R v Jacobs Group (Australia) Pty Ltd - NSWCCA 152 (11 July 2022)

R v Jacobs Group (Australia) Pty Ltd [2022]

NSWCCA 152 (11 July 2022)

Last Updated: 11 July 2022

Court of Criminal Appeal

Supreme Court

New South Wales

Case Name:

R v Jacobs Group (Australia) Pty Ltd

[2022] NSWCCA 152

Medium Neutral

Citation:

Hearing

Date(s):

16 February 2022

Date of Orders: 11 July 2022

Decision Date:

Before:

11 July 2022

Bell CJ at [1]

Walton J at [132]

Davies J at [133]

Decision:

Appeal dismissed

Catchwords:

CRIME – appeals – appeal against sentence – by Crown against

inadequacy – Court’s discretion to intervene – principles concerning

Crown appeals pursuant to s 5D of the Criminal Appeal Act 1912 (NSW)

– where error was established in the sentencing judge’s reasoning –

where the circumstances of the case are highly fact-specific and offer

little by way of precedential value – where the arguments advanced on

appeal involve refinements to those advanced at first instance – where a

resentencing exercise would amount to a mere correction of error

SENTENCING – relevant factors on sentence – maximum penalty –

calculation of maximum penalty for an offence of conspiring to cause a

bribe to be offered to a foreign public official, contrary to ss 11.5(1) and

70.2(1)(a)(iv) of the Criminal Code Act 1995 (Cth) – where amount of

the maximum penalty expressed as a multiple of “benefit” derived from

impugned conduct – construction of the word “benefit” in s 70.2(5)(b) of

the Criminal Code – where foreign government contracts to provide

services in relation to public infrastructure projects were procured –

whether “benefit” should be interpreted to mean gross income (i.e. the

total value of the contracts awarded) or the net income obtained from

those contracts

STATUTORY INTERPRETATION – immediate context – consistency of

meaning – calculation of maximum penalty for an offence of conspiring

to cause a bribe to be offered to a foreign public official, contrary to ss

11.5(1) and 70.2(1)(a)(iv) of the Criminal Code Act 1995 (Cth) – where

the amount of the maximum penalty turns upon the construction of the

word “benefit” in s 70.2(5)(b) of the Criminal Code – whether “benefit”

in s 70.2(5)(b) should be given the same meaning as in s 70.2(1)(a)-(b),

which creates the substantive offence – where statutory context requires

or results in different meanings being ascribed to the same term in a

statutory provision

SENTENCING – relevant factors on sentence – deterrence – general

deterrence – where corporate offender reported its own misconduct, and

subsequently provided substantial assistance to law enforcement

authorities – where sentencing judge allowed significant discounts for

the offender’s past and future assistance to law enforcement authorities

– where sentencing judge also had regard to the desirability of

encouraging the self-reporting of corporate misconduct when

considering the importance of general deterrence, and determining the

starting point for the sentences to be imposed – where sentencing judge

considered that the prevention of offending is better achieved by

rewarding a self-reporting company than by imposing a substantial fine

– whether such an approach amounted to a failure adequately to take

general deterrence into account

SENTENCING – Crown appeal against inadequacy of sentence – Court’s

discretion to intervene – principles concerning Crown appeals pursuant

to s 5D of the Criminal Appeal Act 1912 (NSW) – where error was

established in the sentencing judge’s reasoning – where the

circumstances of the case are highly fact-specific and offer little by way

of precedential value – where the arguments advanced on appeal involve

refinements to those advanced at first instance – where a resentencing

exercise would amount to a mere correction of error

Legislation

Cited:

Competition and Consumer Act 2010 (Cth) ss 76(1A), 45AF(3), 45AG(3)

Crimes Act 1914 (Cth) ss 16A(1), 16A(2)(j)-(ja), 16AC

Crimes Legislation Amendment (Serious and Organised Crime) Act (No

2) 2010 (Cth), Schedule 8

Criminal Appeal Act 1912 (NSW) s 5D

Criminal Code Act 1995 (Cth) ss 11.5(1), 12.2, 12.3 70.1, 70.2(1), 70.2(5)

Cases Cited:

AB v The Queen (1999) 198 CLR 111; [1999] HCA 46

Agius v The Queen (2013) 248 CLR 601; [2013] HCA 27

CMB v Attorney-General for New South Wales (2015) 256 CLR 346;

[2015] HCA 9

Director of Public Prosecutions (Cth) v Gregory (2011) 34 VR 1; [2011]

VSCA 145

Everett v The Queen (1994) 181 CLR 295; [1994] HCA 49

Green v The Queen (2010) 244 CLR 462; [2011] HCA 49

Griffiths v The Queen (1977) 137 CLR 293; [1977] HCA 44

House v The King (1936) 55 CLR 499; [1936] HCA 40

Kentwell v The Queen (2014) 252 CLR 601; [2014] HCA 37

Kline v Official Secretary to the Governor-General (2013) 249 CLR 645;

[2013] HCA 52

Lacey v Attorney-General of Queensland (2011) 242 CLR 573; [2011]

HCA 10

Markarian v The Queen (2005) 228 CLR 357; [2005] HCA 25

Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering,

Printing and Kindred Industries Union [2020] HCA 29; (2020) 381 ALR

601

R v Ellis (1986) 6 NSWLR 603

R v Hernando (2002) 136 A Crim R 451; [2002] NSWCCA 489

Registrar of Titles (WA) v Franzon (1975) 132 CLR 611; [1975] HCA 41

Savvas v The Queen (1995) 183 CLR 1; [1995] HCA 29

Selig v Wealthsure Pty Ltd (2015) 255 CLR 661; [2015] HCA 18

Singtel Optus Pty Ltd v Australian Competition and Consumer

Commission (2012) 287 ALR 249; [2012] FCAFC 20

Tabcorp Holdings Ltd v Victoria [2016] HCA 4; (2016) 328 ALR 375

Volkswagen Aktiengesellschaft v Australian Competition and Consumer

Commission (2021) 284 FCR 24; [2021] FCAFC 49

Texts Cited:

Replacement Explanatory Memorandum, Crimes Legislation

Amendment (Serious and Organised Crime) Bill (No 2) 2009 (Cth)

Category:

Parties:

Principal judgment

Crown (Applicant)

Jacobs Group (Australia) Pty Ltd (Respondent)

Representation:

Counsel:

J Gleeson SC with C Tran (Applicant)

T Game SC with A Bonnor and N A Wootton (Respondent)

Solicitors:

Director of Public Prosecutions (Cth) (Applicant)

Jones Day (Respondent)

File Number(s): 2018/154158

Publication

Restriction:

N/A

Decision under

appeal:

Court or

Tribunal:

Supreme Court of New South Wales

Criminal

Jurisdiction:

Citation:

[2021] NSWSC 657

9 June 2021

Date of

Decision:

Before:

Adamson J

File Number(s): 2018/154158

HEADNOTE

[This headnote is not to be read as part of the judgment]

On 3 September 2020, Jacobs Group (Australia) Pty Ltd (the respondent), formerly known

as Sinclair Knight Merz Pty Ltd (SKM), pleaded guilty to three offences of conspiring to cause

a bribe to be offered to a foreign public official, contrary to ss 11.5(1) and 70.2(1)(a)(iv) of the

Criminal Code Act 1995 (Cth). At the time of the offending, which occurred from 2000 to

2012, SKM was an Australian consulting, engineering and project delivery firm involved in

infrastructure projects in Australia and abroad. In December 2013, after the offending conduct

had ceased, SKM was acquired by the respondent.

The offending related to two conspiracies, one in the Philippines and one in Vietnam, which

involved the payment of monetary bribes to public officials following the award of public

infrastructure contracts to SKM. Bribes paid to foreign officials were concealed by making

payments to third party companies, and receiving fictitious invoices for various services which

were not in fact provided. The funds were then redirected to public officials. Although senior

executives were involved in the offending, including at one time the company’s CEO, the

offending conduct was confined to a small area of the company’s operations and was not

known to the company’s directors at large. After the offending conduct came to the attention

of the SKM’s board of directors, the company reported the offending to the Australian Federal

Police, and subsequently provided substantial assistance to investigating and prosecuting

authorities.

The maximum penalty for the first two offences was $330,000. Due to a legislative

amendment introduced in 2010, which increased the maximum penalty for the offence, the

maximum penalty for the third offence is determined by s 70.2(5) of the Criminal Code. That

section relevantly provides that, where it is possible to determine the value of the benefit that

a company obtained from the offending, the maximum penalty is the greater of $11,000,000

or three times the value of that benefit.

The respondent was sentenced in the New South Wales Supreme Court on 9 June 2021.

Importantly, in relation to sequence 3, there was disagreement about the proper

interpretation of the statutory formula contained in s 70.2(5) of the Criminal Code, and

therefore about the maximum penalty to be applied. The Crown contended that the word

“benefit” in that provision meant gross income (that is, the total value of the contracts

awarded), while the respondent contended that it meant the net income from those contracts.

It was agreed that on the former construction, the applicable maximum penalty would be

$30,391,062, whereas on the latter construction, the maximum penalty would be

$11,000,000. The sentencing judge ultimately accepted the respondent’s proposed

construction, and therefore found that the maximum penalty was $11,000,000.

In relation to all three offences, the sentencing judge allowed a discount of 25% by reason of

the respondent’s early guilty pleas. Her Honour also allowed further discounts of 30% and

10% for the respondent’s past and future assistance to law enforcement agencies respectively.

After applying these discounts, her Honour imposed a fine of $67,500 in relation to sequence

1, a fine of $54,000 in relation to sequence 2, and a fine of $1,350,000 in relation to sequence

3. An important consequence of the discounts allowed by the sentencing judge, upon which

reliance was placed by the Crown, was that the fine ultimately imposed for sequence 3 was less

than the benefit obtained by SKM as a result of the offence.

The Crown appealed from these sentences pursuant to s 5D of the Criminal Appeal Act 1912

(NSW). The principal issues on appeal were:

(1) whether the sentencing judge erred in her interpretation of the word “benefit” within the

meaning of s 70.2(5)(b) of the Criminal Code, and therefore erred in identifying the maximum

penalty for sequence 3;

(2) whether the sentencing judge erred in relation to sequence 3, in not taking into account

that the fine imposed would be treated as a cost of doing business (particularly as it was less

than the agreed net benefit obtained as a result of the offending conduct);

(3) whether the sentencing judge constructively failed to take into account general deterrence

in relation to all three sequences; and

(4) if so, whether the Court should exercise its discretion to resentence the respondent

pursuant to s 5D of the Criminal Appeal Act 1912 (NSW), having regard to principles

concerning Crown appeals.

The Court held (Bell CJ, Walton and Davies JJ agreeing), dismissing the appeal:

As to the first issue

(1) The sentencing judge did not err in her construction of s 70.2(5)(b) of the Criminal Code.

Among other considerations, reference to the Explanatory Memorandum to the Bill that

introduced s 70.2(5) supports the conclusion that “benefit” within the meaning of that section

means net benefit. The value of the benefit of winning a contract lies in the opportunity for

monetary gain from its performance: [90]–[97], [101] (Bell CJ); [132] (Walton J); [133]

(Davies J).

(2) While such an interpretation may have the consequence that the word “benefit” is given a

different meaning in s 70.2(5) as opposed to s 70.2(1)(a)-(b), statutory context sometimes

requires or results in different meanings being ascribed to cognate terms: [98]–[99] (Bell CJ);

[132] (Walton J); [133] (Davies J).

