the Director of Public Prosecutions v Henryk Magdulski [1989] ACTSC 10 (9 March 1989)

SUPREME COURT OF THE ACT

THE DIRECTOR OF PUBLIC PROSECUTIONS v. HENRYK MAGDULSKI
S.C. No. 1467 of 1987
Proceeds of Crime Act 1987

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Kelly J.(1)

CATCHWORDS

Proceeds of Crime Act 1987 - Application for order restraining disposal of specified property by respondent - Whether respondent might be regarded as in receipt of benefit from proceeds of a crime or crimes - Whether order sought reasonable in the circumstances.

Proceeds of Crime Act 1987 - ss. 26, 27, 43 and 44

HEARING

CANBERRA
9:3:1989

Counsel for the Applicant Mr R. Livingston

Solicitors for the Applicant Director of Public Prosecutions

Counsel for the Respondent Mr T. Higgins QC

Solicitors for the Respondent O'Neills

ORDER

Pursuant to the provisions of s.43 of the Proceeds of Crime Act 1987 the unexpired residue of the Crown Lease, Register Book Volume 637, Folio 27, of land known as Block 17, Section 108, Division of Kaleen in the Australian Capital Territory, known as 15 Maranoa Street, Kaleen, currently owned by the respondent, be not disposed of or otherwise dealt with by any person except in such manner and in such circumstances as are authorised by this Court.

DECISION

The Director of Public Prosecutions seeks an order under s.43 of the Proceeds of Crime Act 1987 (the Act) that the unexpired residue of the Crown Lease of land known as Block 7, Section 108, Division of Kaleen (15 Maranoa Street, Kaleen) be not disposed of or otherwise dealt with by any person except as authorised by the Court. Henryk Magdulski (the respondent) is registered as lessee of that land (Register Book Vol.637 Folio 627).

2. Section 43 of the Act relevantly provides that:-
"(1) Where a person (in this section and

1section 44 called the 'defendant'):
(a) has been convicted of an indictable
"offence; or
(b) has been, or is about to be, charged
"with an indictable offence;
the DPP may apply to the relevant Supreme
Court for an order under subsection (2)
against:-
(c) specified property of the defendant;
(d) all the property of the defendant
(including property acquired after the
making of the order);
(e) all the property of the defendant
(including property acquired after the
making of the order) other than
specified property; or
(f) ...
(2) Where the DPP applies to a court for an
order under this subsection against property,
the court may, subject to section 44, by
order:
(a) direct that the property, or such part
of the property as is specified in the
order, is not to be disposed of, or
otherwise dealt with, by any person,
except in such manner and in such
circumstances (if any) as are specified
in the order; or
(b) ...
(3) A restraining order against a person's
property may be made subject to such
conditions as the court thinks fit and,
without limiting the generality of this, may
make provision for meeting, out of the
property or a specified part of the property,
all or any of the following:
(a) the person's reasonable living expenses
(including the reasonable living
expenses of the person's dependants (if
any)) and reasonable business expenses;
(b) the person's reasonable expenses in
defending a criminal charge;
(c) a specified debt incurred by the person
in good faith (being a debt to which
neither paragraph (a) or (b) applies)."

The relevant parts of s.44 are as follows:-

"(1) ...
(2) Where the offence concerned is an
ordinary indictable offence the court shall,
subject to subsections (3), (4), (5), (6),
(7) and (10), make a restraining order
against the property unless the court is
satisfied that it is not in the public
interest to make such an order.
(3) If the defendant has not been convicted
of the offence concerned, the court shall not
make a restraining order unless:
(a) the application for the order is
supported by an affidavit of a police
officer stating that the officer
believes that the defendant committed
the offence; and
(b) the court is satisfied, having regard to
the matters contained in the affidavit,
that there are reasonable grounds for
holding that belief.
(4) ...
(5) Where:
(a) the offence concerned is an ordinary
indictable offence; and
(b) the application seeks a restraining
order against specified property of the
defendant;
the court shall not make a restraining order
against the property unless:
(c) the application is supported by an
affidavit of a police officer stating
that the officer believes that:
(i) the property is tainted property in
relation to the offence; or
(ii)the defendant derived a benefit,
directly or indirectly, from the
commission of the offence; and
(d) the court is satisfied, having regard to
the matters contained in the affidavit,
that there are reasonable grounds for
holding that belief.
...
(9) The court may make a restraining order in
respect of property whether or not there is
any risk of the property being disposed of,
or otherwise dealt with, in such manner as
would defeat the operation of this Act.
(10) A court may refuse to make a restraining
order if the Commonwealth refuses or fails to
give to the court such undertakings as the
court considers appropriate with respect to
the payment of damages or costs, or both, in
relation to the making and operation of the
order.
(11) For the purposes of an application under
section 43, the DPP may, on behalf of the
Commonwealth, give to the court such
undertakings with respect to the payment of
damages or costs, or both, as are required by
the court.
(12) An affidavit made by a police officer
for the purposes of this section that states
that the officer believes a particular matter
shall set out the grounds on which the
officer holds that belief."

