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Plead now pay later: Civil consequences of criminal proceedings

Feature Articles

Cite as: October 2012 86 (10) LIJ, p.48

Practitioners advising or representing persons charged with criminal offences must consider the implications of future forfeiture or compensation proceedings before recommending a guilty plea. 

By Nicole Spicer

In Magistrates’ and County Court proceedings significant emphasis is rightly placed on resolution of criminal matters by way of a “negotiated plea”.

Decisions about whether to plead to some or all offences charged, details of any agreed summary of facts on which any plea is based, and the making by the defendant of any admissions or concessions, are all factors which may assume great significance in subsequent civil proceedings.

Defendants should be advised as to their potential exposure to claims for damages, forfeiture, or other civil penalties in addition to sentence, both throughout their criminal proceedings and before confirming their instructions to enter a plea of guilty. This is particularly so where there is real dispute over the factual circumstances of the case, or where there may be a viable defence.

Defendants should also be made aware of orders which can be sought to restrain their property at any time in the proceedings, irrespective of their plea, and what steps they should take in order to avoid the likely forfeiture of property.

Restraining orders

A restraining order obtained under the Confiscation Act 1997 (Vic) (CA) is an order that “no property or interest in property . . . to which the order applies, is to be disposed of or otherwise dealt with by any person in any manner and circumstances . . . specified in the order” (s14).

“Dealing with property” is defined to include repayment of any debt, receiving or making a gift of the property, or using the property to obtain or extend credit.

If there is a “valid reason” for applying for a restraining order, property can be restrained on the application to any court by the Director of Public Prosecutions (DPP).1 A valid reason includes to “satisfy a forfeiture order” or to “satisfy any order for restitution or compensation which may be made under the Sentencing Act [1991 (Vic)]”.

Restraining orders typically restrain bank accounts, real property, shares, cash, and jewellery believed to be in the “effective control” of the accused person.

As well as restraining property suspected of being proceeds of crime, restraining orders are frequently imposed to protect assets and money in relation to sexual offences and offences where the complainant(s) are likely to seek compensation under s85B of the Sentencing Act on the conviction of the accused person.2 Importantly, a restraining order can be imposed well before any conviction has been obtained, and often before the trial process has commenced.

The application for a restraining order is made ex-parte and property owned or possessed by persons other than the accused – often family members not charged with nor suspected of committing any offence – can also be restrained.

Property in which the defendant has an interest is specifically defined under s10(a) of the CA to include property that is under the “effective control” of the defendant or, even more broadly, any property that was the subject of a gift from the defendant to another person within six years before the application for a restraining order.3

While a restraining order is a “means to an end”, designed to preserve property for the specified purposes, the mere fact of its imposition can result in significant hardship for the person(s) whose property is restrained. Application can be made to release funds for “reasonable living and business expenses”, but the process can be convoluted and difficult.

Importantly for many defendants, once funds have been restrained they cannot be released to pay for legal expenses. This can significantly impact on a defendant’s ability to defend themself against serious allegations. An application for legal aid can be made in certain circumstances under s143 of the CA, but this can necessitate a change in legal practitioners if the defendant has previously been privately funded.

Exclusion applications

When property is restrained, any person with an interest in the property can apply to the court to have it “excluded” from the restraining order under s20 of the CA. This involves the applicant satisfying a series of specified tests as to the legitimacy of the use and acquisition of the property.

Critically, the exclusion application must be made within 30 days after the restraining order has been served. This time limit can be extended on application if it is “in the interest of justice”.

The importance of making a timely application for exclusion of property from a restraining order cannot be overstated. Automatic forfeiture applies to all restrained property rather than, as is often mistakenly believed to be the case, only to property that is directly connected with the criminal activity.Once property is excluded from the restraining order it is no longer available to satisfy any orders for compensation or forfeiture, or a pecuniary penalty order (PPO – see below).

Property which would otherwise satisfy the tests for exclusion can now in some circumstances be deemed to be “tainted” by virtue of recent amendments to the CA allowing for “property substitution” (Divison 3, Part 3 CA).

