Director of Public Prosecutions v Kunz
[1999] FCA 302
•25 March 1999
FEDERAL COURT OF AUSTRALIA
Director of Public Prosecutions v Kunz [1999] FCA 302
PROCEEDS OF CRIME – first respondent charged with criminal offences – first respondent’s property subject to restraining orders made in the Supreme Court of Victoria pursuant to s 43 of the Proceeds of Crime Act 1987 (Cth) and the Federal Court pursuant to s 243E of the Customs Act 1901 (Cth) – alleged written agreement (“the agreement”) between first and second respondents disposing of property – application by first respondent for an order that the real property be charged to the second respondent pursuant to the agreement and that the property be valued and transferred to the second respondent in partial satisfaction of the debt of the first respondent to the second respondent – opposing application by Commonwealth Director of Public Prosecutions to have the disposition or dealing with the property effected by the agreement set aside ab initio pursuant to s 52 Proceeds of Crime Act 1987 (Cth) – whether agreement was authentic or a sham – whether agreement made on the date it bears.
Customs Act1901 (Cth): s 243E, s 243K
Proceeds of Crime Act1987 (Cth): s 43, s 52, s 57Thomson v Attorney‑General (1996) 1 NZLR 21 applied
Davis v Federal Commissioner of Taxation (1989) 86 ALR 195 followedDIRECTOR OF PUBLIC PROSECUTIONS v LESLAW KUNZ & ORS
VG 260 of 1990
DIRECTOR OF PUBLIC PROSECUTIONS v LESLAW KUNZ & ANOR
VG 564 of 1998
GOLDBERG J
MELBOURNE25 MARCH 1999
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VG 260 of 1990
BETWEEN:
AND:
DIRECTOR OF PUBLIC PROSECUTIONS
ApplicantLESLAW KUNZ
First RespondentROBERT PETER KUNZ
Second RespondentVICTORIA LEGAL AID
Third Respondent
JUDGE:
GOLDBERG J
DATE OF ORDER:
25 MARCH 1999
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.The second respondent’s motion filed on 28 September 1998 be dismissed.
2.The second respondent pay the applicant’s and the third respondent’s costs of the said motion including reserved costs.
3.The first respondent bear his own costs of the said motion.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VG 564 of 1998
BETWEEN:
AND:
DIRECTOR OF PUBLIC PROSECUTIONS (COMMONWEALTH)
ApplicantLESLAW KUNZ
First RespondentROBERT PETER KUNZ
Second RespondentJUDGE:
GOLDBERG J
DATE OF ORDER:
25 MARCH 1999
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.The document entitled “Agreement of Loan” dated 15 May 1990 signed by the first respondent and the second respondent and the dealing with the properties situated at 39 Tennyson Street, Elwood, 19 Kambea Grove, Caulfield and 6 Morrice Street, Caulfield therein referred to be set aside as from 15 May 1990.
2.The second respondent pay the applicant’s costs of the applicant’s application filed 7 October 1998 including reserved costs.
3.The first respondent bear his own costs of the said application.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VG 260 of 1990
BETWEEN:
AND:
DIRECTOR OF PUBLIC PROSECUTIONS
ApplicantLESLAW KUNZ
First RespondentROBERT PETER KUNZ
Second RespondentVICTORIA LEGAL AID
Third Respondent
VG 564 of 1998
BETWEEN:
AND:
DIRECTOR OF PUBLIC PROSECUTIONS (COMMONWEALTH)
ApplicantLESLAW KUNZ
First RespondentROBERT PETER KUNZ
Second Respondent
JUDGE:
GOLDBERG J
DATE:
25 MARCH 1999
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
Introduction
There are two motions before the Court arising out of restraining orders made in the Supreme Court of Victoria and the Federal Court pursuant to s 43 of the Proceeds of Crime Act1987 (Cth) and s 243E of the Customs Act1901 (Cth) in respect of property of the first respondent. The second respondent, the son of the first respondent, seeks an order that 38,181 shares in RESI‑Statewide Building Society (subject to a restraining order pursuant to s 243E of the Customs Act) be sold and the proceeds be used to pay the legal expenses of the first respondent. As will become apparent later in these reasons these shares were sold in November 1990 and January 1991 and the proceeds were applied toward the payment of the first respondent’s legal expenses pursuant to an order of Sweeney ACJ on 7 September 1990. Accordingly there is no basis for the first order sought by the second respondent.
The second respondent, by his motion, also seeks an order that real property of the first respondent be charged to the second respondent pursuant to an agreement between the first respondent and the second respondent dated 15 May 1990 and that such land be valued and transferred to the second respondent in partial satisfaction of the debt of the first respondent to the second respondent.
The applicant, by application filed on 7 October 1998, seeks an order in proceedings initiated in the Supreme Court of Victoria and now transferred to this Court (VG 564 of 1998) pursuant to s 5(1) of the Jurisdiction of Courts (Cross‑vesting) Act1987 (Vic) that pursuant to s 52 of the Proceeds of Crime Act the disposition or dealing with the first respondent’s property effected by an alleged agreement entered into between the first respondent and the second respondent on 15 May 1990 be set aside as and from that date.
In short, the issue between the parties is the authenticity of the agreement dated 15 May 1990. The second respondent says it is authentic and was entered into on that date. The first respondent appeared in person at the hearing but took no part in the proceedings. However it is clear that he supports the application made by the second respondent. The applicant, Director of Public Prosecutions, and the third respondent, Victoria Legal Aid, contend that the agreement is a sham, was not entered into on the date it bears but rather was entered into at a later point in time.
The circumstances and events giving rise to the applications go back over a period of almost ten years and in order to understand how the applications come about it is necessary to rehearse the relevant chronology.
Background
On or about 22 February 1989 the first respondent was charged with three drug related offences, one under s 233B(1)(cb) of the Customs Act, one under s 233B(1)(ca) of the Customs Act and one under s 79(1) of the Drugs, Poisons and Controlled Substances Act1981 (Vic).
On 1 March 1989 the applicant applied to the Supreme Court of Victoria for a restraining order over the first respondent’s property pursuant to s 43 of the Proceeds of Crime Act which provides:
“ (1) Where a person (in this section and section 44 called the ‘defendant’):
(a)has been convicted of an indictable offence; or
(b)has been, or is about to be, charged with an indictable offence;
the DPP may apply to the relevant Supreme Court for an order under subsection (2) against one or more of the following:
(c) specified property of the defendant’
(d)all the property of the defendant (including property acquired after the making of the order);
(e)all the property of the defendant (including property acquired after the making of the order) other than specified property;
(f) specified property of a person other than the defendant.
(2) Where the DPP applies to a court for an order under this subsection against property, the court may, subject to section 44, by order:
(a)direct that the property, or such part of the property as is specified in the order, is not to be disposed of, or otherwise dealt with, by any other person, except in such manner and in such circumstances (if any) as are specified in the order; and
(b)if the court is satisfied that the circumstances so require – direct the Official Trustee to take custody and control of the property, or of such part of the property as is specified in the order.
(3) A restraining order against a person’s property may be made subject to such conditions as the court thinks fit and, without limiting the generality of this, may make provision for meeting, out of the property or a specified part of the property, all or any of the following:
(a)the person’s reasonable living expenses (including the reasonable living expenses of the person’s dependants (if any)) and reasonable business expenses;
(b)the person’s reasonable expenses in defending a criminal charge;
(c)a specified debt incurred by the person in good faith (being a debt to which neither paragraph (a) nor (b) applies).
