David Choong Lee v Director of Public Prosecutions
[2017] VSCA 82
•7 April 2017
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCR 2016 0168
| DAVID CHOONG LEE | Applicant |
| v | |
| DIRECTOR OF PUBLIC PROSECUTIONS | Respondent |
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| JUDGES: | BEACH and FERGUSON JJA and CAMERON AJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 7 April 2017 |
| DATE OF JUDGMENT: | 7 April 2017 |
| MEDIUM NEUTRAL CITATION: | [2017] VSCA 82 |
| JUDGMENT APPEALED FROM: | DPP v Lee (Unreported, County Court of Victoria, Judge Coish, 18 November 2016) |
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CRIMINAL LAW – Confiscation – Application for leave to appeal – Restraining order – Exclusion application – Tainted property – Meaning of ‘tainted property’ – Property derived or realised from property used in connection with relevant offences – Offender’s interest in property – Offender’s exclusion application dismissed by primary judge – Primary judge plainly correct – Application for leave to appeal refused – Confiscation Act 1997, ss 3, 18, 20 and 22.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr T D Best | SDR Law |
| For the Respondent | Mr T Gyorrfy QC | Mr J Cain, Solicitor for Public Prosecutions |
BEACH JA
FERGUSON JA
CAMERON AJA:
This application for leave to appeal concerns the meaning of the expression ‘tainted property’ in the Confiscation Act 1997 (‘the Act’). In s 3(1) of the Act, ‘tainted property’ is defined relevantly to mean:
property that, in relation to an offence –
(i)was used, or was intended by the accused to be used in, or in connection with, the commission of the offence; or
(ii)was derived or realised, or substantially derived or realised, directly or indirectly, from property referred to in subparagraph (i); or
(iii)was derived or realised, or substantially derived or realised, directly or indirectly, by any person from the commission of the offence; or
(iv)is, or has been, subject to a mortgage, lien, charge, security or other encumbrance wholly or partly discharged using property referred to in subparagraph (i), (ii) or (iii) …
Background
The applicant owned a property in Richmond (‘the Richmond property’). On 3 April 2014, the applicant entered into an unconditional contract for the sale of the Richmond property for $810,000. Pursuant to the contract of sale, the purchasers paid a deposit of $81,000 into the applicant’s estate agent’s trust account. According to the contract of sale, settlement of the sale was to occur on 1 August 2014.
Between 26 May 2014 and 2 July 2014, the applicant trafficked drugs of dependence at the Richmond property. On 3 July 2014, the applicant was charged with relevant drug trafficking offences.
On 28 July 2014, the Director of Public Prosecutions (‘DPP’) filed an application under s 16 of the Act, seeking a restraining order in respect of the deposit and proceeds of sale of the Richmond property. In this application, the DPP also sought (as an alternative, in the event that the Richmond property was not sold in accordance with the contract of sale) a restraining order in respect of the Richmond property. The grounds on which the application for the restraining order was made were expressed, in the application, as follows:
(a)David Choong Lee has an interest in the property described in paragraph 3 of this application, and, or alternatively;
(b)the property described in paragraph 3 of this application is tainted property within the meaning of the Confiscation Act.
The purpose of the restraining order sought was identified, in the application, as being to satisfy any forfeiture order, automatic forfeiture of property, or pecuniary penalty order that may be made under any of divs 1 or 2 of pt 3, or pt 8, of the Act.
On 29 July 2014, a County Court judge (Judge Parsons) made a restraining order pursuant to s 18 of the Act. The order provided:
No person shall dispose of or otherwise deal with the property specified below or any interest in that property:
(a)(i) the proceeds of sale of [the Richmond property], save to pay the proceeds of sale of [the Richmond property] to the Department of Justice, Asset Confiscation Operations … to be held on trust until further order of this Court; the expression ‘proceeds of sale’ refers to the price payable under the contract of sale between [the applicant and the purchasers] dated 3 April 2014 less the amount required to discharge the mortgage in favour of National Bank Limited …, adjustments to the residue of the purchase price payable calculated in accordance with the conveyancing practice and the proper fees, costs, commissions and charges in respect of the transaction; or
(ii)in the alternative, on the condition that the property is not sold pursuant to the contract of sale dated 3 April 2014, [the Richmond property] is restrained;
(b)funds in the amount of $81,000 held in [a specified National Australia Bank account], being deposit funds in relation to the sale of [the Richmond property], save for the application of those deposit funds at, and not before, settlement of the sale of [the Richmond property] … .
