The Commissioner of the Australian Federal Police v Pratten

1. [1]

   In November 2011 the Commonwealth Director of Public Prosecutions sought various orders under the Proceeds of Crime Act 2002 (Cth) against Mr Pratten and the corporate defendants, Pacific Property Investments Pty Ltd (Vanuatu) “PPI”, Astrolabe Services Ltd (Vanuatu) “Astrolabe”, Sonarpia Pty Ltd (Australia) “Sonarpia”, Commercial Pacific Insurance Ltd (Vanuatu) “CPI”, and 71 Cowper Street Holdings Pty Ltd (Australia) “71 Cowper”.

2. [2]

   The proceedings arose out of the operation of an insurance underwriting business in which Mr Pratten was involved in Australia and Vanuatu. It was claimed that he had committed offences involving the concealment of large parts of his taxable income in the 2003 to 2009 tax years, paid out of Vanuatu bank accounts. Mr Pratten has since been convicted of seven offences under s 134.2(1) of the Criminal Code Act 1995 (Cth), of dishonestly obtaining a financial advantage by deception by lodging tax returns which did not disclose all of his assessable income.

3. [3]

   In 2011 restraining orders were made ex parte by Hislop J under s 17 of the Proceeds of Crime Act in relation to shares, real and other property identified in the schedules to the initiating summons owned by Mr Pratten and the corporate defendants.

4. [4]

   Responsibility for the proceedings was later transferred to the Commissioner of the Australian Federal Police who now seeks further orders, including an order under s 116 of the Act that Mr Pratten pay a pecuniary penalty. There was no issue that the Commissioner’s application was made within the time limits specified in s 134(2) of the Proceeds of Crime Act. The corporate defendants did not appear to resist the orders sought, but they were opposed by Mr Pratten, who put the Court’s power to make those orders in issue.

5. [5]

   Mr Pratten was first convicted by a jury in 2014 and sentenced by Rothman J in R v Pratten (No 12) [2014] NSWSC 396. Mr Pratten’s conviction appeal was later upheld in Pratten v R [2014] NSWCCA 117 and he was retried.

6. [6]

   In 2015 Mr Pratten was again convicted and has since served the sentence imposed upon him by Rothman J in R v Pratten (No 25) [2016] NSWSC 539. An application to have those proceedings removed to the High Court failed. There is a pending appeal against those convictions due to be heard in July.

7. [7]

   Shortly before the resumed hearing in January 2021 Mr Pratten, who was unrepresented, issued notices under s 78B of the Judiciary Act 1903 (Cth) in relation to issues which he raised in his written submissions about Constitutional issues which he claimed arose on the Commissioner’s application. Mr Pratten had earlier unsuccessfully raised similar arguments in this Court on sentencing, on appeal and in the High Court and the Commonwealth Attorney had advised that he did not wish to be heard about the matters he had notified in relation to these proceedings.

8. [8]

   Like Rothman J earlier had, I concluded that these s 78B notices were misconceived. The section had not been engaged despite Mr Pratten’s notices, for reasons which I will here explain.

9. [9]

   In his written submissions Mr Pratten also raised for the first time a complaint that much of the evidence on which the Commissioner relied had been obtained by search warrants served in 2008 at his home and places of work, in relation to then suspected indictable offences. He submitted that the use of such material in these proceedings required the Court’s prior leave, which had not been obtained as it should have been and thus the evidence should be struck out.

10. [10]

    I concluded that those submissions could not be accepted, for reasons which I will also here give.

Issues

1. [11]

   What finally remained in issue was:

   1. (1)

      Whether the Court had power to impose a pecuniary penalty on Mr Pratten;

   2. (2)

      Whether there was an evidentiary basis for the imposition of such a penalty; and

   3. (3)

      The amount of any penalty.

Conclusion

1. [12]

   On this application the powers granted by s 116 of the Proceeds of Crime Act must be exercised if the evidence establishes that the requirements of the section, that Mr Pratten has been convicted either of an indictable offence and has derived a benefit from the commission of that offence, or that he has committed a serious offence, have been satisfied.

2. [13]

   There is no issue that Mr Pratten’s seven offences of dishonestly obtaining a financial advantage by deception by lodging tax returns which did not disclose all of his assessable income were both indictable and serious offences.

3. [14]

   His convictions followed from evidence that in his 2003 to 2009 tax returns Mr Pratten had not disclosed over $5 million income which he should have declared and on which, as a result, tax had not been assessed or paid.

4. [15]

   The Commissioner having led evidence in these proceedings which also established not only Mr Pratten’s convictions, but that he had the benefit of the wrongfully undisclosed income, a pecuniary penalty must be imposed upon him.

5. [16]

   Mr Pratten’s case, that no penalty can be imposed because there was no evidence that the Commissioner of Taxation has made assessments under the applicable income tax regime, that he was obliged to pay tax on that income in the amounts advanced by the Commissioner, cannot be accepted.

6. [17]

   There is no issue that the assessment of the income tax Mr Pratten was bound to pay is an administrative task for the Commissioner of Taxation to undertake under the applicable legislation and not a matter for this Court to decide. The Commissioner of Taxation has issued Mr Pratten with amended assessments, which are not in evidence, to which he exercised his right to object. His objections not having been accepted, he has challenged the amended assessments in the Administrative Appeals Tribunal. Those proceedings are stayed, pending the hearing of his conviction appeal.

7. [18]

   But the Court’s assessment of the amount of Mr Pratten’s pecuniary penalty will not determine his assessable income, nor does it depend on the outcome of the Commissioner of Taxation’s administrative task, or the challenge which he pursues. This is consistent with earlier findings of this Court, the Court of Appeal and the High Court, that the jury’s assessment of the evidence led in his criminal trial also did not involve the determination of his assessable income.

8. [19]

   The evidence establishing as it does that Mr Pratten benefitted from the very considerable income he was convicted of dishonestly failing to disclose, leaves the Court with no discretion under s 116 not to impose a pecuniary penalty upon him.

9. [20]

   The amount of that penalty must be determined under Division 2 Penalty Amounts of the Act, by making the assessments and subtractions there specified: s 121. In undertaking that task the objects of the Act specified in s 5 must be borne in mind. They include depriving persons of the proceeds of their offences, punishing and deterring breaches of the laws of the Commonwealth, preventing the reinvestment of the proceeds and benefits of offending in further criminal activities and undermining the profitability of criminal enterprises.

10. [21]

    In the result I am satisfied that the Commissioner’s case that a penalty of $2,431,522.13 should be imposed on Mr Pratten must be accepted.

Refusal of Mr Pratten’s applications

1. [22]

   Before turning to my reasons for those conclusions, it is convenient to explain my reasons for:

   1. (1)

      My refusal of Mr Pratten’s motions, by which he sought orders to:

   2. (2)

      Admitting Mr Tang’s evidence.

   3. (3)

      Concluding that the notices Mr Pratten issued under s 78B of the Judiciary Act were misconceived.

   4. (4)

      Refusing to strike out evidence which had been admitted, because it had originally been obtained under search warrants.

2. [23]

   Mr Pratten‘s former solicitor filed a notice of ceasing to act in August 2017. Mr Pratten has himself been active in the proceedings since his release from custody in 2019, appearing unrepresented before the Registrar when he obtained various extensions of time, while he was seeking further legal representation and when the application was listed for hearing.

3. [24]

   It was in February 2020 that Mr Pratten was ordered to serve his evidence. In May he did not oppose the matter being listed for hearing, even though he had not obtained legal representation and was pursuing his appeal. The matter was then listed for a 2-day hearing commencing on 28 October. The Commissioner was ordered to file and serve submissions by 2 September and Mr Pratten to file his by 23 September.

4. [25]

   Mr Pratten did not comply with these orders, nor did he seek any further extensions of time to do so.

5. [26]

   It was only on 22 October 2020 that Mr Pratten belatedly filed his motion, supported by an affidavit where he merely deposed that he was the first defendant and that he had sought orders for legal representation under Part 7 of the Uniform Civil Procedure Rules 2005 (NSW), as well as a stay. That affidavit alone could not provide a basis for the orders sought.

6. [27]

   On 27 October 2020 Mr Pratten filed written submissions to which were annexed various documents. There he argued amongst other things that it would be unfair for the hearing to proceed without him being legally represented, because the principles in Dietrich v The Queen (1992) 177 CLR 292; [1992] HCA 57 applied, because these proceedings “form part of the criminal justice process”.

7. [28]

   The adjournment was opposed, with the Commissioner relying on an affidavit affirmed by an Australian Federal Police lawyer, Mr Akbar. Mr Akbar was not required for cross examination, but Mr Pratten was. Mr Pratten confirmed that he had not opposed the matter being listed for hearing, having advised the Registrar that he was able to proceed, even though not legally represented.

8. [29]

   There was no question about the Court’s power to order that Mr Pratten be referred to a barrister or solicitor on the pro bono panel, if satisfied that it was in the interests of the administration of justice: r 7.36 of the Uniform Civil Procedure Rules. But the mere fact that he would be assisted by pro bono legal assistance was not sufficient, of itself, for such an order to be made: Sharpe v Hargraves Secured Investments Ltd [2013] NSWCA 288 at [42]. Nor was the nature of the proceedings or the fact that legal representation was expensive, as it undoubtedly is.

