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Australian Federal Police - Platypus Journal/Magazine |
Competing concepts in implementing proceeds of crime legislation
Federal Agent Graham Easterby
There are a variety of theories around the issues associated with confiscation of assets that have been collected by criminals as a result of their dealings. Federal Agent Graham Easterby of Northern Region researched the following paper for his Masters degree in Justice Studies. The paper examines the competing concepts that have been unveiled through 10 years of implementing the Commonwealth Proceeds of Crime legislation. It includes a look at comments from those who endorse the principles of the legislation and those who criticise it.
Two principal concepts, unjust enrichment and hardship, emerge when dealing with the issue of confiscating proceeds of crime. An attempt will be made to illustrate how burdensome these two issues are on the court when deciding to order confiscation of property.
Within these two concepts other issues emerge relating to funding legal representation of the defendant in both the criminal and confiscation matters as well as hardship on third parties.
A comparison of these issues under the Proceeds of Crime Act (Cth) 1987 (hereinafter referred to as the Act) are also compared with other Commonwealth legislation such as the Family Law Act 1995 and Migration Act 1958.
The Act was proclaimed on 5 June 1987. It was introduced following a perceived need to remedy the issue of convicted offenders profiting from their crimes (s3).
The Act provides mechanisms for the forfeiture of tainted property, investigation tools and prescribes criminal offences relating to the proceeds of crime.
The legislation is conviction based and as such requires a conviction before property can be forfeited.
The Act creates offences relating to both laundering of money and the possession of proceeds of crime. The onus of proof varies between civil and criminal. The majority of provisions require only the civil standard of the balance of probability.
When a court issues a Pecuniary Penalty Order, that order becomes a civil debt due and payable to the Commonwealth.
Lawyers, accountants and other persons who assist the criminal element in converting, hiding or falsely legitimising proceeds of crime can be pursued for criminal prosecution under provisions of the Act.
The philosophy underlying the legislation is that criminals should not prosper from ill-gotten gains. The Act contemplates that although criminals may be caught and imprisoned, on release they still may be unjustly enriched due to access to assets obtained by criminal means. Accordingly, the Act provides powerful mechanisms to forfeit to the Commonwealth unlawfully obtained criminal wealth. When discussing the effect of the legislation Temby states "Liberty goes, property goes, reputation has gone, and only life and distant, diminished prospects remain." (1988:12).
The Act also recognises that its application must be tempered by the concept of hardship. Section 19 (3) of the Act is in the following terms;
a. to deprive persons of the proceeds of, and benefits derived from, the commission of offences against the law of the Commonwealth or the Territories;
b. to provide for the forfeiture of property used in or in connection with the commission of such offences; and
c. to enable law enforcement authorities effectively to trace such proceeds, benefits and property. Weinberg (1989:201)
People use criminal enterprise to gain wealth and power. The establishment of criminal power bases leads to an artificial social structure. Criminally acquired power bases have the ability to influence social and political issues.
Freiberg (1992:99) discusses unjust enrichment underlying the forfeiture provisions as "both a moral and ethical justification" to the existence of such laws. Such laws act as a deterrent to criminal activity and enterprise.
Freiberg examines the issue of unjust enrichment from two perspectives. First, an offender benefiting from their crime and secondly, an offender benefiting from the sale of his or her story through publication.
Criminals can enjoy social acceptance by ensuring they become notorious. Publicising their deeds not only promotes their actions, but income and benefits derived from that publicity is realised directly back to them.
A number of professions profit from the ill-gotten gains of the criminal element. Publishers, lawyers, accountants as well as family members draw on the expenditure of the proceeds of crime.
Fisse (1989:375) supports the concept that crime should not pay. He depicts the principle reflected in the Act as the deprivation of unjust enrichment.
Funding legal representation
Once an offender has been arrested, his or her assets can be restrained. Conviction initiates the forfeiture action. A shift in the mentality of the accused persons occurs. Now that they foresee the loss of their wealth, they tend to deploy a significant amount of that wealth in ensuring no conviction, therefore no forfeiture action.
The recipients of that wealth will automatically be the defence lawyers. An intense, lengthy, no expense spared defence campaign will of course be costly. The briefing of expert counsel, paralegals, filing fees are but a few of the avenues to expend the ill-gotten gains of the defendant.