Settlement of the sale of the Richmond property occurred on 1 August 2014 and, accordingly, the Richmond property itself was never restrained. Pursuant to the restraining order, the proceeds of sale of the Richmond property (including the deposit) were then paid to the Department of Justice, Asset Confiscation Operations, to be held on trust until further order.
On 11 August 2014, pursuant to s 20 of the Act, the applicant filed an exclusion application. In the exclusion application, the applicant sought to have the proceeds of sale from the Richmond property excluded from the operation of the restraining order. The grounds upon which the exclusion order was sought were set out in the exclusion application as follows:
(a) the applicant’s interest in the property was lawfully acquired;
(b)the property is not tainted property and will not be [the] subject of a tainted property substitution declaration under s 36F of [the Act];
(c)the property is not derived property; and
(d)the property will not be required to satisfy any pecuniary penalty order or order for restitution or compensation under the Sentencing Act 1991.
On 2 September 2014, a second County Court judge (Judge Cohen) stayed the exclusion application pending the determination of the applicant’s criminal charges.
On 30 November 2015, the applicant pleaded guilty to five charges. Charges 1 and 2 on the indictment were Schedule 2 offences within the meaning of the Act, involving the trafficking of drugs of dependence in amounts that were above the automatic forfeiture quantities for those drugs.
In December 2015, following the applicant’s conviction and sentencing, the exclusion application was relisted for directions. The hearing of the exclusion application subsequently proceeded before a third County Court judge (Judge Coish) on 16 November 2016.
The exclusion application
In support of his exclusion application, the applicant relied upon an affidavit he affirmed on 4 April 2016 and an affidavit from his brother (Daryl Robert Lee), affirmed 13 April 2016. The respondent (the DPP) relied upon an affidavit of a Detective Senior Constable of Victoria Police (Simeon Parker) sworn 28 July 2014, and an affidavit of a legal practitioner employed by the solicitor for Public Prosecutions (Edward Chee), affirmed 22 June 2016. At the hearing of the exclusion application, none of the deponents of the four affidavits were required for cross-examination. Before the primary judge, the sole issue in dispute was whether the deposit and proceeds of sale of the Richmond property was ‘tainted property’ as defined in s 3 of the Act.
The primary judge’s reasons
The primary judge commenced his reasons for judgment with a succinct description of the relevant procedural background, the issue in dispute and the background facts.
Next, the judge summarised the parties’ submissions as follows:
It is not in issue that the Richmond Property itself is ‘tainted property' as defined but that Richmond Property was never the subject of the restraining order. It is submitted on behalf of the Applicant that the deposit and proceeds of sale are not ‘tainted property’ as defined. It is submitted that the chronology of events is critical as upon the Applicant entering into the contract of sale in respect of the Richmond Property on 3 April 2014 he ceased to hold the beneficial interest in the Richmond Property. Further on that date the Applicant's present entitlement to the deposit and settlement monies crystallised even though the balance of the proceeds of sale were not payable until settlement on 1 August 2014. It was only after 27 May 2014 that the Applicant engaged in drug trafficking from the Richmond Property, thus the Applicant's legal and equitable right to the deposit and proceeds of sale crystallised before any relevant illegal activity. Having regard to these dates the deposit and the balance of the proceeds of sale due at settlement could not be regarded as ‘tainted property’ as defined. This submission relies upon the doctrine enunciated in Lysaght v Edwards (1876) 2 Ch D 499 at 506 by Sir George Jessel MR:
"The moment you have a valid contract for sale ... the beneficial ownership passes to the purchaser, the vendor having a right to the purchase money, a charge or lien on the estate for the security of that purchase money and a right to retain possession of the estate until the purchase money is paid."
