Director of Public Prosecutions (NSW) v Colakoglu; Director of Public Prosecutions (NSW) v Dodd; Director of Public Prosecutions (NSW) v Whitby; Director of Public Prosecutions (NSW) v EC

1. [1]

   MACFARLAN JA: I agree with Johnson J.

2. [2]

   JOHNSON J: These four appeals, which were heard together, are brought by the Director of Public Prosecutions (NSW) (“the Director”) under s.92(4) Confiscation of Proceeds of Crime Act 1989 (“the 1989 Confiscation Act”) against the refusal of an application in each case under s.13(2)(b) of that Act for drug proceeds orders (in the quantum sought by the Director) at the Sydney District Court on 28 March 2014 in relation to the Respondents, Aydin Colakoglu, Joel Anthony Dodd, Mitchell Whitby and EC.

3. [3]

   Several issues are raised by these appeals:

4. [4]

   Before moving to consideration of these issues, the factual background to the appeals should be outlined.

Factual Background

1. [5]

   Police investigations conducted by Strikeforce Pryce established that each of the Respondents was a participant in a drug supply enterprise.

2. [6]

   The Respondent Colakoglu was arrested on 27 March 2012 in relation to his involvement in drug supply.

3. [7]

   After pleading guilty in the Local Court, the Respondent Colakoglu came before his Honour Judge Lakatos SC for sentence on 1 November 2013. He pleaded guilty to one count alleging that, between 21 February 2012 and 27 March 2012, he supplied a large commercial quantity of MDMA (1,274.2 grams) contrary to s.25(2) Drug Misuse and Trafficking Act 1985 (“DMT Act”). This was a rolled up charge combining actual sales.

4. [8]

   To be taken into account on a Form 1 was an offence that, on 25 January 2012, he supplied a commercial quantity of MDMA (298.7 grams). This offence involved possession for the purpose of supply.

5. [9]

   During the course of the sentencing proceedings concerning the Respondent Colakoglu, reference was made to the fact that a confiscation application would be brought with respect to him at a later time.

6. [10]

   On 14 November 2013, the Respondent Colakoglu was sentenced for the s.25(2) DMT Act offence, taking into account the Form 1 offence, to imprisonment comprising a non-parole period of four years and three months commencing on 27 March 2012 and expiring on 26 June 2016, with a balance of term of three years and three months commencing on 27 June 2016 and expiring on 26 September 2019.

7. [11]

   The Respondent EC was arrested on 30 April 2012.

8. [12]

   Following guilty pleas in the Local Court, sentencing proceedings concerning the Respondent EC took place before his Honour Judge Lakatos SC on 6 December 2013. The Court was told that a confiscation application was to be made with respect to him.

9. [13]

   The Respondent EC pleaded guilty to five counts, with a further four offences to be taken into account on a Form 1. The five counts were as follows:

10. [14]

    The offences taken into account by way of a Form 1 were as follows:

11. [15]

    On 6 February 2014, his Honour imposed the following sentences upon the Respondent EC (after taking into account the relevant Form 1 offences):

12. [16]

    The Respondent Dodd was arrested on 1 May 2012.

13. [17]

    Following pleas of guilty in the Local Court, the Respondent Dodd came before his Honour Judge Lakatos SC for a sentencing hearing on 1 November 2013. In the course of those proceedings, it was mentioned that a confiscation application would be made with respect to this Respondent.

14. [18]

    The Respondent Dodd pleaded guilty to the following offences:

15. [19]

    On 31 January 2014, the Respondent Dodd was sentenced as follows:

16. [20]

    The Respondent Whitby was arrested on 1 May 2012.

17. [21]

    As with the other Respondents, following pleas of guilty in the Local Court, the Respondent Whitby came before his Honour Judge Lakatos SC and reference was made during the sentencing proceedings to a confiscation application to proceed at a later time.

18. [22]

    The Respondent Whitby pleaded guilty to the following offences:

19. [23]

    In passing sentence on Count 1, the sentencing Judge took into account, on a Form 1, an offence of supplying ecstasy (0.59 grams in the form of two tablets).

