CHAPTER 2
KEY ISSUES
2.1
Submitters and witnesses commented on issues relating to the amendments
proposed in both Schedules 1 and 2 of the Bill.
Schedule 1 – amendments to the Proceeds of Crime Act 2002 (POC Act)
2.2
Submitters expressed views on several issues in relation to Schedule 1, relating
to: judicial discretion in making unexplained wealth orders; the removal of the
ability for legal fees to be paid out of restrained assets; and enabling the
seizure of things relevant to unexplained wealth proceedings.
Removing judicial discretion
regarding the making of unexplained wealth orders
2.3
The Law Society of South Australia expressed concern at the removal of
judicial discretion about whether to make restraining orders, preliminary
unexplained wealth orders and unexplained wealth orders once relevant criteria
are established:
The amendments compel a judicial officer to make orders
sought by the applicant for an order. This is a fundamental inroad on judicial
independence...[A] court may have good reason to decline to make an order. In
those cases where it does, reasons for declining will be given. If the reasons
are not acceptable to the State the decision may be appealed or reviewed.
Viewed in this light, there can be no proper justification for the removal of
the judicial discretion.[1]
2.4
Dr David Neal SC, from the Law Council of Australia (Law Council), also
expressed concern about removing judicial discretion in the area of unexplained
wealth proceedings:
[U]nlike other provisions in this legislation, where the
prosecution would have to establish a link between these proceeds and some
criminal activity, the criterion for unexplained wealth—as the term
'unexplained' carries with it—is a very nebulous sort of a concept, much
broader than the other concepts such as: 'This is the proceeds of crime or it
is in some way tainted'. That vagueness seems to us to argue in favour of the
use of the word 'may', where there is a broader range of discretions, to avoid
the situation where some unanticipated injustice might be worked.[2]
2.5
Conversely, the Police Federation of Australia (PFA) and the Australian
Federal Police Association (AFPA) expressed support for this measure, deeming
it appropriate that unexplained wealth proceedings be brought into line with
other kinds of proceedings under the POC Act.[3]
Use of the terms 'in the public
interest' and 'in the interests of justice'
2.6
Liberty Victoria stated that, while some discretion has been removed, it
'takes comfort that the safeguards remain that orders must be in the public
interest and in the interests of justice'.[4]
The Queensland Council for Civil Liberties (QCCL), however, noted that the term
'public interest' is not defined, and argued that the safeguard for the courts
to refuse to make an order 'in the public interest' is insufficient.[5]
2.7
The Law Council raised additional concerns regarding the use of the
terms 'in the public interest' and 'in the interests of justice' in the
discretion retained by courts in relation to unexplained wealth orders.[6]
The Law Council noted that these two terms are used inconsistently across the
different types of orders in the unexplained wealth provisions of the POC Act,[7]
and argued that their inclusion may be 'insufficient to avoid injustices' due
to these inconsistencies:[8]
These different tests, which will assume increased
significance in the absence of a general discretion to refuse to make the
relevant orders, invite confusion and litigation about the scope of the court's
authority to refuse to make an order or to revoke an order in difficult or
unusual circumstances. They create the possibility that a person contesting an
application may be more limited in their ability to resist the order sought,
than a person seeking to revoke the order after it has been made. Further, they
create the possibility that a court may be compelled to make an order first,
before it can then consider whether such an order is in the 'interests of
justice'.[9]
2.8
The Law Council suggested that the Bill should be amended such that an
'interests of justice' test or a combined 'interests of justice' and a 'public
interest' test be adopted uniformly across the unexplained wealth provisions.[10]
2.9
The Department argued for the retention of both terms in the POC Act as
currently envisaged under the Bill, noting that the 'public interest' test is
used in several places across the POC Act in relation to making certain orders,
while the 'interests of justice test' is used in relation to revoking certain
orders.[11]
The Department explained that it is 'appropriate to retain references to
both tests as they involve different considerations', and that the 'interests
of justice' test ensures that a court has regard to matters which are relevant
to the administration of justice when considering a revocation application.[12]
Removing the courts' discretion to
allow legal expenses to be paid out of restrained assets
2.10
The PFA and the AFPA expressed support for these amendments, stating its
view that assets subject to unexplained wealth restraining orders should not be
able to be used to pay legal expenses.[13]