The final determination of the exclusion application is often stayed until the conclusion of the criminal proceedings. The restrained property is not available for any purpose until the exclusion application has been finalised.

Forfeiture

Forfeiture of property can be automatic, or on application of the DPP.

The most draconian is automatic forfeiture, whereby all restrained property is automatically forfeited 60 days after conviction for an “automatic forfeiture offence”. The entering of a plea of guilty at arraignment is regarded as the date of conviction, and the 60 days starts running from that date. In cases of automatic forfeiture, there is no provision for “hardship” or “ordinary use” considerations.

In order to properly advise their clients of potential liability practitioners should familiarise themselves with the offences that trigger automatic forfeiture on conviction. These are listed in Schedule 2 of the CA, and include serious drug offences and serious dishonesty offences.

Schedule 1 or “forfeiture offences” includes specified offences, but importantly also “any indictable offence under State law”.

On conviction of a “forfeiture offence”, an application can be made by the DPP to forfeit property that is “tainted”. The relevant definition of “tainted” is that the property in question “was used, or was intended to be used in, or in connection with, the commission of the offence”.

In the case of simple forfeiture, a party seeking exclusion of property can argue that loss of the property will cause hardship and that a portion of the forfeited property should be returned to the person seeking exclusion. The court may also give consideration to the “ordinary use” of the property.

Where a person is not charged with any offence, or is acquitted of all offences, the DPP may still successfully apply for civil forfeiture.

Sentencing and forfeiture

In sentencing an offender, the court cannot disregard the prospect or likely prospect and impact of forfeiture of “lawfully acquired property”.4 The offender must present “credible material” to identify the lawful origins of the property, and the determination is on the balance of probabilities.5

The mere possibility of automatic forfeiture can be taken into account in sentencing, despite the likelihood that the property may successfully be excluded.6 The subsequent forfeiture of lawfully acquired property after sentence can amount to fresh evidence for the purpose of appeal proceedings.7

Pecuniary penalty orders

Within six months of a defendant’s conviction, the DPP may apply for a PPO, in which the defendant is ordered to pay “the value of the benefits derived by the Defendant in relation to the offence” (ss68–74 CA).

The assessment of the benefit includes “any money actually received as a result of the commission of the offence, regardless of the expenditures incurred in deriving that money” (s67(1)(aa) CA). Importantly, the application is determined on a civil standard of proof, and the assessment of the benefits is not necessarily limited by any amount negotiated for the purposes of the plea.

The PPO can also include profits accrued to the defendant from a media depiction of the offence (s67(d) CA).

The imposition of a PPO can amount to a substantial financial burden on an individual. Even if the individual’s restrained property can be proved to have been lawfully acquired, and not connected with any criminal offending, the property may still end up being required for payment of the PPO. Any unpaid amount of the PPO becomes an enforceable civil debt.

Commonwealth confiscation proceedings

Criminal offences under commonwealth legislation attract potential proceedings under the Proceeds of Crime Act 2002 (Cth) (POCA).

This legislation also has a regime for the obtaining of restraining and freezing orders, and forfeiture and pecuniary penalty orders, as well as “literary proceeds” provisions.

Proceedings under this Act have historically been less numerous than those under the state confiscation provisions; however this may change with the recent creation of a Proceeds of Crime Litigation Division of the Australian Federal Police. Three significant differences from the state confiscation regime should be borne in mind:

1. Before property can be excluded from a restraining order or from forfeiture, the Commonwealth DPP has the right to require the applicant to undergo a compulsory examination about their financial circumstances (s32(6) POCA).

2. Forfeiture of restrained property will occur six months after conviction, irrespective of whether exclusion or other proceedings are in process, unless an extension has been sought and granted (s92(1)(3)(a) POCA).

3. In many instances an order for forfeiture will not be affected by an acquittal or quashing of a conviction (s80 POCA, re forfeiture under ss47 and 49).

Sentencing Act compensation

Section 85B of the Sentencing Act 1991 (Vic) (SA) provides that:

“If a court finds a person guilty of an offence it may, on the application of a person who has suffered any injury as a direct result of the offence, order the offender to pay compensation of such amount as the court sees fit”.