Tabcorp Holdings Ltd v Victoria [2016] HCA 4; (2016) 328 ALR 375;

Selig v Wealthsure Pty Ltd (2015) 255 CLR 661; [2015] HCA 18;

Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering,

Printing and Kindred Industries Union [2020] HCA 29; (2020) 381

ALR 601; Kline v Official Secretary to the Governor-General (2013)

249 CLR 645; [2013] HCA 52; Registrar of Titles (WA) v Franzon

(1975) 132 CLR 611; [1975] HCA 41, considered.

As to the second issue

(3) The sentencing judge did not fail to take into account a material consideration by not

expressly adverting to the fact that the penalty ultimately imposed for sequence 3 was less

than the agreed net benefit derived from that offence. There is no basis for concluding that the

sentencing judge was not conscious of the benefit obtained by the respondent from the

offence, particularly in circumstances where her Honour fixed a starting point for sequence 3

which was greater than the amount of the benefit obtained, before the application of

sentencing discounts: [104]–[116] (Bell CJ); [132] (Walton J); [133] (Davies J).

Volkswagen Aktiengesellschaft v Australian Competition and Consumer

Commission (2021) 284 FCR 24; [2021] FCAFC 49; Singtel Optus Pty Ltd v

Australian Competition and Consumer Commission (2012) 287 ALR 249; [2012]

FCAFC 20, considered.

As to the third issue

(4) The sentencing judge erred in relation to sequences 1, 2 and 3, in placing emphasis on the

desirability of encouraging the self-reporting of corporate misconduct both when allowing a

sentencing discount and when determining the notional starting points for the fines to be

imposed. The penalty of $1,350,000 ultimately imposed for sequence 3, referable to a

maximum of $11,000,000, suggests either that the importance of general deterrence was

given effect to in name only, or that the sentencing discretion miscarried so as to result in an

inadequate penalty, or both: [123]–[124] (Bell CJ); [132] (Walton J); [133] (Davies J).

Director of Public Prosecutions (Cth) v Gregory (2011) 34 VR 1; [2011] VSCA 145;

R v Ellis (1986) 6 NSWLR 603, considered.

As to the fourth issue

(5) The Court’s discretion to vary the sentences imposed by the primary judge should not be

exercised. Settled principles relating to Crown appeals indicate that the mere identification of

error in the sentencing process does not in and of itself justify the imposition of a new

sentence. The conclusion that the discretion should not be exercised is supported by the

considerations that, other than in respect of the first ground of appeal (which related to the

construction of s 70.2(5) and was unsuccessful), the case is highly fact-specific and offers little

by way of precedential value, and that the arguments advanced on appeal were conceded to

involve “refinements” to those advanced at first instance: [126]–[129] (Bell CJ); [132] (Walton

J); [133] (Davies J).

R v Hernando (2002) 136 A Crim R 451; [2002] NSWCCA 489; Green

v The Queen (2010) 244 CLR 462; [2011] HCA 49; CMB v Attorney-

General for New South Wales (2015) 256 CLR 346; [2015] HCA 9;

Griffiths v The Queen (1977) 137 CLR 293; [1977] HCA 44; Everett v

The Queen (1994) 181 CLR 295; [1994] HCA 49; Lacey v Attorney-

General of Queensland (2011) 242 CLR 573; [2011] HCA 10,

considered.

JUDGMENT

Introduction

1. BELL CJ: This sentence appeal, which follows pleas of guilty by Jacobs Group

(Australia) Pty Ltd (the respondent), raises an important question of statutory

construction in the context of foreign bribery provisions of the Criminal Code Act 1995

(Cth). Its outcome affects the calculation of the maximum penalty payable by a body

corporate for offences committed after 20 February 2010.

2. On the Crown’s construction, the applicable maximum penalty on the facts of the current

case for one of the offences (sequence 3) to which the respondent pleaded guilty was

$30,392,062. By contrast, on the respondent’s construction, which was that given to the

legislation by the sentencing judge, Adamson J, the maximum penalty was $11,000,000.

The question of the proper construction of s 70.2(5) of the Criminal Code lies at the

heart of the Crown’s first ground of appeal.

3. Given the significance to be attached to a maximum penalty in any sentencing exercise

as a yardstick in the overall synthetic sentencing process (see eg Markarian v The Queen

(2005) 228 CLR 357; [2005] HCA 25) and the general importance of the foreign bribery

provisions, the question of construction raised by ground 1 of this Crown appeal is

obviously of great importance and the respondent does not contend that this Court

should decline to entertain it.

4. By way of contrast, the respondent contended that the Court would not exercise its

discretion to resentence under s 5D of the Criminal Appeal Act 1912 (NSW) in relation

to the various matters raised by the remaining four grounds of the Crown’s appeal.

Section 5D(1) provides:

“The Attorney-General or the Director of Public Prosecutions may appeal to the

Court of Criminal Appeal against any sentence pronounced by the court of trial in

any proceedings to which the Crown was a party and the Court of Criminal Appeal

may in its discretion vary the sentence and impose such sentence as to the said

court may seem proper.” (emphasis added)

5. At least two of the grounds of appeal in the present case build upon the fact that, in the

particular circumstances of the case, the penalty imposed for sequence 3, namely

$1,350,000, was, after discounts for an early plea and co-operation with various

authorities, only slightly over half of what the Crown alleged was the agreed profit

($2,680,816) derived from the offending constituting sequence 3. As shall be seen,

however, while the respondent agrees that that figure represents the agreed net benefit

derived from the transactions the subject of sequence 3, it does not accept that the figure

of $2,680,816 represents the profit derived from those transactions.

The charges and penalties

6. On 3 September 2020, the respondent, formerly known as Sinclair Knight Merz Pty Ltd

(SKM), pleaded guilty to three offences of conspiring to cause a bribe to be offered to a

foreign public official, contrary to ss 11.5(1) and 70.2(1)(a)(iv) of the Criminal Code.

When the offending took place, SKM was a private, employee-owned Australian

consulting, engineering and project delivery firm involved in infrastructure projects in

Australia and abroad. In December 2013, after the offending conduct had ceased, SKM

was acquired by Jacobs Group. For the purposes of these reasons, the name SKM will be

used to refer to the respondent prior to the acquisition, as well as its related and holding

companies.

7. Section 70.2(1) of the Criminal Code relevantly provides:

“(1) A person commits an offence if:

(a) the person:

...

(iv) causes an offer of the provision of a benefit, or a

promise of the provision of a benefit, to be made to another

person; and

(b) the benefit is not legitimately due to the other person; and

(c) the first-mentioned person does so with the intention of influencing

a foreign public official (who may be the other person) in the exercise of

the official's duties as a foreign public official in order to:

(i) obtain or retain business...”

8. The three offences against s 70.2(1) related to two conspiracies, one in the Philippines

and one in Vietnam, involving the payment of monetary bribes to public officials

following the award of public infrastructure contracts to SKM. The first offence

(sequence 1) related to a conspiracy to cause a bribe to be offered to a foreign public

official in the Philippines between 1 January 2000 and 20 May 2005. The second offence

(sequence 2) related to a similar conspiracy in relation to a foreign public official in

Vietnam between 1 December 2006 and 19 February 2010. The third offence (sequence

3) related to the continuation of the same conspiracy which is the subject of sequence 2,

from 20 February 2010 to 15 June 2012. Sequences 2 and 3 were charged separately

because an amendment to the maximum penalty for the offence came into force on 20

[1]

February 2010.

9. The maximum penalty for sequences 1 and 2 was 3,000 penalty units, or $330,000. The

maximum penalty for sequence 3 falls to be determined by s 70.2(5) of the Criminal

Code. That provision relevantly provides:

“An offence against subsection (1) committed by a body corporate is punishable on

conviction by a fine not more than the greatest of the following:

(a) 100,000 penalty units;

(b) if the court can determine the value of the benefit that the body

corporate, and any body corporate related to the body corporate, have

obtained directly or indirectly and that is reasonably attributable to the

conduct constituting the offence—3 times the value of that benefit;

(c) if the court cannot determine the value of that benefit--10% of the

annual turnover of the body corporate during the period (the

turnover period) of 12 months ending at the end of the month in

which the conduct constituting the offence occurred.”

At all material times, a penalty unit was $110, and 100,000 penalty units was therefore $11

million. The term “benefit” in Chapter 4, Division 70 of the Criminal Code in which s 70.2 is

located is defined as including “any advantage and is not limited to property”.

10. The sentencing judge indicated that each offence was in the mid-range of objective

seriousness: R v Jacobs Group (Australia) Pty Ltd [2021] NSWSC 657 (the sentencing

judgment or SJ) at [49], [55], [78] and [155]. Her Honour described the offending at

[149] of her sentencing judgment as follows:

“The nature and circumstances of the offending are set out above in the narrative

of facts, which is derived from the agreed facts and the evidence of Mr Latham. As

can be seen from the narrative, the Philippines conspiracy and the Vietnam

conspiracy were paradigm examples of the type of conduct which the Convention

[OECD Convention on Combating Bribery of Public Officials in International

Business Transactions] and the legislation enacted by Australia to fulfil its

obligations under the Convention was designed to criminalise and prevent. Those

individuals involved can be taken to have known that what they were doing was

criminal. They took elaborate steps to hide their offending from those outside the

inner circle within the company so that it would not be detected by the company’s

usual compliance procedures. The offending conduct continued, as set out in the

narrative of facts, for about a decade.”

11. The respondent was sentenced in the New South Wales Supreme Court on 9 June 2021.

In relation to sequence 1, the sentencing judge ordered that the respondent pay a fine of

$67,500. Her Honour indicated that she would have ordered a fine of $150,000, but for

the respondent’s guilty plea, past assistance and undertaking to give future assistance.

12. In relation to sequence 2, the sentencing judge ordered that the respondent pay a fine of

$54,000. Her Honour indicated that she would have ordered a fine of $120,000, but for

the respondent’s guilty plea, past assistance and undertaking to give future assistance.

13. In relation to sequence 3, there was disagreement about the proper interpretation of the

statutory formula contained within s 70.2(5)(b) of the Criminal Code, extracted above at

[9*], and therefore about the maximum penalty to be applied. The Crown contended,

and continues to contend, that the word ‘benefit’ in that provision means gross income

(that is, the total value of the contracts awarded), while the respondent contends that it

means net income from those contracts. It was agreed that if the Crown’s preferred

construction were accepted, the applicable maximum penalty would be $30,391,062,

whereas if the respondent’s contention were accepted, the maximum penalty would be

$11,000,000 pursuant to s 70.2(5)(a).

14. The sentencing judge accepted the respondent’s contention as to the amount of the

maximum penalty, and ordered that the respondent pay a fine of $1,350,000. Her

Honour indicated that she would have ordered a fine of $3,000,000, but for the

respondent’s guilty plea, past assistance and undertaking to give future assistance. An

important consequence of that discounting was that the ultimate penalty imposed in

respect of sequence 3 was substantially less than the benefit derived by SKM from the

transactions making up that sequence. This feature of the outcome particularly informed

grounds 2, 3 and 4 of the Crown’s appeal.

Grounds of Appeal

15. By Notice of Appeal filed on 5 July 2021, the Crown appeals from these sentences

pursuant to s 5D of the Criminal Appeal Act. The appeal is brought on the following

grounds:

“1. The sentencing judge erred in identifying the benefit for the purpose of ss 70.1

and 70.2(5)(b) of the Criminal Code (Cth) as the amounts received by the

respondent less expenses incurred in performing the contracts (SJ [123]-[141]) and

accordingly erred in identifying the maximum penalty which was to operate as the

yardstick for punishment for sequence 3.

2. The sentencing judge erred in relation to sequence 3 in not taking into account

the material consideration that the fine imposed would be treated as a cost of

doing business, particularly when regard is had to the fact that the fine imposed

(SJ [195]) was significantly less than the amount of profit made from the offending

conduct (SJ [81]).