During the course of [the applicant’s counsel’s] very helpful oral submissions on the legal and equitable interests of vendors and purchasers it was submitted that the only legal interest in the Richmond property held by the applicant after the contract of sale had been signed was possession or occupation. The applicant's written submissions conclude with these paragraphs and I quote:
"31 Mr Lee is at a loss to understand the grounds of opposition to his Application for exclusion. His interest in and entitlement to the restrained deposit and proceeds of sale arose before the relevant offending and as such there is no connection between the restrained monies and his Schedule 2 offence. These monies have been restrained improperly.
32 Given that the equitable interest in the Richmond property passed to the purchasers on the signing of the Contract of Sale prior to any relevant offending by Mr Lee which could be said to taint the property it follows that Mr Lee has an interest in the deposit and settlement monies which also cannot be said to be ‘tainted property’ for the purposes of the Act. This position is consistent with the maximum ‘equity considers that done which ought to be done.’”
As I have already stated the background facts to which I have referred are not in issue. The respondent has filed two sets of written submissions and in the second set of written submissions entitled ‘Respondent's Submissions in Reply’ the respondent makes the following submissions and I quote:
"9 The Richmond property was tainted by the criminal offending. The restrained property was derived from the Richmond property within the meaning of the Act. The question of ‘when’ the entitlement of the proceeds arose is not a relevant consideration in the definition of ‘tainted property’ included in s3 of the Act. ...
12 The act of selling the property does not ‘wipe the slate clean’ of the offending conduct. If it did one can easily imagine a scenario where those intent on using property for criminal conduct would enter into a contract to sell the land prior to that use safe in the knowledge the proceedings are now ‘untainted’. In the submission of the respondent, it is inconsistent with the statutory scheme to rely on irrelevant notions of trust and equity to circumvent the clear statutory intention that tainted property be forfeited to the state."[1]
[1]DPP v Lee (Unreported, County Court of Victoria, Judge Coish, 18 November 2016) [9]–[11] (‘Reasons’).
The judge then analysed the issue in dispute and the parties’ submissions, before concluding that the application for an exclusion order would be dismissed. Specifically, the judge said:
In order to make the exclusion order sought I must be satisfied that the relevant property is not ‘tainted property’ as defined (see ss 3 and 22 of the Act). None of the other requirements at s 22 are relevant in this Application. The definition of tainted property in s 3 of the Act, insofar as relevant is as follows:
"’tainted property’ in relation to an offence means (b) in any other case, property that – (i) was used, or was intended by the accused to be used in, or in connection with the commission of the offence, or (ii) was derived or realised, or substantially derived or realised, directly or indirectly, from property referred to in sub paragraph (i), or (iii) was derived or realised, or substantially derived or realised, directly or indirectly, by any person from the commission of the offence..."
The issue in dispute must be resolved by having regard to the words used in this definition. In my opinion the analysis of the legal and equitable rights and interests of vendor and purchaser at various times is not of assistance when considering whether on the facts of this case the deposit monies and proceeds of sale are ‘tainted property’ as defined. I do not accept the submission that the applicant's interest and entitlement to the restrained deposit and proceeds of sale as at 3 April 2014, the date of the signing of the contract of sale, meant that this could not be ‘tainted property’ as defined. I accept the submission of the respondent on the application of the definition of ‘tainted property’ to the facts in this case.
On a plain reading of the definition of ‘tainted property’ I am satisfied that the deposit and proceeds of sale was property that was derived or realised or substantially derived or realised directly or indirectly from the Richmond property which was property used or intended to be used in connection with the commission of the offence. Thus it was ‘tainted property’ as defined. The words used in the definition are broad, e.g. ‘derived’ ‘realised’ ‘substantially’ and ‘directly or indirectly’.
The application for an exclusion order is therefore dismissed.[2]
[2]Ibid [12]–[15].
The proposed grounds of appeal
In his application for leave to appeal, the applicant identifies nine proposed grounds of appeal as follows:
1.At paragraphs 13 and 14 of the written reasons … (‘the Reasons’) the learned judge erred at law in finding that:
(a)the proceeds of sale of [the Richmond property] held on trust by the Department of Justice Asset Confiscation Operations; and
(b)[the] sum of $81,000, being the deposit paid in relation to the sale of [the Richmond property] … , now consolidated with the proceeds of sale referred to in paragraph 1.1(a) above (together, the ‘Restrained Property’),
is ‘tainted property’ within the meaning of the Confiscation Act 1997 (Vic) (the ‘Act’).
