Attorney-General for the Northern Territory and Anor v Emmerson and Anor [2014] HCATrans 8 (5 February 2014)

Last Updated: 6 February 2014

[2014] HCATrans 008

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Darwin No D5 of 2013

B e t w e e n -

ATTORNEY-GENERAL FOR THE NORTHERN TERRITORY

First Appellant

THE NORTHERN TERRITORY OF AUSTRALIA

Second Appellant

and

REGINALD WILLIAM EMMERSON

First Respondent

THE DIRECTOR OF PUBLIC PROSECUTIONS

Second Respondent

FRENCH CJ
HAYNE J
CRENNAN J
BELL J
GAGELER J
KEANE J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 5 FEBRUARY 2014, AT 10.16 AM

Copyright in the High Court of Australia

(Continued from 4/02/14)

____________________

FRENCH CJ: Please call the part-heard matter. Yes, Mr Wyvill.

MR WYVILL: Thank you, your Honour. Your Honour, just before I return to where I left off yesterday, may I make a correction to our written submissions? Paragraph 4.5 on page 3 of our first set of submissions, the very last sentence, recent instructions from Mr Emmerson require me to correct that. The true position at the moment is that he is working as a truck driver under a day release program conducted by NT Correctional Services and it is anticipated that he will continue working in that position after his release shortly after he becomes eligible for parole.

FRENCH CJ: Thank you.

MR WYVILL: Your Honour, may I return then to the point at which I was yesterday, which is bullet points 3 and 4 of our second Kable proposition on the first page of our outline of submissions? Just to summarise the point which we were endeavouring to make, is that there is no capacity under section 44(1)(a) to use the court’s discretion to remedy against the substantive unfairness which necessarily will flow from the forfeiture which the Act expressly contemplates. We made that by making a number of sub-points, particularly that when the Act is read as a whole it is clear that section 3 is an incomplete statement of the objects of the Act.

Section 10 confirms that the extent of the forfeiture is to be as provided under the subsequent specific provisions of the Act. The reference to enforcement cost is explanatory and does not qualify the express statement that the extent of forfeiture is provided elsewhere in the Act. I draw your Honours’ attention to the fact that Emmerson had attempted unsuccessfully to set aside the restraining order on grounds of substantive unfairness and had failed.

I also draw your Honours’ attention to the fact that the judge at first instance had expressed the view obiter dicta which your Honour Justice Keane had put in argument yesterday that it might be possible to confine the injunction to those costs referred to in section 10(2). That proposition was rejected by the Court of Appeal. The references are all, in this respect, in paragraphs 3.1 for that last point and 3.3 for the earlier point in our second set of submissions.

FRENCH CJ: Does that go any higher than saying that the court is given jurisdiction to administer a harsh law? That does not go to validity, does it?

MR WYVILL: It goes to the point that was put by the interveners largely that there was a far broader power in the court to militate against unfairness under the injunction power. That is the way - we answer that submission by putting those matters to the Court. It goes to compulsion, of course. If I may then move on to the objection procedure, this is particularly material for this same point because the objection procedure under the Act gives very specific and very limited abilities to persons affected by the orders to challenge them.

CRENNAN J: Yesterday, as you mentioned, other counsel referred to the court’s powers to prevent abuse and oppression. There was no particular emphasis on the fact that the court has concurrent powers to administer both law and equity. So there are really two categories, if you like, of matters which might be raised and they differ. One is unfairness – and you have made reference to that and I think you used the phrase “substantive unfairness was the grounds upon which an effort was made to set aside the restraining order” – and you were just about to go the limitations in relation to the objection procedure. My query to you though, is there anything to prevent a person who wishes to assert an equity in respect of property about to be restrained or, in fact, restrained from raising that with the court?

MR WYVILL: Yes, your Honour, and this will be covered in the objection procedure because the objection procedure provides a very specific method for challenging the ambit of the restraining order and, in terms, we submit, indicates that that is as far as the court is entitled to go in terms of setting aside the restraining order. I accept that is focused on setting aside a restraining order and your Honour’s point may also go to the grant of the restraining order, but we would say that the equity, or the equitable jurisdiction, to respond to such a complaint must be effected and limited by the statutory scheme.

CRENNAN J: A common enough circumstance is for there to be a legal owner of a piece of real estate and for the mortgagee to, of course, have an equitable interest in the very same object. There is nothing in the Act is there, or is there, to prevent the owner of an equity from asserting the owner – I mean, I appreciate they would have to have notice, of course – from going to court to assert the equity and to ask for some directions, or tailoring, of any restraining order such that would recognise the equity.

MR WYVILL: I am wondering if it might be better, your Honour, if I answered that question after we looked at the objection procedure.

CRENNAN J: Come back to it by all means, if you wish. I simply wanted to highlight it in the context of you going to the objection procedure.

MR WYVILL: Thank you, your Honour, and we can see how that might impact through the objection procedure, if I may do that.

HAYNE J: When you come back to it consider whether it is necessary to examine the anterior premise which is whether the equitable interest is the subject of restraint or not. If the equitable interest is validly restrained one set of consequences may follow. If the equitable interest is not restrained other consequences follow but I think that you need to examine the premise from which your answer will proceed otherwise the argument becomes circular.

MR WYVILL: Absolutely, your Honour, and that, I think if I may say so, reflects your Honour’s view with which we respectfully agree about the multiple ways in which the term “property” is used in this Act, and one way which is not identified in the definition but which does appear from the way it is deployed is that on the one hand on occasions it is confined to the interests of the respondent, on other occasions it is the entire interest in the property, including third party interest but we will come to that, your Honour.

Your Honours, if we go to, firstly, section 47. This requires the DPP to serve a copy of the restraining order not just on the respondent but any person who is known to - may have – and this is 47(1)(b):

any person known to the applicant at the time the order was made who has, may have or claims to have an interest in the property subject to the order.

The person served with the restraining order under section 48, and this is regardless of whether they are the person engaged in the criminal activities or not, is then obliged to file a statutory declaration within seven days of service and is subject to a penalty potentially up to two years of imprisonment if they do not do so, and in that statutory declaration they have to identify any persons they believe or they know, of whom they are aware, who have or may have claims and interest in the property. That statutory declaration, when received by the applicant, then feeds a further obligation under subparagraph (3) of section 47 to serve the restraining order on that new person who is identified.

HAYNE J: How does 47 work in the case of a restraint issued in respect of a bank account with a credit balance maintained by the accused at a bank? Is the banker served with the order? If so, under what operation of 47 is the banker served with the order?

MR WYVILL: I am not aware of what the practice is in that respect, your Honour, but there does not appear to be an obligation on the applicant under this Act to serve the banker with notice of the order.

HAYNE J: If then the banker, for whatever reason, combines accounts, taking the credit balance of one to satisfy the debit balance of another, is the banker entitled to do that or is the banker acting in breach of the restraining order?

MR WYVILL: I think the answer is “yes” to the second question, but “possibly” to the first, and I would need to examine the provisions that relate to breaching of the order which appear elsewhere in the Act. Your Honour, my learned friend reminds me that section 55 describes the prohibited dealings in relation to restrained property, and to answer your Honour Justice Hayne’s question it would seem that the banker who does not have notice of that provision may have a defence under section 55(3) on the basis that they did not know, and could not reasonably have been expected to have known, that the property was seized.

If I may then move onto the objection procedure? The section - Part 5 contains the provisions in relation to the objection procedure, section 60 fixes the time as of right within 28 days after a copy of the order is served, and otherwise with the leave of the Court. Section 62(1) indicates that:

The court that is hearing an objection to the restraint of property may set aside the relevant restraining order to the extent provided by section 63, 64 or 65.

It is then important to look at what is then provided for in sections 63, 64 and 65. Section 65 is the relevant section for declared drug traffickers, but it is informed by the scheme that goes earlier in relation to crime-used and crime-derived property. In 63(1)(a) there are seven matters which an objector needs to establish if they are a spouse or other family member who resides on the property but who is not an owner. One of the elements your Honours will note in paragraph (2) is that that objector must be “an innocent party”, the onus being on the objector to establish all of the elements of paragraph (a) and I will come back to innocent party in a moment.

Subparagraph (b) then sets out a scheme where an owner or co-owner of the property may object on the basis that they have an interest and they have to establish also that they are innocent. The other basis upon which objection may be made is that the objector establishes in paragraph (c):

that it is more likely than not that the property is not crime-used -

so that could go to the merit of the application and, indeed, to the extent of the application. Not dissimilar provisions are made in relation to crime-derived properties. But if we go to section 65(1), one can see that there is only one ground of objection and that is that the court is satisfied that the property is not owned or effectively controlled by the respondent to the application.

Just before I make a broader submission about the scheme, I draw your Honours’ attention to section 66. Your Honours will note from 66(1)(a) and (b) that that section effectively puts a positive obligation on those persons claiming an interest of the kind which could be the basis for an objection to keep themselves informed about the use of the property. Secondly, if they are aware that a forfeiture offence is being committed or would be committed or the property is being used in that respect, they have a positive obligation to take all reasonable steps to prevent it. If they do not satisfy (a) or (b), they cannot establish that they are an innocent party and lose their right to protect their property interest.

Now, from that scheme of objection, I think to answer your Honour Justice Crennan’s question if I may, from that scheme one can see that it is targeted at people of the kind your Honour has described. It provides a very limited right to set aside the restraining order in relation to crime-used property, for example. It would seem that the only right that an owner would have in relation to the proceedings we are dealing with at the moment is to claim that their property was not owned, or effectively controlled, by the respondent. It would seem – and this is one of the difficulties with the Act - it is not clear whether the order extends to cover the property, including at that point, all of those interests which we identified or whether it is only targeting the ownership and effective control interests of the respondent.

CRENNAN J: Well, the reference to ownership I dare say might be said to cover not only legal ownership but the full beneficial ownership.

MR WYVILL: Yes.

CRENNAN J: Therefore, there may be a challenge under section 65 on the basis that the legal owner does not enjoy the full beneficial ownership of a particular property.

MR WYVILL: I think that is right, your Honour, yes.

KEANE J: Where a mortgagee was entitled to go into possession, the legal owner would not effectively control it anyway, so that the mortgagee could have the order set aside.

MR WYVILL: That I think is – well, the Act does not suspend mortgagee’s rights. There is a provision which deals with that, which is 56(3):

Subsection (1) does not prevent:

. . .

(b) the issue of a notice of default by a . . . mortgagee, and the exercise of . . . mortgagee’s rights . . . as the case may be.

FRENCH CJ: If an equitable interest in property is property within the definition, in the definition provision, you could set aside an order in relation to the equitable interest, or insofar as it purports to affect the equitable interest that somebody might have – a third party might have.

MR WYVILL: Yes, your Honour, and I think, with respect, I agree with what her Honour Justice Crennan has suggested, that under 65(1), that reading this with the principle of legality in mind, that that is precisely how one could approach protecting third party property interests there. But noting, of course, that there is – and I think this, if I recall correctly, responds to a proposition that I think was put by my learned friend the Solicitor-General for the Northern Territory about the distressed spouse who was concerned about being evicted from the property but who does not have an ownership interest. There is no equivalent to 63(1)(a) in relation to that, so that would not be, it would seem – that would seem to be a deliberate decision by Parliament not to include an equivalent to 63(1)(a) and hence that would not be, at least on its face, something which the court could take into account.

Your Honours, the final point I wanted to take your Honours to in relation to the objection procedure was to note the significance of what happens if one does not exercise those rights, and that is covered in section 119. This is an application for the release of forfeited property:

A person may apply to the court that ordered the forfeiture of property under Part 7, Division 3 for the release of the property.

That includes section 94(1), but one would have to approach the construction on the basis that “the court that ordered the forfeiture” was an expression which was broad enough to include the making of a declaration because the court does not technically order the forfeiture in this case and, hence, these procedures here which provide for getting property back if you have a claim could only be made available to persons in that position if that construction was adopted.

Then one can see “Order to release forfeited property”. Section 121 then sets out various matters which an applicant has to establish in order to recover property which was theirs and which was forfeited under the procedures of the Act and that includes proving that:

(b) the property was not effectively controlled by a person who made criminal use of the property . . .

(c) the applicant was not aware and could not reasonably be expected to have become aware, until after the property was forfeited, that the property was liable to forfeiture . . .

(d) the applicant is an innocent party in relation to the property -

If we are wrong in our submission that you would construe 119(1) to include automatic forfeitures under section 94(1), triggered by a declaration under 36A, then there does not appear to be any provision of which I am aware under the Act which permits a third party who is not satisfied with the objection procedure to make claim for forfeited property.

So to summarise, what we say is that very specific provision in relation to it – those very specific provisions in relation to objections we say are a very clear statement of what Parliament intended to be the extent to which these forfeiture orders or these forfeitures, at least, could be confined and that the court’s discretion under section 44(1)(a) could not be exercised in a way which was contrary to that scheme.

I might just make one further correction to our submissions at first instance – our submissions before your Honours, at least – paragraph 18 on page 9. We suggested, or submitted, at least, that:

The Court plays a role at two stages in the Scheme -

that technically is incorrect. There is a third stage, which is this objection stage, but for the reasons I hope are clear from looking at the provisions, it is of no assistance to someone like Mr Emmerson in relation to setting aside for substantive unfairness. That is confirmed by what was said by the judge at first instance at appeal book volume 1, page 128.

