Syndicate Mortgage Securities Pty Ltd v Commissioner of Police

Category: Principal judgment

Parties: Syndicate Mortgage Securities Pty Ltd (Applicant)
Commissioner of Police (First Respondent)
Ian Lazar (Second Respondent)
Australian Taxation Office (Third Respondent)
District Court of NSW (Fourth Respondent)

Representation: Counsel:
C Parkin with FG Di Lizia (Applicant)
KE Heath with A Burkitt (First Respondent)
Solicitors:
Raed Rahal, Cambridge Law (Applicant)
Karen Smith, Crown Solicitors (First and Fourth Respondents)

File Number(s): 2024/211991

Publication restriction: None

HEADNOTE

**[This headnote is not to be read as part of the judgment]**On 8 August 2012, Mr Arlo Selby was a passenger in a vehicle which was stopped by uniformed police on traffic patrol. Based on intelligence, the police searched the vehicle and found a gold bar in the possession of Mr Selby, which they seized.

In a statement given to police approximately three years later, Mr Selby said that he stole the bar along with several others, which he gave to Mr Ian Lazar so that Mr Lazar could sell the bars to raise funds with which to pay bribes to police for various matters, including Mr Selby’s. According to Mr Selby, Mr Lazar unsuccessfully attempted to sell two of the bars, after which he returned one bar to Mr Selby for him to sell. That was the bar seized by police.

In April 2022, the police applied to the Local Court for an order under s 219 of Law Enforcement (Powers and Responsibilities) Act 2002 (NSW) (LEPRA) that the gold bar be delivered to a person who appeared to be lawfully entitled to it or, if that person could not be ascertained, that it be dealt with as the court thought fit.

The applicant in these appeal proceedings, Syndicate Mortgage Securities Pty Ltd (SMS), was joined as a party to the Local Court proceedings on its own application. Mr Lazar is the sole director and shareholder of SMS. SMS claimed that the gold bar had been given to Mr Lazar as the director of SMS by Mr Selby in part payment of a loan of $1,000,000 that SMS had advanced to Mr Selby, and two companies of which Mr Selby was the sole director. Mr Lazar made no personal claim to the gold bar.

In the Local Court, SMS claimed lawful entitlement to the gold bar on two bases. First, it claimed a possessory title based on the fact that Mr Lazar as its sole director had had possession of the bar and no other person asserted a right to it. Alternatively, it claimed a charge over the bar. On 31 July 2022, Magistrate Arms gave judgment in those proceedings, finding in favour of the Police Commissioner, and rejecting SMS’s claim of lawful entitlement to the gold bar. His Honour ordered that the gold bar be forfeited to the crown and sold at public auction, with the proceeds to be paid into the consolidated fund.

SMS appealed to the District Court under s 70 of the Local Court Act 2007 (NSW) and Pt 3 of the Crimes (Appeal and Review) Act 2001 (NSW). That appeal was by way of rehearing. One ground of appeal was that Mr Lazar had possession of the bar on behalf of SMS and, in the absence of any other claim to the bar, that was sufficient to justify a finding that SMS was lawfully entitled to it. On 18 April 2024 Anderson SC DCJ delivered judgment, upholding the orders of the Local Court.

By a summons filed on 7 June 2024, SMS sought orders quashing the orders made by Anderson SC DCJ and an order that the matter be remitted to the District Court, differently constituted, for determination in accordance with law. SMS raised four issues on appeal. Ground 1 asserted that the District Court misdirected itself “by concluding that demonstrating ‘lawful entitlement’ for the purposes of [LEPRA] s 219(1) required more than (a) possession of the chattel; and (b) an absence of competing claims to it”. Ground 2 was that the District Court failed to take into account submissions made by SMS. Grounds 3 and 4 related to costs.

The Court held, dismissing the Summons:

Per Ball JA (Basten AJA agreeing at [35] and Price AJA agreeing at [41]):

(1) The findings of the primary judge concerning possession were factual findings that were sufficient to dispose of the appeal, and on any view did not involve a jurisdictional error: [26].

(2) The District Court was not required to address every issue raised by the parties. Nor was it necessarily a jurisdictional error for it to fail to give adequate reasons for the conclusions it reached. Whether the Court was required to address a particular argument and, if so, to what extent depended on a number of factors including the extent to which the argument was clearly articulated and had a proper evidentiary foundation: [31], [33].

Ming v Director of Public Prosecutions (NSW) (2022) 109 NSWLR 604; [2022] NSWCA 209; Plaintiff M1/2021 v Minister for Home Affairs (2022) 275 CLR 582; [2022] HCA 17, applied.

