Commissioner of the Australian Federal Police v Love, M.J

Re: COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE
And: MALCOLM JAMES LOVE; BRENT RICHARD PETERS; DOUGLAS WILLIAM ALLARD PETERS;
KIM HEATHER PETERS
NIWURO PTY LIMITED; VICTOR CHARLES PARSONS; PAULINE PARSONS; VICTOR BENJAMIN
PARSONS; ANITA FLORENCE PARSONS; GAICLIMB PTY LIMITED and KATHLEEN MARIE
PETERS
No. N G430 of 1987
FED No. 302
Customs
29 FCR 396
(1991) 105 ALR 123

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Pincus J.(1)

CATCHWORDS

Customs - action for pecuniary penalties - whether should be determined before related criminal proceedings - costs of criminal defence from funds in control - whether such costs should be limited.

Customs Act 1901, ss.243B, 243C, 243E, 243F

HEARING

BRISBANE

#DATE 31:5:1991

Counsel for the applicant: Mr P. Roberts

Solicitors for the applicant: Director of Public Prosecutions

Counsel for the first defendant: Mr K.G. Horler, QC and Mr P. Byrne Solicitors for the first defendant: Marsdens

Counsel for the second to ninth
and eleventh defendants: Mr S.S. Hanley

Solicitors for the second to ninth
and eleventh defendants: Freemans

Solicitors for the tenth defendant: Bernard D. Brassil and Co.

ORDER

1. The Official Trustee may from time to time pay from funds under his control to the solicitors acting for the second defendant Brent Richard Peters and those acting for the eleventh defendant Kathleen Marie Peters, in respect of these proceedings and civil or criminal proceedings related thereto, on receipt of bills of costs in form satisfactory to the Official Trustee, sums for costs not exceeding in total $70,000.

2. All the applications by defendants under s.243F of the Customs Act 1901 be dismissed.

3. The further hearing of the applicant's claim under s.243B of the said Act be adjourned to a date to be fixed.

4. Any party may apply for further orders and directions on reasonable notice.

5. Costs be reserved.

JUDGE1

The principal application is for an order for payment of pecuniary penalties under s.243B of the Customs Act 1901. These reasons do not include the text of that section, nor of other provisions which will be referred to; they are written on the assumption that the reader will have them at hand. The scheme of s.243B is that an order may be made for payment of a penalty in respect of certain narcotics dealings, based on an assessment of the value of benefits derived from having engaged in such dealings. Under s.243B(3), such an order may be made although there has been no conviction of any relevant offence. Section 243C makes elaborate provision for the mode of assessment of the value of benefits and s.243CA(1) enables the Court to treat as property of the defendant "any property that, in the opinion of the Court, is subject to the effective control of the defendant". There are also ancillary provisions, to which reference is made below.

