State of Queensland v Stevens
[2012] QSC 238
•31 August 2012
SUPREME COURT OF QUEENSLAND
CITATION:
State of Queensland v Stevens [2012] QSC 238
PARTIES:
STATE OF QUEENSLAND
(applicant)
v
BRETT RAYMOND STEVENS
(respondent)FILE NO:
BS1014/09
DIVISION:
Trial Division
PROCEEDING:
Application
DELIVERED ON:
31 August 2012
DELIVERED AT:
Brisbane
HEARING DATE:
22 June 2012
JUDGE:
Dalton J
ORDERS:
1. I declare that Bank of Queensland Limited has an interest as mortgagee under Registered Mortgage 709627798 in the following property of Brett Raymond Stevens:
(a) Real property located at 100 Callaghan Road, Narangba described as Lot 2, Registered Plan 851006, County of Stanley, Parish of Redcliffe registered in the name of Brett Raymond Stevens, Title Reference 18561243;
(b) Real property located at 92 Callaghan Road, Narangba, described as Lot 27, Registered Plan 77681, County of Stanley, Parish of Redcliffe registered in the name of Brett Raymond Stevens, Title Reference 12784172;
(c) Real property located at 82 Callaghan Road, Narangba described as Lot 28, Registered Plan 77681, County of Stanley, Parish of Redcliffe registered in the name of Brett Raymond Stevens, Title Reference 12781042.
2. I declare that the Bank of Queensland Limited’s interest in the aforesaid property extends to the repayment of the total amount owing on Loan Account No 20759418 in the name of Brett Stevens Transport Pty Ltd.
3. I order that proceeds of sale realised pursuant to Registered Mortgage No 709627798 are to be applied to the extent necessary to extinguish the liability balance in respect of Loan Account No 20759418.
4. I exclude the Bank of Queensland Limited’s property, to the extent stated in orders numbered 1, 2 and 3 above, from any forfeiture order made in these proceedings pursuant to the Criminal Proceeds Confiscation Act 2002.
CATCHWORDS:
Criminal Proceeds Confiscation Act 2002 – Restraining order – breach of restraining order – non-intentional breach of restraining order – illegality – consideration of effect of non-intentional breach of restraining order – exclusion order as to nature and extent of property to be excluded from any forfeiture order
Criminal Proceeds Confiscation Act 2002 (Qld)
Equuscorp v Haxton [2012] HCA 7
Nelson v Nelson (1995) 184 CLR 538, 612-613
New South Wales Crime Commission v Lee [2010] NSWSC 1012COUNSEL:
M Drysdale for Bank of Queensland Limited
J Rolls for the State of Queensland
No appearance for Brett Raymond StevensSOLICITORS:
HWL Ebsworth for Bank of Queensland Limited
Director of Public Prosecutions for the State of Queensland
In 2006 the Bank of Queensland Limited took a mortgage over three real properties owned by Brett Raymond Stevens. It lent Brett Stevens Transport Pty Ltd money, loan account number 20759418. The loan was secured by a guarantee and indemnity provided by Brett Raymond Stevens. This in turn was supported by the mortgage given by him over the three lots of land. The “total amount owing” under the mortgage was defined to mean all monies which Mr Stevens owed the bank at any time.
On 18 February 2009 a restraining order was made pursuant to ss 28(3)(a)(iii) and 31(1) of the Criminal Proceeds Confiscation Act 2002 (the Act). That property included the three lots of real property over which the Bank of Queensland had a mortgage. It also restrained dealings with considerable personal property, motor vehicles in the main. The terms of the restraint were, “under ss 28(3)(a)(iii) and 31(1) of the Criminal Proceeds Confiscation Act 2002 (‘the Act’), none of the property of Brett Raymond Stevens (‘the restrained property’) shall be dealt with by any person.” The order then went on to specify, without derogating from the generality of that restraint that, inter alia, the three lots of real property were not to be dealt with by any person. The order continued: “notwithstanding [the restraint], nothing in this order shall prevent Bank of Queensland Limited, its transferees or assignees, from exercising any rights pursuant to encumbrance number 709627798 in respect of the property mentioned in [the restraint paragraphs] of this order.” The number 709627798 is the number of the Bank of Queensland’s registered mortgage over the real property.
By order made 3 December 2009 the Public Trustee was directed to sell some of the motor vehicles the subject of the restraining order. After the sale an amount of $317,715.77 was paid to lawyers on behalf of the Bank of Queensland by the
Public Trustee. This money was to be applied in discharge of monies owing to the bank by Brett Stevens Transport Pty Ltd. Some small deductions were made, and an amount of $316,954.62 was paid to the loan account with the Bank of Queensland, account number 20759418 in the name of Brett Stevens Transport Pty Ltd on 6 August 2010.