(4) A court shall not make provision of a kind referred to in subsection (3) unless it is satisfied that the defendant cannot meet the expense or debt concerned out of property that is not subject to a restraining order.
…”
On 1 March 1989 JH Phillips J (as he then was) ordered that all the property of the first respondent not be disposed of or otherwise dealt with by any person until 15 March 1989. His Honour ordered that any property of the first respondent that was restrained by the order not be further encumbered nor any dealing entered into by any person which thereby increased the indebtedness secured by any encumbrance then presently affecting the restrained property or any part thereof. He also directed that the Official Trustee in Bankruptcy take control of all of the property of the first respondent. On 15 March 1989 JH Phillips J extended the orders made on 1 March 1989 to 1 September 1989 and made certain consequential orders.
On 4 April 1989 pursuant to an order made by the Supreme Court of Victoria on 30 March 1989, the first respondent appeared before Vincent J and was examined as to his financial affairs and the nature and location of all of his property and assets. In the course of that examination the first respondent said that he had bought some shares in RESI‑Statewide Building Society (later the Bank of Melbourne) in January 1989 for his son, the second respondent. He said that the shares were registered in his son’s name and he borrowed $20,000 to pay for the shares.
On 26 May 1989 the first respondent applied to the Supreme Court of Victoria for an order that his costs and expenses in defending the criminal charges laid against him be paid to his solicitors out of the restrained property. On that date Hampel J ordered by consent that so much of the property of the first respondent as was required to meet the costs and expenses of defending the charges against him be released to his solicitors. It was a condition of this order that the first respondent supply the Official Trustee in Bankruptcy with a sworn statement of the particulars of his property, and this he did by affidavit sworn on 9 June 1989. In that affidavit he included in his property a beneficial interest in the real estate situated at 39 Tennyson Street, Elwood, 19 Kambea Grove, Caulfield and 6 Morrice Street, Caulfield. He also included 38,181 shares in RESI‑Statewide Building Society which he valued at $132,633 and which were then in the possession of the Official Trustee in Bankruptcy.
On 29 May 1989 committal proceedings against the first respondent and other persons commenced in the Melbourne Magistrates’ Court.
On 31 August 1989 Beach J ordered that the orders made by JH Phillips J on 1 March 1989 be further extended and remain in force until 1 September 1990. By that order Beach J ordered that:
(a)all the property of the first respondent (including property acquired after the making of the order) not be disposed of or otherwise dealt with by any person until further order;
(b)any property of the first respondent that was restrained by the order not be further encumbered nor any dealing entered into by any person which thereby increased the indebtedness secured by any encumbrance presently affecting the restrained property or any part thereof;
(c)the Official Trustee in Bankruptcy be directed to take control of all of the property of the first respondent.
On 15 February 1990 the Deputy Commissioner of Taxation issued an income tax assessment to the first respondent in the sum of $762,021.84 which was payable by 20 March 1990.
On 2 March 1990 the second respondent filed an application with the Supreme Court of Victoria in which he sought an order that the restraining order made by Beach J on 31 August 1989 be varied so as to release from restraint the property at Flat 5, 37 Tennyson Street, Elwood. The second respondent swore an affidavit on 9 March 1990 (filed in the Supreme Court of Victoria on the same day) in support of that application. In his affidavit the second respondent swore that he was the sole proprietor of the property at Flat 5, 37 Tennyson Street, Elwood, that he purchased the property in February 1987 for $60,500 and that the purchase price was lent to him interest free by his father, the first respondent. The second respondent said that he had made repayments from time to time to his father in respect of the loan. On 13 March 1990 the second respondent’s application was adjourned sine die. The solicitor acting for the second respondent on the application, according to the endorsement on the affidavit, was Mr Tony Parsons from Slades.
On 14 May 1990 the committal proceedings against the first respondent and other persons were concluded and the magistrate discharged the first respondent in respect of all Commonwealth offences laid against him but committed him for trial in respect of two charges under s 79(1) of the Drugs, Poisons and Controlled Substances Act1981 (Vic). The first respondent, the second respondent and Mrs Henryka Kunz (the first respondent’s wife and the second respondent’s mother) say that on the next day, 15 May 1990, an agreement was entered into between the first respondent and the second respondent which had the effect of giving the second respondent a charge over three items of real property then the subject of the restraining order made by Beach J on 31 August 1989. I will return to this agreement in more detail later in these reasons. The authenticity of the agreement is the central issue in these proceedings.
On 30 April 1990 Vincent J in the Supreme Court of Victoria heard an application by the Deputy Commissioner of Taxation for a variation of the restraining order so as to release certain monies for payment to the Deputy Commissioner of Taxation in relation to the tax assessment he had issued against the first respondent. Vincent J dismissed that application on 3 July 1990.
On 1 September 1990 the restraining order continued by Beach J on 31 August 1989 expired. On 4 September 1990 the applicant filed an application in the Federal Court (VG 260 of 1990) seeking an order that the first respondent pay to the Commonwealth a pecuniary penalty pursuant to s 243B of the Customs Act. The application also sought by way of interlocutory relief a restraining order pursuant to s 243E(1) of the Customs Act against:
(a)the first respondent’s joint interest with his wife in the three items of real estate situated at 39 Tennyson Street, Elwood, 6 Morrice Street, Caulfield and 19 Kambea Grove, Caulfield;
(b)the first respondent’s personal property then in the custody or control of the Official Trustee in Bankruptcy;
(c)the interest of the second respondent in the property at Unit 5, 37 Tennyson Street, Elwood; and
(d)the second respondent’s 38,181 shares in RESI‑Statewide Building Society.
In respect of that application, on 7 September 1990 Sweeney ACJ made a restraining order pursuant to s 243E of the Customs Act in relation to the property of the first respondent specified in the application. He ordered that the property was not to be disposed of or otherwise dealt with save with the prior written consent of the applicant or an order of the Court. His Honour also ordered that out of the property of the first respondent restrained the Official Trustee in Bankruptcy pay on account of the first respondent to his solicitor funds sufficient to meet his reasonable legal costs in defending the charges then pending in the County Court of Victoria.
At that stage the second respondent was not a party to the Federal Court proceeding and no order was made on 7 September 1990 in respect of his property. On 13 September 1990 the applicant filed a notice of motion seeking an order that the second respondent be joined in the Federal Court proceeding and that a restraining order pursuant to s 243E(1) of the Customs Act be made against the second respondent’s property, namely his interest in Unit 5, 37 Tennyson Street, Elwood and 40,406 shares in RESI‑Statewide Building Society.
On 14 September 1990 a licensed process server Anthony James Axtens served the second respondent personally at his place of employment with copies of the notice of motion to join him as a respondent in the Federal Court proceeding and the supporting affidavit and he has verified that service in an affidavit sworn 20 September 1990. This is relevant to the second respondent’s statement in an affidavit sworn on 28 September 1998 that he was unaware that he was made a party to the Federal Court proceeding until told by his solicitor in July 1998. In cross‑examination the second respondent said he remembered being served with documents around 14 September 1990 and that the process server’s affidavit verifying that service was correct.
On 21 September 1990 Mr Graeme Steart of FW Robson & Co, Solicitors, wrote to the applicant, confirmed that they had instructions also to act for the second respondent and said that they were instructed to advise that the second respondent would consent to the making of a restraining order on certain terms. Those terms were that the applicant consent to the second respondent selling the RESI‑Statewide (now Bank of Melbourne) shares in blocks and that the proceeds be applied to pay the first respondent’s legal costs of defending the criminal charges. The solicitors also sought an acknowledgment from the applicant that the second respondent was the owner of Unit 5, 37 Tennyson Street, Elwood.
