercise.  There is no guidance as to why some things are excluded and some are not.  It is a wholly ad hoc calculation on the facts of the particular case.  Secondly, there is no mechanism within the statute or the sentencing process for the Crown to compel the information which would allow it to interrogate the offender’s accounts in this way.  Thirdly, there is no standard in the statute for distinguishing tainted from untainted costs.  Fourthly, there is no standard for distinguishing direct costs from indirect, incidental or overhead costs. 

The result in the present case is the offender says, I have comfortably identified a net benefit below the $11 million, therefore I have neutralised the benefit limb, therefore I have avoided the turnover limb.  So, I face the $11 million penalty.  But what this illustrates is that there is simply no guidance or standard in the statute by which any of these questions would be answered in any other case, particularly where they are controversial. 

So, if, for example, it made all the difference to whether the trebled amount exceeded $11 million to know whether the additional agent expenses should be deducted – that is paragraph 14 – there is no guidance in the statute.  Particularly with paragraph 15, if that made the difference, there is no guidance.  And then one asks, if you are deducting paragraph 15 expenses, why are you stopping there and not deducting other head office and overhead expenses?  Why are you not deducting tax, for instance, paid in Australia or elsewhere? 

Your Honours, returning to our outline at paragraph 4, I have covered most of these points. The Crown’s argument, textually, is summarised in our paragraph 4(a) through to (e), and contextually paragraph 4(f), we have our argument from consistency, and as to purpose, we have the final arguments in 4(g) and 4(h). I have dealt with paragraph 5. As to paragraph 6, I have dealt with the text of the Proceeds of Crime Act, could I just conclude with the two authorities.  Firstly, Mansfield v Director of Public Prosecutions (WA), which is tab 11 at page 110.  It is a proceeds of crimes case in the area of insider trading.  At page 124, paragraph 49, there is the paragraph which the primary judge placed considerable reliance upon, and the Court of Appeal said it did not need to be reached.  But even in that paragraph, President Steytler commences by saying:

I accept, as did the courts in Nieves, Peterson and Pedersen –

they are the cases reviewed from paragraph 35 in the judgment:

that the relevant provisions of the –

Proceeds ofCrime Act there:

are concerned with benefits and not with net profits, with the consequence that expenses incurred in the course of committing a crime will not ordinarily be taken into account in assessing the value of the benefit obtained.

Now, those three earlier cases were cases where drugs were being sold, but from them a proposition is being taken that, in general, benefit is not an inquiry into net profit.  The reason why that is given – your Honours will see back on page 120, firstly in paragraph 35, in Nieves, in the Victorian Court of Criminal Appeal, the court said:

The receipt of a sum of money is the benefit which a convicted person derives from the commission of the offence . . . The value of the benefit is the amount of money the convicted person has so received.

That is a similar approach to that we commend here.  Then, in Peterson, paragraph 37 on page 120, Justice Marks observed that:

Parliament clearly did not intend that a “benefit” is synonymous with “net profit”.  Its intention in my view was to have forfeited from an offender whatever it was that he got by way of “income” (or an asset representing it) from the crime itself.  There is no reason to draw back from an analogy between “benefit” and “income” . . . no occasion to deduct “expenses”.  “Income”, for example, for the purposes of our tax legislation only has expenses deducted by virtue of express statutory provision.

Just pausing there without going to it, we have given your Honours the relevant income tax authorities of this Court that make that proposition good in paragraph 20 of our submissions in‑chief.  So, the costs are not taken into account.

STEWARD J:   There are some items of income which are net amounts ‑ ‑ ‑ 

MR GLEESON:   Yes.

STEWARD J:   ‑ ‑ ‑ but it is an exception.

MR GLEESON:   It is an exception, and the general principle, as explained by Justice Higgins and Justice Dixon in the cases, is that one is getting the gross figure – the pool – and then through the statutory process, one is working out what is to be deducted, and then one gets taxable income.  So, in contrast to the position, at least of that time in the United Kingdom, it is yet another example on the Commonwealth statute book where there is nothing unusual in the approach we are taking, which is that if there is to be a subtraction exercise, one sees expressly what is to be subtracted.

Just to conclude that paragraph 49 on page 124, President Steytler, having accepted Nieves, Peterson and Pedersen as the general point, then in the second sentence says:

But the point remains that the assessed value of the benefit . . . must be no more than what was acquired (or presumed to have been acquired –

that is a reference to a particular onus in the statutory provision there:

In a case involving the supply of drugs for money, rather than in return for some other property, service –

et cetera:

the whole of the money will be the benefit derived . . . because the whole of the purchase price will be the benefit that has been derived . . . as a result of involvement in the commission of the transaction giving rise to the offence.

Now, that can quite readily be applied to the present case where the whole of the purchase price is derived as a result of involvement in the bribe which has corrupted the purchasing processes of Vietnam.  President Steytler then cautions:

that will not necessarily be so in cases in which the sale of an item is not absolutely prohibited . . . In such a case, depending upon the nature of the prohibition, and the effect of its breach, the property, advantage or benefit that is acquired by the offender may be different to, or less than, the sale price.

So, coming back to one of your Honour Justice Gleeson’s questions earlier this morning, the nature of the prohibition and the effect of its breach may be relevant to the exercise of identification of the benefit and to its valuation, and accepting such an approach we would say where the nature of the prohibition is to say thou shall not obtain contracts from foreign officials or domestic officials through the force of bribery, the effect of the breach is the whole of the contract is tainted and it is perfectly consistent with that to regard the whole of the contract price as the benefit, which is to be valued as such.

In the particular case here, your Honours will see in 50 that with insider trading where the shares had originally been lawfully purchased with lawful money, the approach commended by the Court of Appeal was to identify the benefit not as the full sale price but as the differential between the sale price and the benefit, the price that would have been obtained had they been sold in an informed market, and that is where the law currently stands in the intermediate appellate courts on proceeds of crime and insider trading, but that particular conclusion says nothing to rebut the general proposition or the approach in a case like the present.

Unless your Honours have questions, they are the Crown’s submissions.

KIEFEL CJ:   Yes, thank you, Mr Gleeson.  Yes, Mr Walker.

MR WALKER:   May it please your Honours.  You have already heard sufficiently that there are three particular words in the various collocations that are at the heart of the argument.  The word “advantage” comes from the statutory definition of the word “benefit” and is also used in the collocation “business advantage”, which can be compared with the notion of “business” to which I will be going.  Mercifully, “business” is not defined but “business advantage” is.

The phrase which we submit is at the heart of the matter employs the two other words about which you have already heard a lot, namely, the value of the benefit, and we in particular would answer the question that the Chief Justice addressed to my learned friend just recently concerning what is to be got from the word “value” that it is an assessment, an evaluation, a measure that is looked for by that word used in the expression “value of the benefit”.

In this case, as you might expect from the terms of the offence provisions to which I am going to come, it was agreed, and still is agreed, that the courts below correctly identified the benefit as the award of the contracts, or, in shorthand, the contracts.  So that the phrase in question, which we know has the word “advantage” from the definition of “benefit” lying behind it, can be understood as meaning the value – in the sense of the advantage – of the benefit – in the sense applying in this case, of the contracts.