As at 6 August 2010, loan account 20759418 was in debit in an amount of $327,916.36. After the deposit the balance owing on the account was $10,961.74. The Bank of Queensland was under a misapprehension that the account had been frozen. In fact it was not. An amount of $304,324.06 was withdrawn from the account on 10 August 2010, leaving a balance of $315,385.80 owing on that account. The evidence before me was that the withdrawal was made electronically by the internet and that the only person whom the bank had authorised to make a withdrawal in that way was Mr Brett Raymond Stevens.[1]
[1]I note that Brett Raymond Stevens was served with this application. A solicitor acting for him appeared briefly and then withdrew. He made no submissions.
On 2 May 2012 orders varying the initial restraining order were made allowing the Bank of Queensland to sell the three real properties over which it has a mortgage. The Bank of Queensland has brought this application asking to apply the proceeds from the sale of these three real properties, inter alia, to discharge the entire amount now owing on account number 20759418. The State opposes that course. The State does not object to the proceeds of sale being applied to repay debt owing to the Bank of Queensland other than the amount of $304,324.06 – see the orders made by Atkinson J on 30 July 2012.
The form of the bank’s application before me is for an exclusion order pursuant to
s 65(2) of the Act. It asks that so much of the proceeds of sale of the three lots of real property as is necessary to discharge the outstanding liability balance on loan account number 20759418 be excluded from any forfeiture order made pursuant to the Act. I was told that a forfeiture order had been sought, in the sense that an application had been filed, but not yet heard.
Under the scheme of the Act, property that is restrained may later be forfeited – see Part 4 of the Act. Part 4 subdivision 4 of the Act deals with circumstances in which a Court may exclude property from forfeiture under Part 4. Section 65 of the Act provides as follows:
“65 Exclusion of property from forfeiture order application
(1)This section applies if an application for a forfeiture order has been made but the application has not been decided.
(2)A person, including a prescribed respondent, who claims an interest in property to which the application relates may apply to the Supreme Court for an exclusion order.
…”
The basis for such an application is left at large but s 68 of the Act provides:
“68 Making of exclusion order
(1)The Supreme Court, on an application under section 65 or 66, may make an exclusion order.
(2)The Supreme Court must, and may only, make an exclusion order if it is satisfied—
(a)the applicant has or, apart from the forfeiture, would have, an interest in the property; and
(b)it is more probable than not that the property to which the application relates is not illegally acquired property.”
Section 69(1) of the Act is:
“(1) An exclusion order is an order that –
(a)states the nature, extent and, if necessary for the order, the value, when the order is made, of the applicant’s interest in the property; and
(b)if the application for the forfeiture order has not been decided, excludes the applicant’s property from the application for the forfeiture order; and
(c)if a forfeiture order has been made for the property, and the property is still vested in the State, directs the State to transfer the property to the applicant; and
(d)if a forfeiture order has been made for the property and the property is no longer vested in the State, directs the State to pay to the applicant the value of the applicant’s property.
...”
The State raised a preliminary point. It said that the property which the Bank of Queensland seeks to have excluded pursuant to s 68(2) is the proceeds of sale from a sale which has not yet taken place. And, on the evidence before me, it seems that, notwithstanding the orders of May 2012, the authorised sales may not take place, although others might. In my opinion this preliminary point is misconceived. The relevant section of the Act is s 65 and, to make an exclusion application what is necessary is that a person claims an interest in property to which the application relates – see s 65(2). The Bank of Queensland claims an interest as mortgagee in the three lots of land – that is the relevant property. It is quite possible to make an exclusion order under s 69 of the Act stating the nature, extent, and indirectly, the value of the interest in that property.
Otherwise, the State puts its case on two bases. The first is that by analogy with cases[2] dealing with further advances and priorities in mortgage law, the bank should be precluded from recouping the money which was withdrawn after the restraining order was made under the real property mortgage. I can see no warrant for making analogies between the very particular rules of law in those mortgage cases and the current situation. It was conceded on behalf of the State that it had no interest of a proprietary nature either under the Act, or pursuant to caveats which it has lodged under s 51 of the Act. That must be correct, see New South Wales Crime Commission v Lee.[3]
[2]E.g. Hopkinson v Rolt (1861) 9 HL Cas 514; West v Williams [1899] 1 Ch 146; Overseas Chinese Banking Corporation v Malaysian Kuwait Investment Co [2003] BSC 495 etc.
[3][2010] NSWSC 1012, [31].
The second basis relied upon by the State is to the effect that the bank seeks to take advantage of its mortgage to secure payment of a dealing made in breach of the restraining order of 18 February 2009. The State contended that once it was accepted that there had been a dealing contrary to the restraining order, the advance of $304,324.06 could be seen to be an illegal transaction.