If I may then move on – or at least move back – to the proposition we advance in paragraph 1 of our Kable argument?

HAYNE J: Just before you do that, can I understand, the construction of this Act seems to grow more difficult as argument proceeds. Does 103 of the Act speak at all in a way that reveals whether a mortgagee retains a power of sale after forfeiture?

MR WYVILL: We would say, your Honour, that it must be implicit in the scheme that that statutory and contractual entitlement power of sale would be lost upon forfeiture, and what is substituted is the rights under 103(1)(d).

BELL J: The scheme seems to contemplate, having regard to 56(3), that in a case in which there has been a relevant event of default it would be open to the mortgagee to exercise the power of sale, but perhaps on a view of the provisions of section 103, and it may be other provisions, the power of sale goes with forfeiture.

MR WYVILL: Yes. So if one was a prompt mortgagee and got in quickly - - -

BELL J: And as in a circumstance in which there was an event of default, yes.

MR WYVILL: Yes, absolutely. Returning then to our first proposition, which is our proposition – Kable proposition focused on the procedure in relation to the making of a declaration, in our submission, it is important in this matter to look at precisely what was the function undertaken by the court in reaching the decision that the declared drug trafficker declaration ought to be made, and if I can take your Honours firstly to section 36A, if your Honours would keep open section 36A(3)? At the same time I invite your Honours to open up appeal book 1 and the references are in the first dot point of our submissions under paragraph 1 at page 30. Following this in chronological order, this is the first of the qualifying offences under paragraph (b) of section 36A(3), and your Honours will see that the qualifying offence is at paragraph 2 of the certificate, that possessing the schedule drug, MDMA:

and the amount of the dangerous drug was a trafficable quantity, namely 5.9 grams.

A trafficable quantity of MDMA is anything over 0.5 grams. That is contrary to section 9(1) - the paragraph is missing but your Honours may recall from being taken to it yesterday that it is (e), which is one of the paragraphs referred to in (6)(d) of 36A, so that satisfies the first. We then move to the second certificate, which is at page 33, and we will see that there are two qualifying offences, both of them satisfy (6)(d) as being offences under 9(2)(e). Would your Honours note that in relation to the possession of cannabis oil that Mr Emmerson had 20.8 grams and that a trafficable quantity is everything over 1 gram.

In relation to the possession of a cannabis plant, Mr Emmerson had 64.1 grams and a trafficable quantity is everything over 50 grams. They are the two qualifying offences that set up then the requirement to go to the Supreme Court for the third qualifying offence, so paragraph (b) now has been satisfied by those two requirements, or those two certificates.

We then move on to the third offence and the certificate for that is found at page 73 and we can see that that is an offence within 36A(6)(a) being an offence against section 5. That was the function which the court was required to discharge in this case in order to reach the conclusion that it was bound to make a drug trafficker declaration.

We can see that from his Honour’s judgment at first instance, particularly at page 90 of the appeal book volume 1. Your Honours will note pages 90 and 91, particularly paragraphs 11 to 12, his Honour, recites the terms of those three certificates. There is then some commentary which is not material to the decision over the next number of paragraphs. If we turn to page 95, paragraph [23], his Honour makes the finding based upon the recitations in the earlier paragraphs of the certificates that 36A(3) has been satisfied and that was the completion of the judicial function which was required for the issue of the declaration.

FRENCH CJ: So what point do you take from that?

MR WYVILL: This goes to the scale of the function and I do not - - -

FRENCH CJ: What, the court does not have enough to do?

MR WYVILL: Well, your Honour, the point is that the function is just a simple function of reviewing other orders of the court and in a great majority of cases what we have just gone through was precisely what the court will go through before it makes a declaration.

FRENCH CJ: Yes.

HAYNE J: Be it so, so what?

MR WYVILL: Well, it comes into the comparator which we will then be submitting in relation to the functions of the Executive and the court. I think the most important point to be made of this particular function is that it has no, and I will be coming to this on the broader Kable point, is that it has no relationship to any substantive engagement by the court in addressing the normative requirements of the scheme. This scheme is about drug trafficking, drug traffickers and about raising funds to meet the cost of enforcing the law against drug traffickers. The court’s engagement here is partly, in our respectful submission, directed towards that normative scheme.

FRENCH CJ: Would it make any difference to your objection if the provision - this is a hypothesis I put to Mr Grant yesterday - said that “any person who commits offences in a category of X, Y and Z within a period of 10 years is deemed to be a drug trafficker” and then somebody applied to the court under its general jurisdiction and powers for a declaration that the person fell within that category?

MR WYVILL: That would raise a range of different issues, your Honour, because we are talking - - -

FRENCH CJ: Well, it is the same sort of judgment, is it not?

MR WYVILL: Well, it is the same - - -

FRENCH CJ: Well, has this person been convicted of X, Y and Z within a period of 10 years?

MR WYVILL: This case is not about the nature of the judgment, about who undertakes it and in what context and that is the important distinction we would make. This judgment - - -

CRENNAN J: In the context of what the Chief Justice is raising with you, which was a point made by Queensland around paragraph 28 of their written submissions, you are dealing here with the statutory construct, are you not, rather than the facts? So as the Chief Justice put to you, different words could have been used. Normative considerations are not really part of the exercise in the context that one recognises that it is a statutory construct. As the Chief Justice said, it could have been repeat drug-related offender or something of that kind.

MR WYVILL: I agree with that, your Honour, but it is a question of how this process is then deployed in the overall statutory scheme. This is a process which we accept could be used legitimately in a range of contexts. It could also, as your Honour the Chief Justice has said, be devised in a different way which then meant that it was made by the Executive and perhaps there would be the power in someone to challenge by prerogative relief, but it is still important to see what the nature of this function is when doing the overall Kable assessment.

Most particularly on this point is the point of the disconnection between this process and the outcome which the Parliament requires the court to provide. That is really the major point that we make here and if I could take your Honours - - -

HAYNE J: The fact that the task is a determinative task readily performed by the court because it is capable of ready proof has what significance for your argument?

MR WYVILL: It has the significance, your Honour, because of the – I think it is not so much the ease with which it is done but the subject matter of the consideration which then leads to that result. It is the subject matter being the focus on court records, and I will come shortly as to why that is significant. Your Honour, but what is important is for this point about the deployment of the court’s declaratory function is to look at what then results and the result is at 153 of volume 1. We can see from that, your Honours, that as a result of that function we have just gone through, at paragraph 3 the court has made a declaration that Reginald William Emmerson is a drug trafficker.

Now, it is not said - and this would be the difference between the scheme that your Honour the Chief Justice put to me and the scheme here - that the court finds that the three qualifying factors for the purpose of the respondent falling in the definition of a drug trafficker within the meaning of that Act have been satisfied. What is happening here is that the court is declaring, at least as a statement of fact, we would submit, that Mr Emmerson is a drug trafficker.

Now, there is a discontinuity here or disconnection at two levels. Firstly, there is a disconnection between the judicial process of looking at the matters the judge considers in order to satisfy himself or herself as to whether he has an obligation to make the declaration, and the terms of the declaration.

HAYNE J: What is the difference between this kind of inquiry and the common form inquiry that lies behind a court ordering winding-up of a company in insolvency on account of failure to comply with a statutory demand? In the uncontested case proof is very straightforward, very easy and the court arrives at its conclusion. What is the essential difference between that determination of status and the determination of status implicit in this declaration?

MR WYVILL: Put in that narrow respect, your Honour, there is no difference, I accept that. The important point is to see how that narrow function, which is a function directed towards the records of the court, is then deployed.

HAYNE J: But your complaint then becomes the Act chooses a pejorative description, a description which is not only pejorative but you say may be, in some cases, many cases - I do not know how far you put it – may be inapt as a matter of ordinary usage in conversation. Is not that where the argument next goes?

MR WYVILL: It goes one step further than that, your Honour, because what is always misrepresented by the statement in paragraph 3 is that that decision has been reached through the ordinary judicial process of looking at the facts and concluding whether or not that person is a drug trafficker.

KEANE J: But that could only be so if you are postulating that the person to whom the order is published or the person who reads it is ignorant of the provisions of the Act.

MR WYVILL: Well, no, your Honour, because – perhaps I have put that – I accept, your Honour, that if somebody has a detailed knowledge of the provisions of this Act and they read that declaration they will, as the Chief Justice said, understand that actually what happened here was not a finding that the person was in fact a drug trafficker but a finding that they had the three qualifying offences.

KEANE J: Is there any case that says that the constitutional validity of a statute can be determined by the imperfect understandings of ignorant people?

HAYNE J: I forbear from comparing it with litigation in this Court, Mr Wyvill.

MR WYVILL: Yes, your Honour, thank you. Your Honour, it is our submission one cannot fairly distinguish between the substance of a declaration and what it will communicate. The declaration is something to communicate unlike, for example, an injunction or an order for the payment of damages where the primary purpose is something else. A declaration - its primary purpose is to communicate. One then needs to look at what that message is that is communicated and it - - -

HAYNE J: But if the declaration said, “This person is a drug trafficker within the meaning of and for the purposes of section 36A of the Misuse of Drugs Act” your point evaporates, does it not, altogether?

MR WYVILL: Well, it does to this extent, your Honour, that if the declaration is clear that it is Parliament’s description, not the court’s, then I agree but this declaration is not clear in that respect. I think the point is – and I will not labour the point with your Honours but it is important to look at the distinction between this case and Silbert. In Silbert it was Parliament’s language, that is the language in relation to deeming a person to have been convicted of a serious offence.

In that particular case the court was asked to treat as the same kind of person a person who was convicted of a serious offence and a person who was deemed to be convicted of a serious offence and then to apply a full judicial process of inquiring into the extent of the criminal benefits – the fact and extent of the criminal benefits which that particular person had enjoyed.

That is a very good example of that language clearly being Parliament’s language. It is not a case where Parliament had taken language and insisted that the court deploy it in the court’s function, particularly a declaratory function, without it being accurate. The comparator provision, and this I think makes the point well, in my respectful submission, the comparator provision is found in section 8(1)(b) of the Act.

The Silbert point, if it was to be made in these proceedings, would be made in relation to the movement from a declared drug trafficker to a person who was taken to be a declared drug trafficker in section 8(1)(b). That is the parallel position with Silbert in this matter. That is not the point we make here of course. Our concern is about Parliament requiring the courts to use Parliament’s language and then presenting it as the court’s.

Just before I move away from this point, there is one matter which I need to note following the submissions of the Solicitor-General for Queensland. He took you through the provisions of the qualifying offences. I would invite your Honours to note the very broad definitions of “supply” and “cultivate” and “produce” in section 3(1) which take it well beyond what would be a trafficking kind of offence, and your Honours should also note of course her Honour Justice Kelly, in a careful analysis of the provisions, highlighted the differences or the disconnection between the qualifying offences and the activity of drug trafficking at appeal book 2, 204 to 206.

If I can move on then to our broader point, which is at paragraph 2 of our submissions on Kable, your Honours, we make these preliminary points about that proposition. The first is in answer to the submissions from our learned friend, the Solicitor-General for Queensland, and that is to note this: that whenever there is a non-consensual freezing and then transfer of valuable assets there is likely to be controversy which will require the intervention of the court to resolve.

The mechanics for preserving those assets and then managing the disputes over the transfer are not material for the Kable analysis, in our submission. The focus is on what causes the forfeiture under section 94(1), but for which there would be no need for any such mechanics. So, the focus in Kable here is the focus on the substantive outcome, what change in title is caused by this particular structure, the combination of the two orders, the order for the restraint of property in combination with the order declaring a person to be a drug trafficker, which then trigger the automatic statutory forfeiture. So one should not be distracted by those other issues in relation to managing that transfer of title, in our respectful submission.

The second submission is a submission in relation to the identification of one of the most critical elements that we say this case has in common with Totani, and the references in this respect are at the very bottom of page 1 of our submissions. All members of the majority in that case noted the absence of any independent role of the court in assessing the existence or otherwise of the elements upon which the normative scheme - - -

FRENCH CJ: But, the anterior decision-making process in that case – the executive declaration of a criminal organisation – falls into quite a different category from the kinds of decisions by the Executive in this case. When one looks at – and we talked about this yesterday – there is a sequence of decisions by the DPP to apply for a restraining order, to prosecute for an offence relevant to making the declaration, to apply for a declaration and, ultimately, to apply for a declaration as to forfeiture pursuant to section 94. They are simply decisions to apply to the court. How can that be said in any sense to be functionally equivalent to Totani? That seems to be another universe.

MR WYVILL: Your Honour, may I answer that when I come to deal with bullet points that relate to the discretion? What I am proposing to do, if your Honour is happy with this, is to deal with the other matters first, the court’s function, and then come back to the DPP’s function at the end and address that question from your Honour head on, if I may.

Just on that, would your Honour note that your Honour is precisely right, with respect, that we need to note an additional stage in the scheme which is the stage your Honour referred to yesterday which is the prosecutorial discretion of the DPP in relation to not just the final qualifying offence but possibly also the earlier offences. I will come to deal with the discretion at one stage, if I may.

Just before I get to the discretion, it is important to note, your Honours, what happened in relation to sentencing here. This is the first dot point in relation to the engagement of the court which is the Criminal Court here. May I take your Honours first to section 5(4) of the Sentencing Act? Under section 5(4), the court:

may have regard to any co-operation –

under paragraph (a):

by the offender . . . under the Criminal Property Forfeiture Act . . .