Now, my learned friend’s argument colloquially is put by him, correctly, with respect, as taking the award of contract, assuming there will be what is called, in his submission a headline price, and saying to look further than that is an inappropriate complication introducing the necromancy of accountants into a sturdy criminal statute, all of that is inappropriate, for reasons I will develop.

For a start, it is not the case, whether in engineering or in professional services contracts of a kind that are useful as a test of these arguments because of the foreign aid context in which this criminalising of conduct by Australians abroad has been enacted, it is useful to consider that not all contracts will have – indeed, many of them could never be regarded as having something called a headline price, whether by reason of so‑called cost plus and the placing of orders in the future as being the imposition of an obligation to do something, or whether because of valuation provisions which depend upon matters that could not be the subject of monetary statement in advance.

So, if there is anything in the notion that difficulties of calculation for an assessment of the value of a benefit should be used in understanding the meaning of that expression, then it cuts both ways, and it certainly means that one cannot make an assumption which is simplistically based that there is always going to be such a thing as a headline price.

Now, while I am talking about headline prices, your Honours will remember that my learned friend used the example of the boast of having obtained a $10 million contract.  Assuming one is talking about an engineering or professional services outfit, as the business that we purchased was, then your Honours will appreciate how fatuous it would be for anyone, whether a business pages journalist or an auditor, to say that a $10 million contract is worth $10 million to the company.  It is, of course, the skill and dangers of those highly skilled persons in such corporations who construct bids to weigh up whether or not the gain will be worth the candle.

The notion of describing a $10 million contract – by which we understand our friend means a contract which appears to stipulate for the eventual receipt of $10 million revenue – the notion of describing that as being worth $10 million or having a value of $10 million is, in our submission, in the face of ordinary understanding which, in the case of corporate accounts, at least, is given legal sanction.  No one could in a balance sheet, as my learned friend referred to, possibly say that the provision for the future receipt, presumably over time of an aggregate of $10 million revenue in return for the goods and services or other considerations stipulated to be provided in return for that revenue, means that the contract is worth that amount or has a value of that amount or has provided an advantage worth that amount.  Indeed, in the real world, it will always be less.  No one has ever yet managed to strike a contract said to be for $10 million which would not involve any cost in performance.

Now, your Honours, it is against that background and the statutory provisions to which my friend appropriately took your Honours that we say, as our first proposition has it, that there has not been an identification of error in terms of the application of canons or methods of statutory interpretation.  Obviously, the word “benefit” is of potentially broad import and, obviously, it is affected by context.  None of that is transgressed as providing the setting in which the Court has to interpret the words by the reasoning in the Court of Appeal.

Now, if at that point I may go, in order to answer some of our friend’s arguments to the provisions in question, could I, like my friend, having noted the definitions that I have already referred to, from 70.1, 23 of the book, take your Honours, again, back to 26 and following in the book.  Section 70.2 where the word “benefit” omnipresent in the first of the elements in the various descriptions that might make out the first of the elements.  My friend drew that to attention in subparagraphs (i), (ii), (iii), and (iv), of paragraph (a) of subsection (1).

Those benefits, of course, are what might be called, in shorthand, for the purposes of argument, the bribe.  The bribe is paid in order to achieve an award, as I shall show, of a kind that is described by the statutory words.  For the purpose of this argument, in shorthand, that might be called the prize.  Nothing concerning the valuation of the bribe is relevant to the determination of the maximum penalty.  Plainly, the provisions of subsection (5), to which we are coming, are concerned with the value of the prize.

So, at the outset, in our submission, the mere fact that the very general English word “benefit”, which, as recognised in the definition, idiomatically, involves the concept of “advantage” or “betterment”, the very fact that that is used both for the person who receives a bribe – it is, from the point of view of the person bribed, a benefit – and it is designed to achieve some advantage, also called a benefit, for the person paying the bribe – the prize.

One sees that in terms of the next element, namely that the bribe – this is paragraph (b) of subsection (1), is “not legitimately due” to the person bribed; is, under subsection (2) and one can note as well the cognate provisions of subsection (3), to be decided or, as the statute has it, in working that out there is a mandated disregard of the value of the benefit, meaning the value of the bribe.  So, the statute on its face removes completely any question of gross or net, if that could ever sensibly be applied in relation to the bribe itself.  One can put, surely, aside the notion of the overheads of receiving bribes by foreign officials who solicit them, whatever that might be:  the brown paper envelopes, who knows?

What Parliament has done in those provisions – you see them in paragraphs (b) of subsections (2) and (3) in section 70.2 – is just to mean that is not a concept that ever plays at all.  Therefore, there is nothing to be got from the fact that the general word “benefit” with its unnecessarily but emphatically definitional notion of advantage is used for the bribe as much as it is used for the prize.

Of course, in order for a bribe to work its intended vicious effect, it has to be perceived as something of advantage to the person receiving it.  One would not bribe by insulting a person or taking their wallet; you would bribe by flattering them and giving them money.  And it is for those reasons, in our submission, that the dwelling by our learned friends upon benefit on what I might call the bribe side of these provisions does not even begin to inform as to what the word means in the collocation “the value of the benefit” in subsection (5), to which I am about to come.

Can I, however, before leaving the elements of the offence, remind you that the third element which is paragraph (c) in subsection (1) of section 70.2, places all of this in the milieu of commerce because one sees that it is the intersection between a foreign official and the notion of business that is at the heart of this species of bribery.  So, it is in order to obtain or retain business that manifests extraterritorial legislative interest of Australia, being the conduct of and, maybe, the reputation, accordingly, of Australians trading abroad.

So, one sees that the focus here is obtaining or retaining business, mercifully undefined, but would certainly include the carrying on of commercial conduct including – though not necessarily only – through the medium of contracts.  And one sees that that business includes the notion of a so‑called business advantage, which is defined in an unhelpful, that is, not particularly informative way – it means “a business advantage”.

GLEESON J:   It could be an illegal business?

MR WALKER:   In the obtaining or retaining business, one does not see – there is no indication, I should say – that our legislature has proceeded on the basis that so long as there is no bribery involved it is fine for Australian businesses to be involved in illegal business abroad.  This statute is not concerned with that.  Presumably that is left to the criminal administration of the law in those foreign places.  But there is nothing interpretively useful for our issue designed – that is to be gained from considering that the business in question, which this statute says is not to be obtained by bribery, might itself be illegal.  There are so many ways in which things can be illegal, from inadequate safety precautions through to out and out cultivation of opium poppies, that nothing useful is to be obtained from contemplating that that might be illegal business.

Now, subparagraph (2), however, which uses the phrase elsewhere found, and to which I am about to come in subsections (2) and (3), of something being “not legitimately due”, certainly contemplates that there is a milieu being contemplated which but for the bribe would be legitimate.  In other words, there may be payments which are made to a foreign public official in the exercise of the official’s duty as such which can be legitimately due.  That is expressly contemplated by the element requiring that such a benefit not be “to obtain or retain a business advantage” that is “not legitimately due”.