9. [30]

   Mr Pratten’s case that he had no means to fund his own legal representation and was in receipt of Centrelink benefits was not challenged. Annexed to the submissions were MyGov and Centrelink printouts, as well as correspondence about his grant of legal aid. It could thus be accepted that he did not have the means to self-fund further legal representation for these proceedings. But still I concluded that was not a sufficient basis for his referral to the pro bono panel.

10. [31]

    Account also had to be taken of the fact that the resources of the pro bono panel are limited; that such services are provided voluntarily; and that referrals should only be made where there is an appropriate reason for the overall administration of justice, to make a request to the panel: Neale v Commonwealth Bank of Australia Ltd [2015] NSWCA 136 at [3]-[6]. Such a reason was not established.

11. [32]

    Despite their subject matter these proceedings are civil, not criminal, in nature. Cases advanced have to be established on the balance of probabilities, according to the rules of evidence applying in civil proceedings: ss 315 and 317 of the Proceeds of Crime Act. The prior grant of legal aid on which Mr Pratten relied actually reflected this.

12. [33]

    Unlike the position in Neale and many other cases where applications for legal assistance have been made, Mr Pratten provided no evidence about any steps he had taken to obtain further legal assistance since his former solicitor ceased to act, to support his application. What he relied on actually established that he had earlier received a grant of legal aid, which he could have pursued, but no evidence that he had.

13. [34]

    In the letter of 15 August 2019 from Legal Aid, Mr Pratten was advised that his grant of legal aid remained, but it did not indicate which proceedings the grant related to, although the letter refers to the legal matter being “other Civil (Commonwealth) Sydney Supreme Court”. Accepting that the letter referred to these proceedings, it was relevant that it advised that the reason for the decision not to pay for more work or expenses, was because on the information available his application did not satisfy the merit test, because the proceedings “do not appear to have reasonable prospects of success”.

14. [35]

    Despite this the letter also advised that it was open to Mr Pratten’s lawyer to ask Legal Aid to pay for more work or expenses in his case in future.

15. [36]

    There was no suggestion that Mr Pratten had appealed Legal Aid’s decision, or sought to have it reviewed in light of the Commissioner’s application for pecuniary penalty orders, or even that he had acted on the invitation to make a further application to have Legal Aid pay for more work or expenses in respect of that application.

16. [37]

    Nor did Mr Pratten’s affidavit deal with other relevant matters, such as why he had not complied with the Court’s orders for the preparation of the matter for hearing and why his motion was filed so shortly before the long-fixed hearing.

17. [38]

    The position in February 2020 when the Commissioner’s motion was listed for hearing was that Mr Pratten had no legal representation, which he had earlier indicated he was pursuing, but he did not oppose a hearing date being fixed. This application was not then foreshadowed and the delay in filing his motion until days before the hearing was unexplained in his affidavit and submissions, despite Mr Pratten having earlier served an unfiled motion seeking a stay until after the hearing of his criminal appeal in June.

18. [39]

    That Mr Pratten so delayed did not support the granting of his application.

19. [40]

    Also, necessary to take into account was that s 319 of the Proceeds of Crime Act permitted the stay of proceedings brought under the Act that are not criminal proceedings, if the court considered that it was in the interests of justice to do so. The onus fell on Mr Pratten to establish that the interests of justice required a stay: Jago v The District Court of New South Wales (1989) 168 CLR 23; [1989] HCA 46 at 34 and Onley v Commissioner of the Australian Federal Police; Menon v Commissioner of the Australian Federal Police; Anquetil v Commissioner of the Australian Federal Police [2019] NSWCA 101 at [99].

20. [41]

    But a stay is precluded in the circumstances dealt with in s 319(2), which applied in this case. It provides:

21. [42]

    Sections 319(3) and (6) were also relevant, providing:

22. [43]

    In Onley Bathurst CJ observed that s 319(3) does not operate to limit the section in any way. Rather, it makes clear that s 319(2)(a) applies even if the circumstances of the criminal proceedings are the same or substantially similar. In that context, “circumstances” means, “the factual circumstances underlying the two sets of proceedings”: at [227].

23. [44]

    On that approach the stay sought could not be granted, notwithstanding Mr Pratten’s pursuit of his second conviction appeal.

24. [45]

    Mr Pratten also argued that if his conviction appeal was successful, it was likely that there would be a further trial. It followed that if forced to conduct his evidence personally in these proceedings he could unwittingly, or by necessity, breach his right of silence, to his detriment in any retrial.

25. [46]

    That submission could also not be accepted. While Mr Pratten had been given the opportunity to lead evidence, he had already made the forensic decisions not to avail himself of that opportunity, even by relying on evidence he had led at his criminal trial. He had also failed to make a timely application for referral for legal assistance and a stay.

26. [47]

    The practical result was that the continuation of this hearing could not put Mr Pratten at risk of breaching his right to silence. He led no evidence so he could not be cross examined about matters which might disadvantage him in later proceedings. He was also at liberty to advance submissions about the evidence on which the Commissioner relied.

27. [48]

    It was also necessary to take into account that “the right to silence is not constitutionally entrenched and may be abrogated by the legislature provided that any statutory provision which purports to do so is ‘perspicuously expressed and strictly construed’. Section 319 is a statutory provision which falls within this category”: Onley at [231].

28. [49]

    In addition, not only did s 319(2)(a) preclude the grant of a stay because of Mr Pratten’s pursuit of his appeal, as was the Commissioner’s case, but the prospect of a third trial if the appeal was upheld was, in any event, unlikely. That followed from the fact that he has already served the sentence imposed upon him after his second trial.

29. [50]

    Further, any pecuniary penalty order made in relation to his convictions is likely to be discharged if his convictions are subsequently quashed on appeal: s 146.

30. [51]

    Mr Pratten also relied on the Administrative Appeals Tribunal’s stay of his challenge to his amended tax assessments in 2013, which remains in effect pending determination of his appeal. But that could also not be determinative of this application.

31. [52]

    Mr Pratten also contended that pursuit of these proceedings prior to the determination of his conviction appeal would involve an abuse of process and irreparable financial harm, from which he might never recover. A basis for this submission was not apparent, given the statutory scheme in the event a conviction is squashed.

32. [53]

    Mr Pratten’s application had to be approached in the context of the duties of a trial judge to a litigant in person, which are those discussed in Bauskis v Liew [2013] NSWCA 297 at [66]-[70]. There it was explained at [70] that “the trial judge must remain at all times the impartial adjudicator of the matter, measured against the touchstone of fairness. In this regard, an unrepresented party is as much subject to the rules as any other litigant”: Rajski v Scitec Corporation Pty Ltd (Court of Appeal (NSW), 16 June 1986, unrep) per Samuels JA at [14].

33. [54]

    All parties must comply with the Court’s orders and the applicable Rules and a litigant in person may not be unfairly advantaged by the fact that they are not represented: Nobarani v Mariconte (2018) 256 CLR 236; [2018] HCA 36. There reference was made to what Samuels JA had said in earlier proceedings in a passage that has been relied upon on many occasions:

34. [55]

    Also, necessary to take into account were relevant provisions of the Civil Procedure Act 2005 (NSW). They began with s 56, which specifies the overriding purpose of the Act and of the Rules which the Court must give effect as “to facilitate the just, quick and cheap resolution of the real issues in the proceedings”. The parties also have a duty to assist the Court to further that purpose and “to that effect, to participate in the processes of the court and to comply with directions and orders of the court”: s 56(3).

35. [56]

    Section 58 requires that when deciding whether to grant a stay the Court must have regard to what the dictates of justice require, taking into account the matters specified in s 58(2) which are relevant. They include the degree of expedition with which the respective parties have approached the proceedings and been timely in their interlocutory activities, and the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction sought. That required the undoubted prejudice to the Commissioner, if the stay sought were granted, to be taken into account.

36. [57]

    Section 59 also requires that the Court’s practice and procedure be implemented with the object of eliminating any lapse of time between the commencement of the proceedings and their final determination “beyond that reasonably required for the interlocutory activities necessary for the fair and just determination of the issues in dispute between the parties and the preparation of the case for trial”.

37. [58]

    Undoubtedly the matters which lay at the heart of the prosecution which led to Mr Pratten’s conviction and these proceedings were complex, his resistance of the orders now sought by the Commissioner important to him and legal representation costly.

38. [59]

    But in all of the circumstances, including the relevant procedural history and applicable legislative schemes, the absence of an explanation for Mr Pratten’s failure to comply with the Court’s orders and the evidence as to the position of Legal Aid in relation to his grant, I was not satisfied that the interests of justice permitted the orders sought by his belated application to be made. To the contrary, I was satisfied that the hearing could not justly be stayed while he was referred for pro bono assistance, which he may never have obtained.

39. [60]

    Accordingly, I ordered that the motion be dismissed.

40. [61]

    The usual costs order under the Uniform Civil Procedure Rules 2005 is that costs follow the event, that being an order for Mr Pratten to bear the Commissioner’s costs of the motion: r 42.1. He opposed such an order being made because of his difficult financial circumstances, but I am not satisfied that this is a just basis for declining to exercise the Court’s discretion in the usual way.

