Banda v DPP (Cth)
[2003] VSC 272
•28 July 2003
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. 1525 of 2000
| MARIJAN (ALSO KNOWN AS MARK LEE) BANDA | Applicant |
| v | |
| DIRECTOR OF PUBLIC PROSECUTIONS (COMMONWEALTH) | Respondent |
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JUDGE: | OSBORN J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 19-20, 23-26 JUNE 2003 | |
DATE OF JUDGMENT: | 28 JULY 2003 | |
CASE MAY BE CITED AS: | BANDA v DPP (CTH) | |
MEDIUM NEUTRAL CITATION: | [2003] VSC 272 | |
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PROCEEDS OF CRIME ACT 1989 (Cth) – Application pursuant to s.48(4) of the Act for declaration that property the subject of a restraining order not be forfeited – Whether property derived from "unlawful activity".
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mrs J. Morrish with Ms L. Taylor | Kalus Kenny |
| For the Respondent | Mr G. Silbert | Director of Public Prosecutions (Commonwealth) |
HIS HONOUR:
Mark (Marijan) Banda, the applicant in this matter, pleaded guilty to five counts upon a presentment/indictment before His Honour Judge Shelton in the County Court on 8 August 2002. After the hearing of his plea the applicant was convicted and sentenced with respect to one count relating to the importation of cocaine and four counts of possession of other drugs of dependence being cannabis, amphetamines and "ecstasy".
Prior to his conviction items of the applicant's property had been made the subject of a restraining order pursuant to s.30 of the Proceeds of Crime Act 1987 (Cth). The order was the subject of a number of variations and ultimately crystallised in the order of Bongiorno J made on 17 April 2003. This order restrained dealings with property of the applicant comprising:
(1)the interest of the applicant as tenant in common in land at Narre Warren Road, Cranbourne;
(2) a parcel of AMP shares registered in the applicant's name;
(3) the interest of the applicant in a superannuation policy;
(4) a motor car registered in the name of the applicant;
(5)money held in a National Australia Bank ("NAB") cash management account in the name of the applicant;
(6) cash in the sum of $50,200; and
(7) the contents of a safe deposit box held in the name of one Reeves.
The applicant claims no interest in Item 7 and it can be disregarded for the purposes of this proceeding.
Section 30 of the Act provides that if, as has occurred in this case, a defendant is convicted of a "serious offence" (as defined), and a restraining order was granted in reliance on the charging of the defendant with that offence, the property subject to the order is forfeited if the restraining order is in force at the end of a six month period commencing on the date of the conviction. That period may be extended pursuant to s.30A as has occurred in this case.
Forfeiture consequential upon conviction is expressly restricted to property not the subject of a declaration under s.48(4). Section 48(4) provides:
"(4) Where:
(a)a person (in this sub-section called the 'defendant') has been convicted of, or has been charged or is about to be charged with, a serious offence;
(b)a court, in reliance on the conviction, charging or proposed charging, makes a restraining order against property;
(c) the defendant has an interest in the property;
(d)the defendant applies to the court for a declaration under this sub-section in relation to the interest; and
(e) the court is satisfied that:
(i)the property was not used in, or in connection with, any unlawful activity and was not derived, directly or indirectly, by any person from any unlawful activity; and
(ii)the defendant's interest in the property was lawfully acquired;
the court may, by order, declare that the restraining order, to the extent to which it relates to the property, shall be disregarded for the purposes of s.30."
In the present case the applicant "defendant" seeks an order that the property other than that contained in the safe deposit be the subject of a declaration under s.48(4) of the Act that it be disregarded for the purposes of s.30, or alternatively that it be removed from the effect of the restraining order by way of an order for variation under s.48(3).
The Director of Public Prosecutions ("DPP") takes the position that the Court should not be satisfied that certain items of property forming the subject of the restraining order were not derived directly or indirectly from unlawful activity. Section 4(1) of the Act defines "unlawful activity" as meaning "an act or omission that constitutes an offence against a law in force in the Commonwealth, a State, a Territory or a foreign country."