20. [24]

    On 29 August 2013, the Respondent Whitby was sentenced as follows:

21. [25]

    The total effective sentence imposed on the Respondent Whitby was one of imprisonment for eight years including a non-parole period of four years and nine months. On 29 May 2015, this Court dismissed an appeal by the Respondent Whitby against sentence: Whitby v R [2015] NSWCCA 124.

22. [26]

    Each of the Respondents was sentenced for “drug trafficking offences” for the purpose of ss. 4(1), 13(2) and 29(1) of the 1989 Confiscation Act.

The Confiscation Applications Concerning the Respondents

1. [27]

   The hearing of the confiscation applications concerning the Respondents proceeded on 31 January 2014 and 28 February 2014.

2. [28]

   With respect to the Respondent Colakoglu, the Director made application for a drug proceeds order under s.13(2)(b) of the 1989 Confiscation Act in the sum of $65,000.00 in respect of benefits said to have been derived by the Respondent from the commission of drug trafficking offences. On 28 February 2014, the Director revised this figure and pressed a claim in the sum of $39,000.00.

3. [29]

   Concerning the Respondent Dodd, the Director made applications for:

4. [30]

   With respect to the Respondent EC, the Director applied for:

5. [31]

   With respect to the Respondent Whitby, the Director made application for a drug proceeds order under s.13(2)(b), in respect of benefits said to have been derived by him from the commission of drug trafficking offences, in the sum of $85,144.00.

6. [32]

   At the hearing of the confiscation applications, the Director relied upon affidavits of Gina Mitchell sworn on 11 July 2013 (Colakoglu), 11 July 2013 (Whitby), 7 August 2013 (EC) and 31 October 2013 (Dodd). These affidavits included statements made for the purposes of ss. 31 and 31A of the 1989 Confiscation Act.

The Decision and Orders Made by the District Court

1. [33]

   Put shortly, the Director had calculated the sum claimed by way of a drug proceeds order in each case by reference to the sum paid as a sale price by an undercover police officer to the particular persons supplying the drugs.

2. [34]

   Again put shortly, the submission advanced for the Respondents in the District Court was that the sum to be provided for, in each drug proceeds order, should be calculated by reference to the monetary sum actually derived by the particular person. In effect, his Honour accepted the construction of the provisions advanced for the Respondents.

3. [35]

   His Honour’s judgment referred to the Notices of Motion giving rise to the claims, and then turned to various provisions contained in the 1989 Confiscation Act. After referring to ss.4, 17, 18 and 29, his Honour observed (page 4, Judgment, 28 March 2014):

4. [36]

   His Honour then turned to consider the terms of s.30 of the 1989 Confiscation Act and the decision of this Court in R v Hall [2013] NSWCCA 47; 227 A Crim R 544. His Honour summarised the approach to calculation adopted by the Director in the following way (page 7):

5. [37]

   With respect to the claims mentioned at [29](a) and [30](a) above, his Honour made forfeiture orders in the sums claimed concerning the Respondent Dodd ($2,715.00) and EC ($405.00). Those orders are not the subject of controversy before this Court.

6. [38]

   His Honour outlined the relevant facts in the following way (pages 7-8):

7. [39]

   In the course of explaining his reasons for rejecting the Director’s approach to the application for drug proceeds orders, his Honour said (page 9-11):

8. [40]

   A little later, his Honour summarised the approach adopted to the applications in the following way (pages 11-12):

9. [41]

   Applying this approach to the applications, his Honour made drug proceeds orders in the following amounts:

The Appeal Provision

1. [42]

   Section 92 of the 1989 Confiscation Act provides for appeals, including appeals by the Director under s.92(4). The section states:

2. [43]

   The principal objects of the 1989 Confiscation Act appear in s. 3:

3. [44]

   Several terms relevant to this appeal are defined in s. 4:

4. [45]

   Section 13 is in the following terms:

5. [46]

   Division 4 (ss.28-31A) provides for the making of drug proceeds orders. Those sections are in the following terms:

Competency of the Appeal

1. [47]

   Mr Dhanji SC, who appeared with Ms Burgess for the Respondents Dodd, Whitby and EC, advanced a submission challenging the competency of the Director’s appeal. Mr Brady, for the Respondent Colakoglu, joined in this submission.

