Carolan v State of New South Wales

Judgment 1In the evening of 11 August 2011 in the foyer of the Hilton Hotel in Sydney, Mr Sean Carolan (the plaintiff) was found to be in possession of a wheeled suitcase. Inside that suitcase was $702,000 in cash, comprised of $50 Australian notes bundled together with rubber bands (the cash). The cash was seized by officers of the New South Wales Commissioner of Police (the second defendant, to whom I shall refer simply as the defendant). They have retained it ever since. The plaintiff has not been charged with any offence. Nor are there any civil proceedings on foot with regard to the cash. 2Pursuant to ss 219 and 229 of the Law Enforcement (Powers and Responsibilities) Act 2002 (NSW) (LEPRA), the plaintiff seeks an order that the cash be returned to him. The issue for determination by me with regard to that claim is: am I satisfied on the balance of probabilities that the plaintiff is "a person who appears to be lawfully entitled to the property"? 3Furthermore, incidental and ancillary orders are sought, pursuant to s 219(2)(e) of LEPRA, for interest on the cash from the date of its seizure at the rates prescribed by the Civil Procedure Act 2005 (NSW) and the Uniform Civil Procedure Rules 2005 (NSW). 4In the alternative, the plaintiff seeks a declaration that the cash has been "wrongly detained" by the defendant. That claim is based upon the proposition that the plaintiff has proven on the balance of probabilities that the defendant has committed the intentional torts of detinue or conversion. The questions for determination by me in that regard are: has the plaintiff established either of those torts on the balance of probabilities? If so, should I exercise my discretion to grant a declaration to that effect? Basis of application 5The position of the plaintiff as to the provenance of the cash may be summarised as follows. It is derived from documentary and oral evidence placed before me. 6Mr Andrew McManus, an Australian concert promoter, wished to bring the well-known Texas trio ZZ Top to Australia for a series of concerts. Mr McManus was short of funds due to various issues he had had with the Australian Taxation Office (ATO). He arranged for a Mr Owen Hanson, "a very good friend of a friend" of Mr McManus who was based in Los Angeles, California, to pay Mr Harold Colfman, the manager of the band, the sum of US$700,000 in cash. Mr Hanson arranged for that sum to be delivered to a "runner" of Mr Colfman. No receipt, or other record of that transaction, was sought, or provided, or otherwise generated. 7The result of Mr Hanson paying Mr Colfman US$700,000 in order to advance the business interests of Mr McManus was that Mr McManus owed Mr Hanson that sum. It was arranged between Mr McManus and Mr Hanson that the sum would be repaid from cash gate receipts derived from the tour once it concluded. 8Mr Hanson came to Australia and stayed in an apartment in Kent Street Sydney. In order to repay the debt, Mr McManus arranged for Mr Craig Haeusler, who worked in "security" for Mr McManus, to deliver AU$702,000 in cash to Mr Hanson at his apartment (that unusual sum reflected the exchange rate between the Australian dollar and the US dollar at the time). That occurred in May 2011. Mr Hanson counted the money in the presence of Mr Haeusler and was satisfied with it. The debt was thereby repaid, with the result that Mr Hanson was in a foreign country with a suitcase containing AU$702,000 in his possession. Again, no receipt or other documentary record of the transaction whereby Mr McManus repaid his substantial debt to Mr Hanson was generated. 9Whilst in Australia and in possession of the cash, Mr Hanson decided to visit his aunt, who lived in Perth, Western Australia. He flew there, and remained in that city for at least several days. Whilst several thousand kilometres from Sydney, he was content to leave the cash hidden in the roof cavity above the bathroom of the apartment in which he had been staying in Kent Street. 10Later, Mr Hanson returned to Los Angeles. He did not seek to deposit the cash in an account with any financial institution in Australia or in the United States. Nor did he seek somehow to take it with him to California. Nor did he entrust it to anyone else in Australia. Instead, he adopted the same procedure as before: he hid it above the bathroom in the rented apartment. On that basis Mr Hanson travelled to the other side of the Pacific Ocean and stayed there for some weeks. After that, he returned to Sydney. 11At that time, Mr Hanson was attending the Fitness First gym in Bond Street Sydney. Through two American women known by the nicknames of "Soul" and "Barb", he was introduced to the plaintiff, who was employed as a personal trainer there. Over several weeks, Mr Hanson trained intensively with the plaintiff. They got to know each other, and the plaintiff explained that he had a plan to develop "effortless" weight loss clinics. Mr Hanson realised that the technology available in Sydney was less advanced than the technology available in such places as Beverly Hills, California. He decided to invest in the business of the plaintiff, including by way of purchasing a particular electronic device and having it shipped to Sydney. 