Pearson v The State of Western Australia
[2012] WASC 102
•29 MARCH 2012
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: PEARSON -v- THE STATE OF WESTERN AUSTRALIA [2012] WASC 102
CORAM: SIMMONDS J
HEARD: 27 MAY 2011
DELIVERED : 29 MARCH 2012
FILE NO/S: CPCA 7 of 2009
CPCA 9 of 2009
CPCA 24 of 2009
MATTER :Section 79 of the Criminal Property Confiscation Act 2000 (WA)
Freezing Notices WAPFN090149 and WAPFN100064 issued against KRISTOFER WILLIAM PEARSON
BETWEEN: KRISTOFER WILLIAM PEARSON
First Plaintiff
HAROLD WILLIAM PEARSON
Second PlaintiffLINDA PEARSON
Third PlaintiffAMANDA RENEE ROTHAM
Fourth PlaintiffAUSTRALIA AND NEW ZEALAND BANKING GROUP LTD
Fifth PlaintiffAND
THE STATE OF WESTERN AUSTRALIA
Defendant
Catchwords:
Criminal law - Criminal property confiscation - Freezing notices of cash on ground - Cash owned or effectively controlled by person to be declared a drug trafficker - Objection to confiscation - Whether cash subject of express trust of kind in Barclays Bank Ltd v Quistclose Investments Ltd - Proof of intention to create such trust by circumstantial evidence
Legislation:
Criminal Property Confiscation Act 2000 (WA), s 3, s 7, s 8, s 30, s 34, s 79, s 81, s 84, s 102, s 156, Glossary
Misuse of Drugs Act 1981 (WA), s 6, s 32A
Result:
Holding that express trust shown and that objection should not be dismissed and that freezing notices should not be set aside without determination of whether cash was cash paid by the objector or was traceable proceeds of such cash
Category: B
Representation:
Counsel:
First Plaintiff : Mr D N Ryan
Second Plaintiff : Mr D N Ryan
Third Plaintiff : Mr D N Ryan
Fourth Plaintiff : Mr C E Chenu
Fifth Plaintiff : Ms J L Thomas
Defendant: Mr M Seaman
Solicitors:
First Plaintiff : Talbot Olivier
Second Plaintiff : Talbot Olivier
Third Plaintiff : Talbot Olivier
Fourth Plaintiff : Bennett & Co
Fifth Plaintiff : Gadens Lawyers
Defendant: Director of Public Prosecutions (WA)
Case(s) referred to in judgment(s):
Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567
Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253
Campana v The State of Western Australia [2008] WASC 230
Commonwealth of Australia v Booker International Pty Ltd [2002] NSWSC 292
Drever v Drever [1936] ALR 446; (1936) 10 ALJ 207
Henry v Hammond [1913] 2 KB 515
Jones v Dunkel (1959) 101 CLR 298
Luxton v Vines (1952) 85 CLR 352
McManus RE Pty Ltd v Ward [2009] NSWSC 440; (2009) 74 NSWLR 662
Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491
Re EVTR; Gilbert v Barber [1987] BCLC 646
Salvo v New Tel Limited [2005] NSWCA 281
Walker v Corboy (1990) 19 NSWLR 382
SIMMONDS J:
Introduction
This is the hearing of a summons by the defendant, the State of Western Australia, for dismissal of certain objections to the confiscation of certain property not yet confiscated to the State and for a declaration that that property has been confiscated to the State. The proceedings are under the Criminal Property Confiscation Act2000 (WA).
I first describe the legislative background to these proceedings, before describing the proceedings, including the hearing and the evidence before me. I turn then to the factual background, before describing the issues before me and the applicable law. I then apply that law. The final section of these reasons is my conclusion and call for orders.
The legislative background to these proceedings
Criminal Property Confiscation Act s 7 in material part provides as follows:
7.When frozen property is confiscated automatically
(1)Frozen property is confiscated if an objection to the confiscation of the property is not filed on or before the 28th day after the service cut off date for the property.
(2)If an objection to the confiscation of frozen property is filed on or before the 28th day after the service cut off date for the property, the property is confiscated if -
(a)the objection, or each objection if there are more than one, is finally determined;
(b)where the property is subject to a freezing notice - the freezing notice is not cancelled or set aside;
…
(3)However, property frozen under a freezing notice is not confiscated under subsection (1) or (2) until the freezing notice is filed in accordance with section 36(6)(a).