Now, under subsections (2) and (3), as I have noted for other purposes already, that notion of what is “not legitimately due” reflecting, no doubt, global experience, is at pains in paragraphs (a) and (c) in each of those subsections, to ensure that what might be called the climate, commercially and governmentally, of the foreign jurisdiction is not to be taken into account in considering that which is legitimately due.  In other words, a global determination, as it were, mutually to lift standards of conduct.  So, against that background, with respect to the penalties for corporations, which is what this case is about, one comes to subsection (5).

Now, your Honours already know the text, obviously, and how the Crown puts it with respect to the so‑called three limbs.  They are probably better understood as two limbs, with the second having two parts to it.  In this case, as you know, by an agreement – it is not simply convenient; it is an agreement by the Crown for the purposes of doing what the Crown does in a prosecution, including on sentence.  There was full agreement and in detail that the court could determine the value of the benefit, whatever that means.  There was agreement that could be done.  That means that for our case, paragraph (c), which is the second alternative in the second limb of the determination of maximum penalty, did not apply and cannot apply, and the Crown is not arguing for it to apply.  It is, of course, interpretatively important, and we do not criticise the Crown for paying regard to it and the Court must take it into account.  We accept that. 

It is to be remembered that this is a formula for determining a maximum penalty.  It is not a formula for determining in the context of legislative powers of forfeiture, for example, including by way of disgorgement, the monetary reflex of property, which is not just money in the context of other statutes such as proceeds of crime to which your attention has been drawn.  It is just a formula for setting maximum penalty.  Now, particularly when you look at paragraphs (a) and (c) of subsection (5), I accept the fact that it is just a formula for a maximum penalty might momentarily tell against our argument because those paragraphs plainly enough have no regard whatever in the way they are devised to the value of the benefit, whatever that phrase means, derived from the contract awarded pursuant to the bribe, to which I am going to come back. 

Paragraph (a) is just subject to a regulated indexation; (a) is just a figure – happens to be $11 million.  Paragraph (c) has to do with transactions or business not including, almost certainly, the contract in question.  That last does not follow necessarily, but very likely will because it is the 12 months ending at the end of the month in which the conduct constituting the offence occurred.  In this case, for example, the conspiracy offence looking to a substantive offence of bribery in the nature of things will often, if not always, precede the receipt of any revenue under a contract awarded.  So, it is pretty plain on the face of things that (c) as well, like (a), will produce – if it comes to be the test applied in the formula, it will produce a figure that really has nothing to do either causatively or commercially with the size of the advantage derived by the wrongdoer, by the offender.

In our submission, and by a contrast against what might be called, without criticism, the arbitrary nature of those paragraph (a) and (c) tests for the maximum penalty, paragraph (b), which is what the Court is concerned with, no doubt picking up the European notion of proportionality to which your attention has been drawn from the OECD Convention, turns attention, unlike (a) and (c), to a figure which is produced by looking specifically at the offending conduct and to an aspect of the offending conduct which could be described in general terms as a consequence.

That is a very neutral expression because it is not just that which follows after the offending, it is identifying in a familiar way, not confined to Australian jurisprudence, the purpose of the criminal endeavour which is able to be seen as the ill‑gotten gain which, without any strain or oddity, informs the interpretation of penalty provisions and, in any event, will inform a sentencing discretion, particularly in the realm of commercial regulation of conduct by criminal sanction, where it is a well‑known concept, to which our learned friend appropriately referred, that fines for corporations lacking bodies and souls should not be simply factored in as a cost of doing business; in other words, defeating the intended deterrent effect of having a monetary sanction.

It is for those reasons, in our submission, that unlike (a) and (c), which are arbitrary in the sense that they do not care about what the commercial project was, criminally assisted by a bribe, (b) does, and in a familiar way over time and different places triples the value of the benefit in order – both facially and as it is worked out from in case according to particular facts – to deter those who might be inclined to see this kind of conduct as worthwhile carrying out because you can bear the fine as a cost which you can then recover from other customers.

So, the notion of treble or triple the value of the benefit is an accepted legislative response in order to achieve, as my friend fairly puts it, that meaning of the notion of proportionate which is otherwise probably not much more than a term of self‑praise applied by those drawing the Convention and seeing a deficiency in Australian performance of it, which led to the amendments of an introduced subsection (5) in its current form.

Now, your Honours, it is fairly plain then that if we are looking at that part of the formula which, unlike the other parts is not arbitrary in the sense of having no connection with the fruit sought to be gained from the wrongdoing, it is fairly obvious that there needs to be a real factual nexus conveyed by the words:

if the court can determine the value of the benefit –

a phrase which contemplates the forensic challenge – I will come back to questions of onus in a moment – and then the phrase:

obtained directly or indirectly –

and I will come back, in particular, to the notion of indirectly not at play in this case, and to the “reasonably attributable” phrase that my learned friend has made submissions about with which we really do not have much difference.  “Reasonably attributable” almost certainly requires a causal connection, but like our friends, we would accept – that is, we would accept what our friends urge, namely, that a reasonable attribution is not to be enmeshed in technicalities of strict logic, for example.  Knowledge of the world and the world of commerce, no doubt, will be much more useful.

Now, the conduct constituting the offence, going back to the element that your Honours will recall in 70.2(1)(c), is conduct with a view to business, and in this case and in the paradigm case, as the first instance judge noted, that will be business in the form of a contract under which revenue is expected to flow in return for goods and services or worker materials to be supplied.

Coming back to “indirectly”, we accept that there are many ways in which there can be indirect benefit or obtaining, indirectly, benefit from this kind of bribery offence.  It may be said that some of the idioms used to describe this kind of conduct capture the flavour, such as “greasing the wheels of commerce”.  So, whether it is the engendering of an overall favourable milieu for your business activities, including into the future, or whether it is the more specific notion of a loss leader – so, a first contract about which the recipient administration can boast as to its keen price and successful outcome in order, then, to provide a favourable entrée to perhaps more profitable ventures down the line – or any other way in which there could be an indirect benefit obtained by reason of the bribery conduct with the intent to obtain business or a business advantage, those are matters which will call for a case‑by‑case determination.  That is what (5)(b) requires.

In its interpretation, one cannot call in aid, as our friends really have, particularly towards the end of my friend’s address, the notion that there may be problematic or arguable – certainly contestable – matters of fact and evaluation involved in the question, can the Court determine the value of the benefit and, depending upon the outcome of that inquiry, if so, what that value is.

GAGELER J:   Mr Walker, can I ask a question about the benefit that we are valuing in this case?

MR WALKER:   Yes.

GAGELER J:   Your outline of submissions seems to be at pains to say that the benefit is the contract and only the contract, whereas it is put against you that this is a contract that has been performed or has been obtained by your client through the performance of the contract as money, and that we are valuing the money.

MR WALKER:   No.  I am sorry, that is put against me.

GAGELER J:   I am sorry, that is what was being put – so we are valuing different things on the different cases?

