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District Court 8 October 2013

R v Staas (No 3)

[2013] NSWDC 289

DrugsFraud & dishonesty
CRIMINAL LAW PROCEDURE CONFISCATION OF PROCEEDS OF CRIME FORFEITURE ORDER REFUSED DRUG PROCEEDS ORDER SOUGHT DEFENDANT A MIDDLEMAN

Citation: R v Staas (No 3) [2013] NSWDC 289
Court: District Court of NSW
Date: 8 October 2013
Judge: Cogswell SC DCJ

Background

The defendant had previously been sentenced for a series of drug offences. Following that sentencing, the Director of Public Prosecutions brought a notice of motion under the Confiscation of Proceeds of Crime Act 1989 (NSW) seeking two separate orders against him.

The first order sought was the forfeiture of a diamond ring found at the premises where the defendant was arrested. The second was a drug proceeds order requiring him to pay the State $62,000, that being the total amount of cash handed over to him by an undercover police operative across several drug supply transactions.

A third party, the man who had supplied the ring to the defendant, appeared at the hearing represented by counsel. He gave evidence that he had transferred the ring to the defendant on credit, intending to be paid $10,000 within two weeks. The defendant was arrested before that payment was made.

  • Whether the diamond ring constituted "tainted property" under s 18 of the Confiscation of Proceeds of Crime Act 1989, such that a forfeiture order should be made.
  • Whether the defendant had "derived a benefit in connection with drug trafficking" under s 29 of the Act, and if so, what pecuniary penalty reflected the value of that benefit.
  • Whether the court could make any further declaration as to the rightful ownership of the ring in favour of the third-party supplier.

Decision

Forfeiture of the ring refused. The court was not satisfied that the ring was "tainted property," defined under the Act as property substantially derived or realised, directly or indirectly, as a result of a serious offence. The evidence established that the ring had been purchased by the third-party supplier from a jeweller, then provided to the defendant on credit for an agreed price of $10,000 that was never paid. The supplier's evidence was consistent with the recorded telephone conversation and the jeweller's receipt, and the court accepted that no payment had passed from the defendant to the supplier. On those facts, the court could not be satisfied that the ring was derived from the proceeds of the defendant's drug offences.

Drug proceeds order made, but at a significantly reduced amount. The Director sought a pecuniary penalty of $62,000, equivalent to the full sum passed by the undercover operative. The court accepted that the defendant had derived a benefit from drug trafficking, but found that he operated as a middleman. The court's earlier sentencing findings established that the defendant's actual profit was $500 per ounce, with a total profit from the transactions of approximately $3,500. The cash beyond that margin had been passed on to others in the supply chain. The court declined to assess the benefit at $62,000 and made a drug proceeds order reflecting the actual profit derived.

No ownership declaration in favour of the third party. The supplier's counsel sought a finding that his client was the rightful owner of the ring. The court declined, noting that the forfeiture application had been brought against the defendant, not the supplier, and that the court's task was confined to the statutory findings required under the Act. The court indicated that the supplier could draw the transcript of the judgment to the attention of the relevant Commissioner and rely on the applicable provisions of the Act to advance any claim to the property through that route.

Orders Made

• A transcript of the judgment will be taken out and made available to the judge for revision
• Once revised, the associate will pass the transcript to the parties
• The motion is disposed of

Key Takeaways

  • Under s 18 of the Confiscation of Proceeds of Crime Act 1989, a forfeiture order requires the court to be positively satisfied that the property is "tainted property." Where credible evidence establishes a legitimate chain of acquisition, that satisfaction may not be reached.
  • A drug proceeds order under s 29 is assessed by reference to the benefit actually derived by the defendant, not the gross sum that passed through their hands. Where a defendant acted as a middleman, the benefit is the profit retained, not the total transaction value.
  • The District Court declined to make findings about third-party ownership that went beyond what the statutory framework required. The court noted the supplier's potential recourse through other provisions of the Act rather than through a declaration in these proceedings.
  • Prosecution evidence that a defendant "did not appear to hold any legitimate employment" was treated as incomplete where other evidence disclosed insurance payments and bank deposits that had not been investigated.
  • Where a third party appears at proceeds of crime proceedings as an interested party, the court's jurisdiction remains anchored to the orders sought against the defendant. Broader proprietary findings in favour of the third party require a different procedural pathway.

Legislation and Cases Referenced

Legislation:
- Confiscation of Proceeds of Crime Act 1989 (NSW), ss 4(1), 18, 29, 41

Cases:
- R v Brett Staas [2012] NSWDC 287 (the underlying sentencing decision)