LEASK v COMMONWEALTH OF AUSTRALIA

Judges: Brennan CJ
Dawson J
Toohey J
Gaudron J
McHugh J

Gummow J
Kirby J

Court:
Full High Court

Judgment date: 5 November 1996

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Gummow J

A Justice of the Court has reserved for consideration of the Full Court the following question:

``Is section 31(1) of the Financial Transaction Reports Act 1988 a valid law of the Parliament of the Commonwealth?''

Section 51(xii)

The plaintiff denies and the Commonwealth asserts that s 31(1) of the Financial Transaction Reports Act 1988 (Cth) (``the Act'') is supported by s 51(xii) of the Constitution. This provides that the Parliament shall, subject to the Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to:

``Currency, coinage, and legal tender.''

^[136] In addition, specific provision for the issue of paper money is made by s 51(xiii). This confers legislative power with respect to: ``Banking, other than State banking; also State banking extending beyond the limits of the State concerned, the incorporation of banks, and the issue of paper money.'' Section 115 is directed to the States. It reads: ``A State shall not coin money, nor make anything but gold and silver coin a legal tender in payment of debts.''

The Commonwealth also seeks to characterise s 31(1) as a law with respect to taxation, within the meaning of s 51(ii) of the Constitution. In my view, the law is supported by s 51(xii) and it is unnecessary to consider whether it also is supported by s 51(ii).

Section 8(1) of the Currency Act 1965 (Cth) (``the Currency Act'') states that the monetary unit, or unit of currency, of Australia is the dollar; s 9(1), so far as is material, requires every transaction, dealing, matter or thing relating to money or involving the payment of, or a liability to pay, money to be made, executed, entered into or done according to the currency of Australia, unless the currency of some other country is used; and s 11(1) requires that every payment, unless made according to the currency of some other country, be made according to the currency of Australia.

Section 16 of the Currency Act treats as legal tender a tender of payment in coins issued thereunder. Section 36(1) of the Reserve Bank Act 1959 (Cth) (``the Reserve Bank Act'') renders Australian notes issued pursuant to Pt V (ss 32-45) of that statute, and other statutes (s 32), legal tender throughout Australia. ^[137] Section 36(1) is a valid law of the Commonwealth: Re Skyring's Application (No 2) (1985) 59 ALJR 561 ; 58 ALR 629 .

The Financial Transaction Reports Act 1988 (Cth)

Before turning to s 31(1) of the Act, it is appropriate briefly to refer to certain other provisions. There is established by s 35 an agency by the name of the Australian Transaction Reports and Analysis Centre (``AUSTRAC''). Part II of the Act (ss 7-17H) imposes obligations to make to the Director of AUSTRAC various ``transaction reports''.

In particular, s 7 obliges a ``cash dealer'' who is a party to a ``significant cash transaction'' to prepare a report of the transaction and communicate the information contained in the report to the Director of AUSTRAC, unless, to put it shortly, the cash dealer is ``an approved cash carrier'' declared as such by the Director under s 8, or the transaction is an ``exempt transaction''. Detailed provision is made in respect of exempt cash transactions by ss 9-13. The phrase ``cash dealer'' bears the meaning spelled out in pars (a)-(n) of the definition in s 3(1). In particular, it includes a financial institution (being a bank, building society or credit union), an insurer, a securities dealer, a futures broker, a bullion dealer, a person who operates a gambling house or casino, a bookmaker and an operator of a totalisator betting service.

The report required by s 7 must contain the ``reportable details'' which are specified in Sched 1 to the Act. These include the nature and date of the transaction and details of each person conducting the transaction with the cash dealer or on whose behalf the transaction was conducted, together with the type and identifying number of any account with the

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cash dealer affected by the transaction and the total amount of currency involved in the transaction.

