McMunn v DPP

[2010] VSCA 330

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2009 3771

CORNELIA MARIA McMUNN
	Appellant
v
DIRECTOR OF PUBLIC PROSECUTIONS FOR VICTORIA	Respondent

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JUDGE	MAXWELL P, WEINBERG and MANDIE JJA
WHERE HELD	MELBOURNE
DATE OF HEARING	16 November 2010
DATE OF JUDGMENT	16 November 2010
MEDIUM NEUTRAL CITATION	[2010] VSCA 330
JUDGMENT APPEALED FROM	McMunn v DPP [2009] VSC 44 (Harper J)

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CRIMINAL LAW – Confiscation – Restraining order – Application for exclusion of interest – Family home purchased in applicant’s name – Funds provided by husband – Prior convictions for dishonesty – Whether husband’s explanation of source of funds plausible – Whether reasonable person in applicant’s position would have had a suspicion – Trial judge correct to refuse application – Appeal dismissed – Confiscation Act 1997 (Vic) s 22(b)(i).

APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr C G Juebner	Randles, Cooper & Co Pty Ltd
For the Respondent	Mr M Derham QC with Mr S K McGregor	Mr C Hyland, Solicitor for Public Prosecutions

MAXWELL P:

1. We have been greatly assisted by the clarity of submissions provided in advance, which we have read, and by the oral argument presented on both sides.  That has enabled us to come to the unanimous conclusion that the appeal should be dismissed.  It follows that the matters in the Notice of Contention do not need to be addressed.  The cross-appeal on costs will be allowed.  My reasons for joining in those orders are as follows.

1. Sitting in the Trial Division of this Court, Harper J refused an application by the appellant, Mrs Cornelia McMunn, under s 20 of the Confiscation Act1997 (Vic) (‘Act’) for exclusion from a restraining order of an interest which she claims in a property at 3 Bendall Street, Kensington (‘the property’).

1. At the relevant time, sub-section 20(1) of the Act read as follows:

20       Application for exclusion from restraining order

(1) If a court makes a restraining order against property under section 18, any person claiming an interest in the property (including the defendant) may apply to that court for an order under section 21, 22 or 24.[1]

[1]As the sub-section read in 2005.

1. The conditions which had to be satisfied before such an order could be made were set out in sub-s 22(b) of the Act, as follows: [2]

   [2]The appellant’s application for exclusion was made in 2005, prior to the commencement of the Confiscation Amendment Act 2007 (Vic), which, inter alia, amended s 22 of the Act. However, by virtue of s 177(1)(b) of the Act, the amendments to s 22 had retrospective effect, and therefore the amended s 22, as extracted above, applied here. None of the remaining amendments with relevance here operated retrospectively.

22 Determination of exclusion application—restraining order—automatic forfeiture

On an application made under section 20, where the restraining order has been made in relation to a Schedule 2 offence for the purposes of automatic forfeiture—

(a)       …

(b) where the application is made by a person other than the defendant, the court may make an order excluding the applicant's interest in the property from the operation of the restraining order—

(i) if the court is not satisfied that the property in which the person claims an interest is not tainted property or derived property but is satisfied that—

(A) [not relevant]; and

(B) [not relevant]; and

(C) where the applicant acquired the interest at the time of or after the commission, or alleged commission, of the Schedule 2 offence, the applicant acquired the interest without knowing, and in circumstances such as not to arouse a reasonable suspicion, that the property was tainted property or derived property; and

(D) the applicant's interest in the property was not subject to the effective control of the defendant on the earlier of the date that the defendant was charged with the Schedule 2 offence or the date that the restraining order was made in relation to the property; and

(E) where the applicant acquired the interest from the defendant, directly or indirectly, that it was acquired for sufficient consideration;

1. At the relevant time, s 3 defined ‘tainted property’ as follows:

tainted property, in relation to an offence, means property that—

(a) …

(b) …

(c) was derived or realised, or substantially derived or realised, directly or indirectly, by any person from the commission of the offence;

…

1. The provision on which the application turned before the judge, and on which attention has been focused on the appeal, is s 22(b)(i)(C). It is common ground that, in order to have her interest in the property excluded, Mrs McMunn had to satisfy the Court that she acquired her interest ‘without knowing, and in circumstances such as not to arouse a reasonable suspicion, that the property was tainted property’.

1. His Honour concluded that he was not so satisfied.  He said:

I cannot be satisfied that Mrs McMunn acquired her interest in the Bendall Street property in circumstances such as not to arouse a reasonable suspicion that the property was tainted.  No person dealing with Mr McMunn and knowing of his criminal history as at the end of 1994 could sensibly rely on his honesty in relation to any issue or dealing of any financial magnitude, especially if it was financially opportune for him to be dishonest.