41. [62]

    The basic principle is that costs are compensatory not punitive, awarded to indemnify a successful party for costs which have been incurred in successfully resisting a claim: Oshlack v Richmond River Council 193 CLR 72; [1998] HCA 11 at [67]. Usually, without delinquency on the part of the successful party, that rule will not be departed from. Impecuniosity is not generally a relevant consideration in the exercise of a cost’s discretion and thus not a reason for departing from the usual order: Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25 at [36].

42. [63]

    There had been no delinquency on the Commissioner’s part in resisting Mr Pratten’s belated motion and the fact of Mr Pratten’s financial circumstances, of itself, is not a proper basis for departure from the usual order. Accordingly, the proper order is to be that Mr Pratten must bear the Commissioner’s costs of the motion, as agreed or assessed.

43. [64]

    The matter adjourned part heard on 29 October to 26 November to allow Mr Pratten to complete his cross examination of Mr Tang, which he estimated would take a further 2 to 3 hours.

44. [65]

    During the adjournment Mr Pratten sought and was refused leave to issue a subpoena to Ms Anthony, the solicitor who had provided Mr Tang with written instructions. The Registrar refused the application under r. 7.3 of the Uniform Civil Procedure Rules, not being satisfied that the oral evidence of a solicitor about instructions given to an expert was relevant to what was in dispute.

45. [66]

    On 20 November Mr Pratten filed a motion again seeking leave to issue a subpoena to Ms Anthony, supported by an affidavit in which he referred to the Registrar’s refusal. He claimed that Mr Tang’s oral evidence “to the effect that his report, provisionally admitted at this stage, is contradistinctive to the intent of Ms Anthony’s instructions” and that the Court’s determination of the central controversy in the proceedings “will be substantially influenced and determined by the weight given to Mr Tang’s report”.

46. [67]

    Mr Pratten also said in his affidavit:

47. [68]

    Mr Pratten also explained by email that he was pursuing the leave sought in order that he could examine Ms Anthony on her instructions to witnesses, in particular Mr Tang, and information provided to the witnesses on which their reports were prepared and that he did “not propose to examine Ms Anthony on any particular issues which would offend client privilege”. He also said that the examination would take only about 30 minutes.

48. [69]

    The application was still opposed, no legitimate forensic purpose for the course Mr Pratten sought to pursue having been disclosed and the evidence he wished to pursue being privileged.

49. [70]

    I was satisfied that the leave sought could not be given.

50. [71]

    Mr Tang’s report revealed the written instructions which he was given and in cross examination he had explained that he had not done various things about which Mr Pratten asked him, because he had not been instructed to do so. Whether he had adhered to his instructions depended on what his report contained and potentially on the evidence Mr Tang gave in cross examination, not on evidence which Ms Anthony could give about his written instructions, their scope, intent or purpose.

51. [72]

    Further, it could not be accepted that the proposed cross examination of Ms Anthony would not intrude into matters to which legal professional privilege applied.

52. [73]

    Sections 118 and 119 of the Evidence Act 1995 (NSW) are concerned respectively with adducing evidence which would result in disclosure of confidential communications between a client and a lawyer for the dominant purpose of the lawyer providing legal advice to the client and disclosure of confidential communications between a lawyer acting for the client and another person, for the dominant purpose of the client being provided with professional legal services relating to proceedings.

53. [74]

    The instructions given to Mr Tang were clearly not confidential, communicated as they were in order that they could be referred to in his report. But questions of Ms Anthony about the matters Mr Pratten wished to pursue in her cross examination about the instructions could plainly have resulted in both confidential and privileged communications being disclosed, if permitted.

54. [75]

    “Legal advice” is not defined in the Evidence Act, but the term has been broadly construed as not being confined to telling the client the law, but including advice as to what should prudently and sensibly be done in the relevant legal context: General Manager, WorkCover Authority of NSW v Law Society of NSW (2006) 65 NSWLR 502; [2006] NSWCA 84 at [77]-[78]. I was satisfied that this concept includes advice given about instructions which should be given to an expert such as Mr Tang, in order to advance the Commissioner’s case in proceedings such as this.

55. [76]

    In the case of an in-house lawyer such as Ms Anthony, whether advice given is “legal advice” may require consideration of the purpose for which a document was brought into existence. But here the purpose of the written instructions given was apparent, namely to instruct Mr Tang as an expert, for the purpose of producing a report to be relied on by the Commissioner in these proceedings, to establish the amount of the penalty which the Court should impose.

56. [77]

    Both Ms Anthony’s evidence about why particular instructions were given to Mr Tang and the scope and intent of those instructions thus involved matters which were clearly privileged, touching as they would not only on forensic decisions made about the conduct of the proceedings, but also on advice given as to how the expert evidence to advance the Commissioner’s case should be adduced.

57. [78]

    In addition, it was also apparent that opinions which Ms Anthony could give about the effect of the instructions so given, or what they intended were not relevant to what arose to be decided in this case.

58. [79]

    What was instructed and Mr Tang’s evidence about what he did as a result in arriving at his opinions could plainly be the subject of cross examination and submissions, going as that potentially could to the question of whether or not his evidence assisted the Commissioner meet the onus of establishing the case advanced on the balance of probabilities. But any opinions which Ms Anthony, the Commissioner’s solicitor, had about the matters Mr Pratten wished to pursue were simply not relevant to a determination of what has to be decided.

59. [80]

    In the result leave to issue the subpoena was refused.

60. [81]

    Mr Tang’s evidence was initially received provisionally. Annexed to his report were documents including Mr Pratten’s income tax returns and the Commissioner of Taxation’s original assessments.

61. [82]

    After cross examination I concluded that Mr Tang’s evidence had to be admitted, relevant as it was to what lay in issue between the parties about the amount of any pecuniary penalty to be imposed and the case which Mr Pratten advanced in relation to the administrative task undertaken by the Commissioner of Taxation, when assessing tax payable on income.

62. [83]

    Mr Tang explained how Australia’s income tax system operates on the basis of self-assessment, with taxpayers being obliged to annually declare all of their assessable income and also to claim deductions to which they are entitled in their tax returns. The Commissioner of Taxation then issues either a notice of assessment of tax payable or a refund, which is calculated by reference to the taxpayer’s assessable income, allowable deductions and applicable tax rates, less tax offsets and credits for tax already paid.

63. [84]

    The Australian Tax office uses the WINTAP software system which calculates income tax, Medicare and other levies payable on a taxpayer’s income, allows for tax offsets and other available credits, as well as calculating administrative penalties and interest, if applicable. Mr Tang used that software to make such calculations on the undisclosed income Ms Celona had identified, which he considered to be ordinary income, for reasons which he explained.

64. [85]

    Ms Celona had analysed and traced the funds which had been sent by the insurance broking business to the two Vanuatu accounts she had examined, the Vanuatu International Trust Company “VITCO” and International Trust Company “ITCO” accounts, as well as payments made out of them to accounts belonging to Mr Pratten and to third parties. There was no suggestion that payments Ms Celona had so identified had been disclosed as income by Mr Pratten. It was this nondisclosure which had resulted in his convictions.

65. [86]

    Ms Celona had been involved in the investigations into tax fraud which came to be known as the Wickenby investigations. They included Operation Starlifter, an investigation into the activities of the PKF Vanuatu accounting firm of which Mr Robert Agius was principal partner and its operation of certain bank accounts. That had led to the investigation into Mr Pratten’s offending and his eventual convictions in the criminal trial in which she had given evidence. In her report Ms Celona explained how the funds paid out of the two accounts had been used, what the limitations of the information she had access to had resulted in and the income she had concluded had not been disclosed.

66. [87]

    In undertaking the calculations on the undisclosed income Mr Tang had regard to Mr Pratten’s tax returns. There he had disclosed income, as well as claiming allowable deductions, tax offsets and tax credits. There was no suggestion that they were involved in Mr Pratten’s offending. Mr Tang explained for each financial year the result of the WINTAP system’s calculation of Mr Pratten’s income tax on that income, having taken those claims into account, as well as the resulting variation from the tax originally assessed by that system on the income declared in his tax returns.

67. [88]

    In cross examination Mr Tang agreed that his report was based on assumptions he had been instructed to make, including Ms Celona’s opinions about the payments made from the Vanuatu accounts, which he had not declared as income.

68. [89]

    Mr Tang was also cross examined about how he had approached his task, given his instructions and the Commissioner of Taxation’s power to assess what tax was payable by a taxpayer. He accepted that the exercise which he had undertaken had thus been a hypothetical one, different to an audit or assessment of the tax actually payable by Mr Pratten, which was for the Commissioner of Taxation to assess. He also agreed that in coming to his conclusions he had not consulted Mr Pratten, as a tax office client engagement officer would, if an audit of his tax affairs was being conducted, in order to determine whether the income he had stated in his tax returns was correct.

69. [90]

    Notwithstanding these aspects of Mr Tang’s evidence, given his relevant expertise and how tax is calculated by the Commissioner of Taxation under the applicable statutory regime, utilising the WINTAP software in the way he explained, I accepted that his evidence was relevant to the resolution of what lay in issue. It was thus admissible: s 55 Evidence Act.

70. [91]

    It is convenient at this point to note that Mr Pratten also submitted that if accepted, Mr Tang’s evidence should be given no weight, there being no conclusive proof as to the veracity of the conclusions which he had reached. Further, his evidence involved an abuse of process, contrary to the requirements of Chapter III of the Constitution and an infringement of his implied rights to procedural due process and natural justice.