MR WALKER:   No, that is right, your Honour.  That is put against us.  It is an argument that perhaps runs most neatly against us.  In a case such as the present where you can close the books, it is a completed exercise, obviously enough these are provisions that are not limited to what I will call completed business – in other words, fully performed and finally paid contracts.  That alone would suggest that you will not get much interpretive assistance from contemplating that in many, if not most, cases one will be able to look at a contract awarded being the business which was the object of the bribe and be able to look at what I will call the accounts of that business, revenue and expenditure at its simplest or crudest.

But it was common ground and surely still is that there is no error below in regarding the benefit in question as the contracts which were awarded or, as the Chief Justice below spells out, understanding a contract in commercial or economic terms as an opportunity, pursuant to that chose in action, to derive by your performance an entitlement to be paid in accordance with it.

KIEFEL CJ:   Mr Walker, if there is really no divergence about the benefit being the contract, the question then is:  what is the real issue here?  And is the issue then simply whether costs are to be brought into account in relation to the contract?

MR WALKER:   Boiled down, yes.  I am not sure whether I can just boil it down, but boil it down, yes. 

KIEFEL CJ:   Essentially.

EDELMAN J:   You would accept, would you not, that even if the characterisation or the nature of the benefit does not change from the moment the contract is awarded until the moment the contract is fully executed, the value of the benefit itself might change.  So, at the start of the contract, the value of the benefit might be – even here, on the appellant’s case, at the start of the contract, the value of the benefit might be, say, $15 million but, by the end, it might turn out to be $50 million. 

MR WALKER:   Yes.  We know, however, that there has to be history in order for (b) in subsection (5) to apply.  Why do I say history?  It is because the language is “have obtained”, not stood to obtain, or hoped to obtain, or projected to obtain, but “have obtained”.  So, these are provisions which, whether this helps an offender or not, may not be able to be resorted to for the maximum penalty if somebody is caught and pleads guilty before they have performed the work for which would entitle them to send a progress payment claim.

That means that, though what Justice Edelman has put to me is very importantly true, of all business that is obtained in the form of contracts awarded, namely, its value will change according to a number of different things and it may be said – probably, in most countries – by reference to a number of different markets – the labour market, market for power, the market for cement, whatever, and the foreign exchange market, for that matter.  That value is, in the nature of value, something which will fluctuate according to the fluctuation of factors that inform the assessment of value.

But we know that (5)(b) says that you will get this tailored, as it were, maximum – depending upon its comparison with $11 million, you will get that only if the court can determine the value of the benefit that you, the wrongdoer, have obtained.  In this case, as the agreed facts showed, there had been money paid and expenses incurred pursuant to the contracts.  The money paid and the expenses incurred, that is, the provision of the services, including by local subcontractors, are indifferently the outcome of the contract being performed.

It is not true that the revenue received is somehow more to be attributed to the contract than the expenditures by which the services are provided for which the money is paid.  They are – to use the old expressions – synallagmatic; you only get the money because you have provided the services.  It is for those reasons, in our submission, that when one looks at (b), recalls its contrast with (a) and (c) which have that essential arbitrariness not to do with the actual conduct in question, one starts with a proposition that this is a provision by which it would appear, subject to the arithmetic comparison, that the word “the greatest” means that you are looking at something which will require and ad hoc, to use a deprecatory phrase our friend used, or particular, fact-based assessment.

The Parliament plainly understood that that may be problematic, or indeed, not possible – for the Court that is.  In other words, leaving aside questions of onus, the evidence that is before the Court will be in a state, whatever that state may be, enabling the Court to say whether or not it can determine the value of the benefit.

STEWARD J:   Is another way of looking at it in the context of 70.2(c), really from the perspective of the briber, the word “benefit” is really talking about the business or the “business advantage” which was obtained, and which is expressed in this case ‑ ‑ ‑ 

MR WALKER:   As the contract.

STEWARD J:   In the contracts that were won.

MR WALKER:   Yes.

STEWARD J:   So, if you read it as business – no one values a business by ignoring its expenses.

MR WALKER:   Not in the real world.

STEWARD J:   No.

MR WALKER:   And not in the legally‑sanctioned world of public disclosures for public companies and proper accounts for private companies.

STEWARD J:   So, then the question becomes, from your perspective, how do you work out what your expenses are?

MR WALKER:   Yes, yes.  That is our problem.

STEWARD J:   Which ones are you going to include?

MR WALKER:   That is our problem.  The word “incentives” has been used in this context.  Can I just try to unpack that a bit?  It would not be right for your Honours to approach this interpretive question by worrying about whether we are being given incentives and are the incentives good enough to open our books?  That is not a proper way to approach it.

But practically speaking, if a wrongdoer in our position, looking at what the maximum penalty formula is, and having some notion, one would hope, of what (5)(c) would produce, and being able to find out that (5)(a) means 11, then, plainly enough, you either have an incentive or not to spend money on accountants, witnesses, and even lawyers, to explore (5)(b).  In other words, of course there has to be a reason.  Your Honours will not be appalled to know self‑interest informs decisions as to what people will do by way of assembling material for forensic presentation.

So, under (5)(b), of course, if it is thought that that would lower the ceiling, given the application of (a) and (c), then one in our position attends to the investigation, self‑investigation, for the purposes of, can I put together material that will persuade a court that it can determine the value – and then, most importantly – and if I do that, what is the figure?  Now, one can see immediately that depending upon the nature of the corporation, how big it is, which is not an element in the offending, it has to do with the character of the offender, but not by reason of the offending, (c) may or may not be tempting to leave operating, and your Honours can see the obvious arithmetic.

So, depending upon the turnover, depending upon its relation to, as it happens, $11 million, as the courts below observed and the Chief Justice observes, then it will operate, and if the Crown wants some higher figure produced by resort to (5)(b) then the so‑called incentive switches to the Crown, if it wants to produce by the treble or triple value of benefit approach, a higher figure.  Incentives is perhaps not really an appropriate word to use with respect to the Crown that has no self‑interest, but obviously the Crown has a duty to make submissions about what the applicable maximum penalty is, because of the possible significance depending upon the facts of the case of the maximum penalty to the ultimate self‑sentencing discretion in the particular case.

So, not a matter, really, of the incentive only being on us.  It is either an incentive or duty to see whether (5)(b) applies.  We do not have duties, so maybe incentive applies to us.  But the onus, plainly, remains on the Crown to make out what the maximum penalty is.  But we are neither silent nor gagged in that exercise and, if it is in our self-interest, we will obviously put forward what, Blatch v Archer style, one would expect from us.

Now, my friend put, although this could not be relevant surely, to interpretation, my friend put that the Crown really cannot do anything about the ascertainment of the value of the benefit under (5)(b).  That is probably not right, bearing in mind the availability of subpoenas and the unavailability of privilege against self-incrimination for a corporation.  But, leaving that matter of detail aside, the question will be, almost regardless of onus, can the Court determine the value of the benefit?