12The result was that Mr Hanson decided to invest very substantial sums in the business of a personal trainer whom he had known for several weeks in a country far from his home. 13Mr Hanson decided that he would invest somewhere between $150,000 to $250,000 of the $702,000 in the business of the plaintiff. And he would do so by giving the plaintiff that sum in cash. In order to do so, on 11 August 2008 Mr Hanson invited the plaintiff to his apartment in Kent Street. 14Earlier that day, the red motorcycle of the plaintiff had broken down outside a restaurant in Woolloomooloo. The plaintiff had left it there and checked into the Hilton Hotel. He walked from the Hilton Hotel to the apartment of Mr Hanson in Kent Street. There Mr Hanson provided the plaintiff with the suitcase full of hundreds of thousands of dollars in cash. The plaintiff caught a taxi from the apartment back to the hotel. Bearing in mind that his motorcycle had broken down, he was intending somehow to travel to his home near Penrith and keep the cash there. In due course, he was proposing to set up accounts in which the money could be retained more securely. 15In the meantime, an anonymous caller had telephoned the police and told them that the person staying in a certain room at the Hilton Hotel was in possession of a pistol. The police attended and discovered that the name of the plaintiff was registered against that room number. The police met the plaintiff when he arrived in the foyer wheeling the suitcase behind him. They searched him and located the cash in the suitcase. He was arrested on suspicion of having committed the offence colloquially known as "Goods in Custody", pursuant to s 527C of the Crimes Act 1900 (NSW). The suitcase was seized. The plaintiff provided the police with a version of events by way of a recorded interview in the early hours of the morning of 12 August 2011. No charge was preferred against the plaintiff, and he was permitted to leave the police station. As I have said, the cash remained behind, and it has been with the police ever since. 16The foregoing constitutes a very broad outline of the case for the plaintiff. It is convenient now to set out the legislation upon which the primary application is founded. Applicable legislation 17Although the application was originally said to be founded on ss 218 and 219 of LEPRA, in discussion it became clear that the former section, based as it is on demonstration of a particular state of mind of a police officer about which there is no evidence before me, is not directly relevant. 18Section 219 of LEPRA is as follows: 219 Disposal of property on application to court (1) A court may, on application by any person, make an order that property to which this Division applies: (a) be delivered to the person who appears to be lawfully entitled to the property, or (b) if that person cannot be ascertained, be dealt with as the court thinks fit. (2) In determining an application the court may do any one or more of the following things: (a) adjust rights to property as between people who appear to be lawfully entitled to the same property or the same or different parts of property (including adjusting rights by extinguishing, whether in whole or in part, any interests in the property of such persons), (b) make a finding or order as to the ownership and delivery of property, (c) make a finding or order as to the liability for and payment of expenses incurred in keeping property in police custody, (d) order, if the person who is lawfully entitled to the property cannot be ascertained, that the property be forfeited to the Crown, (e) make any necessary incidental or ancillary orders. (3) Property ordered to be forfeited to the Crown: (a) in the case of money, is to be paid to the Treasurer for payment into the Consolidated Fund, or (b) in any other case, may be sold by or on behalf of the Commissioner at public auction and the proceeds of sale are to be paid to the Treasurer for payment into the Consolidated Fund. (4) If the property is not money or is not fit or suitable for sale, or fails to sell at public auction, it is to be disposed of in accordance with the directions of the Commissioner. (5) An order under subsection (2) (a) that provides for the extinguishment, whether in whole or in part, of any interest in property operates to extinguish the interest according to its tenor. 19It can be seen that the plaintiff relies in particular on ss 219(1)(a), 2(b) and (2)(e). 