The phrase “dealing with property” is defined in the dictionary schedule to the Act as including:
“(a)acquiring the property; and
(b)disposing of the property; and
(c)encumbering the property; and
(d)if property is a debt – making payment to anyone to reduce the amount of the debt; and
(da)engaging in a transaction that has the direct or indirect effect of changing the value of a person’s interest in the property; and
(e)removing the property from Queensland; and
(f)receiving or making a gift of the property; and
(g)vesting the property in a person while administering the estate of a deceased; and
(h)dealing with the property in another way; and
(i)attempting to do a thing mentioned in paragraph (a), (b), (c), (d), (da), (e), (f), or (g), or to deal with property in another way.”
The State submitted that subparagraph (da) applied here and that when money was withdrawn on 10 August 2010 the bank engaged in a transaction which had the effect of changing its interest in the three lots of land, and the mortgage over those lots of land.
On the evidence before me the person who withdrew the money on 10 August 2010 undoubtedly engaged in such a transaction and that person breached the restraining order of 18 February 2009. In my view more difficult questions arise as to whether or not the bank engaged in such a transaction. By mistake, the bank did not freeze the account so that as at 10 August 2012 it had in place facilities which enabled Brett Raymond Stevens to withdraw money from the loan account. By that time there was a Court order prohibiting Mr Stevens from so doing, and the bank knew of that. Nevertheless, when money was requested under the arrangements authorising Mr Stevens to withdraw money, the bank advanced its own money to the person making the request. In the end I think the fact that no human being directed the advance, but that it occurred electronically under a system which the bank had set up and authorised, cannot matter to the question of whether or not the bank has engaged in a transaction within the meaning of subparagraph (da) above. I find that both the person withdrawing the money on 10 August 2010 and the Bank of Queensland did deal with property which was restrained pursuant to the order of 18 February 2009.
Section 52 of the Act provides:
“52 Contravention of restraining order
(1)A person who conceals restrained property or does another act or makes another omission in relation to restrained property with the intention of directly or indirectly defeating the operation of the restraining order commits a crime.
…
(2)It is a defence to a charge of an offence against subsection (1) for the person to prove that the person had no notice that the property was restrained under a restraining order and no reason to suspect it was.
(3)A dealing with property in contravention of subsection (1) is void unless it was either for sufficient consideration or in favour of a person who acted in good faith.”
The State did not contend that the dealing by the bank was within s 52(1) of the Act. The State thus accepted that s 52(3) did not apply to the dealing which took place on 10 August 2010.
Nonetheless the Crown contended that because the dealing had occurred in breach of the restraining order, it was illegal. Precisely what was meant by that is not clear from the Crown submissions – cf the discussion by Gummow and Bell JJ in Equuscorp v Haxton at [94].[4] It was not argued before me that there was a contempt of Court by the bank. There was certainly no evidence that the bank had intentionally breached the order of 18 February 2009. A breach of a restraining order will generally only amount to what is known as a civil contempt.[5] Generally, there must be an element of mens rea proved in both criminal and civil contempt.[6]
[4][2012] HCA 7.
[5]AMIEU v Mudginberri Station Pty Ltd (1986) 161 CLR 98, 106-113, and see The King v Metal Trades Employers’ Association (1950-1951) 82 CLR 208, 253-254 per Dixon J; see also Halsbury’s Law of Australia [105-5] and [105-250].
[6]Arlidge, Eady and Smith on Contempt, Sweet and Maxwell, 4th ed, [1-116], [3-256].
In Equuscorp Pty Ltd v Haxton[7] Heydon J set out a passage from McHugh J’s judgment in Nelson v Nelson:[8]
“If courts withhold relief because of an illegal transaction, they necessarily impose a sanction on one of the parties to that transaction, a sanction that will deprive one party of his or her property rights and effectively vest them in another person who will almost always be a willing participant in the illegality. Leaving aside cases where the statute makes rights arising out of the transaction unenforceable in all circumstances, such a sanction can only be justified if two conditions are met.
First, the sanction imposed should be proportionate to the seriousness of the illegality involved. It is not in accord with contemporaneous notions of justice that the penalty for breaching a law or frustrating its policy should be disproportionate to the seriousness of the breach. The seriousness of the illegality must be judged by reference to the statute whose terms or policy is contravened. It cannot be assessed in a vacuum. The statute must always be the reference point for determining the seriousness of the illegality; otherwise the courts would embark on an assessment of moral turpitude independently of and potentially in conflict with the assessment made by the legislature.
Second, the imposition of the civil sanction must further the purpose of the statute and must not impose a further sanction for the unlawful conduct if Parliament has indicated that the sanctions imposed by the statute are sufficient to deal with conduct that breaches or evades the operation of the statute and its policies. In most cases, the statute will provide some guidance, express or inferred, as to the policy of the legislature in respect of a transaction that contravenes the statute or its purpose. It is this policy that must guide the courts in determining, consistent with their duty not to condone or encourage breaches of the statute, what the consequences of the illegality will be. Thus, the statute may disclose an intention, explicitly or implicitly, that a transaction contrary to its terms or its policy should be unenforceable. On the other hand, the statute may inferentially disclose an intention that the only sanctions for breach of the statute or its policy are to be those specifically provided for in the legislation.”
