Black Uhlans Inc v New South Wales Crime Commission

[2002] NSWSC 1060

CITATION:	Black Uhlans Incorporated v New South Wales Crime Commission & Ors [2002] NSWSC 1060 revised - 10/12/2002
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 5601/01
HEARING DATE(S):	30/9/02-3/10/02
JUDGMENT DATE:	13 November 2002
PARTIES :	Black Uhlans Incorporated (P) New South Wales Crime Commission (D1) Public Trustee of New South Wales (D2) Alan George Reardon (aka Jack Andrew Wilson) (D3) State of New South Wales (D4)
JUDGMENT OF:	Campbell J

COUNSEL :	J Sexton SC (P) I Temby QC; R Bromwich (D1) R Bromwich (D2) No Appearance (D3) G Bartley (D4)
SOLICITORS:	Peter Duggan & Associates (P) New South Wales Crime Commission (D1) Public Trustee of New South Wales (D2) No appearance (D3) State Crown Solicitor's Office (D4)
CATCHWORDS:	TRUSTS AND TRUSTEES - existence of express trust - legal tests for recognising existence of express trust - examination of facts concerning whether express trust established - TRUSTS AND TRUSTEES - resulting trust through payment of purchase price - tests for existence of resulting trust through payment of purchase price - juristic nature of resulting trust through payment of purchase price - EQUITY - general principles and maxims of equity - unclean hands - circumstances in which equitable relief denied because of unclean hands - EVIDENCE - evidence of convictions
LEGISLATION CITED:	Associations Incorporation Act 1984 Conveyancing Act 1919 Drug Trafficking (Civil Proceedings) Act 1984 Drug Trafficking (Civil Proceedings) Act 1990 Evidence Act 1898 Evidence Act 1995 Legal Profession Act 1987
CASES CITED:	Argyle v Argyle [1967] 1 Ch 302 Armstrong v Sheppard & Short Ltd [1959] 2 QB 384 Atilgan v Atilgan [1999] NSWSC 324 Bloch v Bloch (1981) 180 CLR 390 Bodly v -- (1679) 2 Chan Cas 15; 22 ER 824 Brown v Brown (1993) 31 NSWLR 582 Bugg v Day (1949) 79 CLR 442 Cadman v Horner (1810) 18 Ves Jun 10; 34 ER 221 Calverley v Green (1984) 155 CLR 242 Capricorn Financial Planners Pty Ltd v Australian Securities and Investment Commission (1999) 31 ACSR Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 Clapham v Shillito (1844) 7 Beav 146; 49 ER 1019 Clifford v Clifford [1961] 1 WLR 1274 Commissioner of Stamp Duties (QLD) v Jolliffe (1920) 28 CLR 178 Commonwealth of Australia v Booker International Pty Ltd [2002] NSWSC 292 Cory v Gertcken (1816) 2 Madd 40; 56 ER 250 Currie v Hamilton (1984) 1 NSWLR 687 Dering v Earl of Winchelsea (1787) 1 Cox 318; 29 ER 1184 Dow Securities Pty Ltd v Manufacturing Investments Ltd (1981) 5 ACLR 501 FAI Insurances Ltd v Pioneer Concrete Services Ltd (1987) 15 NSWLR 552 Falcon v Famous Players Film Company [1926] 2 KB 474 Gascoigne v Gascoigne [1918] 1 QB 223 Glyn v Weston Feature Film Company [1916] 1 Ch 261 Goddard v Midland Railway Company (1891) 8 TLR 126 Greater Sydney Development AssociationLtd v Rivett (1929) 29 SR (NSW) 356 Griffiths v Griffiths [1973] 1 WLR 1454 Gill v Lewis [1956] 2 QB 1 Hewson v Sydney Stock Exchange Ltd [1968] 2 NSWR 224 In Re Emery's Investment Trusts (1959) Ch 410 Jones v Lenthal (1669) 1 Chan Cas 154; 22 ER 739 Kettles and Gas Appliances Ltd v Anthony Hordern and Sons Ltd (1934) 35 SR (NSW) 108 Last v Rosenfeld [1972] 2 NSWLR 923 Learmonth v Morris (1868-9) 6 WW & A'B (E) 74 Little v Little (1988) 15 NSWLR 43 Littlewood v Caldwell (1822) 11 Price 97; 147 ER Litvinoff v Kent (1918) TLR 298 Loughrin v Loughrin 292 US 216 (1934) Meyers v Casey (1913) 17 CLR 90 Money v Money (No2) [1966] 1 NSWR 348 Moody v Cox [1917] 2 Ch 71 Mrs Pomeroy Ltd v Scalé (1907) 24 RPC 177 Napier v Public Trustee (Western Australia) (1980) 32 ALR 153 Nelson v Nelson (1995) 184 CLR 538 New South Wales Diary Corporation v Murray Goulbourn Co-Operative Company Limited (1990) 171 CLR 363 Nowell v Palmer (1993) 32 NSWLR 574 Overton v Banister (1844) 3 Hare 503; 67 ER 479 R v Aldridge (1990) 20 NSWLR 737 R v Deputy Commissioner of Taxation (WA) (1987) 72 ALR 365 Re Kerrigan; ex parte Jones (1946) 47 SR (NSW) 76 Rochefoucauld v Boustead [1897] 1 Ch 196 Ryan v Dries [2002] NSWCA 3 Shepherd v Cartwright [1955] AC 431 Slingsby v Bradford Patent Truck and Trolley Co [1905] WN 122; [1906] WN 51 Stephens v Avery [1988] 1 Ch 449 Tinker v Tinker [1970] P 136 Tripodi v R (1961) 104 CLR 1 Vauxhall Bridge Co v Spence (Earl) (1821) Jac 64 Vigers v Pike (1842) 8 Clark & Finnelly 562; 8 ER 220 Wall v Stubbs (1815) 1 Madd 80; 56 ER 31 Wratten v Hunter [1978] 2 NSWLR 367
DECISION:	Resulting trust found for part of beneficial interest in property, see paragraph 190

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EQUITY LIST

CAMPBELL J

13 NOVEMBER 2002

5601/01 BLACK UHLANS INCORPORATED v NEW SOUTH WALES CRIME COMMISSION & ORS

JUDGMENT

1 HIS HONOUR: The Black Uhlans Motor Cycle Club (the “Club”) has existed as a voluntary unincorporated association from at least the early 1980s. It was an Australia wide club, which had a Sydney chapter, and chapters in various other places. In about 1984 the Club began occupying premises at Factory 3, 15 Stanley Street Peakhurst as its clubhouse. These premises were leased from the owner by a club member, but the rent was paid out of the Club’s funds. The clubhouse was located in a building which was divided into three different units, one of which was used as the clubhouse. In 1991 a club member came to purchase the land on which the clubhouse was erected. Also in 1991, the Club had become incorporated under the Associations Incorporation Act 1984.

2 The club member in whose name the premises had been purchased was later convicted of various criminal offences, in consequence of which a restraining order was made under the legislation then known as the Drug Trafficking (Civil Proceedings) Act 1984, which prevented him from disposing of any interests he had in, inter alia, the premises which contained the clubhouse. In 1996 a forfeiture order was made, under the Drug Trafficking (Civil Proceedings) Act 1990, of his interest in that property. That forfeiture order resulted in his interest in the property becoming vested in the Public Trustee on behalf of the State of New South Wales. In these proceedings, the incorporated Club contends that the real estate was held on trust for it, and hence that the beneficial ownership of the property was not forfeited to the State. The Club has a fall back position, that part of the beneficial interest in the property was held by it, and hence was not forfeited to the State. The Club contends that the trust in its favour is an express trust, or alternatively a resulting trust.