71. [92]

    There is no reason to doubt Mr Tang’s evidence about the results of the application of the WINTAP system to the undisclosed income, unchallenged as that was by any other expert evidence. Whether it is of assistance in determining the amount of the penalty to be imposed on Mr Pratten depends on the requirements of the Proceeds of Crime Act.

72. [93]

    The case which the Commissioner advanced did not depend on the amended tax assessments issued by the Commissioner of Taxation, which were not tendered. It was Mr Pratten who argued that only the tax assessed by the Commissioner of Taxation could be accepted as providing conclusive proof of any tax which he owed, but he did not rely on those assessments or even his challenge to them.

73. [94]

    The Commissioner of Taxation’s original assessments rested on Mr Pratten’s dishonest disclosure of his income in his tax returns. They were part of the evidence on which he was convicted of his offences. On this application they also help establish that he obtained a considerable benefit from his offences, given the amount of income which Ms Celona identified he had not there disclosed.

74. [95]

    Mr Tang’s evidence established how income tax would be calculated on that income. But it did not establish the amount of additional tax which the Commissioner of Taxation has assessed is payable.

75. [96]

    Given the case which Mr Pratten advanced, if those assessments would have assisted his defence of the Commissioner’s case, no doubt he would have tendered them, his case being as it was that only the Commissioner of Taxation’s assessments could conclusively prove the tax which he owed.

76. [97]

    In the result, that Mr Pratten did not tender those assessments permits the inference that they would not have assisted the case he advanced: Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8. But what can be made of Mr Tang’s evidence in arriving at any penalty, if one must be imposed, remains to be resolved.

77. [98]

    Section 78B of the Judiciary Act requires the Court not to proceed unless and until satisfied that a notice specifying the nature of the matter arising under the Constitution or involving its interpretation has been given to the Attorneys-General of the Commonwealth and of the States and that a reasonable time has elapsed after the giving of the notice, for their consideration of the question of intervention in the proceedings or removal of the cause to the High Court.

78. [99]

    Before the hearing the Commonwealth Attorney had already indicated that there would be no intervention, but the other Attorneys had not yet responded. I concluded that it was not necessary to await their response, it being settled that there is no need to do so, if the matter raised is frivolous or vexatious or does not arise under the Constitution or involve its interpretation: Pham v Secretary, Department of Employment and Workplace Relations [2007] FCAFC 179 at [12].

79. [100]

    That Mr Pratten’s notices were of that kind was established by the circumstances in which the notices were given, so shortly before the resumed hearing and the fact that he had unsuccessfully pursued similar arguments in the criminal proceedings, on appeal and before the High Court, where his arguments had been rejected as misconceived. That was also inconsistent with him having had only a recent realisation that the case which he advanced in his written submissions in these proceedings raised Constitutional issues which had to be notified under s 78B, as he claimed.

80. [101]

    The Court’s jurisdiction arises under s 335 of the Proceeds of Crime Act, under which the Commissioner’s application must be determined. What has to be decided is whether a pecuniary penalty order should be imposed. That Mr Pratten has been assessed as having a liability to pay tax on his undeclared income is but part of the factual matrix against which the evidence must be considered, in determining the amount of the pecuniary penalty which s 116 requires be imposed upon him.

81. [102]

    In R v Pratten (No 26) [2016] NSWSC 935 Rothman J dealt with Mr Pratten’s application for removal of the proceedings to the High Court, where Mr Pratten had filed a summons claiming that the Court was looking at or deciding “financial advantage”, in the context of an understatement of income tax; that under the Income Tax Assessment Act 1936 (Cth) and the Income Tax Assessment Act 1997 (Cth) the task of determining assessable income was reposed in the Australian Taxation Office as an administrative act; and that it was thus beyond the Court’s power in criminal proceedings to determine whether a financial advantage existed, “it being an administrative function that is inconsistent with the functions of the Court as a Chapter III court”: at [4].

82. [103]

    In his written submissions Mr Pratten advanced similar arguments.

83. [104]

    Rothman J considered that the Australian Taxation Office’s assessment was almost wholly irrelevant to the issues before the Court in the criminal proceedings, which concerned Mr Pratten’s guilt of the offences charged, that turning on whether he had dishonestly and by deception obtained a financial advantage, by understating his income. That required proof that income tax had not been assessed or paid on that income, which had been dishonestly understated: at [9]-[10].

84. [105]

    In the result Rothman J concluded that neither a finding of guilt nor a sentence imposed on Mr Pratten could interfere with the independent assessment of any review by the Commissioner of Taxation under the income tax regime, so that there was no arguable proposition which involved Chapter III of the Constitution, which would warrant an adjournment of the sentence hearing. Further, that the matter raised was ultimately one for the High Court: at [13].

85. [106]

    In Director of Public Prosecutions (Cth) v Pratten [2016] NSWCCA 322 Mr Pratten sought an adjournment of the hearing of his conviction appeals, given the proceedings in the High Court. That application was refused, the Court agreeing with Rothman J that the constitutional issue Mr Pratten had sought to raise was misconceived: at [15].

86. [107]

    In the High Court Gageler J noted the amended assessments which the Commissioner of Taxation had issued, Mr Pratten’s unsuccessful objections to those assessments and the stayed review proceedings he had brought in the AAT: Pratten v Commonwealth of Australia [2017] HCATrans 121.

87. [108]

    Gageler J took the view that however the constitutional argument might possibly be formulated, it was not viable. Mr Pratten’s criminal liability depended on the question of whether he had obtained a financial advantage through a reduction in his liability to pay income tax consequent on his failure to disclose assessable income, which was a question of fact: at 4, The jury was not asked to determine his liability to pay tax, nor could it. While there was a possibility that the result of its deliberations might be implicitly inconsistent with the outcome of the proceedings he was pursuing in relation to his amended tax assessments, that was not alone indicative of a constitutional difficulty: at 4.

88. [109]

    The position was similar in this case. Again it is conceivable that a view reached in these proceedings about the benefit which Mr Pratten obtained from his offences may be implicitly inconsistent with the Commissioner of Taxation’s assessment of the outcome of his challenge to his amended tax assessments as to his liability to pay income tax, consequent on his failure to disclose assessable income. But the amount of the tax which he owes is not for this Court to determine, nor has it been asked do so. Thus there was in this case also no proper basis for the conclusion that the claimed constitutional difficulty exists.

89. [110]

    In the result it had to be accepted that the s 78 B notices were misconceived and that it was not necessary to adjourn the hearing.

90. [111]

    Mr Pratten raised in his final written submissions for the first time that evidence which the Commissioner had led included documents obtained by search warrants issued under the Crimes Act 1914 (Cth) or the Criminal Code Act for the purpose of the criminal proceedings without obtaining prior leave of the Court, which the Commissioner, as a model litigant should have obtained. In the circumstances that evidence, on which expert witnesses had relied, should be struck out.

91. [112]

    The evidence led by the Commissioner established that some documents in evidence were obtained by search, but Mr Pratten did not identify which documents he took objection to. Still I was satisfied that the objection was raised too late and could not, in any event, be accepted.

92. [113]

    On this application the Court was entitled to have regard not only to the transcript of the criminal proceedings, but also to evidence there led: s 138 Proceeds of Crime Act. Section s 3ZQU(1)(b) of the Crimes Act also permitted materials seized under that Act to be used in these proceedings. That these provisions did not apply to anything in evidence was not apparent. Nor was it apparent why, if leave was required, it would not be given, given what was here in issue.

The parties’ final cases

1. [114]

   The Commissioner’s case was advanced on the evidence of Mr Johnstone, Ms Wynn, Mr Morse and Ms Gledhill, who were not required for cross examination and that of Mr Walloscheck, Mr Tang and Ms Celona, who were. On that evidence of the $19,022,405.09 broking fees remitted to the Vanuatu accounts, payments totalling $4,555,025.98 were paid out for Mr Pratten’s benefit, but dishonestly not declared as income.

2. [115]

   The penalty sought was calculated in accordance with s 125(2) of the Proceeds of Crime Act, to reflect the present-day value of the additional tax Mr Tang calculated was payable on such undeclared income, $1,974,549, namely a total sum of $2,431,522.13.

3. [116]

   There was no issue between the parties about the mathematical calculation of any of these sums.

4. [117]

   The matrix of entities and assets involved in Mr Pratten’s offending was explained by Mr Walloscheck, a former Australian Federal Police officer. They included the corporate defendants, other entities and trusts, real and other property including a farm, game fishing boat and helicopter, as well as interlocking shareholdings. His evidence explained what had led to Mr Pratten’s prosecutions and his connection with the payments Ms Celona had identified.

5. [118]

   Ms Celona explained the flow of fees transmitted to Vanuatu for the insurance policies which had been written and the funds later returned to Australia to Mr Pratten, or used for payment there of his expenses, those of entities he had effective control of, as well as for the acquisition of their assets.