The DPP initially contended before me that:
(a)The applicant's interest in the land at Cranbourne derived from moneys received in breach of income tax legislation and in particular derived from the application of gains made as a result of failing to disclose capital gains on prior property dealings;
(b)There is no dispute with respect to the AMP shares or the superannuation policy;
(c)The car was purchased from a cash management account, and both the balance of moneys in that account (Item 5) and the car (Item 4) derived from income which was the subject of tax evasion;
(d)The cash (Item 6) included $15,000 which had been brought into Australia illegally by the applicant's mother and the balance comprised money in respect of which the applicant has avoided the payment of income tax.
During the course of the hearing before me it became apparent that the applicant's mother was in fact entitled to $15,000 of the cash comprising item 6. Upon oral application made by counsel on her behalf I made an order that the restraining order be varied with respect to this amount and a further order that such amount be paid to Mrs Helen Banda.
In the course of the hearing the DPP also refined its position with respect to the unlawful activity which it put in issue. Ultimately it contended that the relevant activity was constituted by the understatement of income and capital gains in and between 1978 and the year ending 30 June 1999 in breach of ss.25(1), and 161 of the Income Tax Assessment Act 1936, and s.8C of the Taxation Administration Act 1953.
In so formulating the description of the relevant unlawful activity the DPP accepted that a failure to hitherto lodge income tax returns with respect to income and capital gains received by the applicant since 30 June 1999 did not result in illegal activity within the meaning of s.48(4).
This concession is of obvious significance with respect to two matters. First it is apparent that insofar as the applicant maintained that cash forming the subject matter of the restraining order was derived from income received for casual work after the date of his last income tax return, the failure to lodge a return with respect to the period in issue is not now relied on by the DPP. Second insofar as the applicant's assets forming the subject matter of the restraining order can be regarded as derived from the sale from 336 Glen Eira Road, Elsternwick finalised on 4 February 2000, any capital gain involved in such sale is also now to be regarded as free from challenge by the DPP on the ground of failure hitherto to declare such gain for taxation purposes.
The Legislation
The principal objects of the Proceeds of Crime Act 1987 are:
"(a)To deprive persons of the proceeds of, and benefits derived from, the commission of offences against the laws of the Commonwealth or the Territories;
(b)To provide for the forfeiture of property used in or in connection with the commission of such offences; and
(c)To enable law enforcement authorities effectively to trace such proceeds, benefits and property."
In the present case it is not suggested that any of the property in issue:
(a)was derived from the commission of the offences in respect of which the applicant was convicted in the County Court; or
(b)was used in or in connection with the commission of such offences.
Nevertheless it can be seen that object (a) set out above might extend to benefits derived from other illegal activity including conduct in breach of fundamental obligations under Commonwealth income tax legislation. In Brauer[1] Connelly J observed:
"It is natural then to ask what head of legislative power of the Commonwealth supports the legislation. The question was not raised before us and one is conscious that it is not fashionable at present to doubt the capacity of the Parliament of the Commonwealth to make any law it chooses but, in this case at least, a fairly clear answer may be discerned. In its application to Customs offences the provision in question may be seen to add to the penalties which attend a conviction for a serious offence, the additional deterrence of forfeiture of the whole of the property of the offender, unless he can demonstrate affirmatively that it was not used in or in connection with any unlawful activity. There is really nothing novel about this. In earlier days serious offences involved not merely capital or other punishment but forfeiture of lands and goods subject only to the right of the offender to avoid the beggary of his family by being pressed to death for failure to plead. In the Greek city states the penalty for breach of a decree of the Assembly was not infrequently the death or banishment of the offender and his family and the forfeiture of all his property."[2]
[1](1989) 45 A Crim R 109
[2]Ibid at 118
In Jeffrey[3] Hunt CJ at CL stated at first instance:
"The repeal in England in 1870 of the common law forfeiture of all of the property of a person convicted of a capital felony and of certain other offences (such as striking or threatening a judge) does not prevent the legislature from reintroducing a limited form of that concept where it forms the view that such measures are necessary in order to deter those who may otherwise be minded to commit the serious offences to which s.48(4) of the Proceeds of Crime Act applies; see, generally, Brauer at 118, 119-120.