Several other submitters and witnesses, however, expressed opposition to these
proposed amendments.[14]
Effectiveness of the current
provisions
2.11
The EM offers the following rationale for the removal of an individual's
ability to meet legal expenses through restrained assets:
The ability of a person to dispose of restrained property to
meet their legal costs weakens the effectiveness of the unexplained wealth
provisions by allowing the wealth suspected to have been unlawfully acquired to
be used to contest proceedings. This may lead to fewer assets being available
for confiscation if an unexplained wealth order is successful and is likely to
cause more protracted litigation.[15]
2.12
The Law Council contested the assertion that the current ability of the
courts to make orders for legal costs to be paid from restrained assets
undermines the effectiveness of the unexplained wealth provisions in the POC
Act. It argued that, as the current provisions relating to legal costs are yet
to be tested (having only been introduced to the POC Act in 2010), there is no
evidence that they do, in fact, have the effect of shrinking the asset base
which could otherwise be drawn from in making an unexplained wealth order.[16]
2.13
The Law Council also noted that individuals are not automatically
entitled to use restrained assets to pay legal costs under the current system,
because:
- a person will only have access to their restrained assets to meet
legal costs where the court so orders;
-
the court may require that a costs assessor certify that legal
expenses have been properly incurred before permitting the payment of expenses
from restrained funds, and may make any further or ancillary orders it considers
appropriate; and
- where an unexplained wealth order is made against a person which cannot
be completely met from restrained assets because some of those assets have been
released to meet legal expenses, the Commonwealth can still pursue the person
who is subject to the order for any remaining amount.[17]
2.14
The Law Council argued that a court is 'highly unlikely' to make an
order allowing legal costs to be paid from restrained assets where it can be
demonstrated that a person has the ability to meet their expenses from
unrestrained assets.[18]
Harmonisation with other kinds of
proceedings under the POC Act
2.15
The EM states that this amendment 'will harmonise provisions relating to
the payment of legal expenses for unexplained wealth cases with those for other
proceedings under the POC Act'.[19]
The Law Council argued that such harmonisation is unnecessary, as unexplained
wealth proceedings have a number of unique features, including a lower
threshold before an individual's assets can be restrained, and a reverse onus of
proof:
There is no move to harmonise the thresholds that must be met
before assets may be restrained for different types of proceedings under the [POC Act]
or to harmonise the matters of which the court must be satisfied before
different types of final orders are made. Such a move towards harmonisation
within the [POC Act] would be illogical because the different types of
proceedings are directed towards different circumstances and scenarios. So too,
it is also misguided to suggest that the provisions relating to the payment of
legal expenses should be harmonised when they relate to different types of
proceedings, which place respondents in different positions.[20]
Access to appropriate
representation
2.16
The EM states that people who are subject to POC Act proceedings may
seek legal representation through legal aid if their unrestrained assets are
not sufficient to meet legal costs, to 'ensure that they are appropriately
represented, are not disadvantaged and continue to be equal before courts and
tribunals'.[21]
2.17
Submitters argued that despite potential access to legal aid services,
individuals may in many cases be unable to mount an appropriate defence in
unexplained wealth proceedings, and may have their choice of legal
representative inappropriately limited. For example, the Law Council argued:
Proceeds of crime litigation can be complex, and significant
resources are expended by the law enforcement agencies in identifying targets,
gathering evidence and preparing a matter for court. To contest such
proceedings, respondents must also expend resources, including potentially on
their own expert witnesses. However, respondents reliant on legal aid may find
themselves unduly restricted in this regard.[22]
2.18
Dr Neal from the Law Council elaborated at the committee's public hearing:
The idea that there is any genuine equality in saying that
these people can depend on legal aid to run litigation of this complexity is
really not confronting the reality of life in the courts at this stage...It is
just unrealistic to think that the cases which have commercial and financial
complexity to them can be done within the confines of legal aid rates. And
given the nebulous nature of the unexplained wealth provisions, it seems
particularly unreasonable to say: 'Your asset base is suspicious. We're going
to stop you from using any of it to prove that it's not.'[23]
2.19