3. The DPP is the Director of Public Prosecutions (s.4(1)).

4. Section 26 of the Act reads, in part:-

"(1) Where:
(a) an application is made to a court for an
order under this section in respect of
benefits derived by a person from the
commission of an offence; and
(b) the court is satisfied that the person
derived benefits from the commission of
the offence;
the court may, if it considers it
appropriate:
(c) assess, in accordance with section 27,
the value of the benefits so derived;
and
(d) order the person to pay to the
Commonwealth a pecuniary penalty equal
to the penalty amount.
(2) Subject to subsections (3) and (4), the
penalty amount is the value of the benefits
as assessed under paragraph (1)(c)."

5. Sub-sections (3) to (5) inclusive deal with situations not relevant to the circumstances I am considering.

6. Subsection (1) of s.27 reads and subsection (2) of s.27 reads in part as follows:-

"(1) In this section:
'Offence period', in relation to an
application under subsection 14(1) made
in relation to 2 or more offences, means
the period commencing when the earlier
or earliest of those offences was
committed and ending when the later or
latest of those offences was committed.
(2) For the purposes of an application for a
pecuniary penalty order against a person (in
this subsection called the 'defendant'), the
value of the benefits derived by the
defendant from the commission of an offence
or offences shall be assessed by the court
having regard to the evidence before it
concerning all or any of the following:
(a) the money, or the value of the property
other than money, that came into the
possession or under the control of:
(i) the defendant; or
(ii)another person at the request or
direction of the defendant;
by reason of the commission of the
offence or any of the offences;
(b) the value of any other benefit provided
to:
(i) the defendant; or
(ii)another person at the request or
direction of the defendant;
by reason of the commission of the
offence or any of the offences;"

7. By s.5 a pecuniary penalty order is defined to mean an order under subsection 26(1) while penalty amount is defined to mean in relation to a pecuniary penalty order against a person the amount that the person is liable to pay the Commonwealth under the order.

8. The evidence in support of the application is that of William Dalton Jamieson (the informant), a Detective Senior Sergeant of the Australian Federal Police attached to the Australian Capital Territory Command Fraud Squad and therefore a police officer within the meaning of the Act. In paragraph 3 of his affidavit, sworn on 11 February 1988, he deposed that he made that affidavit from his own knowledge and from information which he believed and which had been made known to him by a number of named informants. He deposed further that the respondent has been charged with -

(a) 13 counts under s.29D of the Crimes Act 1914
(Commonwealth) (the Crimes Act) that he in
the Australian Capital Territory defrauded
the Commonwealth by submitting claim for
payment forms in relation to work done by a
company known as Nifty Waste Disposals
Limited containing information he knew to be
untrue;
(b) 14 counts under s.72(c) of the Crimes Act
that he in the Australian Capital Territory,
being a Commonwealth Officer, fraudulently
and in breach of his duty falsified progress
certificates in the name of Nifty Waste
Disposals Limited knowing the said entries to
be false; and
(c) 14 counts under s.73(2) of the Crimes Act
that he received property, namely cash, on
the understanding that the exercise by him of
his duty as a Commonwealth Officer would be
influenced.

9. Copies of each of the informations charging the offences were annexed to the informant's affidavit. He also deposed to his belief that the respondent had committed the offences just referred to and had derived a benefit from their commission. The informant thereafter set out the detailed grounds for those beliefs in paragraphs 8-35 inclusive of his affidavit.

10. Receipt of the cash, said to have totalled $26,350, is alleged to have taken place on dates between 2 April 1986 and 27 March 1987.