[7][2012] HCA 7 [122].
[8](1995) 184 CLR 538, 612-613.
In this case there is no doubt that the order of 18 February 2009 prohibited the dealing which took place on 10 August 2010. However, in my view it is to the Act that I must turn to determine the consequence of this. Consistently with
McHugh J’s observations in the passage extracted above, the Act does give considerable guidance as to the effect of a dealing in breach of a restraining order. Section 52 of the Act shows that if there is an intentional dealing after a restraining order is made then, except in circumstances mentioned in s 52(3) of the Act, the dealing will be void. Even where a dealing has been intentionally undertaken in defiance of a restraining order, it will still not be void if it was either for sufficient consideration or was in favour of a person who acted in good faith – see s 52(3) of the Act.
Moreover, the part of the Act which deals with forfeiture shows an intention that an interest in property gained legitimately – that is not with illegally acquired property – is not to be the subject of forfeiture orders, see the terms of s 68, set out above.
At a more general level, an intention to protect persons who advance money secured over property in good faith for valuable consideration and in the ordinary course of business is discernible – see s 63 of the Act:
“63 Forfeiture order may provide for discharge of encumbrance
(1)If—
(a)the Supreme Court is satisfied an encumbrancee took an encumbrance over property to be forfeited under a forfeiture order in good faith, for valuable consideration, and in the ordinary course of the encumbrancee’s business; and
(b)the State gives an undertaking to apply the proceeds of disposing of the forfeited property towards discharging the encumbrance;
the court may make the orders about the encumbrance the court considers appropriate.
…”
In my view these specific provisions, particularly s 52 of the Act, must prevail over more general indications of policy taken, for example, from s 4 of the Act. The dealing on 10 August 2010 is not caught by s 52 and I do not detect an intention otherwise in the Act that the Court ought to refuse to recognise the transaction.
Cases dealing with illegality generally have regard to the illegal purposes of those involved in impugned transactions. Here the only illegal purpose was on the part of the person who withdrew the money on 10 August 2010. No illegal purpose could be attributed to the bank. No bad faith could be attributed to the bank, although it might be said that it neglected its own interests in failing to freeze the account. Having regard to the terms of s 52(3) I think it is relevant that the bank paid away its own money, and in that sense gave full consideration for the transaction. Further, having regard to the terms of s 68(2)(a) of the Act, it is clear that at general law, under the all monies clause in the mortgage, and leaving the breach of the restraining order to one side, the monies are owing under the mortgage. The bank’s rights under the mortgage were preserved by the restraining order.
Often in illegality cases there is a competition between a party with an illegal purpose and a party who is viewed by the Court as innocent. The situation here contrasts in the sense that both the State and the bank are free from any illegal purpose. The person who withdrew the money on 10 August 2010 presumably did have an illegal purpose and is the only person who has benefitted from the transaction. In such circumstances there is little attraction in an argument that the loss ought to lie where it falls.
Disposition
In the circumstances I am satisfied that I should make an exclusion order pursuant to s 65 of the Act. Having regard to the terms of s 69(1) of the Act I make the following orders and declarations:
1.I declare that Bank of Queensland Limited has an interest as mortgagee under Registered Mortgage 709627798 in the following property of Brett Raymond Stevens:
(a)Real property located at 100 Callaghan Road, Narangba described as
Lot 2, Registered Plan 851006, County of Stanley, Parish of Redcliffe registered in the name of Brett Raymond Stevens, Title Reference 18561243;
(b)Real property located at 92 Callaghan Road, Narangba, described as
Lot 27, Registered Plan 77681, County of Stanley, Parish of Redcliffe registered in the name of Brett Raymond Stevens, Title Reference 12784172;
(c)Real property located at 82 Callaghan Road, Narangba described as
Lot 28, Registered Plan 77681, County of Stanley, Parish of Redcliffe registered in the name of Brett Raymond Stevens, Title Reference 12781042.
2.I declare that the Bank of Queensland Limited’s interest in the aforesaid property extends to the repayment of the total amount owing on Loan Account No 20759418 in the name of Brett Stevens Transport Pty Ltd.
3.I order that proceeds of sale realised pursuant to Registered Mortgage
No 709627798 are to be applied to the extent necessary to extinguish the liability balance in respect of Loan Account No 20759418.
4.I exclude the Bank of Queensland Limited’s property, to the extent stated in orders numbered 1, 2 and 3 above, from any forfeiture order made in these proceedings pursuant to the Criminal Proceeds Confiscation Act 2002.
I will hear the parties as to costs.
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