McLeod v The State of Western Australia
[2015] WASC 48
•11 FEBRUARY 2015
McLEOD -v- THE STATE OF WESTERN AUSTRALIA [2015] WASC 48
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 48 | |
| Case No: | CPCA:29/2011 | 5 SEPTEMBER 2014 | |
| Coram: | JENKINS J | 11/02/15 | |
| 23 | Judgment Part: | 1 of 1 | |
| Result: | The first and second plaintiffs' objections to confiscation dismissed | ||
| B | |||
| PDF Version |
| Parties: | GEORGE KENNETH McLEOD GLENN MURRAY McLEOD THE STATE OF WESTERN AUSTRALIA |
Catchwords: | Criminal property confiscation Objection to confiscation of real property Property owned by second plaintiff 'crimeused' Whether first plaintiff an innocent party Criminal property confiscation Objection to confiscation of real property Property owned by second plaintiff 'crimeused' Whether property 'effectively controlled' by first plaintiff who was not an innocent party and made criminal use of the property Meaning of 'effective control' |
Legislation: | Confiscation Act 1997 (Vic), s 9 Crimes (Confiscation of Profits) Act 1988 (WA) Criminal Property Confiscation Act 2000 (WA), s 7, s 8, s 34, s 76, s 82, s 146, s 153, s 156 |
Case References: | Auxil Pty Ltd v Terranova [2009] WASCA 163; (2009) 260 ALR 164 Charles Marshall Pty Ltd v Grimsley [1956] HCA 28; (1956) 95 CLR 353 Connell v Lavender (1991) 7 WAR 9 Director of Public Prosecutions v Ferguson [2006] VSC 484 Jones v Sutherland Shire Council [1979] 2 NSWLR 206 Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
GLENN MURRAY McLEOD
Second Plaintiff
AND
THE STATE OF WESTERN AUSTRALIA
Defendant
Catchwords:
Criminal property confiscation - Objection to confiscation of real property - Property owned by second plaintiff 'crimeused' - Whether first plaintiff an innocent party
Criminal property confiscation - Objection to confiscation of real property - Property owned by second plaintiff 'crimeused' - Whether property 'effectively controlled' by first plaintiff who was not an innocent party and made criminal use of the property - Meaning of 'effective control'
Legislation:
Confiscation Act 1997 (Vic), s 9
Crimes (Confiscation of Profits) Act 1988 (WA)
Criminal Property Confiscation Act 2000 (WA), s 7, s 8, s 34, s 76, s 82, s 146, s 153, s 156
Result:
The first and second plaintiffs' objections to confiscation dismissed
Category: B
Representation:
Counsel:
First Plaintiff : Mr G W Massey
Second Plaintiff : Mr G W Massey
Defendant : Mr T A Staples
Solicitors:
First Plaintiff : Holborn Lenhoff Massey
Second Plaintiff : Holborn Lenhoff Massey
Defendant : Director of Public Prosecutions (WA)
Case(s) referred to in judgment(s):
Auxil Pty Ltd v Terranova [2009] WASCA 163; (2009) 260 ALR 164
Charles Marshall Pty Ltd v Grimsley [1956] HCA 28; (1956) 95 CLR 353
Connell v Lavender (1991) 7 WAR 9
Director of Public Prosecutions v Ferguson [2006] VSC 484
Jones v Sutherland Shire Council [1979] 2 NSWLR 206
Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538
1 JENKINS J: The plaintiffs object to the confiscation of the property known as 67 Woodlands View, Bridgetown (the Property) which is the subject of freezing notice WAPFN 110042, issued on 8 April 2011 (the FN). Pursuant to the Criminal Property Confiscation Act 2000 (WA) (the CPC Act) s 82 they apply to have the FN set aside and the Property returned to the second plaintiff.
The first plaintiff's objection
2 At the hearing the first plaintiff conceded that his objection must be dismissed. The first plaintiff's concession was appropriate. I will state briefly my reasons for dismissing the first plaintiff's objection.
3 The first plaintiff pleaded guilty to, and was convicted of, cultivating a prohibited plant (cannabis) between 1 May 2010 and 9 October 2010 and possessing a prohibited drug (cannabis) with intent to sell or supply it on 9 October 2010 (the Offences). These are confiscation offences. Both of the Offences were committed on the Property. Thus, the Property is 'crime-used property' as that phrase is defined in the CPC Act s 146, and unless at least one of the plaintiffs' objections is successful the Property is confiscated: CPC Act s 7(2).
4 In order for the first plaintiff's objection to have succeeded, and resulted in the FN being set aside, he would have had to establish, amongst other things, that it is more likely than not that he is an innocent party: CPC Act s 82(3) and (4). An innocent party is defined relevantly in the CPC Act s 153 which states:
(1) A person is an innocent party in relation to crime-used property if the person -
(a) was not in any way involved in the commission of the relevant confiscation offence; and
(b) did not know, and had no reasonable grounds for suspecting, that the relevant confiscation offence was being or would be committed, or took all reasonable steps to prevent its commission.
(2) A person is an innocent party in relation to crime-used property if the person -
(a) did not know, and had no reasonable grounds for suspecting, that the property was being or would be used in or in connection with the commission of the relevant confiscation offence; or
(b) took all reasonable steps to prevent its use.
The second plaintiff's objection
6 In order to understand the issues between the second plaintiff and the defendant, it is only necessary for me to refer to the following facts which are not in dispute. I provide a more detailed analysis of the facts later in these reasons.