The statute certainly provides novel, drastic and Draconian remedies. As a penal statute, it will be enforced only where the intention of the legislature is clear: DPP v Milienou (1991) 22 NSWLR 489 at 497; 53 A Crim R 271 at 279. Where that intention is clear it will be given effect to, notwithstanding the drastic consequences to those affected by the penalties which it imposes: Saffron v DPP (Cth) (1989) 96 FLR 196 at 199-200. In my view, the intention of the legislature is clear in s 48(4), and it must be applied. There is, accordingly, no limitation to be read into the definition of 'unlawful activities' in s.4(1)."[4]
[3](1992) 58 A Crim R 310
[4]Ibid at 320. See also the discussion of Kirby P in DPP (Cth) v Toro-Martinez & Ors 119 ALR 517
On appeal the New South Wales Court of Appeal in Jeffrey[5] considered a series of underlying matters:
[5](1995) 79 A Crim R 514
(a) the relevant principles of statutory interpretation;
(b) the onus under s.48(4)(e)(i) and (ii);
(c)whether the notion of retrospectivity is applicable to the relevant provisions;
(d) the notion of unlawful activity; and
(e) the meaning of "derived".
Three of these matters are of particular relevance to the application before me and I respectfully agree with the conclusions of the Court of Appeal in relation to them:
(a)It is clear that the applicant bears the onus of proof and that onus is with respect to proof of a negative in respect of s.48(4)(e)(i). Depending on the circumstances of the particular case "slender evidence" may suffice to satisfy the evidential burden on the balance of probabilities;
(b)A failure to disclose income or capital gains in taxation returns might constitute "unlawful activity" within the meaning of s.48(4)(e)(i); and
(c)The meaning of the word "derived" in s.48(4)(e)(i) is its ordinary English meaning and the question of whether property was not "derived directly or indirectly by any person from any unlawful activity" is a question of fact.
Background Matters
The applicant was born in the former Yugoslavia in 1962. His family migrated to Australia in 1969 and the applicant then attended primary school and technical school in Melbourne. In 1979 he commenced an apprenticeship as a toolmaker at the Commonwealth Ammunition Factory in Maribyrnong which he successfully completed. He became involved in gym work and boxing training and in 1980, at the age of 18, commenced working a second job as a security man in the entertainment industry.
In 1984 the applicant purchased a house in East Keilor. There is a dispute as to whether such house was purchased as his place of principal residence or as an investment property.
In 1988 the applicant took pay in lieu of long service leave and left his employment at the ammunition factory. He went into full time business in security and crowd control work with one Reeves. The applicant conducted his business through a company called BB Entertainment Pty Ltd ("BB"). In 1988 a daughter was born to the applicant and a de facto partner.
The applicant's business grew rapidly and at one time employed over 100 persons in casual security and promotion work for entertainment venues. Reeves was primarily responsible for "business" matters and the applicant for control of operations on the ground.
In 1990 the applicant and Reeves sought to acquire an interest in the Gasometer Hotel. They managed the hotel pursuant to an arrangement with the owner with a view to increasing the business to a level where bank finance would be available to assist to fund the purchase. The venture was a failure and deposit moneys paid were lost. The applicant had mortgaged his residential property to secure a loan to BB for the purpose of funding this deposit and thereafter BB repaid the applicant to enable discharge of this mortgage liability. In 1991 the applicant sold the Keilor house and purchased a house in Rupert Street, Brunswick. Between 1990 and 1997 the applicant was involved in managing a variety of nightclubs with Reeves. In 1994 he purchased a residential property in Ashmore Street, Brunswick for investment purposes. After difficulties with tenants he resold the property at a loss in October 1995. In 1997 he purchased a half share in a residential property in Glen Eira Road, Elsternwick for investment purposes. In 1997 Reeves and the applicant separated their business interests by mutual agreement. The applicant then managed a bar until it closed in 1999.
The sentencing Judge concluded and (on the basis of the documentary evidence tendered to me without objection) I agree that "to this stage then, you obviously had a very strong work ethic, and, it seems, had some success in business."[6]
[6]County Court transcript p.157
Thereafter the applicant's business activities became casual and disorganised. In 1999 he sold the Rupert Street, Brunswick property and returned to live with his mother.
In February 2000 he sold his joint interest in the Glen Eira Road property and thereafter purchased a joint interest in a property in Narre Warren Road, Cranbourne in April 2000.
