| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : DIRECTOR OF PUBLIC PROSECUTIONS -v- MORRIS [No 2] [2010] WADC 148 CORAM : WAGER DCJ HEARD : 22 SEPTEMBER 2010 DELIVERED : 7 OCTOBER 2010 FILE NO/S : CPCA 10 of 2008 BETWEEN : DIRECTOR OF PUBLIC PROSECUTIONS Applicant
AND
ROBERT WILLIAM MORRIS
Respondent
ROBERT WILLIAM MORRIS
Objector
AND
DIRECTOR OF PUBLIC PROSECUTIONS
Respondent to Objector
Catchwords: Application for declaration of unexplained wealth - Respondent's obligation to establish total wealth - Respondent required to rebut presumption that wealth not lawfully acquired - Turns on own facts
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Legislation: Criminal Property Confiscation Act 2000 Result: The sum of $108,390 declared lawful wealth
Freezing order cancelled Representation: Original Action
Counsel:
Applicant : Mr M Seaman
Respondent : Mr C Chenu
Solicitors:
Applicant : Director of Public Prosecutions
Respondent : Lavan Legal
Counterclaim
Counsel:
Objector : Mr C Chenu
Respondent to Objector : Mr M Seaman
Solicitors:
Objector : Lavan Legal
Respondent to Objector : Director of Public Prosecutions
Case(s) referred to in judgment(s):
Director of Public Prosecutions for Western Australia v Gypsy Jokers Motor Cycle Club Inc (2005) 153 A Crim R 8, [2005] WASC 61
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1 WAGER DCJ: On 22 February 2008, police stopped Mr Morris' car and confiscated the sum of $108,390 cash, approximately $106,000 of which was in an open red paper bag on the passenger seat next to him.
2 By ex parte notice of originating motion dated 15 May 2008, the Director of Public Prosecutions (DPP) successfully applied pursuant to s 43(3)(b) of the Criminal Property Confiscation Act 2000 (the Act) for the cash sum to be frozen until further order. On that same date the DPP filed a notice of motion pursuant to s 11(1) of the Act seeking a declaration that Mr Morris had unexplained wealth in the sum that was confiscated. Mr Morris applied to set aside the freezing order and objected to the automatic confiscation of his property. 3 Prior to the hearing on 23 September 2010 the DPP had accepted Mr Morris' affidavit evidence that he had a quantity of lawfully acquired wealth, including a sum of cash greater than the sum that was frozen. The DPP indicated that the only constituent of Mr Morris' property presumed not to have been lawfully acquired and therefore requiring Mr Morris to rebut by establishing the contrary on the balance of probabilities pursuant to s 12(2) was the $108,390 that was frozen. 4 Counsel for Mr Morris argued that the DPP as the applicant in an unexplained wealth declaration had an obligation to establish that Mr Morris had wealth because otherwise the application had no foundation. The DPP was therefore required to value Mr Morris' wealth to allow a calculation of lawful wealth to be made. Counsel for Mr Morris argued that in order to value the wealth the DPP has an onus to put evidence of Mr Morris' wealth before the Court in order for the application to proceed and that the presumption against Mr Morris that the wealth had not been lawfully acquired would only arise once the DPP had established the existence of wealth and its value. 5 For the reasons that I gave orally on 21 September 2010 (T33 – T49) I rejected the submissions made on Mr Morris' behalf. The statutory framework for a hearing of an application for unexplained wealth is very unusual in that once an application is before the Court pursuant to section 11 the applicant has no further onus or obligation and the respondent, in this case Mr Morris, bears the onus in relation to leading evidence at the hearing. 6 I considered that the Criminal Confiscation Bill 2000 – explanatory notes in relation to s 12(2) was of assistance because it noted: (Page 4)
Sub-clause (2) places and onus of proof onto the respondent to establish that his wealth was lawfully acquired. This is because it is easier for a person to establish that his wealth is lawfully acquired rather than for the state to establish the contrary. This provision is central to the advancement of the objectives of the Act. Failure to include such a provision would place heavy resource obligations on the state in seeking to establish that a person's wealth was not lawfully acquired. 7 Although s 12(2) refers to the establishment of wealth being lawfully acquired the final sentence of the explanatory note indicating that Parliament did not want to place a heavy resource obligation on the State is inconsistent with their being an onus on the DPP to quantify value and have to lead evidence. 8 Having reviewed the Act I considered that once an application had been made pursuant to s 11(1) the onus to lead evidence at the hearing was carried by the respondent. If the DPP admitted that some of the respondents wealth was explained wealth then the admission relieved the respondent of rebutting the presumption under s 12(2) in relation to the admitted wealth but the respondent would continue to bear the onus of rebutting the presumption that wealth had not been lawfully acquired if the DPP did not admit that the respondent had lawfully acquired it.