7 On 27 March 2006, the second plaintiff became the sole registered proprietor of the Property. He says that he purchased it as an investment property. The first plaintiff, who is the second plaintiff's father, contributed a substantial portion of the purchase price. The Property was left vacant for a period until the first plaintiff moved into the Property, pursuant to an oral agreement between the first and second plaintiffs. The second plaintiff did not charge the first plaintiff any rent.
8 The first plaintiff cultivated cannabis on the Property at least between 1 May 2010 and 9 October 2010. When police attended the Property on the evening of 9 October 2010, the first plaintiff was in possession of the Property and was also in possession of cannabis which he had grown on the Property. Police located 13 cannabis plants being grown hydroponically in a cool room in a shed on the Property. Another two cannabis plants were being grown by the first plaintiff in a spare bedroom in the house on the Property. The hydroponic set up in the cool room included a central water line, a ventilation pipe, 30 20 litre drums of fertiliser, small grow blocks, spare hydroponic lighting and globes, a growth regulator and bottles of rooting hormones. In another cool room the police located approximately 1.11 kg of cannabis. Inside the house on the Property the police located 50 g of cannabis.
9 At about 8.45 pm on the same date, Yvonne McLeod, the first plaintiff's wife and the second plaintiff's mother, arrived at the Property in her car. She did not live at the Property. Mrs McLeod unsuccessfully attempted to evade the police. A short time later the police searched her car and spread throughout it was approximately 1 kg of fresh (261 g dried) cannabis head material. That evening a further 318 g of cannabis (remnants) was found by police in Mrs McLeod's home in Bridgetown. The cannabis in Mrs McLeod's possession had been grown by the first plaintiff on the Property.
10 On 8 April 2011, a Justice of the Peace issued the FN pursuant to the CPC Act s 34(2) on the basis that there were reasonable grounds for suspecting that the Property was crime-used or crime-derived. The second plaintiff accepts that the Property was crime-used within the meaning of the CPC Act s 146(1).
11 On 30 August 2011, the first plaintiff pleaded guilty to and was convicted of the Offences. At sentencing, the State did not dispute the first plaintiff's submission that he intended to use the cannabis he grew and to supply it to his friends; rather than to sell it. The first plaintiff was sentenced to a total of 12 months' imprisonment which was conditionally suspended for 12 months.
12 On 23 November 2011, Mrs McLeod was convicted, after trial, of one count of possession of cannabis with intent to sell or supply it to another in relation to the cannabis in her car and home. On 20 March 2012, she was sentenced to 12 months' imprisonment which was suspended for 18 months. She was also declared a drug trafficker because of this and other convictions for drug offences. The trial judge sentenced Mrs McLeod on the basis that she was intending to supply the cannabis to the first plaintiff.
13 On 24 September 2012, EM Heenan J dismissed Mrs McLeod's objection to the confiscation of her property and declared that all of Mrs McLeod's property was confiscated to the State.
14 The defendant does not maintain the contention in the FN that the Property is crime-derived. It relies solely on the allegation that it is crime-used. The defendant accepts the second plaintiff is 'an innocent party', as defined in the CPC Act s 153.
15 As stated above, the second plaintiff filed an objection to the confiscation of the Property under the CPC Act and applied to have the FN set aside.
16 The Property is confiscated unless the FN is set aside as a result of the determination of the second plaintiff's objection: CPC Act s 7(2). The CPC Act s 82(1) provides that the court may set aside a freezing notice for property that was frozen on the ground that it is crime-used if the objector establishes that it is more likely than not that the property is not crime-used.
17 As it is not in dispute between the second plaintiff and the defendant that the Property is crime-used, the second plaintiff relies on the CPC Act s 82(4) to support his application to have the FN set aside. The CPC Act s 82(4) states:
The court may set aside the freezing notice or freezing order if the objector establishes that it is more likely than not that -
(a) the objector is the owner of the property, or is one of 2 or more owners of the property; and
(b) the property is not effectively controlled by a person who made criminal use of the property; and
(c) the objector is an innocent party in relation to the property; and
(d) each other owner (if there are more than one) is an innocent party in relation to the property.
18 As it is not in dispute also that the second plaintiff is the sole owner of the Property and that he is an innocent party, the only issue between the parties is whether the Property is not effectively controlled by a person who made criminal use of the property. In this case, the issue is whether the second plaintiff has established that it is more likely than not that the Property is not effectively controlled by the first plaintiff who made criminal use of it? Although it is not explicit in the section, the time for my consideration must be the time when the first plaintiff made criminal use of the Property.
Effective control
19 The term 'effective control' is defined in the CPC Act s 156(1). The definition is in the following terms:
For the purposes of this Act, a person has effective control of property if the person does not have the legal estate in the property, but the property is directly or indirectly subject to the control of the person, or is held for the ultimate benefit of the person.
20 The CPC Act s 156(2) provides a non-exhaustive list of matters which may be taken into account in deciding whether a person has effective control of any property. The matters listed are as follows:
(a) any shareholdings in, debentures over or directorships of any corporation that has a direct or indirect interest in the property;
(b) any trust that has a relationship to the property;
(c) family, domestic and business relationships between persons having an interest in the property;
(d) family, domestic and business relationships between persons having an interest in or in a corporation that has a direct or indirect interest in the property;
(e) family, domestic and business relationships between persons having an interest in a trust that has a relationship to the property;
(f) any other relevant matters.