Facts Proved From Documents

3 There are some facts relevant to the transaction in which the property was acquired which can be proved by contemporaneous documents. One is that by 1991 the Club had several tens of thousands of dollars, which it had been accumulating over a period of years. The Club deposited $3,000 with Australian Guarantee Corporation on 26 November 1987, and redeemed that amount on 28 March 1988. The Club deposited a further amount of $23,000 with Australian Guarantee Corporation on 19 March 1988, and redeemed it on 17 August 1988. The Club deposited an amount of $6,000 with Australian Guarantee Corporation on 30 September 1987, and redeemed it on 19 August 1988. The evidence does not establish what happened to any of these three deposits immediately after they were redeemed. However, on 6 April 1989 the Club lodged an amount of $30,574 with the Commonwealth Bank, as a term deposit. It was withdrawn on 8 January 1990, by which time the addition of interest had caused it to grow to $34,295.76. That precise amount was then used, on 8 January 1990, as the opening balance for a current account, in the name of “Black Uhlans Motor Cycle Club”, with the Commonwealth Bank at its branch in the Sydney suburb of Carlton (“the BUMC Commonwealth Account”). Further deposits were made to the BUMC Commonwealth Account until, on 1 May 1991, the balance to its credit was $67,170.27.

4 On 4 June 1991 Hancock, Alldis & Co, solicitors, sent to Justin Hill, solicitor, a draft contract for the sale of the land in question. Hancock Alldis & Co were acting for the vendors of the land, Austral Power Products Pty Ltd. Mr Hill acted as solicitor for the purchaser named in that contract, Jack Andrew Wilson. The contract related to the sale of the land in volume 8383 folio 23. The contract stated that the land was located at 15 Stanley Street, Peakhurst, and it had erected on it three factory units, each of which was leased. The sale was for the sum of $400,000, and was subject to those existing tenancies.

5 Contracts for sale of that land were exchanged on 30 July 1991. The contract as exchanged must have differed from the contract as originally submitted, because the document which was tendered as the contract as exchanged, showed factory 1 as being leased for a period of three years commencing 6 June 1991, factory 2 as being leased for one year commencing 9 June 1991, and factory 3 as leased for three years commencing 11 July 1991 – each of the commencement dates of those leases is after the date the contract was originally submitted. The third of those factory units is one which was in fact used as the clubhouse of the Black Uhlans Motor Cycle Club.

6 The deposit payable under that contract was $40,000. On 21 June 1991 an amount of $40,000 was withdrawn from the BUMC Commonwealth Account. That withdrawal took the form of two bank cheques. One was a cheque dated 21 June 1991, drawn on the Commonwealth Savings Bank, Carlton Branch, in favour of Hancock Alldis & Co in the sum of $20,000. The other was a bank cheque drawn on the Commonwealth Savings Bank, Carlton Branch, dated 21 June 1991, in the sum of $20,000, in favour of Melville McGregor Solicitors. The evidence does not establish what role Melville McGregor Solicitors played in this transaction, if any. Mr Hill gave tentative assent to the proposition that Melville McGregor had nothing to do with the acquisition of 15 Stanley Street, Peakhurst by Wilson.

7 The deposit for purchase of the Peakhurst property was paid to Hancock Alldis & Co towards the end of July 1991 (and banked by Hancock Alldis & Co on 1 August 1991). It took the form of the bank cheque for $20,000 which had been withdrawn from the BUMC Commonwealth Account on 21 June 1991, and bank cheques in the sum of $8,000, $5,000 and $7,000, drawn on 23 July, 26 July and 29 July 1991 respectively, on the Commonwealth Savings Bank, Kogarah Branch. Each of those three cheques had been purchased by Mr Hill. Counsel for all parties in this litigation hypothesised that Mr Hill had requested the Club to provide him, for some purpose of his own, with the cheque for $20,000 made payable to Melville McGregor Solicitors, and had later repaid the $20,000 which the Club so made available to him, and used the repayment funds to provide $20,000 of the deposit. While the Crime Commission and the State retreated, in some written submissions delivered after judgment had been reserved, from this hypothesis, it seems to me that it is a reasonable inference to draw. It has the consequence that the whole of the deposit of $40,000 was paid from funds of the Club.

8 The purchaser of the Peakhurst land applied to Citibank for a loan to enable him to complete the purchase. On 19 July 1991 the sum of $1,500 was withdrawn from the BUMC Commonwealth Account. It took the form of bank cheques for $1,250, and $250, each payable to Citibank Savings Limited. Those cheques were sent to Citibank, and constituted the application fee, and a valuation fee, in connection with that proposed loan from Citibank.

9 On 30 July 1991, Citibank issued Mr Wilson with a letter of approval for a loan of $250,000, at a rate of interest of 13.5%, repayable by equal monthly repayments over a period of 15 years. On 4 September 1991 Citibank wrote to Mr Wilson confirming some recent discussions it had had with Mr Hill. Citibank had valued the property at $350,000, and in consequence of it requiring a loan to security ratio of 65%, the loan amount was reduced to $227,500. For that loan, the monthly repayments were to be $2,955.45.

10 On 10 September 1991 a further withdrawal was made from the BUMC Commonwealth Account, in the sum of $14,361. It took the form of a bank cheque payable to the Commissioner for Stamp Duties. It was paid to the Commissioner for Stamp Duties, to pay stamp duty on the contract for the purchase of the Peakhurst land, and on the mortgage of that land to Citibank.

11 On 12 September 1991, a further amount of $19,765.54 was withdrawn from the BUMC Commonwealth Account. From that withdrawal, bank cheques for $16,222.53 in favour of Austral Power Products Pty Ltd, and for $3,484.46 in favour of Justin Hill solicitor were purchased. The cheque in favour of Austral Power Products Pty Ltd was paid as part of the purchase price upon settlement of the purchase of the Peakhurst property. I would infer that the cheque in favour of Mr Hill was in payment of his costs and disbursements in connection with this transaction. Those two cheques total $19,706.99. The small difference, of $60 odd, between the amount withdrawn from the account, and the total of the two cheques, was used partly in paying a debits tax on the account, and is partly unexplained. That withdrawal made on 12 September 1991 drew all funds out of the BUMC Commonwealth Account.

12 The settlement of the purchase of the Peakhurst property occurred on 13 September 1991. After making the usual adjustments for periodical outgoings of the property, the amount payable on settlement was $360,565.00. It was made available to the vendor in the form of four bank cheques as follows:

Source	Payee	Amount
BUMC Commonwealth Account	Austral Power Products	16,222.53
Citibank	Austral Power Products	226,528.50
Advance Bank	Austral Power Products	4,949.81
Advance Bank	Day Dockrill	112,864.16
TOTAL	360,565.00

13 The cheque from Citibank was the net amount made available by Citibank to Mr Wilson from the mortgage loan, after deduction of some fees and expenses.

14 The two amounts made available by Advance Bank arise from a second conveyancing transaction which was settled simultaneously with the purchase of the Peakhurst land. Ms Charmaine Bernoth was a client of Mr Hill, and was selling property which she owned, at 49 Calder Road, Chippendale, to a Mr and Mrs Oryl. Mr and Mrs Oryl were being financed in that purchase by Advance Bank. At Mr Hill’s request, the solicitors for Mr and Mrs Oryl asked Advance Bank to make available money which it was advancing in connection with the purchase of 49 Calder Road, Chippendale in the form of the two cheques which Advance Bank drew and which were used to settle the purchase of the Peakhurst property. Mr Hill has given evidence that Ms Bernoth was someone with whom he had had a long-term relationship, that she consented to her money being used in this fashion, and that she was repaid.

15 The explanation for the cheque in favour of Day Dockrill is that a third conveyancing transaction also settled on 13 September 1991. Austral Power Products Pty Ltd purchased a home unit in Jindabyne, and the cheque for $112,864.16 in favour of Day Dockrill was used by Austral Power Products Pty Ltd in connection with that purchase.

16 As part of the settlement on 13 September 1991, Mr Wilson gave a mortgage to Citibank Savings Limited over the Peakhurst land. That was the only mortgage given over the land.

17 Soon after 13 September 1991, the transfer of the Peakhurst land to Mr Wilson was registered, as was the mortgage over that land which Mr Wilson granted to Citibank.