3. In relation to all three sequences, the sentencing judge applied a wrong

principle, or constructively failed to take general deterrence into account, in

reasoning that general deterrence of others is achieved in this case not by

punishing and denouncing the respondent's conduct with a substantial fine but

rather by rewarding it for disclosing its offending (SJ (187]).

4. The sentence for sequence 3 is manifestly inadequate.

5. The sentences for sequences 1 and 2 are manifestly inadequate.”

Background

16. The circumstances of the respondent’s offending conduct are set out in some detail in

[2]

the sentencing judgment, and in the three statements of facts agreed by the parties.

The first statement of facts and supplementary statement of facts relate to the conduct

which forms the subject of the offences, while the further supplementary statement of

facts concerns matters relevant to the calculation of the maximum penalty for sequence

3. It should be noted that, although the respondent agreed to the statements of agreed

facts, they were not the subject of agreement by the individuals referred to therein and

do not constitute and may not be taken to be admissions by them of the matters referred

to in them.

17. For present purposes, only a relatively brief summary of the salient facts taken from the

agreed facts is necessary.

18. The three offences involved the operations of the SKM Overseas Development Assistance

(SODA) business, an ‘operations centre’ within SKM which provided project

management and technical services for engineering projects in developing countries in

the Asia-Pacific. SODA was one of around fifty ‘operations centres’ within SKM, which

contributed around 1% of SKM’s total revenue. The division provided services for public

infrastructure projects administered by the Australian Agency for International

Development (AusAID), as well as for projects managed by foreign governments and

funded by the World Bank and the Asian Development Bank (ADB). The offending

conduct related only to projects administered by foreign governments, and not by

AusAID.

Sequence 1: Philippines, 1 January 2000 to 20 May 2005

19. In 1999, Lyndsay Chapple was appointed to the position of Country Manager for SKM in

the Philippines. In about 2000, Yolanda Fernandez, who was a Business Development

Manager for SKM in Manila, suggested to Mr Chapple that it was necessary to make

illegitimate payments to public officials in order to win contracts in the Philippines.

20. At some point in the early 2000s, Mr Chapple met with Paul Dougas, who was the Chief

Executive Officer (CEO) of SKM, and raised the prospect of making payments to public

officials after the award of contracts to SKM. Mr Dougas told Mr Chapple that any such

payments by SODA were to be subject to the following guidelines:

“a. the payments should always be made at ‘arms length’ through a third party and

not directly by SKM;

b. The ‘circle of knowledge’ within SKM in relation to the payments was to be kept

to an absolute minimum;

c. The payments should only be made after the contract was awarded to SKM; and

d. Payments should always be recorded through an auditable invoice.”

21. This conversation formed the basis for what was referred to by the sentencing judge as

the “Philippines conspiracy”. As Mr Dougas was the CEO of SKM, it was common

ground that the physical and fault elements of the offence were attributable to SKM

pursuant to ss 12.2 and 12.3 of the Criminal Code. As such, Jacobs Group is liable for Mr

Dougas’ participation in the Philippines conspiracy.

22. Between early 2000 and 20 May 2005, Ms Fernandez, Mark Read, Geoffrey Linke, and

Mohit Kumar, who were all employees or officers of SKM, variously became parties to

the Philippines conspiracy. At some time in the early 2000s, Mr Read suggested to Mr

Chapple that illegitimate payments should be constrained to 5% of the budget for each

project.

23. The method by which bribes were to be paid to public officials was as follows. SKM made

payments to a third party company, and received invoices for various services which

were not in fact provided. From late 2003 until 2005, payments were made to an entity

named Intelmar Enterprises (Intelmar), which was associated with Ms Fernandez.

Intelmar provided invoices to SKM for expenses such as ‘marketing and representation’.

The funds were then intended to be withdrawn and provided to Filipino public officials

by Ms Fernandez. Inducements paid to public officials were referred to in

correspondence within SKM as ‘external marketing costs’ or ‘marketing fees’. They were

intended to influence public officials in their consideration of SKM’s bids for contracts,

and to ensure that public officials performed their obligations under existing contracts.

24. The mechanism for payment of the bribes is conveniently set out in an email dated 20

May 2005 from Mr Kumar to Mr Linke:

“... I returned to Manila and discussed with Yolanda [Fernandez] in detail (who

returned from her maternity leave last Monday) to understand how the practice

has been established in PHIL... My understanding is as follows:

1. A company by the name of 'lntelmar' has been utilized for this purpose (a single

person outfit), a Philippine BIR registered company with a TIN No etc.

2. Invoice for the appropriate marketing services (incl. a 5% handling charge) is

received from lntelmar.

3. Payment is made to lntelmar by check after deduction of the appropriate WHT.

4. On receipt of payment in the account, the funds are provided to Yolanda.

5. Yolanda then delivers the payment in person to the concerned parties.”

25. The statement of facts identifies eight payments made to Intelmar, in connection with

five infrastructure projects for which SKM had been awarded contracts. The combined

total amount of the illegitimate payments was 6,563,578.94 Philippine pesos, or

approximately AUD $157,795.13.

26. The benefit obtained by SKM from the sequence 1 transactions was not the subject of

agreement between the parties.

Sequence 2: Vietnam, 1 December 2006 to 19 February 2010

27. During a trip to Vietnam, Mr Chapple met Nguyen Ngoc Thang, who was then the in-

country agent for Landell Mills Ltd, an international development consulting firm. SKM

retained Mr Thang as its in-country agent to provide various services, including liaising

with Vietnamese public officials and sourcing foreign and local consultants. By late

2006, Mr Chapple and Mr Thang agreed that, where necessary, illegitimate payments

would be paid to Vietnamese public officials (the Vietnam conspiracy).

28. At various times between 1 December 2006 and 19 February 2010, Adam Carey, Andrew

Counihan, Mr Kumar and Mr Linke each became a party to the Vietnam conspiracy with

Messrs Chapple and Thang. All were employees or officers of SKM except Mr Thang,

who was engaged as an agent. Mr Linke was then the General Manager, Water and

Environment, and therefore a high managerial agent of SKM. As such, it was common

ground that liability for the offence is attributable to SKM pursuant to ss 12.2 and 12.3 of

the Criminal Code.

29. Mr Linke became a party to the Vietnam conspiracy by no later than 26 June 2007. On

that day, Mr Kumar sent an email to Mr Linke and Mr Chapple concerning three

infrastructure contracts in Vietnam which were expected to be finalised shortly

thereafter. In the email, Mr Kumar stated:

“As we move towards mobilization, we are required to make payments for proposal

preparation and marketing costs incurred (as you are aware on loan projects). All

the usual internal guidelines will be followed i.e. payment for services rendered

under proper invoices etc. Total payment will not exceed 5% of project budget (as

discussed in the past).”

30. Later that day, Mr Linke replied to the above email, requesting further details about the

payments. Mr Kumar replied on 27 June 2007, and stated:

“Yes, rest assured all payments will be structured in a way that are at ‘arms length’,

w/n the 5% limit; in terms of timing occur when we get paid by the client at

appropriate milestones etc. Hope that is ok.”

31. The terms and method of the Vietnam conspiracy were substantially similar to those of

the Philippines conspiracy. SKM entered into contracts with two companies associated

with Mr Thang, being Nhat Phuong Investment & Trading Company Ltd (NPIT) and

Hai Dang Tourism Development and Investment Joint Stock Company (HTD). Both

companies provided false invoices to SKM for services which were never provided. In

reality, the payments made to each company were intended to be redirected to

Vietnamese public officials, in order to influence them in their consideration of tenders

submitted by SKM, and in their performance of obligations under contracts which had

been awarded.

32. In 2007, SKM was awarded a contract for the provision of technical services relating to

the Vietnam Urban Upgrading Project (VUUP), involving the construction of drainage

infrastructure works in Ho Chi Minh City. SKM executed the VUUP contract on 25

September 2007. In 2008, SKM entered into a contract with NPIT, purportedly for the

provision of training services by NPIT, and in 2009, it entered into a contract with HTD

for a “logistic study tour in Korea”. Neither of these services were in fact provided by

NPIT or HDT. The true purpose of these contracts was to facilitate payments to

Vietnamese public officials involved in the tender process for the VUUP.

33. In total, during the relevant period SKM made three payments to NPIT and four

payments to HDT which were intended to be redirected to Vietnamese public officials.

The combined total amount of the illegitimate payments was approximately AUD

$80,962.31.

34. The benefit obtained by SKM from the sequence 2 transactions was not the subject of

agreement between the parties.

Sequence 3: Vietnam, 20 February 2010 to 15 June 2012

35. As has been explained, sequence three relates to the continuation of the Vietnam

conspiracy described above. At some time between 20 February 2010 and 15 June 2012,

Paul Casamento, then the Commercial Manager of SKM’s Water and Environment

Business Unit, became a party to the conspiracy.

36. During the period relevant to sequence 3, the contract relating to the VUUP remained on

foot. SKM made two further payments to HDT for the fictitious “study tour” referred to

in paragraph [32*], which were in fact intended to be redirected for public officials in

connection with the VUUP project. SKM also entered into an additional contract with

NPIT, under which it made a further payment for the same purpose. The combined total

amount of these three payments was approximately AUD $25,262.08.

37. SKM was also awarded two further contracts during this period, for the following

projects:

(1) the Thanh Hoa Comprehensive Socioeconomic Development Project Metro

(the Thanh Hoa project), to improve urban infrastructure in the city of Thanh

Hoa; and

(2) the Da Nang Priority Infrastructure Investment Project (the Da Nang

project), to upgrade urban infrastructure in Da Nang City.

38. In order to facilitate the payment of bribes in relation to these two projects, SKM entered

into a number of new agreements with NPIT, HDT and Mr Thang personally, for the

provision of various services which were never provided. One of these agreements, and

the invoices for payments made under it, were falsely backdated by several months.

39. In total, seven payments were made in connection with the Thanh Hoa project,

amounting to a total of approximately AUD $164,328.30. In respect of the Da Nang

project, SKM entered into an agreement with NPIT which contemplated payments of

approximately AUD $98,360.89. However, only one payment was made under that

contract, in the amount of approximately AUD $15,070.93.

40. The total amount of the illegitimate payments made during the period relevant to

sequence 3 was approximately AUD $204,661.21 and, as has already been noted, the

agreed net benefit to SKM of the transactions the subject of sequence 3 was $2,680,816.

Contemplated projects for which no bribes were paid

41. In addition, SKM was involved in the preliminary stages of obtaining contracts for two

further infrastructure projects in Vietnam, for which no bribes were ultimately paid.

42. First, SKM staff members engaged in internal preparations for a tender to be submitted

for the Hai Phong Roads Budget Upgrade Project (the Hai Phong project). In October

2010, Mr Counihan prepared two versions of a draft budget for the Hai Phong Roads

project, which he labelled “actual” and “alternative presentation”. The “actual” budget

contained a line item named

“PM support” in the amount of USD $343.859.07. In the “alternative” budget, the line

item had been relocated and reduced to USD $22,000. The “PM support” entry in the

“actual” budget related to bribes that were intended to be paid to Vietnamese public

officials. SKM ultimately did not lodge a successful tender for the Hai Phong project, and

no illegitimate payments were made in relation to the project.

43. On about 13 July 2011, SKM submitted an expression of interest for a contract in relation

to the Northern Mountains project in Vietnam. Over the following months, a number of

iterations of a draft budget were circulated between Messrs Counihan, Chapple and

Thang. Several of these included a line item for “PM Support”, which fluctuated in value

between zero dollars and USD $240,763. These amounts represented the budget for

bribes that were intended to be paid to Vietnamese public officials. In the final

spreadsheet to be circulated, the “PM costs” had been incorporated into the line item for

payments to Mr Thang, which were listed under “national specialist”. Around this time,

both Mr Chapple and Mr Counihan had conversations with Mr Thang, in which Mr

Thang expressed concerns that he felt nervous and unsafe about the personal risk posed

by his direct involvement in delivering bribes.