6. [119]

   What was so traced and analysed to be Mr Pratten’s income included the payments made to and from the Vanuatu accounts:

7. [120]

   In oral evidence Ms Celona explained why she had not included certain payments in the conclusions she had reached, namely, because of agreements reached at Mr Pratten’s second trial. In cross examination she explained that her task was to give an overall picture of the source and flow of the funds and not to form opinions about whether payments made were assessable income. She also explained how documents she had explained had been stored and accessed on an electronic evidence management system, as well as how some documents had been obtained by search warrant, others seized from the offices of Rural and General Insurance Broking Pty Ltd “RGIB” and some provided by the Tax Office.

8. [121]

   The Commissioner did not press for a pecuniary penalty in respect of all the income Ms Celona had identified, but only in the amount Mr Tang had calculated.

9. [122]

   Mr Pratten’s case was that the Court could not impose such a penalty. He did not challenge the opinions which Ms Celona had reached about the matters she dealt with but he did challenge the evidence of Mr Tang and that of Mr Walloscheck.

10. [123]

    Mr Pratten led no evidence to resist the Commissioner’s case, not even the evidence which he had relied on in the criminal proceedings. He finally relied on an affidavit which he had affirmed in January 2021 annexing copies of extracts from Australian Tax Office annual reports and financial statements for tax years from 2005 - 2006 to 2015 - 2016 and certain tax rulings, to advance submissions that there was no evidence that there had been a victim of his offending.

11. [124]

    In oral submissions Mr Pratten also argued that the Commissioner was not speaking on behalf of the Commissioner of Taxation and despite his convictions, that there was no evidence that any benefit he had received had been unlawfully obtained, the money having flowed to him legally. While he had not declared such income, there was no proof that anyone was claiming it, or that the Commissioner of Taxation had determined that the amount of the pecuniary penalty sought, was payable as income tax.

12. [125]

    Mr Pratten pressed the case he advanced in his written submissions, that the Court has no power to make the orders sought because the Commissioner’s case depended on whether he had an obligation to pay tax on the payments Ms Celona had identified, which Mr Tang’s evidence did not establish. Mr Tang’s exercise involved a hypothetical question which could only be answered by the Commissioner of Taxation and which thus did not constitute a “justiciable matter” under Chapter III of the Constitution.

13. [126]

    Mr Pratten also denied that any of the transactions Ms Celona identified legally constituted his personal income, other than 23 payments of consultant’s fees which he had declared as income in 2010. He also contended that neither Ms Celona’s evidence, nor that of Mr Walloscheck or Mr Tang provided a foundation for the orders sought, there being no evidence that the Commissioner of Taxation had assessed him to be liable to pay the amount of tax Mr Tang had calculated.

14. [127]

    Mr Pratten relied on his original income tax returns and notices of assessment and the absence of the amended assessments later issued to him, to submit that he was entitled to rely on the “legal veracity” of the Commissioner of Taxation’s original assessments. He also submitted that there was no evidence that he had made any high level decisions about the operation of the Vanuatu insurer’s business, or that he had the necessary control of that business, to satisfy the “controlling interest criteria” provided by the Income Tax Assessment Act.

15. [128]

    Mr Pratten’s case was thus that the Commissioner had merely advanced a “hypothecated postulation” which did not constitute a justiciable matter in terms of Chapter III of the Constitution. It followed that the Court had no power to determine what his taxable income was and accordingly, no jurisdiction to determine that he had derived any benefit from failing to pay such an amount. On his approach, to accept the Commissioner’s case would involve jurisdictional error of the kind identified in Craig v South Australia (1995) 184 CLR 163; [1995] HCA 58 as well as a denial of natural justice.

16. [129]

    But in final oral submissions Mr Pratten did accept that given the breadth of the definition of “effective control” in the Proceeds of Crime Act, it would be a very difficult exercise to say that he did not have such control, even though from a taxation point of view in terms of control and control interests, he considered that the position would be different.

17. [130]

    But still Mr Pratten submitted that such control was irrelevant, because it was a secondary issue. The first issue was whether those assets over which he had that control and the money which flowed into those assets was a proceed of crime. That was not established by Ms Celona’s report, nor was it alleged that the insurance business was a sham. The Commissioner’s case came purely from a taxation perspective, with the result that there could be no benefit, unless there was a taxation obligation, which had not been established on the balance of probabilities.

18. [131]

    Mr Pratten’s case thus remained that the evidence did not establish that he had received the benefit of the amount which the Commissioner sought to have imposed upon him as a pecuniary penalty, there being no evidence that the Commissioner of Taxation had assessed him as owing such an amount of unpaid tax. That the penalty sought could be imposed on Mr Pratten thus still remained in issue.

The Court is empowered to make the orders sought

1. [132]

   The restraining orders made in 2011 under s 17 of the Proceeds of Crimes Act concerned various property then suspected of being the proceeds of crime. Mr Pratten’s restrained property was identified in the First Schedule to the summons, the fully paid shares issued to and held by Mr Pratten in RGIB and Sonarpia.

2. [133]

   The corporate defendants’ restrained property was identified in the Second to Sixth Schedules:

3. [134]

   Automatic forfeiture of Mr Pratten’s restrained property would have occurred six months after he was sentenced by Rothman J on 29 April 2016: s 92 Proceeds of Crime Act. In The Commissioner of the Australian Federal Police v Pratten [2016] NSWSC 1557, however, I made orders under s 93 extending the period for forfeiture of restrained property so that the automatic forfeiture provisions of the Act did not take effect until 28 July 2017.

4. [135]

   In October 2016 the defendants filed a motion seeking orders, including orders under s 29 and s 31 of the Proceeds of Crime Act, excluding their interest in the restrained properties from restraint. In November 2016 Davies J made various interlocutory orders, including that Mr Pratten be examined about his own affairs. The Commissioner relied on answers which he later gave in that examination to advance this application.

5. [136]

   In April 2017 Mr Pratten filed a further motion seeking an order under s 94 excluding all of the restrained property. The onus fell on him to establish his case on the evidence.

6. [137]

   In Commissioner of the Australian Federal Police v Pratten [2017] NSWSC 927 Hulme J dismissed both motions, noting that Mr Pratten then claimed an interest in all of the property specified in the first to sixth schedules of the summons: at [29]. But his counsel appeared only for him and not the corporate defendants: at [34]. In his affidavit Mr Pratten had explained how he had an interest in the restrained property, which he contended was neither proceeds of unlawful activity, nor an instrument of unlawful activity, but had been lawfully acquired: at [35]. But he did not rely on that affidavit on this application.

7. [138]

   Hulme J noted that the only restrained property in respect of which automatic forfeiture resulted under s 92 as the result of Mr Pratten’s convictions were the shares dealt with in schedule 1, his shares in RGIB and Sonarpia: at [38]. Thus, orders could not be made under s 94 in relation to the other restrained property which belonged to the corporate defendants: at [39]-[42].

8. [139]

   Hulme J accepted that Mr Pratten had available to him $1.00 from a legitimate source which he could have used to purchase his share in RGIB: at [61]. His Honour concluded, however, that:

9. [140]

   His Honour also accepted that while Mr Pratten’s shares in Sonarpia were acquired during the period of his offending, the acquisition of those shares was at such a minimal cost ($10), that he would not likely have needed to have recourse to illegitimately acquired funds to acquire them (at [70]). But his Honour also concluded:

10. [141]

    The result was that the motions were dismissed and Mr Pratten’s restrained shares later forfeited. But because the corporate defendants have not been convicted of any offences, their property has not been forfeited. While they did not appear to resist the orders which the Commissioner sought under s 141 that their restrained property be available to satisfy the pecuniary penalty imposed on Mr Pratten and that the Official Trustee in Bankruptcy take custody and control of that property, so that the Court’s other orders can be complied with, he does.

11. [142]

    The orders pressed were:

    1. (1)

       Pursuant to section 116 of the Proceeds of Crime Act, the First Defendant is to pay to the Commonwealth a pecuniary penalty in the amount of $2,431,522.13.

    2. (2)

       Pursuant to section 141 of the Act, the property referred to in the Schedule to these orders is available to satisfy the pecuniary penalty order.

    3. (3)

       Pursuant to section 282(1) of the Act, and subject to s 284 of the Act, the Official Trustee is directed to pay to the Commonwealth, out of the property referred to in the Schedule to these orders, $2,431,522.13.

    4. (4)

       Pursuant to section 283(1) of the Act, for the purpose of complying with the direction at paragraph 79 above, the Official Trustee is directed, to sell or otherwise dispose of the property referred to in the Schedule to these orders and may execute any deed or instrument in the name of the First to Sixth Defendants relating to the property.

    5. (5)

       Mr Pratten is to pay the Commissioner’s costs as agreed or assessed.

12. [143]

    The onus fell on the Commissioner to establish an evidentiary basis for the case advanced on the balance of probabilities, according to the rules of evidence applicable in civil proceedings, upon which these orders could be made: ss 317 and 315(2).

13. [144]

    I note that there is no Schedule to those Orders which must refer to the Schedule to the Summons.

14. [145]

    In resolving what lies in issue it must be born in mind that the Proceeds of Crime Act contemplates that in addition to any punishment imposed under the criminal law for their offences, offenders will also be deprived of the proceeds of their illegal activities: The Commissioner of the Australian Federal Police v Fysh [2013] NSWSC 81 at [1]. How the Act interferes with vested rights in “property” was there explained, that being defined in s 338 to mean “real or personal property of every description, whether situated in Australia or elsewhere and whether tangible or intangible, and includes an interest in any such real or personal property.” This definition captures the various property the subject of this application.