11. In his affidavit the informant deposed that on or about 30 January 1986 a company, Nifty Waste Disposals Pty Limited (the Company) of which Gary Henness was a shareholder, director and manager, entered into a contract with the Commonwealth to perform minor concrete work in various suburbs and districts in the Australian Capital Territory. The contract provided that the Company would complete such work as it was directed to do by a superintendent or by a person appointed as the superintendent's representative. It provided for payment to the contractor in accordance with fixed rates provided in respect of a series of categories of work as set out in a schedule of rates incorporated in the contract. At one stage during the procedure a supervisor was required to complete a form known as "Instructions to Contractors" (ITC). The informant stated that many of the ITCs filled in by the respondent were false in that:-

a)the amount of materials supplied or work
performed as cited in the ITC was
greater than the amount measured by
Henness and supplied to the Respondent
as outlined above (ITCs in this category
were referred to as 'exaggerated
ITCs').
b)some ITCs recorded work performed by the
company when no work had been carried
out by the company (ITCs in this
category were referred to as 'fictitious
ITCs').
c)some ITCs recorded work performed by the
company at the direction of the
Respondent which related to work
actually effected at premises of a
number of private individuals known to
the Respondent (this was referred to as
'private work').

12. The informant annexed a number of schedules to his affidavit. The first, Schedule "B", listed 176 ITCs which had been prepared by the respondent and showed first the measurement made by Mr Henness under the heading "Henness" and that recorded on the ITC by the respondent, the latter being in each case greater than the measurement made by Henness. No value is ascribed to the apparent increase between the measurement made by Henness and that made by the respondent. The ITCs in Schedule B were "exaggerated ITCs".

13. Schedule C listed a number of "fictitious ITCs". The amount said to have been paid to the Company in respect of "fictitious ITCs" is $15,693.48.

14. The amount said to have been paid to the Company in respect of "private work" is $11,932.22.

15. In all, $748,137.07 was paid to the Company under the contract.

16. The informant alleged that the respondent arranged with Mr Henness that he would be paid part of the overpayments made to the Company and that usually it was agreed between the two that the amount which the respondent would receive would be approximately 50% of the overpayment. Henness is said to have made payments totalling $26,350.00 to the respondent on 14 occasions. It emerged during cross-examination that of that amount $3,000, said to have been paid on 27 March 1987, was intercepted by the Federal Police.

17. The informant stated that on 27 March 1987 he was present when members of the Australian Federal Police executed a search warrant on premises occupied by the respondent. During the course of that search police found a metal box containing $22,800.00 in $100 notes. Questioned about its ownership the respondent replied, "I don't know, it's Teresa's money; she got it when her father died". The woman Teresa referred to was apparently one Teresa Greczanik. She denied that she owned the money and asserted that it was the respondent's property.

18. The police retained possession of the total of $25,800.00.

19. Cross-examination elicited from the informant his understanding that Mr Henness was prepared to pay to the Commonwealth a sum of money to be determined by the Commonwealth. He did not know whether the sum had been determined but Mr Henness had told him that he had agreed to pay the money. No evidence was led to show that Mr Henness had in fact paid any money to the Commonwealth in respect of the alleged overpayments.

20. At the hearing several challenges were made as to the reasonableness of the informant's holding the beliefs that the respondent had committed the offences charged and derived a benefit directly or indirectly from their commission.

21. In cross-examination it was put to him that Mr Henness, one source of his information and belief, had recently given evidence in proceedings for the committal of the respondent. It was put to him that during the course of that evidence Mr Henness had contradicted in several respects the information he had earlier given the informant, namely,

(a) with regard to the alleged falsity of one
certificate (progress certificate No.1);
(b) in denying a meeting with the respondent and other
departmental officials;
(c) in denying that he and the respondent had certain
conversations explaining how the details on ITC
forms were exaggerated; and
(d) in asserting that there was no arrangement or
agreement between him and the respondent that the
latter would be paid part, apparently
approximately 50%, of any overpayments allegedly
made to Mr Henness.

22. In response, the informant stated that he was aware of a newspaper report of the committal proceedings indicating that Mr Henness had given evidence that he had previously lied. The informant had apparently confirmed with the Director of Public Prosecutions that the charge relating to progress certificate No.1 was still proceeding but otherwise had not sought out a transcript of Mr Henness' evidence at the committal and so was unable to comment on the details of the alleged contradictions. He did, however, agree that he would be concerned if Mr Henness had given evidence which contradicted the information deposed to in his affidavit.

23. Counsel for the respondent submitted that it was unsatisfactory to have facts deposed to in the existence of the uncertainty illustrated by the evidence just referred to and that it was unreasonable for the informant to hold the relevant beliefs upon the grounds deposed to when simple inquiries to check the evidence could have been made before he swore his affidavit.