21 Thus, by the terms of the CPC Act s 156(1), in order to establish that the Property is not effectively controlled by the first plaintiff, the onus is on the second plaintiff to establish all three of the following propositions:
(1) the first plaintiff does not have the legal estate in the Property; and
(2) the Property is not directly or indirectly subject to the control of the first plaintiff; and
(3) the Property is not held for the ultimate benefit of the first plaintiff.
The defendant contends that the second plaintiff has failed to establish propositions (2) and/or (3).
22 There is no Western Australian Court of Appeal decision which elucidates the meaning of the CPC Act s 156(1). In Connell v Lavender (1991) 7 WAR 9 the Full Court considered the definition of the term 'effective control' in a predecessor of the CPC Act the Crimes (Confiscation of Profits) Act 1988 (WA) (the CCP Act). In broad terms, the CCP Act provided that in determining an application for a confiscation order in relation to property, a court may treat as property of the person in respect of whom the application was made, any property that in the opinion of the court was 'either directly or indirectly' subject to the effective control of the person whether or not the person had any legal or equitable estate or interest in the property or any right, power or privilege in connection with it. Thus, there are similarities between the wording of the CCP Act and the CPC Act s 156(1). Although, in the CCP Act the issue was whether the person, in relation to whom the application under the Act was made, was in effective control of the relevant property, whereas in the CPC Act the issue is whether the person, who made criminal use of the property, is not in effective control of the property. Malcolm CJ (Pidgeon & Rowland JJ agreeing) said:
In my opinion, the ordinary meaning of 'control' is de facto control or control in fact. The question then is: what effect does the adjective 'effective' have upon the meaning? ... In my opinion, 'effective control' in the context of the statute means de facto control. The expression contemplates control that is practically effective, in the sense that the person concerned has in fact the capacity to control the possession, use, or disposition of the property (22).
23 In determining this matter I am also guided by the ordinary meaning of the word control. The Macquarie Dictionary defines control as a noun to mean 'the act or power of controlling'. Relevantly, the verb controlling is defined to mean 'to exercise restraint or direction over; dominate; command'.
24 The Oxford English Dictionary defines control as a noun to mean 'the fact of controlling, or of checking and directing action; the function or power of directing and regulating; domination, command, sway'.
25 Kay J in Director of Public Prosecutions v Ferguson [2006] VSC 484 considered the definition of effective control in the then Confiscation Act 1997 (Vic) s 9. Section 9 provided that property may be subject to the effective control of a person whether or not the person had an interest in it. The section then listed a non-exhaustive list of matters which the court could have regard to when determining whether or not property was subject to the effective control of a person. Kay J said:
It is clear both from s 9, and from other provisions in the Act, that a defendant may have the effective control of property notwithstanding that that defendant has no legal, equitable or other interest in the property. Thus, s 9(2) enables a Court to be guided by the reality, rather than the legal structure, of the relationship of the defendant to the property in question. What is relevant is the de facto, rather than the de jure, relationship between the defendant and the property. In ordinary usage, 'control' means the power of directing or commanding. Ordinarily, a person may be in effective control of real property if that person has the power to make and implement basic decisions which affect the ownership, possession, use and enjoyment of property. In terms of real property, effective control would therefore encompass the de facto power to make and implement decisions such as to sell, lease, use, exclude others from possession of, and make significant improvements to, the property. …
That meaning of effective control is, I consider, consistent with the clear purposes served by the Confiscation Act. The concept of 'effective control' is employed in a number of sections of the Act. The intention of the legislation is to focus on the reality of the relationship between the defendant and the particular item of property. The purpose is to capture, and have available for the purposes of enforcement of a pecuniary penalty order (s 72(2)) or (in other provisions) forfeiture, property which, whilst not subject to any proprietary or other interest of the defendant, nonetheless is in the de facto power of the defendant. Consistent with that purpose, the concept of effective control is used to deprive the defendant of property and wealth to which he or she might have access, regardless of whether the defendant has any legal or equitable interest in it [49] - [50]. (footnotes omitted)
26 Kay J also noted that other authorities had cautioned against paraphrasing or redefining the concept of effective control. I must apply the definition of effective control contained in the CPC Act s 156(1). That definition is consistent with the dicta in Connell and Ferguson.
27 The CPC Act s 82(4) provides that a court cannot set aside a FN unless the objector is a legal owner who is an innocent party and he or she can prove that the person who made criminal use of the property did not have effective control over the property, in that he or she did not have the legal estate in the property and neither did he or she have the power or capacity, in fact, to directly or indirectly, direct or command the possession, use or disposition of the property.
28 The second plaintiff does not dispute the above propositions. Rather, he submits that he has established that the first plaintiff did not have effective control of the property for a number of reasons, including the presumption of advancement that applies to the payments made by the first plaintiff towards the acquisition of the Property. He says that I should be satisfied that the first plaintiff did not have effective control over the Property because only the second plaintiff had the power to 'sell, lease, use, exclude others from possession of, and make significant improvements' to the Property.
The presumption of advancement
29 When a donor purchases property in the name of another, equity often applies a presumption of a resulting trust in favour of the donor. Whereas, if the donor is the father of the person who becomes the legal owner, a presumption of advancement arises, from the relationship of the parties, that the father intended to purchase the property to advance his child and to make the child not only the legal but also the beneficial owner of the property. The same presumption of advancement will apply if only part of the purchase price is paid by the father.