20The solicitor for the defendant did not submit that I would make any alternative order such as forfeiture to the Crown, pursuant to s 219(2)(d). Nor did he dispute that, in light of the value of the cash, the application had been brought appropriately in this Court, in accordance with s 229 of LEPRA. He simply submitted that the test in s 219(1)(a) had not been made out. 21I turn now to consider the evidence, which was in the main placed before me by way of affidavits and included the cross-examination of the plaintiff, in a little more detail. Aspects of evidence considered broadly chronologically 22Detective Sergeant Grant Findley swore an affidavit on 11 June 2013 that was read before me by the defendant. The affidavit attaches a number of documents that disclose the following chronological background. 23According to a COPS entry that was exhibit GF-1 to the affidavit of Detective Sergeant Findley, on arrest the plaintiff told police that "he didn't know what was in the bag and that [Mr Hanson] gave him the bag to mind for the night". That is in sharp contrast to the position of the plaintiff before me. 24As I have said, the plaintiff engaged in a recorded interview in the early hours of 12 August 2011, and a transcript of it became exhibit GF-2 to the same affidavit. 25In summary, the plaintiff explained that he worked as a personal trainer and had known Mr Hanson for a short period of time. He was expecting to receive between $100,000 and $250,000 as a cash investment, and was surprised to be informed by the police that in fact the suitcase contained very much more than that. 26His intention if he had not been arrested had been to take the money to his home in the outer western suburbs of Sydney. He would have been unable to bank the money, because he had no appropriate account set up. The business in which Mr Hanson had invested was to be called "Change for Life", and the plaintiff was trying to get it "off the ground". 27The plaintiff claimed that Mr Hanson told him that he had lost a lot of money gambling at the Star Casino, and that he wished the plaintiff to take possession of all of the cash so that Mr Hanson did not lose any more of it. 28The plaintiff believed that Mr Hanson was involved in the "money trade, sport trade, overseas". 29When the plaintiff picked up the bag, he did not have a "sneak peek" in it. 30In the process of setting up his business, the plaintiff had consulted a man whom he believed to be a solicitor, Mr Nigel Cade. 31On 20 December 2011, Mr Hanson signed a statutory declaration that was provided to the police (exhibit GF-7 to the affidavit of Detective Sergeant Findley). However, because Mr Hanson was not available for cross-examination before me as requested by the defendant, the statutory declaration was not read by the plaintiff as going to the truth of its contents, and accordingly I shall not discuss them. 32On 14 March 2012, Mr McManus sent an email marked "without prejudice" to the solicitor for the plaintiff (exhibit GF-4). Mr McManus explained that "the funding that is currently being held by the NSW police is monies that were loaned to me by Owen Hanson covering off on the ZZ Top tour held in May of 2011." Mr McManus also explained that "I now need these funds back urgently to fund Lenny Kravitz tour as I have had to repay Owen [Hanson] separately." 33In short, it seems that at that stage Mr McManus was asserting that the money seized from the plaintiff in fact belonged to Mr McManus. 34On 4 April 2012, Mr McManus engaged in a recorded interview with police (exhibit GF-5). The last time he had seen Mr Hanson was "in Aspen, then LA" in February 2011 (Q106). In summary, the position of Mr McManus was that the money was "not the proceeds of crime, it's the [proceeds] of Andrew McManus" (Q293). A little later, Mr McManus said "it's pretty obvious, though. I gave some one 700 large, and you've found someone with 700 large" (Q339). 35On 12 April 2012, Mr Haeusler engaged in a recorded interview with police (exhibit GF-6). In a nutshell, his position was that he was employed by Mr McManus. He explained the circumstances in which he had delivered the $702,000 on behalf of Mr McManus to Mr Hanson at the apartment in Kent Street. He himself had received the cash from Mr McManus contained in "just bags". Mr Haeusler kept the money hidden in his own apartment for four to five days before delivering it to Mr Hanson. 36On 24 April 2012, Mr Hanson sent some taxation records to the solicitor for the plaintiff (exhibit GF-8). They were an unsigned US individual income tax return for the year 2011. Under "total gross receipts" is an entry for $725,000. Under "total other expenses" is an entry for $707,115. 37On 5 June 2012, Mr Nigel Cade made a statement to police (exhibit GF-9). In short he explained that he was a "qualified Loss Adjuster/ Insurance Assessor". He explained that he had developed a friendship with the plaintiff about two years before then, and that in late June or early July 2011 he had provided the plaintiff with advice about setting up a weight loss business. Although his statement referred to a number of handwritten notes of Mr Cade that were attached to it, they were not placed into evidence before me. 38Mr Cade said of Mr Hanson that he "was never staying in the same hotel for more than about 3 nights in a row, or he would have more than one hotel booked at the same time." He also referred to a meeting with Mr Hanson after the cash had been seized. At that meeting Mr Hanson told Mr Cade that, the evening before, Mr Hanson and the plaintiff had been at the Star Casino in Sydney, and the plaintiff had had a heated argument with a gentleman known as "Robinhood". 