During the period prior to the offences in November 2000 which led to the convictions forming the basis of this proceeding, the applicant was, on the evidence before the sentencing Judge (which was again submitted to me in documentary form without objection) "severely depressed, emotionally vulnerable, fragile and lacked direction".[7]
[7]County Court transcript p.158
The Factual Issues
The factual issues between the parties can be summarised as follows. Has the Applicant satisfied the Court on the balance of probabilities that:
(a)The Applicant's interest in the land at Cranbourne was not acquired with moneys derived directly or indirectly as a result of the breach of income tax obligations during the period between 1978 and 30 June 1999;
(b)The balance standing in the Applicant's cash management account as at the date of the restraining order was not derived directly or indirectly as a result of the breach of such obligations;
(c)The Applicant's motor car was not acquired with moneys derived directly or indirectly as a result of the breach of such obligations; and
(d)Cash in the sum of $35,200 found in the Applicant's place of residence at the time of his arrest was not derived directly or indirectly as a result of breaches of such obligations.
General Submissions on Behalf of the DPP
It was submitted on behalf of the DPP that ultimately the case turned on the view the Court took of Mr Banda's credit. I am not, however, persuaded that his evidence is so generally untrustworthy that I should place no reliance upon it or that there is a clearly demonstrable inconsistency between the applicant's asset position and the history of earnings which is disclosed in his income tax returns. Insofar as the attack on the applicant's credit is concerned the applicant gave consistent and generally credible explanations for statements made by him in covertly taped conversations, the terms of his initial affidavit in this proceeding, the manner in which he conducted his business over the years and the details of the sequence of property transactions in which he has been involved. Insofar as his asset position is concerned it must be understood that such position as at the date of the restraining order is in part the product of an admitted failure to lodge tax returns since 30 June 1999. As such his financial position is subject to potential liability for taxation both with respect to income obtained and capital gains from the sale of property during the interim period. Further, his evidence is that he has borrowed moneys during the relevant period. In my view the correct approach in the present case must be to assess the evidence as to the derivation of each disputed item of property.
The applicant gave oral evidence affirming the contents of a series of affidavits he had sworn which elaborate his claim and incidentally respond first to queries raised by letter on behalf of the DPP and second to criticisms made in an affidavit sworn by an accountant on behalf of the DPP, who assessed the primary affidavit material (including extensive exhibits) relied on by the applicant.
It is to be noted that the applicant opened himself up to detailed cross-examination which had the potential to incriminate him. It is further to be observed that whatever might be said as to the adequacy of some of his answers as to matters of detail, it is apparent that he made all reasonable endeavours to place before the Court relevant formal records remaining available with respect to the history of the financial transactions in issue. Further I am satisfied that his answers were fundamentally consistent as to the relatively complex substance of this history.
The applicant also called evidence from his mother and as to investigations made by his solicitor as to bank records and history of his taxation records. He did not call evidence from his former business partner Reeves or his friend Ruddy but there may be a number of explanations for this and he was not directly cross-examined as to such failure.
The DPP called evidence from the investigating accountant Mr Borg. He expressed a "general opinion" that:
(a) items of interest were not disclosed in the applicant's taxation returns;
(b) rental income was not disclosed; and
(c)capital gains not disclosed may have been required to be disclosed if properties acquired and resold by the applicant were not his principal place of residence.[8]
[8]Transcript p.317
The DPP ultimately did not rely upon the first concern. It was accepted that the bank interest identified had been the subject of the retention of withholding tax by the bank. Accordingly the DPP could not in these circumstances contend that a failure to disclose the income had led to the derivation of any assets.
Furthermore, insofar as capital gains were concerned, it was accepted (as I have already noted) that relevant capital gains were restricted to those prior to 30 June 1999.
It is further to be observed that Mr Borg did not contend that it could be positively established from the documents available to him that the applicant had failed to declare earnings he may have received from time to time in the course of his work (including cash payments). Likewise Mr Borg conceded that:
(a)he had not undertaken a betterment analysis which might theoretically have demonstrated that the applicant's net asset position could not have resulted from the lawful activity to which the applicant deposed;
(b)insofar as Mr Borg had sought to conduct an analysis of the applicant's ongoing financial position, the acquisition of assets shown by the evidence might be explicable by a high savings to earnings ratio. In this regard I am satisfied that the applicant has been a careful and frugal man. He has continued to eat the majority of his main meals with his mother on a daily basis even when living away from home. He has for the greater period of his working life steadily accumulated savings and applied those savings to the acquisition of property. He kick started this process by working two jobs for eight years between the ages of 18 and 26.