And, in the course of that inquiry, interpretatively, you would not be – I should not put it that way.  That the Court would not be deterred from the natural meaning of those words by the fact that there may be cases where it is too obscure or difficult, or too uncertain, or turns on matters which are unstable in terms, for example, of the assessment involved.  And I have in mind here abstruse theories, for example, about the nature and extent of so-called overhead expenses which ought to be attributed as a cost to the earning of revenue, there not being complete agreement and there requiring to be, from time to time, collaboration among professional associations to work out acceptable accounting standards, for example.

A court approaching paragraph (5)(b) can, of course, reach the conclusion that, bearing in mind the problematic nature of such material in light of the opposing arguments, the Court cannot determine the value of the benefit, meaning, of course cannot to that degree of satisfaction which is appropriate when the Court is making such a serious adjudication as the maximum penalty applicable to a corporation.

Now, in that context, in our submission, it is unidiomatic, uncommercial and therefore unlikely, given the nature of paragraph (b) as a tailored test of maximum penalty, that one would regard the phrase “value of the benefit” when the benefit is the contract as leaving out of account what performance of that contract on both sides will add to the treasure of the corporation.  Is that a convenient time, your Honour?

KIEFEL CJ:   Yes, thank you, Mr Walker.  The Court will adjourn until 2.15 pm.

AT 12.48 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.15 PM:

KIEFEL CJ:   Yes, Mr Walker.

MR WALKER:   Your Honours, I am up to proposition 9 in our outline.  Can I just complete what I wanted to say on that topic.  Our learned friend sought to draw contrasts with other provisions for other purposes in other statutes and the provisions before the Court today, pointing to detailed prescriptions or stipulations as to inclusions or exclusions from such notions as value, for example, of benefit – or analogous concepts in those other statutes.

It is true that there is not elaborate or detailed statutory prescription or machinery in these provisions concerning value, but that there will be a forensic exercise undertaken is explicit in the contemplation that the Court may find it is not able to determine the value of the benefit.

That is a factual question which no doubt involves some evaluative assessments, utterly familiar – as you have noted, we have argued in our written submissions to the courts – both at common law and in many statutory contexts.  That is no indicator one way or the other as to whether when one undertakes to value the benefit – which consists of a contract awarded – whether one takes into account, in the commercial way that we have argued, the advantage, the gain, the extent by which somebody is better for having won that contract or not.

May I depart slightly from our order to insert here an answer to some matters my learned friend raised this morning with respect to the statute.  Attention was drawn to the turnover provisions in section 70.2(6), that is, there is a detailed prescription for the concept of turnover which is, as we know, the paragraph (3)(c) possible test for the maximum penalty.

As my friend points out, there are terms of art, including from the GST statute, that are used in those provisions, none of which casts any light whatever on whether the value of the benefit, the phrase with which we are concerned, should be, to put it in the simplistic way we have all adopted, net or gross. In particular, the word “values” is not used in a way which produces any requirement of so‑called consistent meaning, whether that could possibly produce here in the phrase “the sum of the values of all the supplies that the body corporate”, et cetera has made, subject, as my learned friend appropriately points out, to the particular provisions of the GST Act, not themselves the most plain language you will find. The central concept there, the core concept there, has to do, obviously, with price with respect to the taxing of transactions, so‑called supplies.

Your Honours will note that there is, in the middle of subsection (6), this notion of supplies not only that have been made or that the body corporate has made but also is “likely to make” during that period, which is a concept that may, for the purposes of subsection (6), may bring into play notions that, in a slightly different context, we might call work in progress, WIP.  Who knows, but obviously, if you are talking about the values of supplies that are likely to be made, that may or may not be a problematic assessment, but it is called for to be made by subsection (6).  There is no choice here.  One cannot admit defeat.  As a Court, there just will have to be that assessment.

These are not provisions which necessarily will spare a tribunal and the parties who seek to obtain advantage before the tribunal, effort and the need to clarify that which would otherwise be obscure.  Those are not, in our submission, weighty matters at all in favour of the interpretative approach urged by the Crown.  Even more remote, we say, is what our learned friends this morning called in aid with respect to section 70.4, the facilitation payments defence.

Obviously, there are evaluative assessments there as well:  what is a “minor nature”, for example.  Nothing here, with respect, casts any light whatever on the notion of the value of the benefit when that is an awarded contract for the purposes of the formula to determine the maximum penalty.  Indeed, there are no phrases which are similar except for the stipulated record, which is a price for those who wish to maintain such a defence.

Subsection (3) of section 70.4 requires “the value of the benefit concerned” to be recorded, but that takes us right back to where we started under the statute, that is benefit meaning bribe, not benefit meaning the enhancement of the position of the person offering the bribe or, in this case, the coyly‑named facilitation payment.

GORDON J:   Do we take anything from the fact that routine government action does not include what is set out in (2)(c)?

MR WALKER:   Well, we take this from it, that it would appear ‑ ‑ ‑

GORDON J:   I should also say (2)(d).

MR WALKER:   Yes, (c) and (d) can be seen to – not reflect, exactly but they conjure the same notions that you will find in the third element of the offence, that is, in 70.2(1)(c), and what one takes from it is that any bribe, even if euphemistically called a facilitation payment, in the milieu of decisions that do involve whether to award new business, for example, will not attract this defence.  Routine government action is defined in ways that may well be, with uncooperative officials, an obstacle to enjoying the benefit of an awarded contract, but the defence is not available for obtaining the contract in the first place.

There is simply nothing to be gathered from the fact that the expression “the value of the benefit” appears in subsection (3)(a).  It is, as I say, that is the benefit being the facilitation payment, being that which has to be, by value, of a minor nature, see 70.4(1)(a).  Again, though the Crown does not do it, I suppose you could observe about that there is no machinery stipulated there, but that does not mean that those words cannot be given effect according to the facts of a particular case if and when they arise.  That, again, is no argument concerning interpretation.

In proposition 10 we say that which I really do not need to elaborate further – can I simply say this – the concept of proceeds of bribery to which my learned friend drew attention from Article 3.3 in the OECD Convention and to which Justice Steward has drawn attention, that equally does not take us any further.

It is always, in our submission, an uncertain foundation for interpretation of an Australian statute to look at different words in a Convention which is being implemented perhaps, by the municipal legislation.  It really does not take us further.  In any event, it is a compressed phrase.  It may even be a translated phrase – proceeds of bribery – and it certainly involves consideration of consequences which would include, naturally enough, the so-called benefit that the person giving the bribe is trying to achieve.

STEWARD J:   You might read it as the net proceeds of bribery in any event.

MR WALKER:   Exactly.  It is completely indifferent as to that question.  If anything, the word “proceeds” would rather suggest it is what you are trying to obtain, and one does not try to obtain losing positions.

With respect to the figures in question, could I also make this observation with respect to how the matter was put against us this morning.  There is nothing in the agreed facts that exhibits any manipulation by us in negotiating those facts.  There is no suggestion that the Crown was, in any respect, less than conscientious in making those agreements.  No court below has recorded any misgivings about it, and the Court ought to reject any deprecatory notion that may or may not have been advanced in our friends’ argument there was some kind of manipulation of figures.  There was an open, as recorded in the reasons below, there was an open process by which material was made available.