30 The presumption may be rebutted by other evidence, which manifests an intention of the father, at the time of purchase, that the child should take the property only as a trustee. Such rebutting evidence also may be comprised of the subsequent acts and declarations of the child, but not of the parent. Generally speaking, any rebutting evidence is constituted by what was said and done before or at the time of the purchase: Charles Marshall Pty Ltd v Grimsley [1956] HCA 28; (1956) 95 CLR 353, 364 - 365; Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538, 547 (Deane & Gummow JJ), 574 (Dawson J), 600 - 601 (McHugh J).
The evidence
31 The evidence relied on by the second plaintiff is contained in his three affidavits and the affidavit of Mrs McLeod. Both the second plaintiff and Mrs McLeod gave evidence.
32 There is evidence that the first plaintiff is ill and not fit to give evidence. No medical evidence was adduced in support of his failure to give evidence. In light of my other findings, there is no need for me to decide whether I should draw an adverse inference from the second plaintiff's failure to adduce evidence from the first plaintiff.
33 The evidence relied on by the defendant is contained in the affidavits of police officers, employees of the Director of Public Prosecutions (WA), an employee of the second plaintiff's settlement agent, a bank officer and a friend of the first plaintiff. None of the deponents of the defendant's affidavits were required for cross-examination.
34 The affidavit of Nathan James Dalton sworn 14 August 2013, which was tendered by the defendant without objection, has attached to it the records of interview (ROI) conducted with the first and second plaintiffs pursuant to compulsory powers in the CPC Act s 76(1). Section 76 requires a person to provide information to the police in order to locate crime-used or crime-derived property (s 76(1)(d)) or to give information to the police that is relevant to determining whether or not property is confiscable (s 76(1)(e)). Section 76(4) provides that information compulsorily given is not admissible in a criminal proceeding against the person except in proceedings for an offence of contravening a requirement to give information. These are civil proceedings. Other than s 76(4), the CPC Act is silent on the use which may be made in evidence of information compulsorily obtained under s 76(1).
35 There is no dispute that the plaintiffs participated in the ROI, which are now in evidence. Given that the ROI were tendered without objection they are evidence 'in proof of the issue to which [they are] relevant': Jones v Sutherland Shire Council [1979] 2 NSWLR 206, 219 (Samuels JA). This is not a case where it is reasonable for me to infer that the absence of objection to the tender of the ROI related only to an acceptance by the plaintiffs that what was said by them in the ROI could be used in a limited way, rather than to prove the truth of what was said: Auxil Pty Ltd v Terranova [2009] WASCA 163; (2009) 260 ALR 164 [62] - [63] (Buss JA).
36 Nevertheless, like all evidence, it is a matter for me to decide what weight should be put on the material in the ROI. In this regard, I take into account that although the ROI were not given under oath, the plaintiffs were aware of their obligation to give true information to the police. They were also aware of the use that could be made of what they said in determining whether the Property was confiscable. Thus, there was some incentive for the plaintiffs to give little information which might disclose that the first plaintiff rather than the second plaintiff had effective control over the Property. For example, in his ROI the first plaintiff did not say anything about his arrangement with Mr Klopper, that he had owned a house in June Road, Safety Bay or that he had provided $117,000 of the purchase price of the Property, even though he was asked questions about these issues. Neither did the second plaintiff tell the police about his father's financial contribution to the purchase of the Property.
Analysis of the evidence
37 The second plaintiff is the child of the first plaintiff and Mrs McLeod. He was born in 1975. He is single but he has a girlfriend with whom he lives.
38 At the time of the hearing of his objection, the second plaintiff was employed by a major supermarket as a part-time store worker. His main employment duties were filling shelves and forklift driving. For his services he received $21 per hour but he had no idea of his income for the previous year. He said that his girlfriend had completed his tax return. He thought that his income from the supermarket was less than $50,000 per annum. He had no other source of income.
39 The second plaintiff had been employed by the supermarket for approximately six years. Prior to that he said he owned a fish and chip shop, which he told the police he bought for $50,000 (ROI ts 21). Although, at an earlier point in the ROI he said 'we' owned a fish and chip shop when he was talking about his mother's role in paying his bills (ROI ts 8). The second plaintiff said that he bought the shop over 10 years before he commenced work for the supermarket. This means that he was about 23 when he bought the fish and chip shop. It is unclear how he could have afforded to buy a business at that time of his life.
40 On the other hand, in his ROI, the first plaintiff said that he had watched the fish and chip shop, noticed that it was a good business and bought it. He said that he gave it to the second plaintiff. He also said that he worked in the shop himself and that he (the first plaintiff) 'could pull a quid out of it' (ROI ts 30 - 31). This account is more likely to be closer to the truth.
41 The second plaintiff has failed to satisfy me that he purchased, owned or operated the shop independently of his parents.
42 The second plaintiff was unable to recall the income which he received from the fish and chip shop. That business was not able to be sold as a going concern because the owner of the premises from which it operated refused to renew the lease. The second plaintiff said that 'we' sold the fixtures and fittings. He could not recall how much they sold them for.
43 The second plaintiff gave evidence that at the time he bought the Property he was the registered proprietor of two other properties, the addresses of which were 6 Costa Rica Place, Safety Bay (the Costa Rica Place property) and 2 Harley Close, Safety Bay (the Harley Close property). He had lived in the Costa Rica Place property since December 2004 when he purchased it. He regarded the Harley Close property as an investment property. The second plaintiff did not give evidence about the purchase of either of these two properties.