2. [48]

   It was submitted for the Respondents that an appeal by the Director under s.92(4) of the 1989 Confiscation Act is confined to an appeal against a refusal to make a drug proceeds order. In this case, it was submitted, the District Court did not refuse to make an order. Rather, in each case, a drug proceeds order was made against the relevant Respondent, although not in the sum as sought by the Director.

3. [49]

   It was submitted for the Respondents that the right of appeal conferred by s.92(4) does not extend to an appeal against the quantum of a drug proceeds order as made. It was submitted that s.92(4) may be contrasted with the terms of s.92(1) and (2), which provide for a drug proceeds order to be appellable as is if it was part of a sentence.

4. [50]

   The Director submits that s.92(4) should be construed as if it said “appeal … against a refusal by a court to make a drug proceeds order in the amount sought” by the Director.

5. [51]

   In this respect, the Director relied upon the decision of this Court in R v Galek (1993) 70 A Crim R 252, in support of the proposition that s.92(4) permitted the Director to appeal against the making of an order in a lesser sum than that which was sought at first instance.

6. [52]

   In response to the Director’s submission based upon R v Galek, Mr Dhanji SC submitted orally that the Court should not follow that decision upon the basis that it is plainly wrong. It was submitted that this issue was dealt with briefly in R v Galek and submissions were developed before this Court in support of a contrary view.

7. [53]

   It was submitted for the Respondents that the Court should not fill the gap in s.92(4) by reading in the words “in the amount sought” at first instance. It was said that there was no warrant to read in words of this type: Taylor v The Owners - Strata Plan No. 11564 [2014] HCA 9; 253 CLR 531 at 548 [38]. This was particularly so, it was submitted, as the relevant legislation provides for the confiscation of property rights and should be strictly construed: Studman v Director of Public Prosecutions (Cth) [2007] NSWCCA 285; 177 A Crim R 34 at 40 [35]; Commissioner of Australian Federal Police v Fysh [2013] NSWSC 81; 272 FLR 414 at 416-417 [10]-[12].

8. [54]

   As recognised by counsel for the Respondents, the decision of this Court in R v Galek supports the Director’s right to appeal under s.92(4) against a refusal by a court to make an order as sought at first instance by the Crown. So much was made clear in R v Galek by Allen J (at 255) and by Hunt CJ at CL (Mathews J agreeing) at 258.

9. [55]

   The precise nature of the statutory avenue of appeal to this Court depends upon the legislation in question: Fleming v The Queen [1998] HCA 68; 197 CLR 250 at 258-260 [17]-[21]; Turnbull v New South Wales Medical Board [1976] 2 NSWLR 281 at 297-298.

10. [56]

    It is noteworthy that the legislature has used what appears to be a restricted formula of words in s.92(4), namely an appeal against a refusal to make an order. That provision may be contrasted with the terms of s.92(1) and (2). It may be contrasted, as well, with other provisions providing for a Crown appeal against sentence: ss.5D, 5DA, 5DB and 5DC Criminal Appeal Act 1912.

11. [57]

    It might be said that if the legislature had intended to provide for an appeal by the Director against an order (including quantum) as well as the refusal to make an order, it could have been expressed simply in these terms. This would be especially so given the operation of the provision in the area of confiscation of property.

12. [58]

    This Court should only depart from the decision in R v Galek if satisfied that the decision is clearly wrong: Green v The Queen [2011] HCA 49; 244 CLR 462 at 490-491 [84]-[85]. For the Court to depart from a previous decision would require a strong conviction that the previous decision was incorrect: R v Arnold [1993] 30 NSWLR 73 at 85; Jimmy v The Queen [2010] NSWCCA 60; 77 NSWLR 540 at 570 [127].

13. [59]

    Whilst recognising the arguments advanced for the Respondents in this respect, I am not persuaded that it has been demonstrated that the decision in R v Galek is clearly wrong.

14. [60]

    Accordingly, that decision should be followed and the challenge to the competency of the appeal should be rejected.