Temby (opcit 11) points out that lawyers defending wealthy criminals were often paid with monies that had been obtained from illegal activities.
He discusses a conflict that can occur in such criminal proceedings. Defendants have the right to defend themselves through solicitors of their choice. However, the cost of legal representation should not be met by society as would be the case if the criminal proceeds were not used for that purpose. (ibid)
The issue of unjust enrichment could be seen to extend beyond that considered by Freiberg and encompass the value of the proceeds of crime ensuring top legal counsel which, without the unlawfully acquired riches, a defendant could not afford. In considering Temby, perhaps solicitors would not be earning their income levels if it were not for the spending by criminals of their ill-gotten gains on legal representation.
In contrast, Fisse (opcit 397) considers that forfeiture action under the Act may work harshly and lawyers fees may warrant protection. Fisse is concerned that restrained monies under the Act, may not be available to pay legal costs. However, he takes this issue further in that monies released for the purpose of legal fees may not be beyond recovery by the Commonwealth exercising forfeiture action.
Fisse concerns himself with the issue that lawyers fees should be protected from recovery action. This contrasts with Temby and Freiberg who consider that criminals should not enjoy their proceeds from crime, including the removal of the benefit of criminals utilising those monies for expensive legal counsel.
Fisse admits that lawyers are enriched by the proceeds of criminal activity. Is this unjust enrichment?
Thornton (1990:86) raised the issue that if criminals are going to lose their wealth anyway, why not spend it on legal counsel.
The Act allows for reasonable living expenses, which can include the cost of legal expenses. Thornton's view relates to the fact that the better the ability and reputation of particular legal counsel, the more expensive their representation is. Therefore, why not buy the best, rather than have it forfeited to the Commonwealth.
Hardship was defined in Fowkes v DPP(1996) 88 ACrimR 166 Victorian Court of Appeal, as "something other than mere deprivation of property or possession caused by forfeiture under the Act".
The concept of hardship was addressed in Fowkes v. DPP. In that case, Fowkes was the defacto of the defendant. A car was forfeited as a result of the defendant's criminal actions. Fowkes lodged an appeal in relation to the forfeiture of the car on the grounds that it was her loss and she suffered hardship as a result of the loss of the car. She argued that the basis of the hardship was that she needed the car for transporting her child from their remotely located residence to kindergarten as well as facilitating access of the child to the accused.
In considering her appeal, the Victorian Court of Appeal examined section 19(3) of the Act and discussed the concept of hardship as it applied to forfeiture under the legislation. This section addresses the issue of hardship that may reasonably be applied to any person. It does not limit the hardship issue to the convicted person, but specifically extends it to any interested party. Paragraph (b) of the section requires that the ordinary intended use of that property must also be considered.
The court held that the standard of hardship suffered must be more than the loss of the property caused by the forfeiture (ibid). The court was thus required to consider how to determine the level of hardship.
The Act imposes a reverse onus on the applicant. The trial judge used the following in his determination;
• that the applicant was not involved in the commission of the offence
• that the applicant has sufficient interest in the car
• that the interest in the car was acquired without reasonable suspicion that the car was tainted. (id 22)
The trial judge introduced a measure as to the level of hardship suffered to be "some special extraordinary or severe hardship" (id 24-25). This was met with criticism by the Appeal Justices who confirmed it was an inappropriate proof of hardship.
The Appellate Court introduced a test requiring that the hardship not be disproportionate to the gravity of the offence. This test is an extension of the sentencing principle adopted by the High Court in Veen v The Queen [No. 2] (1987-1988: 472) which held that the sentence of an offender must be proportional to the gravity of the offence.
Fisse (1992:152) discusses the issue of measuring proof of hardship. He recognises the Act authorises additional deterrent punishment, however, he opines it is difficult to measure the additional punishment of forfeiture.
What Fisse is addressing is that forfeiture is a form of punishment in addition to that received in sentencing. He believes that it is difficult for the court to measure what punishment forfeiture is in reality.
By applying Fisse's concerns to Fowkes, though she is not the accused, it is necessary to see how difficult it is to measure what she would suffer by not having the car. In addition to that measurement, what measure would this reflect as punishment.
In Fowkes, this issue of proportionality of hardship is being extended to an innocent third party. The Appeal Justices can been seen to be actively applying the provisions of section 19(3) of the Act, in recognising that hardship does extend to innocent third parties.
