MATTER : Section 57 and s 41(1) of the Criminal Property Confiscation Act 2000

DIRECTOR OF PUBLIC PROSECUTIONS OF WESTERN AUSTRALIA against PAOLO MUSARRI, also known as PAUL MUSARRI

DIRECTOR OF PUBLIC PROSECUTIONS OF WESTERN AUSTRALIA against MALAGA HOLDINGS PTY LTD

BETWEEN : WESTPAC BANKING CORPORATION (ABN 33 007 457 141)

Criminal property confiscation - Appeal against judgment ordering sale of properties - Stay of execution - Principles to be applied

Criminal Property Confiscation Act 2000 (WA)

First Respondent : State Director of Public Prosecutions

Director of Public Prosecutions : State Director of Public Prosecutions

1 On 22 January 2001 Steytler J made a freezing order, subsequently varied by Roberts-Smith J on 23 February 2001, in respect of the assets of Mr Paolo (Paul) Musarri and Malaga Holdings Pty Ltd, a company with which Mr Musarri is closely associated.

2 On 18 December 2001 Hasluck J made orders on the application of two banks, Westpac and Citibank, for the sale of certain properties, mortgages in respect of them being in default. At the same time Hasluck J dismissed alternative applications by Mr Musarri and Malaga Holdings Pty Ltd for the sale of the properties and distribution of the proceeds on terms proposed by Mr Musarri. These terms had been opposed by the banks and by the Director of Public Prosecutions. The Director of Public Prosecutions supported the applications by the banks.

3 The properties and the specific orders are set out in the orders made on 18 December 2001. In brief, the banks have the right to sell after obtaining two valuations. After discharge of their mortgages and expenses the balance of the money is to be paid to the Director of Public Prosecutions. Citibank also has the right to appoint a receiver. The banks are proceeding with dispatch in accordance with these orders.

4 Mr Musarri and Malaga Holdings Pty Ltd have lodged a notice of appeal against the decision of Hasluck J. The appeal has been lodged within time and I do not consider there has been any delay in so doing. The appellants seek a stay of the orders of Hasluck J until the appeal is heard. This application is opposed by the banks. The Director of Public Prosecutions does not wish to be heard on the application.

5 An appeal does not act as a stay unless the Full Court or a Judge so orders. The principles are in common application daily and do not seem to be in contention in the present case. The onus is on the appellant to establish that special circumstances exist in the sense set out by Dawson J in the Federal Commissioner of Taxation v Myer Emporium (No 1) [1986] HCA 13; (1986) 160 CLR 220, 222, where he said:

"It is well established by authority that the discretion which it confers to order a stay of proceedings is only to be exercised where special circumstances exist which justify departure from the ordinary rule that a successful litigant is entitled to the fruits of his litigation pending the determination of any appeal. ... Special circumstances justifying a stay will exist where it is necessary to prevent the appeal, if successful, from being nugatory: see Wilson v Church [No 2] (1879) 12 Ch D 454, at p 458; Klinker Knitting Mills Pty Ltd v L'Union Fire Accident and General insurance Co Ltd [1937] VicLawRp 28; [1937] VLR 142. Generally that will occur when, because of the respondent's financial state, there is no reasonable prospect of recovering moneys paid pursuant to the judgment at first instance. However, special circumstances are not limited to that situation and will, I think, exist where for whatever reason, there is a real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed: see McBride v Sandland [No 2] [1918] HCA 59; (1918) 25 CLR 369, at p 375."

6 One factor relevant to the special circumstances is the strength of the appeal. In Ross v Carvallio, unreported; SCt of WA (Anderson J); Library No 960043; 31 January 1996 at 5 - 6 Anderson J put it this way:

"It was of course neither appropriate nor possible for the parties to fully argue out the merits of the appeal in this application. I think what the appellant is required to do in an application of this kind is to persuade the Judge that the appeal is not 'frivolous' (Erinford Property Ltd v Cheshire County Council [1974] 1 Ch 261 per Megarry J at 268) in the sense that there is "a reasonable ground of appeal" (Polini v Gray, Sturla v Freccia [1879] 12 Ch D 438 per Cotton LJ at 446) and that the appeal 'seems to raise an arguable point' (Jesasu Pty Ltd v Minister for Mineral Resources (1987) 11 NSWLR 110)."

7 In Bridge Pump Co v Fazio, unreported; SCt of WA (Murray J); Library No 980591; 2 October 1998, Murray J expressed the test at 8 where his Honour said:

"One should not overlook the need for a case of sufficient persuasive power in support of the stay to lead the Court to the conclusion that there have been demonstrated special circumstances of an exceptional character of the kind to which I have referred which would justify the grant of a stay."