Criminal Property Confiscation Act s 8(1) in material part provides as follows:
8. Drug trafficker's property
(1)When a person is declared to be a drug trafficker under section 32A(1) of the Misuse of Drugs Act 1981 as a result of being convicted of a confiscation offence that was committed after the commencement of this Act, the following property is confiscated -
(a)all the property that the person owns or effectively controls at the time the declaration is made.
Criminal Property Confiscation Act s 30 provides as follows:
30.Applying for and making declarations of confiscation
(1)The DPP may apply to the court for a declaration that property has been confiscated.
(2)On considering an application, if the court finds that the property described in the application has been confiscated under section 6, 7 or 8, the court must make a declaration to that effect.
Criminal Property Confiscation Act s 34(3) in material part provides as follows:
34.Issue of freezing notices
...
(3)A Justice of the Peace may issue a freezing notice for all or any property that is owned or effectively controlled by a person, or that the person has at any time given away if -
(a)the person has been charged with an offence …; and
(b)the person could be declared to be a drug trafficker under section 32A(1) of the Misuse of Drugs Act 1981 if he or she is convicted of the offence.
The effect of the issue of such a freezing notice is that the property its subject is 'frozen' property for the purposes of the Criminal Property Confiscation Act: s 3 and Glossary 'frozen'.
Criminal Property Confiscation Act s 79 provides in material part as follows:
79.Objecting to confiscation of frozen property
(1)A person may file an objection to the confiscation of frozen property.
…
(3)If a copy of the freezing notice or freezing order was not served on the objector, the objection must be filed -
(a)within 28 days after the day on which the objector becomes aware, or could reasonably be expected to have become aware, that the property has been frozen; or
(b)within any further time allowed by the court.
Criminal Property Confiscation Act s 81 provides as follows:
81.Court may release frozen property under s. 82, 83 or 84
(1)On hearing an objection to the confiscation of frozen property, the court may set aside the freezing notice or freezing order to the extent permitted under section 82, 83 or 84.
(2)However, if the property was frozen on 2 or more grounds, but the court does not set aside the freezing notice or freezing order in relation to both or all the grounds, the freezing notice or freezing order continues in force as if it had been made on each remaining ground.
It was not suggested to me that s 81(2) was relevant in this case, notwithstanding (as will be seen) that part of the property the subject of the present proceedings was frozen on a ground or grounds other than that on which the defendant relied.
Criminal Property Confiscation Act s 84 provides in material part as follows:
84.Release of other frozen property
…
(2)The court may set aside a freezing notice issued for property under section 34(3) … if the court finds that it is more likely than not that the person who is or will be charged with the offence does not own or effectively control the property, and has not at any time given it away.
(3)The court may make any necessary or convenient ancillary orders.
Criminal Property Confiscation Act s 102 provides in material part as follows:
102.Proceedings, general provisions about
(1)Proceedings on an application under this Act are taken to be civil proceedings for all purposes.
(2)Except in relation to an offence under this Act -
…
(b)the rules of evidence applicable in civil proceedings apply in proceedings under this Act;
I turn now to describe the proceedings before me in terms of these provisions.
These proceedings, including the hearing before me
On 30 December 2008 the first plaintiff was charged with offences including one count of the possession of MDMA with intent to sell or supply contrary to Misuse of Drugs Act 1981 s 6(1)(a). It is not in contest that that offence was one, conviction of which meant that the court was required, on the application of the Director of Public Prosecutions under s 32A(1) of the Misuse of Drugs Act, to declare the first plaintiff to be a drug trafficker.
On 17 June 2010, following his conviction of that offence under Misuse of Drugs Act s 6(1)(a), the first plaintiff was declared to be a drug trafficker under s 32A(1) by Bowden DCJ in the District Court.
Between the date the first plaintiff was charged and the date he was declared to be a drug trafficker, three freezing notices were issued in respect of property seized from him.
The earliest freezing notice was WAPFN080282, issued 30 December 2008 and filed in this court on 5 January 2009 (freezing notice 80282). None of the property the subject of freezing notice 80282 is the subject of the proceedings before me, as will become apparent. Included in the property the subject of freezing notice 80282 was cash in various sums seized from the first plaintiff on 30 December 2008 at addresses in Sorrento and Hillarys and totalling $8,980.00.