44. On 14 November 2011, SKM submitted a tender for the Northern Mountains project.

Before the tender process was concluded, the General Counsel of SKM became aware of

the possibility that members of SODA had caused bribes to be offered to foreign public

officials. She began conducting enquiries into the operations of SODA, which are

described in further detail below. On 11 June 2012, SKM was notified that it was the first

ranked firm in the tender process, and was invited to enter into contract negotiations for

the Northern Mountains project. On 15 June 2012, SKM terminated the Vietnam

conspiracy, and on 20 June 2012, the company withdrew its tender for the Northern

Mountains project. As such, SKM made no illegitimate payments in relation to the

Northern Mountains project.

Benefit obtained by SKM attributable to sequence 3

45. As has been explained, the maximum penalty for sequence 3 is determined by reference

to the ‘benefit’ that was obtained by SKM and that was reasonably attributable to the

offence. While the parties advanced opposing submissions as to the meaning of the word

‘benefit’, there was no dispute about the underlying income and expenditure figures with

respect to sequence 3, which were contained in a further supplementary statement of

facts.

46. During the period relevant to sequence 3, SKM provided services and received payments

in relation to three projects: the VUUP, the Thanh Hoa project, and the Da Nang project.

It was common ground that the gross income received by SKM in respect of these three

projects was AUD $10,130,354. For the purposes of calculating the net benefit, the

parties agreed upon the deductions to be made from the gross income. These deductions

did not include bribery payments, nor did they include any payments made to Mr Thang,

whether lawful or not. Accordingly, it was agreed on this basis that the net benefit

received by SKM in respect of the conduct constituting sequence 3 was AUD $2,680,816.

47. As has been noted at [5*] above, the respondent does not accept that this agreed figure

represented the profit derived from the transactions the subject of sequence 3 but,

rather, was simply the gross amount paid to SKM and related bodies corporate less

third-party payments to Vietnamese contractors for performing the underlying

contractual obligations together with incidental expenses. This characterisation issue as

to whether the agreed net benefit was synonymous with profit is relevant to grounds 2

and 3 of the Crown’s appeal.

The respondent’s post-offence conduct

48. As heavy reliance was placed by the sentencing judge on the respondent’s post-offence

conduct, it is necessary to briefly set out the series of events which followed the

commission of the three offences described above. These events were explained in detail

in the two unchallenged affidavits of Matthew Latham of Jones Day, affirmed on 26

April 2021 and 28 May 2021.

How the offending came to light

49. The offending conduct initially came to light in 2012, during preparations within SKM

for a proposed merger or acquisition. In early 2012, SKM engaged Jones Day to provide

advice in relation to the proposed merger or acquisition process which ultimately led to

the acquisition of SKM by Jacobs Group. In the course of conducting vendor due

diligence enquiries, Mr Latham, a partner of Jones Day, met with Mr Carey, who was

then in charge of SODA. During this conversation, Mr Carey disclosed that SODA had

been paying bribes to foreign public officials in Vietnam for years, under the pretext of

‘training contracts’ or ‘study tours’. He said these practices had been endorsed by

members of SKM’s senior management.

50. SKM’s General Counsel, Chief Operating Officer and CEO were promptly informed of Mr

Carey’s disclosures. The CEO was then Santo Rizutto, who had recently been appointed

following Mr Dougas’ retirement. In April 2012, SKM initiated an internal inquiry into

the allegations made by Mr Carey, which spanned five to six weeks and was ultimately

inconclusive.

51. In light of the inconclusive findings of that inquiry, in June 2012, SKM engaged Jones

Day to conduct an independent investigation into the disclosures made by Mr Carey.

This decision appears to have been made in light of advice by Mr Latham that SKM

would be required to disclose Mr Carey’s allegations to any prospective merger partners

or acquirers, and those parties would likely be dissatisfied with the inconclusive outcome

of the internal inquiry. The investigation became known as “Project Blue” and

scrutinised the activities of SODA over the decade from 2002 to 2012. SKM allowed

Jones Day to interview any of its employees, provided unfettered access to its business

records, and imposed no limitation on the fees that might be charged. The efforts to

secure a merger or acquisition were put on hold pending the outcome of the independent

investigation.

52. The investigation resulted in the completion of a 177-page draft report, presented to

SKM in late August 2012, and a final report, which was completed on 22 November

2012. The final report relevantly concluded that:

(1) Over the relevant period, SODA made a number of payments that were

intended to be directed to foreign public officials in the Philippines and Vietnam;

(2) Four employees or officers of SKM (being Messrs Carey, Chapple, Counihan,

and Aman Mehta) were involved in the arranging or making, or had knowledge of,

illegitimate payments; and,

(3) Emails located during the investigation suggested that some members of SKM’s

senior management, being Messrs Dougas, Read, Katari, Clarke and Linke, may

have been aware of illegitimate conduct in the Philippines and Vietnam. Although

some of these individuals could not be interviewed, those who were interviewed

denied having any knowledge of the illegitimate payments.

53. Evidence was led that SKM “incurred millions of dollars of professional fees to its

advisers, including Jones Day and KPMG, in connection with the Independent

Investigation”.

Assistance provided to the AFP and CDPP

54. Shortly after Jones Day presented the draft Project Blue report in August 2012, the non-

conflicted directors of SKM unanimously voted to report the findings of the investigation

to the Australian Federal Police (AFP). To do so, the company waived legal professional

privilege over the draft Project Blue report and provided it to the AFP in its entirety. At

this time, the matters which were the subject of the report were not known to the AFP.

55. SKM later provided the final Project Blue report to the AFP when it was completed in

November 2012. The sentencing judge accepted the evidence of Mr Latham that due to

the complexity of the conspiracies, “it would have been nigh impossible [for

investigating authorities]... to detect or appreciate the significance of what had occurred

[3]

within SODA without the benefit of the company’s independent investigation.”

56. After the acquisition of SKM (discussed below at [62*]), the respondent continued to

provide assistance to the AFP in relation to investigations against both the respondent

and the individuals involved in the conspiracy. These investigations spanned six years

from the time of the self-report until May 2018. The assistance provided by the

respondent during the investigations included:

(1) providing business records on over 13 occasions, including contract

agreements, invoices, accounting records, profit and loss spreadsheets, and emails;

(2) arranging for the AFP to interview the respondent’s employees, and preparing

draft witness statements for some of those employees;

(3) responding to requests for information from the AFP; and

(4) preparing and providing factual analyses in relation to the Vietnam conspiracy.

57. The respondent continued to assist the AFP and the CDPP after the commencement of

proceedings in May 2018. This assistance included meeting with counsel for the CDPP to

discuss aspects of the Crown case against the individuals accused, and providing the

CDPP with further business records and privileged material associated with the Project

Blue report. On 27 May 2021, the respondent gave an undertaking pursuant to s 16AC of

the Crimes Act 1914 (Cth) to cooperate in the prosecution of Messrs Casamento,

Counihan, Dougas, Linke and Read.

58. The AFP provided a letter of assistance for the purposes of sentence proceedings, which

stated that the respondent’s assistance “provided crucial intelligence and information

otherwise unavailable to the AFP”. Before the sentencing judge, AFP Assistant

Commissioner Peter Crozier gave evidence that the AFP would have been unlikely to

become aware of the offending without the benefit of the respondent’s self-report, and

that there was “no higher level” of assistance in terms of the respondent’s self-report and

subsequent assistance. The sentencing judge accepted Assistant Commissioner Crozier’s

evidence that the company’s response to the offending was “best practice” and its

[4]

assistance was of the highest quality.

Assistance provided to other relevant authorities

59. After the completion of the draft Project Blue report, SKM also reported the findings of

the investigation to a number of other relevant authorities, namely, the World Bank, the

ADB, AusAid, and the Australian Securities and Investments Commission (ASIC).

Neither the World Bank nor the ADB was aware of the conduct which was the subject of

the self-report, and there was no evidence to suggest that any other authorities had

knowledge of the offending conduct. Each agency’s response is briefly explained below.

(1) World Bank: the World Bank undertook its own investigation, which

culminated in the conclusion of a Negotiated Resolution Agreement (NRA) with

SKM in July 2013. The NRA imposed a conditional non-debarment for two and a

half years, meaning that SKM’s eligibility for World Bank funded projects was

subject to certain conditions – including that it implement a new integrity

compliance program and engage an independent compliance monitor. SKM

engaged an independent monitor at its own expense, who conducted a review of

changes which had been made to the company’s anti-bribery and corruption

policies since the offending conduct. The review generally found that SKM’s

compliance policies were rigorous and satisfied World Bank guidelines. SKM

incurred expenses “in the millions of dollars” in connection with this appointment.

(2) ADB: the ADB also undertook an investigation, during which Mr Latham

travelled to Manila to present the findings of the Project Blue report to ADB staff.

In August 2013, the ADB informed SKM that it had determined to enter into a

confidential NRA with the company on substantially the same terms as that agreed

with the World Bank – that is, a conditional non-disbarment for two and a half

years. However, ultimately no such agreement eventuated.

(3) AusAid: Representatives of SKM met with representatives of AusAid, and

provided the agency with information to establish that there had been no corrupt

conduct involving projects administered by AusAid. In July 2013, AusAid prepared

a memorandum for the Director-General of DFAT which concluded that AusAid

had no grounds to terminate agreements with SKM, or to prevent SKM from

tendering for AusAid projects.

(4) ASIC: in September 2012, SKM disclosed the offending conduct by lodging a

‘Misconduct and Breach’ form with ASIC. In October 2012, ASIC notified Jones

Day that it did not intend to take any action, as it considered the matter to fall

within the remit of the AFP, but reserved the right to do so should it be considered

necessary.

Steps taken by the respondent in response to investigation

60. In response to the findings of the internal investigation, SKM took a number of steps to

reform its internal governance mechanisms, and in particular its anti-bribery and

corruption policies. These included:

(1) forming an internal working group to implement 22 recommendations

provided by Jones Day in relation to changes to anti-bribery and corruption risk

management;

(2) introducing a new Code of Conduct which explicitly prohibited the offering of

inducements to public officials;

(3) introducing a requirement for the completion of a bribery and corruption risk

assessment before committing to new projects;

(4) upgrading various internal policies, including SKM’s Whistleblower Policy,

Political and Charitable Donations Policy, and Gifts and Entertainment policy;

(5) updating and expanding existing bribery and corruption training programs for

staff;

(6) introducing policies which discouraged the use of agents, and required the

screening of all new suppliers and sub-consultants for bribery and corruption risk;

and

(7) modifying internal audit practices to more closely scrutinise non-financial risks

such as bribery and corruption.

61. Mr Latham gave evidence that the implementation of these changes lifted SKM’s anti-

bribery and corruption program to ‘global best practice standards’.

The acquisition

62. In September 2013, SKM was acquired by Jacobs Group. The purchase price was paid to

SKM’s shareholders, who were its employees. One of the terms of the merger was that a

proportion of the payment would be placed in an escrow account, to be used as a security

for certain costs which Jacobs might incur after the merger. One of several costs to

which the escrow funds applied was the payment of fines for SKM’s non-compliance

with anti-bribery and corruption laws. The effect of this arrangement is, in essence, that

the former shareholders of SKM will incur the costs of any fine imposed by this Court.

Some reliance was placed on this arrangement by counsel for the respondent, both at

sentence and on appeal, who stressed that the fine would largely be paid by former

employees who bore no responsibility for the offending conduct.