(b) . . . to the extent –

of forfeiture in relation to “crime-used property”, but then -

(c) must not make any allowance for any other property that has been or may be forfeited to the Territory by operation of the Criminal Property Forfeiture Act –

That is a provision which expressly precludes a sentencing court at the sentencing of the final qualifying offence taking into account the likely forfeiture which result from that third offence triggering the entitlement in the DPP to make a drug trafficker declaration – to seek a drug trafficker declaration.

I will not take your Honours to it, but the references are in the appeal book which we have given there at page 61 and just simply to note that it was his Honour Justice Mildren, as part of the sentencing, did two things – took into account the fact that the third offence was a breach of the bond in relation to the second offence and that was taken into account in the sentencing. So the prior offending – at least the second prior offending – was expressly taken into account in the sentencing for the third offence.

His Honour noted the likelihood of forfeiture, erroneously – we do not know why – referred to it as “crime-used property forfeiture” and flagged up the possibility that that might be brought into account on an appeal from his sentence. All of that is immaterial because it was never going to be crime-used property forfeiture. It was always going to be declared drug trafficker forfeiture and by reason of section 5(4)(c) a sentencing court could never take that into account.

I have already dealt with in our submissions the court hearing a restraining order under section 44(1)(a) of the Criminal Property Forfeiture Act. It is important to note that, as was conceded I think yesterday, the DPP has a discretion as to the ambit of the restraining order. The practical position and the legal position is that if the DPP - - -

FRENCH CJ: Do you mean by that the DPP has a discretion as to the scope of the property in respect of which he makes application for a restraining order?

MR WYVILL: Yes, but the court has no power to review that exercise. So if the DPP comes to court having decided to qualify the application to limit property, it is very unlikely that a respondent is going to complain about that, so the court is not going to have that matter brought to its attention, and even if it – it is just not a likelihood. If the DPP is not inclined at all in spite of some vigorous lobbying by the respondent to the DPP to limit property that is going to be restrained, it is difficult to see what the court can do absent an abuse of process. We have already dealt with those points, and I have also already covered the objection procedure under section 59 which has no practical significance to the outcome, and similarly the court’s function in relation to making of the declaration.

If I can then address now head-on the question your Honour the Chief Justice raised with me, which is the difference firstly between – if I can do it this way, firstly by addressing the differences between this discretion and the ordinary discretion – prosecutorial discretion of the DPP and then explain why that puts it in a similar situation to the position in Totani? The DPP’s discretion arises in three ways. It is the selection of the respondent, and that is in relation to both the restraining order and the declaration procedure. It arises in relation to the ambit of the restraining order. But it also arises on an antecedent basis in relation to the decisions that are made in the exercise of the ordinary prosecutorial discretion with respect to the qualifying offences, and I am going to subsequently deal with your Honour Justice Crennan’s point about the relationship between this new scheme and the prosecutorial discretion.

Your Honours, we say there is a marked point of distinction in three ways between this discretion to the DPP – it is the one person in all three respects – and the ordinary prosecutorial discretion. The most significant difference is the fact that the exercise of this discretion is not followed by or does not form part of a full trial or a full engagement by the court in a judicial process, examples of which are Fraser Henleins, Palling v Corfield and Magaming, all of those cases in which there were issues raised about prosecutorial discretion. They were in the context of there being a full trial of – a full discharge of the judicial function directly focused on the normative scheme which was the subject of the exercise of the DPP’s discretion.

This is not that case. We have here very, very limited roles that the Court plays in relation to the matter. It is not engaged, in our submission, in any substantive way in looking at whether the objects of the Act are going to be achieved independently in its own mind by the invocation of its process. The second difference is that – this goes to transparency – in Palling v Corfield, for example, it was obvious, and should have been obvious, that it was for the Executive to make a decision as who would be admitted to the armed forces, and that is not a proper role for the judge and it was obvious that that decision was made by the Executive and there was no suggestion that the DPP was doing anything other than that function.

Here there is a lack of transparency in the sense that the DPP’s discretions, in our respectful submission, and the decisions they have made, as I have referred to here, are hidden behind the ultimate outcome in the court proceedings. The final point that we make is – and this can be contrasted with the crime-used property applications, in a crime-used property application an offender deploys the property and that then immediately attracts the risk of it being found to have been crime-used property. There is then a full trial based upon whether or not the property has been crime-used, and the court makes a full determination, makes a determination itself in the ordinary judicial process of whether or not that conduct of the offender amounted to crime-used property.

Here the DPP’s discretion in relation to the selection of a qualifying person is a discretion not as to enforcing the law, but as to which person in that qualifying class will be made subject to the scheme, and that is a significant point of distinction, in our submission, between this legislative scheme and the DPP’s discretion and the ordinary prosecutorial discretion.

BELL J: How does that differ from the ordinary prosecutorial discretion? The Parliament has made a judgment that upon the third conviction for one of the offences specified a person is liable to the forfeiture of all their property as defined, whether or not a person who answers that description suffers that consequence will depend upon matters including whether they are prosecuted for offences falling within that description and then a determination of the Director to proceed with an application for forfeiture.

I do not think I understand the distinction in principle between the decision to prosecute for an offence that answers the description of a specified offence for forfeiture purposes or a decision to prosecute for a lesser or different offence. Is not the significance in no small measure that one knows what one is presumed to know, offences constituting offences under the Drugs Act, just as one is presumed to know that if one suffers conviction on three occasions a consequence may follow?

MR WYVILL: Yes, your Honour, but we do say there is a distinction in kind between a law which attaches consequences to the conduct of a person and then permits the DPP to, as part of the ordinary constitutional structure, make a decision as to whether that breach of the law is enforced, and a law which does not attach directly on past conduct but attaches on the findings of a tribunal of a court and then permits the DPP to make a decision as to whether those persons who qualify ought to be made subject to this fresh, distinct and new regime. I cannot put it any different to that, your Honour.

HAYNE J: The consequence of your argument is that an Act that said the Director shall apply for a drug trafficker declaration in every case in which would be a valid law, but a law which says the Director may apply is invalid.

MR WYVILL: Well, it is a factor that goes to validity, your Honour, but there is an important distinction between those two cases; one is a rule of law which is set by Parliament which is general application, the other is not, and that is the point we make. May I move on to the question of the interplay between the DPP’s discretion here and the other prosecutorial discretions, particularly in relation to prior offending? I wish to make the submission by putting these propositions as a rhetorical question.

Given this new capacity in the DPP under this legislative scheme to obtain on behalf or for the Crown significant financial benefits, can it be said not to be rational or appropriate for the DPP to take that scheme into account when selecting persons to prosecute and also to take that scheme into account when selecting how and in what way they are to be prosecuted? More particularly, would it be wrong or not rational or appropriate for the DPP to maintain records which enabled him to keep track or her to keep track of persons who were potentially coming up to qualify for this kind of remedy and then to be aware of that and perhaps to make – have his prosecutorial discretion in respect of prosecuting offences affected by the benefits which this scheme could provide to the Territory if invoked?

BELL J: If you accept that there is a deterrent component to forfeiture, what do you suggest is the vice in the DPP proceeding as you suggest, keeping an eye on people who answer the description of three times committing offences of the specified kind and then taking action to see their goods are forfeited?

MR WYVILL: If I can just note, of course, I do not agree with the premise about the object, the object appears to be to raise funds, but accepting the premise upon which your Honour puts the question, yes, there is no particular vice in doing that at all. We do not say that it would not be appropriate or rational for the DPP to do so. This is a further example, in our submission, of the powers that the DPP gains in order to produce the outcome which the court gives the DPP at the end of the day from this legislative scheme.

BELL J: Parliament has provided that upon one’s third conviction for a specified offence one will be liable to the confiscation of all one’s assets. That aspect of this normative scheme seems to not figure very prominently in your submissions.

MR WYVILL: Well, your Honour, this is not to say that Parliament cannot create that remedy. The question is can it create it in a way that we say in effect gives the substance of the authority to initiate and secure an outcome to the DPP and engages the court as an involuntary participant in that procedure.

Your Honours, moving on to, just to respond directly to what your Honour the Chief Justice has put to me, we say that it is comparable to Totani because of the fact that the scale of the discretion given to the DPP, which is not in any way controlled or regulated by the legislation, is such that, when compared with the function given to the court, the DPP’s decisions are then dressed up and presented in the robes of the court by the terms of the court orders in a way which is, in our respectful submission, to take benefit of the authority of the court to present it as a judicial decision but without that being the truth.

FRENCH CJ: When you say the DPP’s decisions, what decisions are there other than to make application? It is decisions of statutory significance.

MR WYVILL: They are the decisions absolutely, your Honour. We accept that but the outcome of those procedures, we can see in the court’s capacity to control the outcome, is very limited. Your Honours, may I move then to the section 50(1) point, which is on page 2 of our submissions. Your Honours should have with our submissions a schedule of cases and we have, in order to deal with this as quickly as possible, put into this schedule what we regard as the critical cases in relation to the fines, forfeiture and penalties exception.

May I start off by indicating what we accept and what is not in dispute? We accept that a disproportionality between the forfeiture and the offence is not a proper basis for disputing its characterisation as a law falling within the fines, penalties and forfeiture exception. That concession, or acceptance at least, however, in our submission, underlines the importance of the process of characterisation to ensure that section 50(1) retains its status as a meaningful constitutional guarantee.

The second proposition, we accept that in committing an offence, an offender necessarily puts the title to his or her property at risk but laws targeted at offenders are not excused from compliance with section 50(1). That characterisation must ensure that the assessment of compliance with section 50(1) is meaningful.

The third proposition is this, in the cases in this Court concerning the fines, penalties and forfeiture exception, in upholding the validity of all laws which have been challenged in this Court, this Court has emphasised the common features between the nature of the exactions which have been affected by those laws and those exactions which have been for a long time “regular features of the law in England, the Australian colonies and now of the Commonwealth”. That is a quote from the plurality in Theophanous at paragraph 60.

For that reason, it is important to undertake as briefly as possible a taxonomy of the different kinds of cases so one can recognise what is established and what is not. We propose to undertake that taxonomy in two ways, firstly by reference to the cases in this Court and then secondly, by reference to the various provisions to which Mr Emmerson was subject when he committed this third offence.

Looking very briefly at that schedule I have given to your Honours, what we have included in that are the relevant provisions of the subject legislation so one can see precisely how the forfeiture operated. For example, Burton v Honan was an example of the kind of forfeiture we have referred to in 3.1, automatic forfeiture upon the commission of an offence.

HAYNE J: No, automatic forfeiture of crime-used property.

MR WYVILL: Yes. If we then go to Cheatley - - -

HAYNE J: Burton v Honan has to be understood also as an absolute Hornbrook example of nemo dat, namely, the goods were forfeit on importation or at least forfeit at the point of the misstatement in connection with entry for home consumption and title to the chattel thereafter could not be passed. It was forfeit at the point of entry.

MR WYVILL: Your Honour is quite right to indicate the two elements of the characters of that particular forfeiture: one, the automatic forfeiture by force of law; and secondly, that it was focused on crime-used property. Cheatley is not dissimilar save that - in the sense that it was crime-used property save that – the key distinction is that it was in relation to a forfeiture at the discretion of the court. We can see that in section 13AA(3).

HAYNE J: Some authors at least trace this species of forfeiture to early forms of maritime legislation I think. I have in mind Freiberg and Fox in a collection of essays entitled The Money Trail published as long ago as 1992, Chapter 6 from page 106 onward, and I think some of the US journal articles trace it in like fashion.

MR WYVILL: That attacks property that is deployed directly in the commission of an offence.

HAYNE J: The history of seizure of boats used for fishing illegally may perhaps be traced in that way. Perhaps some contrast is to be drawn with the Customs forfeitures which are again of long standing.

MR WYVILL: Thank you, your Honour. In R v Smithers; Ex parte McMillan that is an important case because although talking about the cumulative penalties it was in the context of what is described as a civil remedy but importantly the remedy was confined to the profit, to the benefit from the unlawful activity, so that is a crime-derived category of case but associated with a judicial function in that respect of sentencing in relation to a breach of the civil law.

But your Honour should note the concern expressed by the court which we have set out at the bottom of the first page, page 3, in relation to the breadth of section 243E(2)(c)(ii) which permitted an innocent – may permit a person who had innocently derived a small benefit, without the knowledge, having all of their property seized and there was a question raised about the validity of that but not answered.

HAYNE J: But, again, that has historical antecedents, see, for example, the Forfeitures for Treason and Felony Abolition Act 1878 (Vic) where the property of a convict could by order of the court be taken under the control of the curator.

MR WYVILL: Yes, your Honour. Ex parte Lawler which is the next case was again a case of crime-used property and again in relation to a discretion that was given to the sentencing court. Finally, Theophanous is a civil recovery case but targeted directly to the contribution made by the Commonwealth on the basis that in retrospect proved to be false. Your Honours should note particularly that the contributions by the employee to the scheme were expressly excluded from the forfeiture.

If I could then go back to paragraph 3 of our submissions and we have listed there the relevant sections which are within the exception which apply to Mr Emmerson. There is the capacity to fine which we referred to in 3.2 and your Honours should note that that capacity was made by section 28 of the Misuse of Drugs Act in combination with sections 16 and 17 of the Sentencing Act is effectively unlimited but the court had to take into account his capacity to pay in exercising that sentencing discretion.