The financial dealing that involved the purchase of the Bendall Street home was one of some magnitude.  Yet it was one that he could and did finance within three years of his release from prison and without resort to a bank or other source of funds.  According to Mrs McMunn, she was informed by her husband that this was possible because “he would be getting about $400,000 from the sale of software”.  She did not deal with the payment of the reparations the subject of the October 1994 proceedings.[3]

[3]McMunn v DPP [2009] VSC 44, [18]–[19] (citations omitted).

1. As those paragraphs make clear, his Honour was addressing the question posed by the section, which is whether a reasonable person in the circumstances of Mrs McMunn, knowing what she knew, would have formed a suspicion that the property was tainted property.[4]  It is common ground that that is the test to be applied.  It pays attention to what the applicant for exclusion actually knew, but asks the question ‘Would a reasonable person in her position have had a suspicion?’  Mrs McMunn had to satisfy the judge that the question should be answered in the negative.  As I have said, Mrs McMunn did not so persuade his Honour.[5]

   [4]DPP v Phan Thi Le (2007) 15 VR 352, 359‑60 [24] (‘Le’).

   [5]McMunn v DPP [2009] VSC 44, [18]–[21], [25], [28]‑[29].

1. With the assistance of the chronology provided by both sides, I am able to set out in Schedule A the sequence of events leading to the acquisition of the property in October 1998.

1. It is important to draw attention to one feature of the chronology which was the subject of discussion in argument.  It was common ground that the business which Mr McMunn was conducting or purporting to conduct until April 1998 was a business of providing services for fees.  In April 1998, Mr McMunn and his wife went to Sydney, so she deposed, for the purposes of his seeking legal and accounting advice in relation to a franchising operation.  When, in October 1998, Mr McMunn provided the balance of the purchase price for the property, he informed Mrs McMunn, that the money was ‘the proceeds of the sale of software owned by his company’.[6] 

   [6]Affidavit of Cornelia McMunn sworn 13 September 2005, [4].

1. In an affidavit sworn 23 January 2008, Mrs McMunn deposed that:

In about 1993, John was sentenced to prison for a period of two and a half years for committing fraud offences.  I had no knowledge of that offending at the time and was in no way involved in it.  At about the time that John came out of prison, I gave him an ultimatum.  I told John that I would leave him if he ever got involved in something like that again.

…

When John and I started looking around to buy a new house, John told me that money was about to come in from the sale of software.  There was no reason for me to doubt that at the time.  I recall John saying something to the effect that we could buy a house for about $250,000 and that he thought that he would be getting about $400,000 from the sale of software but wanted to keep some of that money in the business.[7]

[7]Affidavit of Cornelia McMunn sworn 23 January 2008, [5], [8] (emphasis added).

1. As Mrs McMunn stated, her husband told her that he would be getting ‘about $400,000 from the sale of software’.  It was accepted by her counsel that she knew that this could only be the proceeds of the newly-established franchising business.

1. In my opinion, to be told that such a large amount had been generated, in under six months from the obtaining of advice about the selling of franchises would – in the circumstances known to Mrs McMunn about her husband’s criminal record –have raised a suspicion in any reasonable person’s mind.  In my respectful opinion, his Honour was correct in the conclusion he reached.

1. This is an appeal by way of rehearing,[8] and hence, as the Court of Appeal, we must ask ourselves whether, on the material, we are satisfied of the negative, namely, that a reasonable person would not have had a suspicion. For the reasons which his Honour gave, I would come to exactly the same conclusion as he did. In

other words, I am not satisfied that a reasonable person in Mrs McMunn’s position would not have had a suspicion.  On the contrary, it seems to me that the converse is true, given both what counsel for the respondent described as the ‘very sudden and rather surprising’ change of financial fortunes in October 1998 and Mr McMunn’s very serious criminal record for offences of dishonesty.  As the trial judge pointed out there was in addition the matter of some $72,000 of reparations which Mr McMunn had been ordered to pay in respect of Commonwealth offences.  There was no information provided to Mrs McMunn to suggest that that had been paid but she knew it was a liability her husband was facing.

[8]Le (2007) 15 VR 352, 356–358.

1. As Weinberg JA pointed out in the course of argument, an applicant in a proceeding of this kind may wholly believe in what she says about her state of knowledge, and may be believed when she says, ‘I had no suspicion’.  But that will not avail the applicant if a reasonable person in her position would have had a suspicion.[9]  His Honour made adverse credit findings against Mrs McMunn, and they are not challenged.  But the objective facts were so stark that, even if it was accepted that Mrs McMunn did not doubt that the sale price was being paid out of legitimate money, her application would still have failed.  For the reasons I have given, a reasonable person in her position, knowing what she knew, would have had a suspicion to the contrary.  There having been those adverse findings, his Honour’s conclusion is all the more strongly sustained. 