Per Basten AJA

The existence of the privative clause in s 176 of the District Court Act 1973 (NSW) is a statutory indication that errors of law which may appear from the reasoning of the judgment under review will not usually be sufficient to engage this Court's jurisdiction under s 69 of the Supreme Court Act 1970 (NSW): [39].

JUDGMENT

1. BALL JA: The issue raised by this appeal is whether the District Court made a jurisdictional error, or failed to exercise its jurisdiction, when it upheld orders made by the Local Court under s 219 of the Law Enforcement (Powers and Responsibilities) Act 2002 (NSW) (LEPRA) that a gold bar in the possession of the police “be forfeited to the Crown and sold at public auction. Proceeds to the Treasurer for payment into consolidated fund”. Section 219 relevantly provides:

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)…

…

(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.

Background

2. On 8 August 2012, Mr Arlo Selby, was a passenger in a vehicle being driven by Mr Gus Duarte when it was stopped by uniformed police on traffic patrol. Based on police intelligence, the police searched the vehicle and found a gold bar in the possession of Mr Selby, which they seized. Mr Duarte and Mr Selby were then permitted to drive away.

3. In a statement given to police approximately three years later, Mr Selby said that he stole the bar along with several others, which he gave to Mr Ian Lazar so that Mr Lazar could sell the bars to raise funds with which to pay bribes to the police “for various matters, including my own”.

4. According to Mr Selby, following an unsuccessful attempt to sell two of the bars to a jeweller behind the Queen Victoria Building, Sydney, Mr Lazar returned one of them to Mr Selby for Mr Selby to sell, on the basis that he would keep 10% of the proceeds. That was the bar seized by the police.

5. Subsequently, Mr Lazar was charged with one count of intent to pervert the course of justice contrary to s 319 of the Crimes Act 1900 (NSW). He was found guilty on 24 January 2020 following a judge alone trial in the District Court. That conviction was overturned by the Court of Criminal Appeal on 11 February 2022: see Constantinidis v R; Lazar v R [2022] NSWCCA 4.

6. In April 2022, the police applied to the Local Court for an order under s 219 of LEPRA that the gold bar be delivered to a person who appeared to be lawfully entitled to it or, if that person could not be ascertained, that it be dealt with as the court thought fit.

7. The applicant, Syndicate Mortgage Securities Pty Ltd (SMS), was joined as a party to those proceedings on its own application. Mr Lazar is the sole director and shareholder of SMS. SMS claimed that the gold bar had been given to Mr Lazar as the director of SMS by Mr Selby in part payment of a loan of $1,000,000 that SMS had advanced to Mr Selby, Wirraway Parade Pty Ltd and Advantis (Qld) Pty Ltd, two companies of which Mr Selby was the sole director. The borrower’s obligations under the agreement were said to be secured by “a registered Fixed & Floating Charge” over the assets of Wirraway and Advantis, although the only document purporting to grant a fixed and floating charge was a deed dated 13 December 2007 by which Wirraway purported to grant a charge over its assets. Mr Lazar made no personal claim to the gold bar.

8. Mr Selby’s statements to the police were tendered in the Local Court proceedings and he gave evidence. He gave oral evidence in chief at that time that he had obtained the bar by fraud. The details of the fraud are not important for present purposes. In cross-examination, Mr Selby denied the loan and suggested that the documents evidencing it were fraudulent.

9. SMS claimed lawful entitlement to the gold bar on two bases. First, it claimed a possessory title based on the fact that Mr Lazar as its sole director had had possession of the bar and no other person asserted a right to it. Alternatively, it claimed a charge over the bar.

10. Judgment was given by Magistrate Arms on 31 July 2022. His Honour reached the following conclusions:

So my findings with regard to the provenance of the gold, whilst there is evidence the gold may have been obtained by fraudulent means and is possibly tainted I do not consider that to be a relevant factor in determining on the balance of probability whether the company Syndicate Mortgage Solutions Pty Ltd appear to be lawfully entitled to the property. I note there [are]no other competing interests and the police have agreed that they do not have an interest as the owner of the property. Mr Selby stated in his evidence and that was the evidence of Constable [Vial], that the gold was Mr Lazar's when spoken to by police in the initial stop in 2012.

I have not been provided with any sufficient evidence to persuade me on balance that this payment was an account of the loan deed as inferred and submitted payable to the company. That is the only evidence that I accept, that at the time of arrest it was clear on Selby's evidence to police that the bar was owned by Mr Lazar personally. There has been no satisfactory explanation on the balance of probabilities that the gold is the property of the company. The third respondent has failed to persuade me on the balance of probabilities that [it is] lawfully entitled to the gold bar.