The term ``cash transaction'' is of primary significance for this case. It is defined in s 3(1) as meaning a transaction involving ``the physical transfer of currency from one person to another''. A ``significant cash transaction'' is a cash transaction ``involving the transfer of currency of not less than $10,000 in value''. The term ``currency'' is defined as follows in s 3(1):

```currency' means the coin and paper money of Australia or of a foreign country that:

• (a) is designated as legal tender; and
• (b) circulates as, and is customarily used and accepted as, a medium of exchange in the country of issue.''

One of the functions given by s 38(1) to the Director of AUSTRAC is the provision of advice and assistance to the Commissioner of Taxation in relation to information obtained by the Director under the transaction reporting provisions of the Act.

Section 4 of the Act states:

``(1) The principal object of this Act is to facilitate the administration and enforcement of taxation laws.

(2) A further object of this Act is to facilitate the administration and enforcement of laws of the Commonwealth and of the Territories (other than taxation laws).''

The phrase ``taxation law'' is given by s 3(1) the same meaning as it has in s 2 of the Taxation Administration Act 1953 (Cth). This includes any statute of which the Commissioner of Taxation has the general administration.

Regard is to be had to the statement of principal object in s 4 when resolving issues of construction ( Acts Interpretation Act 1901 (Cth), s 15AA). But s 4 does not mean that the validity of the legislation cannot be supported by any other available head of legislative power. Doyle CJ pointed this out in Rogers v The Queen . <sup>[138]</sup> (1995) 64 SASR 280 at 286.

I return to the provision in contention, s 31(1). In broad outline, it resembles the United States provision, 31 USC § 5324, introduced as part of the Money Laundering Control Act of 1986 , <sup>[139]</sup> Pub L 99-570, Title I, Subtitle H, § 1354(a). The provision was construed by the Supreme Court in Ratzlaf v United States (1994) 126 L Ed (2d) 615; 16 F (3d) 1078 , and then amended by Pub L 103-325, Title IV, § § 411, 413. but no assistance for present purposes is to be derived from consideration of that law. Section 31(1) states:

``A person commits an offence against this section if:

• (a) the person is a party to 2 or more non- reportable cash transactions; and
• (b) having regard to:
  • (i) the manner and form in which the transactions were conducted, including, without limiting the generality of this, all or any of the following:
    • (A) the value of the currency involved in each transaction;
    • (B) the aggregated value of the transactions;
    • (C) the period of time over which the transactions took place;
    • (D) the interval of time between any of the transactions;
    • (E) the locations at which the transactions took place; and
  • (ii) any explanation made by the person as to the manner or form in which the transactions were conducted;
• it would be reasonable to conclude that the person conducted the transactions in that manner or form for the sole or dominant purpose of ensuring, or attempting to ensure, that the currency involved in the transactions was transferred in a manner and form that:
  • (iii) would not give rise to a significant cash transaction; or
  • (iv) would give rise to exempt cash transactions.''

The phrase in s 31(1) ``non-reportable cash transactions'' means a cash transaction to which a cash dealer is a party but which is not a significant cash transaction or which is an exempt cash transaction. This follows from the definition in s 3(1). A person who commits an offence against s 31(1) is, by force of s 31(3), punishable upon conviction, if a natural person, by a fine not exceeding $10,000 or imprisonment for a period not exceeding five years or both, and, if a body corporate, by a fine not exceeding $50,000.

I have referred to the general reporting requirement in s 7 as regards significant cash transactions, to the special treatment of exempt

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transactions, and to the definition of ``cash transaction'' as one involving the physical transfer of currency. From the foregoing it will be apparent that the mischief to which s 31(1) is directed is the generation of two or more non- reportable cash transactions (being cash transactions each involving transfer of currency of less than $10,000 in value or being exempt cash transactions) where it would be reasonable to conclude that the transactions were conducted in that manner or form for the sole or dominant purpose specified in s 31(1). This purpose is the ensuring or attempting to ensure that the currency involved in the transactions be transferred in a manner and form that (i) will not give rise to a cash transaction involving the transfer of $10,000 in value or more, or (ii) will give rise to exempt cash transactions.

