Embed Size (px)
Citation preview
New South Wales
Supreme Court
CITATION : Black Uhlans Incorporated v New South Wales Crime
Commission & Ors [2002] NSWSC 1060 revised -
10/12/2002
CURRENT JURISDICTION: Equity
FILE NUMBER(S) : SC 5601/01
HEARING DATE(S) : 30/9/02-3/10/02
JUDGMENT DATE : 13 November 2002
PARTIES :
Black Uhlans Incorporated (P)
New South Wales Crime Commission (D1)
Public Trustee of New South Wales (D2)
Alan George Reardon (aka Jack Andrew Wilson) (D3)
State of New South Wales (D4)
JUDGMENT OF : Campbell J
COUNSEL : J Sexton SC (P)
I Temby QC; R Bromwich (D1)
R Bromwich (D2)
No Appearance (D3)
G Bartley (D4)
SOLICITORS : Peter Duggan & Associates (P)
New South Wales Crime Commission (D1)
Public Trustee of New South Wales (D2)
No appearance (D3)
State Crown Solicitor's Office (D4)
CATCHWORDS : TRUSTS AND TRUSTEES - existence of express trust - legal
tests for recognising existence of express trust - examination of
facts concerning whether express trust established - TRUSTS
AND TRUSTEES - resulting trust through payment of
purchase price - tests for existence of resulting trust through
payment of purchase price - juristic nature of resulting trust
through payment of purchase price - EQUITY - general
principles and maxims of equity - unclean hands -
circumstances in which equitable relief denied because of
unclean hands - EVIDENCE - evidence of convictions
LEGISLATION CITED : Associations Incorporation Act 1984
Conveyancing Act 1919
Drug Trafficking (Civil Proceedings) Act 1984
Drug Trafficking (Civil Proceedings) Act 1990
Evidence Act 1898
Evidence Act 1995
Legal Profession Act 1987
CASES CITED : Argyle v Argyle [1967] 1 Ch 302
Armstrong v Sheppard & Short Ltd [1959] 2 QB 384
Atilgan v Atilgan [1999] NSWSC 324
Bloch v Bloch (1981) 180 CLR 390
Bodly v -- (1679) 2 Chan Cas 15; 22 ER 824
Brown v Brown (1993) 31 NSWLR 582
Bugg v Day (1949) 79 CLR 442
Cadman v Horner (1810) 18 Ves Jun 10; 34 ER 221
Calverley v Green (1984) 155 CLR 242
Capricorn Financial Planners Pty Ltd v Australian Securities
and Investment Commission (1999) 31 ACSR
Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353
Clapham v Shillito (1844) 7 Beav 146; 49 ER 1019
Clifford v Clifford [1961] 1 WLR 1274
Commissioner of Stamp Duties (QLD) v Jolliffe (1920) 28
CLR 178
Commonwealth of Australia v Booker International Pty Ltd
[2002] NSWSC 292
Cory v Gertcken (1816) 2 Madd 40; 56 ER 250
Currie v Hamilton (1984) 1 NSWLR 687
Dering v Earl of Winchelsea (1787) 1 Cox 318; 29 ER 1184
Dow Securities Pty Ltd v Manufacturing Investments Ltd
(1981) 5 ACLR 501
FAI Insurances Ltd v Pioneer Concrete Services Ltd (1987) 15
NSWLR 552
Falcon v Famous Players Film Company [1926] 2 KB 474
Gascoigne v Gascoigne [1918] 1 QB 223
Glyn v Weston Feature Film Company [1916] 1 Ch 261
Goddard v Midland Railway Company (1891) 8 TLR 126
Greater Sydney Development AssociationLtd v Rivett (1929)
29 SR (NSW) 356
Griffiths v Griffiths [1973] 1 WLR 1454
Gill v Lewis [1956] 2 QB 1
Hewson v Sydney Stock Exchange Ltd [1968] 2 NSWR 224
In Re Emery's Investment Trusts (1959) Ch 410
Jones v Lenthal (1669) 1 Chan Cas 154; 22 ER 739
Kettles and Gas Appliances Ltd v Anthony Hordern and Sons
Ltd (1934) 35 SR (NSW) 108
Last v Rosenfeld [1972] 2 NSWLR 923
Learmonth v Morris (1868-9) 6 WW & A'B (E) 74
Little v Little (1988) 15 NSWLR 43
Littlewood v Caldwell (1822) 11 Price 97; 147 ER
Litvinoff v Kent (1918) TLR 298
Loughrin v Loughrin 292 US 216 (1934)
Meyers v Casey (1913) 17 CLR 90
Money v Money (No2) [1966] 1 NSWR 348
Moody v Cox [1917] 2 Ch 71
Mrs Pomeroy Ltd v Scalé (1907) 24 RPC 177
Napier v Public Trustee (Western Australia) (1980) 32 ALR
153
Nelson v Nelson (1995) 184 CLR 538
New South Wales Diary Corporation v Murray Goulbourn Co-
Operative Company Limited (1990) 171 CLR 363
Nowell v Palmer (1993) 32 NSWLR 574
Overton v Banister (1844) 3 Hare 503; 67 ER 479
R v Aldridge (1990) 20 NSWLR 737
R v Deputy Commissioner of Taxation (WA) (1987) 72 ALR
