Macarthur v Cawdor Nominee Pty Ltd

[2003] NSWSC 249

CITATION:	Macarthur v Cawdor Nominee Pty Ltd [2003] NSWSC 249
HEARING DATE(S):	27 March 2003
JUDGMENT DATE:	27 March 2003
JURISDICTION:	Equity
JUDGMENT OF:	Campbell J
DECISION:	Stay refused
CATCHWORDS:	PROCEDURE - miscellaneous procedural matters - whether Supreme Court proceedings seeking declaration of equitable interests in property should be stayed pending application for forfeiture order under Proceeds of Crime Act 1987 (Cth) of that property - TRUSTS - discretionary trusts - rights by virtue of being nominated as "beneficiary" or as taker in default of appointment
LEGISLATION CITED:	Crimes Act 1914 (Cth) District Court Act 1973 Proceeds of Crime Act 1987 (Cth)
CASES CITED:	Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 Re Director of Public Prosecutions; ex parte Lawler (1994) 179 CLR 270 Gartside v Inland Revenue Commission [1968] AC 553 Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405
PARTIES :	Stuart Alexander Macarthur - First Plaintiff Fiona Anne Macarthur - Second Plaintiff Duncan George Macarthur - Third Plaintiff Kirsty Jane Macarthur - Fourth Plaintiff Cawdor Nominee Pty Limited - First Defendant Commonwealth Director of Public Prosecutions - Second Defendant Official Trustee - Third Defendant
FILE NUMBER(S):	SC 5849/02
COUNSEL:	D Caspersonn - Plaintiffs/Respondents No appearance - First Defendant D Fagan SC - Second Defendant/Applicant No appearance - Third Defendant
SOLICITORS:	L J Rickard - Plaintiffs/Respondents Christopher Levingston & Associates - First Defendant Commonwealth Director of Public Prosecutions - Second Defendant/Applicant Piper Alderman - Third Defendant

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

CAMPBELL J

THURSDAY 27 MARCH 2003

5849/02 FIONA ANN MACARTHUR & ORS v CAWDOR NOMINEE PTY LIMITED & ORS

JUDGMENT - Ex tempore

1 HIS HONOUR: The proceedings in which this notice of motion was brought are ones that are brought by the four children of Ross William Macarthur. They seek a declaration that some real estate at Kenthurst, which was at one time owned by Cawdor Nominee Pty Limited, was owned as trustee for them. That Kenthurst property has now been sold, and its proceeds of sale are held by the Official Trustee. The four Macarthur children seek also a declaration that they are entitled to have transferred to them the proceeds of sale.

2 The proceedings are ones which were begun on 9 December 2002.

3 The impetus for the proceedings comes from the fact that Ross William Macarthur was, on 28 August 2002, found guilty, in the District Court, of an offence of being knowingly concerned in a company defrauding the Commonwealth contrary to s 29D of the Crimes Act 1914(Cth). The fraud related to avoiding excise duty on diesel fuel, over a period of 1 February 1998 to 5 May 1999.

4 The conviction was not entered in the District Court until 17 December 2002.

5 While those proceedings in the District Court were pending, orders were made in the Common Law Division of this Court freezing certain of the assets alleged to be assets controlled by Mr Macarthur. One of those assets was the Kenthurst property. It was pursuant to an order made, after that freezing order was imposed, that the Kenthurst property came to be sold and the proceeds came to be held by the Official Trustee.

6 In the District Court, the Director of Public Prosecutions is proposing to make an application for a pecuniary penalty order. The pecuniary penalty order is one which can be imposed under the Proceeds of Crime Act 1987 (Cth). The following provisions of that Act are relevant:

“9A(1) Property, or an interest in property, may be subject to the effective control of a person within the meaning of this Act whether or not the person has:
(a) a legal or equitable estate or interest in the property; or
(b) a right, power or privilege in connection with the property.
(2) Without limiting the generality of any other provision of this Act, in determining:

(a) whether or not property, or an interest in property, is subject to the effective control of a person; or
(b) whether or not there are reasonable grounds to believe that property, or an interest in property, is subject to the effective control of a person:

regard may be had to:

(c) shareholdings in, debentures over or directorships of a company that has an interest (whether direct or indirect) in the property;
(d) a trust that has a relationship to the property; and
(e) family, domestic and business relationships between persons having an interest in the property, or in companies of the kind referred to in paragraph (c) or trusts of the kind referred to in paragraph (d), and other persons.
…
14(1) Where a person is convicted of an indictable offence, the DPP may, … apply to an appropriate court for one or both of the following orders:
(a) a forfeiture order against property that is tainted property in respect of the offence:
(b) a pecuniary penalty order against the person in respect of benefits derived by the person from the commission of the offence.
…
24. This Division applies to:
(a) property that comes into the possession, or under the control, of a person either within or outside Australia and either before or after the commencement of this Act; and …
26(1) Where:

(a) an application is made to a court for an order under this section in respect of benefits derived by a person from the commission of an offence; and
(b) the court is satisfied that the person derived benefits from the commission of the offence:

the court may, if it considers it appropriate:

(c) assess, in accordance with section 27, the value of the benefits so derived; and
(d) order the person to pay to the Commonwealth a pecuniary penalty equal to the penalty amount.
(2) Subject to subsections (3) and (4), the penalty amount is the value of the benefits as assessed under paragraph (1)(c).
…
(8) An amount payable by a person to the Commonwealth in accordance with a pecuniary penalty order is a civil debt due by the person to the Commonwealth.
(9) A pecuniary penalty order against a person may be enforced as if it were an order made in civil proceedings instituted by the Commonwealth against the person to recover a debt due by the person to the Commonwealth and the debt arising from the order shall be taken to be a judgment debt.
…
27(2) For the purposes of an application for a pecuniary penalty order against a person (in this subsection called the “defendant” ), the value of the benefits derived by the defendant from the commission of an offence or offences shall be assessed by the court having regard to the evidence before it concerning all or any of the following:
(a) the money, or the value of the property other than money, that came into the possession or under the control of:
(i) the defendant; or
(ii) another person at the request or direction of the defendant:
by reason of the commission of the offence or any of the offences.
(b) the value of any other benefit provided to:
(i) the defendant; or
(ii) another person at the request or direction of the defendant:
by reason of the commission of the offence or any of the offences: …
28(1) In assessing the value of benefits derived by a person from the commission of an offence or offences, the court may treat as property of the person any property that, in the opinion of the court, is subject to the effective control of the person. …
(3) On application by the DPP, a court may, if in its opinion particular property is subject to the effective control of a person against whom the court has made a pecuniary penalty order, make an order declaring that the whole, or a specified part, of that property is available to satisfy the pecuniary penalty order.
(4) Where a court declares the property is available to satisfy a pecuniary penalty order:
(a) the order may be enforced against the property as if the property were property of the person against whom the order is made; …”

7 The application before me today is a notice of motion by the Director of Public Prosecutions seeking that these present proceedings be stayed until after the determination of the application for a pecuniary penalty order in the District Court.

8 The basis on which the DPP makes the application is that the power of the District Court to make such an order is one which depends on the notion of whether property is within the “effective control” of a person, or (if this is a different thing) simply the “control” of a person. Section 9A makes clear that property can be within the “effective control” of a person regardless of how the legal or equitable estates or interests in that property lie.

9 The submission of the DPP amounts, it seems to me to saying that because the powers of the District Court under the Proceeds of Crime Act are so wide, there is no point in ascertaining what the equitable interests in the Kenthurst property were.

10 I do not accept that that is so. Under the Proceeds of Crime Act 1987 the concept of property which is under the “effective control” of someone convicted has two separate roles to play – it enters into the quantification, under s 26(2) and s 27 of the amount of pecuniary penalty to be imposed on the person convicted, and it provides the basis for an order under s 28(3) and (4) the effect of which is to forfeit the property itself. The District Court Judge will have power to make a pecuniary penalty order or an order under s 28(3) and (4) regardless of whether there was an equitable interest in the Kenthurst property in the Macarthur children, if the District Court Judge finds that that particular property was within the effective control of Mr Macarthur. Even so, there would still be important questions of discretion to be exercised by the District Court Judge in deciding whether he or she would actually make any such order. It is well enough recognised that the limitation in s 51(xxxi) of the Commonwealth Constitution requiring there to be just terms for the acquisition of property does not apply to the imposition of penalties: Re Director of Public Prosecutions; ex parte Lawler (1994) 179 CLR 270. I will proceed on the basis of assuming that that line of authority would also apply to the Proceeds of Crime Act 1987. However, it would be a relevant matter for a District Court Judge to take into account in his or her discretion whether property under effective control of a convicted person should, under s 28(1) be taken into account when fixing the quantum of a pecuniary penalty, if other people had property interests in it. It would be relevant for a District Court judge contemplating an order under s 28(3) and (4) to take into account whether he or she was, by such an order, depriving someone of a property right, or not. It would also be relevant for the Judge to take into account what precisely the property right was which he or she was deciding should be forfeited, on the basis it was within the effective control of someone who had been convicted. In saying that these are relevant matters to take into account, I say nothing about the effect of taking them into account – that is a matter entrusted to the discretion of the District Court judge.