The second freezing notice was WAPFN090149, issued 7 August 2009 and filed in this court on 11 August 2009 (freezing notice 90149). The only property the subject of freezing notice 90149 was cash in the amount of $5,235.00, seized on 6 August 2009 from the first plaintiff at an address in Kallaroo. That cash together with interest on it is part of the property the subject of the proceedings before me. The grounds for inclusion of that cash were shown in freezing notice 90149 as that the cash was crime-used or crime‑derived property (see Criminal Property Confiscation Act s 34(2)), as well as property owned or effectively controlled by a person who could be declared a drug trafficker.
The third freezing notice was WAPFN100064, issued 6 April 2010 and filed in this court on the same day (freezing notice 100064). The property the subject of freezing notice 100064 was five sums of cash totalling the amount of $161,292.00, all seized on 30 March 2010 from the first plaintiff, at two addresses. Four of the five sums - $70,000, $60,150, $180.00 and $50.00 - were seized at an address in Heathridge. The remaining sum - $30,912.00 - was seized at an address in Darch. The cash totalling $161,292.00, together with interest on the amounts making it up, is the remainder of the property the subject of the proceedings before me. The sole ground for inclusion of that cash was shown in freezing notice 100064 as that the cash was property owned or effectively controlled by a person who could be declared a drug trafficker.
Thus, in grand total, cash totalling $166,527.00, together with interest, is the subject of the proceedings before me (the subject property).
On 18 February 2009 the first, second and third plaintiffs filed an objection to confiscation of property frozen under freezing notice 80282 pursuant to Criminal Property Confiscation Act s 79 (the first plaintiff's objection, the second plaintiff's objection and the third plaintiff's objection, respectively). It is not in contest that these objections, filed as one objection, were duly lodged and had the effect of preventing automatic confiscation under s 7(1) while also relating to the confiscation of the part of the subject property the subject of freezing notice 90149 and freezing notice 100064.
The second plaintiff is the father of the first plaintiff; the third plaintiff is his mother.
No long before 18 February 2009 the fourth plaintiff applied to this court to have freezing notice 80282 set aside in relation to property included in it, while not long after 18 February 2009 the fifth plaintiff applied to this court to have that freezing notice set aside as to one of the items of property so included.
By consent orders made on 2 June 2010 all three of these matters were consolidated as one action.
By summons filed on 8 October 2010 the defendant applied for orders and a declaration pursuant to Criminal Property Confiscation Act s 8(1) and s 30 that the plaintiffs' objections all be dismissed and that all property that the first plaintiff owned or effectively controlled at the time he was declared to be a drug trafficker and all property that he gave away at any time before that declaration was made had been confiscated to the defendant (the defendant's summons). The defendant's summons went on to seek a declaration that specified property had been confiscated, including the subject property, without limiting the generality of the general declaration sought, while certain other specified property was excluded from the declaration of confiscation sought.
By consent orders dated 14 January 2011, among other things and materially for my purposes, the plaintiffs' objections were dismissed and declarations of confiscation were made, save for the inclusion, as also excluded from the general declaration, of some additional specified property, and save for the adjournment of the defendant's summons and the second plaintiff's objection with respect to the subject property.
The hearing before me was on the matter so adjourned, at least as to whether or not the second plaintiff's objection with respect to the subject property should be dismissed. The parties' submissions as I understood them were with respect to that matter. The matter of whether or not, if that objection were dismissed, the declaration sought by the defendant's summons as to the subject property should be made was not separately addressed. I will reach the latter matter at the end of my reasons.
For the purposes of the hearing, I had an affidavit of Marie Clair Normoyle sworn 29 September 2010 in support of the defendant's summons and the affidavit of the second plaintiff sworn 9 February 2011 in support of originating summons, which I understood to be the originating summons of the second plaintiff filed 18 February 2009 being at the same time as the second plaintiff's objection. The programming orders for the hearing before me gave leave to cross‑examine deponents, provided for each party to advise the other in writing which of the affidavits filed by the other party might be tendered into evidence by consent and in respect of the remaining affidavits which part or parts was or were objected to, as well as which deponents were required to attend the hearing for the purposes of cross‑examination. In the event, there were no objections and no cross‑examination of any deponent, and the affidavits I have referred to were treated by both parties as in evidence before me.