In circumstances which will be explained, the matter came before the Court as a hearing of an application for final relief, coupled with the hearing of some other applications which might be regarded as interlocutory. The application for final relief sought orders for pecuniary penalties. At the inception of the trial, the first defendant applied by counsel to have the application for pecuniary penalties as against him adjourned to a date to be fixed and, by consent, that was done. Mr Hanley then applied on behalf of other defendants for a similar order, but that was refused, so that the trial proceeded on the basis that there was an issue as to pecuniary penalties (in relation to the second and eleventh defendants) as well as questions concerning interlocutory relief. In the result, however, I have determined the interlocutory proceedings only. For reasons which are explained below, I have ultimately acceded to Mr Hanley's submissions (which he continued to press) that the determination of the application for pecuniary penalties should be stood over.
Broadly speaking, the arguments concerned property - land, gold and money - which was said on the defendants' side to have been derived from honest effort and on the applicant's side to have been derived from extensive heroin dealing on the part of the second and eleventh defendants. Whether or not final relief was in issue, it was necessary for me to consider the extensive evidence about this property and the activities of the second and eleventh defendants for two reasons: first, because there was an issue as to the ownership and control of the property and, secondly, because it was, in my opinion, relevant to an application made by the second defendant for payment of the costs of criminal defence.
The applicant's claim for pecuniary penalties was based on the assertion that the first defendant, Malcolm Love, and the second defendant, Brent Peters, were the principals in a substantial business enterprise of purchasing and selling heroin. Both of them were charged on 25 August 1987 in respect of that matter, but have not yet been tried. The applicant's case was that a friend of Brent Peters, one Shane Heffernan, was involved in the heroin business with Love and Brent Peters, as was the eleventh defendant, Kathleen Peters. The applicant asserted that property, discussed below, should be inferred to have been obtained from these unlawful activities. The defendants' case was that the property came largely from cash supplied by the third defendant, Douglas Peters (Brent's father) and the eighth and ninth defendants, Victor and Anita Parsons. Mr and Mrs Parsons are the parents of the eleventh defendant, Kathleen Peters (Brent's wife).
Of these defendants, Brent and Douglas Peters and Victor and Anita Parsons gave evidence. A number of other persons whom one might have expected to be called on the defendants' side were not called, one being Kathleen Peters.
There are two corporate defendants, Niwuro Pty. Limited, which was supposedly a company from which Brent Peters derived significant income, and Gaiclimb Pty. Limited ("Gaiclimb"), a trustee company whose dealings are discussed in detail below, which was separately represented at the trial by Mr Brassil.
I have mentioned that the defendants Love and Brent Peters were arrested and charged with offences relating to heroin on 25 August 1987; on the same day the defendant Kathleen Peters was similarly arrested and charged. On 3 September 1987 and subsequently, interlocutory orders were made with respect to property under the provisions of s.243E of the Act. Again, I do not set out the relevant parts of that section, but assume the reader will have access to it. The effect of s.243E is to empower this Court, in circumstances of the present kind, to make an order directing the Official Trustee in Bankruptcy to take custody and control of property. Interlocutory orders have been made under this section by Wilcox J. on 3 September 1987 and by Foster J. on 21 September 1990. I will not set out the details of these orders, except to say that the latter required delivery of property of Gaiclimb Pty Ltd ("Gaiclimb") and the consequences of that order are discussed below.
Douglas Peters has applied for an order that a property at 64 Murriverie Road, North Bondi, be discharged from the order of Wilcox J. of 3 September 1987. That application is based on s.243F(1)(a) of the Act, which empowers the Court in circumstances of this kind to vary an order which has been made under s.243E directing the Official Trustee to take custody and control of property. Under s.243F(2A), such an application as that made by Douglas Peters in respect of the property just mentioned (which is called, below, "North Bondi") must be granted, in certain circumstances. Those are that the applicant, being a person having an interest in the property in question, satisfies the Court that "the interest is not subject to the effective control of the defendant", where "the defendant" means the person whose alleged narcotics dealings founded the s.243E order. In the present case, Douglas Peters' application was opposed by counsel for the applicant, Mr Roberts, on both the grounds implicit in s.243F(2A): that Douglas Peters had no interest in the property and that, if he did, that interest was subject to the effective control of Brent Peters.
A similar application was made on 30 April 1990, for what was described as "severance" of a property at Coates Park Road, Cobbity, which has been sold by the Official Trustee. This property is referred to below as "Cobbity". On 13 February 1991, there was filed a supplementary application by the sixth and eighth defendants, Victor Charles Parsons and Victor Benjamin Parsons. It asked that the order of Wilcox J. of 3 September 1987, insofar as it relates to Cobbity and any funds received by the Official Trustee from its sale, be discharged and that a sum of $150,000 contributed by the defendants I have mentioned to the purchase of the property be paid from moneys held from the sale; other orders having the same general purpose were also sought. It appears to me that this latter application was intended to be made, not by the sixth and eighth defendants, but by the eighth and ninth defendants, Victor and Anita Parsons, and I shall so treat it. There was no attempt made to show that the sixth defendant is interested in the proceeds of the sale of Cobbity.
Next, there was before me an application by Gaiclimb for a declaration that its property is the subject of a trust for the benefit of children of Brent and Kathleen Peters, namely Tara and William Peters. Further, there was sought an order that the Official Trustee deliver up to Gaiclimb the whole of the property of Gaiclimb dealt with under the order of Foster J. mentioned above (made on 21 September 1990).
Lastly, there fell for consideration an application for the payment of legal costs for Brent Peters, under an amended Notice of Motion filed on 30 April 1990. By that application, Brent Peters sought payment of past and future legal costs for work done and to be done by his solicitor Miss Rosemary Janet Freeman.
The application for costs was restricted to funds held by the Official Trustee in respect of an aircraft which passed into his control under the provisions mentioned above, together with an associated shareholding (ten shares) in a company known as Nivco Pty Ltd. It was common ground that the funds in question are held partly in an account in the name of the Official Trustee and partly by Egan McLean and Co., Tamworth solicitors, under an agreement with the Official Trustee. They total about $109,000.
A great quantity of material was tendered, including transcripts of conversations to which the defendant Brent Peters and others were parties, which was said to bear upon the question whether, as the applicant claimed, Brent Peters had access to substantial amounts of money. That evidence was put forward by the applicant as showing a source of funds alternative to those which, according to Douglas Peters and to Victor and Anita Parsons, went toward the purchases of Cobbity and North Bondi and towards the acquisition of assets by Gaiclimb. These three defendants said that they always had large sums in cash in their residences from legitimate earnings, whereas the applicant asserted that money came from heroin dealing conducted by Love and by Brent Peters with the co-operation of Shane Heffernan and Kathleen Peters. The content of the transcripts was important, as to this issue. Brent Peters commented upon the transcripts extensively, but nothing he said could possibly dispel the impression they create.
I propose now to deal with the issues thus arising, but preface that treatment by a remark concerning credibility.
Apart from the solicitor acting for most of the defendants, Miss Freeman, the only witnesses who gave evidence for the defendants were the defendant Brent Peters himself, his father Douglas Peters, Heffernan and the parents of Kathleen Peters. Of these witnesses, the least credible was Brent Peters. For example, in evidence before Beaumont J. on 17 September 1990, Brent Peters described the tapes purporting to be a record of conversations in his residence as "absolute fiction" and said that he accepted nothing in them. He also said they were "totally unintelligible". In the end, although he pointed to quite a number of matters on which he differed from the transcripts, he did not, in large part, dispute their correctness. In this and many other respects Brent Peters was an unreliable witness. As to Miss Freeman, it is evident that she must have known a great deal more about the transactions in question and the reasons for them than she disclosed to the Court.
Cobbity
On or about 12 November 1985, one K.W. Debreceny as vendor, and the defendants Mr and Mrs. V.B. Parsons as purchasers, entered into an agreement for sale of a house at Coates Park Road, Cobbity for the sum of $242,500 and that contract was duly completed. So much seems clear, but other facts concerning this property are disputed. The defendants' case is that the property was bought with the intention that the Brent Peters family would go to reside in the house in the first instance and that, eventually, Mr and Mrs. Parsons would also reside there. Brent Peters in fact went to reside at the property in 1986, after spending a curiously large sum on "security" measures there. The defendants say that the moneys used to purchase the house came, as to $100,000, from Mr Douglas Peters, and the balance from the savings of Mr and Mrs. Parsons.
The origin of the moneys used to purchase the property remains obscure. Mr Hanley complained that Mr Paul Roberts, appearing for the applicant, had not put a specific case to witnesses called on the other side as to the origin of the money. It appears to me that it would have been difficult for Mr Roberts to do so, as the applicant was not in a position to give him instructions as to the origin of the money, a fact which is known with certainty only by the defendants or some of them.
Mr and Mrs. Parsons gave evidence that Mr Parsons had saved $150,000 in cash during his working life and hidden it in the ceiling. Mrs. Parsons suggested that this was because of a distrust of banks. Their evidence as to the source of these funds changed somewhat. At one stage, the impression was given that the $150,000 was wholly a surplus from Mr Parsons' business, but it later appeared that much of it was said to come from successful gambling and, still later, money from sale of greyhounds was mentioned as a source.
The money used for the purchase of Cobbity passed or should have passed through the trust account of a solicitor, Miss Freeman, who acted for Mr and Mrs. Parsons in the purchase. The trust ledger (Exhibit 30), omitting insignificant sums, shows the following moneys as coming into Miss Freeman's trust account in relation to the Cobbity purchase:

Kathleen Peters Cash $31,000.00 Mr and Mrs. Parsons N.A.B. Parramatta $49,694.38 Mr and Mrs. Parsons Macquarie Bank, Sydney $48,080.16