The statutory framework for an unexplained wealth declaration hearing 9 On hearing an application for an unexplained wealth declaration, the court must declare that the respondent has unexplained wealth if it is more likely than not that the total value of the person's wealth is greater than the value of the persons lawfully acquired wealth; s 12(1). 10 The property, services, advantages and benefits that together constitute a persons wealth are set out in s 143(1). The term 'unexplained wealth' is defined in s 144 as: 1. For the purposes of this Act, a person has unexplained wealth if the value of the person's wealth under sub-section 2 is greater than the value of the persons lawfully acquired wealth under sub-section 3; 2. The value of the person's wealth is the amount equal to the sum of the values of all items of property and all the services, advantages and benefits that together constitute the persons wealth; 3. The value of the persons lawfully acquired wealth is the amount equal to the sum of the values of each item of property and each service, advantage of benefit that both is a constituent of the person's wealth and was lawfully acquired. (Page 5)
11 The term 'lawfully acquired' is defined in s 149: Any property, service, advantage or benefit that is lawfully acquired only if: (a) the property, service, advantage or benefit was lawfully acquired; (b) any consideration given for the property, service, advantage or benefit was lawfully acquired. 12 A property, service, advantage or benefit that is a constituent of the respondent's wealth is presumed not to have been lawfully acquired unless the respondent establishes the contrary s 12(2). 13 Without limiting the matters to which the court must have regard, for the purpose of deciding whether the respondent has unexplained wealth the court may have regard to the amount of the respondent's income and expenditure at any time, or at all times; s 12(3). 14 When making a declaration the court is to assess the value of the unexplained wealth and specify the value of the unexplained wealth declaration. The value of the respondent's unexplained wealth is the amount equal to the difference between the total value of the respondent's wealth and the value of the respondent's lawfully acquired wealth; s 13(1). 15 The assessed value of the unexplained wealth specified in the declaration is to be in accordance with s 13. 16 When the court makes an unexplained wealth declaration, the respondent is liable to pay to the state an amount equal to the amount specified in the declaration as the assessed value of the respondent's unexplained wealth; s 14. 17 Given that there have been very few defended applications for unexplained wealth declarations the second reading Criminal Property Confiscation Bill 2000 – Hansard, Thursday 29 June 2000, pg 8611 (Mr Barron-Sullivan) provides some guidance; The Honourable Member said: The most significant of these proposed reforms is the confiscation of unexplained wealth as provided by pt 3 div 1 of the Bill. These provisions target those people who apparently live beyond their legitimate means of support. Under the Bill the person has unexplained wealth when the value of his or her total wealth is more than the value of the wealth which has been lawfully acquired. (Page 6)
More importantly, it is not relevant whether or not the person has committed any offence. The clear intention of the bill is to deprive people of wealth which has been unlawfully acquired. In this regard, the bill requires a person to establish that the ultimately source of his or her wealth was lawfully. For example, it is not sufficient for a person to establish that a particular item of property was given to that person, rather, the person must establish that the person who gave the property had lawfully acquired the property. 18 Counsel for the DPP referred to the decision of Director of Public Prosecutions for Western Australia v Gypsy Jokers Motor Cycle Club Inc (2005) 153 A Crim R 8, [2005] WASC 61 which is factually different from this case because it was a decision relating to a freezing order granted over property suspected of being derived from crime. However, the requirement of the respondent to prove on balance of probabilities that it owned substantial property through legitimate means is relevant to a consideration under s 12(2). 19 In that case Templeman J said at [68]: In my view a person who becomes the owner of substantial property by legitimate means ought reasonably to be expected to be able to prove that fact, on the balance of probabilities, without any great difficulties. If the route by which property came into the ownership of an objector is lawful, it will usually be documented in some way. In those circumstances, it matters not what allegations of criminal activity are made against the person concerned.