I turn now to the factual background to these proceedings.
The factual background to these proceedings
The following factual background is not in contest.
The first plaintiff was trained and is qualified as a plumber.
In or about July 2008, after eight years in that trade, the first plaintiff was unemployed and wanted a change. He approached the second plaintiff and the third plaintiff about starting a plant hire business. Following a discussion between the three, it was agreed between them (the agreement) that the second plaintiff and the third plaintiff would assist the first plaintiff to obtain employment by buying a truck and a bobcat or an excavator for him to use, and that the second plaintiff would organise a business around the truck and the bobcat or excavator (the business). The first plaintiff would work in the business that the second plaintiff would create, and the second plaintiff and the third plaintiff would have an investment. A particular of the agreement was that the second plaintiff would own the business.
In July 2008 the second plaintiff began to provide the first plaintiff with moneys which the second plaintiff deposed were 'for the business'. The moneys were provided in cash, in sums ranging from $2,500.00 to $30,000.00 at a time, over the period from about 12 July 2008 to 20 June 2009. The sums were paid at different times in each of the months over that period, except for November 2008 (when no payment was made). The payments ranged from once in July 2008 to three times in each of January, March and May 2009. The monthly total amounts (excluding November 2008) ranged from $3,000 in July 2008 to $35,000 in April 2009 (two payments). The total over the period was $166,000, at a monthly average of just over $15,000. This was money the second plaintiff deposed he provided over that period 'in order for a business to be purchased'. It was 'not … for [the first plaintiff] to spend as he pleased or for general living expenses', but rather 'solely for the business'.
During the period of the payments, the second plaintiff drafted a preliminary business plan in relation to the agreement (the preliminary plan). The preliminary plan had a 'finances' section in which it was stated that the second plaintiff was to provide the funding for the business in a total of around $185,000, of which $166,000 would be 'capital expenditure', with the rest to be used as 'working capital'. The preliminary plan stated that the business would do two things: provide 'a good return on investment' and 'also provide a wage for the operator who at this time will be [the first plaintiff]'. The preliminary plan also stated that the 'owner' would be the second plaintiff and the third plaintiff. However, it was not in contest before me that at all times the proposed ownership for the business was to be by the second plaintiff alone.
The preliminary plan was dated 11 November 2008. It did not bear any signature and I have no direct evidence that its contents were ever approved by, discussed with or known to the first plaintiff. Below I consider the matter of circumstantial evidence, at least as to the payments I have referred to being for the business.
In the event, the business was never created or bought from any third party.
I should note at this point that the defendant did not accept that the subject property was the cash so paid by the second plaintiff or the traceable proceeds of such cash. I return to that matter below.
I turn now to the issues before me and the applicable law.
The issues and the applicable law
It was not in contest that the matter before me should be approached as a hearing on the second plaintiff's objection in respect of the subject property under Criminal Property Compensation Act s 81(1). On that approach, the question for me to determine was whether or not I should set aside freezing notice 90149 and freezing notice 100064 on the basis, which was the question under s 84(2), that it was more likely than not that the first plaintiff did not own or effectively control the subject property. The effective dates for that determination were the dates the subject property in its various sums was seized. The burden of proof on this question was on the second plaintiff, as in my view appears from s 84(2).
It was the case for the second plaintiff that the first plaintiff did not own or effectively control the subject property as he held it on trust for the second plaintiff for the purpose of the acquisition of a truck and a bobcat or an excavator for the business. On the failure of that purpose, when the business was not created or acquired, the first plaintiff held the subject property on what I understood to be a bare trust for the second plaintiff. The case for the second plaintiff relied on the finding of an express trust of the kind recognised in Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567.
It appeared to be common ground that if such a trust were found, then the second plaintiff's objection should be upheld, but only to the extent the subject property was the cash provided by the second plaintiff or the traceable proceeds of such cash. In any event I consider the contrary could not be maintained. This is on the basis that, to that extent, the first plaintiff would have been shown not to 'own' the subject property, because the beneficial ownership would have been shown to be in the second plaintiff. There was no question on the second plaintiff's case of 'effective control', as on the second plaintiff's case the first plaintiff would be a trustee of the subject property on trust for the second plaintiff (see s 156(1) on 'effective control'), while if there was no such showing then, in the terms of s 84(2), it had not been shown the first plaintiff did not 'own' the subject property.