44 Mrs McLeod gave evidence that her family, rather than one individual person, had seen the Harley Close property for sale and thought it was a good buy. She said that she and the second plaintiff went to the bank to organise a loan to purchase it. She said that it was purchased as an investment property and it was always for the second plaintiff. In evidence, although she finally acknowledged being named as a borrower on the papers for the loan obtained for the purchase price, her reply to a straightforward question in this respect was anything but straightforward:
Were you named as a borrower on the papers?---I only got - I don't know. I - it was - yes (ts 45).
45 Yet, when I asked her questions she told me that the second plaintiff provided the purchase price for that property and that he had obtained the loan from the relevant bank.
46 Mrs McLeod said that the second plaintiff had made the repayments on the loan to purchase the Harley Close property from the income from the fish and chip shop.
47 On 27 March 2006, the second plaintiff became the sole registered proprietor of the Property. The purchase price was $295,000. The date of purchase means that the second plaintiff was still working in the fish and chip shop when he bought the Property.
48 The second plaintiff said that the purchase of the Property came about because his father's friend owned it and his mother and father told him that it would be a good investment. He said that he did not know the basis for that advice, but he relied on it. He did not have firm plans to rent the Property and had not done any calculations to determine how he would meet the outgoings on the Property from his income. In his ROI in October 2010 he did not know the address of the Property.
49 The second plaintiff said that he first saw the Property when he went to Bridgetown with his father less than 12 months prior to its purchase. After that visit, he did not visit it again before he became the registered owner of it. He could not recall the name of the previous owner of the Property.
50 The second plaintiff said that when he was considering purchasing the Property, he had a meeting at his mother's house with a mortgage broker. She explained that he did not have enough equity in the Costa Rica Place property or the Harley Close property to borrow the money to purchase the Property and so he needed to find another form of equity for a loan to purchase the Property. The second plaintiff has deposed that he did not 'really know' what the mortgage broker meant.
51 The second plaintiff's account of the details of the purchase of the Property has changed over time.
52 In his ROI he said he had bought the Property 'outright' with the proceeds of the sale of the Harley Close property (ROI ts 23). He was unable to recall the purchase price (ROI ts 5), other than that it was 'two hundred and something'.
53 In his affidavit sworn 13 June 2013, the second plaintiff said he borrowed approximately $280,000 from Permanent Custodians Ltd, approximately $180,000 of which was paid towards the purchase of the Property and approximately $100,000 of which was paid off his mortgage on the Costa Rica Place property. He deposed that his mother's property, as well as his own properties, were used as equity for the loan from Permanent Custodians Ltd. He said he had also used approximately $120,000 which his father had 'gifted' him to purchase the Property.
54 In the second plaintiff's affidavit sworn 11 August 2014, which was sworn after the defendant had filed its evidence which included some of his mother's bank statements, he said that he borrowed $200,000 from Permanent Custodians Ltd and it was paid into his mother's bank account. He also said that his mother helped him to obtain the loan from Permanent Custodians Ltd but she did not have an interest in the Property.
55 In the second plaintiff's evidence he said that his mother was the only borrower of the money from Permanent Custodians Ltd. Then he said that he did not recall any of the details of the loan. After that he said his mother did all the paperwork but it was his loan. He did not recall how much was borrowed.
56 In her affidavit of 11 August 2014, Mrs McLeod deposed that she was not sure how Permanent Custodians Ltd structured the loan but a lady called Rochelle from Permanent Custodians Ltd arranged for a loan of $200,000 to be paid into her Bankwest account. Mrs McLeod said that it was paid into her account rather than the second plaintiff's account because it was 'easier that way' because she was 'organising the loan'. She said that she handled most if not all of the communications to organise the loan. She said that it was never intended that she would have any interest in the Property.
57 Mrs McLeod's oral evidence as to who borrowed the money for the purchase varied. The following is an excerpt from her evidence:
Did you take a loan to buy this property?---Yes, from Suncorp - no, from Perpetual Trustee Australia's Mortgage Finance.
Could it be Permanent Custodians?---Yes. Sorry.
Okay. And do you remember the amount you borrowed roughly?---Close to 300. 298 or - close to 300.
The materials suggest that the property was bought in 2006. Does that sound about right?---That sounds right.
Was this home loan secured against one of your own properties?---Yes. There wasn't enough equity in [the second plaintiff's] home so they secured my property.
And what was your property?---74 June Road.
Do you know whether [the second plaintiff] was named as a borrower on the paperwork?---No.
Or was it just you?---No, it was just - I didn't know it was me. Yes, it was [the second plaintiff] as a borrower.
So [the second plaintiff] and you. Were anyone else named as borrowers?---No.
JENKINS J: But as far as you're aware, both of you were named as the borrowers?---My house had to go up as security, but I wasn't borrowing any money.
No, no, no, I just - - -?---No. Sorry.
That's why I want to make sure that we understand your evidence. Are you saying you were named as a borrower with [the second plaintiff]?---Yes (ts 46 - 47).
58 After the luncheon adjournment, the respondent's counsel continued cross-examination on this point. During that cross-examination, Mrs McLeod said that she did not take out a home loan; rather the second plaintiff took out a home loan and she helped him to obtain the home loan. This appears to be contrary to her position before lunch that both she and the second plaintiff were borrowers and her initial answers which were consistent with her alone being the borrower.