365
Re Kerrigan; ex parte Jones (1946) 47 SR (NSW) 76
Rochefoucauld v Boustead [1897] 1 Ch 196
Ryan v Dries [2002] NSWCA 3
Shepherd v Cartwright [1955] AC 431
Slingsby v Bradford Patent Truck and Trolley Co [1905] WN
122; [1906] WN 51
Stephens v Avery [1988] 1 Ch 449
Tinker v Tinker [1970] P 136
Tripodi v R (1961) 104 CLR 1
Vauxhall Bridge Co v Spence (Earl) (1821) Jac 64
Vigers v Pike (1842) 8 Clark & Finnelly 562; 8 ER 220
Wall v Stubbs (1815) 1 Madd 80; 56 ER 31
Wratten v Hunter [1978] 2 NSWLR 367
DECISION : Resulting trust found for part of beneficial interest in property,
see paragraph 190
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EQUITY LIST
CAMPBELL J
13 NOVEMBER 2002
5601/01 BLACK UHLANS INCORPORATED v NEW SOUTH WALES CRIME
COMMISSION & ORS
JUDGMENT 1 HIS HONOUR: The Black Uhlans Motor Cycle Club (the ―Club‖) has existed as a voluntary
unincorporated association from at least the early 1980s. It was an Australia wide club, which
had a Sydney chapter, and chapters in various other places. In about 1984 the Club began
occupying premises at Factory 3, 15 Stanley Street Peakhurst as its clubhouse. These premises
were leased from the owner by a club member, but the rent was paid out of the Club’s funds.
The clubhouse was located in a building which was divided into three different units, one of
which was used as the clubhouse. In 1991 a club member came to purchase the land on which
the clubhouse was erected. Also in 1991, the Club had become incorporated under the
Associations Incorporation Act 1984.
2 The club member in whose name the premises had been purchased was later convicted of
various criminal offences, in consequence of which a restraining order was made under the
legislation then known as the Drug Trafficking (Civil Proceedings) Act 1984, which prevented
him from disposing of any interests he had in, inter alia, the premises which contained the
clubhouse. In 1996 a forfeiture order was made, under the Drug Trafficking (Civil
Proceedings) Act 1990, of his interest in that property. That forfeiture order resulted in his
interest in the property becoming vested in the Public Trustee on behalf of the State of New
South Wales. In these proceedings, the incorporated Club contends that the real estate was held
on trust for it, and hence that the beneficial ownership of the property was not forfeited to the
State. The Club has a fall back position, that part of the beneficial interest in the property was
held by it, and hence was not forfeited to the State. The Club contends that the trust in its favour
is an express trust, or alternatively a resulting trust.
Facts Proved From Documents 3 There are some facts relevant to the transaction in which the property was acquired which can
be proved by contemporaneous documents. One is that by 1991 the Club had several tens of
thousands of dollars, which it had been accumulating over a period of years. The Club deposited
$3,000 with Australian Guarantee Corporation on 26 November 1987, and redeemed that
amount on 28 March 1988. The Club deposited a further amount of $23,000 with Australian
Guarantee Corporation on 19 March 1988, and redeemed it on 17 August 1988. The Club
deposited an amount of $6,000 with Australian Guarantee Corporation on 30 September 1987,
and redeemed it on 19 August 1988. The evidence does not establish what happened to any of
these three deposits immediately after they were redeemed. However, on 6 April 1989 the Club
lodged an amount of $30,574 with the Commonwealth Bank, as a term deposit. It was
withdrawn on 8 January 1990, by which time the addition of interest had caused it to grow to
$34,295.76. That precise amount was then used, on 8 January 1990, as the opening balance for a
current account, in the name of ―Black Uhlans Motor Cycle Club‖, with the Commonwealth
Bank at its branch in the Sydney suburb of Carlton (―the BUMC Commonwealth Account‖).