It follows that the critical sensitivity identified by Mr Borg in his initial general opinion relating to the applicant's dealings with residential properties is consistent with the view that the applicant did disclose his primary income derived from employment for income tax purposes. The limited nature of the criticism made by Mr Borg in his general opinion might be thought to significantly corroborate the overall credibility of the applicant's case. It was ultimately contended on behalf of the DPP with respect to the applicant's property dealings that:
(a)rental income derived from residential properties had not been disclosed for income tax purposes;
(b)capital gains had not been disclosed upon properties acquired and resold by the applicant which were not his principal place of residence; and
(c)properties had been acquired in part with income which was not disclosed for income taxation purposes.
In order to resolve these issues it is necessary to examine the applicant's dealings with residential property in some detail. In summary:
(a)The applicant acquired 68 Quinn Grove, East Keilor ("Quinn Grove") on 31 October 1986 for a purchase price of $105,000 and completed the sale of such property on 18 December 1991 for $140,000 with a clear title.
(b)The applicant purchased 19 Rupert Street, Brunswick ("Rupert Street") on 7 October 1991 for $190,000 and completed the sale of such property on 15 June 1999 for $355,000.
(c)The applicant purchased 44 Ashmore Street, Brunswick ("Ashmore Street") on 22 June 1994 for $129,000 and completed the sale of such property on 28 October 1995 for $120,000.
(d)The applicant purchased a half share as tenant in common in 336 Glen Eira Road, Elsternwick ("Glen Eira Road") on 2 June 1997, the total price of the property being $185,000. The sale of such property was completed on 4 February 2000 for a total price of $279,000.
(e)The applicant purchased a half share as tenant in common in 485 Narre Warren Road, Cranbourne ("Narre Warren Road") for a total price of $390,000 completing such purchase on 26 April 2000.
The applicant funded the whole of the purchase of the Narre Warren Road property. A$39,000 deposit was paid from the applicant's NAB flexi account on 3 March 2000 effectively out of $40,000 transferred from the NAB Cash Management Account to the flexi account on 2 March 2000. A further $371,450 was withdrawn from the NAB Cash Management Account on 20 April 2000 and applied to the settlement of the purchase.
It can be seen that disregarding the Ashmore Street transaction (upon which the applicant made a loss of $9,000) the capital return achieved by the applicant with respect to Rupert Street ($355,000) and Glen Eira Road ($139,500) were sufficient to fund the purchase the property at 485 Narre Warren Road. The records of the cash management account demonstrate that the moneys within the account were derived in large part from the sales of Rupert Street (the account statement records a credit of $345,718 on 16 June 1999) and the sale of a half interest in Glen Eira Road (the account statement records a credit of $134,732 on 9 February 2000). Indeed between 14 August 1999 (on which date payments relating to the Glen Eira Road purchase were made) and the date of the restraining order, the only transactions other than dealings relating to the sale and acquisition of real estate recorded in the cash management account are weekly transfers from BB in the sum of $500 to the applicant's credit continuing up until 4 January 2000. In addition to the weekly transfers from BB the account was also credited with bank interest and following 4 January 2000 this was the only money credited to the account save for the proceeds of the sale of Glen Eira Road on 9 February to which I have already referred. The practice of drawing the weekly sum of $500 from the business (initially conducted with Reeves) is recorded from the inception of the cash management account in November 1995 up until January 2000. It is clear that there was a substantial change to the applicant's financial affairs at the end of 1999. I should also add that the apparent reason the picture reflected in the cash management account is so stark is that the applicant also operated the NAB flexi account in parallel and paid expenses such as maintenance for his daughter and other matters from this account. The consequence of this is that the funds applied to the purchase of assets through the cash management account can be relatively easily traced.
Because the substantial derivation of the whole of the funds for the purchase of 485 Narre Warren Road can be traced directly to the funds derived from the sale of Rupert Street and Glen Eira Road and because the purchase of Rupert Street was in turn funded in part by the sale of Quinn Grove it is necessary to examine these three earlier transactions.
Quinn Grove
The applicant worked as a toolmaker at the Commonwealth Ammunition Factory during the period 1978 to 1987. He earned a wage of about $350 per week and from 1980 also did security work from which he estimates he earned about $120 per week. It is to be observed that these are not precise figures and in particular it might be thought that the nature of his part time work renders it likely that his earnings were capable of fluctuation.