On 21 September 1990 Northrop J ordered by consent that the second respondent be joined as a respondent in the proceeding and that until further order the interest of the second respondent in the property at Unit 5, 37 Tennyson Street, Elwood and 38,181 shares in RESI‑Statewide Building Society be restrained pursuant to s 243E of the Customs Act. His Honour adjourned the application to 7 December 1990. (There is a discrepancy between the number of shares specified in the motion and the number of shares specified in the order but that is of no consequence for present purposes.)
On 16 October 1990 Mr Steart of FW Robson & Co, Solicitors, sent a letter to the applicant enclosing authorities signed by the first respondent and the second respondent authorising the sale of 15,000 shares in the Bank of Melbourne Limited. In that letter the solicitors said that the authorities were sent without prejudice to the instructions of both of their clients that the shares were owned by, and the property of, the second respondent. On the same day the applicant wrote to FW Robson & Co noting that he did not resile from the position that the shares were the property of the first respondent. The letter continued:
“As such, they are of course available to meet reasonable legal costs incurred by Mr Kunz within the scope of the present orders, once those costs have been agreed or taxed.”
On 26 October 1990 FW Robson & Co acting as solicitors for the first respondent and the second respondent filed a notice of appearance with the Federal Court registry.
On 26 October 1990 the first and second respondents’ solicitors sent a letter to the applicant seeking his consent to the Official Trustee selling 15,000 shares in Bank of Melbourne Limited. The letter enclosed a statutory declaration dated 25 October 1990 from the second respondent to the effect that certain share certificates had been lost. It is important to note that in the statutory declaration the second respondent said he was the registered holder in the books of Bank of Melbourne Limited of 42,307 shares. The certificates for all but 1,901 of the shares had been lost.
On 20 November 1990 Ord Minnett, sharebrokers, sold 15,000 Bank of Melbourne Limited shares on account of the second respondent for $2.50 per share, the net proceeds being $36,812.50.
On 22 January 1991 FW Robson & Co wrote to the applicant stating that their client the second respondent wished to dispose of the balance of the Bank of Melbourne Limited shares, namely 28,307 shares. (In fact the balance was 27,307 shares). Again it was denied on behalf of the first and second respondents that the shares were the property of the first respondent and it was said that the second respondent had instructed the solicitors to apply the proceeds towards payment of his father’s legal costs provided for in the order of Sweeney ACJ on 7 September 1990.
On 25 January 1991 Ord Minnett sold a further 27,307 Bank of Melbourne Limited shares on account of the second respondent for an average price of $2.40 per share resulting in net proceeds of $64,522.81.
An application had been made to the Supreme Court of Victoria for an order for the payment of the legal expenses incurred by the first respondent in relation to the criminal charges out of moneys under the control of the Official Trustee in Bankruptcy in accordance with the terms of the order of Hampel J made on 26 May 1989. On 30 January 1991 Teague J handed down his decision in relation to that application and he ordered that the Official Trustee in Bankruptcy pay to the first respondent’s former and present solicitors costs incurred by them in acting for him in defending the charges laid on 22 February 1989.
On 20 June 1991 FW Robson & Co (the solicitors for the first and second respondents) filed a motion with the Federal Court seeking orders that Mrs Henryka Kunz, the first respondent’s wife, be granted leave to intervene in the proceeding and that the restraining order made on 7 September 1990 by Sweeney ACJ be varied so as to allow certain items of jewellery and certain sums of money to be removed from the restraining order and given to Mrs Kunz. Mrs Kunz swore an affidavit on 19 June 1991 in support of that motion as did the second respondent. The second respondent in his affidavit sworn on 5 July 1991 sought the repayment of $5,000 being loan moneys which he had repaid on behalf of his father and the return of certain jewellery which he said belonged to him. For present purposes the only significance of the affidavit is the second respondent’s description of himself as “the Secondnamed Defendant hereing [sic]”. Again this is inconsistent with the second respondent’s statement in his affidavit of 28 September 1998 that it was only in July 1998 that he became aware he was a party to the Federal Court proceeding.
On 21 June 1991 FW Robson & Co filed a motion in the Federal Court on behalf of the second respondent seeking an order that the restraining order made on 7 September 1990 by Sweeney ACJ be varied so as to allow for the payment of certain sums to him. That application was supported by an affidavit sworn by the first and second respondents’ solicitor Mr Steart who said that certain of the moneys requested by the second respondent were required for the payment of fees on behalf of the first respondent.
On 5 July 1991 Ryan J made consent orders in relation to the two motions. He ordered that Henryka Kunz be granted leave to intervene in the proceeding and that the restraining order made by Sweeney ACJ on 7 September 1990 be varied so as to allow the return of certain jewellery to Mrs Kunz, the payment to her and the second respondent of certain sums of money and the release of two sums of money to enable the payment of fees incurred by or on behalf of the first respondent.
On 20 January 1992 the Deputy Commissioner of Taxation filed a motion seeking a declaration that he was entitled to issue a bankruptcy notice against the first respondent and sought an order varying the restraining order made by Sweeney ACJ on 7 September 1990 so as to enable him to recover the judgment he had obtained against the first respondent in the Supreme Court of Victoria. On 15 July 1993 Ryan J ordered that the Deputy Commissioner of Taxation have leave to apply for an order under s 243F(1) of the Customs Act with respect to the orders made by Sweeney ACJ on 7 September 1990. His Honour further ordered that that order be varied to require the Official Trustee in Bankruptcy to pay out of the property restrained, if that property on or after 31 July 1993 was sufficient for the purpose, the amount required to comply with the bankruptcy notice which might be issued by the Deputy Commissioner of Taxation in respect of his judgment in the Supreme Court of Victoria for $827,159.03 together with interest and costs.
On 18 August 1993 Mr Steart of FW Robson & Co wrote to the applicant seeking his consent to the execution by the first respondent of charges over all of his restrained real estate in favour of the Legal Aid Commission (as it then was) so that legal aid could be obtained for the purpose of defending the criminal charges. There was no reference in the letter to the agreement dated 15 May 1990 on which the first respondent and the second respondent now rely. The applicant gave his written consent to the execution of the charges on 7 September 1993.
On 20 April 1995 the proceeding in this Court was adjourned sine die (by consent) pending the finalisation of the criminal proceedings against the first respondent.
In or about May 1998 the Official Trustee in Bankruptcy received a request from the first respondent for the release of $3,000 to enable him to make an application to the County Court pursuant to s 360A Crimes Act1958 (Vic) for an order that Victoria Legal Aid provide him with legal representation. Thereafter Mr Hicks, an officer in the Office of the Commonwealth Director of Public Prosecutions, had conversations with the first respondent’s solicitor concerning the funding of the first respondent’s legal expenses out of the property restrained by the order of 7 September 1990. As a result of issues being raised as to whether the Deputy Commissioner of Taxation had a claim to the property under restraint, Mr Hicks wrote to the Australian Government Solicitor on 15 June 1998 and expressed the view that the order made by Ryan J on 15 July 1993 had no effect so far as the Deputy Commissioner of Taxation was concerned because the value of the property restrained was approximately $508,000 of which $320,000 or thereabouts was charged to Victoria Legal Aid. Mr Hicks expressed the view that so far as the Deputy Commissioner of Taxation was concerned the order was of no effect. No reply has been received to that letter.