As I understood the case for the second plaintiff there was no other basis for upholding the second plaintiff's objection contended for. In particular, it was not contended that the second plaintiff had made the first plaintiff his agent, either so that the first plaintiff had mere possession of the subject property or was a trustee of the subject property, in either case with authority to contract on the second plaintiff's behalf. See on agency Heydon JD and Leeming MJ, Jacobs' Law of Trusts in Australia (7th ed 2006) [210] ‑ [212]. Nor was it put to me that a constructive trust should be recognised in respect of the subject property to any extent. The matter before me, which was conducted without pleadings and indeed without written submissions except for those for the defendant, was not fought on any territory other than that of an express trust of the Barclays Bank v Quistclose Investments kind.
What then are the matters which the second plaintiff must prove in order for me to find an express trust of that kind?
I begin by noting that a trust of that kind may be recognised in a case in which moneys are paid to a person for the purpose of that person making an acquisition of property: see Re EVTR; Gilbert v Barber [1987] BCLC 646 (EWCA), applied in Salvo v New Tel Limited [2005] NSWCA 281. The trust may be one under which the moneys are held on an express trust for the benefit of the payer for the payee to make the acquisition and, on the failure of that purpose, on either an express or a resulting trust for the payer. See Salvo [53] (Spigelman CJ), [96] (Young CJ in Eq) (express trust both on payment and on failure), [79] (Handley JA) (express trust on payment and resulting trust on failure). I find that the purpose of any trust for the acquisition of a truck and a bobcat or an excavator had failed, on the only relevant evidence I have. I consider it would not matter for my purposes whether any trust for the payer thereafter were express or resulting.
In this case, of course, the moneys were paid by a father to his son. A payment by a father to his son without more would give rise to the presumption the money was vested in the son as an absolute gift or an advancement, for the son's benefit. See Campana v The State of Western Australia [2008] WASC 230 [82] (Jenkins J). However, in my view it is clear that any such presumption would be rebutted by evidence sufficient for a finding of an express trust of the kind in Barclays Bank v Quistclose Investments.
The fundamental requirement for an express trust of the kind in Barclays Bank v Quistclose Investments is that the payment in question was made by the payer with the intention that the payer retain the beneficial interest in the amount paid or with the intention of conferring that interest on a third party. This entails that there was no intention that the payee was to take a beneficial interest in the amount paid. See Campana [83], referring to Drever v Drever [1936] ALR 446; (1936) 10 ALJ 207, 450 (Dixon J, Evatt J agreeing) ('definite intention' to retain beneficial interest); Salvo [44] (Spigelman CJ), referring to Barclays Bank v Quistclose Investments (580) (Lord Wilberforce) (primary trust for creditors payment of debt to whom was the purpose of payment). There need be no express or clearly implicit intention to create a trust, as where the parties gave no actual thought to the matter. However, the requirement is that at the least the payer intended the payee took no beneficial interest in the payment, which might be shown by a stipulation that the amount paid be kept separately from the payee's other money. See McManus RE Pty Ltd v Ward [2009] NSWSC 440; (2009) 74 NSWLR 662 [25] (Palmer J). I return to the matter of how the required intention might be shown below.
If there is an intention by the payer that the payee not take any beneficial interest in the amount paid, is more required? In particular, must the payee be aware of the payer's intention?
During the course of oral argument there was an exchange between both counsel and myself on this matter. The position of the defendant was that the evidence of the second plaintiff that the moneys paid were 'solely for the business' did not represent a statement that it was a term of the agreement that the moneys provided by the second plaintiff were only to be so used. The second plaintiff's statements of intention were only 'unilateral'. In oral argument counsel for the defendant enlarged on this, by referring to Barclays Bank v Quistclose Investments, where the intention was communicated and agreed, as indicating the need at the least for the intention to be communicated. In oral argument counsel for the second plaintiff conceded that the first plaintiff had to be shown to have been aware of the purpose for which the moneys were paid when they were paid.