The evidence 20 The following affidavits filed on Mr Morris's behalf were tendered by consent to the hearing: Exhibit 1 - affidavit of Mr Morris sworn 21 August 2008 Exhibit 5 - affidavit of Mr Piromalli sworn 3 September 2010 21 The DPP did not require Mr Morris to rebut the presumption of unlawfulness in relation to the assets and the income that his affidavits disclosed and accepted that the property was lawful wealth. 22 In summary Mr Morris' unchallenged position was that he has started work as a personal trainer in 1985 and established his own personal training business as the sole owner and occupier of Body Concept Personal Training, at Unit 9, 442 Beaufort Street, Highgate in 2004. Mr Morris had earned an income from Body Concept Personal Training (after tax deductible expenses) from taxable year 2005 until 22 February (Page 7)
2008 of approximately $111,705.00 with tax payable of approximately $18,000. He had also received a payment from Mr Poynton of Azure Capital in the sum of $30,000 by way of contra against personal training services provided or to be provided, a personal loan from the ANZ Bank in the sum of $30,000, BAS refunds totalling $7,230, proceeds from the sale of a motor vehicle and a motor cycle totalling $15,000 and capital gains on the sale of shares in the sum of $14,226. 23 Between 2004 and late November 2005 Mr Morris had lived with Mr Nick Martin who assisted Mr Morris to set up the personal training business by not charging him any rent or requiring any contribution towards the bills for water, electricity and gas etc. Mr Morris' only expenses at that time were for food and entertainment being approximately $200 per week. 24 After November 2005 Mr Morris lived at the gym premises in Beaufort Street, Highgate. His only living expenses continued to be for food and entertainment being approximately $200 per week. Mr Morris deducted $200 each week from his taxable income from 2005 until 22 February 2008, being a sum of $37,600. He established that the nett amount he had earned or lawfully acquired in cash was over $170,000. 25 After setting up the Highgate gym in 2004 Mr Morris saved all of the cash because he wanted to establish a new second gym and purchase equipment for it. Mr Morris kept all of his money in a portable safe at the Highgate gym. The reason why he did not keep the money in a bank was because he had lost $3,500 which was his savings of a couple of years when he was a teenager following the collapse of the Permanent Building Society. Mr Morris said that at that age the sum of $3,500 was everything that he had and it had been a lot of money to him. Since losing the money he has not held any substantial amounts of money in banks or other financial institutions because he did not have faith in the security of banks. He chose to hold cash in his safe believing that it was better and safer than keeping money as savings in the bank. While running the Highgate gym Mr Morris had two bank accounts and the records of the accounts have been fully disclosed. 26 I am satisfied that on the 22 February 2008 Mr Morris had access to lawful wealth of cash of an amount equal to or greater than $108,390. 27 Counsel for the DPP submitted that despite having lawful access to an equivalent or greater sum of cash than that frozen, the sum frozen had not come from his savings but had come into Mr Morris' possession (Page 8)
because he collected it when he visited Mr Nick Martin at Mr Martin's mother's home in Mount Lawley and obtained the money in a red paper bag minutes before he was stopped by police, a submission strongly denied by Mr Morris. 28 Counsel for Mr Morris submitted that the obligation under the unexplained wealth legislation is to prove that the wealth that a person has is lawful. Mr Morris has proven that he lawfully has a sum of cash greater than $108,000 in his possession and he has therefore complied with the legislation. 29 Paraphrasing the submissions of counsel for Mr Morris it was submitted that it was open to the DPP to proceed under criminal legislation if they questioned the use to which Mr Morris intended to put the $108,390 however whether he intended to use the money prudently, imprudently, lawfully or unlawfully was not relevant to an unexplained wealth application once the presumption under s 12(2) had been rebutted in respect of a cash sum held. It was submitted that given the onerous nature of the Act it should be narrowly construed and that to allow a de facto allegation of criminal unlawful possession of the cash to be determined by placing a presumption of unlawfulness on the respondent took the legislation too far and was not the intention of Parliament. 30 Although Mr Morris' counsel's submission have some merit I consider that the legislation is wide enough to cover the DPP's challenge to the cash frozen as being a constituent of Mr Morris's wealth pursuant to s12(2).