QCCL agreed, arguing that proceedings involving asset confiscation are
often very time-consuming and complex, and require 'a higher level of skill
than might otherwise apply in civil litigation'.[24]
2.20
Dr Neal also argued that many respondents may not meet the relevant
legal aid means test in order to qualify for legal aid, yet still not have
enough unrestrained assets to mount a proper defence:
The legal aid means tests are so low in a number of
jurisdictions that, for instance, in New South Wales, the poverty line is the
cut off for legal aid. There will be numbers of these people who, if they have
some assets left, simply will not qualify for legal aid but certainly would not
have sufficient assets to defend or run the proof of how they came by all of
this money.[25]
2.21
Liberty Victoria argued that in cases where legal aid is not granted,
respondents may become self-represented, at 'a significant cost to the
resources of the Courts and to taxpayers'.[26]
Consequently, Liberty Victoria argued that the amendments in the Bill 'may
actually result in more cost being incurred to the public due to the limited
and valuable resources of the Legal Aid Commission and the Courts'.[27]
2.22
Finally, the Law Council noted that, as legal aid costs incurred in the representation
of individuals whose property is restrained are reimbursed from the
Commonwealth's Confiscated Assets Account, the revenue gained by proceeds of
crime is still diminished in the model proposed by the Bill.[28]
Departmental response
2.23
The Department made several points in response to the concerns raised by
submitters and witnesses about removing the courts' discretion. It noted that
the rationale for removing the ability to use restrained assets is not 'harmonisation
for harmonisation's sake', but rather is based on lessons learned from the
experience of the Proceeds of Crime Act 1987 (POC Act 1987):
Under the original [POC Act 1987], restrained assets could be
accessed for the purposes of meeting legal expenses...In essence, defendants
would actively frustrate [proceeds of crime] proceedings, either through
frivolous or unreasonable legal defences to dissipate restrained funds, or using
legitimate avenues to reclaim the restrained assets (using money laundering
type practices)...[T]he amendments [in the Bill] are intended to ensure that the
experience in proceeds of crime proceedings from 1987 to 2002 is not replicated
in proceedings for unexplained wealth matters.
To date, no unexplained wealth proceedings have been
commenced. As such, it is not possible to point to cases in which
respondents have sought to dissipate restrained assets to meet the costs of
legal expenses related to [POC Act] proceedings. However, there is clear
evidence that similar provisions were abused under [the POC Act 1987] and there
is nothing to suggest that similar dissipation of assets will not occur under
the unexplained wealth provisions.[29]
2.24
The Department also argued that unexplained wealth proceedings are not,
in fact, fundamentally different to other proceedings under the POC Act,
pointing out that several other types of proceedings under the POC Act, such as
proceedings where a person suspected of committing a serious offence has their
assets restrained, also place the onus of proof on the respondent in relation
to restrained property.[30]
2.25
Further, retaining the ability for legal costs to be met from restrained
assets may affect whether unexplained wealth proceedings can be brought forward
at all:
[T]he ability to use restrained assets to meet a person's
legal costs is a significant deterrent to the use of the unexplained wealth
provisions, as it is necessary to take into account that a large proportion of
the restrained assets may be dissipated prior to their confiscation in deciding
whether it is in public interest to commence proceedings.[31]
2.26
In relation to whether respondents would have their choice of legal
representation restricted, a representative from the Department noted that
similar concerns had been raised about other proceeds of crime proceedings:
[I]nitially, with proceeds of crime, restrained assets could
be used to fund legal expenses, and people justified that by saying it would be
unfair if people were not allowed to choose their own legal representatives and
to defend themselves to the full extent of their assets...[T]he experience has
been that the ability of people to defend themselves in proceeds of crime
actions has been ample and sufficient and adequate under the [current] legal
aid arrangements...[W]e have seen those concerns before with respect to proceeds
of crime and they have not actually been borne out in practice.[32]
2.27
The Department also highlighted that the Parliamentary Joint Committee
on Law Enforcement (PJC-LE) inquiry into unexplained wealth arrangements had examined
other options for dealing with the payment of legal costs in unexplained wealth
proceedings, including: the introduction of a cap on fees for legal costs in
those proceedings; and making greater use of independent cost assessors.[33]
The PJC-LE ultimately recommended that the model proposed in the Bill should be
adopted.