2.The learned judge erred at law in refusing to make an order pursuant to s 22(1)(a) of the Act, to exclude the Restrained Property from the operation of the restraining order made 29 July 2014 by [Judge Parsons] (the ‘Restraining Order’).
3.The learned judge erred at law in his findings at paragraphs 9, 13 and 14 of the Reasons by failing to take into account and accept the following relevant considerations:
(a)that as the [applicant’s] beneficial interest in the Richmond property was converted to a corresponding interest in the Restrained Property prior to the Richmond property becoming ‘tainted property’, the [applicant’s] legal and equitable interest in the Restrained Property was never at any relevant time derived and/or realised from property that was ‘tainted property’ within the meaning of the Act;
(b)the proper construction of the definition of ‘tainted property’ within the meaning of s 3 of the Act and for the purpose of s 22(1)(a)(ii) of the Act; and
(c)the principle of legality, namely that the Act does not expressly abrogate the equitable principle described in Lysaght v Edwards (1876) 2 Ch D 499 at 506 by Sir George Jessel MR, as to when the title to real property passes in equity.
4.The learned judge erred at law at paragraph 11 of the Reasons in accepting the following submissions of the respondent:
(a)‘it is inconsistent with the statutory scheme to rely on irrelevant notions of trust and equity to circumvent the clear statutory intention that tainted property be forfeited to the State’; and
(b)‘The Richmond property was tainted by the criminal offending. The restrained property was derived from the Richmond property within the meaning of the Act. The question of ‘when’ the entitlement to the proceeds arose is not a relevant consideration in the definition of “tainted property” included in section 3 of the Act’.
5.The learned Judge erred at law in concluding at paragraph 14 of the Reasons that:
(a)‘On a plain reading of the definition of “tainted property” I am satisfied that the deposit and proceeds of sale was property that was derived or realised or substantially derived or realised directly or indirectly from the Richmond property which was property used or intended to be used in connection with the commission of the offence. Thus it was ‘tainted property’ as defined’; and
(b)‘The words used in the definition are broad, e.g. “derived” “realised” “substantially” and “directly or indirectly”.’
6.The learned judge erred at law and misconstrued the effect of the definition for ‘tainted property’ as set out in s 3 of the Act and for the purpose of s 22(1)(a)(ii) of the Act and as such mis-directed himself in relation to his findings at paragraph 14 of the Reasons.
7.The learned judge erred at law in failing to address or follow established legal authorities as to the passing of title in equity relied upon by the Appellant, including in particular Lysaght v Edwards (1876) 2 Ch D 499.
8.Having regard to the test in House v The King,[3] the primary judge erred in the exercise of discretion in refusing to exclude the deposit and settlement monies from the operation of the Restraining Order pursuant to s 22(1)(a) and having regard to the definition of “tainted property” in s 3 of the Act.
9.By reason of the above the learned judge erred in the exercise of his discretion to exclude the Restrained Property from the Restraining Order by acting on the wrong principles, failing to take into account material considerations and by taking into account irrelevant matters.
[3](1936) 55 CLR 499.
Immediately, it may be observed that the complaint in ground 3 concerning a finding made by the judge at [9] of the Reasons is misconceived, at least to the extent that the ground asserts that the primary judge made a finding in that paragraph. Paragraph [9] of the Reasons was no more than a recitation by the judge of the applicant’s submissions at first instance.
Analysis
The argument underlying all of the applicant’s proposed grounds of appeal is that prior to engaging in any relevant drug trafficking the applicant transferred the beneficial interest in the Richmond property to the purchasers who signed the contract of sale on 3 April 2014. It was then submitted that the applicant’s interest and entitlement to the restrained deposit and proceeds of sale arose before the relevant offending and, as such, there was no connection between the restrained moneys and the applicant’s drug trafficking offences. The applicant further submitted that because the equitable interest in the Richmond property passed to the purchasers on the signing of the contract of sale (and prior to any relevant offending which could be said to taint the Richmond property), it followed that the applicant had an interest in the deposit and settlement moneys which could not be said to be tainted property for the purposes of the Act.