Mr Morris' actions on 22 February 2008 31 Mr Morris had saved his income and other lawfully acquired property for three years in order to set up a second gym. His accountant Mr Piromalli has set up a projected budget for a second gym (attached to Mr Morris' affidavit sworn 8 March 2010) and he had discussed the purchase of gym equipment with Yolinda Stowers, State Manager Elite Fitness Equipment who had known Mr Morris for 18 years through both the health and fitness and the hospitality industries and who had recommended the purchase of items of gym equipment that totalled $66,000 - $76,000. The items of equipment and their prices are particularised in Mr Morris' affidavit sworn 8 March 2010 and a letter from Ms Stowers is marked as an attachment. 32 Mr Morris said that he wanted to go to Elite Fitness Equipment on 22 February 2008 in order to negotiate a good deal. He took cash with (Page 9)
him because he believed that presenting cash would save the amount of credit card fees payable if not more. If he negotiated a good deal then he was willing to pay 50% of the cost of the equipment in cash on that date, a sum that he agreed was about $35,000. 33 Mr Morris also intended to pay White Knight Nominees approximately $10,000 cash that day by way of a deposit to pay Henry Day to commence working on an awareness campaign to advertise the new gym including logos and ideas for advertising. Mr Day had discussed paper advertising, letter drops, flyers, business cards and a website with Mr Morris. An undated letter from Mr Day confirming that his role was to formulate an initial three month awareness campaign followed by a 12 month marketing program to help kick start (Mr Morris' second gym) is attached to Mr Morris' affidavit sworn 8 March 2010. 34 Mr Morris said that he also intended to look at three properties in the Cottesloe to Claremont areas on that day as they were potential sites to lease for his new gym. Although he did not expect to pay any monies towards the lease on that day he considered that it was better to have the money with him and not need it rather than not to have the cash money and to need it. 35 In total he anticipated that he could spend up to $50,000 - $80,000 that day leaving at least $30,000 to pay for a fit out and to pay for the first few months wages and other costs that were unlikely to be met by income once the second gym opened. 36 In cross-examination at the hearing Mr Morris said that he removed all of the cash that he had in the safe at the Highgate gym on 22 February 2008 and placed it in a Coles style white plastic bag after bundling the notes together using elastic bands. He did not count the money nor did he divide it in any particular way. Mr Morris knew that there was over $100,000 cash and not more than $110,000 cash in the safe. 37 Mr Morris intended to go to Elite Fitness Equipment however he went to Flex Fitness in Morley and then drove to Mr Martin's mother's house in Ninth Avenue, Mount Lawley to visit Mr Martin in order to make arrangements to meet up later in the day. He had not referred to his meeting with Mr Martin on 22 February 2008 in affidavits filed before the hearing. Mr Morris said that his memory was triggered when surveillance operative number 35's affidavits were filed in this matter and this occurred (Page 10)
after he had already prepared his own affidavits. He had forgotten about visiting Mr Martin until that point. 38 Mr Morris said that when he arrived at Mr Martin's mother's house he pushed the white plastic bag of money under the drivers seat and locked the car and then went to the house. He saw an empty red paper bag in Mr Martin's house and asked to have it. He took it back to the car and removed the cash from the white plastic bag, placing it in the red paper bag and then, in a tongue in cheek gesture, approached Mr Martin to give him the white plastic bag. Mr Martin did not take the bag and Mr Morris then drove off. Surveillance footage (exhibit 3) shows Mr Morris returning to his car from Mr Martin's mother's house carrying a red paper bag and speaking on a mobile telephone. It