18 Mr Wilson opened an account with Citibank Savings Limited (“the Wilson Citibank Account”) at the time his loan from Citibank was approved. Periodical payments due to Citibank, in repayment of its mortgage loan, were debited to that account. Mr Wilson, by a written agreement made on 25 September 1991, appointed Antipas Real Estate, of Penshurst, as his agent in relation to the leasing of units 1 and 2 at the Peakhurst premises. Those agents were given instructions to bank the net proceeds of leasing those two units to the Wilson Citibank Account. Thereafter, the net proceeds of leasing units 1 and 2 were paid into that account. The net proceeds of leasing units 1 and 2 were not sufficient to pay the full amount of the monthly amount payable to Citibank. Other deposits were made to the Wilson Citibank Account from time to time, with the result that the account was kept (at least until May 1994) in credit by a small amount. From May 1994 the periodical debits needed to repay the Citibank mortgage were not made to the Wilson Citibank Account, presumably as a consequence of the restraining order which had been made against Mr Wilson’s assets in March 1994.

Incorporation of the Club

19 On 3 May 1991, Mark Florence, who was then the Treasurer of the Club, completed a form applying for incorporation of the Club, under the Associations Incorporation Act 1984. He filled out the portion of the form calling for “particulars of property held by a person, in trust or otherwise, for or on behalf of or for the object of the currently unincorporated association” by writing “nil”. He filled out another part of the form so that it read, “the income of the association is likely to be $20,000-$25,000 per annum which is likely to be derived from the following sources: members dues and membership fees. The expenditure of the association is/is likely to be $20,000 per annum.” The form as lodged, included a statement, signed by the then Secretary and President of the Club that,

“At a meeting of the Black Uhlans Motor Cycle Club Australia held on the 15th day of May 1991, it was resolved that the presently unincorporated body will be taken over by Black Uhlans Incorporated.”

20 That form was lodged with the appropriate government department on 25 June 1991. The plaintiff was incorporated that same day, 25 June 1991.

21 Schedule 2 to the Associations Incorporation Act 1984 provides:

“2. (1) On the incorporation of an association … under this Act the following provisions have effect:
(a) the assets of a former association of the incorporated association vest in the incorporated association without the need for any conveyance, transfer, assignment or assurance,
(b) the rights and liabilities of a former association of the incorporated association become the rights and liabilities of the incorporated association.”

22 There is a very wide definition of “assets”, and a very wide definition of “liabilities” in schedule 2. The effect is that all assets and liabilities of the unincorporated club became, on incorporation, assets and liabilities of the incorporated association. It is the incorporated association which is the plaintiff in the present case.

23 On 11 August 1992 the plaintiff lodged, with the Department of Consumer Affairs, the annual statement required by section 27 of the Associations Incorporation Act 1984. The statement said that the last financial year of the incorporated association ended on 31 May 1992. Particulars of the income and expenditure of the incorporated association during its last financial year were set out. They were as follows:

INCOME
Subscriptions	26,264
Run Fees	4,345
Sales – Refreshments	17,023
T-Shirts, Badges	667
Donations	320
Other Income	3,445
52,064
EXPENDITURE
Rent	18,155
Light & Power	2,771
Telephone	1,325
Purchase – T-Shirts, Badges	5,593
Waste Disposal	712
Meeting Expenses	6,773
Run Expenses	4,907
Repairs & Maintenance	805
Purchase – Refreshments	15,518
15,559
DEFICIT FOR THE YEAR	$4,495

24 The assets and liabilities of the incorporated association at the end of its last financial year were stated to be as follows:

ASSETS
Cash	1,283
Debtors	410
Loans Payable	15,601
$17,294
RETAINED CAPITAL
Reserves acquired following incorporation	21,789
Deficit for the period ended 31st May, 1992	4,495
$17,294

25 The form of the annual statement called for details to be provided of “particulars of mortgage, charges and other securities of any description affecting any of the property of the incorporated association as at the end of its last financial year”. That section of the form was filled out by writing, “not applicable”. The form also contained a “certificate as to financial affairs” which said,

“In the opinion of the members of the committee -
(a) the particulars set out in items 5-9 above are not misleading and give a true and fair view of the matters to which those particulars relate …”

The statement of income and expenditure, statement of assets and liabilities, and statement that the particulars of mortgage item was “not applicable” were items 5, 6 and 7 of the form. The certificate was signed by two members of the committee, Mr Florence and Mr Gioffre.

26 Mr Florence (who happened also to be the Public Officer of the association) gave another certificate, that “the particulars contained above are true”. Mr Gioffre gave a certificate that,

“I attended the annual general meeting of the association held on 10th June 1992. This annual statement was submitted to the members of the association at its annual general meeting.”

That annual statement was lodged by T E Gibbs & Co, Accountants.

27 T E Gibbs & Co also prepared, in October 1992, a tax return for Mr Jack Wilson. That return showed him as having no income from salary and wages, as having earned (after deductions) $36,800 from letting out on hire a refrigerated trailer, and as having suffered a net loss of $9,272 from rental activities. The amount of that loss was derived from a total of $21,330 rental having been received for the rental of units 1 and 2 at 15 Stanley Street, and total expenses attributable to 15 Stanley Street, Peakhurst being paid of $30,602. A working paper of Mr Gibbs shows that those expenses were made up of rates, repairs, agent’s fees and other like matters connected with conducting the business of a landlord, together with interest in the sum of $25,424. Mr Gibbs’ working papers included a summary statement, provided by Antipas Real Estate, of the income derived from units 1 and 2 at 15 Stanley Peakhurst, and outgoings connected with that property. The figures contained in the tax return, relating to the rental of 15 Stanley Street, matched the figures in the summary statement provided by Antipas Real Estate, save only that the summary statement from Antipas Real Estate did not include any outgoing for interest.

28 On 22 January 1993 Mr Wilson was arrested by police. Police seized some drugs, cash, weapons and other items which Mr Wilson had in a hired storage unit.

29 On 5 January 1994 Mr Gibbs wrote a letter of advice to Mr Florence, as follows:

“Following our recent discussion I have given consideration to the problem of the most appropriate method of ownership of club property.
There are four alternatives to this problem with each of them having advantages and disadvantages. We have set out your options briefly below.
1. AN INDIVIDUAL NOMINEE
With ownership held by an individual nominee. The principle advantage is ease of obtaining finance. The principle disadvantage is of security of the asset, especially in the case of personal misfortune to the nominee. A change in the nominee would also mean that full stamp duty on the property value (eg $10,000) would be payable upon each change of nominee.
2. PARTNERSHIP
A partnership has the same advantage as that of a nominee (above).
The possible problems of risk with a nominee are reduced as ownership would be spread. Risk would be reduced and stamp duty payable on the change of each nominee would be much smaller. (Depending on how many partners existed in the partnership)
3. COMPANY
A company could be established owning the property with the company ownership being split among a number of club members (shareholders).
The stamp duty problem could be limited by not notifying the Stamp Duty Office of any changes in shareholding, although we cannot professionally advise you to follow such a practice.
The security of ownership can easily be covered by having signed share transfer forms for all shareholders kept on hand.
The big negative for the company is that there is no provision for the inflationary increases in value to be tax exempt. This exemption exists for all other options and as the inflation component of the capital gain will amount to close to 100% of that gain then this exemption must be capitalised on. Otherwise you will lose close to 33% on the gain in value on the property in tax.
4. DISCRETIONARY TRUST
The final option is I believe your best alternative. It involves the establishment of a discretionary trust with a company acting in the capacity as trustee. Members of the club would act as shareholders of the trustee and the advantages available under the Company option in regards to the change of shareholders and stamp duty extend to this option.
As the actual property is owned by a Trust the exemption from capital gains tax for the inflationary increase in the value of the property would also be available to this option.
Beneficiaries for the Trust would be required but this requirement can be made very flexible. The Trust also has a finite life (unlike a company) and would only be expected to last for only 100 years.
All above changes will involve substantial costs to establish. Stamp Duty and legals, with the company option costing a further $1,000 and the Trust option would be approximately $2,500 extra.”

30 On 22 March 1994 Studdert J made a restraining order, under the Act then known as the Drug Trafficking (Civil Proceedings) Act 1990 relating to, amongst other things, Mr Wilson’s interest in the Peakhurst property. The New South Wales Crime Commission lodged a caveat against the title of the Peakhurst property on 25 March 1994. It was also on 25 March 1994 that Mr Wilson was served with the restraining order.