39On 4 July 2012, Mr Hanson engaged in a recorded interview with New South Wales police by telephone from Los Angeles (exhibit GF-10). 40He explained that the first time he arrived in Australia was on 11 May 2011. He met the plaintiff at the end of May or the beginning of June. He departed Australia on 19 June 2011 for the United States, and then returned on 7 July 2011. He departed for good, after the money had been seized, on about 15 August 2011. 41 He explained how he had shipped over an $80,000 machine called the "Zerona Laser" (Q64). He was planning to invest "about $100,000" (Q83). 42When asked by the Detective to provide the details of the provenance of the $702,000, Mr Hanson replied "Do you want me to tell you the, the full story of how basically this money was laundered and et cetera?" (Q102) 43Mr Hanson explained that the arrangement whereby he would provide the money to Mr Colfman, and thereafter be reimbursed by Mr McManus, was a "sweetheart deal" for Mr Hanson (Q103-4). He recounted how he met Mr Haeusler in a bar before Mr Haeusler delivered the cash from Mr McManus (Q114). Mr Haeusler delivered that cash at "the end of May. Maybe June" (Q120). Mr Hanson recalled that the suitcase weighed "eighty pound" (Q135). After that, he visited his aunt in Perth. Thereafter he departed Australia for the first time, on both occasions leaving the cash behind in the location and circumstances that I have already recounted. 44He explained that the entry on the 2011 tax return that referred to "total gross receipts of $725,000" related to the cash found in the possession of the plaintiff (Q189). He denied that he knew a man who called himself "RobinHood", although he did recall meeting a man who seemed to be "from Italy" in the company of the plaintiff (Q199). He also had a memory of the advisor Mr Cade (Q211-7). 45Mr Hanson denied that he had said anything to the plaintiff about needing to give money to the plaintiff in order to avoid Mr Hanson losing any more of it in the Sydney Casino (Q223-5). He told the police that he told the plaintiff that "I wanted [him] to take the money because I'm moving back to the US and I want it in a safe spot. And I told him to put it in his farm in Penrith" (Q226). 46On 25 May 2013, the plaintiff swore an affidavit. His position in short was that he believed that the money given to him by Mr Hanson was legitimately obtained. He had been informed by Mr Hanson "that he wished to invest these monies in a company" of which the plaintiff was a director. He explained that his position was that he is "responsible and liable to the investor for these funds", and was seeking the return of them. 47In cross-examination before me, the plaintiff accepted that in his original recorded interview he had not mentioned that, to his knowledge, Mr Hanson was involved in the promotion of music tours. 48He agreed that he had not known Mr Hanson for very long when he received the suitcase. He also agreed that he was surprised to discover that it contained over $700,000 in cash, because he was expecting "somewhere between 100 and 250". 49The plaintiff agreed that it was "extraordinary" for somebody to give a suitcase containing that amount of cash to "a person who was their personal trainer". 50He confirmed that, if he had not been arrested, he would have taken what he believed to be something in the order of $250,000 cash to his home. No accounts had been set up to receive the funds at the time of receipt, even though he was expecting to receive the investment monies from Mr Hanson. 51The plaintiff confirmed that it was his position that Mr Hanson had told the plaintiff to take the money because Mr Hanson was concerned about losing more of it at the Sydney Casino. 52The plaintiff confirmed that he believed "at the time that the money was legitimate, absolutely." 53Finally, the solicitor for the plaintiff gave evidence before me. He was cross-examined about the state of the evidence, including the unavailability of some witnesses; I consider that those exchanges do not require further analysis in this judgment. Submissions of the plaintiff 54Counsel for the plaintiff accepted that the way business was done as outlined above was "unorthodox". He also accepted that aspects of the evidence were "extraordinary". 55Nevertheless, he submitted that it is significant that no charges have been laid; that any previously available summary charges are now statute barred; that no civil forfeiture proceedings are on foot; and that there is no explicit evidence that an investigation of any kind is ongoing. 