The application for compensation must be made within 12 months after the finding of guilt, and is considered part of the sentencing process.

Any amounts awarded can include compensation for “pain and suffering experienced by the victim as a direct result of the offences”, past and future medical and counselling expenses, and “some or all of any other expenses actually and reasonably incurred by the victim as a direct result of the offence” (s85B SA).

The definition of injury includes: “mental illness or disorder or an exacerbation of a mental illness or disorder, whether or not flowing from nervous shock” as well as “grief, distress, trauma or other significant adverse effect” (SA s85A(1)(b) & (d)).

Past awards for compensation of victims for “pain and suffering” and the types of “psychological injury” referred to above have ranged from thousands to hundreds of thousands of dollars.

The financial circumstances of the defendant can be taken into account by the sentencing judge in determining the quantum of any award. Remorse, delay, cooperation and personal background are not relevant in the determination of the compensation order.

Once a compensation order is made, any restrained property can be used to satisfy such an order. The payment of compensation takes priority over forfeiture.

Common law damages

An award of compensation under the SA does not affect the right of a complainant to bring civil proceedings.

Defending a civil claim with respect to a “criminal injury”, where a defendant has previously pleaded guilty to an offence in another court or tribunal with respect to the same incident, is fraught with difficulty.8

Civil proceedings for “criminal injuries” may be pursued in circumstances where for example the “injury” does not become apparent until some years after the (alleged) offence has concluded. This is often the case in sexual abuse cases, particularly where there is a diagnosis such as “post-traumatic stress disorder”, or where the complainant claims to have repressed any memory of the abuse.

In claims for damages relating to a personal injury arising from a “breach of duty of care” causing a “disease or disorder”, the complainant has a time limit of three years to take legal action from the time that they first knew that (a) they had suffered those personal injuries; and (b) that those personal injuries were caused by the breach of duty of care of the person being sued. That time is extended to six years where the complainant was under “a disability”.

The person seeking compensation also has the ability to apply to the court to extend the time for making a claim where it is “just and reasonable to do so” (s23A Limitation of Actions Act 1958 (Vic)). Consequently, defendants in criminal proceedings may remain vulnerable to a claim for damages against them for many years following the conclusion of those proceedings.

Common law claims can include facts and circumstances beyond those found proven in the criminal courts. The lower standard of proof in the civil jurisdiction can result in a very different result from that in the criminal courts.

Conclusion

It is incumbent on criminal law practitioners to consider and advise defendant clients of the range of quasi-criminal and civil proceedings which may be initiated during a criminal investigation or prosecution, as well as after the determination of the criminal proceedings. Such proceedings can have a very significant financial impact.

Readers will be familiar with the OJ Simpson case in the United States, in which a civil action against the defendant resulted in a judgement that he pay 33.5 million dollars for the “wrongful death” of two individuals, even though he had previously been acquitted in the criminal courts of their murders. The prospect of a similar outcome is now a reality for defendants facing criminal charges in Victorian courts.



NICOLE SPICER has extensive experience in criminal law as a solicitor and advocate and is an LIV accredited specialist in criminal law. She is principal of Spicer Lawyers, which has a particular focus on confiscation proceedings and litigation arising from criminal proceedings.

1. Or application by the Chief Commissioner of Police to the Magistrates’ or Children’s Court.

2. For compensation for “criminal injuries” sought other than pursuant to the provisions in the Sentencing Act (1991), assets are restrained by application by the plaintiff in the proceedings for a Mareva injunction or “freezing order”.

3. The six-year time limit for the making of the gift does not apply for a restraining order sought for automatic forfeiture.

4. Sentencing Act s5(2A)(ab).

5. R v Mcleod [2007] VSCA 183.

6. Filopovic & Gelevski v R [2008] VCSA 14.

7. Rajic v R [2011] VSCA 51.

8 . For example, in McCracken v Melbourne Storm Rugby League Football Club Ltd [2007] NSWCA 353, the trial judge was held to have validly concluded that a plea of guilty by two rugby league players to “making a dangerous throw” in earlier disciplinary proceedings indicated an acceptance on their part that each did not exercise “reasonable care”.

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