31 On 31 March 1994 a company called Peakhurst Nominees Pty Limited was incorporated as a shelf company. On 5 April 1994 shares were allotted in the company to Mr Florence, and to John Richard Nevin. According to Mr Florence, Mr Nevin had been appointed President of the Club in January 1994. Mr Florence and Mr Nevin were appointed as directors of the Company in place of the previous directors who were, I would infer, from the shelf company organisation which had caused the company to be incorporated. Peakhurst Nominees Pty Limited did not, so far as the evidence discloses, carry out any transactions after passing into the control of Mr Florence and Mr Nevin. A death certificate establishes that Mr Nevin is now dead.

32 On 11 March 1996 a forfeiture order was made in relation to, inter alia, Mr Wilson’s interest in the Peakhurst property. It is common ground that before that forfeiture order was made the Crime Commission had received notice of a claim that the Peakhurst property was held, by Mr Wilson, on trust for the plaintiff. Hence the defendants in these proceedings do not assert that the Public Trustee took the property free of any trust which existed as between Mr Wilson and the Club.

33 On 25 September 1996 a request was lodged with the Registrar General that the Peakhurst land be vested in the Public Trustee on behalf of the Crown, pursuant to section 23 of the Drug Trafficking (Civil Proceedings) Act 1990, in consequence of the taking effect of the forfeiture order made on 11 March 1996. That request has resulted in the Public Trustee becoming the registered proprietor of the Peakhurst land.

The Plaintiff’s Claim that Wilson Holds the Land on Trust for the Plaintiff

34 This paragraph of the judgment gives an account of the way the plaintiff puts its claim for the existence of a trust over the Peakhurst premises. In about 1984 the Club began occupying factory 3 at the Peakhurst land as its clubhouse. Those premises were leased from the owner by Barry Keene, who was then a member of the Club, but the rent was paid out of the Club’s funds. From time to time at meetings of the Sydney chapter of the Club there were discussions about buying the property which contained the clubhouse. Mr Gioffre, who was President of the Club from approximately 1989 to 1993 had various discussions from 1989 onwards with Mr Kevin Vincent, a director of the company which owned the premises, about the possibility of the Club purchasing the land. Mr Vincent was initially not interested in selling, then was interested in selling, but for more money than the Club wished to pay, and only in 1991 was agreement in principle arrived at that the premises would be sold for $400,000. From early 1991, there were several meetings between office holders and a few other members of the Club, and Mr Hill. Mr Hill was asked whose name the building should be put in. Mr Hill recommended putting it in the name of someone who had a job and assets. He recommended Mr Wilson as being a good person to present to an incoming mortgagee, because he had had a job for 10 years, and owned his own home. Mr Hill recommended that the Club should start feeding money into Mr Wilson’s bank accounts to give him a proven savings record, as that would improve the chances of getting finance. Club money was used to increase the balances in some bank accounts which Mr Wilson had, the records of which were duly shown to Citibank. There was some talk about execution of a formal trust deed, but somehow no trust deed came to be executed. The Club raised money in cash, which it gave to Mr Hill to pay the amount of the purchase price which was not derived from the Citibank loan and from the BUMC Commonwealth Account. A significant contributor to the Club’s cash contribution to the purchase price was a levy which was imposed on club members in 1991, to help pay for the clubhouse. Wilson regarded himself as the owner of the clubhouse property in name only. Wilson’s money found its way into the purchase of the clubhouse to no greater extent than did the money of any other club member. After the purchase was complete, the Club paid money into the Wilson Citibank Account from time to time, to make up the amounts by which the net rental received from units 1 and 2 was insufficient to pay the mortgage repayments. After Citibank ceased debiting the Wilson Citibank Account in May 1994, the Club made payments from time to time to the Public Trustee, with a view to meeting the shortfall between the mortgage repayments and the net rental income from units 1 and 2.

35 The principal witnesses upon whom the Club relies to make good this case are Mr Florence, Alan George Reardon, Mr Gioffre, and Mr Hill. The Club has explained the absence of Mr Vincent by tendering his death certificate.

Alan George Reardon

36 Alan George Reardon is the real name of “Jack Andrew Wilson”, the person in whose name the Peakhurst property was purchased. He has lived under the name of Jack Andrew Wilson for many years, because he was once charged with a criminal offence in Queensland under his real name, and skipped bail.

37 Mr Reardon has more than one false identity, however. As well, he is known as Peter John Reardon, Graham Wilson, Andrew Spirou, Alan James Bennett, Michael John Wilson, and Alan George Francis. He also had an identity, Trevor James Lane, which he was not sure that he had used. For these false identities he had a variety of documents to establish the identity – he had false birth certificates, false driver’s licences, and bank accounts in false names. When, in January 1993, police seized property from the storage unit which he had rented since August 1990 (under the name of Graham Wilson) they found these proofs of identity. As well, they found a 1989 newspaper article titled “How I Created a False Identity”, blank Birth Certificate forms from New South Wales and Tasmania, blank Australian Certificate of Marriage forms, and blank Western Australian driver’s licences. It was under one of his false names, Andrew Spirou, that he was director of a company which was involved in importing and distributing chemicals, for the purpose of manufacture of prohibited drugs.

38 Sometimes he would supply people with documents which would enable them to have a false identity. At other times, he would supply people with blank documents, so that they could create their own false identities.

39 By a transfer which was registered on 5 September 1991, a parcel of New South Wales land was conveyed to Alan James Bennett. Mr Hill was the solicitor who acted for the purchaser in that transaction. Alan James Bennett was one of the false identities of Mr Reardon. However, Mr Reardon said that, so far as that transfer was concerned, the transferee was not him, but that for that transaction he had lent his false identity to someone else. He did not say who that other person was.

40 He made a practice of carrying only one false driver’s licence on him at a time (because there had been an occasion earlier when the police had found two false driver’s licences in his wallet). He did this so that if he were to be caught for a traffic offence, the penalty points connected with that offence would accrue against one of his false identities.

41 Mr Reardon had a significant involvement with drug manufacturing and distribution. Arising from his arrest on 23 January 1993, he pleaded guilty (in February 1996) to an indictment which included a count of manufacturing a prohibited drug (methylamphetamine) in a large commercial quantity between 1 January 1991 and 23 January 1993 at Granville and elsewhere in the State of New South Wales. That charge was laid under the Drug Misuse and Trafficking Act 1985. Schedule 1 to that Act defines a “large commercial quantity” of methylamphetamine as being one kilogram. Eleven matters were taken into account on a Form 1 with that count of the indictment. (This means that he admitted his guilt of eleven other offences, had those offences taken into account in deciding the sentence, and thereby achieved immunity from any future prosecution for those eleven offences.) Another count of the indictment, to which Mr Reardon pleaded guilty, related to the deemed supply of a prohibited drug, namely cocaine, on 22 January 1993 at Kings Park in the State of New South Wales. This “deemed supply” arises under section 29 of the Drug Misuse and Trafficking Act 1985, whereby a person who has in his or her possession an amount of a prohibited drug which is not less than the traffickable quantity of the prohibited drug is deemed to have it in his or her possession for supply, unless able to prove otherwise. Schedule 1 of that Act nominates three grams as being the traffickable quantity for cocaine. For the first count on the indictment, Mr Reardon was sentenced to a minimum term of imprisonment of four years and two months, together with an additional term of one year. For other counts on that indictment, he was sentenced to lesser terms of imprisonment, to be served concurrently with the sentence for the first count.

42 When Mr Reardon’s storage unit was searched by police in January 1993, it was found to contain, inter alia, five books, and various other pieces of information, concerning the manufacture of drugs. Even after his arrest, he “happened to notice once” that he was present at a “cook” of amphetamines. A “cook” is part of the process of manufacturing amphetamines.

43 The charges to which Mr Reardon pleaded guilty also included two charges of possessing an unlicensed firearm, and four charges of possessing a prohibited weapon. The firearms which the police had found in the storage unit included rifles, and an Uzi semi-automatic pistol. As well, there was a silencer for a gun.