Towards the end of June 1998 Judge Higgins in the County Court heard an application by the first respondent pursuant to s 360A of the Crimes Act in which he sought an order that the Victoria Legal Aid provide legal representation for him.
On 30 June 1998 the applicant received from the Official Trustee in Bankruptcy a copy of a letter dated 29 June 1998 sent by facsimile transmission by the second respondent to the Official Trustee. That letter was in the following terms:
“FAX; FROM MR ROBERT KUNZ
5/681 BURKE RD CAMBERWELL 3124TO; MR ACHUA
OFFICIAL RECIEVERS [sic] OFFICE.DEAR MR ACHUA,
I AM WRITING tO YOU IN REGARDS TO ENFORCING A CAVIAT [sic] ON PROPERITES BELONGING TO MY PARENTS.
I HAVE A LEGAL AGREEMENT BETWEEN MY FATHER (LESLAW FRANCISZEK KUNZ) AND I [sic] DATED 15/5/90 AND SIGNED AS TO MONIES OWING TO ME BY MY FATHER.I WISH TO PLACE A CAVIAT [sic] THREE EXISTING PROPERTIES
1.39 TENNYSON STREET ELWOOD.
2.19 KAMBEA GROVE NORTH CAULFIELD.
3.6 MORRICE ST NORTH CAULFIELD.
PLEASE NOTE WE ARE BOTH IN AGREEMENT OT [sic] THIS REQUEST AND WE WISH TO HAVE IT IN FORCE IMMEDIATLY [sic] PENDING A RESOLUTION BETWEEN US. I HOPE THIS LETTER REACHES YOU AS I WOULD APPREICIATE [sic] IT IF YOU COULD TELL ME WEATHER [sic] YOU CAN CONFIRM MY REQUEST.
I CAN BE CONTACTED ON THIS NUMBER DURING BUSINESS HOURS. 9882 8822.
THANKYOU KINDLY FOR YOUR TIME.”
This letter was the first occasion on which the agreement dated 15 May 1990 had been referred to by the second respondent.
On 3 July 1998 a solicitor, John Stewart, telephoned Mr Hicks and said that he had received instructions from the second respondent to lodge a caveat over the property at 6 Morrice Street, Caulfield. He said he understood that there was a restraining order over the property so he would withdraw the caveat. On the same day the solicitor wrote to the applicant and told him that he was not aware of the order of the Federal Court on 7 September 1990 and as instructed by the second respondent had lodged a caveat over 6 Morrice Street, Caulfield on 2 July 1998. He said that on being made aware of the Federal Court order he had arranged for the caveat to be withdrawn and that he had advised the second respondent accordingly.
On 3 July 1998 Mr Hicks on behalf of the applicant wrote to the second respondent. He drew attention to the terms of the order made on 7 September 1990 and said he was unaware of any Court order permitting the second respondent to place caveats on the properties nor had the consent of the applicant been sought. He also referred to the order of the Supreme Court of Victoria made by Beach J on 31 August 1989 which was in force on 15 May 1990. On the same day, 3 July 1998 Judge Higgins rejected the first respondent’s application for an order that Victoria Legal Aid provide representation for him.
The first respondent made a further application pursuant to s 360A of the Crimes Act in August 1998 and Judge Higgins dismissed that application. I was informed in the course of the hearing that a later application pursuant to s 360A had been successful.
On 7 October 1998 the Official Receiver provided Mr Hicks with valuations of property currently under the Official Trustee’s control which valued each of the three items of real estate at $350,000 and in a subsequent letter that day identified a credit balance in the cash management account of $7,885.82 in respect of which the first respondent’s entitlement was $3,413.07 (Mrs Kunz being entitled to the balance). As I understand the submissions made to Judge Higgins neither the applicant nor the Deputy Commission of Taxation oppose any of the restraining orders being varied to enable funds to be released for the purpose of enabling the first respondent to pay reasonable legal costs and disbursements incurred in defending the criminal charges brought against him.
The proceedings before the Court
The second respondent’s motion seeks orders that:
“1.The $38,181 [sic] shares in RESI-State Wide Building Society be sold and the proceeds be used to pay the legal expenses of the Firstnamed Defendant.
2.The real property of the Firstnamed Defendant be charged to the Secondnamed Defendant pursuant to the agreement between the Firstnamed Defendant and the Secondnamed Defendant dated 15 May 1990.
3.The real property of the Firstnamed Defendant be independently valued and transferred to the Secondnamed Defendant in partial satisfaction of the debt of the Firstnamed Defendant to the Secondnamed Defendant.
…”
The applicant’s application seeks an order that the agreement dated 15 May 1990 be set aside ab initio.
On the first day of the hearing the second respondent sought leave to amend his notice of motion to seek orders that the second respondent be declared to be a creditor of the first respondent in the sum of $510,093 together with interest and costs, that judgment be entered accordingly by consent and that the second respondent be entitled to a charge over the three properties in accordance with the agreement dated 15 May 1990.
I do not consider that it is appropriate in the present proceeding to be making orders in relation to the claimed indebtedness between the first and second respondents, so I do not allow the second respondent’s motion to be amended to claim relief against the first respondent. The relief sought in the proposed amended notice of motion in relation to the agreement dated 15 May 1990 is effectively covered by the unamended motion. Accordingly I refuse the second respondent leave to amend his notice of motion in the terms sought.
The second respondent relies upon a loan agreement said to have been entered into between the first respondent and himself on 15 May 1990. That agreement is in handwriting and is in the following terms:
“ MELBOURNE 15/5/90
AGREEMENT OF LOAN
BETWEEN: LESLAW FRANCISZEK KUNZ
AND
ROBERT PETER KUNZI LESLAW F. KUNZ OF M.R.C – 317 SPENCER ST. MELBOURNE DO AGREE TO BORROW SHARES ON THE BANK OF MELBOURNE TO THE TOTAL AT THIS DATE $132.000 BEING 52.000 UNITS, FROM MY SON MR. ROBERT PETER KUNZ OF 39 TENNYSON ST ELWOOD. VIC. 3184 IN RETURNE [sic] FOR MY SHARE IN THE 3 PROPRETIES [sic]
LISTED BELOW;
1/ 39 TENNYSON ST. ELWOOD. Vic. 3184
2/ 19 KAMBEA GR. Caulfield Vic. 3182
3/ 6 MORRICE ST. Caulfield Vic. 3182THE MONEY TOTALLING $132,000 IS TO BE HELD BY THE OFFICIAL RECIEVER [sic] MR. KELLY, TO BE USED FOR MY LEGAL COST. – DEFENCE
MR. ROBERT P. KUNZ MAY SELL ANY PART OF MY PROPERTIES AT SUCH TIME AS HE REQUIRES FOR THE MARKET PRICE OF THE SHARES AT THE TIME ALSO INCLUDING BONUSES AND OR INTERESTS PAYABLE.
SIGNATURE SIGNATURE
ROBERT P. KUNZ LESLAW F. KUNZ”
The agreement was signed by the first respondent and the second respondent. On the back of the single sheet of paper on which the agreement was written the following appeared:
“15/5/90
I Robert Peter Kunz,
Hereby agree with the terms of this agreement between myself and Leslaw Kunz.
I state that these monies are to be used for the defense of Leslaw Kunz.
It was recommended that I sell these shares by solicitor Mr Graham Steart.”
(Robert Kunz)
It was signed by Robert Kunz, the second respondent.
