MATTER : Section 79 of the Criminal Property Confiscation Act 2000 (WA)

Freezing Notice No WAPFN060009 Issued Against Phillip William Rowles on 13 January 2006

BETWEEN : PERMANENT CUSTODIANS LTD (ACN 001 426 384)

Criminal profits confiscation - Land frozen - Extent of interests restrained - Whether mortgagee's rights are frozen - whether a power of sale can be ordered

Criminal Property Confiscation Act 2000 (WA)

Transfer of Land Act 1893 (WA)

Permanent Trustee Co Ltd v The State of Western Australia [2002] WASC 22

Mansfield v The Director of Public Prosecutions for Western Australia [2005] WASCA 79; (2005) 153 A Crim R 41

1 30 Milner Road, High Wycombe is a property owned by Phillip William Rowles and Diana Joy McCamey as joint tenants. Pursuant to a loan agreement dated 7 January 2003, Permanent Custodians Ltd ("Custodians") advanced $300,000 to Mr Rowles and Ms McCamey on 14 February 2003 securing that loan by a registered first mortgage over the land.

2 On 30 August 2005, Custodians served a notice of demand on Mr Rowles and Ms McCamey because they were behind in their payments in the sum of $4,438.46. By 12 September 2005, the amount of arrears had risen to the sum of $35,605.80. The notice of demand triggered provisions in the contract making the whole debt payable.

3 Normally Custodians would have taken steps to enforce its rights under the mortgage including bringing proceedings under O 62A of the Rules of the Supreme Court 1971 (WA). However, things are not normal. Early this year, Mr Rowles was charged with a serious drug offence. If he is convicted, the Court may make an order that he is a drug trafficker under s 32A of the Misuse of Drugs Act 1981 (WA).

4 On 13 January 2006 a Justice of the Peace issued a freezing notice on property listed in a schedule to that notice.

5 The sole basis of the freezing notice is that Mr Rowles might be declared to be a drug trafficker. If he is so declared, then his property will be confiscated under the Criminal Property Confiscation Act 2000 (WA) ("CPCA") s 8. The freezing notice does not specify that 30 Milner Road was used in the commission of a crime or derived from the commission of a crime. Schedule 2 to the freezing notice relevantly reads as follows:

"(Interests owned and/or effectively controlled and/or given away by the Person):

The Land at Lot 103 on Diagram 71373 in Certificate of Title Volume 2081 Folio 559, commonly known as 30 Milner Road, High Wycombe."

6 The estimated value of the property is given as $750,000. And so it is that Custodians brings an originating summons filed 10 March 2006 for orders that:

"1. Freezing Order No. WAPFN060009 made by Trevor Grinter, Justice of the Peace, on 13 January 2006 (Freezing Notice) be set aside insofar as it relates to the real property described at Item 3 in Schedule 2 of the Freezing Notice (Property) and to the extent of the Plaintiff's interest in the Property.

2. A Declaration as to the extent of the Plaintiff's interest in the Property.

3. The plaintiff have leave to proceed to exercise its powers in relation to any money standing to the credit of Phillip William Rowles (Mortgagor) in account 1021925 with the Plaintiff as a consequence of the default of the Mortgagor arising from the issue of the Freezing Notice."

7 In Permanent Trustee Co Ltd v The State of Western Australia [2002] WASC 22; (2002) 26 WAR 1, a mortgagee was refused orders to sell the property by auction on its application under the CPCA s 91(2)(b).

8 This application is brought under the CPCA s 84(2) which relevantly provides that where a freezing notice has been issued because a person could be declared to be a drug trafficker, and 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, the Court may set aside the freezing notice and may make any necessary or convenient ancillary orders.

9 There are objections to the freezing notice by Mr Rowles and Ms McCamey as well. On 11 April 2006 all the actions were consolidated. The position of Ms McCamey in short is this. She is now estranged from Mr Rowles and is pursuing action in the Family Court and seeks an outcome most beneficial from her point of her view.

10 Mr Rowles opposes the orders sought by Custodians.

11 The DPP supports the orders sought by Custodians. The DPP makes a concession of fact which is that Mr Rowles does not own or effectively control the interest of Custodians and has not at any time given it away. That concession is relevant to any necessary finding that must be made before any power may be exercised under s 84.

What property is the subject of the freezing notice?

12 Custodians' application proceeds on the assumption that the interest of Custodians has been frozen. However, this may be a wrong assumption. The freezing notice is, to a degree, ambiguous.