56With regard to the latter, he invited my attention to authorities to the effect that the police cannot retain items in the hope that one day they may become part of a prosecution: see generally Gordon v Chief Commissioner of Metropolitan Police (1910) 2 KB 1080 at 1096-7; McQueen v Hawi [2008] NSWSC 136 at [19]; Fantakis v Commissioner of Police [2013] NSWSC 685 at [30]. 57In short, his position was that there is nothing to gainsay the proposition that his client was in possession of the money lawfully, remains entitled to it, and should have it returned to him. 58He also submitted that, in cross-examination of the plaintiff, the solicitor for the defendant had not sufficiently complied with the well-known rule in Browne v Dunn (1893) 6 R 67 HL to permit me to find against the application on the basis of rejecting the credibility of the plaintiff. 59In support of the proposition that the police had committed an intentional tort, he queried whether the police in truth acted lawfully when they searched the plaintiff, arrested him, and seized the cash on 11 August 2011. 60In discussion between Bench and Bar table, he accepted that in order to make out detinue or conversion, one must demonstrate a lawful right to the property in question. In that regard, he accepted that it is inconceivable that, for example, a person could sue in this Court if he or she entrusted a large quantity of heroin to another person for a certain period pursuant to an agreement, and the other person refused to return it at the end of that period. Determination 61Turning first to the submission that the police did not behave lawfully on 11 August 2011, I respectfully reject that proposition on the evidence placed before me. I do so for the following reasons. 62As a result of the phone call and its particularity with regard to the room in which the plaintiff was staying, I consider that the police had reasonable grounds to suspect that he was in possession of a pistol, and could therefore stop, search and detain him pursuant to s 21(1)(b) or (c) of LEPRA. Once they located $702,000 in cash in the possession of the plaintiff in a suitcase in a hotel lobby, I consider that they were soundly within their rights to arrest the plaintiff with regard to a charge pursuant to s 527C of the Crimes Act, and to seize the cash pursuant to s 23(1)(c) or (d) and s 23(3) of LEPRA. I respectfully reject the submissions of counsel for the plaintiff on those topics. 63As for the rule in Browne v Dunn, it is true that the solicitor for the defendant did not explicitly put to the plaintiff in the witness box that his evidence was a lie. But I consider that the cross-examination fairly and sufficiently made clear to the plaintiff that the position of the solicitor for the defendant was that the plaintiff was not lawfully entitled to the cash. 64Turning to the central issue, it was not in dispute between the parties that, pursuant to s 219 of LEPRA, the plaintiff bears the onus of persuading the Court that he appears to be lawfully entitled to the cash: see Application of Hampton (1972) 3 DCR 59 at 61; Anderson v Judges of the District Court (NSW) (1992) 27 NSWLR 701 at 710-11. To state my determination succinctly, I am not satisfied on the balance of probabilities of that proposition. 65Of course, I have not determined to the criminal standard, the standard discussed in Briginshaw v Briginshaw (1938) 60 CLR 336, or indeed the civil standard, that anyone has told lies to the police, or indeed to the Court by way of affidavit or in the witness box. It is simply a matter of not being satisfied of the affirmative proposition for which counsel for the plaintiff contends on the balance of probabilities. I have come to that view for the following reasons. 66First, despite the absence of direct evidence to that effect, I am prepared to infer that an investigation by the police into the provenance of the cash may be continuing. I accept that it can be harder to follow transfers of money and to locate and speak to individuals internationally than domestically. Having said that, I also accept that the situation cannot remain in abeyance indefinitely, and that eventually the police will have to state determinatively whether or not they propose to bring any proceedings either against the plaintiff or with regard to the money. However, whilst it is true that over three years have passed since the money was seized, I do not consider that that point of determination has yet been reached. 67Secondly, there is no satisfactory explanation why very large sums of money were being transferred in cash and without any documentary trail. I include in that the transfer by Mr Hanson to Mr Colfman; the transfer by Mr McManus to Mr Hanson via Mr Haeusler; and the transfer from Mr Hanson to the plaintiff. 68Thirdly, there is no satisfactory explanation why Mr Haeusler would choose to keep hundreds of thousands of dollars in a rented apartment for a number of days before providing it to Mr Hanson. 