Put broadly, s 31(1) might be characterised as an anti-avoidance provision. That against which it is directed, and in respect of which criminal liability is created, is transactions performed with the sole or dominant purpose of ensuring, or attempting to ensure, that currency involved in the transactions is transferred in a particular manner and form. At the heart of the section is the physical transfer from one person to another of currency, meaning the coin and paper money of Australia or of a foreign country that is designated as legal tender and circulates as, and is customarily used and accepted as, a medium of exchange in the country of issue.

Is s 31(1) a law ``with respect to'' currency?

The first question is whether s 31(1) is a law with respect to ``Currency'' within the meaning of s 51(xii) of the Constitution.

In R v Public Vehicles Licensing Appeal Tribunal (Tas); Ex parte Australian National Airways Pty Ltd , <sup>[140]</sup> (1964) 113 CLR 207 at 225-226. it was said in the joint judgment of Dixon CJ, Kitto, Taylor, Menzies, Windeyer and Owen JJ that such an issue was to be approached as follows:

``The simplest approach, however, to the problem is simply to read the paragraph and to apply it without making implications or imposing limitations which are not found in the express words. We must remember that it is part of the Constitution and go back to the general counsel to remember that it is a constitution we are construing and it should be construed with all the generality which the words used admit. See per O'Connor J in the Jumbunna Case .''

<sup>[141]</sup> (1908) 6 CLR 309 at 367, 368.

More recently, in Re Dingjan; Ex parte Wagner , <sup>[142]</sup> (1995) 183 CLR 323 at 368-369. McHugh J said:

``In determining whether a law is `with respect to' a head of power in s 51 of the Constitution, two steps must be taken. First, the character of the law must be determined. That is done by reference to the rights, powers, liabilities, duties and privileges which it creates. Secondly, a judgment must be made as to whether the law as so characterised so operates that it can be said to be connected to a head of power conferred by s 51. In determining whether the connection exists, the practical, as well as the legal, operation of the law must be examined. If a connection exists between the law and a s 51 head of power, the law will be `with respect to' that head of power unless the connection is, in the words of Dixon J [ in Melbourne Corporation v The Commonwealth <sup>[143]</sup> (1947) 74 CLR 31 at 79. ], `so insubstantial, tenuous or distant' that it cannot sensibly be described as a law `with respect to' the head of power.''

<sup>[144]</sup> See also Cunliffe v The Commonwealth (1994) 182 CLR 272 at 315 per Brennan J.

It should also be recalled that a single law can possess more than one character, in the sense that it can properly be characterised as a law with respect to more than one subject- matter and that it suffices for validity that any one or more of those characters is within a head of Commonwealth legislative power. Moreover, as Mason and Deane JJ explained in Re F; Ex parte F : <sup>[145]</sup> (1986) 161 CLR 376 at 387-388.

``In determining validity, it is not necessary to single out the paramount character. It is enough that the law `fairly answers the description of a law ``with respect to'' one given subject-matter appearing in s 51' regardless of whether it is, at the same time, more obviously or equally a law with respect to some other subject-matter: see Actors and Announcers Equity Association v Fontana Films Pty Ltd . <sup>[146]</sup> (1982) ATPR ¶ 40-285 at 43,571-43,572; (1981-1982) 150 CLR 169 at 192-194. In a case where a law fairly answers the description of being a law with respect to two subject-matters, one of which is and the other of which is not a subject-matter appearing in s 51, it will be valid notwithstanding that there is no independent connexion between the two subject-matters.''

In Watson v Lee , <sup>[147]</sup> (1979) 144 CLR 374 at 410. Mason J, with whom Gibbs J agreed, held that s 51(xii) gave the Parliament power ``to control and regulate the receipt and use'' in Australia of foreign