Allowing officers to seize things
relevant to unexplained wealth proceedings
2.28
Submitters and witnesses commented on the proposed amendments to the POC
Act that would allow officers to seize things relevant to unexplained wealth
proceedings when carrying out a search warrant. The PFA and the AFPA supported
these provisions, as recommended by the PJC-LE.[34]
2.29
The Law Council, however, argued that these powers are too broad:
[U]nexplained wealth proceedings essentially concern the
entirety of a person's financial affairs over their lifetime. There is no
aspect of a person's income, expenditure, investments and business dealings
(and potentially that of their family and close associates) which is not of
possible relevance...[T]he amendments in their current form will mean that there
are no practical limits placed on the type of information that may be seized in
the course of executing a search warrant under the [POC Act].[35]
Schedule 2 – amendments to the Criminal Code Act 1995 (Criminal
Code)
2.30
Submitters that commented on Schedule 2 of the Bill were generally
supportive of the new firearms offences created by the proposed amendments.[36]
2.31
The NSW Government commented on two issues relating to the four
aggravated firearm trafficking offences proposed in the Bill.
Threshold number of firearms or firearm
parts for aggravated trafficking offences
2.32
The NSW Government argued in its submission that the thresholds for the
new aggravated firearm offences created by the Bill (trafficking of 50 or more
firearms or firearm parts within a six-month period) should be significantly
lowered to ensure that prosecutions can be made under these offences:
In prosecutions commenced for the ongoing sale of firearms in
NSW since 2008, the maximum number of firearms involved was 25, and the average
was seven. These were sold over a period of twelve months, rather than six
months. None of these cases would have been captured as an aggravated offence
under the proposed new Commonwealth provisions.
NSW is concerned that, unless the threshold for aggravated
offences is set at a substantially lower level than 50 firearms, the provisions
may not result in any prosecutions. The period should also be extended from six
months to 12 months to ensure that the offence captures serious cases.[37]
2.33
The EM notes that the threshold quantity of 50 firearms or firearm parts
'represents a significantly higher threshold than those in existing State or
Territory offences, reflecting the severity of the penalties proposed' (life
imprisonment).[38]
2.34
At the committee's public hearing, a departmental representative
explained the rationale for including a six-month time period for the
aggravated offences, and stated that this period could potentially be extended:
Six months is aimed at capturing a process where someone
seeks to structure what they are doing—the trafficking arrangement—where they
are sending small consignments on a regular basis. Six months would be
sufficient to capture a number of shipments through international cargo
channels, for example. So, if someone is engaged in this behaviour, six months
should be adequate to prove the offence, but it could always be extended to 12
[months].[39]
2.35
Customs expressed the view that the six-month time period is
appropriate:
The inclusion of a six-month period for the accumulation of
firearms or parts of firearms to make up the 50 or more threshold seems reasonable
given the severity of the penalties proposed for the aggravated
offences...It is essential that these offences only apply to serious
examples of offending.[40]
Formulation of aggravated
trafficking offences – number of firearm parts
2.36
The aggravated offences will apply where it can be shown that the
individual has been involved in the trafficking of either:
(i) 50 or more firearms;
(ii) 50 or more firearm parts that might be used to constitute one or more
firearms;
(iii) a combination of firearms and firearm parts such that the sum of the
actual firearms and the firearms that might be constituted by the parts is 50
or more.[41]
2.37
The NSW Government expressed concern about this formulation:
As the Bill is currently drafted, it appears possible for a
person who commits a trafficking offence involving parts which combine to make
up only a few whole firearms to face the same penalty as someone who commits
the same offence involving 50 whole firearms.
