It’s the vibe: Federal Court’s new powers to hear criminal cases raise eyebrows

In the refined and polished corridors of the Federal Court, a quiet change has occurred that could flip financial crime prosecutions on their head.

In June 2024, the court received new powers to hear criminal cases brought against people accused of breaking laws overseen by the corporate watchdog, including allegations against dodgy company directors and fraudsters.

For over a century, criminal matters have been conducted only in the Supreme Courts of each state, or in the District Courts of Sydney and Brisbane, and in Melbourne’s County Court, before juries.

Now those cases will be heard in a court that has – to borrow a line from one of Australia’s most famous fictional lawyers, Dennis Denuto – a very different “vibe”.

While most Australians – and large cohorts of the legal community – are unaware of the change, the court is already at work. Last year, two men – former Berndale Capital Securities bosses Stavro D’Amore and Daniel Kirby – were committed to stand trial in the Federal Court before a jury for dishonesty and misuse of client funds offences. The court has also taken its first-ever guilty plea, from Kirby.

The new power for the Federal Court to hear criminal matters marks a considerable change for a court that is usually the home of the country’s biggest civil cases – often between companies, and sometimes their regulators – based on pointy issues of law relating to commercial matters, competition and taxation, as well as a small but extremely high-profile defamation list.

The jurisdictional shift has split opinions in legal circles. Some experts and criminal law practitioners are concerned about the court’s readiness to hear such important cases due to a lack of depth in the current bench – which is geared towards the court’s current focus on commercial law – and the risk of “forum shopping”.

The Federal Court itself does not hold such reservations, according to Chief Justice Debra Mortimer, who tells this masthead her court stands ready to hear such cases.

“The court has the experience and expertise to handle any cases committed to this court,” says Mortimer.

“There are a number of judges with extensive criminal expertise (including one of the new appointments), and many judges with subject-matter expertise,” she says, referring to the eight new judicial appointments announced in December.

She says appropriate judges with criminal expertise and subject-area specialists will hear appeals.

“So far as state courts are concerned, many judges in state courts conduct criminal proceedings, although they may never have practised in that area, nor have subject-matter expertise. Many such judges become well-regarded by the profession and their judicial colleagues as trial and appellate judges in criminal jurisdiction.”

It’s not a view that is widely shared in the legal community.

Leading criminal defence lawyer Bill Doogue says the changes seem unnecessary and could cause unforeseen problems.

“There’s obviously some very smart people in the Federal Court, but they’re not people who have spent decades standing in front of juries and criminal trials, and they don’t understand that,” Doogue says.

“They might be able to grasp it in an intellectual sense, but setting up parallel systems and having one that’s already really doing its job well just seems unnecessary.”

“The reality is that most of the commercial judges might have dabbled with a bit of drink-driving when they first went to the bar, but they haven’t spent decades running big cases, and they don’t understand the nuances.”

Increasing the Federal Court’s powers has been on the agenda of the court and legislators for more than a decade.

In 2009, the court won the power to hear criminal cartel cases brought by the Australian Competition and Consumer Commission. Anticipating a wave of cases, jury rooms were built in every Commonwealth courthouse. The ACCC’s spectacular run of losses with its criminal cartel cases, however, left many of those jury facilities underused.

Following the bruising Hayne banking royal commission in 2018, the Morrison government decided to beef up the court’s powers further in expectation of a wave of criminal cases being brought against bad bankers in the years that followed. Yet, the flurry of criminal cases against bankers and their employers expected after the royal commission did not eventuate.

By the time the Albanese government passed the changes in the discreetly titled omnibus legislation, the Attorney-General’s Portfolio Miscellaneous Measures Bill 2023, there was so little trumpeting about the changes that the consultation on the draft laws drew just a handful of submissions.

One of these submissions came from the Law Council of Australia, which listed a range of concerns, including: “The nondescript title of the bill, which does not make reference to the Federal Court, may mean that interested stakeholders are unaware of the bill’s potential implications.”

The powerful body and “the voice of the legal profession” was also concerned about the uncertainty surrounding how the measures would operate in practice, including the depth of the bench in terms of criminal-court experience and the potential for differences in practices and procedures at the Federal Court to create the risk of forum shopping by prosecutors or defendants looking for a preferred system and a desired outcome.

Council president Greg McIntyre, SC, says it is closely monitoring how the changes will work in practice.

