Commonwealth of Australia v Lee

Conveyancing Act 1919 (NSW) LEGISLATION CITED : Proceeds of Crime Act 2002 (Cth) Financial Transaction Reports Act 1988 (Cth)

Commonwealth Director of Public Prosecutions v Hart [2007] QCA 184; (2007) 172 A Crim R 57 CASES CITED : Woodson (Sales) Pty Ltd v Woodson (Australia) Pty Ltd (1996) 7 BPR 14,685 Tory v Tory [2007] NSWSC 1078

Commonwealth of Australia PARTIES : v James Young-Soo Lee

COUNSEL : Plaintiff: A Spencer Defendant: T Russell (solr)

SOLICITORS : Plaintiff: Addisons Defendant: ERA Legal

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2913/08 Commonwealth of Australia v James Young-Soo Lee JUDGMENT 1 HIS HONOUR: This is an application that the proceedings commenced by the Commonwealth of Australia for orders under s 66G of the Conveyancing Act 1919 (NSW) be stayed until further order. The proceedings brought by the Commonwealth arise from the forfeiture of the interest of Maria Jung-Phee Lee of an interest in a property in Augusta Street, Strathfield. 2 The defendant to the proceedings and the applicant on the present motion is a co-owner of that property. He is Mrs Lee's husband. The interest of Mrs Lee in the property became vested in the Commonwealth pursuant to ss 92 and 96 of the Proceeds of Crime Act 2002 (Cth). 3 On 19 May 2004, a restraining order was made pursuant to s 17 of that Act in the following terms: " Pursuant to section 17 of the Proceeds of Crime Act 2002 ('the Act'), specified property (within the meaning of 'property' as defined in section 338 of the Act) of Maria Jung-Hee Lee ('the Defendant'), being the Defendant's interest in the property described in the First Schedule is not to be disposed of or otherwise dealt with by any person. "

4 The property in Augusta Street, Strathfield was one of the properties specified in the first schedule. Section 338 of the Act defines "property" as meaning "real or personal property of every description, whether situated in Australia or elsewhere and whether tangible or intangible, and includes an interest in any such real or personal property." 5 On 23 November 2005, Mrs Lee was convicted of twelve offences against subs 31(1) of the Financial Transaction Reports Act 1988 (Cth). It is common ground that she was convicted of a serious offence within the meaning of subs 92(1) of the Proceeds of Crime Act. It is also common ground that pursuant to that section, her interest in the property was forfeited to the Commonwealth six months after the day of her conviction, namely on 25 May 2006. It is common ground that the Commonwealth has become registered as proprietor of the property as tenant-in-common in equal shares with Mr Lee, the defendant in these proceedings. 6 On 8 August 2006, Mr Lee and five other plaintiffs instituted proceedings number 13862 of 2006 in the Common Law Division claiming orders pursuant to ss 102 and 104 of the Proceeds of Crime Act. The orders sought were as follows: " The plaintiffs claim: Pursuant to s 104 and s 102 of the Proceeds of Crime Act 2002, an order (a) declaring the nature, extent and value of each Plaintiff's interest in the property described in the Schedule as follows:

(i) Schedule 1 - James Young-Soo Lee ...

(b) directing the Commonwealth to transfer the interest in the property to [the plaintiff];

(c) declaring that there is payable by the Commonwealth to each plaintiff an amount equal to the value declared under paragraph (a) " 7 Those proceedings have not been determined. The evidence for the plaintiffs has only recently been served. A substantial reason for the delay is the appointment of receivers to the assets of some of the plaintiffs and to some of the assets which are the subject of the orders sought in those proceedings. The receivers have now realised sufficient property to discharge the debt of the secured creditors by whom they were appointed, and it is not expected the receivership should further delay the resolution of those proceedings. Having said that, it is common ground that, unless the proceedings are settled, it is not expected that they would be ready for hearing in less than twelve months. 8 The property in question is the family home of Mr and Mrs Lee and their son. On 23 May 2008, the Commonwealth filed a summons in these proceedings seeking orders under s 66G of the Conveyancing Act. Pursuant to s 99, the Commonwealth could not dispose of, or otherwise deal with, property forfeited under s 92 until the period for appeals had expired. Mrs Lee sought special leave to appeal to the High Court but special leave was refused on 31 August 2007. Section 100 provides that if subs 99(1) no longer prevents disposal of or dealing with particular property forfeited under s 92, the Official Trustee must, on the Commonwealth's behalf and as soon as practicable, dispose of any of the forfeited property that is not money. The section then deals with how amounts received from the disposal are to be dealt with. The delay between the Commonwealth's being able to dispose of Mrs Lee's interest in the property and its taking steps to do so was the period from 31 August 2007 to 23 May 2008. 9 Mr Lee contends that the Commonwealth's proceedings should be stayed until the proceedings number 13862 of 2006 are determined. He said: " ... I respectfully request that this Court stay these proceedings pending resolution of the Substantive Proceedings, so that Maria and I, and our son Timothy, may continue to live in the Property until this Court has determined the extent of my interest in the Property so that the Commonwealth and I can ascertain the amount I need to pay to the Commonwealth to purchase Maria's interest in the Property. "