59 As to where the money advanced by Permanent Custodians Ltd went to, Mrs McLeod's evidence was unsatisfactory. First she said that none of that money was paid into her bank account. Then she said that she received $200,000 which was paid to the settlement agent. She then said that she was confused and she did not know what Permanent Custodians Ltd had done in respect of the money. A short time later in her evidence after some questions from myself, Mrs McLeod said that Permanent Custodians Ltd had told her that they would give the second plaintiff some of the money that they were lending (presumably any monies advanced in excess of the $200,000 paid into her bank account) so as to increase his equity in his Costa Rica Place property which would enable him to borrow more money. When I put to her that that would not give him greater equity because he would still owe Permanent Custodians Ltd a corresponding amount, she just said that that was how Permanent Custodians Ltd had set it up.
60 The second plaintiff did not tender any loan agreement or mortgage document which may have provided objective evidence of these matters.
61 One of the few things Mrs McLeod was definite about was that there were no repayments made on the loan obtained from Permanent Custodians Ltd to purchase the Property. When giving evidence about this matter she used the word 'we'. She said:
Yes. We have got a bridging - bridging thing, but we have never had - we definitely didn't have to pay any money (ts 57).
62 In order to effect settlement on the Property, the first plaintiff paid $117,417.30 directly to the second plaintiff's settlement agent. The first plaintiff's source of these funds is discussed later in these reasons. The second plaintiff said that this money was a gift from his father, the first plaintiff, it was not repayable and has not been repaid. The second plaintiff said that it was never intended that his father, the first plaintiff, would have an interest in the Property.
63 The second plaintiff and Mrs McLeod both said that the balance of the purchase price, approximately $179,000, was provided by Permanent Custodians Ltd, who took a registered mortgage over the Property. It is recorded in Mrs McLeod's Bankwest bank account statements that just prior to settlement 'Aus Mortgage Sec' paid a total of $200,000 into her account. She withdrew $179,007.26 by way of a bank cheque and paid it to the second plaintiff's settlement agent.
64 The second plaintiff said that he borrowed the stamp duty payable on the purchase contract in the sum of $10,450 from a club which he and his father were members of called the Fremantle Workers Punters Club (the Club). The second plaintiff thinks he repaid that money but does not know if he did or not and does not recall whether any interest was payable on that money. If he did pay it back he does not recall where the money came from to repay it.
65 On 17 May 2006, about 2 months after settlement on the Property, the second plaintiff sold the Harley Close property.
66 The majority of the proceeds of the sale of the Harley Close property, being $297,790.99, were collected by Permanent Custodians Ltd. This sum is said to have paid out the mortgage on the Property. It is not clear to me why Permanent Custodians Ltd collected significantly more than the $200,000 which it had deposited into Mrs McLeod's bank account, only $179,000 of which was used to buy the Property. The second plaintiff suggested that the balance represented money which Permanent Custodians Ltd had advanced to him to increase his equity in the Costa Rica Place property. The evidence in this respect was not clear or persuasive.
67 The bank statements of Mrs McLeod's Bankwest bank account show that up until 21 October 2005 she regularly paid $300 per week to Keystart Loans. This is consistent with her evidence that she obtained a loan through 'Homestart' around 1999 - 2000 to purchase a property at 74 June Road, Safety Bay. However, after 21 October 2005 she made no further payments from her Bankwest bank account to Keystart. Rather, in December 2005 she made two payments totalling $8,135.47 to 'Aus Mortgage Sec' and from 6 January 2006 she made regular weekly payments of $702.10 to 'Aus Mortgage Sec', the same entity which on 22 March 2006 deposited $200,000 into her account, $179,000 of which was used to purchase the Property. Mrs McLeod's payments to 'Aus Mortgage Sec' continued throughout 2006 and up to at least 13 June 2008 (the date covered by the last Bankwest bank statement which is in evidence). However, the amount of the weekly repayment dropped to $350 on 26 May 2006, which happened to be the first payment made after the second plaintiff settled the sale of the Harley Close property and Permanent Custodians Ltd collected $297,000 from that sale. 'Aus Mortgage Sec' also paid Mrs McLeod $60,000 on 16 June 2006 and $43,500 on 6 September 2006. If I accept the second plaintiff's contention that 'Aus Mortgage Sec' was associated with Permanent Custodians Ltd, it is difficult for me to avoid a conclusion that part of the proceeds from the sale of the Harley Close property went to reduce Mrs McLeod's indebtedness to Permanent Custodians Ltd which had arisen before the second plaintiff purchased the Property and which continued after the loan to purchase the Property was paid out.
68 What the above discussion of the evidence shows is that in the absence of any independent evidence, I am not prepared to rely on the second plaintiff's evidence about the borrowing of money to purchase the Property. I do not know whether Mrs McLeod borrowed the money or, as Mrs McLeod at one point said, she and the second plaintiff were joint borrowers. However, I do know that I am not satisfied that the second plaintiff was the sole borrower. Secondly, I do not accept that $297,000 of the proceeds of the sale of the Harley Close property only went to pay off the loan from Permanent Custodians Ltd to purchase the Property. It seems that part of those proceeds went to pay off another debt, probably held by Mrs McLeod.
69 The final settlement statement for the sale of the Harley Close property indicates that the balance of the sale funds of $50,000 was paid to the Club. This sum appears to equate to the $50,000 which another letter from the settlement agent said was to have been paid, at settlement, to the second plaintiff. It is not clear to me how both statements could be correct and, if they are not both true, which one is correct. It may be that part of the $50,000 was used to repay the $10,450 that was borrowed from the Club for the stamp duty payable on the contract to purchase the Property. The second plaintiff has not provided any information as to why the balance of $39,550 was made to the Club and on whose behalf it was made.