...Subsection (ii) could...apply a much lower threshold than
subsection (i) in terms of numbers of whole firearms. This inconsistency is
undesirable and could result in outcomes which are disproportionate to the
criminality involved.[42]
2.38
A departmental representative provided the reason why the Bill has been
drafted in this way:
It is drafted with an emphasis on parts of firearms being
treated as parts that could constitute a firearm. For example, if someone sends
through 50 barrels of firearms, that can actually constitute 50 firearms
in itself.
[I]t is 50 firearms, 50 parts of firearms or a combination of
parts and whole firearms that could constitute 50 or more firearms...[T]hat is
drafted by the Office of Parliamentary Counsel; we worked with them in the
drafting and we believe that it is unambiguous.[43]
Committee view
2.39
The committee considers that the Bill contains a reasonable set of
measures to assist the fight against serious and organised crime in Australia. The
committee's specific comments on the proposed amendments are as follows.
Amendments to the Proceeds of Crime
Act 2002 (POC Act)
2.40
The committee supports the proposed amendments to the POC Act in
relation to unexplained wealth proceedings. The committee notes that these
legislative amendments implement the recommendations of the Parliamentary Joint
Committee on Law Enforcement (PJC-LE), which examined these issues at length in
its report into the Commonwealth's unexplained wealth legislation and
arrangements.
2.41
In relation to removing the courts' discretion to make orders in cases
where the unexplained amount is over $100,000, the committee considers that the
safeguards retained in the Bill are sufficient to warrant this measure's
inclusion in the POC Act. These safeguards include the court's initial function
in determining whether the relevant criteria have been satisfied to make an
order, as well as the ability of a court to refuse to make an unexplained
wealth order or restraining order where it is not in the public interest, and
to revoke a restraining order or preliminary unexplained wealth order if it is
in the interests of justice to do so.
2.42
The committee is also satisfied with the approach proposed in the Bill
to remove the ability for legal fees to be paid out of restrained assets, which
will make the treatment of legal fees consistent across the POC Act. The
committee has not received any evidence from Legal Aid Commissions that the
existing arrangements in relation to other proceeds of crimes matters are
unsatisfactory, and considers that the potential for the dissipation of
restrained funds in unexplained wealth proceedings, as occurred in similar
types of proceedings under the POC Act 1987, should be removed.
2.43
The committee agrees with the policy decision to enable the seizure of
things relevant to unexplained wealth proceedings in the execution of a search
warrant, where this has been approved by a magistrate. While this may enable a
range of materials to be seized in some circumstances, the committee is of the
view that this is appropriate due to the serious nature of the activity
unexplained wealth measures are designed to target.
2.44
Having stated its support for these proposed changes, the committee
acknowledges that unexplained wealth provisions are still new in Commonwealth
law, and hence require close monitoring in the coming years to ensure that they
are operating effectively. Under the changes proposed in the Bill, the PJC-LE
will have ongoing oversight of the operation of unexplained wealth provisions
in the POC Act. The committee considers that this oversight should ensure
that any issues that arise in relation to the operation of the legislation are
swiftly brought to the attention of the parliament.
Amendments to the Criminal Code
2.45
The committee is supportive of the measures included in the Bill to
create stronger penalties for trafficking in large numbers of firearms or
firearm parts. The committee agrees that, given the severity of the penalties
associated with the new proposed aggravated offences, a high threshold needs to
be set in order to trigger these offences. As such, the committee considers
that 50 firearms or firearm parts over a six-month period seems reasonable.
2.46
The committee is satisfied with the Department's evidence that the
drafting relating to the number of firearms or firearm parts has been carefully
considered, and agrees with the approach taken in the Bill.
Recommendation 1
2.47
The committee recommends that the Senate pass the Bill.
Senator Trish Crossin
Chair
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