Further deposits were made to the BUMC Commonwealth Account until, on 1 May 1991, the
balance to its credit was $67,170.27.
4 On 4 June 1991 Hancock, Alldis & Co, solicitors, sent to Justin Hill, solicitor, a draft contract
for the sale of the land in question. Hancock Alldis & Co were acting for the vendors of the
land, Austral Power Products Pty Ltd. Mr Hill acted as solicitor for the purchaser named in that
contract, Jack Andrew Wilson. The contract related to the sale of the land in volume 8383 folio
23. The contract stated that the land was located at 15 Stanley Street, Peakhurst, and it had
erected on it three factory units, each of which was leased. The sale was for the sum of
$400,000, and was subject to those existing tenancies.
5 Contracts for sale of that land were exchanged on 30 July 1991. The contract as exchanged
must have differed from the contract as originally submitted, because the document which was
tendered as the contract as exchanged, showed factory 1 as being leased for a period of three
years commencing 6 June 1991, factory 2 as being leased for one year commencing 9 June
1991, and factory 3 as leased for three years commencing 11 July 1991 – each of the
commencement dates of those leases is after the date the contract was originally submitted. The
third of those factory units is one which was in fact used as the clubhouse of the Black Uhlans
Motor Cycle Club.
6 The deposit payable under that contract was $40,000. On 21 June 1991 an amount of $40,000
was withdrawn from the BUMC Commonwealth Account. That withdrawal took the form of
two bank cheques. One was a cheque dated 21 June 1991, drawn on the Commonwealth
Savings Bank, Carlton Branch, in favour of Hancock Alldis & Co in the sum of $20,000. The
other was a bank cheque drawn on the Commonwealth Savings Bank, Carlton Branch, dated 21
June 1991, in the sum of $20,000, in favour of Melville McGregor Solicitors. The evidence does
not establish what role Melville McGregor Solicitors played in this transaction, if any. Mr Hill
gave tentative assent to the proposition that Melville McGregor had nothing to do with the
acquisition of 15 Stanley Street, Peakhurst by Wilson.
7 The deposit for purchase of the Peakhurst property was paid to Hancock Alldis & Co towards
the end of July 1991 (and banked by Hancock Alldis & Co on 1 August 1991). It took the form
of the bank cheque for $20,000 which had been withdrawn from the BUMC Commonwealth
Account on 21 June 1991, and bank cheques in the sum of $8,000, $5,000 and $7,000, drawn on
23 July, 26 July and 29 July 1991 respectively, on the Commonwealth Savings Bank, Kogarah
Branch. Each of those three cheques had been purchased by Mr Hill. Counsel for all parties in
this litigation hypothesised that Mr Hill had requested the Club to provide him, for some
purpose of his own, with the cheque for $20,000 made payable to Melville McGregor Solicitors,
and had later repaid the $20,000 which the Club so made available to him, and used the
repayment funds to provide $20,000 of the deposit. While the Crime Commission and the State
retreated, in some written submissions delivered after judgment had been reserved, from this
hypothesis, it seems to me that it is a reasonable inference to draw. It has the consequence that
the whole of the deposit of $40,000 was paid from funds of the Club.
8 The purchaser of the Peakhurst land applied to Citibank for a loan to enable him to complete
the purchase. On 19 July 1991 the sum of $1,500 was withdrawn from the BUMC
Commonwealth Account. It took the form of bank cheques for $1,250, and $250, each payable
to Citibank Savings Limited. Those cheques were sent to Citibank, and constituted the
application fee, and a valuation fee, in connection with that proposed loan from Citibank.
9 On 30 July 1991, Citibank issued Mr Wilson with a letter of approval for a loan of $250,000,
at a rate of interest of 13.5%, repayable by equal monthly repayments over a period of 15 years.
On 4 September 1991 Citibank wrote to Mr Wilson confirming some recent discussions it had
had with Mr Hill. Citibank had valued the property at $350,000, and in consequence of it
requiring a loan to security ratio of 65%, the loan amount was reduced to $227,500. For that
loan, the monthly repayments were to be $2,955.45.
10 On 10 September 1991 a further withdrawal was made from the BUMC Commonwealth
Account, in the sum of $14,361. It took the form of a bank cheque payable to the Commissioner
for Stamp Duties. It was paid to the Commissioner for Stamp Duties, to pay stamp duty on the
contract for the purchase of the Peakhurst land, and on the mortgage of that land to Citibank.