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currency. Barwick CJ and Stephen J (with whom Gibbs J also agreed) spoke to the same effect. <sup>[148]</sup> (1979) 144 CLR 374 at 382, 398-399. By parity of reasoning, the power also supports laws to control and regulate the receipt and use of coin and paper money in Australia, being the medium of exchange in Australia.

Stephen J and Mason J also emphasised that, while ``coinage'' and ``legal tender'' involved quite specific and narrow concepts, the former being concerned with coins as money and the latter with the prescription of that which at any particular time may be a lawful mode of payment, ``currency'' was a broader expression. This is exemplified by the provisions of the Currency Act to which I have referred earlier in these reasons. They illustrate the proposition that currency is a universal means of exchange, designated by a particular unit of account. <sup>[149]</sup> See Jolley v Mainka (1933) 49 CLR 242 at 259-261, 266-269 .

Counsel for the plaintiff accepts that the power conferred by s 51(xii) supports laws which control and regulate the receipt and use of coin and paper money of Australia as the medium of exchange in this country. Nor is there any challenge to the power of the Parliament to enact a criminal law within the limits as to subject-matter prescribed by the Constitution.

However, the plaintiff contends that the offence created by s 31(1) operates ``simply to support a reporting requirement'', found, principally, in s 7. The submission continues that s 7 does not itself prevent or regulate any transaction in relation to currency, and that, rather, it requires a reporting once currency in a particular amount has been used in a particular species of transaction. The result is said to be that s 31(1) has an insufficient connection with the head of power.

The provisions of the Currency Act and the Reserve Bank Act to which I have referred legislatively ordain the function of Australian paper money and coins as legal tender which circulates as, and is customarily used and accepted as, a medium of exchange. The definition of ``currency'' in s 3(1) of the Act adopts this central constitutional conception of currency and adds to it, as Watson v Lee indicates may validly be done, foreign coin and paper money which so operates in its country of issue.

A law such as s 7 which selects as a criterion of operation a transaction involving the physical transfer of currency from one person to another is a law with respect to currency. This is nonetheless so if the obligation created by the law is to report to an agency of government details of the transaction, as specified in Sched 1 to the Act. The law operates to qualify the uncontrolled and unregulated use of the currency employed in the reportable transaction as a medium of exchange. It does so by imposing the reporting requirement. Therefore, the law is one with respect to currency in the constitutional sense.

This obligation to report is enhanced by the offence created in s 31(1) against avoidance or evasion by the use of means to ensure or to attempt to ensure that currency is so transferred as to create non-reportable transactions. The law operates upon cash transactions involving the physical transfer of currency from one person to another and qualifies the uncontrolled or unregulated use of that currency as a medium of exchange in those transactions. Accordingly, s 31(1) also is a law with respect to currency. In the scheme of the Act, s 31(1) operates in aid of the reporting provisions, but as a matter of characterisation to assess validity, it has its own direct link with the head of power.

However, the submissions for the plaintiff stressed the presence in s 31(1) of the phrase ``it would be reasonable to conclude''. This was said to indicate an insufficient connection between s 31(1) and the head of power. In a given case, it may still be reasonable to conclude that the transactions were conducted in a particular manner for the sole or dominant purpose spoken of in the section, even though this be contrary to the fact. The suggestion was that s 31(1) would then rise above its constitutional source.

The submissions for the plaintiff should not be accepted. Even if, in particular circumstances, the reasonableness of the conclusion was contradicted by the absence in fact of the relevant sole or dominant purpose, nevertheless the law, however unfairly it may then have operated, would remain a law with respect to currency. There would remain as a criterion of liability the engagement of the person in question in two or more ``cash transactions'' involving the physical transfer of currency from one person to another, albeit in ``non-reportable'' form.