In fact, on my review of the authorities on express trusts of the kind in Barclays Bank v Quistclose Investments I was unable to find any statement of a requirement for the intention to be common or even communicated. I also note the following, from Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491 (Gummow J):
The question as to the existence of any express trust will always have to be answered by reference to intention. An example of that basic proposition at work in this Court is the decision of Lockhart J in Re Wall; Ex parte Official Receiver v Kemmi's (1979) 25 ALR 615 at 624‑625. Ordinarily, the relevant intention is that of the alleged settlor, but where the subject matter of the trust is contractual rights against the settlor, conferred by the settlor upon the alleged trustee, the objective (or 'purpose') of the transaction being to benefit third parties, it may be appropriate to look to the mutual intention of settlor and trustee. This is consistent with the approach by Deane J to a similar question in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 149, but cf per Mason CJ, Wilson J (at 121). At all events, and as I have said, in Quistclose (at 580), Lord Wilberforce looked to 'the mutual intention' of Quistclose [the payer] and Rolls Razor [the payee] and to 'the essence' of their bargain (502 ‑ 503). (emphasis added)
In this case, however, I understood the case for the second plaintiff to be that it was the mutual intention of the first plaintiff, the second plaintiff and the third plaintiff embodied in their agreement that the second plaintiff and the third plaintiff would buy a truck and a bobcat or an excavator for use by the first plaintiff in the business. This feature was subsequently evidenced by the preliminary plan with its reference to $166,000 for plant and equipment. On that case, the second plaintiff accepted, it would be necessary to show that there was a mutual awareness that the payments were pursuant to the agreement and that the payments were solely for the business, with the intention that the first plaintiff have no power to spend the payments as he pleased. I consider that a showing of that kind would preclude distinguishing between the payments, in particular between those before and after the preliminary plan. I also consider that such a showing would be sufficient for me to recognise an express trust of the kind in Barclays Bank v Quistclose Investments.
As to how the second plaintiff might make such a showing, it appeared not to be in contest that the matter could be by way of inference from all of the relevant circumstances, in the absence of any express provision or clear implication in the agreement that the parties to it intended a trust to be created. In any event, I do not consider the contrary could be successfully maintained. I note as authority for that view the following, from Salvo (Spigelman CJ):
It is well established that an intention to create an express trust can be inferred from the full range of relevant circumstances, including the nature of the transaction and the construction of the words used. (See Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 120; Walker v Corboy (1990) 19 NSWLR 382 esp at 395-399; Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (In Liq) (2000) 202 CLR 588 at [34]; Tito v Waddell (No 2) [1977] Ch 106 at 211. The relevant case law has been summarised by Campbell J in Commonwealth v Booker International Pty Ltd [2002] NSWSC 292 at [34]-[45].) There are cases in which it is pertinent to consider the mutual intention of the parties to a transaction. (See Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 at 580B; Australasian Conference Association Ltd v MainlineConstructions Pty Ltd (In liq) (1978) 141 CLR 335 at 353; Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491 at 502-503; Re Goldcorp Exchange Ltd; Kensington v Liggett [1995] 1 AC 74 at 100.)
As Gummow J put it in Re Australian Elizabethan Theatre Trust supra at 503:
'The relevant intention is to be inferred from the language employed by the parties in question and to that end the court may look also to the nature of the transaction and the relevant circumstances attending the relationship between them: Walker v Corboy (1990) 19 NSWLR 382; Scott, The Law of Trusts, 4th ed, 1987, s 25.2. There is no need for particular caution in drawing the inference that a trust was intended: Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 618-19. However, it also is important to appreciate both the flexibility of the institution of the express trust and the range of equitable institutions which fall short of but have some of the characteristics of a trust' [33] ‑ [34].
As to the drawing of an inference in connection with the payment of a sum of money for a particular purpose, I note Commonwealth of Australia v Booker International Pty Ltd [2002] NSWSC 292 (Campbell J):
Other circumstances where courts have recognised a trust, notwithstanding that the parties have not in so many words said that a trust is intended, have been the line of cases starting from Barclay's Bank Ltd v Quistclose Investments Ltd [1970] AC 567.
