Eleven years ago money laundering offences in the Commonwealth Criminal Code were expanded to include dealing with money or property with an intention that the money or property will become an instrument of crime. Prior  to that change, it was only a criminal offence to deal with money or property as proceeds of crime. Recently the High Court in Milne v The Queen [2014] HCA 4 had an opportunity to consider this expansion in the context of dealings with shares. 

Background facts

The accused was the sole director and shareholder of a company called Barat Advisory Pty Ltd (Barat). Barat had a beneficial interest in shares in a publicly listed company, Admerex Ltd. The shares were acquired in April 2004 as repayment of a debt assigned to Barat and had a value of over $2.2m. However, the debt assigned to Barat had been purchased by another company controlled by the accused for $1 and Barat had never paid that company for the assignment. Barat transferred the shares to five off-shore companies in June 2004 but retained beneficial ownership.

In January 2005 the accused made an agreement to exchange the majority of the Admerex shares, then valued at between $8m and $9m, for shares in a Swiss software development company, Temenos Group AG (Temenos), of similar value. Between February and June 2005 the Temenos shares were disposed of and the proceeds deposited in a Swiss bank account. From March 2005 to January 2006 these funds were then transferred to Barat’s account with the Commonwealth Bank of Australia. Barat did not declare the capital gain derived from the disposition of the Admerex shares.

Conviction and grounds of appeal

At trial, pursuant to section 400.3 of the Criminal Code, the accused was convicted of dealing with money or other property of a value of, or exceeding, $1 million with the intention that the money or other property will become an instrument of crime. The accused was also convicted of the crime of general dishonesty. A person is guilty of general dishonesty if the person does anything with the intention of dishonestly obtaining a gain from a Commonwealth entity. The maximum penalty for general dishonesty is 5 years’ imprisonment. However, section 400.3 carries a maximum penalty of 25 years’ imprisonment. The accused appealed against the conviction under section 400.3; first to the Court of Criminal Appeal of New South Wales and subsequently to the High Court. The ground of appeal was that the Court of Criminal appeal erred in its interpretation of the definition of “instrument of crime”.

Decision of the High Court

“Instrument of crime” is defined under the Criminal Code. Money or property is an instrument of crime “if it is used in the commission of, or used to facilitate the commission of, an offence”. The High Court held that the shares were not an instrument of crime because defining them as such would require the Court to give an inappropriate meaning to the term “use”. The Court explained that the disposal of the Admerex shares was a dealing with property for the purposes of section 400.3. However, as those shares were sold to a third party, there was no intended further use for those shares after the dealing for the purpose of the definition of “instrument of crime”.

The decision shows that while hiding money to evade tax is clearly a crime under the Criminal Code, such conduct does not necessarily constitute money laundering for the purpose of the Act. Thus the Commonwealth will need to look at other means to ensure tax evaders are held to appropriate account.