44 Mr Reardon’s storage unit also contained a booklet titled, “Lock Picking Simplified”. Mr Reardon said that somebody gave him that as a present, that he tried to use it, but it didn’t work.

45 Mr Reardon’s understanding about illegal drug use is informative:

“Q. I suggest to you that numbers of members of the Black Uhlans were involved in illegal drugs?
A. Not that I know of. What do you mean by involved? With me?

Q. Users of illegal drugs?
A. With me?

Q. Not necessarily with you but, to your knowledge, users of illegal drugs?
A. Everybody uses illegal drugs, everybody. Depends what you call everybody. Everybody smokes pot or whatever you call it, uses amphetamines, I suppose, you go down to the pub down the road now on Friday and everybody uses it or what you suppose - what do you mean? You mean as I understand it everybody uses prohibited drugs?

Q. Not everybody but an awful lot of people?
A. Young people, sure.

Q. And that's what you're saying was included but not confined to members of the Black Uhlans?
A. I can't comment about that. Maybe they did, maybe they didn't, I'm not sure. You'd have to ask them.”

46 Mr Reardon explained one aspect of his attitude to giving evidence:

“Q. Is one of the unwritten rules of the Black Uhlans that you don't, if you're a member, put in other members?
A. That's right. You don't put in anybody whether they're members or not.

Q. And you sit there as a witness reluctant to put in anyone?
A. I don't put in anybody.

Q. You can't?
A. No, I won't.

Q. You won't?
A. No.”

47 Mr Reardon’s activities were such that he had significant sums of cash available to him. At the time of his arrest in January 1993 he had $5,000 in cash in his car, $74,600 in his storage unit, and a further $7,000 in a secret safe at home. In evidence he said that the $7,000 in the safe at home was the product of dealing in motorbikes. Mr Reardon accepts that the chemicals which go into the manufacture of amphetamines are quite cheap, and at the time were fairly readily available. He also accepts that the amounts for which amphetamines, when manufactured, can be sold illicitly are very large, depending on how expert the people operating the selling operation are.

Justin Hill

48 Mr Hill was admitted as a solicitor in New South Wales in about July 1981. He stopped practicing as a solicitor (both in New South Wales, and anywhere else) in about 1992. In 1996, after having pleaded not guilty, he was found guilty, in South Australia, on counts of taking part in the production of methylamphetamine, and of a conspiracy to produce 3, 4-Methylenedioxymethamphetamine. For those crimes, he had been sentenced to eight years imprisonment with a non-parole period of five years. Prior to his trial on these drug charges, he had been charged in New South Wales with knowingly making a false statement in a passport application. That charge concerned an attempt he made to obtain a passport in a false name. After his drug trial, he pleaded guilty to that charge, and was fined. At some stage – Mr Hill is not sure precisely when – his name was struck off the Roll of Solicitors in New South Wales.

Mr Reardon and Mr Hill Apply for Finance from Citibank

49 Citibank had a standard form for mortgage finance proposals. Mr Hill filled out the details on that form, and Mr Reardon signed it, in the name “J Wilson”. That form, as filled out, said that the applicant was Jack Andrew Wilson. This was, of course, not Mr Reardon’s real name. It said his date of birth was 10/10/53. This was not his real date of birth. It said his private address was 96 Victoria Avenue Mortdale, and that he had been 1 ½ years at that address. In fact, Mr Reardon/Wilson had never lived at that address.

50 The form said that Mr “Wilson” had been identified by a particular numbered gold driver’s licence. That was a driver’s licence which Mr Reardon/Wilson provided to Mr Hill, which was one of his false driver’s licences. The form said that the applicant’s occupation was “General Manager”. This was untrue.

51 The form said that the applicant’s gross monthly salary was $3,500. This was untrue – Mr Reardon’s earnings from employment were of the order of $500 to $600 per week.

52 The form said that Mr “Wilson” had a monthly gross income of $2,000 from investments, and $601.25 from rental income. Alongside this listing of income, the form said, “note tax returns for 1989 and 1990 annexed”. There were income tax forms, marked “Copy”, for the 1989 and 1990 tax years, annexed. Those forms were ones which were drawn up by T E Gibbs & Co, accountants. Notwithstanding that they purported to be copies of income tax returns for the 1989 and 1990 tax years, they were drawn up in 1991, after Mr Hill had referred Mr Reardon/Wilson to Mr Gibbs. No original tax returns, in the form of these “copies” had ever been, or ever were, lodged with the Taxation Department.

53 The 1989 “copy” return purported to be in the name of Jack Andrew Wilson, and gave his residential address as 96 Victoria Avenue, Mortdale. It annexed what purported to be a 1989 Group Certificate for Jack Andrew Wilson, showing that he had received $35,862 gross salary, from Nostalgia Motor Cycles. It also showed that he had received bank interest of $1,589, and a net income (after registration, insurance and repairs) of $18,274 from truck hire.

54 The “copy” return for the 1990 tax year contained the same particulars as the 1989 year about the identity and address of the taxpayer. It annexed a copy of what purported to be a 1990 Group Certificate for Jack Andrew Wilson, from Nostalgia Motor Cycles, showing a gross salary of $39,204. It showed a net income of $22,069 (after deduction of expenses for registration, insurance and repairs) from truck hire.

55 In fact, Mr Reardon did not own a truck, and had received no income from truck hire. He was employed by Blacktown Harley Davidson, a company which traded under the name of Nostalgia Motor Cycles, but was employed so that he was shown on the books under his real name of Reardon, not under his assumed name of Wilson. Further, his salary or wages from Nostalgia Motor Cycles was less than the amounts shown in the purported group certificates. These “copy tax returns” were fabrications, created for the purpose of deceiving Citibank.

56 The Citibank application form also called for a listing of assets. Mr Hill filled out the form by showing the assets of Mr “Wilson” as including a refrigerated trailer worth $60,000, $24,000 with Westpac, a deposit of $40,000, and “investment Justin Hill Solicitor” of $100,000. In fact, Mr “Wilson” did not own any refrigerated trailer. While there were two Westpac Savings accounts in the name of Jack Andrew Wilson, which had balances totalling approximately $24,000, those amounts were almost entirely amounts which had been placed there very recently. The only amount of “deposit” in the sum of $40,000, appears to have been the amount which was sourced from the BUMC Commonwealth Account. There was no investment of $100,000 with Justin Hill Solicitors.

57 The application form also stated “only commitment $500 per month rent”. It was not disclosed that Mr “Wilson” was not paying rent at all, but rather living in his own home. The statement of assets did not disclose him as owning the residence he owned and lived in, but rather as owning a rental property, worth $90,000. By failing to disclose to Citibank the residence which Mr “Wilson” actually owned, there was a departure from what some Club witnesses say was the initial plan, of putting forward Mr Wilson as the applicant for finance because he owned his own home.

58 The application form made provision for providing the name of a reference, being a close relative or person not residing with the applicant. There, the form was filled in by nominating “sister – Margaret Wilson”, and giving an address of 58 Renway Avenue, Lugarno. In fact, Mr “Wilson” did not have a sister of that name, and the address of 58 Renway Avenue, Lugarno was not the address of anyone known to Mr “Wilson”. A telephone number for this fictitious sister was provided on the form. Mr Reardon claimed, in cross-examination, not to know whose number that was.

59 On 23 July 1991 Mr Hill wrote to Citibank saying:

“We act for Jack Andrew Wilson with regard to the purchase of the above property. Contract price is $400,000.00.
Mr Wilson hereby makes application for finance for an amount of $250,000.00 – 15 year principal and interest loan. Security offered being mortgage over the above property.
Pursuant to this application we enclose the following.
A. Completed Mortgage Finance Proposal.
B. Copy of Contract
C. Copy Tax Returns 1989 - 1990
D. Copy of leases re; 3 factory units and associated correspondence.

Factory	1	Ty Pringle Motor Trimmer	$1250	per month
2	Prestoo Pty Ltd	$1120	per month
3	B Keene	$1667	per month
$48,444.00 per year

E. Documentation re; Mr Wilson ownership of house in Queensland Lot 20 Tregana Circuit Edens Landing.
F. Documentation re: Mr Wilson ownership of refrigerated trailer.
G. Copy of Savings bank account – Westpac Bank showing present balance of $24,000.00
H. Letter from Justin Hill, Solicitor re 10% deposit and other source of funds.
I. Signed EASI-PAY FORM.
J. Bank cheque to Citibank Limited for $1250.00 re: Establishment fee.