'That case is authority for the proposition that where money is advanced by A to B, with the mutual intention that it should not become part of the assets of B, but should be used exclusively for a specific purpose, there will be implied (at least in the absence of an indication of a contrary intention) a stipulation that if the purpose fails the money will be repaid, and the arrangement will give rise to a relationship of a fiduciary character, or trust. (per Gibbs ACJ, Australian Conference Association Ltd v Mainline Constructions Pty Ltd (in Liquidation) (1978) 141 CLR 335.'
See also Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371, at 379‑380 per Gibbs CJ, with whom Dawson J agreed).
In Walker v Corboy (1990) 19 NSWLR 382, at 385 Priestley JA quoted the following passage from the decision of Channell J in Henry v Hammond [1913] 2 KB 515 at 521:
'...We must apply that principle to a case where the property is a sum of money. It is clear that if the terms upon which the person receives the money are that he is bound to keep it separate, either in a bank or elsewhere, and to hand that money so kept as a separate fund to the person entitled to it, then he is a trustee of that money and must hand it over to the person who is his cestui que trust. If on the other hand he is not bound to keep the money separate, but is entitled to mix it with his own money and deal with it as he pleases, and when called upon to hand over an equivalent sum of money, then in my opinion, he is not a trustee ... but merely a debtor. All the authorities seem to me to be consistent with that statement of the law.'
Priestley JA then continued:
'Channell J in this passage makes the first inquiry the question of the terms upon which a person receives the sum of money. This does not mean starting from some prima facie position. It will be from the detailed facts of the case itself that the court draws its conclusion.'
In Re Australian Elizabethan Theatre Trust (1991) 30 FCR 491 Gummow J gave a detailed account of the proper scope of operation of the Quistclose decision. However the case before Gummow J was not the type of case to which the Quistclose decision could be directly applied, because in that case there were no loans made for a specified purpose. Rather, in that case there were donations given to the Elizabethan Theatre Trust, 'unconditionally', with the expression of a 'preference' that the donations be passed on to some nominated arts organisation.
In deciding whether a trust has been established,
'... payment into a separate bank account is a useful (though by no means conclusive) indication of an intention to create a trust, but of course there is nothing to prevent the company from binding itself by a trust even if there are no effective banking arrangements' (per Megarry J, in Re Kayford Ltd (in Liquidation) (1975) 1 WLR 279, at 282).
See also Davies v Australian Securities Commission (1995) 59 FCR 221 at 234, Occidental Life Insurance Co of Australia Ltd v Bank of Melbourne (1993) 7 ANZ Insurances Cases 78,310 for further authority that payment into a separate account does not necessarily mean that a trust exists [39] ‑ [43].
I note in passing that it appears now to be clearly established in the law of express trusts in Australia that, where the creation of an express trust is in issue, regard is 'had to all the relevant circumstances ... to show the intention manifested by the words and actions comprising those circumstances', but not to show 'what the relevant actor meant to convey as a matter of "real intention"': Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 [65] (Gummow & Hayne JJ, source of quotations), see also [17] (French CJ), [113] ‑ [116] (Heydon & Crennan JJ). On the case for the second plaintiff as I have described it, I do not consider that any question of the application of that principle is implicated in these proceedings.
I turn now to apply the law I have described as applicable to the case for the plaintiff.
The application of the law to the issues
The only evidence I have of an agreement between the first plaintiff, the second plaintiff and the third plaintiff is that in the affidavit of the second plaintiff previously quoted in this regard, and in the preliminary plan, including the second plaintiff's evidence as to it. I consider that on that evidence the preliminary plan should be regarded for my purposes as a specification of aspects of the performance of the agreement, including past performance, by reference to the amount it stated for 'capital expenditure', $166,000.
The only evidence I consider I have as to the mutual awareness of the second plaintiff and the first plaintiff that the payments totalling $166,000 over the period July 2008 to June 2009 were pursuant to the agreement and that the payments were solely for the business, with the first plaintiff having no power to spend the payments as he pleased, is that evidence of the agreement; the evidence of the second plaintiff as to him having given the first plaintiff the sums the second plaintiff did which totalled that amount 'not … for him to spend as he pleased or for general living expenses' but 'solely for the business'; the degree of correspondence between the aggregate of the sums seized from the first plaintiff which are the subject property and that total amount; the fact of having sums on hand in the amount represented by the total ($161,292.00) of the cash seized from the first plaintiff on 30 March 2010; and the lack of evidence that the first plaintiff was employed in the context of his being unemployed in July 2008 and the purpose of the agreement to provide him with work.