There is the sentencing of specific property in section 34 of the Misuse of Drugs Act, the drugs themselves, the vehicles that are used in the commission of an offence and materials like that may be forfeited by the court in the exercise of a sentencing power. Under the civil remedies, if I may describe them as that in the Criminal Property Forfeiture Act, we have the crime-derived property which was available against Mr Emmerson and indeed unexplained wealth or criminal benefit declarations of the kind in Theophanous.

Of course, the instrument of crime, remedies were available under the Act in relation to the deployment of any of Mr Emmerson’s assets in pursuit of a crime. This particular kind of recovery is, in our submission, unprecedented prior to 2000 in the State of Western Australia and we have covered that in footnote 1 on page 3. We understand, or from our researches at least, the drug trafficker declaration concept was first introduced in Western Australia by the Crimes (Confiscation of Profits) Amendment Act 1990, but in the context of a scheme for the recovery of the proceeds of crime only. That scheme was expanded in a way in substance the same as the scheme before your Honours by the introduction of the Criminal Property Confiscation Act, particularly section 8, in 2000. That is the first occasion on which we believe any scheme like the present has been brought into law.

HAYNE J: Well, you thereby meld two cases which may have to be kept separate. Has there been any consideration in this Court or elsewhere of a law providing for the confiscation of, or injurious affection of, third party interests in property other than crime-used property or in connection with recovery of proceeds of crime?

MR WYVILL: We are not aware of any of that kind, your Honour.

BELL J: In that connection it might be noted by reference to Director of Public Prosecutions; Ex parte Lawler [1994] HCA 10; (1994) 179 CLR 270 at 279 Justice Brennan discusses the provision in:

modern statutes . . . for the forfeiture of property owned by an innocent person are justified on the footing that the liability . . . enlists the owner’s participation in ensuring the observance of the law and precludes future use of the thing forfeited –

Now, there is nothing of that character in a circumstance where lawfully acquired property in which an innocent third party has an interest is confiscated.

MR WYVILL: That is right, your Honour, and that is because there is no connection between that property and the offending, and it is difficult to see how any third party could be engaged in any way in the enforcement of the criminal law in that respect, yes, your Honour. So if we can make our points quite shortly in relation to characterisation of this legislation, the first point, of course, is to go to the terms of the Act itself, section 10(2), which is an expressed acquisitive object. The acquisitive object in that particular provision is used in direct contrast in the very same provision with references to deterring criminal activities, for example, it is said in 10(3) that:

Crime-used or crime-derived property (real or personal) is forfeit to the Territory to deter criminal activity –

It is not referred to in subsection (2) and, I think, your Honour Justice Bell probably would say to me that that reflects the same point you have just made to me because you cannot connect the forfeiture of innocent property with the deterrence of crime, at least certainly with third parties.

So we say a primary point is that the Act itself declares an acquisitive object. The words that the legislature has used are the surest guide to their intention and that is a very strong starting point in the process of characterisation. It cannot, of course, determine characterisation. One needs to go further. If I then take what I suspect is your Honour Justice Hayne’s point at 4.2, that this scheme does not share any of the features of any laws – sorry – this particular scheme does not share the feature of any laws for the exaction of fines, penalties or forfeitures which fall within that expression used by the plurality in Theophanous. We also make the point at 4.3 - - -

HAYNE J: Is there anything to be gained by looking to America in this? I recognise that taking is not acquisition but is there anything to be gained by looking to America, and the RICO Act - - -

MR WYVILL: We did look.

HAYNE J: - - - we all know from The Sopranos, is large in its reach, but does it extend to injurious affection of third party interests?

MR WYVILL: We did look at – research the American authorities in this respect and what appeared to us was that the forfeiture provisions tend to be dealt with under other constitutional protections in the United States and we were not able to locate – and I stand to be corrected by those who are assisting me – a case which related forfeiture to the takings protection. But, your Honour, we can look at that and provide your Honour with a note if that would assist.

We also note the point because it is taken against by the interveners and by my learned friend, the Solicitor-General for the Northern Territory, about the effect of this being punitive and deterrent and disabling, yes, but that will be the case in relation to every law with respect to the acquisition, otherwise in the just terms it is directed towards offenders and if that proposition was accepted it would effectively put such people outside the constitutional protection entirely.

We also make the point that – and there has been no attempt to do it – that the appellants have not shown why it would be necessary to enlarge the established categories to include this new kind of legislation. We would accept the proposition, if it is put, that the categories may not necessarily be closed for all time but there would need to be, in our respectful submission, a strong case put forward as to why the assisting categories were not adequate.

BELL J: Can I just stop you for a moment, just directing your attention to paragraph 4.2? The suggestion that the scheme does not share features of laws for which there is an appropriate, or a background in history. That may have considerable strength when one is looking at innocent third parties, but it is a difficult proposition to make good in relation to the person who has suffered a criminal conviction and is subject to forfeiture, surely.

MR WYVILL: Your Honour, for the process of characterisation, we would submit that obviously it is material that the legislation is targeting somebody who is an offender. That puts it in a very different category, we completely accept that, but we would respond by saying that does not mean that acts of that kind do not have to satisfy characterisation to put them outside the constitutional protection.

BELL J: But the suggestion that there is not an historic foundation for the notion that forfeiture might extend beyond crime-used property and the like to the confiscation of the whole of a felon’s property seems to me to be a novel proposition.

MR WYVILL: It is not novel because that is exactly how felony forfeiture operated, of course, but that operated as a rule of law, so that fell within 3.1 of our categorisation. What we are talking about here is civil forfeiture procedures which are initiated by the Executive.

BELL J: But what I am raising with you is whether the statements in Theophanous cited, or to which reference is made in paragraph 4.2, in your contention, have application beyond innocent third parties.

MR WYVILL: Well, Theophanous was a wrongdoer’s case.

BELL J: We may be at cross purposes.

MR WYVILL: Sorry, your Honour, but yes, Theophanous was a wrongdoer’s case which is why I have selected that particular dicta.

BELL J: Yes.

MR WYVILL: And that appears to be - and the principles which this Court has applied - in reviewing the legality of forfeiture, or whether forfeiture falls within or without the constitutional protection.

BELL J: Whether it is properly characterised as forfeiture or a device. Now, I am simply taking up with you the question that to require that the whole of a convicted felon’s property be confiscated has a long history.

MR WYVILL: It does, your Honour.

BELL J: And the circumstance that this is a civil scheme that applies only upon one’s third conviction might on one view not be thought to take it outside that history, save in relation to the innocent third party.

MR WYVILL: Yes, your Honour, but the point of distinction we make is that this procedure here is completely separate and distinct from the sentencing procedure and that has not been the case before. It is not by rule of law but by decision of the Executive as to which persons may be subject to the scheme and it is a civil procedure with all the benefits of the civil procedure which we say put it into a completely different category.

HAYNE J: In that respect, it completely mirrors procedure provided for by the 1878 Victoria Act in substitution for the automatic forfeiture at law. There is a provision, civil proceedings moved by the Executive for appointment of a curator to the whole of the convict’s property, separate altogether from sentencing.

MR WYVILL: Yes, your Honour, I am afraid I am not aware of that particular provision. We can look at that.

BELL J: This scheme is clearly separate to sentencing because the consequence does not attach as the result of conviction for a given offence. It is a consequence that flows when one has thrice been convicted of a specified offence.

MR WYVILL: Yes, but it is still the result of three sets of offending and we would say, with respect, that it would be an artificial distinction to say that it was not part of the sentence or consequence of the offending. This is the major issue about which we see – not the policy issue but the major issue in terms of recognising this new category, if our submissions are right that it is a new category, is the impact it has on the sentencing discretion because it is difficult to see how legislation of this kind, which effectively does not include a consideration by the court of the appropriateness of this in relation to the offending, could not have the potential of overwhelming the sentencing discretion, at least in relation to financial penalties.

KEANE J: If the statute provided for a penalty, a money penalty of $100 million, but in no case to exceed the value of the offender’s assets, would that be invalid?

MR WYVILL: If it was a provision that applied by force of law to all persons who qualified, it may not be, no, your Honour.

CRENNAN J: In the context of the Act’s operation and the differences you have pointed to in relation to the features of other laws, is it your submission that the Act operates to forfeit property not owned by the person declared to be a drug trafficker or is the complaint in that respect something along the lines that the Act has the potential in the abstract to forfeit property not owned by the person declared to be a drug trafficker?

MR WYVILL: Well, the Act in its terms creates the likelihood that it will forfeit property which is not owned by the respondent and the two primary examples of that are the property under the control of the respondent and the second example is property in which third parties have an interest who are unable to deploy or for whatever reason the objection procedure to escape the forfeiture. So the answer is that that is, in our submission, your Honour, a real likelihood from the way the Act is structured.

To give an example in relation to the forfeiture of property under the effective control, for example, if Mr Emmerson had an enduring power of attorney in relation to a parent, it is difficult to see how that would fall outside the scope of the forfeiture order in this case. Any property held on trust for children may, it would seem, fall within the scope of the forfeiture that is contemplated.

Similarly, third party rights we have talked about already where people claim co-ownership in assets are at significant risk by reason of provisions of the Act. So, your Honour, I cannot put it so high as to say that the Act will necessarily, in every case, apply to third party property, but it contemplates in terms that it could very well do so, and the likelihood is certainly there.

KEANE J: Whether it did in fact would depend upon the facts of each case.

MR WYVILL: Yes.

KEANE J: So, that it would be a case of, as applied in validity, not a case of ex facie invalidity?

MR WYVILL: No, your Honour, the way we would answer that, with respect, your Honour, is to say that if one is looking at the characterisation process one can look at the intended operation of the Act, that does not need to be the operation in every instance, but certainly the intention of Parliament here is to capture property which may belong to a third party but which is effectively controlled by the respondent or which that third party does not avail themselves of the objection procedures successfully, that property will fall within, necessarily, the scope of the forfeiture.

CRENNAN J: But it is not an issue in relation to the facts in this case.

MR WYVILL: It is not an issue in relation to the facts in this case, no, your Honour. That is the point we make about the issues about third party engagement, third party’s property engagement, is that that goes towards characterisations in two ways; firstly, because it reinforces the unprecedented nature of this legislation and, secondly, because it supports an acquisitive object on the part of Parliament in terms as opposed to a regulatory object, and particularly the enforcement of the law. Your Honours, that completes my submissions on section 50(1), unless there was a further point which your Honours wish to raise with me.

May I very briefly refer to point C of our submissions just to note three points? Firstly, to agree with the point your Honour the Chief Justice put that Executive discretion obviously features significantly in the primary points we put, and it may very well see that issue determined within those first and second issues. The second point we would make is that the cases which we refer to in relation to Executive discretion in relation to tax are not confined, in our submission, as my learned friend, Mr Grant, has put them, but are broader in relation to imposition otherwise than by authority of Parliament.

And finally, in relation to double punishment, we do not dispute that Parliament may pass a law for double punishment, but our challenge here is that Parliament may not vest such a discretion in the Executive. Your Honours, I will hand over to Mr Christrup to complete our submissions briefly in relation to Part D, but in order to complete my role the orders are set out at paragraph 7 in relation to the two alternatives in the event that the appeal is allowed or the appeal is dismissed.

KEANE J: Mr Wyvill, can I just ask you, what is the point – or perhaps to elaborate on the point being made in 8.2?

MR WYVILL: To ensure, your Honour, that the benefit of the undertaking from the appellants to cover Mr Emmerson’s costs in this Court is not impacted by setting - - -

KEANE J: Is not defeated by a set-off?

MR WYVILL: Yes, precisely, yes.

KEANE J: Thanks.

MR WYVILL: Unless there is something further, I will hand you to Mr Christrup.

FRENCH CJ: Yes.

MR CHRISTRUP: If the Court pleases, this part of the appeal concerns the proper construction of section 52(3) of the Criminal Property Forfeiture Act. The two propositions that we seek to advance today are set out in Part D of the first respondent’s outline of submissions and they appear at paragraphs 5 and 6 of that document. I will start with paragraph 5.

Can I take your Honours to section 52(3) of the Forfeiture Act? The section provides for the automatic cessation of the restraining order following the completion of the third charge referred to in section 36A of the Misuse of Drugs Act and it does so by identifying the occurrence of two events. In subparagraph (a), the final determination of the charge and in subparagraph (b), the disposal of that charge without its determination.

Between them subparagraphs (a) and (b) cover the field as to the fate of that charge. I pause here to note that the expression “disposal of” where it appears in subparagraph (b), is defined in section 5 as meaning the withdrawal of the charge, the filing of a notary bill, its dismissal or the filing of a nolle prosequi.

Each event specified in subsection (3) occurs at a single point in time, as, indeed, is the case with the other instances identified in section 52. It is upon the occurrence of one of the events in subsection (3) that the restraining order ceases to have effect if the person is not at that time declared a drug trafficker under section 36A.

Your Honours, the Court of Appeal rejected this construction and found that the Director of Public Prosecutions did not have to obtain the declaration at the final determination of the charge. The relevant references - - -

BELL J: Is your contention that finally determined in subparagraph (a) means at the point of entry of conviction?

MR CHRISTRUP: Further than that, your Honour. It extends – it includes sentencing. I do not need to go that far for the purposes of the argument today because, in our submission, there is a distinction between a finding of guilty, which is the expression that appears in section 36A, and conviction. They are two separate stages.

BELL J: But the final determination of a charge is a different matter again to consideration of the reference in 36A.