15. [146]

    In Fysh it was observed that “In some instances the Act operates in rem providing for the forfeiture to the Crown of particular property. Pecuniary penalty orders operate in personam, requiring a person to pay a penalty in an amount determined by the court. However, such orders are in some instances enforceable by the creation of a charge on property: see ss 116 and 142 of the Act.”: at [7].

16. [147]

    Contrary to Mr Pratten’s case the evidence did establish that the payments Ms Celona identified, from which he benefited, involved illegality. That was why he was convicted of the offences on which the Commissioner’s application rests.

17. [148]

    The concept of “property or wealth being lawfully acquired” must be borne in mind, s 336A providing that for the purpose of the Act property or wealth is only lawfully acquired if:

18. [149]

    It follows that the fact that the funds sent to Vanuatu were lawfully acquired during the operation of the insurance broking business is not the only relevant consideration. The evidence I will discuss establishes that the payments from which Mr Pratten benefited and the assets acquired with those funds were not lawfully acquired, being either proceeds or an instrument of his offending.

19. [150]

    Also relevant is the term “person’s property” defined to include “property in respect of which the person has the beneficial interest”: s 338. The term “beneficial interest” is not defined, but "interest” in relation to “property or a thing” is defined in s 338 to mean:

20. [151]

    The evidence also established that Mr Pratten had such an interest in the funds and property acquired with them, including those sought to be made the subject of the Court’s orders.

21. [152]

    It is s 116 which regulates when a pecuniary must be imposed on an offender like Mr Pratten, providing:

22. [153]

    The Commissioner is a “proceeds of crime” authority: s 338. The offences of which Mr Pratten was convicted were both indictable offences and “serious offences”: s 337B. The latter term is defined in the Dictionary to include “unlawful conduct by a person that causes, or is intended to cause, a benefit to the value of at least $10,000 for that person or another person”, as well as “unlawful conduct by a person that causes, or is intended to cause, a loss to the Commonwealth or another person of at least $10,000”: subss (a)(iii) and (iv).

23. [154]

    Part of the funds lawfully sent to Vanuatu were used to make the payments Ms Celona identified in order to conceal income, with the result that tax payable upon them was not assessed. It was the dishonesty involved in all that was done to conceal that income, which resulted in Mr Pratten’s convictions.

24. [155]

    The evidence of Ms Celona and Mr Walloscheck established the complex arrangements put in place to conceal Mr Pratten’s offending. Still Mr Pratten contended that the orders sought could not be made because the evidence did not establish that the Commonwealth had suffered any loss from his offending.

25. [156]

    Even if that were accepted, which I am satisfied it could not be given the offences of which he was convicted, the section is also concerned with unlawful conduct that causes or is intended to cause a benefit to the value of at least $10,000 for the person or another. The evidence well establishes that Mr Pratten did “derive” such a “benefit” from his offences. “Benefit” being defined in s 338 to include a “service or advantage” and s 336 extending the concept of deriving a benefit beyond personal receipt of what was derived, to include another person at the request or direction of the first person deriving “the proceeds, benefit, literary proceeds or wealth directly or indirectly”: s 336(b).

26. [157]

    The evidence of Ms Celona and Mr Walloscheck well established the basis of the Commissioner’s case that Mr Pratten had so derived the claimed benefit. That included not only the funds paid into his accounts and for his personal expenses, but the payments made to third parties for the acquisition of the corporate defendant’s assets and payment of their expenses. That was the result of the interest and control which he had and exercised over the funds deposited in and paid out of the Vanuatu accounts, as well as over the entities and assets involved in his offending, including those of the corporate defendants.

27. [158]

    The evidence also established that these payments were made and assets were acquired with the proceeds and/or were the instrument of Mr Pratten’s offences, as those terms are defined in s 329 of the Act. “Proceeds” is property wholly and partly derived or realised, directly or indirectly from the commission of an offence: s 329(1). An “instrument” of an offence is property used or intended to be used in or in connection with an offence. The evidence establishes that the payments and assets in issue were both derived or realised from the commission of his offences and used in or in connection with their commission.

28. [159]

    That the benefits which Mr Pratten so obtained resulted from his exercise of the “effective control” which he had and exercised was also established by this evidence, as he accepted in his final oral submissions. As he then explained it was the wide terms of s 337, which defines the term “effective control”, which led to his proper concession as to what the evidence established. It relevantly provides:

29. [160]

    The definition of “effective control” is thus not confined to concepts of beneficial ownership, or the person’s practical power to take the benefits of property for themselves. It is rather concerned with the exercise of control over the property: Cth DPP v Hart & Ors [2005] QCA 51 at [22]. There effective control was established by evidence which showed that the plaintiff’s attitude and behaviour towards the disputed property was “reminiscent of many others who persist in treating the business and assets of companies as if they were their own, with scant regard for the legal boundaries dividing personal and corporate powers and ownership”: at [32].

30. [161]

    This was a similar case.

31. [162]

    In Director of Public Prosecutions v Ferguson [2006] VSC 484 Kaye J explained at [49]:

32. [163]

    Ms Celona and Mr Walloscheck’s evidence established Mr Pratten’s use and enjoyment of the funds paid out of the Vanuatu accounts, that being the result of his exercise of the effective control which he had. They were used as if they were his own, including to acquire, use and maintain the corporate defendant’s restrained assets. In the result the restrained property may thus be treated as his own: s 116(3).

33. [164]

    It follows that the Commissioner’s application was justiciable.

34. [165]

    Section 76 of the Constitution is concerned with the original jurisdiction of the High Court in the matters there specified, including those which arise under laws made by the Parliament. Contrary to the case which Mr Pratten advanced, the matters which are here raised for determination concern whether s 116 of the Proceeds of Crime Act requires that a pecuniary penalty be imposed upon him and if so, in what amount. Their determination will result in binding and enforceable orders, which will not involve jurisdictional error of any of the kinds identified in Craig at [12].

35. [166]

    That in resolving the matters on which the parties have joined issue the Court is required to consider Mr Tang’s evidence about how income tax is calculated, leads to no different conclusion.

36. [167]

    In resolving any of those matters the Court is not required to undertake the Commissioner of Taxation’s administrative task of assessing income tax which Mr Pratten should have paid on the income he dishonestly concealed, nor was it asked to do so. In considering Mr Tang’s evidence about how the Commissioner of Taxation calculates tax which is payable, by use of the WYNTAX software and what its application to Mr Pratten’s undisclosed income results in, it is not required to exercise a non-judicial power.

37. [168]

    Nor could taking that evidence into account in determining the amount of Mr Pratten’s pecuniary penalty result in the assessment of his income tax. That has already been determined by the Commissioner of Taxation, who has issued amended assessments. Nor can the Court’s conclusion about the amount of the pecuniary penalty have any impact on the resolution of his challenges to his amended assessments, which are presently stayed before the AAT.

38. [169]

    It was Mr Pratten’s conviction of dishonestly concealing income that triggered the Commissioner’s s 116 application. On that application the question of whether he derived a benefit from his offending is put in issue and must thus be determined. If the evidence establishes that he did, a pecuniary penalty must be imposed, calculated in the way provided by the legislative scheme.

39. [170]

    The resolution of this issue does not depend on what the Commissioner of Taxation has determined about the income tax Mr Pratten should pay on his undisclosed income. Nor does its resolution, on the evidence led, deny him either procedural fairness or due process.

40. [171]

    There was no issue that Mr Pratten was an officer and at times director of RGIB, the Australian registered insurance brokerage which arranged contracts of insurance for its customers with CPI, as well as reinsurance cover for CPI. RGIB’s operations resulted in the funds paid into the Vanuatu accounts out of which the payments Ms Celona examined were made.

41. [172]

    There was also no issue as to Mr Pratten’s directorships, shareholdings and various interests in and involvement with RGIB; Rural and General Insurance Ltd; CPI, formerly known as Rural and General International Insurance Ltd; Practical Insurance Claims Administration Pty Ltd; Cowper Street Holdings Pty Ltd; Sonarpia; PPI and the Pratten Family Trust, or his dealings with Astrolabe and the Vanuatu accountancy firm PKF Vanuatu.

42. [173]

    The evidence of Mr Johnstone, Ms Wynn, Ms Gledhill, Mr Walloscheck and Ms Celona established the complex arrangements which lay at the heart of Mr Pratten’s offending and how they came to light. The analysis in two schedules to the final written submissions advanced for the Commissioner of what this complex evidence established about the effective control which he exercised over the restrained property and how he had an interest in and control of the entities which had title to that property, was finally not challenged by Mr Pratten, but rather accepted.

43. [174]

    PKF’s principal, Mr Robert Agius, was involved in the running of some of the Vanuatu companies involved in Mr Pratten’s offending. Mr Agius’ own offending was dealt with in Commissioner of the Australian Federal Police v Agius [2016] NSWSC 894. It was his concealment of income, which PKF helped facilitate, which lay at the heart of the offences of which Mr Pratten was convicted.

44. [175]

    Mr Johnstone was a Detective Sergeant employed by the New Zealand Police who was a financial investigator within the Wellington Metro Crime Unit, Proceeds of Crime Unit, from 2006 to 2012 also involved in assisting the Australian Federal Police investigation into large scale tax evasion and money laundering, Operation Starlifter. When he swore his affidavit, he was still responsible for the matter, including for the storage of information and documents.