The Merits of the Appeal

1. [61]

   The Director submitted that the 1989 Confiscation Act, in the context of drug proceeds orders, is dealing with benefits and not profits. It was submitted that the clear intention of the legislation was that, when a person exchanges drugs for money, the amount of money received by the person is the benefit and the Court cannot reduce that amount by deducting any expenses or outgoings (having regard to s.30). Accordingly, the Director submits, the term “benefit” is the monetary amount received and not profits after the deduction of expenses.

2. [62]

   The Director submits that the distinction between “benefit” and “profit” is not new. Reference was made to the decision of the Victorian Court of Appeal in R v Nieves (1991) 51 A Crim R 350 at 355-356 and the decision of the Supreme Court of Queensland (Shepherdson J) in Director of Public Prosecutions (Qld) v Raines (1995) 79 A Crim R 448 at 450-451.

3. [63]

   The Director referred to the decision of this Court in R v Fagher (1989) 16 NSWLR 67, in particular the judgment of Hunt J at 77.

4. [64]

   It was submitted that the primary Judge in this case adopted an approach which is contrary to s.30(6) of the 1989 Confiscation Act. It was submitted that his Honour erred in approaching the matter upon the basis of attempting to ascertain if reliable evidence existed as to the expenses and outgoings, for the purpose of reducing the amount constituting the benefit. It was submitted that such an approach is contrary to s.30(6) which makes clear that such outgoings and expenses are not to be deducted.

5. [65]

   The Director submitted that his Honour erred in law by deducting expenses and outgoings from the proceeds of drug sales in assessing the benefit. It was submitted, in respect of each matter, that once his Honour accepted the statements made under s.31 of the 1989 Confiscation Act as to the amount of money received by each Respondent as the proceeds of drug sales, it was incumbent on his Honour to assess the entire amount of the proceeds as the value of the benefit, and to make a drug proceeds order for that amount.

6. [66]

   It was submitted for the Respondents that the approach advanced by the Director would seek to extract from an offender a drug proceeds order which may exceed, by a considerable margin, the amount of any profit which the offender received from his or her crime. It was submitted that such an approach would breach the double jeopardy principle contained in s.20 Crimes (Sentencing Procedure) Act 1999.

7. [67]

   The Respondents submitted that assistance could be obtained from the long title of the 1989 Confiscation Act which referred to the confiscation of the “profits of crime”.

8. [68]

   The Respondents emphasised that the task to which s.30(6) is directed is “assessing the value of the proceeds of drug trafficking”. The concepts of “benefit” and “proceeds” are distinct, and are separately defined in s.4 of the 1989 Confiscation Act (see [44] above).

9. [69]

   The Respondents submitted that the inclusive definition of “benefit” does not attempt to alter the natural meaning of the word. It was noted that in Commissioner of the Australian Federal Police v Fysh, McCallum J observed (at 418[21]) that the ordinary meaning of the word “benefits” is “the good or gain received”.

10. [70]

    Accordingly, the Respondents submitted that it is apparent from this that the exercise required by s.29(1)(b), and the task to which s.30(6) is directed, are different.

11. [71]

    The Respondents accepted, however, that the assessment of the value of the “benefit” in s.29(1)(b) may be related to the assessment to the value of the “proceeds” in s.30(6). That is, an assessment of the former may require an assessment of the latter.

12. [72]

    The Respondents submitted that the focus of s.30(6) is on the particular “offence or offences” so that the “expenses and outgoings” are consequentially limited to, in the context of drug trafficking offences, matters related to the particular transaction. This will include, it was said, matters such as payments made to persons to deliver drugs and payments for transport associated with the delivery of the drugs. It did not include costs anterior to the particular offence.

13. [73]

    It was submitted that this construction presented no particular evidentiary difficulty with evidence being given regularly of the market place value of prohibited drugs, including the cost at both the wholesale and street value levels. It was submitted that such evidence is contemplated by s.30(1)(d).

14. [74]

    The Respondents submitted that this construction is consistent with other provisions of the 1989 Confiscation Act, including s.30(1)(f) and (g), s.30(3) and (4), in which the focus is on net gains.