The sentencing judgment

63. An important element of the judgment concerned the proper meaning and application of

s 70.2(5)(b) of the Criminal Code, which provides for the calculation of the maximum

penalty for sequence 3. That section is set out at [9*] above. As I have indicated, at the

sentencing hearing, there was a dispute about whether the word ‘benefit’ within the

meaning of s 70.2(5)(b) meant ‘gross benefit’, as was contended by the Crown, or ‘net

benefit’, as was contended by the respondent. It was agreed that on the former

construction, the applicable maximum penalty would be $30,391,062, whereas on the

latter construction, the maximum penalty would be $11,000,000.

64. The sentencing judge ultimately accepted the respondent’s submission that the word

“benefit” within the meaning of s 70.2(5)(b) of the Criminal Code meant “net benefit”.

As such, her Honour found that the maximum penalty was $11,000,000. Her Honour’s

reasons for adopting this construction are set out at SJ [123]-[141], which relevantly

include the following:

“124 The word ‘benefit’ in s 70.2 of the Criminal Code is defined in s 70.1 as

including ‘any advantage and is not limited to property.’

...

126 If ‘benefit’ in s 70.2 of the Criminal Code means, as the company contended,

net benefit, the maximum penalty for sequence 3 is $11m as three times the net

benefit is $8,042,448 (or, on the corrected figure, $8,042,146.14), which is less

than $11m. If ‘benefit’ means, as the Crown contended, the gross income, the

maximum penalty for sequence 3 is three times $10,130,354, which is

$30,391,062, since this figure is greater than $11m.

127 The Crown was unable to identify any basis on which the value of the contract

would represent the benefit to the company. It conceded that the consequence of

the construction for which it contended was that the maximum penalty for an

offence under s 70.2 of the Criminal Code would be the same for a loss-making

contract, a profitable contract or a break-even contract as long as the contract price

was the same. The only rationale given by the Crown for such a capricious

consequence was that it was easier to work out contract price than to work out net

benefit and it could not be expected that such an important guidepost in the

sentencing process as maximum penalty would require, potentially, detailed

calculations and value judgments.

128 The policy behind the calculation of maximum penalty in s 70.2 is evident. As

Mr Walker submitted, there are powerful reasons why a penalty ought be

calibrated by reference to the gains of the offender. To specify a flat maximum

penalty is, at least potentially, apt to disadvantage the impecunious and benefit the

wealthy. For commercial crimes, such as bribing a foreign official, the law seeks to

achieve the consequence that crime does not pay. In other words, the general

deterrent effect of a sentence is designed to persuade those who might be tempted

to commit the offence that the risk/reward ratio tends in favour of compliance with

the law rather than breach by commission of such a crime. To calibrate the penalty

by reference to the benefit received makes the penalty both rational and

commensurate (since three times a sum, whether measured as profit or damages,

is accepted to be penal).

129 Further, the legislative policy accords with the plain meaning of the word

‘benefit’. The contract sum may confer a benefit, but it also may not. Thus, as Mr

Walker submitted, liquidators are entitled to disclaim onerous contracts: that is,

contracts which do not confer a benefit on the company for the reason that they are

unprofitable.

130 This construction of s 70.2(5)(b) of the Criminal Code also makes sense in the

context of s 70.2(5)(c), which selects turnover as a default determinant of the

maximum penalty. Whereas benefit requires a comparison between income and

the costs incurred in earning that income, turnover, which is referable to gross

income, requires no such comparison. It would be odd if the relevant integer in s

70.2(5)(b) were, in effect, the same as the integer in s 70.2(5)(c). The evident

purpose of s 70.2(5) is to provide a significant incentive to offenders, such as the

company in the present case, to establish the benefit obtained from the offending

conduct, which, especially for large companies with substantial businesses, is likely

to be less than 10% of their annual turnover. An offender is in a pre-eminent

position to establish the benefit obtained since both the knowledge and the means

of proof are at its disposal: Blatch v Archer [1774] EngR 2; (1774) 1 Cowp 63 at 65

(Lord Mansfield CJ); [1774] EngR 2; (1774) 98 ER 969.

131 The construction for which Mr Walker contended is consistent with the

legislative intention to be derived from Chapter 4 of the Criminal Code, which is

entitled ‘The integrity and security of the international community and foreign

governments’. Division 70, entitled ‘Bribery of foreign public officials’ is intended

to facilitate Australia’s compliance with the obligations undertaken by it as a party

to the OECD Convention on Combating Bribery of Public Officials in

International Business Transactions which came into force on 15 February 1999

(the Convention). The Convention will be addressed further below in the context of

the objective seriousness of the offence. However, for present purposes, it is

important to note that article 3.1 of the Convention requires criminal penalties to

be ‘proportionate and dissuasive’. Thus, given the evident purpose of Division 70,

an interpretation of the provisions which is consistent with Australia’s

international obligations is to be preferred: see, Minister for Immigration and

Ethnic Affairs v Teoh [1995] HCA 20; (1995) 183 CLR 273 at 287 (Mason CJ and

Deane J); [1995] HCA 20 and the Malaysian Declaration Case (2011) 244 CLR

144; [2011] HCA 32 at [98] (Gummow, Hayne, Crennan and Bell JJ).

132 Where offenders are natural persons, maximum penalties for serious offences

are generally expressed in terms of years of imprisonment on the basis of the

assumption that this is an appropriate measure of punishment since we all have

finite lives, which are assumed to be of equal value. For companies, the calculus of

penalty is more difficult. A requirement of proportionality invites the question:

proportional to what? The obvious answer is that the penalty must be

proportionate to the benefit obtained by the offender for the criminal conduct. The

relationship between the offending conduct and the benefit (and therefore the

maximum penalty) is evident from the wording of s 70.2(5)(b): the benefit must be

obtained and must be reasonably attributable to the conduct constituting the

offence. In this context, s 70.2(5)(b) of the Criminal Code can be seen to be the

primary determinant of maximum penalty and s 70.2(5)(c) as being the evidentiary

incentive on an offender to facilitate proof of the benefit.

133 For a penalty to be dissuasive, it must be sufficiently high to deter the conduct,

both prospectively (in terms of general deterrence) and retrospectively (in terms of

specific deterrence). This purpose is achieved by the multiplier of three in s

70.2(5)(b).

134 The construction of maximum penalty on the basis for which Mr Walker

contended would require, in many cases (though not the present because of the

agreement on figures), a judicial determination of, first, whether the quantum of

benefit could be ascertained and, second, if so, the actual quantum. I reject the

Crown’s submission that this tells against the construction for which Mr Walker

contended. The assessment of benefit (or, more usually, its converse, loss) is a task

commonly undertaken by courts. Indeed the measure of damages for tort (the

amount of money required to put the plaintiff in the position he or she would have

been in had the tort not occurred) and contract (the amount of money required to

put the plaintiff in the position he or she would have been in had the contract been

performed) illustrate that it is a task performed as a matter of course by a court in

every case where such an assessment is required. Courts exercising equitable

jurisdiction may be required to determine the benefit received by errant fiduciaries

before making orders for disgorgement or restitution. The comparative difficulty of

the task is no barrier to its being required.

135 There are analogies in the criminal context which are of assistance.

136 In Mansfield v Director of Public Prosecutions (WA) (2007) 33 WAR 227;

[2007] WASCA 39 (Mansfield), the offender had disposed of shares while in

possession of inside information. The Director of Public Prosecutions for Western

Australia (the Director) sought to confiscate the whole of the proceeds of the sale of

the shares under the Criminal Property Confiscation Act 2000 (WA). Section

16(1)(c) of the Act provided that the Director could apply for a criminal benefit

declaration in respect of ‘property ... wholly or partly derived or realised, directly

or indirectly, as a result of the person’s involvement in the commission of the ...

offence, whether or not it was lawfully acquired’. Section 145(1) of the Act provided

that a person had ‘acquired a criminal benefit if ... any property ... that is a

constituent of the person’s wealth was directly or indirectly acquired as a result of

the person’s involvement in the commission of a confiscation offence, whether or

not the property ... was lawfully acquired.’ The Director’s submission that the

whole of the proceeds of sale of the shares was acquired as a result of the offender’s

‘sale of the shares with inside information’ was rejected.

137 The Court (Steytler P, McLure and Buss JJA agreeing) said at [49]:

‘I accept, as did the courts in Nieves, Peterson and Pedersen

that the relevant provisions of the Act are concerned with

benefits and not with net profits, with the consequence that

expenses incurred in the course of committing a crime will

not ordinarily be taken into account in assessing the value of

the benefit obtained. But the point remains that the

assessed value of the benefit (whether it be in the

form of property, a service, an advantage or

something else) must be no more than what was

acquired (or presumed to have been acquired in the

absence of proof to the contrary) as a result of the

person’s involvement in the commission of the

offence (in a case falling within s 145(1)(a)). In a case

involving the supply of drugs for money, rather than in

return for some other property, service, advantage or

benefit, the whole of the money will be the benefit derived

(if the offender is not merely a conduit, as in Peterson)

because the whole of the purchase price will be the benefit

that has been derived, or acquired by the offender as a result

of involvement in the commission of the transaction giving

rise to the offence. However, that will not necessarily be so

in cases in which the sale of an item is not absolutely

prohibited, but is only prohibited in specified

circumstances. In such a case, depending upon the nature of

the prohibition, and the effect of its breach, the property,

advantage or benefit that is acquired by the offender may be

different to, or less than, the sale price.’

138 This reasoning is also consistent with the approach of McCallum J in

Commissioner of the Australian Federal Police v Fysh [2013] NSWSC 81; (2013)

224 A Crim R 523 in the context of proceeds of crime derived from insider trading.

Her Honour said, at [21]:

‘Based on the ordinary usage of the language of those

provisions, I would have little difficulty in concluding that

the value of the benefit derived from the sale of shares

purchased unlawfully with inside information was the net

amount received upon sale of the shares after deducting the

original purchase price. In its ordinary meaning, the term

‘benefits’ means the good or gain received. In the present

context, the term may be understood to refer to the amount

by which Dr Fysh's financial position had improved at the

conclusion of the transaction as a result of his having sold

the shares for more than he paid for them. If he had sold the

shares for the price for which he bought them (or less), one

would readily accept that he derived no ‘benefit’ from his

offending.’

139 The reasoning was also followed and applied in Director of Public

Prosecutions (Cth) v Gay (2015) 26 Tas R 149; [2015] TASSC 15, which was also an

offence of insider trading. Estcourt J considered that an assessment of the value of

the benefits derived from the commission of the offence necessarily required the

cost price of the shares to be brought to account against the gross proceeds of sale.

In Director of Public Prosecutions (Cth) v Gay (No 2) (2015) 256 A Crim R 194;

[2015] TASSC 58, Estcourt J held, at [34], that the ‘benefit’ was the difference

between the price achieved on the sale of the shares and the ‘price that he would

have achieved at the earliest time that he was lawfully able to dispose of those

shares, and the market had been fully informed by reason of the inside or price

sensitive information being generally available.’ An assessment which requires a

comparison between a known figure and a hypothetical counterfactual is, as

referred to above, a task commonly undertaken by courts in various contexts.

140 The approach of assessing the net benefit, which I have found is the correct

one, is consistent with comparable decisions in the United Kingdom: see, for

example, Director of Serious Fraud Office v Airbus SE [2021] Lloyd’s Rep FC 159;

[2020] 1 WLUK 435 at [66] (Sharp P).

141 For these reasons, the maximum penalty for the offence in sequence 3 is

$11m.” (emphasis in original)

65. Having determined the maximum penalty for sequence 3, the sentencing judge then

proceeded to consider the matters enumerated in s 16A of the Crimes Act, which must be

taken into account in determining sentences for federal offences.