The second respondent in an affidavit sworn 24 September 1998 said that until advised by his current solicitor in July 1998 he was unaware of the fact that he was made a party to this proceeding and was also unaware that there were injunctions made restraining him from dealing with his property. The second respondent continued:
“Solicitors apparently appeared on my behalf without my direct knowledge. I have been advised that they filed an appearance on my behalf. Those solicitors were instructed by my father. I do not believe that at any time they have communicated with me directly. That I was not informed by them of these orders. At no time was I informed by my father of the orders and he did not explain the consequences of these orders to me.”
These statements by the second respondent are somewhat surprising having regard to the fact that the process server Mr Axtens has sworn that on 14 September 1990 he served the second respondent personally with a copy of the notice of motion and affidavit in support seeking to join him in the proceeding and to obtain the restraining order against him. Further, on 21 September 1990 FW Robson & Co wrote to the applicant confirming that they had instructions “to also act for Robert Peter Kunz” and that he had instructed them to file an affidavit to set out his entitlement to various assets. It will also be recalled that a motion was filed on behalf of the second respondent on 21 June 1991 seeking a variation of the order made on 7 September 1990 by Sweeney ACJ and the second respondent swore an affidavit at that time. I am satisfied that by the end of September 1990 the second respondent was aware that he had been made a party to the proceeding and that injunctions had been granted restraining him from dealing with his property.
Insofar as the agreement dated 15 May 1990 affects or purports to deal with property which was subject to the order of Beach J on 31 August 1989 or the order of Sweeney ACJ on 7 September 1990 the Court has power pursuant to s 52(3) of the Proceeds of Crime Act and s 243K of the Customs Act respectively to set that agreement aside. On the date of the agreement the order of Beach J was still on foot and was operative. That situation continued until 1 September 1990. On 7 September 1990 the restraining order of Sweeney ACJ came into effect and it remains in effect and operative. The fact that the magistrate discharged the first respondent from all Commonwealth offences laid against him on 14 May 1990 did not have the effect ipso facto of determining or nullifying the order of Beach J. There is authority for the proposition that an order of a superior court of record which is irregular is not a nullity but merely voidable: Cameron v Cole (1943) 68 CLR 571, 590‑591, 598, 599, 604‑605; Taylor v Taylor (1979) 143 CLR 1, 7‑8; Deputy Commissioner of Taxation v Clyne (1984) 4 FCR 156, 158. I refer to these authorities only by way of analogy to respond to the submission that the restraining order of Beach J ought not to have had any effect after 14 May 1990 because of the first respondent’s discharge from the Commonwealth offences. Subject to any relevant statutory provision that restraining order remained operative and in force, notwithstanding the first respondent’s discharge from the Commonwealth offences, until it was discharged or terminated by effluxion of time or earlier court order.
However the Proceeds of Crime Act did not in its terms have the effect that the order of Beach J either ceased to be in force or have effect after 14 May 1990. Section 57 of the Proceeds of Crime Act makes specific provision for the circumstances in which a restraining order made pursuant to s 43(2) of the Proceeds of Crime Act ceases to be in force. Section 57 provides relevantly:
“(1) If, at the end of the period of 48 hours after the making of a retraining order in reliance on the proposed charging of a person with an offence, the person has not been charged with the offence or a related indictable offence, the order ceases to be in force at the end of that period.
(2) Subject to subsection (5), where:
(a)a restraining order is made in reliance on a person’s conviction of an offence or the charging of a person with an offence; or
(b)a restraining order is made in reliance on the proposed charging of a person with an offence and the person is, within the succeeding period of 48 hours, charged with the offence or a related indictable offence;
the following provisions have effect:
(c)if, within the relevant period in relation to the restraining order, the charge is withdrawn and the person is not charged with a related indictable offence by the time the charge is withdrawn, the restraining order ceases to be in force when the charge is withdrawn;
(d)if, within the relevant period in relation to the restraining order, the person is acquitted of the charge and the person is not charged with a related indictable offence by the time of the acquittal, the restraining order ceases to be in force when the acquittal occurs;
…
…
(6) A reference in this section to the relevant period in relation to a restraining order is a reference to the period beginning on the day when the order was made and ending:
(a)if an order has, or orders have, been made under subsection (3) extending the restraining order’s period of operation – at such time, or on the occurrence of such event, as is specified in the order, or the last of the orders, so made;
(b)if paragraph (a) does not apply but an order has, or orders have, been made by virtue of paragraph 48(1)(a), (b) or (e) in relation to the restraining order – at the end of 6 months after the day when the order, or the last of the orders, was so made; or
(c)in any other case – at the end of 6 months after the day when the restraining order was made.
…”
None of the provisions contained in s 57 allows for a restraining order to cease to have effect on the discharge of a person charged at a committal hearing. The closest provision is found in subs (2)(c) but that only covers a situation where a charge is withdrawn. I do not consider there to be a lacuna in the legislation in this respect as it is always open to the Director of Public Prosecutions to present an indictment even though the person charged has not been committed in respect of the charge the subject of the indictment.
The second respondent in written submissions contended that the discharge from committal in respect of the Commonwealth charges on 14 May 1990 by the magistrate was the equivalent of such charges being withdrawn so that by virtue of the provisions of s 57(2)(c) of the Proceeds of Crime Act the restraining order of Beach J ceased to be in force when the first respondent was discharged from those charges at the committal. However, Mr Finkelstein, who appeared for the second respondent, properly drew my attention to a passage in Thomson v Attorney‑General (1996) 1 NZLR 21, a decision of the New Zealand Court of Appeal where the Court said at 24:
“It must be remembered, however, that a discharge at a preliminary hearing is not an acquittal”.
On the basis of this principle Mr Finkelstein said that he was unable to advance the submission that the second respondent had been released from the restraining order on 14 May 1990 pursuant to s 57(2)(c) of the Proceeds of Crime Act because he had been discharged from committal in respect of the Commonwealth charges. (See also Daemar v Gilliand [1981] 1 NZLR 61, 62; R v Kent; Ex parte McIntosh (1970) 17 FLR 65, 69.)
It therefore follows that the issues before the Court have to be considered against the background that the restraining orders made by JH Phillips J and continued by Beach J operated from 1 March 1989 to 1 September 1990 and that the restraining orders made by Sweeney ACJ on 7 September 1990 and Northrop J on 21 September 1990 are still operative and in effect.
The effect of s 52 Proceeds of Crime Act
The second respondent’s case is based upon the authenticity of the agreement dated 15 May 1990 but even if I find it was entered into on 15 May 1990 the second respondent is confronted with the provisions of s 52 of the Proceeds of Crime Act. The applicant and the third respondent contend that the agreement is a sham, that it was not entered into on 15 May 1990 and that it was probably entered into in or about June or July 1998. They submit that the agreement is a contrivance to keep the interest of the first respondent in the properties referred to away from Victoria Legal Aid. The third respondent contends further, in the alternative, that the agreement is not in a form which can be registered in the Register under the Transfer of Land Act1958 (Vic) so as to support a caveat, relying on the decision in Classic Heights Pty Ltd v Black Hole Enterprises Pty Ltd (1994) V ConvR 54‑406. Mr Lacava QC, who appeared for the third respondent properly pointed out that that decision had not been followed in Crampton v French (1995) V ConvR 54‑529 and Composite Buyers Ltd v Soong (1995) 38 NSWLR 286.