MR CHRISTRUP: Correct.

BELL J: I am directing your attention to what you say is the point of final determination of the charge. Is it your contention that it is conviction – entry of conviction?

MR CHRISTRUP: Our submission is that it includes the act of sentencing as well. But for the purposes of the argument today it makes no difference. It can also include – it can also be cut off at the point of conviction. It makes no difference to my argument today. The reason for that - - -

BELL J: Well, if it is the former, that is, if it is entry of conviction, it would be, for all practical purposes, impossible that the restraining order could persist for a sufficient time to enable the declaration.

MR CHRISTRUP: In our submission, no, your Honour, and the reason for this is found in the wording of section 36A which is the section that permits the court to make the relevant declaration. If I can take your Honours to that provision, section 36A(3)(a), which is the relevant third charge and the one that is referred to in section 52(3) refers to the person who “has been found guilty”.

FRENCH CJ: The application for a declaration must be made between the return of the verdict and the entry of the conviction.

MR CHRISTRUP: Correct, and importantly, your Honour, the court controls, the court hearing the charge controls when it is it should enter a conviction, assuming that it chooses to enter such a conviction.

KEANE J: So how is that consistent with section 36A(2) which says:

An application under subsection (1) may be made at the time of a hearing for an offence or at any other time.

MR CHRISTRUP: We say, your Honour, that that provision is facilitative in two respects. First of all, it counters any possible argument that may be put in the absence of this provision, of subsection (4), that if the application for a declaration is filed before the charge is determined, one could argue that it is premature because the third element, namely, the finding of guilt on the third charge has not arisen so the application would be premature. So in that sense, your Honour, it addresses the question that - - -

KEANE J: But 44(1)(a) contemplates that the restraint will have been put in place before the third charge is determined so the restraining order is in force - - -

MR CHRISTRUP: Yes.

KEANE J: - - - to support an application under subsection (1) that may be made at the timing of the hearing for an offence or at any other time, so you need to read some words in, do you not, qualifying the words, “at any other time”?

MR CHRISTRUP: Well, we do not have to read them in. We do not have to read any words into it. It can be construed on the basis that it facilitates, on our submission, the filing of the application for a declaration before the third element in subsection (3) has been satisfied, namely that the person has been found guilty of the third offence.

HAYNE J: As I understand it, you seek to give operation to the phrase “or at any other time” as permitting application to be put on before commencement of the hearing. That would give some operation to “at any other time”. You, I think, have to get to the point, do you not, of saying the application must be put on before entry of conviction. It can be put on before trial begins, it can be put on during trial but cannot be put on, cannot be made after entry of conviction. Is that where the argument ends up?

MR CHRISTRUP: Yes, it is, your Honour. Yes it is, and - - -

BELL J: Well, entry of conviction precedes sentence necessarily.

MR CHRISTRUP: Yes.

HAYNE J: If you read “entry of conviction” as being the entry in the records of the court - I understand that is perhaps an available meaning - it would mean that counsel for the DPP as the judge utters the words on return of the verdict, “Very well, you are convicted of the offence” that counsel for the DPP has to say “Do not forget my application and you have to deal with my application before the entry of conviction is recorded”.

MR CHRISTRUP: Or, in our submission, it could also extend to the end of sentencing but the facts of this case - - -

HAYNE J: I think that is fairly heroic, but there we are.

MR CHRISTRUP: Well, the facts of this case, your Honour, may provide an indication, if I may. The facts in this case were that Mr Emmerson pleaded guilty on 18 July 2011 and was not convicted or sentenced until two months later – over two months later. That much is apparent from the sentencing remarks of his Honour Justice Mildren which appear at appeal book volume 1 at page 68.

BELL J: But the entry of the plea is not to be equated with the finding of guilt by the court. The court may give permission to withdraw a plea of guilty. The plea of guilty is taken to be an admission for purposes but that is not to be equated with a finding by the court of guilt.

MR CHRISTRUP: But the guilty plea, in our submission, would stand and would form the basis – would satisfy the criteria referred to in section 36A until the court gives leave for that plea to be withdrawn.

HAYNE J: But why would we read the Act as requiring this particular sequence of events? I know you say that the words of the Act admit of the interpretation you advance. Let us accept, for the purposes of argument, that that is an available construction of the words. Why? Why would one insist upon that sequence of events?

MR CHRISTRUP: On that premise, your Honour, we rely on, if you like, the principle of legality in a sense because if our construction is right then the effect of section 52(3)(a) is that in effect imposes a limitation period during which or before which – before that time arrives that the DPP must move to have the property rights of the respondent or the person charged forfeited. It operates no different, we say, as any other limitation period which, as this Court has held on a number of occasions, is a substantive and valuable right belonging to the person - - -

HAYNE J: Can I put it as bluntly as this? The availability of the order at the moment does not seem to me to bear upon whether conviction is recorded or not. We are not dealing with offences of the kind, are we, where there is going to be an adjourned bond without conviction? The availability of the forfeiture order is not going to bear, is it, or is it, on whether conviction is recorded?

MR CHRISTRUP: I will not comment on the facts in this case, your Honour, but speaking more generally, her Honour Justice Kelly in the Supreme Court referred to the fact that the third charge could be constituted by passing a marijuana joint to a friend at a party. You would not necessarily expect, depending on what the two prior offences are, but that may very well be a situation where a conviction is not recorded.

In light of what has fallen from the Bench, it is not conceded by Mr Emmerson that necessarily the final time at which the section 36A declaration can be made must be before conviction. Finally determined in relation to the charge, we say, is apt to include also sentencing.

FRENCH CJ: The premise is that 94(1) requires a subsisting restraining order at the time of the declaration in order for the forfeiture to operate.

MR CHRISTRUP: That is so, and in this case the facts – or the chronology, if you like, of the events was that the respondent was convicted and sentenced on 22 September 2011, and that is apparent from the transcript of the sentencing remarks of his Honour Justice Mildren that I took you to before, but the DPP did not bring its application until February the following year, the application for the declaration, and that declaration – or application, pardon me – appears at pages 19 and 20 of the appeal book.

Can I also say this, that the effect of what the Court of Appeal decided was that the DPP could bring its application for its declaration after the final determination of the charge. I have already addressed your Honours as to the error that we say the Court of Appeal committed by saying that the earliest possible time at which the declaration could be made is at the point of conviction. We say that is not reading section 36A.

FRENCH CJ: It is not a question of when - a limitation on the time at which the declaration could be made; it is the time at which the declaration if made will interact with section 94.

MR CHRISTRUP: Yes, that would be part of the approach to construing it.

FRENCH CJ: The whole premise, as I said, is section 94 requires a subsisting restraining order.

MR CHRISTRUP: Perhaps given what has been said, I should refer your Honours to section 7 of the Sentencing Act (NT) which, if you like, brings out the differences between a finding of guilt and the entry of conviction. They are very much in that provision seen as two separate events. So we say there is indeed a period of time during which the relevant – during which the court can make a ruling as to whether to make the necessary declaration under section 36A, and that is the gap between either finding of guilt and conviction or, taking the wider interpretation, between finding of guilt and the finalisation of sentence. It is during that period that the declaration, if one should be made, should be made.

FRENCH CJ: Even if you are right, the declaration being made after determination of the restraining order would still have effect through 94 in respect of property given away.

MR CHRISTRUP: Yes, it would. I do not think that result can be avoided, your Honour. I should also just point out two other things while I am on paragraph 5 of our outline of propositions. The first one is that it must be borne in mind that the court controls the length of the gap between the finding of guilt and when to either convict or finalise sentencing and it would be unrealistic to assume that the court will not, in deciding when to finally determine the charge would take into account the fact that an application has been made for declaration under section 36A.

More importantly, because the court controls the length of the gap there is room within which any unresolved objections can be dealt with, and you will recall that one of the concerns of the Court of Appeal was that the construction proffered by Mr Emmerson might cut across such objections. In our respectful submission, that is not the effect of the Act.

The final point on paragraph 5 – sorry, two more points. I should say first of all the issue of appeals has been raised and how they fit in in relation to section 52(3). On, on our submission, “finally determined” means at the conclusion of sentencing. It does not refer to appeals. If it was the case that a respondent was to appeal at the finding of guilt then at the same time he or she could also appeal the declaration under section 36A, and if the finding of guilt was set aside at the same time so would the declaration and there would be no forfeiture.

The Court of Appeal construed the reference in subsection (3)(a), the reference there to a person not being declared a drug trafficker as a shorthand for a failure by the DPP on its section 36A application to prove either the relevant criteria set out in that provision or the discontinuance of that application, its withdrawal or its dismissal, and that much is apparent from pages 186 and 187 of the reasons of his Honour Chief Justice Riley, with whom her Honours Justice Kelly and Justice Barr agreed, and also essentially approving what his Honour Justice Southwood said, the primary judge, at appeal book 1, pages 159 to 160 at paragraph 113.

Our submission on that point is that if that is what the legislature intended, namely a person is not declared a drug trafficker, if they intended for that to mean that the DPP did not prove the facts or that the application was withdrawn or dismissed then the legislature would have used the words that they chose to use in subparagraphs (4) and (5) which deals with subsequent applications of a different kind. I also make the point in those traditions, subsections (4) and (5), the present tense “is” which appears in subsection (3)(a) does not appear. They used the words “has not been made”. That completes the oral submissions in respect of point 5.

If I can move on to point 6. If this Court is of the view that there is also another construction of section 52(3)(a) available, namely the one that was advanced by the Court of Appeal, or by the appellant in this Court, then Mr Emmerson’s submission is that the provision is ambiguous and if so the construction which involves the least invasion of property rights should be preferred, and I have already addressed your Honours as to the existence of, or the imposition, if you like, of the limitation period in respect of which the making of the declaration should be made is such a protection.

In our submissions we have referred to the relevant passages in two decisions; one is the Director of Public Prosecutions (ACT) v Hiep (1998) 86 FCR 33 at page 42 where the Full Court of the Federal Court made the point that there is a public interest in maintaining certainty and security in relation to property holdings and that that public interest would be significantly undermined if forfeiture were to be available for more or less an open-ended period.

In there we have also made a reference to the observations of this Court in George v Rocket [1990] HCA 26; (1990) 170 CLR 104 at pages 110 and 111, where the Court observed that in construing statutes affecting property rights it must be borne in mind that they authorise the invasion of rights, rights which the common law has always valued highly and went to great lengths to protect. We say that if there is an ambiguity then the construction which does the most to protect these fundamental property rights should be adopted by this Court.

FRENCH CJ: We may have explicitly addressed this before, but the construction for which you contend at 52(3)(a) requires us, does it not, to read:

if the charge is finally determined but [prior to that final determination] the person is not declared –

et cetera?

MR CHRISTRUP: No, your Honour, we say because the use of the word present tense “is” suggests that it should be dealt with at the same time, and it is no coincidence, we say, that the declaration that section 36A can only be made by the Supreme Court and it is only the Supreme Court which can determine the final and third charge. That much is apparent from section 36A.

BELL J: In the event a restraining order, as with the order made in this case, is not expressed to be for a determinate period of time, what provision, apart from 52(3), deals with the determination of a restraining order? There is provision for the applicant to request the court to set the order aside at any time for any reason under 50(3). What mechanism is there for a respondent to do so?

MR CHRISTRUP: I am not aware of any, your Honour. Thank you, your Honours, I may just close by making the point that if our submissions are accepted in relation to the section 52(3) point, that does not involve any disturbance of the orders of the court below because the application for the declaration should be dismissed and the making of the declaration below would be futile because there would not be any restraining order in relation to which it could attach. If the Court pleases.

FRENCH CJ: Thank you. Solicitor-General for the Commonwealth.

MR GLEESON: Your Honours, I had proposed to divide our oral submissions into three parts. The first is a brief capitulation at a level of principle of how the Court should approach the question of acquisition of property. The second is to apply those principles to the issues joined in the written submissions, which is a case where there are no third party interests, which is the factual situation we are dealing with. The third is to extend those principles to the issues raised by the Court yesterday and today of the possibility of third party interests. I would like to distinguish analytically, at least, the second from the third. In other words, the scheme is not an acquisition of property so far as it impacted on Mr Emmerson, being a person who owned absolutely all of the property the subject of the order. The question whether it is an acquisition so far as third party interest does not strictly arise in this case but I will offer the Court some submissions on how that matter would be addressed.

Your Honours, at the level of principle, we are dealing with a question of characterisation. Is it properly to be characterised as a law for the acquisition of property within a just terms guarantee? In this type of case, but perhaps not all cases, that question reduces to whether the notion of terms, or just terms, would simply be irrelevant or incongruous, given the nature and object of the law.

We do put that the primary object of a forfeiture law will be to impose a penalty or a sanction as a consequence of proscribed conduct in order to vindicate a norm or rule of conduct and it will be necessary for us to indicate what is the rule or norm of conduct in the present case. If the forfeiture is of that character, then the application of a just terms requirement would annihilate the penalty, or forfeiture, and be inconsistent, or incongruent, with its effect.

Your Honours, perhaps more controversially or not, in our written submissions we have suggested there is an analytical tool available to distinguish between in rem and in personam forfeiture. The division may not be absolutely strict, but it would seem to capture the case that most of the cases in this Court are in rem cases in the sense that the property forfeited is itself directly involved in crime. It is crime-used, crime-derived or, potentially, property likely to be used in crime. Lawler is but one of many examples in that territory.