24. I do not accept that submission. It seems to me that upon their true construction sub-paragraphs (c) and (d) of s.44(5) of the Act require only that the Court be satisfied that, having regard to the matters contained in the police officer's affidavit, there were reasonable grounds for his holding the belief that a defendant derived a benefit directly or indirectly from the commission of an offence. The belief of the police officer is not, in my opinion, to be equated with the view which a committing Magistrate may take of the evidence before him. In my opinion the police officer is entitled to maintain his acceptance of what he had been earlier told notwithstanding the later contradictory evidence. His acceptance of earlier statements notwithstanding later contradictions may amount to reasonable grounds for holding the relevant belief under sub-paragraph (c).

25. Counsel submitted that an object of the Act was to ensure that the recipient of proceeds of a crime should not be required to pay more than the proceeds of the crime in question. He pointed to s.26 and said that that section made it clear that the Commonwealth was not to be the beneficiary of what he described as "double dipping".

26. He also submitted that the order sought ought not to be made against the respondent because of the arrangement apparently entered into between Mr Henness and the Commonwealth. That arrangement, he submitted, was sufficient to ensure that the Commonwealth would not suffer any loss and accordingly relieved the respondent of any Ppossible liability in connection with any overpayments found to have been made.

27. He also submitted that the Commonwealth was in possession of all but $550 of the amount said to have been paid to the respondent.

28. Assuming, without deciding, that the submission concerning "double dipping" is valid (I am inclined to think that it is), I am not satisfied that the evidence shows sufficiently that any arrangement which Mr Henness may have entered into would render it unreasonable and against the public interest to make the order sought on the ground that that arrangement would sufficiently compensate the Commonwealth in respect of any crime which the respondent may be found to have committed.

29. If the allegations made by the informant be correct, the respondent has come into possession of $26,350.00. That money may be taken into account in assessing a pecuniary penalty order under s.27(2) and, it seems to me, may be taken into account in assessing the reasonableness of any order which the Court may be asked to make under s.43. Additionally, the value of the "private work" carried out at the request of the respondent is said to be $11,932.22. That work comes under the heading of benefits allegedly provided to another person at the request or direction of the respondent (see sub-paragraph (b) of s.27(2)) and may also be taken into account in considering any order which may be made under s.43. Additionally, payments made in respect of "fictitious ITCs" are said to have amounted to $15,693.48. It seems clear, if the allegation be proven, that that benefit was provided either to the respondent or to Mr Henness.

30. The informant deposed on information furnished him by Mr Henness and his wife that it was usually agreed between the respondent and Mr Henness that he would receive approximately 50% of any overpayment. On that basis I think I am entitled to draw the inference that Mr Henness is alleged to have received something of the order of $25,000 out of the overpayment. That amount may be taken into account in considering whether I ought to make the order sought.

31. Section 99 of the Act provides that any question of fact to be decided by a Court on an application under this Act is to be decided on the balance of probabilities. I am satisfied that the application under s.43 is in respect of ordinary indictable offences, that it is supported by an affidavit of a police officer stating that he believes that the respondent derived a benefit directly or indirectly from the commission of the offences and that, having regard to the matters contained in the informant's affidavit, there are reasonable grounds for his holding that belief.

32. I deal finally with the submission that the police already have possession of an amount of money approximating that alleged to have been gained as a benefit by the respondent from the commission of crimes against the Commonwealth. Counsel says that in those circumstances it would be unreasonable to make an order such as that sought because there must be some proportion between the amount which may effectively be taken as security for any penalty amount that may in future be made under a pecuniary penalty order.

33. Counsel for the applicant conceded, properly as I think, that there must be some proportion between the amount which may be claimed as a penalty amount and the value of the property in respect of which a restraining order, effectively security for the possible debt, is sought but he pointed to the fact that there was some doubt as to the ownership of the property since the respondent denied ownership. I think it would be unreasonable to make the restraining order sought if the only benefit which the respondent might be found to have received was the sum of $26,350.00. Of that sum the Australian Federal Police have all but $550.00 in their possession. True the respondent has denied ownership of it. But if the charges against him proceed and he is found guilty then it is most unlikely that the money will be found to be other than his money, given the contradictory statements which were made at the time of its discovery. If he is found not guilty, no problem can arise.

34. However, I think that, as I have indicated, there are other alleged benefits to be taken into account and being satisfied on the balance of probabilities that those benefits are substantial, I make the order sought.