11. In reaching those conclusions, his Honour said:

The evidence of Mr Lazar was general as to the actual amounts paid or credited and the definitive balance of the debt, he could not identify the definitive amount. He did also note there was default interest also owing. The evidence given was the third bar was not sold because he believed he could obtain a better price from what Mr Selby had informed him. No evidence by Mr Lazar. What the actual price was he alleged could be obtained by Selby, was provided. I do not on the evidence before me accept this assertion. I do not accept on balance that a person who apparently owes such a large debt also would then be provided with a commission for selling two gold bars that are allegedly for the payment of a debt that has been outstanding for some time, noting it is outstanding since 2007.

As to the assessment by the Court of the deed, it appears to me to be a poorly executed document particularly one that is purported to loan an amount of one million dollars. My concerns, and will include the deed schedule is not dated, Selby's signature is not witnessed. There is only one initial at the bottom of the deed notwithstanding a number of persons are signatories to the deed. There has been no evidence produced to confirm the deed was properly executed from any of the witnesses to the signatories or from the solicitor who apparently held a power of attorney on behalf of the company. There was no documentary evidence to indicate where the monies loaned came from.

12. Accordingly, his Honour made an order under s 219(3)(b) that the gold be forfeited to the Crown and sold at public auction, with the proceeds to be paid into the consolidated fund.

The appeal to the District Court

13. SMS appealed to the District Court under s 70 of the Local Court Act 2007 (NSW) and Pt 3 of the Crimes (Appeal and Review) Act 2001 (NSW) (CAR Act). That appeal was by way of rehearing: CAR Act, s 18(1).

14. The grounds of appeal emerged from SMS’s written submissions. There were three. The first was that the magistrate erred in concluding that the bar did not belong to SMS because (1) “[t]here was no evidence that any person claimed lawful entitlement to the gold bar other than SMS”; (2) Mr Lazar had possession of the bar as the director of SMS before he gave it to Mr Selby; (3) Possession was prima facie evidence of ownership, with the result that absent any other evidence the Local Court should have concluded that the bar belonged to SMS. That analysis was said to be consistent with the central task of the court under s 219 of LEPRA which was to ascertain “who appears to be lawfully entitled to the property in question”.

15. Second, SMS submitted that the magistrate constructively failed to exercise his jurisdiction or acted beyond power because, having concluded that the bar did not belong to SMS, he should have considered whether it belonged to Mr Lazar. The third was that the magistrate failed to consider SMS’s “secondary position” that SMS had a security interest over the bar.

16. The appeal was heard on 15 April 2024 by Anderson SC DCJ, who delivered judgment on 18 April 2024 upholding the orders of the Local Court. In reaching that conclusion, his Honour rejected two factual propositions advanced by SMS. The first was that “Mr Selby gave the bar to Mr Lazar in his capacity as a representative of SMS and in part payment of the loan”. The second was that “Lazar held the bar for SMS”. In doing so, consistently with the conclusions of the magistrate, his Honour accepted that Mr Selby had given the bar to Mr Lazar, but was not satisfied about the existence of the loan or that Mr Selby gave the bar to Mr Lazar in part payment of the loan. His Honour stated his conclusions in these terms (J[50]):

There has been no satisfactory explanation on the balance of probabilities that the gold is the property of the appellant company. There is insufficient evidence to find on the balance of probabilities that the gold bars were provided on account of the purported loan. I reject the application that SMS is entitled to the gold on that basis or simply that Mr Lazar held it on its behalf. I do not find any connection between SMS and the gold bar and I do not accept that it is lawfully entitled to it.

17. His Honour then considered whether Mr Lazar “was entitled to the gold bar under the terms of s 219 of LEPRA” (J[52]), even though Mr Lazar was not a party to the proceedings. In relation to that possibility, his Honour concluded (at J[58]):

The difficulty the appellant has in these circumstances is that having rejected SMS as having lawful entitlement to the gold, it does not follow that it becomes Mr Lazar’s, in effect, as the last man standing. This is because he expressly stated in his evidence that the gold belonged to SMS, that is, he did not have a personal claim to it. If Mr Lazar had not given that evidence, and had given evidence consistent with Mr Selby, I would have found that he did have possessory title to the gold and he would be entitled to have [it] returned to him. However, in circumstances where he has, for reasons best known to himself, disclaimed title and instead insisted that it belongs to SMS, the Court finds itself in a position where it cannot identify who has lawful entitlement to the gold bar on the balance of probabilities.

18. His Honour did not specifically consider SMS’s “secondary position”. However, there was no reason for his Honour to do so, since that contention depended on acceptance of Mr Lazar’s evidence concerning the loan and the validity of the loan documentation.