   [9]Ibid 359–360 [24].

1. I would dismiss the appeal.

WEINBERG JA:

1. I agree for the reasons given by the President that the appeal should be dismissed.  It follows that the cross‑appeal on costs should be allowed.

1. I would add that suspicion is a state of mind which falls well short of belief, as

the High Court made clear in George v Rockett.[10] 

[10](1990) 170 CLR 104.

MANDIE JA:

1. In my opinion the judgment appealed from was correct for the reasons stated by the learned trial judge.  I further agree with what has been said by the President and by my brother Weinberg. 

1. Not only do I consider that it was open to the trial judge not to be satisfied that the appellant acquired her interest in the property in circumstances such as not to arouse a reasonable suspicion that the property was tainted property, but I would not myself have been so satisfied. 

1. I further note that the appellant abandoned the argument that she had acquired her interest before the property became tainted property.  I too would dismiss the appeal.

SCHEDULE A

Date	Event
1967-1972	John McMunn is charged with various offences, including stealing and the common law offence of ‘false pretences’, and convicted on four separate occasions.
February 1975	Marriage of Cornelia and John McMunn.
1975, 1978	John McMunn is convicted on two further occasions (management of a company within five years of conviction of a dishonesty offence; obtaining financial advantage by deception).
1983-1984	John & Cornelia McMunn are bankrupted.
1987	John McMunn is convicted of one count of obtaining property by deception.
20 February 1992	John McMunn is convicted of 43 counts of dishonesty offences and sentenced to his first jail term (non-parole period of 4 years).
28 October 1994	John McMunn convicted of 4 further counts (imposition on the Commonwealth) and sentenced to 8 months’ imprisonment & reparations.
June 1995	John McMunn is released from prison.
15 November 1995	Cornelia McMunn inherits a property in Green Street, Airport West from her mother, who had just died.
1996	John McMunn purchases computer software for the calculation of interest payable on loans.
1997	John McMunn purports to sell the software to Recalculation Services Ltd (‘Recalc’).
December 1997	Interest Recount Corp (‘IRC’) is registered in Victoria with John McMunn as a director.
1997	IRC commences business (which was conducted until 2000), in which it would, for a fee, calculate the interest payable on loans, using the computer software (pursuant to an agreement with Recalc).
1998	John McMunn begins to promote a scheme whereby investors could purchase a ‘master licence’ from Recalc.  Investors are convinced to pay money to IRC in return for these services, which are never delivered (‘Recalc offences’).
March-April 1998	John and Cornelia McMunn decide to purchase a new family home, and agree that it should be placed in Cornelia’s name.  They also agree that Cornelia will sell the Green Street property and contribute half of the sale proceeds to the new home.  John McMunn has so far received $179,500 from IRC investors.
April 1998	John McMunn travels to New South Wales to obtain legal advice from a solicitor and accounting  advice from KPMG in respect of the business.  Cornelia McMunn accompanies him on this trip.
15 August 1998	Contract of sale is signed for the new home, in Bendall Street, Kensington, at a price of $320,000.  John McMunn pays the $32,000 deposit from the IRC account.
3 October 1998	The Green Street property is sold for $140,000.
22 October 1998	The Bendall Street property settles.  John McMunn pays the balance of the purchase price ($288,660.57) from the IRC account.
9 November 1998	Cornelia McMunn receives the balance of the Green Street purchase price.
27 November 1998	Cornelia McMunn transfers $70,000 to John McMunn (half of the Green Street purchase price).
4, 22 December 1998	Cornelia McMunn pays the stamp duty on the Bendall Street property and associated expenses (totalling $15,742).
21 December 1998	Cornelia McMunn is registered as sole proprietor of the Bendall Street property.
September 1999	John McMunn completes the Recalc offences.  By this time $801,000 of investors’ funds have been deposited into the IRC account.
March-5 May 2005	John McMunn is tried and found guilty on 16 counts of obtaining property by deception and 16 counts of defrauding the Commonwealth.
12 May 2005	The DPP applies for a restraining order under the Act.
16 May 2005	Justice Hollingworth makes the restraining order.
27 May 2005	John McMunn is sentenced for the Recalc offences, with a non-parole period of 3 years and 6 months.
7 June 2005	Cornelia McMunn swears a declaration that no one but her has an interest in the Bendall Street property.
24 June 2005	Cornelia McMunn files an application for exclusion under the Act.