It will be noted that these sums add up to less than the purchase price.
According to Brent Peters' evidence before Beaumont J. on 17 September last, his father contributed $100,000 in cash towards the purchase. Brent accompanied his father to Miss Freeman's house in Vaucluse to deliver the money. When asked why cash was handed over, Brent Peters said, in effect, that the price would be better if cash were paid. I do not believe that had anything to do with it; for one thing, when the $100,000 was paid the sale was already agreed.
In Douglas Peters' evidence, he said his son wanted the money in cash because the real estate agent said that otherwise other people would buy the property first. I do not accept that either - i.e., I do not accept that the agent said that to Brent or that Brent told his father the agent had done so. Douglas Peters said he understood the $100,000 was a deposit, but it is not credible that he did so understand.
Douglas Peters said, in effect, that it was Brent and not himself who handed the money over to Miss Freeman in Vaucluse and that he waited outside the office in which the money was handed over; I accept that version of events. Miss Freeman gave no receipt for the money, nor any reasonable explanation of her failure to do so. Where the money came from - i.e. whether it was Mr Peters Snr.'s money as he claims - is a question I discuss below.
In that it omits mention of the $100,000, the trust account ledger is plainly deficient. Miss Freeman, in her oral evidence, confirmed that she received $31,000 in cash from Kathleen Peters, as the ledger shows. As to the next item set out above, $49,694.38, the evidence showed that the truth was more complex than the ledger would indicate. Miss Freeman said that she received $50,000 in cash. She did not claim to have a recollection as to who brought it in, but pointed out that the ledger indicated that it was Mr and Mrs. Parsons. The difficulty about that is that the ledger simply does not record any receipt of $50,000; Miss Freeman said Kathleen Peters "may have" brought the $50,000 in. Miss Freeman said that the $50,000 was paid to the United Permanent Building Society. She lodged it there as trustee, and it remained there for eight days; the documentary evidence supports this. Then it was arranged that that sum, less an unexplained deduction, should be paid into her trust account in the form of a cheque drawn on the National Australia Bank at Parramatta.
The failure of Miss Freeman to record the receipt in cash of either of these two sums - i.e. the $100,000 and the $50,000 - appears to be difficult to attribute to mere inefficiency.
Some more needs to be said about the sum of $48,080.16, the third receipt set out in the ledger. This came into Miss Freeman's trust account from a Macquarie Finance Limited cheque dated 2 December 1985 and was, as the trust account ledger indicates, supposedly a payment made by Mr and Mrs. Parsons. The evidence of Brent Peters throws some light upon the origin of this money. According to his evidence, he put $30,000 in cash supplied by Mr Parsons into an account with "Hill Samuel", an entity which later became "Macquarie Finance". Brent Peters said that Victor Parsons asked him to deposit some money for him. There were produced in evidence documents which appear to relate to this money (Exhibits 4 and 5). On the face of Exhibit 4, Victor Parsons asked Hill Samuel Property Services Limited to accept $20,000 as an unsecured deposit, and on the face of Exhibit 5, Victor Parsons gave Kathleen Parsons permission "to accept the cheque with the presentation of the bank slips and the letter showing deposits and account number". Brent Peters admitted that he wrote Victor Parsons' signature on both these documents. I accept that he was responsible for these forgeries, but do not believe that they were committed with any authority from Victor Parsons.
Victor Parsons said that he gave Brent Peters $20,000 to invest "while we were waiting for the purchase" and "then I would give him another 25 after that to invest"; he explained that "we were looking for property for about three or four months". I do not accept this account. I think the money which came from Macquarie Finance Limited did not belong to Victor Parsons but to Brent and Kathleen Peters and that the reason for the forgeries I have mentioned was to disguise that fact. One reason for my conclusion is that I found both Victor Parsons and Brent Peters unsatisfactory witnesses, and another is that Exhibit 4 was purportedly issued in February 1985, whereas the contract of sale of Cobbity was not made until November, some nine months later.
There are other complexities about the property at Cobbity which need to be explained. Victor Parsons said the property was bought as an investment. There was produced in evidence (Exhibit 45) a copy of a deed between Victor Parsons and his wife as trustees and various persons as beneficiaries. This recites the contract for sale of the Cobbity property and that the sum of $242,500 "will be provided by the beneficiaries towards the purchase price". The operative part of the deed is a declaration that the property was held in trust for the beneficiaries.