However, even if I were to accept the evidence of the second respondent and Mrs Kunz that the agreement was in fact signed by the first respondent and the second respondent on 15 May 1990 is still susceptible to being set aside under the provisions of s 52 of the Proceeds of Crime Act. Section 52 of the Proceeds of Crime Act provides:
“(1) A person who knowingly contravenes a retraining order by disposing of, or otherwise dealing with, property that is subject to the restraining order is guilty of an offence punishable, upon conviction, by:
(a)if the person is a natural person – a fine not exceeding $10,000 or imprisonment for a period not exceeding 5 years, or both; or
(b)in the case of a body corporate – a fine not exceeding $50,000.
(2) Where:
(a) a restraining order is made against property;
(b)the property is disposed of, or otherwise dealt with, in contravention of the restraining order; and
(c)the disposition or dealing was either not for sufficient consideration or not in favour of a person who acted in good faith;
the DPP may apply to the court that made the restraining order for an order that the disposition or dealing be set aside.
(3) Where the DPP makes an application under subsection (2) in relation to a disposition or dealing, the court may make an order:
(a)setting the disposition or dealing aside as from the day on which the disposition or dealing took place; or
(b)setting the disposition or dealing aside as from the day of the order under this subsection and declaring the respective rights of any persons who acquired interests in the property on or after the day on which the disposition or dealing took place and before the day of the order under this subsection.”
Section 243K of the Customs Act is in similar terms. It provides:
“(1) A person who knowingly contravenes a restraining order by disposing of, or otherwise dealing with, property that is subject to the restraining order is guilty of an offence.
Penalty: Imprisonment for 5 years.
(2) Where:
(a)a restraining order is made against property;
(b)the property is disposed of, or otherwise dealt with, in contravention of the restraining order; and
(c)the disposition or dealing was either not for sufficient consideration or not in favour of a person who acted in good faith;
the Minister, the Commissioner of Police, the CEO or the Director of Public Prosecutions may apply to the Court for an order that the disposition or dealing be set aside.
(3) Where an application is made under subsection (2) in relation to a disposition or dealing, the Court may make an order:
(a)setting the disposition or dealing aside as from the day on which it took place; or
(b)setting the disposition or dealing aside as from the day of the order under this subsection and declaring the respective rights of any persons who acquired interests in the property on or after the day on which the disposition or dealing took place and before the day of the order under this subsection.”
There is no doubt, and it was not contended to the contrary by the second respondent, that the agreement purports to deal with the property which was restrained by the order of Beach J and the orders of Sweeney ACJ and Northrop J. Further the applicant and the third respondent contended that the dealing was not for sufficient consideration nor was it in favour of a person who acted in good faith. In such circumstances the Court is empowered to set the dealing aside as from the day on which it took place. Thus, even if the agreement was entered into on 15 May 1990 it is still subject to s 52(2) of the Proceeds of Crime Act. If it was entered into on any day other than 2 to 6 September 1990 it is subject to s 243K(2) of the Customs Act.
The factual issues
The contest between the parties related to two controversial issues:
·who owned the RESI‑Statewide/Bank of Melbourne shares; and
·on what date was the agreement dated 15 May 1990 signed by the first and second respondents.
Although the first respondent said in an affidavit sworn on 9 June 1989 that he had a beneficial interest in the shares, he had earlier said in an examination before Vincent J on 4 April 1989 that he had bought the shares for his son and registered them in his son’s name. Mrs Kunz described how money had accumulated in a bank account for their son and had been used with other funds to acquire the shares in his name. For present purposes, it matters not who owned the shares. They were registered in the second respondent’s name and were ultimately sold with the proceeds being used to fund the first respondent’s defence. It is sufficient for present purposes to find that 42,037 shares or thereabouts had been accumulated over time and registered in the second respondent’s name.
The more important issue relates to the circumstances in which, and the date on which, the agreement was entered into. Mrs Kunz says that she visited her husband on the day after his discharge from the Commonwealth charges on 15 May 1990 and discussed arrangements at the Remand Centre in North Melbourne. They were both concerned about how they would raise funds to pay the legal costs in respect of the remaining charges. They discussed the possibility that their son might be prepared to sell his shares as the sale of their properties would take too long. Her husband wrote out the document by hand which has been produced, signed it and asked her to take it home, explain it to their son with a view to getting his consent. Mrs Kunz says that either on that day or the next day she spoke to her son concerning the agreement and showed him the document. Her son agreed and signed the reverse side of the agreement to indicate his consent.
The second respondent maintained in his second affidavit sworn 15 December 1998 that he signed the agreement on the date it bears. However later in the affidavit he recalled signing it in the kitchen of his home “either the same date as the Agreement bears, or the next” when his mother handed it to him explaining that she had received it from his father at the Remand Centre. He recalled his mother explaining that the shares needed to be sold to supply funds to meet the legal costs of his father’s defence and he signed the agreement. He gave it back to his mother and did not see it again until after the motion initiated by him in September 1998 had commenced.
The second respondent and Mrs Kunz were cross‑examined in respect of their explanation as to the signing of the agreement and a number of matters emerged in cross‑examination which cast doubt on the credibility of their version of the signing of the agreement. Mrs Kunz said that her husband’s lawyers at the committal proceeding were Mrs Hampel, counsel, and Mr Parsons from Slades, solicitor, and that in September 1990 her husband engaged Mr Steart of FW Robson & Co to act for him. Although Mrs Kunz said Mr Steart had acted for one of the other accused persons, she was clear that he did not become their solicitor until at least September 1990. At one stage Mrs Kunz said that Mr Steart might have become their son’s solicitor a little later than September 1990. She could not remember if she took her son to Mr Steart in September or October 1990. What was clear from her evidence was that Mr Steart did not become either her husband’s or her son’s solicitor and was not retained for that purpose prior to September 1990. She said this did not occur until a few months after the committal proceeding was concluded in May 1990.
Mrs Kunz also said that she went with her son to see Mr Steart and they discussed the proposal in relation to the selling of the shares. Having regard to the fact that as at 15 May 1990 Mr Steart was not involved as solicitor for the first respondent or the second respondent this visit must have occurred well after 15 May 1990 and sometime in September 1990. According to a bill of costs prepared by Mr Steart, his first contact with the second respondent was on 7 September 1990.
The second respondent’s evidence in cross‑examination did not differ materially from his mother’s evidence as to when he first met Mr Steart. He said that his involvement with Mr Steart arose as a result of his father engaging Mr Steart as his solicitor and that he met Mr Steart as a result of him becoming his father’s solicitor in the middle to the second half of 1990. The second respondent said that on 15 May 1990 he did not know, and had not met, Mr Steart and that it was after he met Mr Steart and as a result of Mr Steart’s advice that the agreement was signed. The following question and answer was revealing:
“Can you explain to his Honour how on earth you referred to the fact that it’s done [the sale of the shares] on the advice of Mr Steart when you haven’t met Mr Steart at that point in time?‑‑‑No, I can’t explain it, no.”
The second respondent agreed that in September 1990 Mr Steart was negotiating on his behalf to have the shares released and sold so that the money could be used for his father’s defence. He agreed that at no time during those negotiations was it suggested that he had a charge over the restrained properties.
What was surprising about the evidence of the second respondent was that over a period of eight years the existence of the agreement had never been raised until around the time of the first respondent’s application to the County Court that Victoria Legal Aid fund the defence of his second trial. His explanation was that he was getting tired of waiting for the Court proceedings to finish, he saw that his father was going to be retried and he saw that his father was going to have to sell the properties and he would have no chance of getting his money back. As appears from a passage in the transcript to which I will shortly refer, it was Victoria Legal Aid’s claim that his father should not get legal aid because he had three properties to sell which prompted the second respondent, after eight years, to send his letter of 29 June 1998 to the Official Receiver. He acknowledged that he instructed Mr Stewart to lodge a caveat over 6 Morrice Street, Caulfield so as to get in before Victoria Legal Aid.