66. Her Honour noted that the offences constituted a course of conduct which spanned over

a decade, and considered them to “paradigm examples of the type of conduct which the

Convention and the legislation enacted by Australia to fulfil its obligations under the

[5]

Convention was designed to criminalise and prevent”. Her Honour considered that

the individuals involved were aware of the criminality of their conduct, and “took

elaborate steps to hide their offending from those outside the inner circle within the

company so that it would not be detected by the company’s usual compliance

[6]

procedures.”

67. Her Honour noted, however, that the offending conduct was confined to a small area of

the company’s operations, and accepted the respondent’s submission that the company’s

liability was “based on the conduct of two senior executives, not upon a deficient

[7]

corporate culture”.

68. Her Honour considered it important that the charges concerned conspiracy to cause an

offer of a bribe to a foreign official, rather than the substantive offence of paying a bribe

to a foreign official. In her view, it was “of particular importance when assessing the

company’s degree of criminality” to note that the company was not being sentenced “for

the payment of bribes per se”, but rather for conspiring to offer bribes. Her Honour

noted that she was, however, entitled to make findings about, and take into account,

facts relating to the amounts that were in fact paid as bribes after the formation of the

[8]

conspiracy, citing Savvas v The Queen (1995) 183 CLR 1; [1995] HCA 29. The

amounts actually paid as bribes referable to each offence were:

(1) in relation to sequence 1 – approximately AUD $157,795.13;

(2) in relation to sequence 2 – approximately AUD $80,962.31; and

(3) in relation to sequence 3 – approximately AUD $204,661.21.

69. Her Honour regarded each of the three sequences of offending to fall within the mid-

[9]

range of objective seriousness for the offence. She noted that while there was no

suggestion that the company’s offending had resulted in the provision of incompetent or

substandard services, “the acts performed in pursuance of the two conspiracies

corrupted the selection process for several contracts and thereby tended to reinforce the

assumption... that corruption of public officials was part of the way of doing business in

those countries.” She accepted “that the offending conduct has caused damage in this

[10]

sense.”

70. In relation to the respondent’s remorse, contrition and rehabilitation, the sentencing

judge found that the timing of the company’s self-report “indicate[d] that the company’s

corporate culture was law-abiding and vigilant to detect and address errant conduct by

[11]

its employees and officers.”

Her Honour remarked that in self-reporting, the

company had confessed to an “unknown crime”, motivated “not by ‘fear of discovery or

acceptance of the likelihood of proof of guilt’ but rather by ‘remorse and contrition’”

(citing AB v The Queen (1999) 198 CLR 111; [1999] HCA 46 at [113], per Hayne J). She

considered that, through its swift and costly response to the allegations of misconduct

once they came to light, the company “demonstrated instantaneous remorse and

contrition... and set about its own rehabilitation through prompt termination of the

services of anyone who was suspected of being involved and a rigorous analysis of its

[12]

own procedures.”

71. To reflect the respondent’s early guilty pleas, the sentencing judge allowed a discount of

[13]

25% from the fine that would otherwise be given for each offence.

Her Honour also

placed substantial weight on the respondent’s past and future assistance to law

enforcement agencies, for which she allowed a 30% and 10% sentencing discount

respectively. She said she had made these discounts because the matter involved “a truly

extraordinary case of self-reporting of a practically undetectable crime and the provision

of substantial assistance to the investigating and prosecuting authorities, without which

it would have been almost impossible to bring either the company or the individual[s]

[14]

accused (who are yet to be tried) to justice.”

72. In relation to the respondent’s past assistance to authorities, her Honour considered it

important that, before the respondent’s self-report, nobody but the parties to the

[15]

conspiracy and the recipients of the bribes knew of the offending conduct.

She

accepted that the respondent’s assistance to authorities enabled the individuals involved

in the conspiracy to be charged and prosecuted, and similarly allowed the company itself

to be charged and prosecuted. She stated, “it is difficult to conceive of anything else that

the company could have done to facilitate the administration of justice”.

[16]

73. In this context, her Honour said the following:

“While a usual purpose of a sentence is to punish the offender, denounce its

conduct and deter the commission of like offences, this sentence is required to

fulfil a further, and perhaps even more important purpose: to encourage those

companies who learn of offending within their own operations to disclose it, even

though it might otherwise never be revealed and even though it might, as in the

present case, lead to the company and its officers and employees being prosecuted

for an offence which would otherwise have gone unnoticed by the investigating

authorities. This purpose can be achieved through rewarding the company for its

wholly exemplary and extraordinary assistance by applying a substantial discount

to the sentence that would otherwise be imposed.”

74. In relation to future assistance to authorities, her Honour noted that the respondent had

made an undertaking to provide assistance in the proceedings against its former

employees who were parties to the conspiracy. She described this as “future assistance of

[17]

the highest order”.

75. Her Honour considered that there was no need to give particular weight to specific

[18]

deterrence, as she regarded the company’s post-offence conduct to be “exemplary”.

In relation to general deterrence, she said she had taken into account “the need to deter

others from committing similar crimes, as well as the need to encourage corporations

[19]

such as the company to self-report.”

As shall be seen, in ground 3 of its appeal, the

Crown contends that, notwithstanding this indication in the sentencing judgment, the

sentencing judge constructively failed to take general deterrence into account.

76. Her Honour also took into account the substantial delay between the company’s self-

report and the laying of charges by the prosecutor. She found that there were three

periods of delay which were not adequately explained, and which combined to a total of

about three years. She considered this to be a “significant mitigating factor”.

77. Taking into account the above factors, her Honour imposed the following sentences

(with the reductions reflecting the discounts for early pleas and assistance):

(1) sequence 1 – a fine of $67,500, reduced from a nominal starting point of

$150,000;

(2) sequence 2 – a fine of $54,000, reduced from a nominal starting point of

$120,000; and

(3) sequence 3 – a fine of $1,350,000, reduced from a nominal starting point of

$3,000,000.

Appeal Ground 1

78. The first ground of appeal, the terms of which have been set out at [15*] above, concerns

the proper construction of s 70.2(5)(b) of the Criminal Code and, in particular, the

meaning of the word “benefit” as used in that sub-section. On this issue turns the

calculation of the maximum penalty for sequence 3.

79. At the most general level, the Crown contended that the term “benefit”, defined to

include “any advantage”, was of broad compass and would include any moneys received,

directly or indirectly, as a result of the offending conduct. This would include, in the case

of contracts secured from foreign governments, moneys payable under such contracts

including the contract price.

80. It was submitted that the receipt of “money flows” as a result of contractual payments

was advantageous, and thus a “benefit”, even if performance of the contract in question

was not profitable, i.e. the contract or transaction to which the bribe related was break-

even or loss-making. In other words, any payment of money in relation to the

transaction was argued by the Crown to be a benefit or advantage within the meaning of

the section, even if insufficient to defray or balance the cost of performing the contract

or contracts in question.

81. The Crown pointed out that the amendments introduced in 2010 which led to the form

of s 70.2(5) of the Criminal Code were intended radically to increase the penalties

capable of being imposed for an offence contrary to s 70.2(1) of the Criminal Code. Thus,

under the predecessor provision, the maximum monetary penalty was $330,000,

whereas under s 70.2(5), the “minimum” maximum penalty was $11 million, an increase

by a factor of approximately 33.

82. Mr Gleeson SC, who appeared for the Crown, referred to passages from the Explanatory

Memorandum concerning the maximum penalties for both individuals and corporate

defendants. He contended that the mischief to which the amendments introduced in

2010 were directed was to avoid the risk that a monetary penalty was simply perceived

as a “cost of doing business”. It was submitted that there needed to be a sufficient

deterrent to avoid cynical breaches, hence the significant increases in monetary penalty

introduced by the amendments.

83. In this context, it was submitted that the Crown’s construction of s 70.2(5) was

consistent with and advanced the statutory purpose underpinning the section.

84. The Crown also submitted that the word “benefit” in s 70.2(1)(a) and (b) of the Criminal

Code simply refers, in the context of a monetary bribe, to the payment of money to the

foreign official, irrespective of what it may have cost the foreign official to accept the

payment. In the same way, it was submitted that the benefit to the corporation must

simply mean or at least include any payment received. In making this submission, the

Crown called in aid the principle that, where the same word is used in a statutory

provision, it will ordinarily attract the same meaning, citing in this context Tabcorp

Holdings Ltd v Victoria [2016] HCA 4; (2016) 328 ALR 375 (Tabcorp) at [65] (French

CJ, Kiefel, Bell, Keane and Gordon JJ); Selig v Wealthsure Pty Ltd (2015) 255 CLR 661;

[2015] HCA 18 at [29] (French CJ, Kiefel, Bell and Keane JJ); and Mondelez Australia

Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries

Union [2020] HCA 29; (2020) 381 ALR 601 at [95] (Edelman J).

85. The Crown further contended that the construction advanced by the respondent and

favoured by the primary judge required the word “benefit” to be read as “net benefit”

and that, had the legislature intended to refer to a trebling of profits in s 70.2(5)(b), it

would have done so in terms.

86. The Crown also attacked particular aspects of the primary judge’s reasoning on the

critical question of construction. Thus, it was submitted that her Honour’s observation at

[128] that:

“[t]o calibrate the penalty by reference to the benefit received makes the penalty

both rational and commensurate (since three times a sum, whether measured as

profit or damages, is accepted to be penal)”

illegitimately transposed a concern for proportionality, which is conventionally an aspect of

the synthetic sentencing process, to the construction of a provision concerned with identifying

the maximum penalty.

87. The Crown also criticised the primary judge’s reference to and apparent analogy with

liquidators’ disclaimers of onerous contracts (at [129]) and the reliance on dicta drawn

from cases involving proceeds of crime legislation (at [136]-[139]).

Consideration

88. It is first necessary to note some matters of statutory background.

89. First, the formulation of a penalty being expressed by reference to a multiple of benefits

obtained by the offending party did not originate with s 70.2(5) of the Criminal Code.

Similarly structured and expressed penalty provisions were introduced in 2007 and

2009 in ss 76(1A), 45AF(3) and 45AG(3) of the Competition and Consumer Act 2010

(Cth) in relation to a number of offences against that Act, and related civil penalty

provisions.

90. Secondly, both parties referred to the following extract from the Explanatory

[20]

Memorandum to the Bill that introduced s 70.2(5):

“The temptation to bribe a foreign public official increases with the size of a

potential transaction/benefit. The alternative sanctions available under subsection

70.2(5) have the effect of penalising a body corporate proportionately to either the

benefit obtained, or 10% of the annual turnover of the body corporate, so that the

risk of being successfully prosecuted for this offence outweighs the potential

benefit from the transaction/benefit procured through the bribe.”

91. It should be noted that s 70.2(5) operates in a “stepped” way: 100,000 penalty units

(relevantly $11 million) is the “minimum” maximum fine; if the benefit obtained can be

identified and, once trebled, exceeds $11 million, it in turn becomes the maximum; and

finally, if the court cannot determine the value of the benefit, the maximum penalty

becomes (assuming it exceeds $11 million) 10% of the body corporate’s annual turnover

during the period of 12 months preceding the commission of the offence. As Mr Gleeson

pointed out, s 70.2(5)(c) will only come into play when the relevant body corporate’s

turnover exceeds $110 million because, otherwise, s 70.2(5)(a) supplies the maximum

penalty.