15. [75]

    It was submitted that s.30(3), in its terms, requires an exercise to be undertaken by which the net gain is assessed as the “benefit” for the purposes of s.29(1). The “benefit” in s.29(1)(b) cannot take on different meanings dependent on which part of s.30 is utilised.

16. [76]

    Indeed, it was submitted for the Respondents that the Court may have approached the matter through s.30(3) in this case. Had this been done, the Court would have assessed the amount by which the particular Respondents’ property, after he committed the drug trafficking offences, exceeded the value of his property before he committed the offences. The Court would then have been entitled to “treat the value of the benefits derived by [the Respondent] as being not less than the amount of the excess”. The Respondents submit that this is, in effect, what was done here.

17. [77]

    The Respondents submit that the word “benefit” in s.29(1) means the net gain when calculated by the means permitted by s.30(3) and (4). The meaning of the term does not change as a result of being calculated by other means contemplated by s.30.

18. [78]

    The Respondents submit that the Director’s reliance on authorities dealing with other legislation provides limited assistance in this case. None of those authorities deal with the present question in the context of the 1989 Confiscation Act. It was submitted that none of those authorities involved a statutory scheme where a distinction is made between “proceeds” and “benefits” as in the 1989 Confiscation Act.

19. [79]

    That said, the Respondents submit that there is some support for their construction in these authorities. Reference was made to the decision of the Court of Appeal of New Zealand in R v Pedersen [1995] 2 NZLR 386 at 390, where the Court doubted that payment to a supplier is an expense or outgoing in connection with the commission of an offence of sale.

20. [80]

    The Respondents advanced an alternative construction, whereby accounting to another participant in the enterprise is not an expense or outgoing within s.30(6) of the 1989 Confiscation Act.

21. [81]

    It was submitted that an analysis of the facts in the present case demonstrates that the Respondents Whitby, Dodd and EC did not purchase drugs and then on-sell them for a profit. Rather, they received money for the drugs from the undercover officer and then accounted to each other for the supply of those drugs, retaining their share of the purchase price from the undercover officer and passing on the balance of that up the line. It was submitted that this accounting to another was not an “expense” or “outgoing” within the meaning of s.30(6).

22. [82]

    The Respondents relied upon the judgment of Pincus J in Cornwell v Commissioner of the Australian Federal Police (1990) 24 FCR 544 at 562 and the judgment of Macrossan CJ in Re Ashworth (1992) 2 Qd R 459 at 467, with respect to the concept of “expenses or outgoings”.

23. [83]

    Reliance was placed upon the judgment of Wilcox J (Lockhart J agreeing) in Cornwell v Commissioner of the Australian Federal Police at 544-555 where his Honour observed that the “payment of monies to a partner, calculated by reference to the success of an enterprise, is a payment not ordinarily encompassed by the words ‘expenses or outgoings’”.

24. [84]

    It was submitted that, in the present cases, the objective of the Respondents was to supply the undercover officer with the drugs requested for an agreed price, with such drugs to be sourced up the line and supplied down the line for that purpose. Agreements in relation to the supply of those drugs between the Respondents were contingent on the payment by the undercover officer, and were not accounted for until after payment was made. Each Respondent shared the financial risk in that each was reliant on the money being paid by the undercover officer. Each retained a share of the purchase price, and handed on the balance to their supplier to take their share of the proceeds.

25. [85]

    In these circumstances, the Respondents submitted that the money handed up the line by each Respondent was not an “expense” or “outgoing” of the particular Respondent “in connection with the commission of the offence”. Accordingly, it was submitted, s.30(6) did not prevent that money being “deducted”.

26. [86]

    The Respondents submitted, contrary to the Director’s contention, that the primary Judge did not envisage two approaches to the assessment of benefit under the legislation. Rather, his Honour said no more than if the only evidence was the gross benefit, then the Court would have accepted that was the benefit. It was submitted that it was open to his Honour to observe that, when there was reliable evidence as to the net benefit, the Court was entitled to act on it.

27. [87]

    It is for the Director to establish error on the part of the primary Judge. I am not persuaded that error has been demonstrated. In so concluding, I accept generally the submissions made for the Respondents.