8 The lack of a persuasive case for appeal suggests an absence of special circumstances. However, the presence of a reasonable case does not necessarily lead to the conclusion that special circumstances exist. A Judge must always bear in mind that this is not the hearing of the appeal and consideration of the strength of the appeal is made only for the purposes of the exercise of the discretion to grant a stay in all the circumstances.

9 The appellants' counsel argues strongly that the following factors, among others, amount to special circumstances:

(1) the appellant Mr Musarri is presumed innocent of the charges laid against him;

(2) the appellant Mr Musarri has been in custody since August 2000 having been repeatedly refused bail;

(3) the first trial is some way off - May 2002 - the other trials are not yet listed;

(4) because of his incarceration Mr Musarri has not been able to run his business contributing to his mortgage default;

(5) all his assets are frozen and he is effectively without income.

10 I do not consider that these matters, singly or in combination, constitute special circumstances in the sense used in the cases to which I have referred. They constitute a considerable misfortune to the appellants but have not been brought about by the proceedings before Hasluck J or his judgment, nor will a successful appeal lift the burden from the appellants in respect of any of these matters. The matters which I have listed are a consequence of the operation of the Criminal Property Confiscation Act 2000 and other events.

11 The Criminal Property Confiscation Act is new and radical legislation. It is a departure from the previous conviction based scheme under the Crimes (Confiscation of Profits) Act 1988. Its parameters have not yet been tested on appeal. Indeed, there have been almost no reported cases on its operation.

12 As the learned authors of "Criminal Law in Queensland and Western Australia", 3rd ed, state at p 717, par 31.11:

"It remains to be seen whether this new approach to confiscation of criminal proceeds will be more effective than the conviction-based scheme it replaced and whether the rights of innocent parties can be protected."

13 The fact that this appeal tests legislation which has a dramatic effect on the appellants' property rights is a significant circumstance to be weighed. Of itself it is not decisive.

14 The appellants also argue that the orders made on 18 December 2001 mean that Mr Musarri in particular is denied the opportunity of selling the properties in a manner under his control and on his terms. He is concerned, as his counsel put forward, that there is a real risk there will be a fire sale. To some extent this submission is bound up in the issue of the strength of the appeal. I will deal with it in the course of my consideration of that topic to which I now turn.

15 Hasluck J delivered judgment ex tempore on 18 December 2001. I have had access to the transcript of that judgment. I refer to it with the caveat that his Honour has not yet had the opportunity of revising it into a form he would consider acceptable for publication.

16 There are certain matters which were not in contention before Hasluck J and which indeed are not challenged on appeal. It is common ground that the properties were mortgaged to the banks and that the mortgagors are in default. It is also common ground that the properties should be sold. As Hasluck J put it:

"It is against that background where there is both a desire, it seems, upon the part of the mortgagor to realise his assets and a desire on the part of the mortgagee to enforce what the mortgagee sees as its legitimate security that the question of the discretion allowed to the court pursuant to s 91 falls to be considered."

"... That is the broadly stated fact that Mr Musarri and Malaga themselves do not oppose the sale, although there is ... some controversy as to the manner in which the sale should be conducted and how the proceeds should be applied."

17 Against that background the grounds of appeal can be considered. They attack the exercise of the judicial discretion asserting that the appellant should have been allowed to sell the properties, not the banks. However, such an argument overlooks the contractual arrangements of the mortgages. The judgment of Hasluck J of the Criminal Property Confiscation Act s 91, on the applications before him, did not and could not alter those contractual arrangements.

18 The banks had an entitlement to sell arising under the mortgages, not arising under the Act. The Criminal Property Confiscation Act, in its application to this case, does not give the court power to interfere with those arrangements. Once the court decided to exercise its discretion under s 91 to make an order, it was bound to make an order in favour of the banks, not the appellants.

19 In this sense I consider there is force in the contention of counsel for the second respondent that the appeal is misconceived. It follows that in my opinion no sufficiently special circumstances are shown by the grounds of appeal. Nevertheless, mindful of the limited discretion that I do exercise, I will consider each ground of appeal singly or in combination to see if my conclusion might alter.