We would distinguish from that analytically the less common case of forfeiture acting in personam where the critical feature is the wrongdoer and the wrongdoer’s conduct which requires a forfeiture of identified property, property which is not necessarily crime-used or derived. We would suggest that Theophanous is an example of an in personam forfeiture. The benefits which were forfeited were lawfully obtained benefits, namely, the superannuation benefits. The reason the forfeiture was upheld was that the condition upon which Mr Theophanous was entitled to those benefits was defeated by his own wrongful conduct.

On our researches – and we would like to find more cases – Theophanous is probably the only clear in personam forfeiture case that this Court has considered. I may have missed others, but that is the best and only one we could find. Clearly, the present law has a more draconian effect than the Theophanous Case and it will be necessary to ascertain whether it is in truth a forfeiture, but in principle it is doing the same type of thing as Theophanous is doing.

Proportionality – the parties agree that in this circumstance it is of no assistance to the Court in terms of the constitutional question. It may have some relevance in the application of the discretion under the Act, and I will come back to that. We have accepted that, of course, it is a question of substance and if the forfeiture is a circuitous device to effect an acquisition of property divorced from a norm of conduct, it would fall foul of the guarantee.

Could I then come to the final principle which we offer today? It was not in our written submissions, but it is intended to deal with the questions from yesterday and today, which is how does the court deal with that which appears to be a forfeiture but which impacts on third parties? What we would offer at a level of principle is that a forfeiture may retain its character outside the just terms guarantee even though it impacts on innocent third parties, provided that the impact is reasonably incidental to the primary purpose of forfeiture.

HAYNE J: What does that mean?

MR GLEESON: What that means is then applied to particular cases, in an in rem case such as the ones that have been discussed, the relationship between the property in question, whether it be the boat, the imported drugs, the prohibited import and the like, and the prescribed conduct will be such that in order to vindicate the norm the forfeiture must occur even if the property has got into the hands of an innocent party. Your Honour Justice Bell referred to what Justice Brennan said in Lawler and that is an application of the reasonably incidental principle to that type of case.

Coming to in personam forfeiture, we would submit that if there is an impact on third parties it must be reasonably incidental to the forfeiture of the wrongdoer’s property in the sense that for the forfeiture not to extend that far would weaken or destroy the effect of the forfeiture of the wrongdoer’s party.

GAGELER J: Mr Solicitor, could I just ask you about Theophanous? This is your only example of the in personam category, yet did I understand you correctly in saying that was a case which is properly explained as there having been a breach of a condition on which the property was held?

MR GLEESON: Analytically for the purpose of acquisition of property it could be regarded as a breach of condition or failure of consideration. The benefits were promised on the basis that they would provide adequate remuneration to prevent a person giving in to temptation. The person gave in to temptation in a very broad restitutionary sense, the condition had failed, and the benefit could thus be seen to be, as it were, unjustly or illegitimately retained in the hands of Mr Theophanous. So that is an example of the response of forfeiture to identify a wrongdoing but the benefit itself not being crime-used or crime-derived.

Beyond that example, in terms of the proposition of reasonably incidental, Theophanous was also a case, of course, where the forfeiture affected the wife’s interest in the superannuation. The Court dealt with that at paragraphs 65 to 67. It was dealt with perhaps fairly swiftly at the end of paragraph 66 that:

If the superannuation order presently sought against the plaintiff –

that is the forfeiture –

be made, then the plaintiff’s wife can never become entitled to any benefits –

Of course, logically, that is true as a matter of construction but what must have underpinned that I would put, with respect, is a proposition that the connection or dependency between the husband’s entitled to the benefits and the wife’s contingent entitlement to them was so close that you could not leave the benefits available to her, the forfeiture had to be comprehensive. Your Honours, the final matter on the point of principle is I did wish to go to the Victorian - - -

HAYNE J: I would have thought the hinge about which that aspect of Theophanous turned is the second sentence in paragraph 66, that her interest depended upon her survival and at the point of survival him being “entitled”.

MR GLEESON: No doubt true, but when the Court, however, was upholding the forfeiture of his interest it was no doubt the practical effect of that forfeiture – the practical effect of it that her interest would thereby be defeated. The Court was mindful of that effect - - -

HAYNE J: Well, her hope. Her hope.

MR GLEESON: Even if put at hope the Court was mindful of that contingent effect upon a third party interest, took it into account and said it did not destroy the character of the forfeiture. Your Honours, I did wish to go to the Forfeitures for Treason and Felony Abolition Act 1878 (Vic) that your Honour referred to as one of the examples from around the colonies because it touches on a number of the points of the level of principle. Your Honours should have the Forfeitures for Treason and Felony Abolition Act 1878 (Vic).

Section 1 was the abolition of the longstanding rule of forfeiture in personam based on felony. It was then replaced under section 2 with the provision that pensions and superannuation allowances would be lost, and that is the origin of the Theophanous-type provision, and then next, that the office itself would be vacant, and that is the origin of section 44(2) of the Constitution. So here we see more specific types of forfeiture in personam operating in lieu of the more blunt approach which common law had taken.

Section 3 is a more modest forerunner of the objective in section 10(2) of the current Act in that it provides for an obligation to make compensation to the community for a category of costs and expenses incurred. It is narrower category of course than the present case. It is costs and expenses in and about prosecution and conviction. Nevertheless, the notion of an obligation to compensate based upon your conviction thereby depriving you of that property is well-established in this provision.

Then we see that there are other forms of compensation, section 4, compensation to the persons defrauded. Section 7 is important because although the general felony forfeiture has been abolished there is an inability to sue at law and equity for recovery of property, so in effect that has forfeited the ability to turn your property into money.

So I am going to this partly to illustrate the continuing nature of in personam forfeiture in the statute books even after the abolition in 1878 in Victoria, partly to illustrate that compensation is a purpose recognised for forfeitures, and then in section 8 and following, coming to the point your Honour Justice Hayne adverted to, there was an ability for the property of the convict to be placed in the hands of a curator.

HAYNE J: Done by executive act, not court order. I was mistaken.

MR GLEESON: Yes. The court might think that the language in section 9 is a fraction more precise than the language in the current Act in identifying exactly what it is that is handed over to the curator. What is handed over, what is vested, is all of the estate and interest of the convict in the property, so it is property in the legal sense, not in the factual sense. I will be submitting that in the present Act that is the concept that is embodied in sections 44 and 94, but here it is perhaps clearer in language than it currently is.

So, under this administration provision, all of the property so defined invested, and then we see in section 10 provisions for remuneration; section 11, the curator can sell, and in a sense a common fund is established, and out of the common fund in section 12 the cost and expenses are paid. Section 13, debts are paid; 14, compensation is paid; 15, maintenance is paid; 16, perhaps very reminiscent of section 148 of the current Act, the curator is given a discretion as to the order of priority of payments out of the fund. Section 17, the fund creates a trust which is held for the use and benefit of various persons including, I note:

such other persons as may be lawfully entitled thereto according to the nature thereof –

So, in a manner similar to the present scheme, dealing with the interest of third parties, their interests are subjected to a form of administration under a common fund. I go to that to illustrate that there is precedent in the statute books for in personam forfeiture having an impact on third party rights, but an impact which is qualified and protected by provisions such as common fund provisions.

HAYNE J: How is there an impact on the third party when what is vested is the section 9 vesting of the estate and interest of the convict?

MR GLEESON: Take, for example, section 11, your Honour. If the legal ownership of the property subject to mortgage is vested in the curator, the curator has a power to sell the property and that power of sale by the practical impact on the separate mortgagee’s interest will see property sold which the mortgagee may otherwise prefer not to be sold. It does not, of course, defeat the mortgagee’s economic interest and there will be an accounting back to the mortgagee under the trust provisions of section 17, but consistently with the current scheme that I am going to come to, what is happening is the interests of third parties are subjected to the common fund administration. They are not destroyed; they receive economic benefit within the common fund arrangement.

HAYNE J: But the mortgagee’s power of sale is unaffected, is it not?

MR GLEESON: This does not per se take away that mortgagee’s power of sale.

HAYNE J: The mortgagee can realise upon its security at a time of its choice if that precedes the exercise of the curator’s power under section 11.

MR GLEESON: Yes, so - - -

CRENNAN J: So what rests under section 9 is the legal and equitable interests subject to competing equities, or competing equitable interests.

MR GLEESON: Yes.

CRENNAN J: Subject to those.

MR GLEESON: Yes, but as with a typical administration and subject to the mortgagee, for example, not having acted first, because the curator has the powers of full management and control of the property, if the curator exercises a power of sale or mortgage or selling, it can then have that impact upon the third party interest but there will be duty to account.

To take your Honour’s example of a bank account, as a chose in action owned by the convict against the bank in a debtor/creditor relationship the chose in action would vest in the curator.

HAYNE J: Subject to the bank’s right to combine accounts, I would have thought.

MR GLEESON: Subject to the contractual obligations under that arrangement.

HAYNE J: And the bank could combine with the debit balance satisfying pro tanto.

MR GLEESON: Yes, and subject to whether the bank exercises contractual rights or not, the curator will have the rights over the chose in action and can realise the chose in action and reduce it to money. So, my point is not absolute equivalence between the provisions. My point is, rather, that the principle of in personam forfeiture leading to an administration of the estate or interest of the convict’s property, leading to the possibility of choice as to priority of payments – your Honours see that in section 16 – the very thing that section 148 of the present Act provides for is not new.

GAGELER J: Mr Solicitor, as I read section 17 with the previous provisions you were referring to, what this legislation appeared to do was to simply set up a statutory trust in respect of the convict’s property for so long as the convict remained a convict. The property was then to revert beneficially to the convict. Is that correct understanding?

MR GLEESON: Not simply a statutory trust. It set up a common fund where the curator had the absolute powers under section 11 to reduce the property to such form as was thought appropriate, and out of the common fund was able to make decisions as to payments of debts and compensatory payments in such order as the curator thought appropriate. So it is the common fund nature of the statutory trust that I am drawing attention to, and within that common fund nature the priority of payments under section 16 would be governed by good faith decisions of the curator. It is not greatly different to the provisions Mr Sofronoff took you to to illustrate where, in the present case, the Public Trustee has the powers and we would say duties under section 148 as mentioned.

HAYNE J: But that, if there is a difference, the difference is whether the third party retains the rights and can exercise those rights according to that third party’s choice, so long always as the curator has not taken a step in the interim which puts exercise of that right beyond capacity to perform.

MR GLEESON: Yes, and under this scheme, which I will come to under the third part, in the period prior to the forfeiture there is no doubt there is a subjection of the third party rights to the larger perceived purpose of the forfeiture. There is not a destruction of those rights, there is a subjection, and your Honours have referred to the provisions which the mortgagee is allowed to issue notices of default and seek to realise property.

So there is a range of provisions which are designed to subject but not destroy the third party rights pending the forfeiture, and the framework which we put around that is: if those provisions are reasonably incidental to effecting the forfeiture in personam against the wrongdoer in the sense of reasonably necessary to vindicate that forfeiture and not see its effect destroyed or annihilated, the consequence would be it is not a relevant acquisition of property and, alternatively, the terms that are given may satisfy just terms.

Your Honours, could I move to the second part more briefly, which is the case that is actually joined in the written submissions which is focusing on Mr Emmerson’s interests on the assumption, on the facts that he is the absolute owner of all the property. We would contend that section 36A of the Misuse of Drugs Act can be looked at in the present context to understand the purpose and object of the forfeiture, even though it is in a different Act and what it establishes is the rule of conduct in relation to recidivist drug offenders of a defined kind and the forfeiture is imposed for breach of that rule of conduct.

If it is permissible to look at section 36A in that way, that helps to inform the character of the forfeiture and immediately opens up that it is penalty or a sanction for a breach of the norm of conduct, that it has a proper deterrent effect. Its deterrent effect is evident from its purpose as indicated in section 36A and, prima facie, this would be a forfeiture and not an acquisition of property.

I need to then deal on this topic with a couple of matters, firstly, the points which Mr Wyvill made this morning, I think in paragraph 4 of his outline, as his key characterisation arguments, which would take this outside of forfeiture. If your Honours have paragraph 4, the short answer is to paragraph 4.1, the alleged declaration of an acquisitive object adds little to the analysis. The scheme’s practical effect is not to acquire the legitimately acquired wealth as efficiently as possible, it is to acquire all wealth caught by the restraining order, whether legitimately acquired or not, and those two should not be elided.

As to 4.2, it is not a very useful basis to proceed to simply say, “Can I find something identical to this in the history?” However, as your Honour Justice Bell pointed out, the history is there in spades for this type of scheme, at least against the wrongdoer. As to 4.3, the punitive deterrent and disabling effects are present and are quite significant in the characterisation exercise. As to 4.4, it is not a case of extending known categories but dealing with the matter at the level of principle.

Could I next come to the construction question of section 44 which the Court has raised yesterday? Critically, the question of what limits are there upon the court’s exercise of discretion. Your Honour Justice Bell asked considering, for example, a case where all property was legitimately acquired, what limit is there in the Act which would indicate the nature of an order which should be made?

Our starting point is that there is clearly a discretion at several levels. There is the discretion in section 44(1) whether to make the order or not. There is the discretion in 44(2)(a) as to what property to attach the order to. Thirdly, we would submit - this point may not have been put so far squarely – that in deciding what property to attach the order to, it would not be beyond the court’s discretion to say if this order were in truth to impact upon innocent third party rights in a manner not adequately protected for in the Act, then I could exclude that property from the order provided that does not otherwise defeat the purposes of the Act.