70 In respect to the source of the $117,417.30 which the first plaintiff contributed to the purchase of the Property, prior to 2003 the first plaintiff approached an old friend, Bradley Klopper, and asked him whether he would purchase a property in June Road, Safety Bay (the June Road property) on his, the first plaintiff's, behalf and also whether he would borrow the money in order to enable the purchase to proceed. The first plaintiff told Mr Klopper that he had purchased a fish and chip shop but he was unable to borrow the funds to buy the June Road property himself due to the shop's low turnover. The first plaintiff told Mr Klopper that he would take care of all the outgoings in relation to the June Road property, including servicing the loan and that he would live in it. In his ROI, the first plaintiff said that he had been married for 45 years but he had not lived with his wife, Mrs McLeod for 15 years. He said they were good friends and she looked after all of his finances but he could not live with her (ROI ts 10).
71 Mr Klopper agreed to the first plaintiff's request on the basis that it would not cause financial detriment to him. Mr Klopper borrowed the full purchase price for the June Road property. The loan repayments were made from Mr Klopper's bank account. In turn, Mr Klopper said that there was a direct debit from the first plaintiff's bank account into his bank account which reimbursed him for those loan repayments. The first plaintiff also paid for all outgoings in respect of the June Road property.
72 Mrs McLeod gave evidence that she had purchased 74 June Road, Safety Bay around 1999 and that she was the registered owner of it. Her evidence as to when the first plaintiff lived with her at 74 June Road was not clear but at one point she said that she and the first plaintiff lived at 74 June Road until she sold it in about July 2006. The second plaintiff's evidence was that in 2006 his father and mother had been living together at 74 June Road for 'years'.
73 The evidence of Mrs McLeod, the second plaintiff and Mr Klopper is only able to be reconciled if the first plaintiff and Mrs McLeod each purchased different properties in June Road. This would be consistent with a comment made by the second plaintiff in his ROI that when he 'shifted down to Rockingham ... [Mrs McLeod] bought a house opposite me' (ROI ts 15). If that is the case, the first plaintiff's assertion to Mr Klopper that he would live at the June Road property would not be consistent with Mrs McLeod's and the second plaintiff's evidence that Mrs McLeod and the first plaintiff lived together at 74 June Road. These matters were not explored with the second plaintiff or Mrs McLeod in evidence and so I make no findings about them. However, Mr Klopper's evidence throws doubt on some of the evidence adduced on behalf of the second plaintiff.
74 At some point the first plaintiff advised Mr Klopper that he wanted to sell the June Road property and in March 2006 part of the proceeds of the sale were paid into an investment account held by Mr Klopper. On 22 March 2006, Mr Klopper withdrew, by cheque, $117,417.30 of the proceeds. The cheque was given to the second plaintiff's settlement agent as part payment of the purchase price of the Property. It is this sum which the second plaintiff says was a gift from his father, the first plaintiff, towards the purchase of the Property.
75 In about August 2006, after Mrs McLeod had also sold 74 June Road, the first plaintiff and Mrs McLeod moved to a home in Walter Road, Bridgetown which Mrs McLeod had purchased. After about six months of living together in Bridgetown the second plaintiff said that his parents realised they could not live together anymore. His father, the first plaintiff, discussed with him, the second plaintiff, about moving into the Property. The second plaintiff said that he was happy with this plan because his father, the first plaintiff, could look after the house and orchard on the Property.
76 Although the second plaintiff gave evidence that he intended to rent the Property when he bought it, it remained vacant until his father, the first plaintiff, moved in which was either late in 2006 or in the first half of 2007. He acknowledged that, even after buying the Property, he did not calculate the cost of servicing the loan and the outgoings on the Property or whether he could afford to meet them from his income from the fish and chip shop.
77 After the first plaintiff moved into the Property, he did not pay the second plaintiff any rent. The first plaintiff paid the utilities, looked after the Property (including the orchard on it), effected and paid for some repairs and improvements to it and had the benefit of the cherries grown in the orchard. The second plaintiff did not look after the Property or visit it. When the second plaintiff was interviewed by the police in October 2010 he said that he had visited the Property five times, 'if that' (ROI ts 13). He could not recall the last time he had visited the Property but said it was a long time since he had visited and it was sometime before Christmas 2009 (ROI ts 9). In an affidavit sworn in June 2013 (when the first plaintiff was still living at the Property) the second plaintiff said that he could only remember going to the Property 'on a couple of occasions' to pick up his father. In evidence he did not say he had visited the Property at all after purchasing it.
78 Mrs McLeod handled all the dealings for the purchase of the Property with the settlement agent and Permanent Custodians Ltd. She also said that she looked after all of the second plaintiff's financial affairs. This included completing his tax returns and paying all his bills from his bank account, to which she was a signatory. She and the second plaintiff said that the second plaintiff paid the land rates for the Property, although the first plaintiff told the police that he paid the land rates (ROI ts 41).
79 Mrs McLeod gave evidence that she personally sold cherries which were grown on the Property and deposited the proceeds of cash sales into her Bankwest bank account. She did not satisfy me that she was telling me the truth in that respect as some of the cash deposits that she said were from sales of cherries occurred in winter, which is well out of season for cherries. I also note that the first plaintiff told the police he used the proceeds of the sale of the cherries (ROI ts 37).