Your Honours will recall that the cooperation in this case included description of our own wrongdoing – by which I mean the wrongdoing of the corporation that we acquired – under previous management, we hasten to point out.  That cooperation included at the highest level – the superlatives cannot be increased in terms of the commendation of our conduct concerning such matters including, as it were, opening books.  So, your Honour should not be troubled at all by the notion that the figures came out as they did.

Proposition 11, I have already referred, I think, to everything I wanted to say about that but it, like proposition 10, concerns resort to these extrinsic materials and to other context including certain other statutory contexts.  We urge, ultimately, the proper way to proceed being in accordance with the last paragraph of our written submission in this Court.  At bottom, this is a matter of interpreting in its context the statutory wording which is before this Court in this case.

In proposition 12 we – nonetheless responding to the resource, such as it might be, of those other cases about other statutes in other contexts, we would urge, with respect, that what President Steytler has said – to which my learned friend has drawn attention – is an entirely acceptable rationale for the different outcomes in different cases.  No error, in our submission, is shown by the Court of Criminal Appeal in New South Wales taking a cue in that regard, none of which is crucial to the final reasoning or the outcome.  It turns upon the interpretation of the words in question.

Your Honours, just some other matters which arise in response to the address this morning.  Mention has been made of what might be called the time value of money as a factor and familiar working notions such as net present value or discounted cash flows.  They are all involved in the notion of valuing a benefit that has been obtained and we entirely agree that a contract either not performed at all but executory in the sense that there is an obligation to perform it, or a contract not yet fulfilled – which may mean that there has been more expenditure than revenues at any given stage – we entirely agree that those are matters that can be valued in a particular case depending upon its facts and the court will ultimately, cued by the statute’s wording, decide whether it can determine the value and, if it does not, it moves to the other alternative in the second limb.

In our submission, that tells one nothing except in favour of our interpretation because the notion that you would ever bother to consider the net present value or discounted cash flow analysis of a right to receive payment in return for expenditure – that is, outlay on your part – the idea that you would do that in some, as it were, gross sense is absurd.  It has no meaning whatever.  There is no reality, accounting or commercial, with respect to the figure that would thus be produced.

We entirely accept, as one would expect, that regardless of what the maximum penalty is, the modesty, if I can call it that – that is, the relatively small sum of the commercial benefit in the sense of being better off as a result of getting the contracts awarded to you – we entirely accept that that will be a relevant matter, as the Crown also properly accepts, in what might be called mitigation in sentencing of the familiar kind; namely, that it is usually relevant, probably never decisive, in the multifactorial weighing up of the gravity of the offending and also aspects of deterrence, both specific and general.  That is, it would not, on its face, be an error to distinguish unfavourably between two punitive offenders, one of whom stood to make $100 million profit – and I use that word advisedly – whereas another made virtually no profit, if any, at all.  It would be, on its face, probably relevant in unfavourably distinguishing between two such offenders if all other things were equal in relation to a sentence to be imposed.

GORDON J:   You would not take it into account twice though, would you?

MR WALKER:   No.  No, not at all.  But is not taken into account in fixing a maximum, and that is the next point I wanted to say.  We know as a matter of principle in this Court concerning sentencing statutes and the sentencing discretion that one does not apply, as it were, a geometric or fractionating approach, let alone by difficult standards like a spectrum of seriousness or gravity of an offending leading to the difficult concept of the most serious case of the kind imaginable, et cetera.  One does not treat a maximum penalty as playing a part in sentencing to that, as it were, formulaic or arithmetic sense.

It is for those reasons, in our submission, that there will not be double counting if one sees the tailored possibility in paragraph (b) as one that does require looking to how a party has commercially benefited by reason of the award of the contract, which can be reasonably attributed to the payment of the bribe. 

Justice Gleeson raised with our friend concerning valuation the unlikelihood that one would proceed by assuming that the contract in question could be assigned.  We entirely accept that.  Value of a contract does not depend on its assignability, manifestly, and assignability is simply a useful test of the fact that the market frequently – probably daily, particularly if you are thinking about bankers and commercial customers –  value contracts sometimes – sometimes – by reason of the fact that the contracts may be, for example, portfolios that can be sold, as life insurers have demonstrated.

May it please your Honours.

KIEFEL CJ:   Yes, thank you, Mr Walker.  Reply, Mr Gleeson?

MR GLEESON:   Thank you, your Honours.  The first point concerns Mr Walker’s answer to your Honour Justice Gageler’s question whether it is at least a strand of our case that it is no more complicated than the contract was obtained by a bribe, the contract was performed, performance produced money, and money can be valued as currency.  At least part of Mr Walker’s answer was that that case may not be available to the Crown as it does not reflect the parties’ agreement about the role of the contract.

If it is submitted that that case is not available to the Crown, can I show your Honours that it is.  Firstly, it is the case put in the Court of ‑ ‑ ‑ 

MR WALKER:   We do not say that.

MR GLEESON:   You do not say that.  All right.  It is accepted that that case is available to the Crown.  I will simply say that it was the case summarised at paragraphs 79 to 80 of the Court of Appeal judgment.  It is the case reflected in the agreed facts.  If your Honours have the book of further materials again, the parties joined issue because, on page 51 at paragraph 5, they agreed under the heading “benefit” that the contracts were awarded. 

That appears to be the critical agreement that there was a linkage as in a reasonable attribution between the paying of the bribes over time and the awarding and the proceeding with the performance of the contracts.  Then, the parties differed at paragraph 7.  The Crown said the benefit is, then, the gross sum received under the contracts, and the position of the respondent, by contrast, is at paragraph 18.  We submit that that simple way of framing the case matches the statute, particularly when one returns to the concept of a benefit obtained directly or indirectly and reasonably attributable to the conduct ‑ ‑ ‑

KIEFEL CJ:   What you are saying is it meets the statute, but does that mean that you are narrowing your argument to something less general than costs are never brought into account in relation to a contract that is entered into because you are now saying that the case – the Crown is relying upon this contract having been performed?

MR GLEESON:   That is the Crown’s case at its narrowest, your Honour, that this contract was performed, produced money ‑ ‑ ‑

KIEFEL CJ:   Well, what is the Crown’s case?  Is it in the alternative, which is rather unattractive?  Is it that on the facts of this case, the contract has been before moneys have been received, that is the benefit, and we need go no further?

MR GLEESON:   That is the primary case.  Your Honours need go no further; that is the primary case.

KIEFEL CJ:   In which case we do not have to consider whether, in all cases, to bring costs into account where the question is really an executory contract?

MR GLEESON:   Yes, at the far extreme there is the possibility of the whole executory contract that was raised with me where that question would fall critically for decision, but at least that is the core case on this contract, that the Crown does say that the absence of any reference to costs or a standard by which costs are to be subtracted is a significant matter in the construction exercise and ‑ ‑ ‑

EDELMAN J:   I may have misunderstood your primary submission.  I had understood your primary submission to be one of consistency, that it does not matter how much of the contract happened to have been performed – whether none of the contract was performed or all of the contract was performed, it is the headline price of the contract that forms the value of the contract, or the value of the benefit.