The beneficiaries set out are children of Victor and Anita Parsons, as well as Tara Peters (Brent and Kathleen Peters' first child) and any other children of Brent and Kathleen Peters. The copy of the deed which was produced is dated 1985, but does not set out the month or day of the month on which it was made. It appears to have been written over for use as a precedent in drafting another trust deed.
Insofar as the deed purports to be made with Tara Peters as a party, it is defective since she had no capacity to contract, being a baby at the time. Insofar as it recites that the purchase price is to be provided by the beneficiaries, it is false, on any view. Victor Parsons gave evidence that he gave instructions for the preparation of the document in April 1986 (the date it bears is 1985).
Victor Parsons was shown a copy of another trust deed bearing date 1986 but (again) not setting out a month or day of a month. This also relates to Cobbity, but shows the trustees as Victor Parsons and Pauline Parsons, who is a daughter of Victor and Anita Parsons. It therefore could not change the beneficial ownership of the property, Pauline Parsons not having any legal interest. The document was apparently signed by Anita as well as by Victor, but in the character of appointor, not trustee. This second trust deed was, in my view, legally ineffective.
However, this may be argued to throw some light upon intention. If the parties were simply using Cobbity as a means of investing Brent Peters' ill-gotten gains, then it is hard to see the point of this second trust deed. Although the evidence was vague and confused and the second trust deed is void, its existence gives some support to the inference that Victor Parsons and his wife regarded themselves as having a genuine interest in Cobbity. Then there was evidence that Victor Parsons made payments of substantial amount for rates, maintenance and the like after Brent Peters and his family left the property, in August 1987. The inference is also assisted by the evidence of Anita Parsons, who appeared to me more credible than her husband. She gave an explanation of the reason for preparation of the second deed which, while it made little sense to me, seemed based on a recollection that the preparation of the second deed had to do with a change of mind on the part of Victor and Anita as to who the beneficiaries should be. But this is not inconsistent with Cobbity having been bought, in the first place, with money from Brent Peters.
I have had difficulty in deciding this issue, but have in the end determined to reject the application to free the property in question from control. The application relating to it was mainly dependent on the evidence of Victor Parsons, which I did not find to be credible. I cannot accept that Cobbity was bought with funds having the sources alleged by the defendants.
North Bondi
On or about 21 March 1984, Douglas Peters agreed to purchase a house property at North Bondi for the sum of $150,000. Brent Peters gave a confused explanation for its purchase, which implied that it had to do with alleviating a tax problem his stepmother had. I do not believe this; his stepmother was not the owner of the property, nor was it bought to be rented out. In his examination before Beaumont J. on 17 September 1990, Brent Peters explained that Douglas Peters gave Kathleen Peters (Brent Peters' wife) a sum in cash to pay the deposit. Brent Peters said the balance was borrowed by his father from a finance company.
After the property was bought, Brent Peters and his family lived in it rent-free for about two years, until they moved to Cobbity in mid-1986. Then the property was rented out until early 1988, when Brent Peters and his family moved back in. Douglas Peters said that $135,000 was borrowed from "C.I.B.C. Financial Limited Company". He gave no explanation for the purchase of the property and, indeed, gave little evidence about any aspect of the issue. He claimed that he wished to transfer the property to the Gaiclimb trust in 1986, but there is no evidence to support that assertion.
In December 1984, Douglas Peters mortgaged a number of properties, including the North Bondi property, to C.I.B.C. Australia Limited to secure unspecified advances. In April 1986, he executed a written agreement to sell the North Bondi property to Botazo Pty. Limited and on 2 May 1986, executed a conveyance of that property to the same company; it was never registered. Botazo Pty. Limited received the rental from the property, when it was let out, on Brent Peters vacating the premises. Douglas Peters was unable to give any explanation of these transactions. It seems to me a reasonable inference, and it is one which I draw, that this inability is due to Douglas Peters' having no real interest in the North Bondi property. It seems to me likely that in 1986 it was thought desirable to distance Douglas Peters from the North Bondi property, although that idea was never put into effect. There is also a deed of trust executed by Douglas Peters as settlor, establishing the "Botazo Family Trust", a document on which Douglas Peters threw no light. Brent Peters, however, claimed some knowledge of this trust, which he said was "never finalised". Heffernan said the directors of Botazo Pty. Limited were Victor Parsons' son and that son's de facto wife; why this was so remained unexplained.
On this scrappy evidence, it is necessary to determine whether, as Douglas Peters (by application filed on 7 February 1991) would have me hold, the property is truly his. Apart from what is set out above, two pieces of evidence assist, although not greatly. One is a conversation between Brent Peters and Malcolm Love of 1 April 1987. That conversation related to income tax and, in particular, investigations into that subject. "They" spoken of in the following passage, from which expletives are deleted, appear to me to be two tax investigators. Brent Peters said:

"If they ever probe there's nothing they can find anyway, like if you know at that house, the house was just directly to me with a total purchase made from ... C.I.B.C. finance company".