11 The trust which the Macarthur children say exists is, it seems, a discretionary trust, contained in a document executed on 30 March 1986. The discretionary trust deed is one which names the four Macarthur children as “beneficiaries”, as well as making provision for various other people to be “beneficiaries”. It follows the familiar form of providing that income and capital can be appointed to the “beneficiaries”, there is a provision saying what is to happen in default of appointment so far as income is concerned, and another provision saying what is to happen to the capital if there is default in appointing it. If it were to be the case that it is this trust deed which presently states the trusts on which the proceeds of the Kenthurst property are held, it may be that it is an over simplification to say that the proceeds are simply held on trust for the four children by virtue of them being named as “beneficiaries” – Gartside v Inland Revenue Commission [1968] AC 553; Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 – though as takers of income in default of appointment they might have a vested, though defeasible, interest in the trust property – Thomas on Powers ¶ 2-67, 2-75, 2-79; Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 at 426-427 per Mahoney JA (with whom Kirby P agreed). Even so, the case which the children seek to bring is that they have an equitable interest of some sort in the property.

12 Mr Caspersonn, for the children, said that if a stay were to be granted, there is a possibility that there could be conflicting findings between the District Court and this Court concerning the existence or incidents of a trust. Those conflicting findings could arise if the District Court were to make, or perhaps even decline to make, a pecuniary penalty order on the basis of the beneficial interests in the property lying a certain way, and if, once the stay was removed, these present proceedings were to continue, and this court came to a different view. There would then, he says, be the unsatisfactory situation of conflicting findings of different courts. Mr Fagan SC for the DPP says that that undesirable situation will not arise, because an issue estoppel would arise from the District Court proceedings, and so this Court would never get to make any decision contrary to that of the District Court.

13 Whether Mr Fagan’s submission is right will depend upon the precise issues which are fought in the District Court, but it seems to me that there is a realistic prospect that the nature of the property rights (if any) of the Macarthur children in the Kenthurst property will be an issue, and if that happens, Mr Fagen’s submission seems to me to have merit. It also reveals a problem that there is in the granting of the stay. The jurisdiction of the District Court in equity proceedings, under s 134 of the District Court Act 1973, is limited, so far as proceedings for a declaration that trusts subsist to proceedings where the trust does not exceed $20,000 in amount or value as determined by the court. Of course, if as an incidental matter to a jurisdiction which is clearly conferred on it, such as deciding whether to make a pecuniary penalty order or s 28(3) or (4) order under the Proceeds of Crime Act 1987 following a criminal trial conducted in the District Court, the District Court needs to decide whether a trust subsists, then it may do so. However, as a factor in whether this Court ought grant a stay in the present case, it seems to me relevant that, usually, this Division of this Court is the appropriate place to decide questions about the existence of equitable interests in property of significant value.

14 In all these circumstances, I decline to grant the stay which is sought. I vacate the hearing before the Registrar of the principal proceedings on 24 April 2003. I fix Thursday 17 April 2003 before the Registrar for mention.

15 The respondent seeks the costs of the application. That is opposed.

16 It seems to me that this present application is one where the substantial merits of who should be entitled to costs, is not going to be affected by the eventual outcome of proceedings. It was, after all, an argument about whether the proceedings should go on at all, and the argument that they should not has been irretrievably lost. Thus it would not be appropriate to make the costs the respondents’ costs in the proceedings. I order the applicant to pay the respondent’s costs.

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Last Modified: 04/09/2003