69Fourthly, there is no satisfactory explanation why Mr Hanson would invest hundreds of thousands of dollars in cash in the business concept of a personal trainer who resided in a foreign country and whom he had known for no more than several weeks. 70Fifthly, there is a lack of consistency in the evidence as to whether Mr Hanson was investing the whole $702,000, or merely a part thereof in the business of the plaintiff, and if the latter, the actual amount. 71Sixthly, although the investment from Mr Hanson was not unexpected by the plaintiff, the latter had not set up any business accounts in order to receive those sums and hold them securely. He was content to intend to transport the cash to his home in the Penrith area, and thereafter keep it there until those accounts could be created. 72Seventhly, the things recorded as having been said by the plaintiff when he was originally arrested are not consistent with his subsequent position. 73Eighthly, the events at the Star Casino on the afternoon and evening in question remain shrouded in mystery. 74Ninthly, the open reference by Mr Hanson to the cash having been "laundered" hardly instils confidence that the plaintiff is lawfully entitled to it. 75Tenthly and most importantly, it is extraordinary that one would leave over $700,000 in cash hidden in the ceiling cavity above the bathroom of a rented apartment in Sydney whilst one travelled across the Australian continent in order to visit a relative. And it is even more extraordinary to leave it there when one subsequently returned to the United States for a number of weeks. 76In short, the combined effect of those aspects of the evidence that underpins the application of the plaintiff has failed to persuade me on the balance of probabilities that he is lawfully entitled to the $702,000. It follows that the plaintiff has not established the state of affairs required by the statute. 77It follows that the test in s 219 of LEPRA has not been made out, and accordingly I do not propose to order that the cash be delivered to the plaintiff by the defendant. Contingent analysis 78Even if I am wrong in my evaluation of the evidence that founds the application of the plaintiff, and my determination of whether it should lead to me being satisfied on the balance of probabilities of the state of affairs required by the statute, it must surely be the case of the plaintiff that Mr Hanson, not the plaintiff, is entitled to the vast bulk of the cash. 79After all, it is the position of the plaintiff that he was merely looking after the majority of the money for Mr Hanson, and at most $250,000 of it was an investment. I consider that it follows that $452,000 at the least should be returned to Mr Hanson if the thesis of counsel for the plaintiff were accepted. But in any event, because of my primary finding, that contingent question does not require further consideration. Declaration with regard to intentional torts? 80The written and oral submissions of counsel for the plaintiff in support of the proposition that I would be satisfied on the balance of probabilities that officers of the defendant had committed detinue or conversion were very concise. I propose to adopt a similarly summary approach in dealing with this claim. I am not prepared, pursuant to the common law principles of trespass to goods, to make a declaration that the cash is being wrongfully detained and should be returned to the plaintiff. That is so for the following reasons. 81First, for the reasons discussed above, I consider that the police were entitled to seize the cash. 82Secondly, it is well established that, when investigations are continuing or the item in question may be required as evidence in a prospective prosecution, it is legitimate for the item to be detained by police: see Gollan v Nugent (1988) 166 CLR 18 at 43-44; Malone v Metropolitan Police Commissioner [1980] QB 49. As discussed above, I am prepared to infer that investigations may be continuing. 83Thirdly, to the extent that a plaintiff must show a right to immediate possession derived from some proprietary or possessory interest in order to pursue a claim in detinue or conversion, that must mean a lawful interest: see generally Gollan v Nugent at 32, 36-37, 44 and 46. As I have indicated, there is a question about that issue that has not been answered in the affirmative. 84Finally, it is well known that a declaration is a discretionary remedy. In the totality of the circumstances that I have set out, including the very limited cross-examination that took place, even if I am wrong in my foregoing analysis of legal principle, I am not inclined to exercise that discretion in favour of the plaintiff. Costs 85No submission was made by either party contrary to the usual position that costs should follow the event. Orders 86I make the following orders: (1)Orders one to seven in the further amended statement of claim filed 12 November 2013 are dismissed. (2)The plaintiff must pay the costs of the second defendant before me.