K. Bank cheque for $250.00 for valuation fee.”

60 The documentation provided to Citibank in that letter concerning Mr Wilson’s ownership of a house in Queensland at Lot 20 Tregana Circuit Edens Landing is a letter purporting to be from Salstar Pty Ltd to Mr Wilson, at 96 Victoria Avenue, Mortdale. It said:

“Dear Mr Wilson,
RE: YOUR PURCHASE FROM SALSTAR PTY LTD
PPTY: LOT 200 TREGANA CIRCUIT, EDENS LANDING
We refer to the above matter and hereby confirm that settlement of the above property took place on the 30th day of June, 1991. We hereby enclose receipt for balance of purchase monies received.
We also advise that the property is now being rented, with a rental income of $138.75 nett per week.”

61 Annexed to that letter were two receipts, purportedly given by Salstar Pty Ltd. One of them, dated 1 April 1991, recorded receipt of a 10% deposit of $8,900. The other, dated 30 June 1991, recorded the receipt of $80,100, as the balance of purchase monies for purchase of Lot 200 Tregana Circuit, Edens Landing. The evidence does not establish whether there had been a purchase made in the name of Wilson of such a property in Queensland, or whether these documents are also fabrications. From the fact that the letter is addressed to Mr Wilson at 96 Victoria Avenue, Mortdale, an address he did not occupy, from the fact that it is unusual for residential property to be rented so as to provide an income of a fixed net amount per week, from the fact that the two receipts total a round sum of $90,000 and thus that the unusual conveyancing practice of adjusting outgoings on completion seems not to have been gone through, as well as from the fact that this documentation was part of a concerted attempt to convince Citibank that Mr “Wilson” was a man of substance, there is quite some ground for suspicion that these documents are fabrications also. However, I cannot positively conclude that that is so.

62 The documentation sent to Citibank concerning Mr Wilson’s ownership of a refrigerated trailer was a Certificate of Registration of Motor Vehicle, in Mr Wilson’s name. A cash register imprint on it records that a transfer fee of $16 had been paid on 1 May 1991. Mr Reardon says that this is a trailer that he did not have any actual ownership of, but which was registered in his name for the purpose of getting finance. It remained registered in “Wilson’s” name for a couple of years, and then was transferred back into the name of the true owner. It is obvious enough that this Certificate of Registration of Motor Vehicle, sent to Citibank, was designed to tie in with the fabricated statements in the 1989 and 1990 “copy tax returns”, relating to income being earned by Mr Wilson from truck rental.

63 The documents sent to Citibank as “copy of savings bank account – Westpac Bank showing present balance of $24,000” were copies of the current page of two savings bank passbooks, in the name of Jack Andrew Wilson. One account showed a balance of $10,115.04, another of $13,881.93. The first of those savings accounts had had $10,000 deposited into it in May 1991. The second of the accounts had had $13,500 deposited into it in May and June of 1991. The evidence does not establish from what source those deposits were made.

64 The “letter from Justin Hill, Solicitor re 10% deposit and other source of funds”, sent to Citibank on 23 July 1991, was a letter which Mr Hill wrote to Citibank dated 17 July 1991. It said:

“RE: WILSON PURCHASE FROM
AUSTRAL PATTERN CO. PTY LTD
PROPERTY: 15 Stanley Street, Peakhurst
We act for Mr Jack Andrew Wilson with regard to the purchase of the above property. Contracts in this matter are to be exchanged this week. We are holding Bank cheques to $40,000.00 (note photocopy annexed – payable to Vendors Solicitor being 10% deposit.)
We are holding the sum of ONE HUNDRED THOUSAND DOLLARS ($100,000.00) to be applied to the purchase. These sums are from the sale of a property at 65 Ollier Crescent, Prospect which belonged to Mr Wilson.”

65 The statement that Mr Hill was holding $100,000 derived from the sale of the Prospect property and to be applied to the purchase was false. Mr Reardon had, at one time, owned a property at 65 Ollier Crescent, Prospect, which was registered in the name of Wilson. However, that property had been sold in about 1984, when “Wilson” purchased his next house. It was sold for something like $62,000, not $100,000. Further, all the net proceeds of sale were put towards the purchase of his next house.

66 The “Signed Easi-pay Form” sent to Citibank on 23 July 1991 was an authority to Citibank, signed by “Wilson” authorising Citibank to make periodical deductions to the account which “Wilson” had opened with Citibank.

67 On 26 July 1991, Mr Hill sent a fax to Citibank. The coversheet of that fax was handwritten, by Mr Hill. It said:

“Re loan application
JACK ANDREW WILSON
Enclosed 1) Copy bill of mortgage for $100,000.00 plus copy C T
2) Copy Bank Statement for withdrawals
(a) 40,000.00 (10% deposit)
(b) 1,500.00 (est fee)”

68 The enclosures with that letter included a document which took the form of a Queensland Real Property Act Bill of Mortgage. It purported to be a bill of mortgage given by Richard Charles Barber, of an address in Surfers Paradise, to “Jack Andrew Wilson of 96 Victoria Avenue, Mortdale (General Manager) in the State of New South Wales”, over the land in an identified certificate of title. The document was dated 20 August 1990. The consideration was stated to be,

“$100,000 principal to be lent to Richard Charles Barber at 16.0% percentum per annum interest only loan for one (1) year. Interest payable at six monthly intervals – 20th February 1991 and 20th August 1991 – principal repayable on the 20th August 1991.”

69 The bill of mortgage bears a signature of the mortgagee “J Wilson”. Mr Reardon denies having signed that bill of mortgage. He says he had not seen it before the time of an examination to which he was subjected, under the Drug Trafficking (Civil Proceedings) Act 1990, in 1994. Mr Reardon says he did not have $100,000 owing to him, whether by Barber or by anybody else, at that time. His explanation for the document is that Mr Hill must have fabricated it. Mr Hill gave evidence that, in relation to all the information and documentation which he sent to Citibank, he provided it in good faith, based on information which “Mr Wilson” gave him.

70 Also annexed to Mr Hill’s fax to Citibank of 26 July 1991 was a document purporting to be a copy of a bank statement, from the Carlton New South Wales branch of the Commonwealth Bank, relating to account number 2137 0079 0874. The document shows that account as being in the name of J A Wilson. Mr Reardon says he had never seen that document before February 2001, and had never held the account referred to in the document, either in the name of “J A Wilson” or in any other name. In fact, the account which has the number shown on that document, at the Carlton branch of the Commonwealth Bank, is the BUMC Commonwealth Account. The transactions shown in the document which was sent to Citibank are all transactions which took place on the BUMC Commonwealth Account. The document shows the withdrawal of $40,000 which took place on 21 June 1991, and the withdrawal of $1,500 which took place on 19 July 1991 from the BUMC Commonwealth Account. The document is a forgery, created by someone taking a copy of a statement of the BUMC Commonwealth Account, and on that statement substituting the name “J A Wilson” for the name of the true account holder.

71 On 29 July 1991 a document was faxed to Citibank, this time from the fax number of Blacktown Harley Davidson. This is where Mr Reardon was employed. There, though Mr Reardon was on the books, and paid, under his real name, he was known to staff members and customers as “Jack Wilson”. The document faxed to Citibank from Blacktown Harley Davidson read as follows:

“To Whom It May Concern:
Jack Andrew Wilson has been employed at Harley Davidson of Blacktown for the last 8 years. His position is General Manager. His income ending 30 June 1991 was $43,200 gross wage.
Yours faithfully
[signed: P Reardon]
P Reardon
Managing Director”

This document is one which Mr Reardon fabricated. “P Reardon” was one of his aliases. His actual income was substantially less than $43,200 gross.