McIntyre says the council had previously identified a risk of there being insufficient numbers of Federal Court judges with experience running complex criminal jury trials.

“This challenge is potentially exacerbated if there are criminal appeals within the existing full Federal Court system,” he says.

“We understand that the Federal Court is alive to this concern and has sought to address this in recent appointments, and we will continue to monitor how this potential limitation is managed in practice.”

McIntyre also says the Law Council of Australia recognises that the final form of the 2024 reforms includes measures to limit forum shopping. This includes a requirement that the court must have regard to the interest of justice in considering whether to make an order to transfer proceedings to another court.

“At the time, we were concerned that insufficient thought had been given to ensuring that the intended policy objectives of greater efficiency would be realised in practice,” McIntyre told this masthead.

The court’s chief justice also plays down the risk of forum shopping.

“The Federal Court shares jurisdiction with the state courts in relation to many areas of practice, such as defamation, commercial and corporations work. This is no different,” Mortimer says when asked about the risk.

Mortimer also believes the move to the Federal Court – where the wheels of justice in commercial matters can take several years to run – will reduce the delays in hearing criminal matters under the previous status quo.

“The procedures that will apply are specific Federal Court procedures, designed to deal with the matters in as expeditious a manner as possible,” Mortimer says.

The court’s notoriously unfriendly media policy – which involves no notification of suppression order applications or decisions to the media – will remain unchanged, says Mortimer, who believes it is the individual responsibility of the journalist or the member of the public to uncover such orders.

A key issue the change seeks to remedy is the delay in hearing white-collar crime offences in the Supreme Court or lower courts, given most people charged with these types of crimes are on bail, and the court tends to preference hearing matters of people on remand, out of fairness.

As Mortimer explains: “Listing of matters in state courts can involve priority being given to certain types of cases (for example, persons in custody, where there are complainants or trials involving sexual offences, etc), which can practically impact the speed at which these types of matters are listed.”

Leading Sydney lawyer Rob Wyld, an expert in a range of corporate criminal and civil matters, questions the idea that ASIC’s criminal matters had experienced significant delays in other courts.

“I think the delays in state-based systems are far more complex than just saying that Commonwealth financial crime cases are too slow in state courts.”

“Many criminal cases, whether under state or Commonwealth law, can be complex. Financial crime is invariably a document-heavy type of prosecution. Terabytes of electronic data, text messages, telephone intercepts and emails must be produced and sorted.”

Wyld says that the complexity of financial crime cases won’t reduce in the Federal Court. Nor will other problems that add to delays, such as access to legal aid and to court time, or the prosecutor’s duty of disclosure, which is ongoing and fundamental to a fair trial, and often results in prosecution briefs of evidence changing over time. Wyld also points to the difference between the committal process in NSW and Victoria, with the former more like an administrative process and the latter a system that can turn into a contested mini-trial with witnesses and cross-examinations.

Most importantly, however, is the fading appetite of the corporate regulator to run complex criminal trials after years of chalking up losses or convictions where the sentences are community correction orders and small fines. Simply put: what if the Federal Court builds it, and ASIC doesn’t come?

According to press reports, in the 2022-23 financial year, ASIC made just 41 referrals to the Commonwealth Director of Public Prosecutions – a huge reduction from the 86 in 2018-2019. ASIC and the CDPP declined to comment for this story.

Lawyer and former ASIC commissioner Pamela Hanrahan says the fact that criminal prosecutions can now be held in ASIC’s “home ground” where its civil litigation matters are heard will not necessarily mean that it will file more criminal cases.

“The (strange) truth in Australian federal regulation is that civil penalties are often very much larger than criminal penalties, particularly where the defendant is a corporation not an individual,” says Hanrahan, an emeritus professor of law at the University of NSW and consultant to Johnson Winter Slattery.

This is, in part, because of the different types of evidence and burden of proof required in civil cases and the requirement to prove fault or intent.

“So pursuing a civil penalty is often more feasible or attractive to a regulator than going down the path of trying to get the CDPP interested in something and running it though the criminal justice system, which is more protective of defendants’ rights and often results in lower sanctions.

“I suspect criminal prosecutions will remain unusual for large corporate defendants, but we might see more in the individual misconduct cases – for example, market manipulation and insider trading – going to the Federal Court.”

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