10 In an affidavit filed in the 2006 proceedings, Mr Lee stated that he, along with other plaintiffs, was seeking relief under ss 102 and 103 of the Proceeds of Crime Act and advanced reasons as to why leave should be given to enable such an application to be made. The summons in the Common Law proceedings does not include a claim for relief under s 103. 11 Mr Spencer, for the Commonwealth, has submitted that Mr Lee has shown no arguable case for an order under s 102 in relation to the forfeiture of Mrs Lee's interest in the Augusta Street property. That section provides: "102 Court may make orders relating to transfer of forfeited property etc. (1) If property is forfeited to the Commonwealth under section 92, the court that made the restraining order referred to in paragraph 92(1)(b) may, if: (a) a person who claims an interest in the property applies under section 104 for an order under this section; and (b) the court is satisfied that the grounds set out in subsection (2) or (3) exist; make an order: (c) declaring the nature, extent and value of the applicant's interest in the property; and (d) either: (i) if the interest is still vested in the Commonwealth - directing the Commonwealth to transfer the interest to the applicant; or (ii) declaring that there is payable by the Commonwealth to the applicant an amount equal to the value declared under paragraph (c). (2) An order under this section may be made if: (a) the applicant was not, in any way, involved in the commission of the offence to which the forfeiture relates; and (b) the applicant's interest in the property is not subject to the effective control of the person whose conviction caused the forfeiture; and (c) the applicant's interest in the property is not proceeds of the offence or an instrument of the offence. (3) An order under this section may also be made if: (a) the property was not used in, or in connection with, any unlawful activity and was not derived or realised, directly or indirectly, by any person from any unlawful activity; and (b) the applicant acquired the property lawfully; and (c) the applicant is not the person convicted of the offence to which the forfeiture relates. " 12 The reason for Mr Spencer's contention is that in this case the property which had been forfeited to the Commonwealth under s 92 is not the entirety of the Augusta Street property, but Mrs Lee's interest in it. It was her interest in the property which was the subject of the restraining order rather than the property itself. (cf Commonwealth Director of Public Prosecutions v Hart [2007] QCA 184; (2007) 172 A Crim R 57 at 61 [20]). 13 Accordingly, so it was submitted, Mr Lee could not claim an interest in the property forfeited except if he could show that Mrs Lee's legal interest as tenant-in-common was held beneficially for him in whole or in part, or that he otherwise had an equitable interest in her legal interest as tenant-in-common or as joint tenant of the property. I accept the force of that submission. 14 In his affidavit sworn 3 September 2008 in proceedings 13862 of 2006, Mr Lee says that the Augusta Street property was purchased and paid for with money belonging jointly to him and Mrs Lee. There is no evidence before me that would support his claim to a beneficial interest in Mrs Lee's share of the property. There are many difficulties with the construction of s 102 of the Act, but given that all that has been forfeited to the Commonwealth is Mrs Lee's interest in the property, I cannot see, on the materials on the present application, how an order could be made declaring him to have an interest in the property beyond the interest which he has as tenant-in-common with the Commonwealth. 15 The position is not so clear if an order were sought under s 103 of the Act leading to the buy-back of Mrs Lee's forfeited interest in the property pursuant to s 105. 16 Section 103 is also a difficult provision. Section 103 provides: "103 Court may make orders relating to buying back forfeited property If property is forfeited to the Commonwealth under section 92, the court that made the restraining order referred to in paragraph 92(1)(b) may, if: (a) a person who claims an interest in the property applies under section 104 for an order under this section; and (b) the court is satisfied that: (i) it would not be contrary to the public interest for the interest to be transferred to the person; and (ii) there is no other reason why the interest should not be transferred to the person; make an order: (c) declaring the nature, extent and value (as at the time when the order is made) of the interest; and (d) declaring that the forfeiture ceases to operate in relation to the interest if payment is made under section 105. " 17 Prima facie, it is hard to reconcile s 96 which provides that property forfeited under s 92 vests at the time of forfeiture in the Commonwealth absolutely, with s 103, which contemplates that an order may be made declaring the nature, extent and value, as at the time the order is made, of an interest claimed by a person in the property, being apparently the same property forfeited to the Commonwealth under s 92. 