This gives some slight support to the inference that the house was bought with Brent Peters' funds, although matters were made to appear otherwise; the inference would have been weaker, had any alternative and credible explanation for the passage been put forward. The second piece of evidence is that $15,000 was paid towards the purchase from accounts in the name of Kathleen Peters - Exhibit 51. This sum was, I think, the deposit. Brent Peters told Beaumont J. on 17 September last that he did not know of the existence of these accounts, but that is not easy to accept. He also denied that Kathleen Peters' money was used to pay the deposit. He said his father gave Kathleen the money to pay it, but again I cannot believe this. Douglas Peters gave evidence that he gave the $15,000 cash to Brent.
On the whole, I am satisfied that the story I was given as to the purchase of the North Bondi property was false. I think the purchase price came, in one way or another, ultimately from funds of Brent and (perhaps) Kathleen Peters and that it was placed in the name of Douglas Peters to hamper any investigation into the assets of Brent and Kathleen Peters. The only substantial evidence that Douglas Peters ever treated the property as his own is the mortgage referred to above, but the other circumstances are against him. I also find that the North Bondi property is, and has at all material times been, subject to the effective control of Brent Peters and it may therefore be treated as his property, under s.243CA(1); I so treat it.
Gaiclimb
Douglas Peters said that he made savings during his career as an airline pilot and currency courier, and travelled to Australia from Hong Kong after his retirement with $1.25 million in cash in his suitcase. He did not put the cash in a bank, but kept it in a trunk. His story as to the Gaiclimb trust is, broadly, as follows. He says that his second wife (the fourth defendant) was in financial trouble in 1984 and, to assist her, he used $400,000 of his cash to buy some Queensland properties in which she was interested. A trust was formed, at the instance of Brent Peters, to hold the properties. Then, according to Douglas Peters, a Mrs. Kenny and Douglas Peters took over the trust's management for about two years, at which time Douglas Peters asked Brent Peters to arrange for it to be run in Sydney. Douglas' other son, Wayne Peters, executed a trust deed, the beneficiaries being William and Tara, the children of Brent and Kathleen Peters. At the end of 1987, one of the properties the subject of the trust was sold and in 1990, the four remaining properties were sold. A substantial part of the proceeds has been used to pay costs of Brent and Kathleen Peters.
It is necessary to set out more detail. Brent Peters gave evidence that Gaiclimb Pty. Limited was set up by his father, but later said that his father "requested me to get a family trust deed established for the two children". Miss Freeman said that it was Brent who instructed her to form the trust. There is in evidence a copy of a deed of settlement in which Gaiclimb Pty. Limited is the trustee and the settlor is Wayne Peters; it is dated 17 April 1986. Douglas Peters gave evidence that the $400,000 necessary to set the trust up was in an account held or operated by Mrs. Kenny; there is no documentary evidence relating to that account, nor was Mrs. Kenny called. Douglas Peters said that after the purchase, income from the properties was banked "to the Gaiclimb account and none went to Brent Peters". However, Brent Peters said in examination before Beaumont J. that he received rental income from Gaiclimb properties "on behalf of my children". He said that occurred from January 1988 and that the money went into an account in his name as trustee for his children. His interest in the purchase of the properties had shown itself earlier; he turned up at the solicitors' office at settlement and demonstrated anxiety when the purchase price, brought by Mrs. Kenny, was not available on time.
There is evidence that an account was opened in the name of Gaiclimb Pty. Limited at the National Australia Bank, Oxford Street on 17 April 1990 and that Brent Peters, prior to the opening of the account, inquired at the bank relating to the matter. Brent Peters had an account there himself, as trustee for Tara and William, and said, by way of explanation of the Gaiclimb account's being at the same place: "I suggested to the directors it would be a good place to have a company bank account, that is all". He thought it was a "good bank".
Although Brent Peters admitted to a continuing interest in the affairs of the Gaiclimb trust, he said he did not know the identity of the current directors of Gaiclimb; immediately after saying that he said that he thought Mrs. Oliphant and a Mr Peter Bishop were directors. Neither of these persons gave evidence; it is obvious that Bishop had nothing, in any practical sense, to do with Gaiclimb's activities. There is in evidence a minute of a directors' meeting of March 1986, which shows Mrs. Kenny and Douglas Peters as the directors. There is other evidence that Mrs. Oliphant was a director but resigned in December 1987, being replaced by Douglas Peters; that is inconsistent with the minute of 1986. Douglas Peters gave evidence that "as far as I understand" he (Douglas) became a director. Confusion and inconsistencies of this sort were relied on by Mr Roberts in support, as I understood it, of the suggestion that the Gaiclimb trust was never intended to be anything other than a facade. However, experience suggests that small private companies are often run quite loosely; that those concerned with the trust were uncertain who its directors were from time to time does not necessarily mean that the trust had no real existence.
On the defendants' case, the $400,000 which was supplied to establish the Gaiclimb trust was wholly the money of Douglas Peters. It happened, so the defendants assert, that the necessity of assisting his wife in her financial difficulties coincided with an impulse of generosity towards Brent Peters' children (being Douglas Peters' grandchildren). Douglas Peters said that "it would be recorded somewhere that I gave this money to Gaiclimb", but that he had no documents relating to it. This seems odd, and another aspect of Douglas Peters' story which has troubled me is that it would have seemed simpler, if the basic motive was to assist his wife, to lend her some or all of the money he had available; it is not suggested that the price paid for the properties was excessive, or that they would not have been saleable to others.
Miss Freeman said that it was Brent Peters who in the first place gave her instructions to set up the trust, although she subsequently spoke to Douglas Peters about it. She says Wayne Peters was to be the settlor; Exhibit 1 shows that that instruction was carried out. Douglas Peters appeared to know nothing of Wayne's role in the matter, which is puzzling.
The properties which were bought were five in number. Brent and Kathleen Peters, together with Malcolm Love, were arrested and charged with drug offences in August 1987, and in early September the proceedings in this Court began. Wilcox J. made an order on 3 September 1987 under s.243B and s.243E of the Act relating to property on the basis of allegations against Brent and Kathleen Peters. It is the fact that fairly shortly after that, one of the Gaiclimb properties described in evidence as "Berkley Square", was sold, the sale price being $350,000. On 16 February 1988, Mrs. Kenny wrote to Miss Freeman asking that the proceeds of the sale be forwarded to Wayne Peters and that money was sent to him on 19 February 1988, the cheque being made payable to Hambros Australia Limited. There was no explanation as to why the money was sent to him, nor any account of what he did with it. It may be possible to infer that the intention was that Wayne Peters would himself hold the money under a sub-trust, but I have heard nothing from him. Nor does Miss Freeman advance any explanation for such a substantial part of the trust funds going to Wayne Peters.
Whatever the reason for the proceeds of sale being dealt with in this way, there seems to have been some connection between that payment to Wayne and payment of Brent and Kathleen Peters' legal costs. On 18 September 1987, and again on 20 November 1987, Wayne Peters paid $50,000 to Miss Freeman for those costs. The first cheque was from Hambros Australia Limited and the second from Dominguez Barry Samuel, a firm of which, according to the evidence, Wayne was the manager. Perhaps Wayne agreed to fund at least part of the cost of the criminal proceedings on the basis that he would be repaid promptly out of property sales, but it is impossible to say whether that explanation or some other is correct. Reference should also be made to documents dated June and July 1988 (Exhibits 35 and 36) evidencing the intention of the trust to pay Miss Freeman money for legal fees; it will be noted that the two sums of $50,000 each referred to above had been paid considerably earlier.
The four remaining properties were sold beginning early in 1990. Although no point was taken about the timing, it is the fact that on 13 February 1990, the High Court of Australia dismissed an appeal by Brent and Kathleen Peters and by Malcolm Love relating to the validity of warrants under which listening devices were used to obtain the tapes, parts of which were played before me. Brent Peters admitted in evidence before Beaumont J. that he dealt with the solicitor and real estate agent in relation to the sale of these properties; he said he did this on behalf of his father. He gave evidence on the same occasion that he had not approached Gaiclimb or its directors for a loan for legal expenses, nor did he propose to do so. However, he must have been speaking inaccurately, because he told me that Gaiclimb paid $50,000 towards the costs of his committal proceedings. Brent Peters also said, as to these sales, that Mrs. Oliphant decided on the price to be accepted. I do not accept that. It seems to me clear from the evidence that Mrs. Oliphant who, when not acting as a company director, has the task of looking after Brent Peters' children, was merely a cipher and exercised no independent discretion. Perhaps appreciating the improbability of Mrs. Oliphant's alleged role in determining price, Brent Peters said immediately afterwards that it was the real estate agent who decided what price should be accepted. It should be kept in mind that these sales took place at a time after his father had instructed him to "get the company in shape". Brent Peters said his father "... asked me to take control, or care - not control but care of the company, to put the company in order ...". Douglas Peters seemed to be expressing the same idea when he said in evidence that in 1988 he left it to Brent to "pick two good people to run it". Douglas did not interest himself in who those good people were. But as a practical matter, I have no doubt that the management of the trust affairs was, at least at the time of the sale of the four properties in 1990, in the hands of Brent Peters; according to his father's recollection, Brent Peters was to be responsible for the legal costs associated with these sales.
The Gaiclimb Account
On 17 April 1990, an account was opened at the National Australia Bank in the name of Gaiclimb Pty. Ltd. From April to September, a sum of $465,332.88 was paid in from various sources. In July, August and September, this money was drawn out in the form of gold and cash - as to the latter, the cash was mainly U.S. dollars. In July, a further sum of $93,000 came from Miss Freeman's trust account and gold was bought with it.
Brent Peters gave evidence before Beaumont J. to the effect that he "was officiating on my father's behalf", as to the Gaiclimb property sales; he said that his father asked him to do this "because of the massive persecution that he has been up against". It is not clear to me what was the nature or source of that persecution. On the evidence, one must infer that at least one reason for the sales was the difficulty Brent and Kathleen Peters were in, both as to the criminal proceedings against them and the Customs Act proceedings in this Court.
Although it is not necessary to set out in full all the details of the transactions I have outlined, it is necessary to refer to some of the evidence which suggests that Gaiclimb's money was being managed by Brent and Kathleen Peters or one of them.
On 27 April 1990, a sum of $79,621.83 was deposited in an account at the National Australia Bank, Paddington described as "Gaiclimb Pty. Limited as trustee for Gaiclimb Family Trust". In May and June, further sums came into the account and on 9 July 1990, the balance stood at $242,572.29. It was common ground that the credits to the account were, with minor exceptions, derived from the sale of Gaiclimb properties, although the details of the sales were not proved. There were two other substantial credits to the account. One of these (a sum of $72,091.97) was, I infer, the proceeds of the sale of the fourth remaining Gaiclimb property. The other was a deposit of $150,000 on 17 July 1990.
According to the evidence, Douglas Peters caused a sum of $260,000 in "my other trust, Hirito" to be lent to the Gaiclimb trust, about this time. The loan was evidenced by Exhibit 9, dated 16 July 1990. Of the $260,000, $150,000 was the sum mentioned above, deposited in the Gaiclimb account with the National Australia Bank. $93,000 was used to purchase 195 ounces of gold.