72 As mentioned earlier, it was on 30 July 1991 that Citibank issued its letter of approval for a loan of $250,000. It is obvious, from the history I have just outlined, that Citibank’s approval, and its subsequent lending of money for the purchase of the Peakhurst land, was the product of a large number of serious misrepresentations, by both Mr Reardon and Mr Hill.

The 1991 Levy

73 The making of the levy, in 1991, is an important part of the plaintiff’s case about how it raised money to pay for the clubhouse. There is not a single contemporaneous record of the making of the levy, or of it being collected, or of its proceeds being paid to Mr Hill. Mr Florence gave evidence of there being a meeting, in May or June of 1991, which imposed the special levy. He says that he received payments of the levy in cash from a man called Glenn Hammond (also known as “Boots”), who is now dead. It was not made clear, in Mr Florence’s evidence, whether this levy was one which was imposed on only the members of the Sydney chapter, or on the members of the Club nationwide. According to Mr Florence, in 1991 there were between 25 and 30 members of the Sydney chapter of the Club. Mr Gioffre estimated that in the second quarter of 1991 there would have been around 60 odd members of the Sydney chapter on the books, of whom between 30 and 40 were active members. Mr Gioffre says that there were approximately 120 members Australia wide at that time. Mr Gioffre’s evidence was to the effect that the levy was a nationwide levy. If the levy was indeed a nationwide levy, no explanation has been given of how it could happen that the Sydney chapter of the Club could impose a nationwide levy.

74 Mr Florence gave evidence about what was done with the proceeds of the levy, as follows:

“Q. As the treasurer did you ultimately receive the moneys that were paid?
A. I did.

Q. Who did you receive them from?
A. I received them from a member named Glen Hammond who was in charge of collecting them, and also from members themselves.

Q. What did you do with the money?
A. Gave it to Justin Hill in the end, who was the solicitor acting for the purchase of the property.

Q. What did you do with it in the meantime before you gave it to Mr Hill?
A. We had a safe at the clubhouse, it was kept in there, kept some of it at home.

Q. As each payment was made to you did you count the money?
A. Yeah.

Q. When you paid the money to Mr Hill was it paid in cash?
A. Yes.

Q. Did you count it before you paid it to him?
A. Yes.

Q. How much did you pay to him?
A. It was varying amounts, I think there is one about 40,000, I couldn't be positive of the other amounts.”

This evidence is extremely vague, as to both the time the money was collected, and the amount collected.

75 In support of the claim that there had been a levy, the plaintiff tendered three statutory declarations made by deceased members of the Club. One of them, from John Nevin, said: “I have paid a joining fee of $1,000 to the Black Uhlans Motor Cycle Club”. Another one said, “I Stephen Hancock of the Black Uhlans Motor Cycle Club hereby solemnly and sincerely declare that I donate $1,000 over a period of two years from when I joined the Black Uhlans”. The third said, “During the period of my membership I did give of my own funds an amount of $1,000. This was a donation to the Club to be used as part of the Club’s funds to acquire property and general Club use”.

76 Five club members were called on this topic. Owen Moseley said he had paid $1,000 to the Black Uhlans Motor Cycle Club as a joining fee. Cross-examination established that he had joined in about 1985, and the joining fee was paid during the period of about 12 months after he had joined.

77 Robert Carnegie gave evidence that he had donated $1,500 to the Black Uhlans on 16 October 1987 for the purpose of obtaining property.

78 Richard Griffiths said that he donated $1,000 towards purchase of property for the Black Uhlans Motor Cycle Club. Cross-examination established that he had joined the Club in about 1987, and paid this $1,000 within 12 months or so of joining.

79 Malcolm Roche gave evidence that he donated $1,000 cash “to the Black Uhlans Motor Cycle Club Inc for the purpose of purchasing property at 15 Stanley Street Peakhurst”. He said he paid it in instalments of $100, when he could afford it, over a period of probably two years, up to 1992. At the time he paid it, he was an associate member, not a full member, and was not required to pay it.

80 Roy Brinson gave evidence that he donated $1,000 to the Club to be used in the purchase of a clubroom whenever that time would be appropriate. That donation was made about the time he joined the Club, in 1983.

81 The evidence of these eight club members fails to establish that there was any levy in 1991. Rather, it suggests that there was a practice of members paying $1,000 to the Club at the time of, or soon after, joining.

82 Mr Florence gave evidence of holding sums in cash in the clubhouse safe, and a large amount in his home garage. He says at one stage he held about $40,000 in his garage for a week. There was no attempt, in evidence, to identify when that occurred, or what happened to the money immediately after it ceased being in his garage. Mr Florence says that he delivered a total of approximately $90,000 in cash to Justin Hill before settlement.

83 Mr Hill, in evidence which he gave on the first day of the trial, told a significantly different story. He said:

“Q. You say, I think, that there was some money that came to you from club officials or members?
A. Yes, that's correct.

Q. Most of it in cash?
A. Dribs and drabs. I think they showed up with cash at different times, they didn't quite understand that is not the way to do it. I have got them to go away and put it in a bank account, I understood they had a bank account, I think I saw a bank account actually.

Q. You agree, don't you, that you actually received cash sums on a number of occasions?
A. I think they showed up with cash and I got them to go down and get bank cheques. They may have paid the stamp duty with cash, I don't recall, I certainly saw some cash.

Q. On a number of occasions?
A. Several occasions, yes.” (emphasis added)

84 The next day, however, when his evidence continued, Mr Hill was concerned to make sure that the Court understood that he had received some cash, even if that understanding of the Court was arrived at through answers which were not responsive to the questions asked. It was put to him that, to enable the settlement to occur, he had provided about $117,000 (namely, the money derived from the sale of Ms Bernoth’s property). The evidence continued:

178 Gascoigne v Gascoigne [1918] 1 KB 223 was a case where a husband put a lease of land in his wife's name and built a house upon the land with his own money. He used his wife's name in the transaction, with her knowledge and connivance, for the purpose of misleading, defeating and delaying present or future creditors. After the parties separated, the husband sought a declaration that the wife was trustee for him of the property. He succeeded at first instance, but on appeal he failed. The Divisional Court (Lawrence and Lush JJ) said, at 226:

"... What the learned judge has done is this: he has permitted the plaintiff to rebut the presumption [of advancement] which the law raises by setting up his own illegality and fraud, and to obtain relief in equity because he has succeeded in proving it. The plaintiff cannot do this; and, whether the point was taken or not in the County Court this court cannot allow a judgment to stand which has given relief under such circumstances as that."

179 Gascoigne was a case where it was necessary for the plaintiff to prove his own bad conduct to rebut the presumption of advancement and thus to establish the trust he sued to enforce. Gascoigne was followed in In Re Emery’s Investment Trusts [1959] Ch 410 (property intended to be held equally by husband and wife put in name of wife only, to enable husband to avoid American withholding tax) and approved by the English Court of Appeal in Tinker v Tinker [1970] P 136. If a plaintiff needs to prove his own bad conduct to be able to prove the circumstances which he says entitles him to an equitable remedy, that bad conduct has an immediate and necessary relation to the equity sued for.

180 By contrast, Griffiths v Griffiths [1973] 1 WLR 1454 was a case where a husband claimed an enlarged beneficial interest in the matrimonial home (which had been conveyed into the name of his wife) by reason of having effected improvements. The wife alleged that his claim must fail because of his unclean hands, in that he had represented to the Law Society for the purpose of obtaining a legal aid certificate, and to a court bailiff for the purpose of avoiding a distraint, that the house belonged exclusively to the wife. Arnold J rejected this argument, at 1456-1457:

"in my judgement the point is a bad one because he is not, in preferring his claim to the improvements, relying upon his own disreputable act, as, for example, does a man who seeks to enforce a resulting or express trust of property transferred by him to his wife by saying "oh, the transfer was only to defraud my creditors." Nor is he doing the other thing which is forbidden, by the doctrine of promissory estoppel, of reversing a previous contention where, but only where, the party against whom the contention is made it has in the meantime all that his or her position in reliance on the previous contention. He falls between the two stalls; for it is no ingredient in the claim that he behaved wrongly, and therefore he escapes from the principle of Gascoigne v Gascoigne [1918] 1 KB 223, and it is not suggested that the wife relied on his disclaimer or either of his disclaimer is in such a way as to make it unfair to her that the position should now be reversed."