In argument this morning, the applicant amplified his submissions by noting that ‘property’ is not merely the physical property, but is also a bundle of rights. It was then said that we should unbundle those rights so as to determine that individual rights (like the right to the deposit) were not in fact tainted. These ‘unbundled rights’ were submitted not to be tainted because they sprang from the contract of sale, and had no relevant connection with the property. Moreover it was also submitted that to allow the deposit to be forfeited had an element of impermissible retrospectivity. This was all said to involve an unjustified and wrong overreach by the respondent.
These submissions are misconceived. First, it cannot be said that at the time of the applicant’s drug trafficking at the Richmond property that the applicant had no relevant interest in the Richmond property. The interest the applicant had in the Richmond property was an interest of the kind described in the authority upon which the applicant based his argument in the present case, Lysaght v Edwards.[4] In Lysaght v Edwards, Sir George Jessel MR described the effect of a contract for the sale of land in the following terms:
[At] the moment you have a valid contract for sale the vendor becomes in equity a trustee for the purchaser of the estate sold, and the beneficial ownership passes to the purchaser, the vendor having a right to the purchase-money, a charge or lien on the estate for the security of that purchase-money, and a right to retain possession of the estate until the purchase-money is paid, in the absence of express contract as to the time of delivering possession. In other words, the position of the vendor is something between what has been called a naked or bare trustee, or a mere trustee (that is, a person without beneficial interest), and a mortgagee who is not, in equity (any more than a vendor), the owner of the estate, but is, in certain events, entitled to what the unpaid vendor is, viz, possession of the estate and a charge upon the estate for his purchase money. Their positions are analogous in another way. The unpaid mortgagee has a right to foreclose, that is to say, he has a right to say to the mortgagor, ‘either pay me within a limited time, or you lose your estate,‘ and in default of payment he becomes absolute owner of it. So, although there has been a valid contract of sale, the vendor has a similar right in a court of equity; he has a right to say to the purchaser, ‘either pay me the purchase-money, or lose the estate.’[5]
[4](1876) 2 Ch D 499 (‘Lysaght v Edwards’).
[5]Ibid 506.
Secondly, as was observed by the respondent, at the time of the applicant’s drug trafficking from the Richmond property, the applicant was the registered proprietor of an estate in fee simple of the property with all that such registration entailed.[6]
[6]See ss 41 and 42 of the Transfer of Land Act 1958 and Breskvar v Wall (1971) 126 CLR 376, 385.
Thirdly, and more fundamentally, the concept of ‘tainted property’ in the Act is not, in any event, dependent upon an offender having any particular interest in the property that is said to be tainted. While the issue of an offender’s interest (or the interest of a third party) may be relevant in respect of other provisions of the Act, that issue is not dispositive when considering the definition of ‘tainted property’ for the purposes of the Act. The Richmond property was tainted property within the meaning of the Act because it was property that was used in connection with the commission of the applicant’s drug trafficking offences. The deposit moneys and proceeds of sale were derived or realised from the sale of the Richmond property. On a plain reading of the definition of ‘tainted property’ in s 3(1) of the Act, the deposit moneys and proceeds of sale were ‘tainted property’. To divorce the entitlement to the deposit and proceeds of sale from the property itself does not, in any event, conform with the definition of ‘property’ in the Act or the evident purpose of the Act as disclosed by the language used by the Parliament when it enacted the Act.
In order to succeed in his exclusion application, the applicant had to establish that the deposit moneys and proceeds of sale were not tainted property.[7] This, the applicant failed to establish. The primary judge was, with respect, correct when he said that on a plain reading of the definition of tainted property, he was satisfied that the deposit and proceeds of sale were realised from the Richmond property which was property used or intended to be used in connection with the commission of the applicant’s relevant drug trafficking offences. The principle of legality, called in aid by the applicant, had no relevant application in this case, in the face of the clear statutory language, and plainly expressed intention, of the Parliament. There is, accordingly, no substance in any of the applicant’s proposed grounds of appeal.
[7]See s 22(1)(a)(ii) of the Act.
Conclusion
For the reasons given above, the applicant’s application for leave to appeal does not have any, let alone any real, prospect of success. Accordingly, the application for leave to appeal must be refused.[8]
[8]Cf Kennedy v Shire of Campaspe [2015] VSCA 47.
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