There was very little evidence about the "Hirito trust". Unless the trust deed was in unusual terms, the payment of the $260,000 must surely have been a breach of trust. The loan agreement, Exhibit 9, made the sum lent repayable within six months of demand, but postponed demand for 25 years. The agreement involved a gift of most of the $260,000 from Hirito to Gaiclimb, because the value of the promise to repay the $260,000 in 25 years with no interest was only a small fraction of the sum lent. The explanation Douglas Peters gave for this transaction had to do with income tax, but in my opinion it was false. It should also be noted that Douglas Peters said several times that the $400,000 which was used to establish the Gaiclimb trust in 1986 was all the money he had left; it is not clear how this is reconcilable with his ability to pay out $260,000 more in 1990.
There are some other puzzling aspects of this transaction. One is that, according to the evidence of Miss Freeman, her firm charged $5,000 profit costs in relation to the loan agreement to which I have referred - a simple document which would take any competent solicitor only a short time to prepare. The amount charged suggests the possibility that there was thought to be a justification, in the extraordinary nature of the transaction, for charging a fee commensurate with the risk it entailed. Another odd feature is that no written acknowledgments were obtained for the payment out of the $260,000 from Miss Freeman's firm. Still another is that Exhibit 43, Miss Freeman's file relating to the $260,000 loan, contains a letter dated 10 July 1990 from Douglas Peters to Miss Freeman referring to a loan of $260,000 and then adding in parentheses "and approx a further $180,000 when available". There was no evidence of any agreement to advance such a sum, nor any explanation of a reason why it might have been discussed.
This same letter sets out the story which was told at the hearing before me as to the reason for the $260,000 advance, namely to take advantage of tax losses Gaiclimb was alleged to have incurred. This might have made some sense if it was contemplated that Gaiclimb would have a substantial income to absorb the losses, but that could not have been so: as I have pointed out, about this time Gaiclimb's property was sold and converted into cash and gold. The view I have formed is that the $260,000 said to have come from Hirito had nothing to do with tax considerations; it seems likely that the payment had to do with a then contemplated concealment of funds.
To return to the subject of the transformation of the moneys from Hirito, plus the moneys from the sale of Gaiclimb properties, into cash and gold, one minor point should first be noted: there was a surplus of $6,500 in Miss Freeman's account above the amount paid into the Gaiclimb account and used to buy gold. Miss Freeman said that this surplus was paid in a cheque made out to Gaiclimb Pty. Ltd. but handed to Brent Peters.
I have mentioned that some of the money from the Gaiclimb account with the National Australia Bank was used to buy gold. There were two separate purchases. Kathleen Peters took part both times; on the first occasion she was accompanied by an older woman referred to as her grandmother; presumably that was Mrs. Oliphant. Kathleen Peters took the leading part in purchasing the first lot of gold and the sole part in purchasing the second. As to each, she was named in the sales record as the sole purchaser.
A third purchase of gold with $93,000 from Miss Freeman's trust account was made on 16 July 1990 by Kathleen Peters. On this occasion, the purchaser was shown in the purchase record as Gaiclimb Pty. Ltd.
As I have explained, the rest of the money from the Gaiclimb account was changed into U.S. dollars. It seems unnecessary to give all the details and enough to mention two examples of these transactions involving Gaiclimb funds. On 19 July 1990, Westpac Banking Corporation of 341 George Street, Sydney paid to a woman who was, as I infer, Kathleen Peters, $38,600 in United States currency. Kathleen Peters took the leading part in this transaction; Mrs. Oliphant was described as her mother and it was said that she was deaf. On 16 July 1990, two women came to the office of the Banque Nationale de Paris at 12 Castlereagh Street, Sydney and the younger of the two produced a National Australia Bank cheque for $15,000. There was some delay and the younger woman, explaining that she had to go elsewhere, told the bank officer to give the money to a man who was in the bank, described as "being about 35 years of age, with a bald head and either a moustache or a beard and of very large build". I infer that the man was Brent Peters. In the result, Kathleen Peters took all the money away, but Mrs. Oliphant signed the relevant documents.
The story I was told by the defendants was that these transactions were entered into by way of investments, but I cannot accept that. I find that Kathleen Peters, using Mrs. Oliphant's services so far as necessary, converted the money in question into cash and gold for purposes connected with the proceedings in this Court, and perhaps the criminal proceedings. The idea was I think to make it more difficult for others to lay hands upon the money and probably there was also an intention of preserving a fund free from Government or Court interference, to fight the criminal charges. Brent Peters told me, in effect, that he expected his criminal trial to cost a sum approaching $1 million.
There was further evidence concerning the cash and gold just discussed. Brent Peters said that he was uncertain what happened to the money lent by Hirito to Gaiclimb, and suggested that the directors be asked; it seems evident that he was more likely to know this than the directors were. Brent Peters also swore that Mrs. Oliphant withdrew the money from the National Australia Bank and used it to purchase U.S. dollars and gold, and that his wife was present as "security for Mrs. Oliphant". In fact, Kathleen Peters took the leading part. Brent Peters said that Mrs. Oliphant gave 400 ounces of the gold to a Chinese person called Ray Chow and that Chow was to take it to Hong Kong for sale at a profit. He also said that Mrs. Oliphant had $U.S.80,000 which Chow had used to purchase other gold. What Chow's role was, in truth, can hardly be determined. Brent Peters said he "would have to say I had a bit to do" with Chow's getting the gold from Mrs. Oliphant.
On 21 September 1990, Foster J. made an order (mentioned above) for delivery up of property of Gaiclimb Pty. Ltd. Brent Peters gave evidence which suggests that he flouted this order. It seems a small matter to mention, but he made a point of saying that he had not bothered to read the judge's order. He took to his father in Tamworth property which was to his knowledge subject to the order. This was, according to him, 200 ounces of gold; it appears that in fact he took 195 ounces of gold to his father and $U.S.100,000 in cash. According to Douglas Peters, he demanded this because he heard that "Gaiclimb was going bust". Brent Peters' version was that he took the gold to his father because his father was furious at the Court's order. Neither version, in my opinion, is true. I think the reason the gold and dollars were taken to Douglas Peters was to mitigate the effect of the order of Foster J. Douglas Peters, perhaps embarrassed about his part in this, produced the gold in this Court, whence it was lodged in a bank. He told me he gave his son Brent the $U.S.100,000 and Brent said he has recently gambled the whole of that sum away, betting on horse races. Heffernan, Brent Peters' close friend, said in Court that he knew nothing of Brent's having got the $U.S.100,000.
The order of Foster J. caught other gold and cash - i.e. other than that which was spirited away by Brent Peters. It appears that this gold and nearly all the cash was delivered up in accordance with the terms of the order of Foster J.
It seems clear, in the end, that the applications by Gaiclimb for a declaration as to the beneficial interest in property, and seeking an order for delivery up of that property, must be refused.
Cash
It is desirable to mention some of the evidence concerning sums of cash found or paid. Reference has been made to some aspects of this elsewhere: in particular, the evidence that Brent and Kathleen Peters' parents had accumulated large sums of cash which they kept at home and of which substantial amounts were spent for the benefit of Brent and Kathleen Peters.
A question in the case is whether a reason for there being so much cash about was that people who buy heroin commonly pay cash.