19. On 30 May 2024, his Honour ordered “[the] appellant pays the respondent the amount of $22,000 representing the costs incurred by the Respondent in appearing in the District Court proceedings”.

The application for judicial review

20. By a summons filed on 7 June 2024, SMS seeks orders quashing the orders made by Anderson SC DCJ and an order that the matter be remitted to the District Court, differently constituted, for determination in accordance with law.

21. The appeal function of the District Court under the CAR Act falls within the criminal jurisdiction of the District Court: Garde v Dowd (2011) 80 NSWLR 620; [2011] NSWCA 115 at [9]; Yousaf v Director of Public Prosecutions (NSW) [2012] NSWCA 397 at [9]. Applications for judicial review of a judgment of the District Court sitting in its criminal jurisdiction are only available where the applicant can demonstrate jurisdictional error: see District Court Act 1973 (NSW), s 176; Mulder v Director of Public Prosecutions (Cth) [2015] NSWCA 92 at [32]; Garde v Dowd at [10].

22. The summons identifies four grounds for the orders sought by SMS. Two relate to the substantive decision relating to forfeiture of the bar. The first, characterised in the summons as an error of law on the face of the record but characterised as a jurisdictional error in SMS’s submissions in reply, is that the Court misdirected itself “by concluding that demonstrating ‘lawful entitlement’ for the purposes of [LEPRA] s 219(1) required more than (a) possession of the chattel; and (b) an absence of competing claims to it”. The second was that the District Court failed to take into account submissions:

a. that Mr Lazar had abandoned title to the gold bar in issue in favour of the Plaintiff; and/or

b. that Mr Lazar had gifted the gold bar in issue to the Plaintiff.

23. The other two grounds relate to costs. The first of those, concerning the power of the District Court to award costs under Pt 3 of the CAR Act, has been abandoned. The second depends on success on one of the two grounds concerning forfeiture of the bar.

Ground 1

24. In considering this ground, it is unnecessary to consider the precise scope of s 219(1) of LEPRA, or the question whether an incorrect interpretation of that section by the District Court exercising its appellate jurisdiction under s 70 of the Local Court Act 2007 (NSW) and Pt 3 of the CAR Act amounts to a jurisdictional error. That is because the argument advanced by SMS was that the appeal ought to succeed if it could establish that either it or Mr Lazar had possession of the gold bar. However, the District Court was not satisfied of either of those matters.

25. So far as SMS is concerned, and subject to the issues raised by ground 2 (dealt with below), the question whether it had possession of the bar (through Mr Lazar) turned on whether Mr Selby had given the bar to Mr Lazar in part payment of a loan said to be owing by Mr Selby and companies associated with him to SMS. After reviewing the evidence, Anderson SC DCJ concluded that he was not satisfied of the existence of the loan. In reaching that conclusion, his Honour preferred the evidence of Mr Selby that the documents evidencing the loan were fraudulent. If there was no loan, there was no basis on which it could be said that Mr Lazar had possession of the bar on SMS’s behalf.

26. So far as Mr Lazar was concerned, his Honour was not prepared to find that Mr Lazar had possession of the bar in circumstances where Mr Lazar denied that the bar was his. That finding must be understood in a context where it was plain, and the case proceeded on the basis that, at the time the bar was seized by the police it was in the actual possession of Mr Selby and that what was alleged was that Mr Selby held the bar as bailee for the person entitled to legal possession. On the finding of his Honour, that was not Mr Lazar.

27. The findings concerning possession were factual findings that were sufficient to dispose of the appeal. On any view, they did not involve a jurisdictional error.

Ground 2

28. There is no merit in ground 2. The suggestion that Mr Lazar had abandoned title to the gold bar to SMS was raised in passing in both the written and oral submissions of SMS. In its written submissions SMS said only that “Mr Lazar gave evidence which demonstrate [sic] that he had in effect abandoned his title vis-à-vis SMS”. There was then a cross-reference to the transcript, which appears to be a cross-reference to the following evidence in chief given by Mr Lazar:

Q. What is your company’s position with respect to that gold bar?

A. The gold bar clearly under a charge that Mr Selby gave, it belongs to my company.

29. The oral submissions for SMS were:

[W]e don’t rest the case for SMS entirely on the arrangement, whether it be assertive [sic], be a sham, or otherwise. We say, even if the arrangement’s not effective, the fact of the matter is Mr Lazar appears to have lawful entitlement. He disclaims that entitlement in favour of SMS. And in two possibilities. One, he’s abandoning his entitlement and through SMS is claiming an entitlement on behalf of SMS. That’s the first possibility. The second possibility is there’s nothing stopping Mr Lazar gifting it to the company, and the change of possession that’s ordinarily required for gifts wouldn’t be required in those circumstances because he’s just simply changing the capacity in which he owns it and it’s accompanied by the intention that it be held by SMS.