"His Honour Erred in Law in the following particulars:

1. He wrongly classified the criminal property confiscation Act 2000 ('The Act') as an 'Ordinary Law' within the meaning of clause 39 Magma Carta (sic) 1215 accordingly he erred in failing to find that the Act was in breach of Clause 39

2. He failed to give due weight to Clause 12 of the Bill of Rights 1688 (Imperial)

3. He failed to give due weight to Clause 7 of the International Covenant on Civil and Political Rights 1966."

21 It is interesting that Magna Carta, a document designed to entrench the rights of the rich and powerful and which is explicitly anti-Semitic, is now regarded as a fundamental pillar of freedom. Be that as it may, the argument to be advanced on behalf of the appellants is likely to be novel and interesting but does not to my mind raise special circumstances.

22 I take the reference in the Bill of Rights 1688 article 12 be a reference to the article which reads:

"That all grants and promises of fines and forfeitures of particular persons before conviction are illegal and void."

23 The constitutionality of the Criminal Property Confiscation Act was not challenged before Hasluck J by reference to the Bill of Rights, so any error by the Judge is simply an error in failing to give a principle in the Bill sufficient weight.

24 If such an error occurred, it did so in the exercise of weighing many factors affecting judicial discretion and I do not consider anything special is raised in the ground relating to the Bill of Rights. So too with the reference to the Covenant on Civil and Political Rights which, although ratified by Australia, does not form part of its domestic law. Article 7 would seem to be to me, with great respect, irrelevant in any event.

"4) He wrongly held that the appellants should be treated with less regard for their personal and corporate rights in view of the terrorist attack on the World Trade Center on 11 September 2001.

5. He wrongly prevented the Appellant from selling their properties at proper market value to preclude mortgagee sales by the second Respondents and the third Respondent."

25 I have not found the reference in Hasluck J's judgment to the comment to which ground 4 relates. In assessing the reasonableness of the appeal in terms of special circumstances to justify a stay, I consider, for the reasons previously expressed, that ground 5 may involve a misconception. If, as seems common ground, the appellants are in default in their mortgages, the court has no power under s 91 to interfere with those arrangements to preclude mortgagee sales.

"6) a) He wrongly concluded that the terms and conditions of sale proposed by the Appellants were unsatisfactory.

b) Alternatively he failed to advise the Appellants counsel of the any (sic) specific concerns he had as to their proposals and failed to give the appellants the opportunity of addressing any such concerns.

7. He wrongly permitted the second Respondent and the third Respondent to realise their securities upon terms which allowed those Respondents:

a) To appoint valuers of the properties of their own choosing.

b) to allow sales to occur for up to 20% below the value determined by those valuers."

26 These grounds are fairly arguable but of themselves do not give rise to special circumstances. I have looked at the grounds separately and I have also considered their combined effect. In the words of Murray J in Bridge Pump Co v Fazio (op cit), and adapting them, the appeal does not have the persuasive effect to demonstrate special circumstances, whether of an exceptional character or otherwise, that would justify the grant of a stay.

27 In the end, the grant of a stay of execution is an exercise of judicial discretion balancing competing interests. I acknowledge that the refusal of a stay will cause prejudice to the appellants if their appeal is successful. The grant of a stay will cause considerable delay in the sale of properties, at least one of which the appellants' counsel asserts is deteriorating. This is a countervailing prejudice to the second and third defendants if the appeal is unsuccessful.

28 I do not consider that the lack of a stay will render the appeal nugatory. The banks are required to comply with the terms of the mortgages and their legal and equitable duties to the appellants in the sales so the appellants are, to a considerable degree, protected and the prejudice reduced. That said, I do acknowledge that a loss of the properties cannot be measured solely by the money or a compensatory award. However, I do not regard the proceedings as resulting in a nugatory effect.

29 In all the circumstances the appellants have failed to persuade me that special circumstances exist sufficient to justify a stay of the orders of Hasluck J made on 18 December 2001. The application will therefore be dismissed. Counsel for the appellants properly conceded that in this event it would be appropriate to make the substantive orders in the summons brought by Westpac in CIV 1034 of 2001.

30 Those orders will be made by me under the Criminal Property Confiscation Act, so in the result action FUL 3 of 2002 order that the summons for stay of execution dated 18 January 2002 be dismissed; in CIV 1034 of 2001 order that within 24 hours Paolo Musarri and Malaga Holdings Pty Ltd:

(a) take all reasonable steps to deliver up the keys to the property at 128 Balga Road, Balga, in the State of Western Australia to the applicant's (Westpac's) solicitors; and

(b) instruct any person or persons who may be occupying the property to permit valuers as nominated by the applicant reasonable access to the property for the purposes of valuing the property, and

(c) in default of compliance, the applicant be at liberty to enter into possession of the property.