Last month, the Court of Appeal weighed in on an unprecedented proceeds of crime action brought by the Commissioner of Police (Comissioner) against a commercial business convicted for health and safety offences.

Whether the Commissioner can seize assets obtained from this kind of regulatory offending will be determined by the High Court later this year. However, the Court of Appeal found that the Commissioner must undertake to cover any resulting losses suffered by the business if the Commissioner loses that case.

Background

In 2017, SCL and its director, Mr Salter, were convicted of offences under the Health and Safety at Work Act 2015 (HSWA) following the death of a contractor who was welding a tank for SCL. At sentencing, the District Court imposed substantial fines on and orders for reparation against SCL and Mr Salter. Mr Salter was also ordered to serve four and a half months’ home detention. 

In 2019, two years after sentencing, the Commissioner applied to the High Court for orders restraining SCL and Mr Salter from disposing of or dealing with its four property assets (worth $10m), pending action under the Criminal Proceeds (Recovery) Act 2009 (Act).

The Commissioner’s application is the first time where the Act has been applied to health and safety offending by an ordinary commercial business. The criminal proceeds regime targets unlawful gains from ‘significant criminal offending’, characterised by an offence punishable by a maximum term of imprisonment of five years, or from which a person derived a profit of $30,000 or more.

Police typically reserve forfeiture orders in relation to assets or profits derived from money laundering, drug dealing and other significant organised criminal activity. The only health and safety offence which meets the significant criminal activity test by reference to the maximum term of imprisonment is the offence in s 47 of HSWA. This applies when a natural person (i.e. not a corporate defendant or similar):

• has a duty under HSWA; and
• engages, without reasonable excuse, in conduct that exposes any individual to whom a duty is owned to a risk of death or serious injury or serious illness; and 
• is reckless as to the risk to an individual of death or serious injury or serious illness.

This offence is relatively rarely used and reserved for very serious health and safety offending. All other offences under HSWA, including all offences against corporate defendants or similar, are finable only and would only meet the significant criminal activity test if a profit of $30,000 is derived from the offending.

Court of Appeal decision

Whether the assets should be forfeited to the Crown is yet to be determined.

The question on appeal was narrower – whether the High Court correctly ordered the Commissioner to cover any losses sustained by SCL and/or Mr Salter in relation to the restraining orders if the Commissioner is unsuccessful. SCL and Mr Salter sought the undertaking under section 29 of the Act out of concern that the orders could impact the sale price of SCL and hurt SCL’s ability to borrow money.

In dismissing the appeal, the Court of Appeal found that the High Court correctly ordered the Commissioner to give the undertaking. The Court was satisfied that the Salters wanted to sell the business and the restraining orders would likely result in some discount on a sale price.

In making its assessment, the Court of Appeal was required to consider the strength of the Commissioner’s case. It noted that the fact that most of the underlying criminal activity in respect of which the orders were sought was the subject of guilty pleas, which necessarily bears on the strength of the Commissioner’s case, but that it remains for the Commissioner to prove:

• in relation to a profit forfeiture order, that SCL and/or Mr Salter had, during the relevant period of criminal activity, unlawfully benefited from significant criminal activity; and
• in relation to asset forfeiture orders, that the property in question was, wholly or in part, acquired as a result of, or directly or indirectly derived from, significant criminal activity.

Given these are live issues to be established in the High Court proceeding, the Court considered it was inappropriate to go further than starting that “the Commissioner has an arguable case that could result in some sort of forfeiture orders”; noting that this would no doubt be the subject of argument at trial.

Our view and key points for businesses

We welcome the Court of Appeal’s decision – the Commissioner’s undertaking represents an important safeguard against loss to SCL, particularly where the restraining orders are novel and unlikely to be understood by lenders and potential purchasers.

There is still some uncertainty for businesses as to whether this case represents a broadening of the criminal proceeds’ regime to regulatory offences like HSWA breaches. That position will likely not be clarified until the High Court determines the Commissioner’s asset forfeiture application. However, some comfort can be taken from the Court of Appeal’s decision which may deter the Commissioner from taking similar action against commercial enterprises as it raises the stakes if the action is unsuccessful.

We also consider it unlikely that such orders will be considered by the Commissioner except in clear cases. We note in that respect that Mr Salter was sentenced by the District Court to home detention in relation to the underlying offending and, in the course of imposing a substantial fine on SCL, the District Court accepted that its culpability was in the “extremely high culpability range”. In any event, restraint and forfeiture action will only be available either in relation to the recklessness offence referred to above or where there is a causal link between the offending and a profit of more than $30,000 (which will be difficult to establish).

The Commissioner’s application has been tentatively set down for a seven-week trial in the High Court commencing in October 2024. We will be watching with interest and reporting on the decision.

You can read the Court of Appeal’s decision here.

This article was co-authored by Rosa Laugesen, a Solicitor in our Litigation team.