28. [88]

    The relevant provisions of the 1989 Confiscation Act were considered most recently by this Court in R v Hall on a successful appeal by the Director against the (complete) refusal by a primary Judge to make a drug proceeds order. McClellan CJ at CL (Bellew and Button JJ agreeing) said at 553 [36]-[37]:

29. [89]

    After referring further to R v Fagher, the Chief Judge at Common Law said in R v Hall at 554 [41]-[44]:

30. [90]

    The primary Judge approached the present applications in accordance with the three steps referred to in R v Hall at 553 [36] (see [88] above).

31. [91]

    The primary Judge had regard to the evidence, including the s.31 statements, for the purpose of determining whether drug proceeds orders should be made and, if so, in what amount. Upon the proper construction of s.30(6), I am satisfied that it was open to his Honour to approach the statutory task before him in the manner in which he did.

32. [92]

    The submission for the Respondents concerning the terms “benefit”, “proceeds” and “expenses or outgoings” in the statutory scheme (at [68]-[77] above) should be accepted.

33. [93]

    I accept the construction of the term “expenses or outgoings” advanced by the Respondents. This term is directed to a range of factors associated with a particular drug supply operation, such as payments made to persons to deliver drugs and payments made for transport hire associated with the delivery of the drugs. It does not extend, however, to the approach advocated by the Director on these appeals.

34. [94]

    It is pertinent that the long title of the 1989 Confiscation Act refers to confiscation of the “profits of crime”. The long title may be referred to as an aid to construction: Pearce and Geddes, “Statutory Interpretation in Australia”, LexisNexis Butterworths, 2014, 8th Edn, paragraph 4.48.

35. [95]

    The construction advanced by the Director would allow, in the case of several co-offenders, a windfall result where multiples of the same sum would be accumulated, and held referable to each particular offender, although the sum in question bore no relationship to what could be regarded as the proceeds of crime or actual benefit derived by that offender from the particular crime or crimes. I do not accept this approach.

36. [96]

    I do not consider that the conclusion reached in these appeals is inconsistent with the statements in authorities relied upon by the Director concerning the meaning of the term “benefit” in other legislation. Those cases did not involve circumstances, as present here, where the Director sought drug proceeds orders against multiple co-offenders using a process of double counting.

37. [97]

    The Respondent’s submission concerning double punishment must be approached with some care. Mr Dhanji SC noted s. 24B Crimes (Sentencing Procedure) Act 1999, which states:

38. [98]

    Section 24B was introduced following a report of the NSW Sentencing Council. In the course of the second reading speech for the Crimes (Sentencing Procedure) Amendment Act 2010, the Parliamentary Secretary, the Hon. Michael Veitch, said with respect to s. 24B (Hansard, Legislative Council, 23 November 2010): “The [NSW Sentencing] Council was of the view that these orders are imposed to deny offenders the fruits of their crimes and this action should not be considered to be extra curial punishment that might lead to a sentence discount.”

39. [99]

    It is usually the case, as with the Respondents, that the Court imposes sentences, with the question of assessment of drug proceeds orders under the 1989 Confiscation Act to be considered at a later time.

40. [100]

    The construction advanced by the Director in this case would see the Respondents being deprived, by way of a drug proceeds order, of far more than “the fruits of their crimes”. It is at this point that the Respondent’s submission based upon the avoidance of double punishment may have some traction.

41. [101]

    The construction adopted by the primary Judge was open to him, and served to achieve the purpose of the 1989 Confiscation Act. His Honour undertook the process required by ss.29 and 30 of the 1989 Confiscation Act as explained in R v Hall. With respect to each Respondent, his Honour:

42. [102]

    The findings made by the primary Judge were, in my view, open on the evidentiary material before the Court.

43. [103]

    The Director has not established error of law or fact on the part of the primary Judge in his approach to determination of the applications for drug proceeds orders against the Respondents.

44. [104]

    In these circumstances, no occasion arises for this Court to consider orders in substitution for those made in the District Court.

Conclusion and Proposed Orders

1. [105]

   The Director has failed to establish error on the part of the primary Judge in the determination of the application for a drug proceeds order against each Respondent.

2. [106]

   In these circumstances, I propose the following orders:

3. [107]

   R S HULME AJ: I agree with Johnson J.