He opened his first bank account with the Commonwealth Bank of Australia ("CBA") at a branch in Nicholson Street in or about 1978. From 1983 to December 1990 he operated a savings account from that branch. The bank statements with respect to this account show the steady accumulation of savings between January 1983 and October 1986 when $54,324 was withdrawn for the purpose of the purchase of Quinn Grove.
During this period no withdrawals were made from the account save for a total of $10,600 on 3 October 1983 (which was probably placed in a term deposit account), and the placing of $50,000 into a term deposit account in March 1986 from which $54,920 was returned to the savings account on 30 October 1986 to facilitate the purchase of Quinn Grove.
The purchase which occurred on 31 October 1986 was funded in part by bank savings, in part by $5,000 provided by the applicant's mother and otherwise by way of a home loan of approximately $40,000 from the Commonwealth Bank.
Mr Borg has analysed a sample of the deposits recorded in the CBA statements. They reflect an average of approximately $1,128 per month or 60% of the applicant's income which was approximately $470 per week. As I have already observed I do not regard the $470 as a precise figure. The applicant states that his savings ratio was higher than 60% of his earnings as he retained cash in addition to banking moneys surplus to his expenditure. Having regard to the evidence as a whole I accept that the applicant saved from his disclosed earnings the moneys which formed the basis of the greater part of the initial down payment on the purchase of Quinn Grove.
Subsequent to the acquisition of Quinn Grove and having regard to the home loan monthly repayments made by the applicant Mr Borg estimates that the applicant's saving capacity was approximately $620 per month or $7,440 per annum. The CBA statements record monthly repayments of $520.
The applicant paid off the home loan prior to the resale of Quinn Grove in 1991. The mortgage is recorded as discharged on 20 December 1988. The DPP contends that:
(a) the applicant derived income by way of rental from Quinn Grove; and/or
(b)from sources other than those which the applicant has disclosed and utilised this income to pay out the home loan.
I am satisfied on the balance of probabilities that the home loan was substantially discharged by way of payments from the sources which the applicant has disclosed and having regard to the preponderance of initial funding provided from previous savings, the extent to which moneys were applied to the purchase of Quinn Grove which were not the subject of disclosure for income tax purposes was, if it occurred, relatively insignificant.
I find that during the relevant period the applicant did have a tenant or tenants in partial occupation of Quinn Grove, but that he utilised the premises jointly as his own residence, albeit he continued to eat the majority of his principal meals at his mother's home. I accept that the tenants were friends who assisted him to renovate and "look after" the house. It is likely that there were contributions made by the tenants to joint household expenses. These circumstances support the conclusion that such moneys as the applicant may have received by way of rentals were not significant. The subsequent conduct of the applicant in purchasing joint interests in property intended to be occupied by friends also corroborates the view that he has been consistently generous in accommodating friends.
The DPP further contends that the applicant failed to disclose the capital gain of $35,000 realised on the sale of Quinn Grove for $140,000 in December 1991. Such non-disclosure was unlawful if Quinn Grove was not the applicant's principal residence. I find that it was. It is recorded as such on his bank statements and tax returns, and there is no sufficient reason to reject his evidence in this regard.
Rupert Street
The applicant stopped work as a toolmaker in 1988 and thereafter his primary income was derived from the operation of a security and promotions business together with Reeves. At about this time he commenced to conduct his part in such business through his company BB. Bank statements relating to the principal account operated by this company with the NAB have been tendered for the period between 22 August 1991 and 13 May 2002. Up until 4 January 2000 the sum of $500 per week was transferred to the applicant's credit on an ongoing basis. The deposits into the account fluctuate and are less frequent than weekly. They are of both cash and cheques and are consistent with income from a business of the type in which the applicant was involved.