92. In an important submission, the respondent noted, by reference to the language of

proportionality in the Explanatory Memorandum, that:

“the “three times multiplier” in the provision only works proportionately if it

applies to the benefit calculated as what the company in fact gained from the

conduct. To illustrate, consider a situation involving two different contracts. The

first has a price of $50 million (expenses of $49 million), whilst the second has a

price of $5 million (expenses of $4 million). Each yields a benefit to the company

of $1 million. On the Crown’s preferred construction, the maximum penalty for the

first contract would be ten times higher than the second. That is plainly

disproportionate. It does not reflect the relevant criminality involved. The

competitively priced contactor is penalised, proportionately, more than the

rapacious one.” (emphasis added)

93. The Explanatory Memorandum’s reference to the intended proportionality of the penalty

provisions also supplies an answer to one of the Crown’s criticisms of the primary

judge’s analysis: see [86*] above. Whilst proportionality is an important sentencing

consideration and, in the context of s 16A(1) of the Crimes Act, a sentence must be of a

severity appropriate in all the circumstances of the offence, particular maximum

penalties may also be set so that they allow for the imposition of sentences of a severity

which is proportionate to the offence in question. This may be seen most obviously in

instances where an element of aggravation is built into an offence. The maximum

penalty for such an offence will typically be higher than for the non-aggravated form of

the same offence: compare, for example, ss 61I and 61J of the Crimes Act 1900 (NSW).

94. The respondent’s submission in respect of proportionality noted at [92*] above is a

powerful one and accords with the primary judge’s reasoning at SJ [130].

95. More fundamentally, however, whilst winning or retaining a contract through the

payment of a bribe would no doubt be directly or indirectly attributable to the

commission of the offence, the value of the benefit of winning such a contract lies in the

opportunity for monetary gain from its performance. There simply will be no benefit to

an offender if the body corporate which has engaged in the bribery breaks even or makes

a loss from its contractual performance. On either of these scenarios, it will not have

obtained any advantage from its commission of the offence. This does not, of course,

mean it will escape penalty: it will still be liable for a maximum of $11 million (or more if

it is a company with an annual turnover in excess of $110 million and the value of the

benefit cannot be determined).

96. Contrary to the Crown’s submissions, the construction preferred by the primary judge

does not involve reading the word “net” into s 70.2(5) to qualify “benefit”. It simply

means understanding “benefit” in the sense in which it is defined in s 70.1 of the

Criminal Code, namely “any advantage”. It could equally be objected of the Crown’s

preferred construction that it involves reading the word “gross” into “value of the

benefit”.

97. In relation to the Crown’s submission recorded at [82*] above, which placed reliance on

the Explanatory Memorandum, the need for significantly increased deterrence was and

is advanced on either of the competing constructions advanced by the parties. Both

constructions resulted in a radically increased penalty. In these circumstances, I do not

see that anything in the Explanatory Memorandum favours the Crown’s construction

over that of the respondent. As already explained, however, the converse is not the case.

The respondent’s construction in supported by the reference to proportionality in the

Explanatory Memorandum: see [92*]-[94*].

98. As to the Crown’s reliance on the principle and authorities referred to in [84*] above,

that principle of statutory interpretation is not absolute, hence the High Court’s

deliberate use of the word “ordinarily” in Tabcorp at [65]. Context, moreover,

sometimes requires or results in different meanings being ascribed to cognate terms:

Kline v Official Secretary to the Governor-General (2013) 249 CLR 645; [2013] HCA 52

at [32]. In Registrar of Titles (WA) v Franzon [1975] HCA 41; (1975) 132 CLR 611 at 618;

[1975] HCA 41, Mason J said that it is “a sound rule of construction to give the same

meaning to the same words operating in different parts of a statute unless there is

reason to do otherwise” (emphasis added).

99. The benefit being referred to in s 70.2(1) of the Criminal Code (see [7*] above) is that

received or obtained by the recipient of the bribe. It is plain why benefit in that context

should be very broadly defined, as it is by s 70.1. The benefit may be monetary or not,

and it need not be proprietary. By way of contrast, the focus of s 70.2(5) of the Criminal

Code is on the “value of the benefit” to be determined. That connotes something that

falls to be assessed if it can be. Section 70.2(5)(c) contemplates that it may not always be

possible to do so. The benefit is relevantly the contract secured by way of payment of the

bribe. The value of the contract to the party required to perform it is not the contract

price per se, but the monetary advantage that will be derived from its performance. That

value or benefit or advantage is not the contract price but the contract price less the costs

of its performance. There is also much force in the observations made by the sentencing

judge at [130] of her reasons, reproduced at [64 *] above, drawing a contrast between

“benefit” and “turnover”.

100. There is merit in the Crown’s attack on the analogy drawn by the primary judge with

disclaimers of onerous contacts by liquidators, but this aspect of her Honour’s reasoning

was not critical to her decision, nor were the dicta drawn from decisions concerned with

proceeds of crime legislation. The exercise before the primary judge was one of statutory

construction, where the principal focus must always be on the text and context of the

statutory provisions under consideration.

101. In my view, for the reasons given at [88*]-[99*] above, which largely reflect those of the

primary judge, the construction given by her Honour to s 70.2(5) of the Criminal Code

was correct. The first ground of appeal should be rejected.

Ground 2

102. By its second ground of appeal, the Crown contended that:

“The sentencing judge erred in relation to sequence 3 in not taking into account the

material consideration that the fine imposed would be treated as a cost of doing

business, particularly when regard is had to the fact that the fine imposed (SJ

[195]) was significantly less than the amount of profit made from the offending

conduct (SJ [81]).”

103. The Crown made the following written submission in support of this ground:

“Imposing a fine at an amount that permits the offender to retain almost half of the

profits made from the crime is flatly inconsistent with the legislative amendment

made in 2010. Nor can that inconsistency be avoided by bringing to account the

respondent’s expenses incurred in uncovering the wrongdoing. There was evidence

that it spent millions in professional fees: J[107]. But the fees it spent in

uncovering its own wrongdoing are brought to bear in the instinctive synthesis in

crediting its past cooperation, for which an Ellis discount was applied. It cannot be

double counted so as to justify the startling result that the fine has been reduced to

a trifling cost of doing business.

That the fine imposed was only half the profit gained from sequence three was a

material consideration, in light of the legislative purpose of s 70.2(5), that the

sentencing judge did not advert to in explicit terms, and which she can be

understood to have overlooked by not mentioning it. Had it been considered, one

would expect her Honour to have addressed it. Especially where the penalty regime

was designed to ensure that the penalty for making bribes is not a cost of doing

business, the sentencing judge was required to reconcile the fine with the amount

which the respondent retained by way of profit. That this was not done constitutes

specific error.”

104. The Crown’s reference in this submission to “specific error” reflects its recognition that,

on a Crown appeal, two stages are involved: the Crown has to establish an error in the

House v The King (1936) 55 CLR 499; [1936] HCA 40 sense, but must also negate any

reason why the discretion of the Court of Criminal Appeal not to interfere should be

exercised: R v Hernando (2002) 136 A Crim R 451; [2002] NSWCCA 489 at [12]; Green

v The Queen (2010) 244 CLR 462; [2011] HCA 49 (Green) at [1]; CMB v Attorney-

General for New South Wales (2015) 256 CLR 346; [2015] HCA 9 (CMB) at [54].

105. The High Court has emphasised that the purpose of s 5D of the Criminal Appeal Act

which authorises Crown appeals does not extend to the general correction of error made

by sentencing judges: Green at [36]. Usually, for the discretion conferred on the Court by

s 5D to be exercised favourably to the Crown, the issue presented by the ground of

appeal must be one which, after specific error has been found, calls for the laying down

of principles for the guidance of sentencing courts on an important question of principle:

Griffiths v The Queen (1977) 137 CLR 293 at 310; [1977] HCA 44; Everett v The Queen

[1994] HCA 49; (1994) 181 CLR 295 at 300; [1994] HCA 49; Lacey v Attorney-General

of Queensland [2011] HCA 10; (2011) 242 CLR 573 at 581; [2011] HCA 10 at [16].

106. This leads one to ask what is the specific error or question of principle sought to be

raised by the Crown’s second ground of appeal, in relation to which it could be said that

guidance for sentencing courts is required. It is not stated with particular clarity in the

second ground of appeal nor in the written submissions.

107. If the principle is said to be that a fine should never be less than the benefit secured by

the party that proffered the bribe, that would be far too absolute a statement and a fetter

on the broad sentencing discretion. In any event, the fine of $3 million determined by

sentencing judge before discounts for an early guilty plea and past and prospective

cooperation was greater than the agreed amount of benefit.

108. If the principle posited is simply that a sentencing judge, in fixing a penalty, should be

conscious of the amount of benefit secured or obtained by the party proffering the bribe,

there is no basis for thinking that the sentencing judge was not conscious of that amount

in the present case. Indeed, in every case other than where the value of the benefit

cannot be determined, the sentencing judge, in order to determine the applicable

maximum sentence, will need to determine the value of the benefit so that he or she

knows whether or not the maximum is supplied by s 70.2(5)(a) or (b).

109. Insofar as the Crown sought to erect a principle around the notion that too lenient a fine

may result in bribes simply being treated as a cost of doing business, this proposition is

really one that a sentencing judge must take general and specific deterrence into

account. That is expressly provided for by s 16A(2)(j) and (ja) of the Crimes Act 1914

(Cth) and is not a matter in relation to which sentencing courts require guidance of a

kind that may warrant a positive exercise of discretion on a Crown appeal.

110. In the context of ground 2 and related submissions making reference to the need for a

fine not to be so low or lenient that it amounts to little more than a cost of doing

business, the Crown called in aid two authorities from the civil penalty context, both

being decisions of the Full Court of the Federal Court. In Volkswagen Aktiengesellschaft

v Australian Competition and Consumer Commission (2021) 284 FCR 24; [2021]

FCAFC 49 (Volkswagen) at [152], the Full Court of the Federal Court said:

“Indeed, in cases where the contravening conduct is concealed and not easily

detected, deterrence (both general and specific) may justify a penalty that is many

multiples of the profits made from the contravening conduct. If the contravening

conduct is concealed and the risk of detection is low, a penalty equivalent to or just

exceeding the profits earned may be regarded by the contravener as “an

acceptable cost of doing business” on a strict cost-benefit analysis because of the

overall likelihood of financial gain from the conduct. That principle has been long

recognised in the context of cartel contraventions, which are typically concealed

and difficult to detect ... The principle is equally applicable in the context of

contraventions of the Consumer Law that involve concealed conduct.” (emphasis

added)

In Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287

ALR 249; [2012] FCAFC 20 at [62], the Full Court said:

“There may be room for debate as to the proper place of deterrence in the

punishment of some kinds of offences, such as crimes of passion; but in relation to

offences of calculation by a corporation where the only punishment is a fine, the

punishment must be fixed with a view to ensuring that the penalty is not such as to

be regarded by that offender or others as an acceptable cost of doing business. The

primary judge was right to proceed on the basis that the claims of deterrence in

this case were so strong as to warrant a penalty that would upset any calculations

of profitability. The purpose of Optus’s conduct was to generate sales, and hence,

profits. The advertising deployed by Optus was calculated to win business from its

rivals. The same share of business might not have been attracted by a more

balanced presentation of the advantages of the plans. There is no reason to doubt

that Optus knows its business sufficiently well that it is safe to proceed on the

footing that its course of conduct in the campaign reflected informed calculation.

While one cannot isolate the profits attributable to the campaign, it is necessary

and desirable to impose a penalty which is apt to affect in a substantial way the

profitability of Optus’s misconduct”.

111. The remarks in Volkswagen were made in the context of cases where the contravening

conduct was concealed and not easily detected. In the present case, although initially

concealed, the conduct was revealed by the company itself. Discretionary sentencing

considerations regarding deterrence fall for consideration in the very particular and

unusual circumstances of the present case. Moreover, the Full Court in Volkswagen was

properly not seeking to lay down some rigid or fixed principle of sentencing; it

appropriately prefaced its observations with the phrase “may justify”.