30. The suggestion that Mr Lazar may have gifted the bar to SMS is raised in the same passage.

31. The District Court was not required to address every issue raised by the parties. Nor was it necessarily a jurisdictional error for it to fail to give adequate reasons for the conclusions it reached. Whether the Court was required to address a particular argument and, if so, to what extent depended on a number of factors including the extent to which the argument was clearly articulated and had a proper evidentiary foundation: for discussion, see Ming v Director of Public Prosecutions (NSW) (2022) 109 NSWLR 604; [2022] NSWCA 209 at [25]-[46]; see also Plaintiff M1/2021 v Minister for Home Affairs (2022) 275 CLR 582; [2022] HCA 17 (M1***/2021***) at [27].

32. There was no evidentiary foundation for the submission that Mr Lazar had gifted the gold bar to SMS. Nor was there any basis for the suggestion that Mr Lazar had abandoned the bar vis-à-vis SMS, whatever precisely that might mean. The evidence of Mr Lazar which is relied on by SMS in support of that submission should be understood simply as a statement that Mr Lazar regarded the bar as belonging to his company because it was handed to him in part repayment of the loan. Anderson SC DCJ rejected that evidence and gave reasons for doing so.

33. Neither argument was substantial nor clearly articulated (to adopt the language of M1/2021), nor did they rely on established facts (Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26; 77 ALJR 1088 at [24]). Indeed, both arguments appear to be expressed as possible conclusions that might be reached, rather than as alternative findings of fact for which SMS contended. His Honour concluded in the passage quoted from J[50] above that there was no connection between SMS and the gold bar. That conclusion was sufficient to dispose of either possibility.

Conclusion

34. I would dismiss the Summons filed on 7 June 2024; the applicant must pay the first respondent’s costs in this Court.

35. BASTEN AJA: I agree with Ball JA. Some further observations are in order.

36. Little thought was given in the preparation of this case as to what material would be required to be put into evidence. A court book was filed, including some 900 pages of material before the Local Court and District Court. None of it was tendered. Its preparation was a waste of money; the result was a waste of paper.

37. While the applicant accepted that, in the light of the privative clause in s 176 of the District Court Act 1973 (NSW), the application of which was not in issue, the only available basis of review was jurisdictional error, the consequences of that limitation were not adequately recognised. First, although error of law on the face of the record was unavailable, the applicant's case was focussed, with one limited exception, on the reasons of the District Court judge. (The exception involved a reference to a submission which was said to have been disregarded.) There was no challenge to the judge's statement as to the basis of the Court's jurisdiction, nor as to the legal basis of the claim; there was no ground alleging procedural unfairness, nor that the outcome was legally unreasonable. The error relied upon was said to be that the judge adopted an unduly restrictive approach in determining his state of satisfaction as to whether a person who appeared to be lawfully entitled to the property could be ascertained. The legally correct understanding of that statutory provision was said to be a precondition to the lawful exercise of power by the District Court.

38. That submission involved a misunderstanding of the concept of jurisdictional error. The function of the District Court judge was to identify the legal principles to be applied, determine any disputed factual issue, and apply the legal principles to the facts as found. Determination of the relevant law is an essential part of the judicial function. To make an error in undertaking that function is not to exceed the Court's jurisdiction, but to exercise it.

39. That is not to deny that the legislature may fix the existence of a particular matter as an essential precondition to the exercise of jurisdiction. That means that the judge's ruling is merely contingent until a court with supervisory jurisdiction has ruled on its correctness. However, there is no basis to construe s 219 of the Law Enforcement (Powers and Responsibilities) Act 2002 (NSW) as having that effect. Further, an implication to that effect would be inconsistent with the general function of a court. The existence of the privative clause is a statutory indication that errors of law which may appear from the reasoning of the judgment under review will not usually be sufficient to engage this Court's jurisdiction under s 69 of the Supreme Court Act 1970 (NSW).

40. That is also not to deny that a judge may so seriously misconceive the statutory scheme as to exceed the court's jurisdiction. However, such cases are rare, and will usually turn on (i) a failure to address the applicant's clearly articulated case, based on undisputed facts or findings of fact actually made, or (ii) a result or reasons which reveal a high degree of unreasonableness. No such case was, nor could have been, run.

41. PRICE AJA: I agree with Ball JA.

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