It is apparent the applicant was able to draw on BB for loans as well as to receive payments for work done by him. The annual accounts of the company and the tax returns of both the applicant and the company were done by the same accountant (for the greater part of the relevant period) and are internally consistent in reflecting the mixed character of moneys flowing to the applicant. Thus, in the first balance sheet of the company put in evidence being that for the year ending 1992 some $18,498 is shown is owing by shareholders to the company. It is clear that borrowings from BB had the capacity to materially supplement the funds available to the applicant by way of income. I further accept that the applicant relied on his accountant for the proper preparation of these accounts. The underlying question is whether he supplied the accountant with accurate primary information as to his financial affairs. I can find no basis for rejecting his evidence that he did. Although it is clear that he and Reeves may have split some small sums of cash (as he conceded in cross-examination)[9], I accept that the applicant's business was in substance conducted through BB and that the income of his business was as the applicant states put through "the books" of BB. Further I am specifically satisfied that it was from moneys passed through BB and disclosed for taxation purposes that he funded the purchase of the significant assets the subject of these proceedings.
[9]Transcript p.252
In the second half of 1991 the applicant sold Quinn Grove and purchased Rupert Street. It is in my view clear that the $140,000 comprising the greater part of the price of Rupert Street namely $190,000, came from the proceeds of sale of Quinn Grove. It also appears that some bridging finance was necessary to co-ordinate the purchase and sale, but the period of such bridging was in no way extraordinary.
The balance of the purchase price for Rupert Street was provided by a $40,000 mortgage loan from the NAB and $10,000 in other moneys.
The applicant's tax return for the year 30 June 1992 shows a taxable income of $9,730. His tax return for the year ending 30 June 1993 shows a taxable income of $17,227.
The tax return for the year ending 30 June 1994 shows a taxable income of $17,025.
During 1994 the applicant purchased Ashmore Street. He paid $129,000, borrowing approximately $80,000 from the NAB and using $49,000 of his own funds.
The applicant's tax return for the year ending 30 June 1995 shows a taxable income comprised by a management fee of $19,000 paid by BB. In the year ending 30 June 1996 his income tax return discloses a management fee of $22,500.
The applicant resold Ashmore Street at a loss for $120,000 finalising settlement on 28 October 1995. The DPP contends that the applicant has failed to disclose as income rentals received with respect to this property after its purchase in June 1994. Putting aside the question of whether the applicant could set off his capital loss against income received, it is apparent that the net income (if any) was in any event minimal. I accept that the interest payable upon the mortgage of $80,000 (which was then in the order of 10 to 11% per annum) together with rates, taxes and other expenses relating to the maintenance of the land would have been equivalent to such income as was received. In this regard I note the applicant's evidence that the tenants were bad tenants failing to pay the full rent due, vandalising and failing to properly maintain the property. It is apparent that the Ashmore Street exercise as a whole was unsuccessful from the applicant's point of view and the resale of the property a little more than a year after its purchase can be seen as reflecting this fact.
Glen Eira Road
The applicant's taxable income for the year ended 30 June 1997 is shown in his tax return as $45,063. For the year ended 30 June 1998 it was $37,250. For the year ended 30 June 1999 it was $31,750. During 1997 the applicant purchased Glen Eira Road together with a friend Ruddy and Ruddy's wife. The applicant purchased a half share as a tenant in common. The total price was $185,000. The applicant provided $9,000 by way of half of the deposit from his savings and the balance of the purchase price was borrowed by way of a mortgage home loan from the NAB. The bank records show an initial series of modest payments in reduction of the home loan. Thereafter $40,000 was deposited to the credit of this home loan from the applicant's cash management account. There followed a period of no home loan repayments and then 13 payments of $2,759 each from the cash management account which evidently resulted in the discharge of fifty percent of the home loan. There is no basis for concluding that the payments were made other than from income derived and moneys borrowed in the course of the applicant's business as reflected in the annual accounts and taxation returns of BB and the applicant's own taxation returns.
There is also no reason to reject the applicant's evidence that the Ruddys paid him no rental with respect to the property but carried out certain repairs upon it. Mr Ruddy is an electrician and it is also likely that he assisted the applicant in other ways. For present purposes, however it is sufficient for the applicant to satisfy me that the asset comprised in Glen Eira Road was not derived from unlawful activity.
Narre Warren Road
Having regard to the chain of property transactions which I have analysed above, I am satisfied that the applicant's interest in Narre Warren Road was not derived from unlawful activity. As I have stated it was substantially funded from the combined proceeds of sale of Rupert Street and Glen Eira Road.