Credibility and reliability of the second plaintiff and Mrs McLeod
80 Neither the second plaintiff nor Mrs McLeod were satisfactory witnesses.
81 The second plaintiff could not remember any details of his financial affairs or the purchase of the Property. This lack of memory and knowledge of his financial affairs does not sit well with his assertion that he purchased and ran his own business, the fish and chip shop, for over six years and that he had bought and sold investment properties as an adult.
82 The second plaintiff's lack of memory of any of the pertinent details of the purchase of the Property means that I am not persuaded that he is a reliable witness. The inconsistencies in his evidence, between his ROI and his evidence and between his and his mother's evidence mean that I am not persuaded that he is a credible witness either.
83 Mrs McLeod's evidence that she handled all of her son's financial affairs including negotiations for the finance to purchase the Property, was not consistent with her assertion that it was her son who made the decision to purchase the Property and that he was in full control of it.
84 The inconsistencies and lack of details in their evidence and the apparent illogicality of some of their evidence mean that I am not prepared to rely on the evidence of either the second plaintiff or Mrs McLeod in the absence of objective supporting evidence.
Conclusions
85 The second plaintiff is an unsophisticated man who has not separated his financial affairs or interests from those of his parents. Further, he has not made financial decisions independently of them and he has allowed his parents to control his financial affairs. I conclude that this approach applied to the majority of the dealings with the Property. For example, the Property was purchased on the recommendation and advice of the second plaintiff's parents, Mrs McLeod handled all the financial transactions in relation to the purchase, the first plaintiff provided approximately $117,000 of the purchase price of the Property and then the first plaintiff moved in to it, maintained it, managed it and grew cannabis on it. All of this occurred at a time when the first plaintiff had sold the June Road property, which he had arranged for Mr Klopper to purchase on his behalf, and he was in need of a place to live, separate from Mrs McLeod. The second plaintiff was the legal owner of the Property and may have hoped that he would one day reap some benefit from the sale of the Property, but he has not persuaded me that the first plaintiff was more likely than not, not in effective control of the Property when he made criminal use of it. I find that it is just as likely that the first plaintiff had the power or capacity, in fact, to direct the possession and use of the Property. It would have been harder for him to directly command the disposition of it, but due to the relationship between he and the second plaintiff, he could indirectly command disposition of the Property.
86 The particular factors which have been influential in my determination that the second plaintiff has failed to persuade me that the first plaintiff was not in effective control of the Property when he made criminal use of it are:
(1) the second plaintiff and Mrs McLeod were not consistent or credible witnesses;
(2) in the absence of independent evidence to support it, I am not prepared to rely on their evidence;
(3) even though legally it may not have given the first plaintiff legal ownership of or even an equitable interest in the Property, the first plaintiff provided $117,417.30 towards the purchase of the Property;
(4) I am not persuaded that the second plaintiff was the sole borrower of the balance of the purchase price of the Property;
(5) I am not persuaded that the second plaintiff alone paid out the balance of the loan obtained to buy the Property from the proceeds of the sale of the Harley Close property in the sense that he has not persuaded me that he paid for the Harley Close property or that the proceeds of its sale belonged entirely to him;
(6) the first plaintiff used Mr Klopper to purchase the June Road property in another person's name which he, the first plaintiff, then controlled;
(7) at the time the Property was purchased the first plaintiff had recently sold the June Road property and he did not have another home;
(8) the first plaintiff recommended the Property to the second plaintiff;
(9) the first plaintiff was the only person who lived on the Property from when the second plaintiff bought it to when the FN was issued;
(10) the second plaintiff only visited the Property once before he purchased it and rarely after that;
(11) when interviewed by the police the second plaintiff did not know the address of the Property;
(12) the second plaintiff placed no express or implied conditions on the first plaintiff's possession and use of the Property;
(13) the second plaintiff did not supervise the first plaintiff's use of the Property;
(14) the second plaintiff did not check on what the first plaintiff was doing on the Property or on the condition of the Property;
(15) the first plaintiff set up a hydroponic system on the Property and grew cannabis on the Property without the second plaintiff's knowledge;
(16) the first plaintiff's criminal use of the Property could have been easily discovered by the second plaintiff if he had been exercising control over the Property.
87 As to the second plaintiff's contention that the $117,417.30, which the first plaintiff paid towards the purchase price of the Property, was a gift to him and that no trust was created to the first plaintiff's benefit, the evidence admissible on the issue is insufficient to rebut the presumption of advancement. However, whether or not such a trust was created, the financial contribution to the purchase price of the Property by the first plaintiff is a relevant factor for me to take into account in deciding whether the second plaintiff has satisfied me that the first plaintiff did not have, in fact, effective control over the Property when he made criminal use of it. It is a factor which in my opinion detracts from the second plaintiff's assertion that the first plaintiff did not have effective control of the Property.
88 It follows that the second plaintiff has failed to have the FN set aside because he has not satisfied me that the Property is not directly or indirectly subject to the control of the first plaintiff rather than because he has not satisfied me that the Property is not held for the ultimate benefit of the first plaintiff. I make no final determination in that regard.
89 For the above reasons, I dismiss the second plaintiff's objection and decline to set aside the FN as the second plaintiff has failed to establish that it is more likely than not that the Property is not effectively controlled by the first plaintiff who made criminal use of it.
6
3