Although the second respondent and his mother claimed that the agreement was signed on 15 May 1990 I reject their evidence on this issue. The applicant and the third respondent submitted that the second respondent and his mother were not credible witnesses and I should not accept their evidence particularly in relation to the date upon which the agreement was signed. I accept this submission. There were a number of respects in which the second respondent, in particular, gave inconsistent evidence and evidence which was contrary to other evidence which was available. I draw attention to the following matters. In his affidavit sworn 24 September 1998 the second respondent said that until advised by his then solicitor Mr Gary Goldsmith in July 1998 he was unaware of the fact that he was made a party to these proceedings and that he was also unaware that there were injunctions made restraining him from dealing with his property. He further asserted that the solicitors “apparently appeared on my behalf without my direct knowledge”. This evidence is contrary to and quite inconsistent with the following evidence to which I have earlier referred. On 14 September 1990 the second respondent was served with the papers in this matter together with an application to join him as a respondent at his place of business. An affidavit of the process server supports this evidence and it was not contested. Further, he acknowledged that he saw Mr Steart about this matter, this being corroborated by entries in a bill of costs submitted by Mr Steart for the purpose of having his fees paid by Legal Aid. The second respondent did not dispute that he had the relevant meetings with Mr Steart. Further, he consented to the sale of the Bank of Melbourne shares in September 1990. In June 1991 an application was made by his mother for the release of certain jewellery and the payment of certain expenses. At that time the second respondent swore and filed an affidavit in which he said he was the second defendant in the proceeding.
In par 3 of his affidavit sworn 24 September 1998 the second respondent referred to the agreement dated 15 May 1990 and continued, “pursuant to this agreement I verily believe that the shares were sold by the Trustee”. This cannot be correct as the shares were sold as a result of the arrangement reached with the applicant in November 1990 and January 1991 yet the second respondent said that apart from his family no one had been told about the agreement until 29 June 1998 when he sent his letter by facsimile to the Official Trustee as the agreement was a matter for the family.
He also denied any knowledge of, or association with, the solicitor Mr John Stewart. Yet later in his evidence he agreed that in July 1998 he had instructed Mr Stewart to lodge a caveat in respect of the three subject properties and it is his evidence in this respect which supplies the reason why the agreement came to light at this time. The following exchange occurred:
“You knew, didn’t you, that of the three properties that your parents own jointly, that property was the only property in respect of which in July 1998, Victoria Legal Aid did not have a caveat over it?‑‑‑That’s correct.
You knew that, didn’t you?‑‑‑I inquired about it, yes.
You instructed Mr Stewart, I suggest, to lodge a caveat to get in before Legal Aid, didn’t you?‑‑‑That’s true.
Sorry?‑‑‑That’s correct.
You were concerned, I suggest, and your father was concerned, that if the assets were not lost as a result of a conviction in the County Court they may ultimately be lost because Legal Aid has used the assets to secure their funding of your father’s defence. Is that right?‑‑‑Yes.”
It was put to the second respondent that it was his father’s application to the County Court for legal aid which prompted him to send his facsimile of 29 June 1998 to the Official Trustee. In this respect the following exchange was illuminating:
“On 29 June of this year you knew, didn’t you, that his Honour Judge Higgins in the Country Court had reserved his decision in respect of an application by your father for legal aid? You knew that, didn’t you?‑‑‑Yes.
…
It was in fact the making of that application by your father which prompted you to send this fax on 29 June, wasn’t it?‑‑‑No, it wasn’t.You knew, didn’t you, that Legal Aid, Victoria Legal Aid, was saying to the court, ‘Mr Kunz should not get legal aid because he has three properties he can sell’?‑‑‑I am aware of that, yes.
It was that issue, I suggest to you, which prompted you, after eight years, to send this fax?‑‑‑that’s correct.”
It is also important to note that there were many opportunities prior to the first time the agreement emerged on 29 June 1998 when one would have expected the agreement, if it existed, to have been acknowledged, identified or referred to. That did not occur. For example when Mr Steart wrote to the applicant on 21 September 1990 in relation to the second respondent’s consent to the sale of the shares a condition was sought that the applicant acknowledge the second respondent’s interest in Unit 5, 37 Tennyson Street, Elwood. No right was asserted or acknowledgment sought in relation to the agreement or the interest in the three items of real estate claimed under it. There is other correspondence from Mr Steart to the applicant in relation to the sale of the shares but it does not contain any reference to the agreement.
On 18 August 1993 Mr Steart wrote to the applicant seeking his consent to the execution by the first respondent of charges over all the restrained real estate in favour of Victoria Legal Aid. If the agreement had existed on this date one would have expected it to have been disclosed at a time when the first respondent was proposing to charge the same property the subject of the agreement in favour of Victoria Legal Aid to ensure his defence would be funded.
A similar letter had been written by Mr Steart to Victoria Legal Aid on 24 June 1993 offering a charge over the restrained properties for the purpose of obtaining legal aid funding for his defence. No mention was made of the agreement. One would have expected it to be disclosed to Victoria Legal Aid in such circumstances if it existed at that time.
On 3 February 1998 the first respondent’s then solicitor, Kenna Croxford & Co wrote to Victoria Legal Aid asking it to reconsider its refusal to grant legal assistance for the first respondent’s retrial. The letter referred to the first respondent’s equity in real estate and stated that the real estate was the subject of a restraint order and equitable charges to Victoria Legal Aid. No reference was made to any charge existing by virtue of the agreement.
I am not prepared to accept the evidence of the second respondent or Mrs Kunz on the issue of the date upon which the agreement was signed. I reach this conclusion not only because of the general unreliability of the second respondent’s evidence and the absence of reference to the adjournment in the correspondence to which I have referred but more particularly because of two matters which in my opinion, point to the conclusion, in respect of which I am satisfied, that the agreement was not in fact executed on 15 May 1990.
The first matter is the reference in the agreement to “52.000 units” stated to be the number of shares in the Bank of Melbourne sold by the second respondent and the second is the reference in the second respondent’s hand on the back of the agreement to:
“It was recommended that I sell these shares by solicitor Mr Graham Steart.”
On 15 May 1990 the second respondent did not own 52,000 shares in the Bank of Melbourne. He only owned of the order of 42,037 shares. Mrs Kunz said that after a third parcel of 7,000 shares was acquired in 1989 the total acquired came to about 42,000 shares. This figure can also be derived from the letter from the accountants JP Hardwick & Associates to Mrs Kunz dated 8 September 1998 which sets out their calculations as to the capital loss forgone by the second respondent as a result of the sale of the shares at the end of 1990 and the beginning of 1991. At that time the relevant number of shares held was 42,037 shares. According to that calculation as a result of capital growth and bonus distributions in the meantime that amount had notionally grown by 1997 to the order of 52,884 shares. According to J P Hardwick & Associates’ calculations the two parcels of shares sold, 15,000 and 27,303, became respectively 18,750 and 34,134 at some time during 1993. Thus, if the agreement was entered into at a time when it was thought that the second respondent owned 52,000 shares in the Bank of Melbourne that could only have been in and between 1993 and 1997 or 1998 and most certainly was not on 15 May 1990. It follows that the agreement must have been signed at some time in and between 1993 and June 1998.