13 I return to the relevant terms of the freezing notice and the concession by the DPP. As a result of the concession, the extent of Custodians' interest by way of mortgage is not part of the freezing notice. Custodians have an interest in the land defined by the mortgage. That is not an interest covered by the freezing notice. The freezing notice is limited to any interest Mr Rowles has in the land. There are three interests in the land and each is legally distinct. Mr Rowles and Ms McCamey have an interest as joint tenants. Custodians have an interest arising from their registered mortgage. The only interest subject to the freezing notice is that of Mr Rowles.

14 The freezing notice, however, freezes real property; that is, the land which meets the description in the schedule by way of certificate of title and address. The CPCA forbids dealing with frozen property in any way: s 50(1). Dealing is defined by s 151:

"A reference in this Act to dealing with property includes a reference to doing or attempting to do any of the following -

(a) sell the property or give it away;

(b) dispose of the property in any other way;

(c) move or use the property;

(d) accept the property as a gift;

(e) take any profit, benefit or proceeds from the property;

(f) create, increase or alter any legal or equitable right or obligation in relation to the property;

(g) effect a change in the effective control of the property."

15 Custodians plan to alter legal or equitable rights or obligations in relation to Mr Rowles' interest in the land; the frozen interest. At present, Mr Rowles holds a direct interest in the land subject to the rights enjoyed by Ms McCamey and the rights, together with his legal obligations, arising under the mortgage enjoyed by Custodians. Custodians seek to sell the land thereby converting Mr Rowles' rights in the land into a prospective right to a sum of money. The mortgage does not of itself operate as a transfer of land (Transfer of Land Act 1893 (WA) s 106) although Custodians may sell the land or exercise other remedies (Transfer of Land Act s 108, s 111, s 112). A conclusion that actions by a mortgagee in selling the property is a dealing with property is confirmed by the CPCA s 52 which limits permitted dealings to accepting payments in accordance with the mortgage.

16 Custodians may find itself in a position analogous to another litigant in a contentious case: Shylock in the Merchant of Venice. Custodians' interest may be able to be declared and severed from that of Mr Rowles. But Custodians is unable to extract its interest without the metaphorical shedding of blood - that is, dealing with property contrary to the CPCA.

17 Custodians' proposal constitutes dealing with Mr Rowles' property within the meaning of dealing in the CPCA. I do not make a declaration as to any interest that Custodians hold in the property frozen because its property is not within the terms of Sch 2 of the freezing notice. Therefore it is not necessary or convenient to make an order for sale. Whether the "necessary or convenient" power extends to making an order for sale is a real question but I do not need to answer it in the present case. Moreover, an order for sale would be an order permitting dealing with Mr Rowles' property, something denied by the CPCA for the reasons I have set out.

18 If, on the other hand, Custodians' legal interest is frozen then there is no mechanism to deal with the examination until a declaration is actually made: Permanent Trustees Co Ltd v The State of Western Australia at [56].

19 I have reached this conclusion mindful that a purpose of construction which minimises the interference with legitimate third party rights should be preferred. It is an unfortunate result but I can construe the plain meaning of the CPCA in no other way.

20 "Property" is defined by the CPCA and means real or personal property or a legal or equitable interest in any property.

21 Drug trafficker's property confiscated under s 8 includes all the property that the person owns or effectively controls at the time the declaration is made.

22 The effect of confiscation of registrable real property (which 30 Milner Road is) is that it vests absolutely in the State when a declaration is made that a person is a drug trafficker and a memorial is registered. When registrable real property vests in the State the property vests free of all interests, including mortgages, and the title in the property passes to the State (s 9)(2)(a).

23 Custodians submits that there is no mechanism for the release of confiscated property when confiscation occurs under s 8. This appears to be correct. Applications for release of confiscated property may be made for property confiscated under s 6 or s 7 but not under s 8 in respect of drug trafficker's property. Whether that is an intended consequence I am unable to say but I see no way to avoid the clear purpose of the CPCA. It is an unfair result but one compelled by the words of the statute.

24 The freezing notice does not extend to Custodians' interest in the land; it is limited to Mr Rowles' interest. It is therefore unnecessary to make an order for sale.

25 If I am wrong about that and all the interests in the land are frozen then it would be appropriate to set aside the freezing notice so far as it relates to the interest of Custodians as mortgagee and Ms McCamey as joint tenant.

26 However, it would be inappropriate to make an order for sale of the land because any action by Custodians will constitute "dealing" with property within the CPCA.