Fisse sees forfeiture as an additional form of punishment. He views forfeiture as being a fine rather than a special sanction. (id:154)
Both Fisse and the Appeal Justices drew on the comments made by Allen J. on this issue in the matter of R v. Bolger (1989) 16 NSWLR 115 where he makes reference to the fact that hardship caused by forfeiture could be disproportionate to the offence committed.
This case is another authority that recognises a relation between forfeiture and the offence committed and the issue of forfeiture being proportionate to the offence.
DPP v. Walsh (1989) WAR at 31 addressed the issue of restitution. Seaman J. recognised that restitution made or likely to be made by the accused must be taken into account when sentencing.
He went on to express that in setting a Pecuniary Penalty Order under the Act, he must have consideration in reducing the amount set in the Pecuniary Penalty Order by the amount already repaid by the accused to the Commonwealth as restitution.
In Walsh the proportionality was held to extend to those provisions where an accused has paid back to the Commonwealth part of or any amount outstanding. The amount the court sets to be paid as a Pecuniary Penalty Order under the Act should be reduced by that amount repaid, to avoid a situation where the total amount repaid to the Commonwealth exceeds that civil amount owing.
Section 18(2) of the Act provides a mechanism to allow the court to:
"defer passing sentence until it has determined the application for the confiscation order".
This mechanism provides the court with the appropriate tool to equate the forfeiture with the sentence to ensure there is a complete balance between the gravity of the offence and the punitive measures.
The relevance and impact of hardship, as it is used in other similar legislation, can provide an insight as to how government policy can influence the courts application and interpretation of the concept.
Tabag v. Minister for Immigration and Ethnic Affairs (1983) FLR 13 at 274 identified the weight to be placed on hardship to innocent third parties for the Administrative Appeals Tribunal (AAT) to use as a rule. The court, in relation to hardship to family, declared it as "important relevant consideration which should be given great weight".
Although this Federal Court matter relates to an Immigration issue of deportation, family hardship was acknowledged as a relevant consideration. Counsel for the applicant relied on the factor of "family disintegration" as one basis for appealing the AAT decision to uphold a deportation order. This deportation order resulted from narcotic-related criminal actions for which the applicant had been convicted. Government policy dictated that he should be deported.
The Migration Act, unlike the Proceeds of Crime Act, does not contain a specific section to address principles regulating ministerial discretion. It is expected that the Minister would exercise "natural justice" in the exercising of powers.
The Federal Court drew on the matter of Drake v Minister for Immigration and Ethnic Affairs (No 2) (1979) where it was held that government policy was open for review by the AAT. Further, that where there is no statutory provisions to apply government policy, the AAT is "obliged to make an independent assessment of the propriety of the policy in question".
Though the Federal Court did not overturn the AAT decision to support the deportation order, the minister of the new Hawke Government revoked the deportation order.
It is clearly seen that prescribing issues such as hardship into legislation places additional accountable onus on the criminal justice system to address all relevant issues in making determinations.
In the civil arena, specific performance identifies that hardship of both parties should be a consideration when evaluating an application to resist performance of a contract by one party.
Priest (1984: 949) on the issue of specific performance relies on Patel v Ali where Goulding J addresses the issue of the severity of hardship. Goulding J does not believe that the nature of the hardship is the issue, but the severity of the hardship.
In addressing the issue of resisting Specific Performance, Goulding J states that "only in extraordinary and persuasive circumstances can hardship supply an excuse".
Goulding J believes that the hardship should amount to an injustice to the defendant of an application for resisting performance of a contract. In this he contends that both parties suffer hardship.
Priest (ibid), drawing on Patel v Ali addresses the issue of third parties. She refers to the matter of Thomas v Deering [1837] EngR 595; (1837) 1 Keen 729 stating that in matters where it would be "prejudicial to persons interested in property, not being party to the property" then the court will not enforce the execution of a contract.
The Family Law Act 1995 has provided a number of authorities who have addressed the concept of hardship as it applies to this Act.
In the marriage of Whitford [1979] FamCA 3; (1979) 35 FLR 445 defined hardship as "substantial detriment not appreciable detriment". Whitford has placed a similar onus on hardship as found in Fowkes "something other then mere deprivation of property or possession caused by forfeiture under the Act".