(This decision was upheld the Court of Appeal ( Griffiths v Griffiths [1974] 1 WLR 1350), but with the present point being regarded (at 1359-1360) as depending only on estoppel.)

181 The two tests emerging from the portion quoted at paragraph 164 above, from Dering v Earl of Winchelsea (“immediate and necessary relation to the equity sued for” and “a depravity in a legal as well as in a moral sense”) do not provide a complete guide to the circumstances in which the “unclean hands” maxim will be applied to deprive the litigant with the unclean hands of a remedy. Those two tests are a necessary condition for the application of the “unclean hands” maxim, but not a sufficient condition. Equitable relief is always discretionary, and other factors can influence the exercise of the discretion. For example, a restrictive covenant arising under a common building scheme, which binds both plaintiff and defendant, might be enforced at the suit of the plaintiff even if the plaintiff has committed some slight breaches of the covenant: Goddard v Midland Railway Company (1891) 8 TLR 126. If a plaintiff who seeks an injunction has, previously, engaged in conduct of a type which, if continuing, might have provided a ground for refusing the injunction on the basis of unclean hands, but prior to trial the plaintiff has ceased that activity and undertaken not to continue it, an injunction might be granted: Mrs Pomeroy Ltd v Scalé (1907) 24 RPC 177. In Littlewood v Caldwell (1822) 11 Price 97; 147 ER a plaintiff was refused an injunction to restrain the plaintiff’s former partner from interfering in the partnership business, receiving debts or drawing bills, and for an account and dissolution of the partnership, on the ground that the plaintiff had removed the partnership books and refused the defendant access to them. The defendant said that, because the partnership books were missing, he was unable to file an answer to the plaintiff’s claim. The plaintiff’s application was refused because of his removal of the books – but that refusal was expressly stated to be without prejudice to any future application which might thereafter be made. Thus, the order specifically left open the possibility of the plaintiff returning the books and of a situation arising where his having once removed them no longer made it unjust to grant an injunction.

182 Further, the weight which is accorded to bad conduct on the part of the plaintiff can differ depending upon the relief which is sought, and the alternatives for relief which the plaintiff has open to him. In Vigers v Pike (1842) 8 Clark & Finnelly 562; 8 ER 220 Lord Cottenham (at 645 of C & F, 251 – 252 of ER) noted that there is a,

"… marked distinction made by the Court of Equity between what is necessary to resist a suit for the specific performance of a contract, and what is necessary to support a suit to set aside a deed executed and an arrangement completed, and consequently to resist a suit founded upon such deed and growing out of such arrangement. When the Court simply refuses to enforce the specific performance of the contract it leaves the party to his remedy at Law; but if it were to refuse to administer equities founded upon a deed executed, it would leave the party applying without remedy, and his opponent in possession of that for which what was sought to be obtained was reserved as an equivalent."

183 If refusal of relief might occasion injustice to people who are not parties, the court might decide to grant relief notwithstanding bad conduct on the part of the plaintiff, if the transaction is objectionable on the grounds of public policy, “the relief not being given for their sake but for the sake of the public” (Vauxhall Bridge Co v Spence (Earl) (1821) Jac 64 at 67; Money v Money(No2) [1966] 1 NSWR 348 at 351-352 per Jacobs J; New South Wales Diary Corporation v Murray Goulbourn Co-Operative Company Limited (1990) 171 CLR 363, at 409).

184 In applying the unclean hands principle in the present case, it is necessary first to identify what is the equity which (absent unclean hands) I would be prepared to uphold. It is the equity of resulting trust, relating to those contributions which the Club has made to the purchase price of the Peakhurst property from its own money.

185 It is not necessary for the Club to prove anything about the circumstances in which Citibank was misled to be able to prove the facts which make good that claim to a beneficial interest. The equity which the Club asserts is one which originally arose against Mr Reardon by reason of the Club’s money providing part of the purchase price, and operated to impose equitable obligations on him, concerning his legal ownership of the property – the circumstances in which Mr Reardon came to have money to make his own contribution to the purchase price of the property have no immediate and necessary relation to that. Another way of putting this is that even accepting (as I do) that the Peakhurst property would probably not have been purchased at all if Citibank had not been misled, that misleading of Citibank did not make any contribution to the proportionate beneficial interest which recognition of the resulting trust would give to the Club. The entirety of the fruits of the deception of Citibank have been treated, on my findings, as a contribution to the purchase price by Mr Reardon. Even if the defendants were right in submitting that all of the wrongful conduct of Mr Hill and Mr Reardon, in their dealings with Citibank, could be attributed to the Club (a matter which I do not find it necessary to decide), recognising the particular resulting trust which I would be prepared to uphold does not involve the plaintiff in receiving a benefit from its own wrongful conduct. Recognition of that trust is nothing more than recognising a proprietary interest into which the Club’s own money, not shown to be derived from any wrongful conduct, can be traced. No attempt was made to show that the Club is better off by having had its asset in the form of a partial beneficial interest in the Peakhurst property, rather than remaining as cash. In my view the principle of unclean hands provides no reason for refusing to recognise that particular resulting trust. If the Club were to claim an entitlement to part of the beneficial interest in the property derived from Mr Reardon’s contributions the position might be different – but I do not need to decide that question.

186 The defendants also submitted that the circumstances in which the Peakhurst property came to be purchased gave rise to discretionary grounds for denying relief, separate to unclean hands. This submission was not expanded upon in any way, and I do not accept it.

Consequences of Payment by the Club of Mortgage Payments, and Repairs

187 At the conclusion of the hearing, Mr Sexton SC, counsel for the plaintiff, foreshadowed that, if I were to come to the conclusion which I have actually reached, some further evidence and submissions might be necessary to work out the consequences of payments which the Club has made in connection with the property after title was acquired (see paragraphs 153 and 154 above). He pointed out that the High Court, in Calverley v Green (1984) 155 CLR 242, made provision for remitting the matter to the Supreme Court once it had been decided that there was a resulting trust to a certain extent.

188 In Calverley v Green a man and woman were jointly liable under a mortgage, in consequence of which the money raised on mortgage was treated as a contribution by each of them. Although the proportionate interests in which the purchase price had been provided were calculated on the basis that the two of them had contributed the amount raised on mortgage (and hence, the resulting trust on which the property was held was calculated on that basis, thus giving the woman the benefit of a beneficial interest arising from her having contributed half the amount raised) the man had, after the purchse, made payments of mortgage instalments. Mason and Brennan JJ, at 263 said:

“If it is right to regard the payment of the mortgage instalments as having been made by the defendant out of his own funds and on his own account – that is, if he made those payments not intending the plaintiff ultimately to have the benefit of those payments – the defendant may be entitled to contribution from the plaintiff for her share of the payments and an equitable charge to secure the making of her contribution: see Ingram v Ingram (1941) VLR 95, at 102”

189 That basis upon which the payment of mortgage instalments might have conferred an equitable interest in the property upon the person who paid them was available only because both the man and the woman were liable to pay the instalments, but the man had made all the payments – he could assert an equity of contributions against her, and possibly have the amount payable pursuant to that equity of contribution secured by an equitable charge. That situation cannot arise in the present case, where it is Mr Reardon alone who had a liability to Citibank to make the payments. If the plaintiff wishes to advance some other basis upon which it says that the making of the mortgage payments, or anything else which the Club did concerning the property after it was purchased, confers any beneficial interest on the Club, it will be necessary for the Club to make application to further argue the case.

Orders

190 The orders I make are:

1. Declare that the interest in fee simple of Alan George Reardon (also known as Jack Andrew Wilson) in the land in certificate of title folio identifier C/404554 known as 15 Stanley Street Peakhurst was, immediately after the purchase of the said property held on trust for the plaintiff and the fourth defendant in the proportions 75,568:344,342.

2. Direct that any party wishing to make any further application concerning this matter make, within 21 days of the date of handing down of these reasons for judgment, an appointment with my Associate, of which not less than five days notice shall be given to the other parties, for the hearing of such further application.
**********

Last Modified: 12/11/2002