18 That is not the only difficulty. Notwithstanding that, in this case, the property forfeited to the Commonwealth was Mrs Lee's interest in the Augusta Street property, it may be arguable that Mr Lee is a person who could claim an interest in the property within the meaning of s 103(a). 19 Alternatively, it may be possible for Mrs Lee to make an application under the section, although she is not at the moment a party to the 2006 proceedings. It was submitted for the Commonwealth that it will, in any event, be open to Mr Lee to seek to purchase the property or perhaps Mrs Lee's interest in the property from trustees for sale if they were appointed. 20 I understand from the solicitor appearing for Mr Lee on this application, Mr Russell, that a reason no claim has been made in the summons for an order under s 103, notwithstanding the terms of Mr Lee's affidavit, is that it is expected that that course would be open to him. There could, however, be a significant difference between an order under s 103 declaring the value of an interest in the property which had been forfeited to the Commonwealth leading to a person with an interest in the forfeited property buying back the interest at that valuation on the one hand, and a realisation of the property by trustees for sale on the other. 21 It is likely that the value of Mrs Lee's interest as co-tenant would not be the same as half of the value of the property (Woodson (Sales) Pty Ltd v Woodson (Australia) Pty Ltd (1996) 7 BPR 14,685 at 14,717; Tory v Tory [2007] NSWSC 1078 at [55], [63]). If it were proposed to pursue relief under s 103 of the Act in proceedings 13862 of 2006, then a stay of the s 66G proceedings would be warranted to enable that application to be dealt with on its merits under s 103. 22 However, it was submitted by Mr Spencer for the Commonwealth that such a stay would not give effect to the policy in s 100 that forfeited property should be disposed of as soon as practicable. It was also submitted that a stay would not give effect to the object of the Act (see s 5). 23 I do not consider that s 100 renders a stay impermissible. If, in order to allow the claim under s 103 to be litigated, the Court were to stay the present s 66G application, s 100 would not be infringed. What is "as soon as practicable" would be assessed by the Court's determining that the sale by trustees was not "practicable" because it could deprive Mr Lee of relief under s 103. 24 So far as giving effect to the principal objectives of the Proceeds of Crime Act are concerned, the only relevant objective on the present application is that in s 5(c), namely to punish and deter a person from breaching the laws of the Commonwealth. Whilst delay in resolution of the s 66G proceedings might be seen as delay in punishment, there are countervailing considerations, namely the position of Mr Lee and his son and, more particularly, the express wish of Mr Lee to bring proceedings forward under s 103. 25 Quite properly, Mr Spencer indicated that he did not put a case of prejudice as a reason for refusing the stay. 26 The difficulty, it seems to me, is that the ground upon which I consider a stay would be justified is not a ground which arises on the summons filed in proceedings 13862 of 2006, although it is a ground which Mr Lee has indicated he wishes to pursue. 27 Mr Russell did not proffer an undertaking to amend the summons or to seek leave to amend, if leave is required, to bring a claim under s 103. He said, and I find this quite understandable, that he would first need counsel's advice as to whether an application could properly be made under that section. Having regard to the difficulties of construction of the relevant provisions, I consider that to be a responsible position. However, if after taking such advice Mr Lee were to decide to bring such a claim or to seek leave to bring such a claim, then, in my view, the s 66G proceedings ought to be stayed until the determination of that claim. Were orders to be made under s 66G, such a claim would be rendered nugatory. 28 For these reasons I make the following orders:

Order that the proceedings be stayed until the determination of proceedings 13862 of 2006 or earlier further order provided that the stay shall lapse:

(a) if within 28 days the plaintiffs in proceedings 13862 of 2006 have not sought the defendant's consent to the filing of an amended summons seeking relief under s 103 of the Proceeds of Crime Act ; or

(b) if such consent is sought but is refused, the plaintiffs do not, within 14 days of such refusal, apply for leave to amend the summons to claim such relief; or

(c) if leave to amend the summons to claim relief under s 103 of the Proceeds of Crime Act is refused. 29 I consider that the proceedings should proceed in tandem with the Common Law proceedings 13862 of 2006. I order proceedings 2913 of 2008 be transferred to the Common Law Division and direct that those proceedings be listed for directions at the same time as proceedings 13862 of 2006. I understand that that means they will be listed for directions on 7 October 2008. 30 I will hear the parties on costs but my preliminary view is that costs should be costs in the proceedings. 31 [Parties address on costs.] 32 Costs of the notice of motion will be costs in the proceedings. The exhibit may be returned.

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