In marriage Neocleous [1993] FamCA 44; (1993) 113 FLR 451 identified hardship being caused by the inability of a person to pursue a claim which in the circumstances of the case appears on the prima facie evidence to be substantive and not trifling. A person, due to his or her personal circumstances, suffering hardship could be denied rights afforded to a similar person not suffering hardship.
The interests of third parties does provoke courts to take notice of issues outside the parties concerned with civil matters.
The following are the Commonwealth Government Agencies that have access to pursue forfeiture action under the Act.
• Australian Customs Service
• Australian Federal Police
• Australian Securities Commission
• Australian Taxation Office
• National Crime Authority
• Australian Transactions Reports and Analysis Centre
The responsibility in administering the Act with fairness falls on the Commonwealth Director of Public Prosecutions (DPP).
Temby addressed DPP's attitude in administering the Act;
". . . the DPP will proceed with all due prudence. That will be done not just because every effort must be made to avoid injustice but also because it is good sense to temper enthusiasm with restraint."
The DPP proposes a disposition that will avoid injustice by tempering enthusiasm from referring agencies to ensure restraint in pursuing forfeiture action.
Temby does particularise his own concept within the Act, as to the deterrent factor, hardship, on third parties can initiate.
". . . all such people will now be interested, for selfish if not principled reasons, to persuade major crime figures to give up their nefarious activities and find some legitimate pursuit, for otherwise the law may do great harm to malefactors directly, and indirectly to those around them."
Temby sees that hardship to be incurred by offenders, spouses and families, shareholders and stakeholders as well as lawyers is the deterrent found within the Commonwealths Proceeds of Crime Act. Those contravening Commonwealth Laws will be targeted, and the vicarious punishment accompanying forfeiture should enthuse those third parties in issuing pressure for the offender not to proceed with their actions.
The use by criminal enterprise to develop both finance and power through unjust enrichment and those parties who prosper on those ill-gotten funds will remain the underlying theme of motivation toward criminal acts.
It is plain enough that the prospect of riches through the financial return on serious criminal enterprise will always attract the greedy. The social status, the global travel, the adrenaline of perpetrating the serious crimes provide a backdrop of a lifestyle of fun and excitement for new players to the game.
The benefits of improving one's lifestyle, access to goods exceeding those acquired through normal income and the chance to provide for family automatically creates third parties who will suffer hardship when this financial base is attacked. The loss of anything material will always cause a hardship to those who own it and to those who use it. A standard of living that has been created on a corrupt foundation will suffer immeasurable destruction when that foundation is removed.
Those who have enjoyed the benefits derived from that corrupt foundation will only be reduced to a financial position that was lawfully established. The loss of the primary income earner due to imprisonment will be an additional burden to be borne by these third parties, but sentencing does form an integral part of the punitive measure.
Hardship extends beyond the person who has lost ownership of forfeited property, it also impacts on spouses, children, family, shareholders, stakeholders and legal representatives.
To compensate the objects as prescribed in section 3 of the Act, section 18 provides for both the forfeiture orders and sentence to be considered to achieve a relationship between the punitive measures against the crime convicted. The interpretation and administration of these sections by the court will reflect what level the concept of hardship will have in competing against the concept of unjust enrichment.
That delicate balance that exists between the unjust enrichment, pursued by both the objectives of the legislation and those who administer it, and the factors of hardship that extend to those third parties associated with the accused will always dictate the justice of this Act.
• Fisse, B. Confiscation of Proceeds of Crime: Funny Money, Serious Legislation, Criminal Law Journal (1989).
• Fisse, B. "Confiscation of Proceeds of Crime: Discretionary Forfeiture or proportionate punishment?" Criminal Law Journal (1992).
• Freiberg, A Confiscating the Literary Proceeds of Crime The Criminal Law Review (1992).
• Priest, J A Hardship and Specific Performance - II New Law Journal (1984).
• Temby, I Australian Law News (April 1988).
• Thornton, J. "Confiscating Criminal Assets, The new Deterrent Current Issues of Criminal Justice (November 1990).
• Weinberg, M The Proceeds of Crime At 1987 - New Despotism or Measured Response Monash University Law Review (1989) [Vol. 15, Nos 3 and 4]
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URL: http://www.austlii.edu.au/au/journals/AUFPPlatypus/1998/11.html