The reference to Mr Graham Steart is just as revealing. On 15 May 1990 the first respondent’s solicitor who was acting for him in the committal was Mr Parsons of Slades. Mr Steart only started to act for him around 11 July 1990. What is more important is that the second respondent said that he did not meet Mr Steart until September 1990. This is confirmed by Mr Steart’s bill of costs prepared for the purposes of recouping his expenses from Legal Aid which shows his first consultation with the second respondent was on 7 September 1990. Neither the second respondent nor his mother disputed the proposition that the first time the second respondent met Mr Steart was in September 1990. What is equally important is that the second respondent said that he had not met Mr Steart on 15 May 1990 and that it was after he met Mr Steart, and as a result of Mr Steart’s advice, that the agreement was signed. It follows from this evidence as well that the agreement could not have been signed on 15 May 1990. If the agreement was entered into as a result of a recommendation by Mr Steart that the second respondent sell the shares such recommendation could only have occurred at the earliest some time after 7 September 1990.
However, I am satisfied that the agreement was not entered into in September 1990 because of the reference to 52,000 units which demonstrates execution at a time much later, certainly not before 1993 and probably around June 1998. It is only possible to infer the date of execution having regard to the probabilities to be determined from relevant circumstances. The applicant had the document examined by an experienced forensic document examiner, Mr Neil Holland. Having examined the document Mr Holland was unable to determine the manufacturer of the ink or paper and could not establish when the document was written.
The motivation for the agreement to be entered into around June 1998 is demonstrated by the second respondent’s acknowledgment that he gave instructions to lodge the caveat over the three properties relying on the agreement for the purpose of ensuring that any interest he had took priority over any charge which Legal Aid might obtain over the three restrained properties. At that time, around June 1998, the first respondent had applied to the County Court for an order pursuant to s 360A of the Crimes Act that Legal Aid provide funds for his defence. It was therefore important for the first respondent to demonstrate that he did not own the restrained assets.
I am satisfied, on the balance of probabilities, that the agreement was prepared and entered into some little time prior to 29 June 1998 and probably around June 1998. Irrespective of the time or date upon which it was entered into I am also satisfied that the agreement, or rather the document purporting to be the agreement, was a sham and a contrivance which did not record or reflect any consensual arrangement reached between the first respondent and the second respondent. The fact that it could not have been entered into on the date it bears, for the reasons to which I have referred, has the result that there was no bargain reached between the signatories on the date on which they contend it was signed. The conclusion that it is a sham and a contrivance is also supported by the fact that the second respondent did not own 52,000 shares in May 1990 and never owned that number of shares.
If I am wrong in my finding that the agreement is a sham and a contrivance then I am still satisfied that the agreement could not have been entered into before 7 September 1990 and I am also satisfied that it could not have been entered into before 1993. In those circumstances it follows in my opinion that the agreement has been back‑dated for the purpose of seeking to enable the first respondent and the second respondent to obtain an advantage to which they are not entitled in relation to the three properties. The reason is that, apart from the period 2 to 6 September 1990 there was a restraining order in place from 1 March 1989 to the commencement of the hearing on 22 December 1998 and presumably still continuing that prevented any dealing with the first respondent’s interest in the three items of real estate.
Accordingly the jurisdiction to set aside the agreement under either s 52(2) and subs (3) of the Proceeds of Crime Act or s 243K(2) and subs (3) of the Customs Act is enlivened. That jurisdiction is available where:
(a) a restraining order is made against property;
(b)the property is disposed of or otherwise dealt with in contravention of the restraining order;
(c)the disposition or dealing was either not for sufficient consideration or not in favour of a person who acted in good faith.
In the circumstances before the Court restraining orders were made against the first respondent’s interest in the three items of real estate. Although the terms of the agreement are not precise and it is open to considerable doubt whether the agreement created a caveatable interest or enforceable charge in favour of the second respondent it is clear that the properties were “dealt with” in the sense that the agreement was seeking to give the second respondent rights in relation to the first respondent’s interest in the three items of real estate the granting of which rights contravened the restraining orders made in the Supreme Court of Victoria and the Federal Court.
As I have found, the agreement was back‑dated. Although I have found that it was entered into around June 1998, it could not have been entered into before 1993 for the reasons to which I have referred. By that time the second respondent did not own any shares in Bank of Melbourne Limited; they had been sold in November 1990 and January 1991. There was therefore no consideration, sufficient or otherwise for the charge over, or interest in, the three properties. To the extent to which the consideration was the use of the funds obtained from the sale of the shares, it was past consideration and therefore not sufficient consideration.
However, even if it might be said that the dealing with the properties was for sufficient consideration I am satisfied that the second respondent did not act in good faith in relation to the agreement. He maintained he signed it on 15 May 1990 when according to his own evidence (to which I have already referred) he could not have been correct in giving this evidence. It follows from my findings that the agreement was a sham, or alternatively that the agreement was not executed before 1993 at the earliest and was therefore back‑dated, that the second respondent did not act in good faith.
Further the second respondent said that on 14 May 1990 he believed that the charges were dropped, that the committal had finished but that one charge was left for his father to contest which had not been dismissed. Thus, whenever he entered into the agreement he knew that one charge was still outstanding and he knew of the restraining order made by Beach J because of the application he had filed on 2 March 1990 seeking to release from restraint the property at Unit 5, 37 Tennyson Street, Elwood. He also knew from 14 September 1990 at the latest about the restraining order made by Sweeney ACJ on 7 September 1990 as he was served with documents to join him in that proceeding on 14 September 1990. In such circumstances he did not act in good faith in relation to the agreement as he knew his father was still to stand trial, he knew a restraining order was in place yet he purported to deal with his father’s interest in the restrained properties.
Conclusion
I am therefore satisfied that an order should be made setting aside the agreement dated 15 May 1990 as from the day on which it purported to take effect.
It is not necessary to determine whether the agreement was such as to create an interest in land in favour of the second respondent which would support the lodging of a caveat. Whatever the nature of the interest created by the document it did constitute a dealing with the three items of real estate in contravention of the restraining orders.
At an early stage of the proceeding the applicant objected to the tender of the original document said to constitute the agreement dated 15 May 1990 on the ground that it had not been stamped with the stamp duty required by the Stamps Act1958 (Vic). Following the procedure adopted by Hill J in Davis v Federal Commissioner of Taxation (1989) 86 ALR 195 I accepted an undertaking by the second respondent’s solicitor that he would have the document stamped and pay the amount of stamp duty assessed by the Comptroller of Stamps.
The second respondent’s motion will be dismissed and an order setting aside the agreement dated 15 May 1990 as from that date will be made on the applicant’s application. The second respondent should pay the costs of the applicant and the third respondent in respect of both motions including reserved costs. The first respondent should bear his own costs of the second respondent’s motion and the applicant’s application.
I certify that the preceding eighty‑six (86) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg J. Associate:
Dated: 25 March 1999
Counsel for the Applicant: Mr G Chettle Solicitor for the Applicant: Director of Public Prosecutions (Commonwealth) Counsel for the First Respondent: In person Counsel for the Second Respondent: Mr P L Finkelstein Solicitor for the Second Respondent: FLA Partners Counsel for the Third Respondent: Mr P Lacava QC Solicitor for the Third Respondent: Victoria Legal Aid Date of Hearing: 22, 23 December 1998 Date of Judgment: 25 March 1999
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