is not possible to say whether the red paper bag is empty or not. Mr Morris is shown entering his car however it is not possible to see what he did while he was in the car. Mr Morris then gets out of the car and carries the flimsy white plastic bag towards Mr Martin who has come out of the Mount Lawley house. It appears that there is something of weight forming a shadow in the white plastic bag. Mr Morris approaches Mr Martin with the bag but then returns to the car still carrying the white plastic bag. Mr Morris was not cross-examined in relation to the contents of the white bag as shown on the surveillance video nor his intention in respect of it. Mr Morris was pulled over by police soon after he left Mr Martin's mother's house. 39 Mr Morris was cross-examined in relation to the paper bag being unsuitable to carry money because it could tear and was open at the top so that others could see what was in the bag. 40 Mr Morris said that the bag had torn when he removed an arm brace at the time of being pulled over by police so he therefore agreed that it could tear, but said that the bag was more suitable than the see through white plastic bag had been and that he thought a rucksack would have been impractical. Mr Morris did not consider he was at risk of having the money stolen and thought that with the handles held together the cash in the bag could not be seen. Mr Morris denied propositions put in cross-examination that his explanation for having the money on the day was inherently implausible. He denied that there was no reason for him to carry all of his money around. He denied that he had not taken the money from his cash at home but had taken it from Mr Martin's mother's house in the red paper bag. 41 I find the following established: (Page 11)
1. Mr Morris had lawful access to the sum of $108,390 on 22 February 2008. 2. Mr Morris had made arrangements to set up, purchase items for and advertise a second gym prior to 22 February 2008. 3. Mr Morris had a reason to keep money in a safe rather than in a bank account because of his loss through the Permanent Building Society collapse. 4. Given his size and physical stature Mr Morris had no reason to fear that such a large sum of money would have been stolen from him even if others could see over the top of the paper bag. 5. The affidavit evidence that Mr Morris went from the Highgate gym to Elite Fitness Equipment was sworn on 8 August 2010 which is 2 1/2 years after the money was initially confiscated on 22 February 2008. The affidavits were drafted in relation to the lawfulness of Mr Morris' wealth, not to reflect his physical movements. No adverse inference is drawn from his failure to disclose that he visited Mr Martin on 22 February 2008 prior to the hearing. 6. Given that Mr Morris was a sole trader personal trainer who wanted to obtain good deals on expensive equipment by paying cash his conduct in driving around with a large quantity of cash was not inherently implausible. 7. There is no evidence that there was anything inside the red paper bag when Mr Morris took it from Mr Martin's mother's house to his car. 8. Although the white plastic bag may have had money in it when Mr Morris got out of the car at Mr Martin's mother's house in order to approach Mr Martin, the bag was taken from the car and returned to the car. The surveillance footage does not show any money being given to Mr Morris by Mr Martin nor is money given by Mr Martin to Mr Morris. (Page 12)
9. There is no evidence in relation to what happened to the white bag after Mr Morris returned to his car and Mr Morris was not cross-examined in relation to what happened to the white bag when he returned to the car. 42 Given my factual findings I accept that Mr Morris has rebutted the presumption and discharged his onus to my satisfaction on the balance of probabilities. The sum of $108,390 is lawful wealth. I do not make an unexplained wealth declaration against Mr Morris. Accordingly the freezing order is cancelled because it stops being in force pursuant to s 49(3)(c).
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