112. The conduct of Optus in the second Federal Court decision relied upon was plainly such

that it called out for strong specific and general deterrence. Once again, the facts of the

present case are very different. The experienced sentencing judge was at pains to expose

the unusual circumstances in which knowledge of the offending had come to the

attention of law enforcement authorities, the costs to SKM in investigating and laying

bare the conduct which led to the charging, and the high degree of ongoing co-operation

volunteered and delivered. Nobody reading her Honour’s reasons in detail could

conclude that, in substance, the respondent came out ahead financially as a result of the

penalty ultimately imposed or that it took the attitude that the conduct was simply a cost

of doing business.

113. Returning to the sentencing judge’s decision, irrespective of whether the agreed “benefit”

figure of $2,680,816 was synonymous with the profit derived by SKM from sequence 3

(the respondent submitted it was not), it is to be noted that the sentencing judge was of

the view that the fine which would have been imposed, but for the plea of guilty and

discount for assistance, was $3 million. This was, of course, greater than the agreed

benefit. If that agreed benefit was not in fact commensurate with SKM’s actual profit

after additional expenses such as indirect fixed and variable costs were taken into

account, the disparity between the $3 million and the true profit would have been even

greater.

114. Accordingly, in fixing a notional starting point of $3 million, prior to discounts, it could

not be said that her Honour failed to take into account a material consideration. The fact

that I may have been inclined to identify a higher amount is not to the point, except only

to the extent that the ultimate penalty may be vitiated by some other error of principle or

excessively lenient so as to be manifestly inadequate. That is the subject of the third and

fourth grounds of appeal, dealt with below.

115. Although her Honour assessed the offending in respect of sequences 1, 2 and 3 to be at

the mid-range of objective seriousness, she also found significant remorse and the

absence of a widespread culture of unlawful conduct. Her Honour was also mindful of

the fact that the crime was self-reported. This aspect was conceptually different from

and anterior to the early guilty plea: it was the self-reporting which allowed the charges

to be laid in the first place.

116. I do not consider in the circumstances of this case that any error of principle was

committed by the sentencing judge of the kind referred to in appeal ground 2.

Grounds 3 and 4

117. By its third ground of appeal, the Crown contended that:

“In relation to all three sequences, the sentencing judge applied a wrong principle,

or constructively failed to take general deterrence into account, in reasoning that

general deterrence of others is achieved in this case not by punishing and

denouncing the respondent's conduct with a substantial fine but rather by

rewarding it for disclosing its offending (SJ (187]).”

118. Ground 4 is closely related to ground 3 and is that the sentence imposed in respect of

sequence 3 was manifestly inadequate.

119. Paragraph [187] of the sentencing judgment upon which appeal ground 3 focuses

appears under the heading “General Deterrence” and is in the following terms:

“The purpose of general deterrence is to deter others from committing the same or

a similar crime. This is commonly regarded as being best achieved by the

imposition of a punishment on the wrongdoer. But in the present case, for the

reasons given above, the prevention of this particular crime is more readily

advanced by rewarding the self-reporting company, who assists the investigating

and prosecuting authorities, rather than by punishing it with a substantial fine,

with all the opprobrium associated with such a penalty. Nonetheless, I have taken

into account the need to deter others from committing similar crimes, as well as

the need to encourage corporations such as the company to self-report.”

(emphasis added)

120. It was submitted by the respondent that the sentencing judge’s observations in respect of

general deterrence must be considered in the context of SJ [181]-[184]:

“181 While a usual purpose of a sentence is to punish the offender, denounce its

conduct and deter the commission of like offences, this sentence is required to

fulfil a further, and perhaps even more important purpose: to encourage those

companies who learn of offending within their own operations to disclose it, even

though it might otherwise never be revealed and even though it might, as in the

present case, lead to the company and its officers and employees being prosecuted

for an offence which would otherwise have gone unnoticed by the investigating

authorities. This purpose can be achieved through rewarding the company for its

wholly exemplary and extraordinary assistance by applying a substantial

discount to the sentence that would otherwise be imposed.

182 To achieve this purpose in this way is consistent with the approach taken in

other jurisdictions, where different measures have been taken to prevent the

corruption of foreign public officials. For example, several jurisdictions (although

not yet Australia) have introduced deferred prosecution agreements (DPAs),

whereby corporations are encouraged to self-report such crimes when they come to

their attention. The way in which such agreements operate was described by Sir

Brian Leveson in Serious Fraud Office v XYZ Limited [2016] Lloyd’s Rep FC 517;

[2016] 7 WLUK 211 at [1] as follows:

“By s. 45 and Schedule 17 of the Crime and Courts Act 2013 (‘the 2013

Act’), a new mechanism of deferred prosecution agreement (‘DPA’) was

introduced into the law whereby an agreement may be reached between

a designated prosecutor and an organisation facing prosecution for

certain economic or financial offences. The effect of such an agreement

is that proceedings are instituted by preferring a bill of indictment, but

then deferred on terms: these terms can include the payment of a

financial penalty, compensation, payment to charity and disgorgement

of profit along with implementation of a compliance programme, co-

operation with the investigation and payment of costs. If, within the

specified time, the terms of the agreement are met, proceedings are

discontinued; a breach of the terms of the agreement can lead to the

suspension being lifted and the prosecution pursued.”

183 His Honour said, at [33]:

“Putting these features together, there is no doubt that XYZ’s conduct

was very serious both in terms of type and scale so that it is not

straightforward that a proposed DPA is in principle in the interest of

justice. However, it is important to send a clear message, reflecting a

policy choice in bringing DPAs into the law of England and Wales, that

a company's shareholders, customers and employees (as well as all

those with whom it deals) are far better served by self-reporting and

putting in place effective compliance structures. When it does so, that

openness must be rewarded and be seen to be worthwhile.”

184 An important objective of the criminal law is to prevent crime. An effective

way of preventing foreign bribery, and the conspiracies which facilitate such

bribery, is to encourage self-reporting by the companies of their human agents who

engage in it. Whether the mechanism is a DPA or a discount for past and future

assistance, or an exercise of the prosecutorial discretion in accordance with the

Guidelines not to prosecute, the reward must be real in order to constitute an

incentive to self-report and assist, including in the prosecution of the company’s

human agents.” (emphasis added)

121. The Crown submitted that general deterrence required a substantial fine, with the

opprobrium that would attach to such a penalty, and at a level that “not only stripped the

respondent of its profits from the offending but outstripped them”. The complaint was

that the fine imposed for sequence 3 in fact left a substantial portion of the agreed

benefit derived by SKM from its unlawful conduct with the respondent, and that this

could scarcely operate as any kind of general deterrent to potential wrongdoers. The

Crown submitted that there was no deterrence at all in such an outcome and thus that

the sentencing judge’s reference to having taken general deterrence into account was

mere lip service to an important consideration in the context of white collar offences. In

this context, reference was made to Director of Public Prosecutions (Cth) v Gregory

(2011) 34 VR 1; [2011] VSCA 145 at [53] where it was said by the Victorian Court of

Appeal that “[i]n seeking to ensure that proportionate sentences are imposed the courts

have consistently emphasised that general deterrence is a particularly significant

sentencing consideration in white collar crime” and that:

“general deterrence is likely to have a more profound effect in the case of white

collar criminals. White collar criminals are likely to be rational, profit seeking

individuals who can weigh the benefits of committing a crime against the costs of

being caught and punished”.

122. The Crown went on to submit that:

“The message to others needed to be simple: where you resort to these concealed

and not easily detected crimes, however you have allowed that to occur through

your deficient systems, you will suffer a heavy fine when it comes to light. No

matter how exemplary your self-reporting, you will still feel the sting of allowing

these serious wrongs to come to pass. The fine should hurt. It should not be a cost

of doing business. It should not leave you enjoying any of your profits from

wrongdoing.”

123. There is, in my opinion, force in the Crown’s attack on [187] of the sentencing judgment

where, in the context of general deterrence, the sentencing judge returned to the notion

of “rewarding” a self-reporting company that she had introduced in [181] of her

sentencing judgment, as reproduced at [119 *] above. Any such reward is to be

effectuated by the giving of a generous discount from the sentence that would otherwise

have been imposed. To reduce that notional sentence and the importance of the

consideration of general deterrence, as the primary judge appears to have done in SJ

[187] by reference to the desirability of encouragement of good conduct, is to run the risk

of double counting. That would account for the instinctively surprising outcome that the

fine imposed upon the respondent in respect of sequence 3 was significantly less than

the agreed benefit it obtained as a result of the admitted offending conduct. It should be

noted that there was no agreement as to the value of the benefit (if any) obtained in

relation to sequences 1 and 2.

124. An ultimate penalty of $1,350,000, referable to a maximum of $11 million, for an offence

assessed by the sentencing judge to have been at the mid-range of objective seriousness,

and which left the wrongdoing company with a net benefit from the transaction of

several hundred thousands of dollars in respect of sequence 3, suggests either that the

importance of general deterrence has been given effect to in name only or that the

sentencing discretion has miscarried so as to result in an inadequate penalty, or both. I

accept the Crown’s submission that:

“What the sentencing judge had in mind [at SJ 184]] seems to have influenced not

only the selection of discounts at the very upper end of what was available in the

discretion, but also the selection of starting points for the fines — for offending

whose objective seriousness was in the mid-range.”

This was in my view and with respect to the sentencing judge in error, in relation to the

penalties imposed for sequences 1, 2 and 3.

125. To reach this conclusion is not to establish a principle that a fine in the context of the

foreign bribery provisions could never be less than the benefit obtained. The articulation

of such a principle would illegitimately fetter the sentencing discretion and the statutory

directive that, when sentencing for a federal offence, the Court must impose a sentence

that is “of a severity that is appropriate in all of the circumstances of the offence”: s

16A(1) of the Crimes Act. The important policy justifications for discounting penalties

that would otherwise be imposed should equally not be emasculated: R v Ellis (1986) 6

NSWLR 603 at 604.

126. The conclusion reached in [124*] above would ordinarily call for a resentencing of the

respondent in accordance with Kentwell v The Queen (2014) 252 CLR 601; [2014] HCA

37. However, this is a Crown appeal, the principles relating to which have been referred

to at [104*]-[105*] above, and the mere identification of error in the sentencing process

does not in and of itself justify the imposition of a new sentence. As the respondent

submitted, once ground one is dismissed:

“the circumstances of this case are highly fact-specific and in that sense,

idiosyncratic, in the artificial structuring of Sequence 3 (which was a continuance

of Sequence 2) to take advantage of the new maximum penalty and in the

extraordinary circumstances of self-disclosure and ongoing assistance. These

aspects are peculiar, and the case thus offers little by way of precedential value.”

127. I agree.

128. The fact that the case offers little by way of precedential value was a matter emphasised

by French CJ and Gageler J as a reason not to exercise the s 5D discretion in CMB at

[37]. There is also to be taken into account the Crown’s candid submission that the

arguments advanced on appeal were “refinements” on the arguments advanced at first

instance. While matters of degree may be involved and a close parsing of differences is

an arid exercise, this concession tends against a variation of the sentence imposed below.

129. Crown appeals should be rare, and the purpose of s 5D of the Criminal Appeal Act is not

the mere correction of error. That is what would be occurring were the Court to embark

on a resentencing exercise with respect to the fine imposed for sequence 3.

130. The same observations may be expressed in relation to ground 5 of the appeal, which

related to the far smaller fines imposed in relation to sequences 1 and 2. Moreover, as

noted earlier in these reasons, there was no agreement (and no evidence) as to the value

of the benefit, if any, flowing to SKM in relation to sequences 1 and 2. Even if the

penalties imposed in respect of sequences 1 and 2 could have been shown to be

manifestly inadequate in light of the value of the benefit obtained, any such error would

not have been such as to attract this Court’s exercise of discretion on a Crown appeal.

131. For the above reasons, the appeal should be dismissed.

132. WALTON J: I agree with Bell CJ.

133. DAVIES J: I agree with Bell CJ.