Taking up one of your Honour Justice Crennan’s questions, if there was a third party with an interest, the third party could be heard either at the section 44 stage or at the section 67 stage and identify its interest and the court, we submit, would not be precluded from framing the order as to identified property in a manner which ensured there was no injurious affectation to that interest.

FRENCH CJ: If the court is satisfied that such an interest exists, is it required to exclude it? In other words, does the power conferred by 44 - is that limited to property and not extending to equitable and other interests of other parties?

MR GLEESON: The answer to that is yes. The power is limited in terms of the subject matter of the order to the legal conception of property, that is the legal or equitable interest which establishes ownership or is the subject matter of effective control.

FRENCH CJ: Your third level discretion went to practical consequences on third party interests.

MR GLEESON: So, in our analysis, if the property was mortgaged, the subject matter of the restraining order is the equity of redemption, it is not the mortgagee’s security and the subject matter of the forfeiture under section 94 is not the mortgagee’s interest. However, because of the relationship between mortgagor and mortgagee interest there can be a practical impact in restraining and forfeiting one and those impacts are either dealt with in the provisions of the Act or, in my submission, if the Act were not sufficient the discretion would not prevent the court saying, well, that house which otherwise might be included will simply be excluded.

In the present case, we know that certain property was excluded from the order. I do not think your Honours know clearly from the record why. You know the redeemable shares were excluded and you know that the proceeds of the Westpac bank account which contained the moneys earned by the band over a number of years were excluded. It is unknown to us what process led to that. It perhaps was by consent of the parties but in our analytical approach to it if, for instance, the moneys of the band were joint and several property, if they were completely legitimately derived, to take your Honour Justice Keane’s question yesterday, they were not necessary to tie up in order to meet purposes of compensation or deterrence or unjust enrichment. The court would have a power to exclude them.

HAYNE J: Just a point that might be answered after lunch, Mr Solicitor, to whom is the order directed? It seems to be directed to the property and otherwise an order directed to the world at large, which is an oddity in this form of restraining order, I would have thought, but those are matters that might be taken up later.

FRENCH CJ: Yes. We will adjourn now until 2.15 pm.

AT 12.44 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.14 PM:

FRENCH CJ: Yes, Mr Solicitor.

MR GLEESON: Your Honours, for completeness in relation to the Victorian Abolition Act, it was repeated in the 1958 Crimes Act 1981 and then abolished some time I believe in the mid 80s. In relation to the question of what does the order operate against, there is a difference between sections 43 and 44. Under section 43 which we would classify as in rem in every sense, it is a restraining order against the property because of its relationship to crime and there is no need apparently even to name a person in the application.

In section 44, it is an order in relation to the property of a person named in the application and so it operates as a restraint on the property and in the present case as an order for delivery up and in that sense directly affects the rights of Mr Emmerson who was named and who was required to deliver up the property to the Public Trustee because of his relationship to the property as the owner or effective controller. So I would maintain the submission that the in personam characterisation is applicable to this type of section 44 forfeiture. Your Honours, to conclude on the - - -

FRENCH CJ: A statement the property cannot be dealt with in - - -

MR GLEESON: Then cannot be dealt with and to that extent in section 55 the persons affected by that prohibition will be first and primarily Mr Emmerson and then any other person who may place themselves in a position of dealing, and in that sense the order will have a larger operation against the world, subject always to people who do not know about the order because of the defence in section 55(4).

Could I conclude our second area of submissions at point 12 to 14 by dealing with the objects and purposes which control the discretion? I have submitted that deterrence is a relevant object and control by reason of the incorporation of section 36A. In relation to compensation, section 10(2), could I make these submissions? Firstly, it is identified as an object and therefore a purpose. It is not, as Mr Wyvill says, merely an indication of the end use of the forfeiture proceeds. His submission does not accommodate the fact that sections 10(2) and (3) are grammatically structured in the same way to compensate in 10(2) and to deter in 10(3). Both are purposive provisions.

Secondly, while it may be one of the primary purposes, it is not the exclusive purpose of the forfeiture, and that can be confirmed by looking at section 10(4) to some of the other applications of section 10(2). In the case, for example, for an unexplained wealth declaration, clearly the purposes of that forfeiture will extend beyond compensation for costs into the area of unjust enrichment, so it is an indication that section 10(2) is not exhaustive as to the purposes involved. Next, the question of evidence as to the costs – in our submission, evidence as to the costs would be admissible and relevant but not necessary in each and every application, and I will show your Honours shortly that in the present case it was not treated as necessary by either party before the Court.

Then could I come to the more problematic role of section 3 which your Honours asked about yesterday? Our submission is that section 3, as a global objective, does have some work to do in relation to section 44. Texturally, that must be the case because it applies to persons involved in criminal activities which picks up the definition in section 10(4) and, thereby, applies to the present case. What work does it have to do? There are these possibilities, depending on the facts of the case.

It could have, as was suggested yesterday in argument, a negative or limiting role in a case where it is unnecessary to restrain particular property because the property was lawfully derived and the property can be left in the hands of the wrongdoer without damaging the other objects of the order and without unjustly enriching the wrongdoer. So that would be one case where it would lead to an exclusion of property. Secondly, it could lead to an inclusion of property where, for instance, with the $70,000 here which was crime-used or derived, to that extent the order will clearly have an effect of preventing unjust enrichment.

BELL J: Can I just take you back to the former instance?

MR GLEESON: Yes.

BELL J: You were submitting before lunch that there is a discretion under section 44 not to make an order in terms of the application in respect of certain property that is the subject of the application for reasons that might be described as taking into account considerations of harshness or the like, as I understood the submission. Is that right?

MR GLEESON: Yes.

BELL J: You say that informing that might be a consideration by the judge dealing with the application that property was lawfully acquired and therefore outside the section 3 objective.

MR GLEESON: Yes, and in that sense it might give you a negative indicator that the order need not extend that far.

BELL J: So that, in your submission, a judge dealing with a valid application which seeks the restraint of all of the property of a person in anticipation of a section 36A order, has a discretion at large to take into account considerations of harshness of operation and the like.

MR GLEESON: Yes and that is what the trial judge did here, as I will come to in just one moment, and did correctly. That is our submission. Just before I come to the trial judge, could I add one further possible, and I put this slightly tentatively, but possible role for unjust enrichment in the discretionary exercise.

BELL J: Just before you do that, I am sorry, Mr Solicitor, but can I take this up with you? If that submission is right, in what circumstance is it ever, or would it ever be right to confiscate the lawfully-acquired property of a person who happens to be a twice convicted drug trafficker?

MR GLEESON: The primary circumstance would be indicated by section 10(2) that the property is forfeited as compensation for the costs described in that paragraph and in addition to that the deterrent role must be taken into account, but it really comes to the answer I was just about to come to next, your Honour, which is it may be that there is a deeper principle underlying this part of the Act which is essentially this.

The Act is targeting, to use a neutral word or to use a word without connotation, one class of serious offender. There is only one class that is singled out for this treatment. They are singled out because it is considered that the degree of their wrongdoing and the recidivist nature of it is so productive of harm to the community that it represents people who in the most serious sense have placed themselves outside the law. They are not prepared to abide in any sense by the rules and they are doing so for profit.

In that sense this person is unjustly enriched at the expense of the community, not just at the expense of individuals, but unjustly enriched because what would be their ordinary rights of property ownership are, in effect, tainted by the nature and quality of the recidivist wrongdoing.

To the extent there is a proposition which underpins what Mr Grant and Mr Donaldson yesterday were putting that ordinarily the order will be broader rather than narrower, to tie that back to the objects of the Act in terms of unjust enrichment, the notion does seem to be, and it is perhaps Aristotelian of restorative justice, that you have so broken the bonds between you and the community and caused costs to the community you must right your wrong through the forfeiture. Now, if that is what is behind it I would submit that is still within the concepts of forfeiture which lie outside acquisition of property.

BELL J: Can I just stay with the exercise of the discretion? On this submission, there might be expected to be evidence of the costs associated with detecting and dealing with the criminal activities of the respondent to the order. There also has to be the costs of deterring. Mr Solicitor, I confess I have some difficulty seeing the sort of evidence that one might reasonably adduce to establish the costs of deterring an individual from engagement in drug-related activities. It just seems there is an element of unreality to the idea informing this aspect of the submission.

MR GLEESON: Let me show your Honour then how the trial judge dealt with it because the proposition I put was such evidence would be relevant and admissible but not necessary in many cases. So if I could ask your Honours to go to pages 125 to 128. At 125 in paragraph [83], Mr Wyvill put his submissions seeking the restraining order to be set aside, and the critical submission is 4 and 5, that the forfeiture would operate disproportionately.

Your Honours will note that no submission was put that there was any third party interest that was affected by the forfeiture. When his Honour dealt with that submission at page 126 at paragraph [85], he reasoned in this fashion, at about line 25. First of all, at the time Mr Emmerson was caught he had a substantial sum of money in his possession which was the proceeds of drug transactions. Secondly, he was involved in what in any view was a very major exercise in drug importation.

His Honour then turned to section 10(2), at about the foot of that page, and said that section 3 did “not contain the sole objectives of the Act”. Then, particularly on page 127, at about line 10, and this is important, his Honour went back to what Justice Mildren had said on the earlier application which was that it was:

open to the court to refuse an application where the forfeiture offence was minor, technical or trivial, and the value of the property sought to be restrained was substantial so that there was significant disproportionality between the remedy sought and the purposes which the remedy sought to achieve –

Stopping there, we would submit that that form of internalised proportionality reasoning within the discretion is available.

HAYNE J: How do you measure it?

MR GLEESON: How do you measure it?

HAYNE J: How do you measure either of the integers that you are comparing?

MR GLEESON: As best you can with the materials you have which is what his Honour did. He went on to say:

particularly if there would be significant hardship to the defendant or others with an interest in the property, this is not such a case.

So his Honour recognised explicitly that in another case, not this one, you may have to take into account interest to others. His Honour then looked at the facts he had:

The 18.6646 kilograms of cannabis . . . had a potential commercial yield of - - -

up to $900,000 -

Cannabis is a dangerous drug which causes considerable harm in the community. The maximum penalties –

are very high. Then his Honour said this, and this perhaps comes to the evidence point:

The cost of his incarceration alone for the length of his sentence of imprisonment or until he is paroled will be substantial and it can reasonably be inferred that the costs of the police investigation into all of his criminal activities and the costs of the various prosecutions against him are not insignificant.

Then, critically, the next sentence:

It was not submitted that the costs of deterring, detecting and dealing with Mr Emmerson’s criminal activities were significantly disproportional to the value of the restrained property.

So in this particular case, in the light of the facts as they unfolded, there being no submission on behalf of Mr Emmerson of any disproportionality between the costs referred to in section 10 and the value of the property, our submission would be it was within his Honour’s discretion to say it is therefore appropriate that I restrain properties A to B.

HAYNE J: Yes, but the availability of the submission presupposes that you can measure the two integers that are being compared.

MR GLEESON: It is not an exercise in precise measurement. .

HAYNE J: No.

MR GLEESON: I am not suggesting it is.

HAYNE J: You can take a wild stab, if you like, Mr Solicitor, but I invite you seriously to indicate how would you begin to make any guesstimate of either of the integers in the comparison. You know the total police budget for the Territory; that is your start. Where do you go from there?

MR GLEESON: If in a particular case it is necessary to be more precise as to the findings on this matter the onus will rest on the DPP to bring forward evidence which in some way allocates a total cost to a particular offender. It is not impossible in principle. It may be difficult, but it is not impossible in principle.

BELL J: There are two things at work in the passages to which you have just referred us. One is considerations of hardship which have nothing to do with the considerations in 10(2). Turning to 10(2) and looking for a moment at the idea of deterring the criminal activities of the respondent, what is the court to make of that? It may be that deterring people from growing cannabis in backyards or on rural properties is a really quite costly exercise, more so than deterring other conduct. There is an air of unreality to the idea that the court can engage in this sort of analysis. Perhaps you can work out how much the cost of a prison term is but that would be about it, surely?

MR GLEESON: Your Honour, I am not suggesting that exercise would be easy or that it would be precise or that it would be necessary in many cases to go to every element of those three heads. I do not think his Honour has brought to account a cost of deterring the activities. He has focused more on inferences as to the costs of detection and dealing with the criminal activities so if there is a deterrence cost it would be on top but his Honour has reasoned, looking at the value of the property which is sought to be forfeited, on the one hand, and looking at this as a statutory purpose on the other hand, on the material before me and the submissions made is there a significant disproportionality?

So that is giving work to do to section 10(2) and your Honours have not heard a submission, quite correctly, that this does not fairly reflect the way in which the case was run before Justice Southwood.

FRENCH CJ: Is that work done in part under the rubric of “to the extent provided in this Act” which, of course, does not apply in relation to 10(3) – crime-used or crime-derived property?

MR GLEESON: Yes. That will then take you back to your discretion in section 44. So it will not solve all problems.

FRENCH CJ: I presume that is linked to the discretion. That is simply the only mechanism.

MR GLEESON: Yes, yes. It is not a freestanding inquiry into compensation.

FRENCH CJ: Yes. That seems to be a mechanism – the mechanism being referred to is presumably the discretion to apply a restraining order to less than all of the property.

MR GLEESON: Yes.