The head of legislative power is not confined to dealings in currency of a particular description or with a particular purpose. Strict

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liability might have been imposed. The subject- matter being fairly within the province of a legislature, the justice and wisdom of the provisions made by the Parliament in exercise of its power over the subject-matter is for the Parliament itself. <sup>[150]</sup> Burton v Honan (1952) 86 CLR 169 at 179.

Section 51(xii) of the Constitution confers a head of legislative power which is non- purposive, to use the phrase adopted by Mason and Deane JJ in Re F; Ex parte F , <sup>[151]</sup> (1986) 161 CLR 376 at 388-389. with reference to the analysis by Dixon J in Stenhouse v Coleman . <sup>[152]</sup> (1944) 69 CLR 457 at 471; see also Australian Communist Party v The Commonwealth (1951) 83 CLR 1 at 192-193 . Consideration of validity thus turns upon whether the legislation operates upon or affects the subject-matter of currency. Validity does not turn upon the end or objective for the attainment of which the legislation operates. <sup>[153]</sup> Murphyores Incorporated Pty Ltd v The Commonwealth (1976) 136 CLR 1 at 11-12, 20 ; Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 89; Cunliffe v The Commonwealth (1994) 182 CLR 272 at 323, 355. No recourse to ancillary or incidental legislative power is necessary to sustain validity. <sup>[154]</sup> See Australian Communist Party v The Commonwealth (1951) 83 CLR 1 at 192-194.

The legislation rests upon a ``non- purposive'' power. The concept of ``proportionality'' has no part to play here. In a case such as the present, ``proportionality'' is an inappropriate and impermissible tool of constitutional interpretation. The issue is not whether the concept of ``proportionality'' may be seen as useful, it is whether its application is permissible in dealing with non-purposive powers.

In my view, such an application is impermissible, and a phrase such as ``reasonable proportionality'' is to be avoided when propounding criteria for the determination of whether a law of the Commonwealth exceeds a ``non-purposive'' grant of power. Each head of power is but one grant and the criterion of validity is sufficiency of connection. I agree, with respect, with the analysis by Dawson J in his reasons for judgment <sup>[155]</sup> At 5,080-5,081. in the present case both of the European origins of the concept of ``proportionality'' and its development in the jurisprudence of the European Court of Justice. I also share the difficulties Dawson J expresses <sup>[156]</sup> At 5,081-5,082. with the passage he sets out from the judgment of Mason CJ in Cunliffe . <sup>[157]</sup> (1994) 182 CLR 272 at 296-297.

Other issues of construction of s 31(1)

There are difficulties in the construction of s 31(1), but before turning to them it is appropriate to refer to authority in a comparable field. In Milicevic v Campbell , <sup>[158]</sup> (1975) 132 CLR 307. the Court held s 233B(1)(ca) of the Customs Act 1901 (Cth) to be a law with respect to trade and commerce with other countries, within the meaning of s 51(i) of the Constitution. This law provided, inter alia, that any person who ``without reasonable excuse (proof whereof shall lie upon him) has in his possession any prohibited imports to which this section applies which are reasonably suspected of having been imported into Australia in contravention of this Act... shall be guilty of an offence''. By s 233B(1B), it was a defence to a prosecution to prove that the goods were not imported into Australia or were not imported in contravention of the statute. The prohibited imports to which s 233B applied were narcotic goods. The Court rejected a submission that s 233B(1)(ca) legislated with respect to goods which, although reasonably suspected of having been imported, need not in truth have been imported and, in that way, went beyond power.

Gibbs J <sup>[159]</sup> (1975) 132 CLR 307 at 315-316. held that, upon its true construction, s 233B(1)(ca) created no offence if it were proved that the goods were not imported or were not imported in contravention of the statute. His Honour stated:

``What the parliament has done is to render it unnecessary for the prosecution to prove anything more than that the prohibited imports (being narcotic goods) in the possession of the accused were reasonably suspected of having been imported into Australia in contravention of the Act, and once that has been proved the accused person, in order to escape conviction, must establish (if he does not rely on reasonable excuse) that the goods were not imported or were not imported in contravention of the Act. If at the conclusion of all the evidence it appears that the goods were not imported no offence is committed.''