45. [176]

    In his affidavit Mr Johnstone explained the search warrants executed in New Zealand during this operation at the ANZ National Bank (New Zealand) Ltd, Recall Total Management, the ANZ Archive Storage Facility and the Bank of New Zealand. Their execution resulted in the seizure of documents that Mr Walloscheck and Ms Celona dealt with, including statements for IFTCO; ANZ international transaction and cleared payment authorisation forms; transaction reports; communications between ANZ and ICFTCO; and BNZ bank statements.

46. [177]

    In her affidavit, Ms Wynn, the Director of Information and Knowledge Products at the Australian Transactions and Analysis Centre (AUSTRAC) explained her role as custodian of documents and information AUSTRAC had received and generated under the Anti Money Laundering and Counter-Terrorism Finance Act 2006 (Cth) and the Financial Transactions Reports Act 1988 (Cth), as well as her responsibility for maintaining its records under the Archives Act 1983 (Cth). She also explained how AUSTRAC’s database came still to hold relevant financial transaction reports, international transfer reports, significant cash transactions and international funds transfer instructions from 19 February 2006.

47. [178]

    In her affidavit Ms Gledhill, the Director of the Capability team with the Regulatory Operations branch of AUSTRAC, explained the conduct of her search of its database for specified international funds transfer instructions.

48. [179]

    Ms Celona’s evidence confirmed the control which Mr Pratten exercised over the funds RGIB sent to Vanuatu and explained the basis upon which she had concluded that in the 2003 to 2009 financial years:

    1. (1)

       some $19,022,405.09 had been remitted to the VITCO and IFTCO accounts offshore;

    2. (2)

       from those accounts:

49. [180]

    There was no issue as to Ms Celona’s qualifications or expertise, or how she came to be involved in the investigation into Mr Pratten, after the Wickenby investigations, the Operation Starlifter investigation and more recently her involvement in the Serious Financial Crime Taskforce investigations. She also explained how she had arrived at her conclusions about Mr Pratten’s undisclosed income, given the instructions she had received and the documents she had examined.

50. [181]

    Operation Starlifter was concerned with Australian taxpayers who had remitted monies to entities controlled by PKF and Mr Robert Agius. During that investigation Ms Celona undertook financial analysis of ANZ bank accounts operated by PKF in New Zealand, to identify Australian taxpayers remitting funds to those accounts, which had identified Mr Pratten. An investigation into his tax affairs was then pursued and in 2011 Ms Celona conducted an analysis and provided a report about funds transferred by RGIB to the Vanuatu VITCO and IFTCO bank accounts in identified years, as well as sums paid from those accounts to Mr Pratten and third parties in relation to his financial affairs in the June 2003 to June 2009 financial years.

51. [182]

    In her report Ms Celona identified gaps in the information she had been provided, which affected her analysis for certain periods and explained how she had conducted her analysis of the documents she had examined by reference to identified persons, businesses companies and accounts. She also explained her methodology and assumptions, as well as what the schedules she had produced reflected and the result of gaps in the information she had to consider. Those schedules explained the result of the money flows she had traced, on which her conclusions rested.

52. [183]

    The monies transferred out of the Vanuatu accounts to third parties which related to Mr Pratten’s personal financial affairs included:

    1. (1)

       the purchase of:

    2. (2)

       payment of Mr Pratten’s identified personal expenses.

53. [184]

    Ms Celona was cross examined about the source of information included in her report, but the accuracy of her opinions and conclusions about the matters she dealt with concerning funds paid to Mr Pratten and identified third parties to acquire assets and meet expenses were not challenged. Nor were they challenged by any expert evidence, or by any evidence which Mr Pratten gave himself, not even evidence that he had relied on in his criminal trial.

54. [185]

    Ms Celona’s evidence about the documents which she examined, given their source and what they disclosed, when considered together with Mr Walloscheck’s evidence established both that Mr Pratten had effective control over the funds which were sent to Vanuatu and the amounts later paid to him and to third parties to meet his personal expenses and those of the corporate defendants, for his considerable benefit.

55. [186]

    Mr Pratten’s case that the utility of Mr Walloscheck’s evidence was difficult to discern, other than as an index of documents tendered to support the Commissioner’s case and that it was relevant that he had no financial or forensic accounting qualifications, cannot be accepted. Nor can the criticism that he was not qualified to give his evidence, lacking accounting, forensic accounting or financial services qualifications.

56. [187]

    Mr Walloscheck’s qualifications and experience were pursued with him in cross examination. They included a Bachelor of Policing and a Master of Fraud and Financial Crime. I accept that he had relevant expertise. As was the Commissioner’s case, his evidence helped establish the effective control which Mr Pratten finally accepted that he had.

57. [188]

    Mr Walloscheck explained the source of the documents dealt with in his affidavit: search warrants, telephone intercept warrants, banker’s affidavits and witness statements, Mr Pratten’s examination and AFP access to various Government information systems, including the documents Ms Celona had examined. His evidence concerned what they revealed about:

58. [189]

    Mr Walloscheck was cross examined about some of the documents which he had considered and what he meant by describing Mr Pratten as a “principal controller” of CPI in his affidavit. He explained he thereby meant the person having effective control over a company and that such control did not necessarily depend on whether the person was a director. Although he accepted that generally a director would primarily be in control of a company. Further, that he had used the concepts of “effective control” and “principal”, being the primary, to coin the combined term “principal controller”.

59. [190]

    Mr Walloscheck also acknowledged the limitation of his understanding of Vanuatu law and that the opinions which he had formed about what Mr Pratten had done rested on his understanding of the documents he had examined, including the transcript of evidence Mr Pratten had given at his examination, as well as transcript of the evidence led at the criminal trial. He also said that he had looked at both inculpatory and exculpatory materials.

60. [191]

    Mr Walloscheck was also asked about what the documents established about Mr Pratten’s involvement with CPI and RGIB and their dealings, in order to establish that he was not the principal controller of CPI. Contrary to what Mr Pratten put to him, Mr Walloscheck considered that there were documents which suggested that Mr Pratten could make high level management decisions for CPI, although he accepted that he could not rule out that other people had some control. He explained that on his examination of the documents, he had concluded that Mr Pratten had total control, although he agreed that he had not examined the financial records Ms Celona had examined, to form an opinion about whether he had controlled its financial accounts. He also agreed that he had not examined documents which showed that Mr Pratten had made decisions about whether a policy of insurance would be issued to a customer or in respect of claims.

61. [192]

    Mr Pratten’s case was initially that the evidence did not establish that he was a director, shareholder or member of CPI; or had voting rights, or the power to initiate its corporate actions, or changes to its operations, or making high level decisions on its behalf; or personal capacity to bind it, determine its management policies, attend directors meetings; or owed it fiduciary duties, was represented to be one of its officers, had authority to deal with its staff or directors or the legal means to control it. Nor was there evidence that CPI was immutably bound to execute his instructions.

62. [193]

    Nevertheless, I am satisfied that Mr Walloscheck’s evidence and the payments Ms Celona examined, made for his benefit and which resulted in his convictions, not only established his practical control over CPI, but also established the “effective control” which he exercised over the funds Ms Celona identified.

63. [194]

    This control was reflected in the way in which the insurance brokerage business was conducted in Australia and Vanuatu, with the results Ms Celona examined. This included not only final payment of part of the funds generated into his own accounts and to meet his personal expenses, but also the acquisition of the corporate defendants’ assets, their maintenance and use of them as if they were his own.

64. [195]

    Contrary to Mr Pratten’s written case, proof of the existence of “specific control mechanisms”, which required the making of the payments Ms Celona identified, was not required in order for the Commissioner to establish that he had and exercised the effective control which he finally accepted he had.

65. [196]

    This control was established by the documents Mr Walloscheck explained, which showed amongst other relevant things that:

66. [197]

    This evidence thus established the effective control which Mr Pratten finally accepted. He had not only represented himself to be the owner of the Wards River property he also conducted himself as if he was, by the use which he made of it and the income which it generated, the maintenance and construction which he undertook there, without ever making any payment for its use. The evidence also well-established Mr Pratten’s use and enjoyment of Los Lobos as if it was his own, despite what was arranged in relation to Astrolabe, an entity he had little understanding of, as well as his control of the other restrained property, all of which he was intimately connected with.

67. [198]

    That he used these assets as if they were his own was put beyond argument by the 2007 email in which he gave instructions about how his assets were to be dealt with, in the event of his death. That included instructions about:

68. [199]

    In Agius Hulme J made orders under s 116 against Mr Agius, having found that he had an interest in or control of, in one form or another, various companies; benefited personally in relation to some of the money there in issue and derived a benefit for others in relation to some of that money, even though he and his partners did not benefit from the total sum involved in the tax fraud there in question: at [55] – [58].

69. [200]

    Those conclusions were driven by what the evidence established about Mr Agius’ effective control of money retained in corporate bank accounts, given evidence that he had caused those entities to be established; the overseas aspects of the tax evasion scheme which made use of those entities operated under his direction; he was a signatory to their bank accounts; he was at times a director and shareholder and at other times took steps which gave the appearance that the ultimate beneficial owners were his sons; and there was evidence that he retained involvement through directorships, control of bank accounts, and use of money to pay off his mortgage and to pay his personal legal fees: at [76].