FRENCH CJ: Apart from crime-used and crime-derived property.

MR GLEESON: Yes. So the steps would be the discretion does extend beyond simply order or no order to order over how much property. If that be so, has the Act given sufficient guidance as to the purposes to be taken into account? If it has not, there may be a problem. But our submission is it has and the court operates within the guidance given by sections such as section 10(2). Certainly in the case of Mr Emmerson, that has not worked any injustice or departure from the law in his case because the exercise was capable of being done within the parameters of his facts.

GAGELER J: How does that submission relate to the acquisition of property argument you are presenting?

MR GLEESON: Only this, that in focusing on the effect of the forfeiture on Mr Emmerson for the moment – ignoring any irrelevant third parties – it has not strayed outside the accepted concept of forfeiture as a sanction for a breach of the norm, insofar as the discretion is the type I have described.

GAGELER J: So do you rely upon the discretion as part of your argument that there is a forfeiture within the permissible range?

MR GLEESON: Yes, and that to the extent - - -

HAYNE J: And a necessary step? I know you rely on it, but - - -

MR GLEESON: Yes.

HAYNE J: - - - is it a necessary step in your argument?

MR GLEESON: No, it is not a necessary step. We put it as an alternative step at the end of our submissions. To the extent it is internalising a loose proportionality exercise, that is, permitting it, it assists in the characterisation as a proper forfeiture.

HAYNE J: If, then, considerations of hardship and cost, whether of deterrents or investigation or some other related cost, are irrelevant to the exercise of power under 44 – that is to say, if those are not considerations which bear upon whether an order should be made or whether an order of a particular extent should be made - what consequence, if any, do you say follows?

MR GLEESON: It is still valid. It is not a forfeiture focusing on Mr Emmerson, not on third parties, because it is open within the concept of a forfeiture to say the norm we are establishing requires for its vindication a sanction which has this comprehensive effect on that category of wrongdoers who have so placed themselves outside the law that this is the result Parliament has deemed for them. So in that sense what I am putting is alternative, not necessary for validity.

HAYNE J: But at the level of construction expressing 44 in permissive terms rather than “a court shall” suggests – at least suggests that a discretion is to be exercised and that the considerations relevant to the discretion are to be determined from the object of the Act, text of the Act, et cetera, Klein v Domus style. Do you point to anything other than 3 and the relevant provisions of 10 as bearing upon the exercise of discretion?

MR GLEESON: Yes, primarily 36A itself as the establishment of the norm of conduct carrying with it the deterrent purpose.

HAYNE J: That would tend, would it not, to point to, if you make an order, make it in respect of all of the assets?

MR GLEESON: Would tend to point that way, yes.

HAYNE J: There is no countervailing consideration, no other consideration to which you draw attention at least in the course of argument?

MR GLEESON: We have drawn attention to “all or any property” in 10(2)(a) which appears to indicate some process of selection and I have sought to draw attention to 10(2) by telling you something of the purpose of the exercise to indicate - - -

HAYNE J: I am not being critical, Mr Solicitor. Just at the end of this we have to go away and write a judgment.

MR GLEESON: Yes. So that is what I have drawn attention to.

GAGELER J: Mr Solicitor, could I just ask you about the broader way in which you put the acquisition of property argument? Am I correct in understanding that you say it would be open to the Northern Territory legislature and open to the Commonwealth Parliament to lay down a norm of conduct and then provide that failure to adhere to that norm of conduct exposes an individual to forfeiture of all or any of their property at the discretion of the Executive? If it is not that, what is your submission?

MR GLEESON: Well, there are two aspects to that. Your Honour has rolled together Northern Territory and the Commonwealth. I am putting submissions solely on acquisition of property. We accept that at Commonwealth level a law which had the features your Honour has described would need to pass an additional test of being within or sufficiently connected to a head of power. In the analysis of Justice McHugh, amongst others, in Lawler, you might even start at that end of the question at Commonwealth level and to see what the connection was with the head of power which justified so draconian a remedy.

If you survive that test at Commonwealth level, then we would say it would follow as night follows day that it is not an acquisition of property under 51(xxxi). That is the first answer. The second is to the extent, your Honour, wrapped into it at the executive discretion that, I respectfully submit, raises a different series of questions. This is a law which, by Parliament, has provided for the liability to forfeiture and has given the DPP the role that has been addressed in other parts of the case as to bringing the application. We would not accept, although I am not submitting on that range of topics, that adding the DPP’s role to it, has any impact upon whether this is, or is not, an illegitimate acquisition of property.

HAYNE J: But any person who unlawfully enters a defence establishment is liable on conviction to punishment of up to six months imprisonment and the DPP may apply for an order forfeiting the whole of that person’s property - -

MR GLEESON: In terms of - - -

HAYNE J: - - - would be a valid law of the Commonwealth, you say?

MR GLEESON: I say it would survive acquisition of property. Whether it would be a valid law of the Commonwealth would depend upon sufficient connection with the defence power and, the Northern Territory not having that hurdle to pass, unless the court were to revisit matters such as the scope of peace, welfare and good government, the Northern Territory has one hurdle to pass, not two, but we are submitting as forcefully as I can that acquisition of property is not the head by which to judge and strike down a law which, on your Honour’s example, clearly has a harsh operation. The protection does not lie there. The protection lies at Commonwealth level in terms of section 51 and at Territory level, the only other protection lies in the scope of peace, welfare and good government.

Could I turn then to the third topic and first raise the question whether it is necessary for the court to decide on the questions concerning impacts on third parties in this case; whether it is necessary and whether it is appropriate for the court to do so. If the Court would go please to section 94 which is the forfeiture provision and compare that with the order under challenge, perhaps at page 75. The question is whether there is a relevant invalidity of section 94 so as to deprive that order of legal effect.

In the present case, section 94 applies in this sense. The property is owned by Mr Emmerson. There are no other owners of that property. There are no other persons with interests in that property and the order does not extend to any gifts. In those circumstances, we would submit that the Act in its application to this order is valid and your Honours would not opine on its application in other potential circumstances.

If your Honours reject that submission and consider its application in other potential circumstances then we would offer these submissions: firstly, as I have indicated, the interrelationship of the definitions of “owner”, “property” and “land” are such that the forfeiture and the restraint is only over the legal or equitable interest of the wrongdoer.

In White v DPP [2011] HCA 20; 243 CLR 478 at 29, Justice Gummow drew a similar-type distinction when he indicated why it was that the lease of the land did not amount to a relevant ownership of the whole land which was why the Court had to move onto substituted crime declarations. So, that is the first narrowing effect.

HAYNE J: Sorry, which paragraph was it, Mr Solicitor?

MR GLEESON: Paragraph 29.

HAYNE J: Thank you.

MR GLEESON: His Honour spelt out the reason for the common assumption which the main judgment dealt with. So that, we submit, is correct and applies here. So that is the first protection for third parties. Your Honours will see from paragraph 16 we make the brief submission, perhaps controversial, that the restraint officially protects the interests of mortgagees and co-owners.

Let me flesh that out a bit. What I am submitting is that the protections are sufficient to confine the impact on mortgagees and co-owners to that which is reasonably incidental to the working of the forfeiture. I have accepted that there is some subjection of the rights of mortgagees and co-owners to the purposes of the forfeiture. The question is whether it is sufficiently confined.

In relation to some particular sections, if I could just flesh out that submission. Under section 44(2) a mortgagee’s interest per se is not restrained. Under section 47 the mortgagee should receive notice of the application. Under section 56(3), as we have seen, the mortgagee is permitted to exercise powers of default. Under section 103, in the case of a sale, there is an accounting to the mortgagee after earlier expenses - 103(1)(d) - and under 103(2) there is a modification of the mortgagee’s rights of recovery under the mortgage but not an extinction of those rights. Under section 148 there is accounting to the mortgagee - 148(2)(d).

Your Honours, the most problematic section might be section 131(2)(e) which appears to indicate that at the stage of the forfeiture being effected on the land register the mortgage is discharged as a registered interest. We would submit that that, when read together with the other provisions, is not designed to extinguish the rights under the encumbrance. It is not designed to destroy the duty to account, but it is designed to allow a clear title on the register so that the Public Trustee can sell the property to the next person.

That is probably the most explicit subjection of the mortgagee’s right to the higher interests of the forfeiture and we would submit that if the duty to account remains this is still reasonably incidental. Your Honours, the other third party interest I particularly wanted to draw attention to was the co-owner. Your Honours will see in section 153 that there is a degree of subjection of the co-owner’s right to the interests of the forfeiture, but not a destruction of that right unless it is essential in order to affect the forfeiture.

So in respect to those third party interests, we would submit that the affectation remains within the reasonably incidental territory. I might just observe there if one were to compare the Corporations Act, even the Corporations Act contains some modifications of the right of the mortgagee in the liquidation, including – if I could just give a reference to one of the sections, under section 554E and F there can be a compulsory sale by the court of the property if the mortgagee and the liquidator cannot agree upon the value to be placed on the security interest. Whether the form of modification is identical is not the point, but the principle that there may need to be modifications in order to implement a common fund arrangement is not a novel one.

Your Honours, at point 17 we have simply referred to the concept of effective control. I do not think you have received many submissions that the extension of ownership into effective control has taken this beyond the territory of a permissible forfeiture, so all I would say about it is that your Honours should not pronounce on that question because it is not squarely necessary or front and centre before you.

I would indicate that there are a number of other Commonwealth statutes which do use concepts of effective control in relation to forfeiture provisions. If I could give one example, it is section 243F of the Customs Act and we would submit that if there is any attack upon effective control provisions it might be reserved for another case.

HAYNE J: What is the context of 243F, Mr Solicitor? Is it dealing with smuggled goods and that kind of circumstance?

MR GLEESON: It is in the context of a pecuniary penalty made against the property relating to prescribed narcotics dealings, another person having an interest in the property, the court is to protect the interest of the third party only if satisfied the property is not subject to the effective control of the defendant.

Your Honours, finally could I deal with only to recognise the question of gifts that has been raised? Our submission would be that the Court should not enter the territory of whether the forfeiture is invalid in relation to gifts as there are no gifts. If there were a problem with that provision, it would probably be fairly readily severable. What has happened with the gifts provision is that the mischief is probably well identified and the execution may be overly generous.

One would expect there to be some limitations for time for intent to defraud or for defences for innocent parties and they are not in this Act. So that is a provision which another day, if it remains on the books in that unqualified form, might suffer some difficulties but we would ask your Honours not to pronounce upon it now.

I would draw attention, finally, to the sham provisions section – 157 which is not under challenge. It is an example of a provision which could impact third parties in a manner which is reasonably incidental to the forfeiture and it probably does the work which the mistimed gifts provision is otherwise seeking to do. So a provision like section 157 would be valid and would not destroy the character of the law as a forfeiture. If your Honours please - - -

HAYNE J: Mr Solicitor, just before you sit down, to revert to a subject I rose with you before lunch before orders to the world at large, the Court – or six members of the Court in Hogan v Hinch [2011] HCA 4; (2011) 243 CLR 506 at 546, paragraph 59, in a different context altogether referred to two things – or really, perhaps, one – the undesirability of framing orders simply by reproducing the relevant provision of the Act. Especially is that so when the orders are addressed not merely to designated parties but to the world at large.

MR GLEESON: Yes. We – and I think in writing we had commended this - that the scheme is intended to identify specific property in the order and the first part of the order complies with that. There may be some issues with the second part which has followed literally the statute and it may create some difficulties. May it please the Court.

FRENCH CJ: Thank you, Mr Solicitor.

MR GRANT: Your Honours, so far as the acquisition of property question is concerned, we adopt what has been put by the Solicitor-General for the Commonwealth, save this. We adopt, so far as he made submissions in relation to the ambit of the discretion under section 44(1) and (2), we adopt what the Solicitor said in relation to the court’s discretion extending to exclude certain property in circumstances where those provisions of the Act would seek to ameliorate the impact of the restraint and subsequent forfeiture on third parties are insufficient to address that prejudice.

Of course, we differ from the Commonwealth in relation to the other aspects of the discretion under section 44 including whether it is to be exercised having regard to questions such as the cost of deterring and detecting and dealing with criminal activities and the practical difficulties to which your Honour Justice Bell adverted, compounded of course by the fact that the three qualifying offences may be committed within a 10-year period, which of course makes the calculus, the hypothetical calculus of which the Commonwealth speaks, even more unreal in terms of its application.

Your Honours, so far as the construction point is concerned – and this is by way of reply – the construction of section 52(3) of the legislation, quite apart from the other textual and contextual difficulties that the first respondent’s propounded construction gives rise to, we have a clear indication, in our submission, in section 44(1)(a) that the construction adopted by the Court of Appeal was correct. Your Honours will recall during the course of our submissions we referred to 44(1)(a) and the use of prospective language in that section. Your Honours will see that the court may make a restraining order where:

the person has been charged, or it is intended that within 21 days after the application the person will be charged, with an offence that, if the person is convicted of the offence, could lead to the person being declared to be a drug trafficker under section 36A –

The very clear contemplation of that provision, your Honours, is that the conviction will precede the making of the declaration, which is entirely at odds with the proposition that is put by the first respondent. If it please the Court, they are the submissions.

FRENCH CJ: Thank you, Mr Solicitor. The Court will reserve its decision. The Court adjourns until 10.15 tomorrow.

AT 2.56 PM THE MATTER WAS ADJOURNED