Mason J said: <sup>[160]</sup> (1975) 132 CLR 307 at 318-319; cf He Kaw Teh v The Queen (1985) 157 CLR 523 at 545-546, 587-588.

``Traditionally the onus of proof is an element in the judicial determination of a fact. Ordinarily the onus rests with the party alleging the existence of the fact, but this circumstance supplies no reason for saying that when the scope of a legislative power does not extend beyond a certain fact, the power does not authorize a provision casting the onus of proof on the party who seeks to deny the existence of this fact. Then a law which makes it an offence for a person to have in his possession narcotics imported into Australia does not cease to be a law with respect to trade and commerce with other countries merely because it contains a provision casting upon the defendant the

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onus of proving that the goods were not so imported. The provision, though procedural in character, is a law with respect to trade and commerce with other countries; as much so, indeed, as would be a provision which explicitly casts the onus of proof on the prosecution.''

<sup>[161]</sup> See also (1975) 132 CLR 307 at 321 per Jacobs J. It has been suggested that there are indications in the judgments of Mason J and Jacobs J that the need to establish a reasonable suspicion might well provide a sufficient connection with s 51(i) of the Constitution to have supported s 233B(1)(ca): Lindell, ``Duty to Exercise Judicial Review'' in Zines (ed), Commentaries on the Australian Constitution , (1977) at 181. It is unnecessary to explore the application of that reasoning to the law in question in the present case.

Section 31(1) of the Act gives rise to various issues of construction. The elements of the offence which it creates appear to be (a) engagement as a party to two or more non- reportable cash transactions and (b) conduct of those transactions in the particular manner or form specified in the section for the sole or dominant purpose identified therein. As to (b), it is sufficient for the prosecution to satisfy the tribunal of fact that ``it would be reasonable to conclude'' that the person conducted the transactions in that manner or form for that sole or dominant purpose, ``having regard to'' (i) the manner or form in which the transactions were conducted, including the matters identified under (A)-(E) of s 31(1)(b)(i), and (ii) any explanation made by the person as to the manner or form in which the transactions were conducted.

It is not immediately apparent what is the temporal element in the phrase ``any explanation made''. One possibility is that regard is to be had to any explanation made before or at the time of the completion of the conduct of the non-reportable cash transactions in question. Another is that the phrase is not so limited and that, it not being an element of the offence itself, regard is to be had to an explanation at any time, up to and including the tender of evidence at the trial.

There is no need to resolve these questions.

This is because, in any event, no offence has been committed unless, at the conclusion of the evidence, ``it would be reasonable'' for the tribunal of fact to conclude that the accused conducted the transactions in the manner and form specified in s 31(1) for the sole or dominant purpose referred to therein. Nor is it necessary for present purposes to identify the level of satisfaction, and standard of proof, which is involved in the phrase ``it would be reasonable to conclude''. This is because, even if the reasonableness of the conclusion does not have to rise to satisfaction beyond reasonable doubt, s 31(1) would remain a law with respect to currency.

Counsel for the plaintiff also referred in argument to s 34 as throwing some light upon the construction, and thus the validity, of s 31(1). Sub-sections (1) and (2) of s 34 deal with the establishment, for the purposes of the Act, of the state of mind of a body corporate, by reliance upon the conduct of certain individuals and their states of mind. Sub-sections (3) and (4) are vicarious liability provisions, as regards persons other than a body corporate. The operation of s 34 does not detract from the conclusion already expressed that s 31(1) is a law supported by s 51(xii) of the Constitution.

It is unnecessary to decide whether validity also is to be drawn from the taxation power.

Conclusion

The question reserved should be answered ``Yes''. The costs of the question reserved should be borne by the plaintiff.