Brent Peters gave evidence that income was received from a company, the defendant Niwuro Pty Ltd, in which he was interested which conducted a security business - mainly the provision of bodyguards. Douglas Peters said that he understood Brent had been working as a bouncer for a security company. It was said that the company got payment by cash rather than by cheque: Brent Peters gave evidence that he did not know whether the company had a bank account and he had no idea of its income. He also explained that the police found about $8,000 during a raid on his premises at North Bondi in 1987, most of which, he said, was company funds.
Some other aspects of discovery of cash at Brent Peters' house should be mentioned. In May 1985, police went to the North Bondi house with a search warrant and found over $20,000 in cash, a sum which Brent Peters attributed to race winnings. In February 1986, according to Brent Peters' evidence, the police found $150,000 in the same premises; he said that was cash which was held on behalf of the defendant Love. Brent Peters said Love had arranged to travel overseas and that Love needed money kept at Peters' house to arrange for betting on horses in his absence. Brent Peters said he had told this story in Court in 1986. If he did, it seems to have been false. On 14 April 1986, there was some discussion between Love and Peters of the result of criminal proceedings, giving custody of the sums just mentioned to its lawful owner. After an unrecorded remark by Love, Peters said "I make small loan from you". There then appears to have been reference to contacting Miss Freeman. Four days later Miss Freeman wrote to the police about the matter; I have no copy of that letter. On 22 April, she wrote demanding $97,600, apparently being the sum in respect of which Brent Peters was charged; she wrote on behalf of Brent Peters and made no mention of Malcolm Love having any interest in the matter. Miss Freeman gave no evidence about this matter; if the letter was written under a misapprehension, one would have expected her to say so. Miss Freeman's letter shows that the Court was misled by the story that the money found in 1986 belonged to Love.
There was also evidence that the Peters used cash to buy a tractor for the Cobbity property and cash to buy a car. As to the latter, Brent Peters said he got the money out of the bank, but the car dealer noticed that the money seemed to be mouldy. Heffernan also appeared to have access to substantial amounts of cash. There was evidence of a trip he took to Bangkok carrying $40,000 in cash, supposedly to complete a contract. Heffernan did not meet the person he intended to contact, according to his evidence, and came straight back to Australia with his money. The applicant's counsel suggested that Heffernan had not used the money for its intended purpose and I must say that seems more likely than Heffernan's version that the man he was to meet did not appear to be there, so he came straight home. Heffernan said he travelled overseas from time to time, paying cash for his fares.
It should also be mentioned that according to Brent Peters' evidence he changed the United States cash ($100,000) he got from his father last year into Australian currency by dealing with a man in a public street. He also travelled overseas from time to time, paying cash for the travel. His taxable income for 1984 was $8,600 and in 1985 about the same; there appears to be no evidence as to his taxable income in other years.
Claim for Pecuniary Penalties
The claim under s.243B for an order that pecuniary penalties be paid is pursued, although there has been no conviction of any relevant offence; sub-s.3 contemplates that this may happen. In my view, however, the Court would not ordinarily determine the question of pecuniary penalty where criminal proceedings are pending against the defendants, if to do so would be likely substantially to prejudice the defence of the criminal proceedings. The circumstances in which the pecuniary penalties proceedings came before the Court should therefore be mentioned. When they were set down (by my order made on 8 October 1990) that was opposed by counsel for, amongst others, Brent and Kathleen Peters. But the submission made was that the defendants' applications, for costs and severance, should precede the hearing of the application for pecuniary penalties; it was not contended that the latter should be adjourned until after the criminal proceedings were concluded. That course was taken, as it appears to me, because the defendants' applications themselves were being resisted on grounds which involved the proposition that Brent and Kathleen Peters had earned large sums by unlawful activities. The Court was told that the evidence for the applicant in the pecuniary penalties case would be merely that which he used to resist the defendants' applications for costs and severance; that proved to be substantially so. The applicant contended, in resisting the defendants' applications, that the evidence showed an alternative source of the funds discussed above, namely dealings in heroin by Brent and Kathleen Peters, and that the Court should not be satisfied on the defendants' applications that those funds were the cash savings of Douglas Peters and Victor Parsons. Mr Roberts also submitted, on the question of costs, that I should hold that there was an overwhelming case against Brent and Kathleen Peters that they had been extensively engaged in heroin dealings and take that into account in exercising the discretion to order payment of costs out of funds held.
To decide in civil proceedings an important issue awaiting determination in criminal proceedings is an unusual course. I was initially inclined to take that course in this case but have, in the end, decided to stand over the decision of the application for pecuniary penalties. My present view is that the application, which should be treated as part-heard, should not be brought on again until the determination of the relevant criminal proceedings. I have been persuaded that only in the clearest case should the Court finally determine, in such proceedings as these, the very question which is in issue in a pending criminal prosecution. Further, it does not appear that, as matters have turned out, the applicant will suffer any significant disadvantage by the adjournment of the application for pecuniary penalties; the applications for release of property from control have failed and that which was "frozen" remains in that condition. The evidence which has already been taken on the application for pecuniary penalties may still be used by the parties, but they will be allowed to call further evidence if they so desire. That is, the application for pecuniary penalties will be treated as part heard.
There will be a direction that the further hearing of the application for pecuniary penalties under s.243B of the Customs Act be adjourned to a date to be fixed.
Costs
There is an application for an order that provision be made in respect of past and future legal costs. The application is of a limited kind, in that access is sought only to funds derived from the sale of a Mooney aircraft and the sale of certain company shares associated with the aircraft. Brent Peters has admitted that he has had, at material times, the exclusive use and control of the relevant property. The sum available is about $109,000.
The submissions made on behalf of the applicant relating to costs dealt with the question whether it would be appropriate to make an order for costs in respect of the whole of the assets under the control of the trustee. However, as argued, the application on behalf of Brent Peters made that question irrelevant; he sought access only to the funds from the sale of the aircraft and shares in Nivco.
Brent Peters gave evidence that the only costs outstanding were those relating to the proceedings in the High Court, his father having paid the costs of a Court of Appeal case. There was some discussion as to whether particular amounts were reasonably charged by Miss Freeman. But it appears to me that a larger issue arises. The sum in question would not be sufficient to fund contested criminal proceedings, in all probability, as cases of this sort are commonly fairly long. I was referred to the decision of Southwell J. in Commonwealth v. Jansenberger (unreported), judgment in which was delivered on 3 October 1985. There, the Commonwealth sought an injunction against the defendant of the Mareva type on the basis of a claim for return of moneys allegedly got by false claims for unemployment benefits. The defendant had been criminally charged and committed for trial, the amount involved being about $378,000. He was still in custody as a result of those charges at the date of the hearing before Southwell J.
One of the questions Southwell J. considered was whether the order should be framed in such a way as to allow moneys to be used to fund the trial, an application for legal aid having been rejected.
The Judge took the view that:

"... there is a strong prima facie case that the plaintiff will succeed to the extent of more than the assets, and substantially more than the assets which have so far been identified".

The part of Southwell J.'s reasons on which Mr Roberts particularly relied was that which related to the costs of the criminal proceedings; the defendant asked that money be provided to enable him to pay for his defence. His Honour refused to do so on the ground that there was:

"... a strong prima facie case that the defendant has obtained by fraud from the Commonwealth of Australia significantly more than the assets which now can be traced to him".

Southwell J., after suggesting that the matter of costs might have to be reconsidered in future, said that it would be desirable that the Legal Aid Commission -

"... should control the expenditure of funds which no doubt will, at least to some extent, depend upon the assessment of the existence of an arguable defence than that the defendant should use moneys in engaging a private solicitor moneys in respect of which, as I have already said, there is a prima facie case of no moral or legal entitlement to possession".

There the money was allegedly obtained by fraud, not heroin dealing, but Mr Roberts invited me to apply this line of reasoning. (He also pointed out that Brent Peters has recently had $100,000 which could have been used to pay costs, but was gambled away.) I agree that, in an appropriate case, a discretion to make provision for costs of a criminal defence out of "frozen" funds alleged to have been obtained by criminal activity may be exercised against a defendant, where there is a strong prima facie case that the funds have been so obtained.
I have also taken into account the view expressed by Ryan J. in this Court in the Commissioner of the Australian Federal Police v. Malkoun (unreported, 1 February 1989). In dealing with a problem of this kind, his Honour suggested that:

"... an unrestricted provision should not be made for the defendants' costs out of the assets now under the control of the Official Trustee so as to allow a hopeless or extravagant defence to be mounted in the expectation that any funds left will inevitably be subsumed by orders for pecuniary penalties under s.243B."

In that case, his Honour placed a limit of $30,000 on the costs.

Here, Brent Peters gave evidence that he contemplated a very lengthy trial, with months being devoted to the transcripts. The applicant points to evidence of an interview with Heffernan dated 25 August 1987, to uncontradicted evidence of heroin dealing on the part of Kathleen Peters, to recorded conversations of the kind mentioned in the affidavit of Robyn Milner (para.6(l)) and to the absence of any plausible explanation of such conversations other than that for which the applicant contends. I think it unnecessary, and perhaps undesirable, to set out my view in detail about these submissions, but simply say that I think the case is one for application of the approaches taken by Southwell J. and Ryan J.
There will be an order that the Official Trustee may from time to time pay from funds under his control to the solicitors acting for the second defendant Brent Richard Peters and those acting for the eleventh defendant Kathleen Marie Peters, in respect of these proceedings and civil or criminal proceedings related thereto, on receipt of bills of costs in form satisfactory to the Official Trustee, sums for costs not exceeding in total $70,000.

[1991] FCA 302

31 MAY 1991