I leave aside the matters of the pattern and the individual sums representing the payments over the period July 2008 to June 2009. I do not consider any significant support, for any reasonable inference in favour of or against the finding for which the second plaintiff contended, can be drawn from those matters.
I note of course that the correspondence referred to is not exact; and I note further that there was a further $8,980.00 in cash seized from the first plaintiff on 30 December 2008, which was included in the freezing notice 80282 but which is not part of the subject property. However, I consider such lack of complete correspondence does not affect the availability of the inference for which the second plaintiff contends. The matter is relevant, however, to the question of the tracing of the sums paid into the subject property, to which I return below.
In drawing inferences to the civil standard (see Criminal Property Confiscation Act s 102(2)(b)), I am required to determine whether or not the inference for which the second plaintiff contends is one which is the 'more probable inference' as explained in Luxton v Vines (1952) 85 CLR 352 (Dixon, Fullagar & Kitto JJ):
The test to be applied in determining in cases like this whether circumstantial evidence suffices to support a finding that negligence for which the defendant is responsible vicariously or otherwise occasioned the injury complained of was restated recently by this Court in Bradshaw v. McEwans Pty. Ltd. [1951, unreported], and for the purposes of this case it is enough to set out the following passage from the judgment: 'Of course as far as logical consistency goes many hypotheses may be put which the evidence does not exclude positively. But this is a civil and not a criminal case. We are concerned with probabilities, not with possibilities. The difference between the criminal standard of proof in its application to circumstantial evidence and the civil is that in the former the facts must be such as to exclude reasonable hypotheses consistent with innocence, while in the latter you need only circumstances raising a more probable inference in favour of what is alleged. In questions of this sort, where direct proof is not available, it is enough if the circumstances appearing in evidence give rise to a reasonable and definite inference: they must do more than give rise to conflicting inferences of equal degrees of probability so that the choice between them is mere matter of conjecture: see per Lord Robson, Richard Evans & Co. Ltd. v. Astley [(1911) A.C. 674, at p. 687]. But if circumstances are proved in which it is reasonable to find a balance of probabilities in favour of the conclusion sought then, though the conclusion may fall short of certainty, it is not to be regarded as a mere conjecture or surmise: cf. per Lord Loreburn [(1911) A.C. 674, at p. 678] (358).
In making that determination, it is not contended I might take into account the fact that there is no evidence from the first plaintiff. The defendant disclaimed any reliance on Jones v Dunkel (1959) 101 CLR 298, and so there was no argument on the point before me.
On assessing all of the evidence I have referred to as relevant, I have concluded that the inference for which the second plaintiff contends is the more probable inference. In doing so, I note in particular the evidence of the substantial sum on hand on 30 March 2010 in the context of the other evidence to which I have referred. See Commonwealth v Booker International [40], above, referring to and setting out the quotation in Walker v Corboy (1990) 19 NSWLR 382, 385 (Priestley JA) from Henry v Hammond [1913] 2 KB 515, 521 (Channell J).
It follows I would not dismiss the second plaintiff's objection so far as the subject property is concerned. However, I would not set aside freezing notice 90149 or freezing notice 100064, at least for the time being.
In my view the second plaintiff's objection should only be upheld to the extent the subject property is shown by the second plaintiff to be cash the second plaintiff paid to the first plaintiff or the traceable proceeds of such cash. Counsel for the defendant conceded that if I reached that conclusion as to the second plaintiff's objection an order for the determination of that issue by an order for an accounting or similar would be appropriate.
Conclusion and call for orders
I have concluded that the second plaintiff's objection in respect of the subject property should not be dismissed. However, the second plaintiff's objection should only be upheld to the extent the subject property is shown by the second plaintiff to be the cash the second plaintiff paid to the first plaintiff or the traceable proceeds of such cash.
At first blush it would seem to follow that, if and to the extent no such showing can be made, the defendant is entitled to the declaration it sought by its summons, by virtue of Criminal Property Confiscation Act s 7(2) and s 30(2).
I will hear from the parties as to the orders I should make to give effect to these reasons.
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