Calculating the “value of the benefit”

Forensic accountants should consider the recent decision in The King v Jacobs Group (Australia) Pty Ltd (formerly known as Sinclair Knight Merz) HCA 23. On appeal by the Commonwealth Director of Public Prosecutions (CDPP) the High Court was required to consider the “value of the benefit” the Respondent had received from bribing a foreign public official within the meaning of Division 70 of the Criminal Code 1995 (Cth).

The Respondent had successfully argued at Trial and at the NSW Court of Criminal Appeal that the “value of the benefit” was the amount the Respondent had received for performing its obligations under the contracts, less the costs it paid to third parties to enable that performance (net benefit approach). The CDPP, on the other hand, contended that the “value of the benefit” was the total gross amount that the Respondent received under the contracts (gross benefit approach) which had been derived from the bribing of the foreign public official. The “value of benefit” adopted by the Court impacted on the Respondent’s penalty.

Although the High Court was called on the decide the meaning of “value of the benefit” within the text, context and purpose of a particular section of the Criminal Code what is interesting as a forensic accountant was the following:

(1) The Court rejected the distinction between “tainted” and “untainted” costs of performing a contract contended by the Respondent. The High Court took the view that the whole of any advantage secured by a bribery offence is tainted by the illegality, as are all costs incurred; and

(2) The High Courts reasoned the words “benefit” and “value of the benefit” was the value of the total advantage as provided or as received by the Respondent.  In the Respondents circumstances “value of the benefit” was the total value of contact secured by the Respondent’s bribery without any allowance for the Respondents contract costs and/or contract expenses of any kind.

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