MR GLEESON:   I attempted to say in answer to your Honour’s question this morning that the example your Honour was pressing me with was not our case.  Our case was that what we would call the simple case, the common case, where it has been performed.  I was then attempting to give my best answer to your Honour’s question of how it would follow through in all cases.

The argument we were putting – which is why I went to 79 and 80 of the Court of Appeal judgment – was that the emphasis is on the money flows, both at the stage of the primary offence – the flow in one direction by the bribe – and then at the second stage, it is on the flow back, by reason of the bribe doing its work.  Now that way of framing the argument was focusing most squarely on a case like the present where the contract was performed and the money did its work.

That is the central point upon which the appeal has always been joined, your Honour Chief Justice, that is why it is there.  I seek to clarify that.  It was a layer of the argument then which may take one into cases not before the Court, such as the purely executory contract of what do we – what can we ever do with cost.  That is where the parties seem to be joined on a second level.  We were saying the absence of any reference to cost or a standard by which costs are to be subtracted is a significant matter in the construction exercise.  The competing argument which you have heard most clearly today is, you do not need to worry about the absence of a standard, ever, because it will all work itself out on a case‑by‑case basis, depending on a forensic contest.

That, we submit, would be an erroneous construction for the Court to adopt, that costs can simply be left to be a forensic contest.  It is critical that there is no standard in here by which tainted costs are to be treated differently to untainted costs, there is no standard by which taint is to be identified, and there is no by which direct costs are distinguished from indirect costs or overhead costs.  Now, we would submit to simply say, leave that to be fought out on another day, does not adequately grapple with the construction exercise, and there being no guidance on any of those questions in the statute that the proper construction is that those are not matters that would go to the reduction of the value of the benefit.

KIEFEL CJ:   Just so I am clear about it, Mr Gleeson, you are saying that your primary case is the narrower one, factually.

MR GLEESON:   Yes.

KIEFEL CJ:   But that, in any event, one has to grapple with the real issue, which is where the costs are brought into account, whether they are brought into account in relation to a performed contract or an unperformed contract.  So, it is regardless of whether the contract has been performed, you say costs are not brought into account.

MR GLEESON:   That is what we say.  So, to then focus – which is my proposition 2 – at least on our case in the performed contract, why is it that costs are not taken into account.  Well, in addition to the absence of any standard or measure, and in addition to the statute directing us to the value of the benefit and not the subtraction of any burdens, there is the critical aspect that was raised with me this morning of the nature of this provision.  What is it that is the wrongdoing which has led to this being established as a potential maximum.

On that, the difference between the parties is somewhat stark.  You will see is in the respondent’s outline of submissions at paragraph 12.  It is in the context of the proceeds of crime cases, but the distinction they draw is between a case where the entire enterprise is unlawful and one where the unlawful act only touches part of the transaction.

KIEFEL CJ:   This is referring to the proceeds of crime cases?

MR GLEESON:   It is referring to the proceeds of crime, but it is that distinction which underpins the respondent’s submission on expenses that I took you to this morning – paragraph 37 – saying the statute allows for a distinction between legitimate expenses and tainted costs, and it is the distinction the respondent advances at paragraph 46.

KIEFEL CJ:   Is this to rather confuse the lawfulness of conduct question that arises in proceeds of crime?

MR GLEESON:   It may, your Honour, because on our simple view, what we would say is what has been criminalised is the conduct, including the bribe.  We would all agree on that.  And the reason it is criminalised is its tendency to corrupt the proper procurement processes of the foreign state or Australia.  So, once the bribe has done its intended work ‑ ‑ ‑

KIEFEL CJ:   Yes, I see.

MR GLEESON:   ‑ ‑ ‑ it is realistic to say that the whole of the contract is tainted, and whatever be done by way of performance of the contract is the carrying into execution of a contract that should never have been entered in that way.  So, what the statute then has said is the benefits under that contract, they come to account for the maximum penalty.  The burdens, the statute is not interested in.  They are your own wrongful conduct in completion of the wrongful contract.

STEWARD J:   Does the lack of a statutory standing really matter?  I mean, in this sense, the fact is that you both agreed on what the expenses were.  So, Mr Walker’s point that it can all be dealt with case‑by‑case may have some force because it happened here.

MR GLEESON:   Your Honour, our answer to that is at two levels.  If your Honours accept the argument that I was just putting about the nature of the offending provision and how that leads us to see the entirety of this contract as a contract which should not have been procured by these means, then, our primary submission is the statute has evinced no interest, no intention, no recognition of whatever costs you choose to engage in an order to complete your obligations under that contract.  That is my primary answer. 

At the level your Honour put it to me – Mr Walker put – it does matter because what he is saying in principle is that we have agreed costs in this case – where the parties’ agree in other case can be left with the other case.  If they do not agree, then each side can do their best, et cetera.  But what lies behind that, as I have tried to show you from the agreed facts, is there is no agreement in principle on two critical questions.  Firstly:  what costs, if any, are not deducted because of the so-called taint, because there is no standard for that part of the exercise?  And secondly:  what costs, if any, short of a full net profit calculation are to be deducted?  So, if one starts down the cost path ‑ ‑ ‑

STEWARD J:   I may have misunderstood.  The impression I got was he was not asserting that there was some statutory basis to the exclusion of tainted costs.  What he is saying is that for the purposes of this agreed fact we agreed to take them out.

MR GLEESON:   That is not quite what the parties did, with respect.  What the parties agreed was on numbers.  They agreed, firstly, there was a bucket of costs which, on the face of the accounts, were passed through as if they were legitimate third‑party payments.  They then agreed within that bucket there was a first subset which were tainted, but then the question was simply posed:  well, if they are tainted, what in the statute here tells us that takes them in or out?  It was then a next bucket where the parties could not agree where they were tainted.  And there was a further bucket which were more indirect costs, and they could not agree what to do with them.

The point I sought to make in‑chief, was that – and this was not an argument about manipulation.  It was never put on that level.  The argument that was put was it was convenient, given the way these numbers worked out, that as soon as the respondent identified the first two items that I have just been to, they had reduced the net benefit, trebled below $11 million, therefore no further questions needed to be answered in this case.  But what that has not done is to say in every other case where those questions matter – to whether you are above or below the $11 million – what is the standard?  What is the answer in the statute to whether they are in or out?  That is what we say is missing in the statute.

KIEFEL CJ:   Mr Gleeson, is that to say that what the parties have agreed, or what the respondents put forward in a particular case, is simply irrelevant to construction?

MR GLEESON:   Yes. 

GORDON J:   Can I ask a question just about your answer to Justice Gageler.  Is what you say at your outline of your oral argument at paragraph 1 consistent with what you say at 2 and 17?  Are they just different ways of saying the same thing?  I am sorry to ask it, but I do not quite understand what the primary and secondary argument is at the moment.  So, paragraph 2, the question is posed:  is it contract price less costs or the contract price?   At 17, as I understood the argument in a summary form, is that where you obtain a benefit as a result of a bribe which is properly awarded – as a contract awarded:

the value . . . is the contract price without deduction of the costs (tainted or untainted) of performing –

it.  And then the outline of oral argument says – and this may be where the narrow form of it comes in – where you have the value being a receipt of money as currency which would, in effect, tie it to a performed contract, you are not concerned with the burdens.