70. [201]

    On the evidence I have explained, in Mr Pratten’s case it was he who had an interest in, in one form or another as well as effective control of the various entities funds and assets used in his offending and also benefited personally from that offending by the various uses to which the funds were put. In the result, given what s 116 requires, a pecuniary penalty must also be imposed upon him.

The amount of the pecuniary penalty

1. [202]

   The Commissioner sought a penalty of only the present-day value of the $1,974,549 tax Mr Tang calculated on Mr Pratten’s undisclosed income, with a present-day value of $2,431,522.13.

2. [203]

   The Commissioner’s case was that this was a penalty which reflects what on the available and best evidence is the benefit Mr Pratten derived from his offending and thus a penalty appropriate and fair to impose upon him, given the considerable income he did not disclose. That the statutory scheme is concerned with questions of fairness is debatable. The Act does not provide for maximum pecuniary penalties in respect of which the Court is given a discretion, but rather specifies how they are to be calculated by reference to the benefits derived from the offending.

3. [204]

   Mr Pratten’s case remained that no penalty could be imposed, but he did not address how the penalty was to be calculated, if his approach to Mr Tang’s evidence was accepted.

4. [205]

   Section 122 specifies the evidence to which the Court must have regard in assessing the value of benefits a person has derived from the commission of an offence. Relevantly, the Court is required to have regard to evidence of:

5. [206]

   It follows that s 122 requires that regard be paid to all of the monies which Ms Celona’s evidence established were paid out of the Vanuatu accounts to Mr Pratten and the identified third parties, that amount being what came into his possession or control as the result of the illegal activity involved in his offending. That totalled $4,552,025.98.

6. [207]

   That result is consistent with s 128 which provides that “in assessing the value of benefits that a person has derived, the court may treat as property of the person any property that, in the court’s opinion, is subject to the person’s effective control.” The evidence established the effective control which Mr Pratten had and exercised over those funds.

7. [208]

   It is s 121 which governs how a “penalty amount” is to be calculated. In the case of a serious offence, it is to be determined under s 121(3) and (4) and otherwise under s 121(2). They provide:

8. [209]

   Thus, as Hulme J explained in Agius, the term "benefits the person derived" used in s 121 does not necessarily involve just a question of what benefits the defendant derived personally: at [62]. It follows that Mr Pratten’s penalty is not necessarily confined to the additional tax which the Commissioner of Taxation might assess he must pay on his assessable income. Consistently with the objects of the Proceeds of Crimes Act, attention in a case such as this may also not necessarily be confined to the actual net benefit resulting from the offending in question.

9. [210]

   Sections 123 and 124 govern the calculation of the value of benefits derived from offending. It is sufficient to refer to s 124 which applies to serious offences, which Mr Pratten’s offences were. It relevantly requires that;

10. [211]

    No tax was paid on the $4,555,025.98 income concealed by Mr Pratten’s illegal activities. Mr Tang’s evidence did not establish the tax payable on Mr Pratten’s assessable income, but rather the tax which would be payable if what was not disclosed was his assessable income, taking into account the deductions he had claimed in his tax returns.

11. [212]

    Mr Pratten’s assessable income would be established by the Commissioner of Taxation’s amended assessments, but they were not relied upon. If there was a basis in those assessments, or even Mr Pratten’s challenges to them, for the Commissioner of Taxation finding that the undisclosed income was not assessable, or that a lesser amount of tax than that calculated by Mr Tang was payable, no doubt Mr Pratten would have led evidence about that. But he did not.

12. [213]

    There is also no evidence that Mr Pratten has claimed other deductions. It is relevant that s 126 precludes the subtraction from the penalty of any expenses or outgoings incurred in relation to the illegal activity in question. This could thus have been pertinent if Mr Pratten had relied on what he had advanced in challenging the Commissioner of Taxation’s amended tax assessments about matters to which he referred in Mr Tang’s cross examination and in submissions. But he did not.

13. [214]

    Section 131(1) requires that a penalty be reduced by an amount that “represents the extent to which tax that the person has paid before the application for the order is made is attributable to the benefits to which the order relates”. There is no suggestion that Mr Pratten has paid any such tax.

14. [215]

    Subsection 131(2) also permits, if the Court considers that it is in the interests of justice to do so, the penalty to be reduced by an amount that in its opinion, “represents the extent to which tax that the person has paid at or after the time the application for the order is made is attributable to the benefits to which the order relates”. There is also no evidence of any such payment.

15. [216]

    Section 132 would also conceivably be relevant if the Commissioner of Taxation had imposed any penalty on Mr Pratten for his failure to disclose income in his tax returns, it permitting that to be taken into account to reduce the penalty imposed. But nothing of that kind was raised for consideration either.

16. [217]

    Account may also be taken of amounts equal to the value of property already forfeited: s 130. There is however no issue that the shares which Mr Pratten held in RGIB and Sonarpia which he has forfeited have no value.

17. [218]

    That was established by the evidence of Mr Morse, a senior case manager at the Australian Security Authority which is the official trustee for the purpose of the Proceeds of Crime Act, whose evidence established that the restrained shares Mr Pratten held in RGIB and Sonarpia were forfeited to the Commonwealth in 2017 and the companies deregistered in 2018, with the shares not being disposed of and no value from them thus being realised.

18. [219]

    I have been persuaded that Mr Pratten’s submissions that Mr Tang’s evidence should not be taken into account, being hypothetical and not taking necessary account of the amount of the tax he must actually pay on his assessed income, that being for the Commissioner of Taxation to be impose upon him, may not be accepted.

19. [220]

    Despite the case which Mr Pratten advanced, it seems to me that the Commissioner’s approach to the calculation of his penalty is potentially to his considerable benefit, given the nature of the legislation discussed in Fysh at [46] by reference to R v Morgan; R v Bygrave [2008] EWCA Crim 1323; [2008] 4 All ER 890. There is no question that the pecuniary penalties for which the Act provides are not necessarily restitutionary and may result in a penalty greater than the profit which a defendant made from his offending, consistently with the statutory objects.

20. [221]

    It is worth noting that a potentially curious result of Mr Pratten’s approach, if accepted, may be that without Mr Tang’s evidence there is no basis for concluding that his pecuniary penalty can be less than the $4,555,025.98 Ms Celona identified, which he did not disclose.

21. [222]

    After all, what arises for consideration under s 116 in Mr Pratten’s case is not a conviction of offences involving the failure to pay his assessed income tax, but rather convictions for having dishonestly concealed his income. In determining the pecuniary penalty for that offending, it is arguable that it is the value of the income concealed to which regard must be had, that being the benefit derived from his illegal activity, when it was paid out of the Vanuatu accounts either to him or other third parties in Australia, not any additional tax payable on such income.

22. [223]

    On the Commissioner’s case, however, a penalty less than $4,555,025.98 can be imposed, given Mr Tang’s evidence. I have been persuaded by the case advanced that such a penalty may be imposed. But there is certainly no evidentiary basis for imposing anything less.

23. [224]

    That penalty reflects the application of s 125, which permits the value of a benefit to be quantified as if derived at the time the Court makes its assessment. Mr McAllister was the federal agent employed by the Australian Police Force who had used the Reserve Bank calculator to calculate the present-day value of the sum arrived at by Mr Tang. His calculation was unchallenged.

24. [225]

    Section 140 permits the pecuniary penalty to be enforced against Mr Pratten as a civil penalty. Section 141 also empowers the Court to order that the whole, or a specified part of property under Mr Pratten’s effective control is available to satisfy the pecuniary penalty order.

25. [226]

    In the circumstances I have discussed, despite Mr Pratten’s objections I am satisfied that justice also requires that those orders be made, the corporate defendant’s restrained property having to be treated as his own under s 116(3).

Costs

1. [227]

   The Commissioner sought the usual order under the Uniform Civil Procedure Rules, that costs follow the event, which in this case is an order that Mr Pratten pay the Commissioner’s costs as agreed or assessed. Mr Pratten did not oppose such an order and I am satisfied must be made.

Orders

1. [228]

   For the reasons given, I order that:

   1. (1)

      Pursuant to section 116 of the Proceeds of Crime Act 2002 (Cth), the First Defendant is to pay to the Commonwealth a pecuniary penalty in the amount of $2,431,522.13.

   2. (2)

      Pursuant to section 141 of the Act, the property referred to in the Schedule to the Summons is available to satisfy the pecuniary penalty order.

   3. (3)

      Pursuant to section 282(1) of the Act, and subject to s 284 of the Act, the Official Trustee is directed to pay to the Commonwealth, out of the property referred to in the Schedule to the Summons $2,431,522.13.

   4. (4)

      Pursuant to section 283(1) of the Act, for the purpose of complying with Order 3, the Official Trustee is directed, to sell or otherwise dispose of the property referred to in the Schedule to the Summons and may execute any deed or instrument in the name of the First to Sixth Defendants relating to the property.

   5. (5)

      Mr Pratten is to pay the Commissioner’s costs as agreed or assessed.

   6. (6)

      All exhibits and subpoenaed material may be returned forthwith; any exhibits returned must be retained intact by the party or person that produced the material until the expiry of the time to file an appeal, or until any appeal has been determined.