The Cash Management Account
I have referred to the most significant aspects of the history of the cash management account in the course of detailing the history of the applicant's purchase and sale of residential properties. The weekly credits of $500 received from BB ceased on 4 January 2000. Since that date the only substantial individual credit is that deriving from the sale of Glen Eira Road on 9 February 2000. The other credits comprise interest. The only significant debit is that relating to the purchase of Narre Warren Road being $371,450.36 on 20 April 2000. I am satisfied that the balance remaining in the cash management account at the date of the restraining order derived firstly from the proceeds of the sale of Rupert Street and Glen Eira Road, secondly from the moneys paid to the applicant by BB and thirdly from interest paid on the balance from time to time by the bank. None of these moneys were derived from unlawful activity. It is possible that during the period of the operation of the cash management account the applicant received cash moneys in the course of his security work above and beyond that which was paid to BB. It is also possible that he received other fringe benefits. Nevertheless I am satisfied firstly that BB was the principal vehicle for his business activities, secondly that it was moneys paid to BB which were in turn credited to the applicant's cash management account, and thirdly that the credit balance now standing in the cash management account derived substantially from the profits made on the resale of Rupert Street and Glen Eira Road.
The Honda Coupe
The applicant purchased the Honda Coupe during August 1997 with moneys withdrawn from his NAB Cash Management Account on 11 July 1997. For the reasons I have already stated I accept that the balance then standing in the cash management account was derived from lawful activity and in particular the weekly transfer to the applicant from BB and the moneys paid into that account following the resale of Ashmore Street. The initial deposit in the cash management account was made on 27 November 1995 shortly after the resale of Ashmore Street and included $75,741 being the net proceeds of such resale. $35,434.16 was also initially credited to the cash management account and was sourced from a pre-existing NAB account comprising prior savings. No specific cross-examination was directed to the derivation of the moneys paid for the car. I am satisfied that the applicant's interest in the car does not derive from unlawful activity but from income disclosed in his business and taxation records and the net proceeds of property transactions which I have analysed above.
Cash
The applicant says that from about July 1999 through 2000 and for some months in 2001 he worked as a consultant, personal trainer, labourer, painter and security guard and was paid cash for his services. Neither he nor BB have lodged income tax returns with respect to these periods. His earnings are only partially recorded being evidenced by invoices for work done for the proprietor of the Spy Lounge. Having regard to the evidence as a whole including the evidence as to the change of the applicant to a less organised way of business and his state of mind, I accept that the cash found at his house not belonging to his mother was substantially the product of income on which he has yet to pay tax. As such it was lawfully derived.
Conclusion
For the above reasons I am satisfied that:
(a)the applicant's interest in the land at Narre Warren Road, Cranbourne was not acquired with moneys derived directly or indirectly as a result of the breach of income tax obligations;
(b)the balance standing in the applicant's cash management account as at the date of the restraining order was not derived directly or indirectly as a result of the breach of such obligations;
(c)the applicant's motor car was not acquired with moneys derived directly or indirectly as a result of the breach of such obligations; and
(d)cash in the sum of $35,200 found in the applicant's place of residence at the time of his arrest was not derived directly or indirectly as a result of breaches of such obligations during the period between 1978 and 1999.
It follows that the applicant is entitled to declarations pursuant to s.48(4) of the Act that the restraining order to the extent to which it relates to the above property and the further items conceded by the DPP shall be disregarded for the purposes of s.30 of the Act.
The applicant is also entitled to damages with respect to the loss of value suffered in relation to his AMP shares since the making of the first restraining order with respect to them on 17 November 2000.
In my view such an order is justified pursuant to the undertaking given by the DPP under s.44 of the Act. As in ordinary civil litigation such an undertaking is generally enforced unless special circumstances exist.[10] No such circumstances exist in this case. It was not contested that the applicant had suffered a loss as a result of the restraining order but it was put on behalf of the DPP that such loss should have been mitigated by a request to sell the shares and substitute the proceeds of sale as the subject of the restraining order. In my view the applicant cannot be said to have acted unreasonably given the circumstances during the relevant period. If the limited amount in issue cannot be agreed between the parties I will order that damages be assessed by a Master of the Court pursuant to Order 51 of the Rules of the Supreme Court.
[10]See McCleary & Ors v DPP (Cth) (1998) 157 ALR 301.
I will give counsel the opportunity to address me further before pronouncing the formal orders of the Court.
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