MR GLEESON:   Yes.  So, your Honours, paragraph 1 of the outline is meant to be the narrower version of the broader argument, which is tailored precisely to where the agreed facts were in this case.  Then, the other parts of the Crown’s argument are the broader proposition that we offer.

GLEESON J:   There is no fact, is there, about the contract price as such?

MR GLEESON:   Your Honour is correct that the agreement is the amounts paid under that contract.  To the extent I was criticised this morning for using the term “headline price” – I was using that, as it were, a catchphrase for the contract price, of course, whether that would be a lump sum contract price, whether it would be a cost-plus calculation ‑ ‑ ‑

GLEESON J:   But we do not have a contract price here.  We just have the receipts under the contract, I think.

MR GLEESON:   We do not have a headline contract price in advance.  We do have the receipts, which may be taken as being paid under the payment obligations of the contract by whatever mechanism that contract employed, and the parties did not need to inquire further into what the mechanism is.  So, yes, paragraph 1 of our outline is designed to match what is in paragraph 7 on page 52 of the agreed facts.

Your Honours, in relation to the facilitation payments defence, the respondent’s position is you can ignore that because it does not tell you anything meaningful about value of the benefit in the penalty provision, or indeed, anything about the penalty provision.  We beg to differ.  It is the very same expression, “value of the benefit”, being used in the flow of moneys from the briber to the other person.  We would submit it is the same concept involved.  It is the flow of money.  It is not interested with ‑ ‑ ‑

EDELMAN J:   Is your submission, then, about 70.4(1)(a) – that there needs to be a symmetry between value of the benefit to the party being bribed and value of the benefit in 70.2(5)(b) to the party who is paying the bribe and receiving a benefit?

MR GLEESON:   Yes.

EDELMAN J:   If that is right, and one treats value of the benefit symmetrically in that way for the purposes of the offence and the penalty, does that mean, then – to adapt the example that is given in the explanatory memorandum – that if the party that is offering the bribe offers in exchange for a permit or a license to enter into a contract to perform work, that the value of the benefit under that contract to perform work, for the purposes of the facilitation payments defence, is the headline price or the contract price, rather than working out whether the contract itself was at market value?

MR GLEESON:   Well, it will not answer your Honour’s question to say we are a number of steps removed for the present case.  I realise the question is ‑ ‑ ‑

EDELMAN J:   But it is the example – it is very close to the example that is given in the explanatory memorandum of the sort of bribes that could occur for the receipt of a permit or a licence.

MR GLEESON:   Well, I had read the explanatory memorandum as assuming the bribe will usually be money – will not always be money, but it will most often be money.  So, your Honour was building upon that example, I think ‑ ‑ ‑

EDELMAN J:   Yes.

MR GLEESON:   ‑ ‑ ‑ to say that if I am giving the intermediary or the foreign official something in order to get a permit for a factory that I am not entitled to, and the something happens to be me assuming obligations ‑ ‑ ‑

EDELMAN J:   Under a contract.

MR GLEESON:   ‑ ‑ ‑ under a contract, then can we reduce the valuation exercise to the contract price.

EDELMAN J:   It becomes exactly the same question, does it not?

MR GLEESON:   Well, your Honour, I will hesitate to agree it is the same question because the inversion of the example may start to take things in a slightly different direction.  But if it were the answer, if it were to be treated as relevantly similar, so be it.  What we are trying to do here with the facilitations payment defence, which does not hang in the ether – as I tried to say this morning, it really sits there in the light of 70.2(2)(b).  The value of the benefit per se will not be a reason to say the benefit is not legitimately due.  So, at that stage of the offence, it is no answer.

But what 70.4 is doing is creating a defence with the onus on the offender, in the usual way, in a very narrow category of cases.  Your Honour Justice Gordon pointed out it has to be routine government action and it is critical that routine government action under subsection (2) does not involve the sorts of decisions that this offence is about, which is the award or the continuation of business.  So, we are in a fairly limited category.

EDELMAN J:   Without a doubt that is right, except that feeds back into 70.2(1)(a)(i), which is, what is the benefit in the first place?  So, admittedly for the purposes of the primary offence, before you get to the defence, you do not look at the value of the benefit, but you have to determine whether there has been a benefit.

MR GLEESON:   Yes.

EDELMAN J:   And one would not accept that a losing contract or a market value contract would ever count as a benefit for 70.2(1)(a)(i) because otherwise what might be a not uncommon circumstance of entry into a market value contract for the purposes of obtaining other benefits would then amount to a bribe.

MR GLEESON:   Your Honour, let me just put this, if I can.  Given the limited purpose of 70.4 and given one of the conditions will be the value of the benefit is of a minor nature, and given under subsection (3) you have to be able to put in the record the value of the benefit concerned, it is something where, I am capable as a responsible official of a corporation of putting $50 in a ledger and saying I spent $50 because – to use the example in the EM – we have 49 telephones connected in the office in Vietnam, we are having trouble getting the 50th connected, $50 is the price.  I put $50 in the ledger.  I do it the day after I pay it.  I put next to it, paid to Mr X in Vietnam to get my 50th telephone connected.

That is what the offence is about.  If we are in your Honour’s example, with respect, which is a little distance removed from where we are, where what I start to put in the ledger is, in order to get the 50th telephone connected what I did was I entered into a contract with the official whereby I agreed to pay the official a sum of money and the official agreed to provide me with a whole series of services, and I can somehow reduce all that to saying, because that is a loss‑making contract, I can put a value of nil or negative 50 on it.  I think one can see that the prospect of that being a realistic deployment of facilitation payments defence is remote.

That is not what this defence is about.  It is about the sort of thing where you can make the record, put it there, an auditor can look at it.  Mr Walker has mentioned auditors and accountants.  An auditor can look at it and say that payment, on its face, can be given a tick because it is meeting the facilitation payment conditions.  So, that would be our answer to your Honour’s question.

Your Honours, the final matters are these.  There are really only two matters, and they are really matters that I think now have been cleared away.  The first is the relevance of the turnover limb.  In‑chief I made submissions that the Court of Appeal’s embrace of the primary judge’s reliance upon the turnover limb in the last sentence of paragraph 99 of the Court of Appeal’s reasons was inappropriate.  I have heard Mr Walker to say he thinks that the turnover limb does not tell us much, if anything, at all about the benefit limb, and we agree on that much.

The second and final point is, your Honours, as to that example in the EM which the Court of Appeal recorded at 92 of the judgment and

accepted at 94, and which the Court of Appeal put at the heart of its reasons, you see that at 94, and indeed you see it at the end of 97, last sentence, we submit no attempt has been made to defend that example and it cannot be defended.

May it please the Court.

KIEFEL CJ:   Thank you, Mr Gleeson.  The Court reserves its decision in this matter and adjourns to 9.30 am tomorrow for pronouncement of orders and otherwise to 10.00 am.

AT 3.00 PM THE MATTER WAS ADJOURNED