11 On 12 September 1991, a further amount of $19,765.54 was withdrawn from the BUMC
Commonwealth Account. From that withdrawal, bank cheques for $16,222.53 in favour of
Austral Power Products Pty Ltd, and for $3,484.46 in favour of Justin Hill solicitor were
purchased. The cheque in favour of Austral Power Products Pty Ltd was paid as part of the
purchase price upon settlement of the purchase of the Peakhurst property. I would infer that the
cheque in favour of Mr Hill was in payment of his costs and disbursements in connection with
this transaction. Those two cheques total $19,706.99. The small difference, of $60 odd, between
the amount withdrawn from the account, and the total of the two cheques, was used partly in
paying a debits tax on the account, and is partly unexplained. That withdrawal made on 12
September 1991 drew all funds out of the BUMC Commonwealth Account.
12 The settlement of the purchase of the Peakhurst property occurred on 13 September 1991.
After making the usual adjustments for periodical outgoings of the property, the amount payable
on settlement was $360,565.00. It was made available to the vendor in the form of four bank
cheques as follows:
Source Payee Amount
BUMC Commonwealth Account Austral Power Products 16,222.53
Citibank Austral Power Products 226,528.50
Advance Bank Austral Power Products 4,949.81
Advance Bank Day Dockrill 112,864.16
TOTAL 360,565.00
13 The cheque from Citibank was the net amount made available by Citibank to Mr Wilson
from the mortgage loan, after deduction of some fees and expenses.
14 The two amounts made available by Advance Bank arise from a second conveyancing
transaction which was settled simultaneously with the purchase of the Peakhurst land. Ms
Charmaine Bernoth was a client of Mr Hill, and was selling property which she owned, at 49
Calder Road, Chippendale, to a Mr and Mrs Oryl. Mr and Mrs Oryl were being financed in that
purchase by Advance Bank. At Mr Hill’s request, the solicitors for Mr and Mrs Oryl asked
Advance Bank to make available money which it was advancing in connection with the
purchase of 49 Calder Road, Chippendale in the form of the two cheques which Advance Bank
drew and which were used to settle the purchase of the Peakhurst property. Mr Hill has given
evidence that Ms Bernoth was someone with whom he had had a long-term relationship, that
she consented to her money being used in this fashion, and that she was repaid.
15 The explanation for the cheque in favour of Day Dockrill is that a third conveyancing
transaction also settled on 13 September 1991. Austral Power Products Pty Ltd purchased a
home unit in Jindabyne, and the cheque for $112,864.16 in favour of Day Dockrill was used by
Austral Power Products Pty Ltd in connection with that purchase.
16 As part of the settlement on 13 September 1991, Mr Wilson gave a mortgage to Citibank
Savings Limited over the Peakhurst land. That was the only mortgage given over the land.
17 Soon after 13 September 1991, the transfer of the Peakhurst land to Mr Wilson was
registered, as was the mortgage over that land which Mr Wilson granted to Citibank.
18 Mr Wilson opened an account with Citibank Savings Limited (―the Wilson Citibank
Account‖) at the time his loan from Citibank was approved. Periodical payments due to
Citibank, in repayment of its mortgage loan, were debited to that account. Mr Wilson, by a
written agreement made on 25 September 1991, appointed Antipas Real Estate, of Penshurst, as
his agent in relation to the leasing of units 1 and 2 at the Peakhurst premises. Those agents were
given instructions to bank the net proceeds of leasing those two units to the Wilson Citibank
Account. Thereafter, the net proceeds of leasing units 1 and 2 were paid into that account. The
net proceeds of leasing units 1 and 2 were not sufficient to pay the full amount of the monthly
amount payable to Citibank. Other deposits were made to the Wilson Citibank Account from
time to time, with the result that the account was kept (at least until May 1994) in credit by a
small amount. From May 1994 the periodical debits needed to repay the Citibank mortgage
were not made to the Wilson Citibank Account, presumably as a consequence of the restraining
order which had been made against Mr Wilson’s assets in March 1994.
Incorporation of the Club 19 On 3 May 1991, Mark Florence, who was then the Treasurer of the Club, completed a form
applying for incorporation of the Club, under the Associations Incorporation Act 1984. He
filled out the portion of the form calling for “particulars of property held by a person, in trust
or otherwise, for or on behalf of or for the object of the currently unincorporated association”
by writing “nil”. He filled out another part of the form so that it read, “the income of the
association is likely to be $20,000-$25,000 per annum which is likely to be derived from the
following sources: members dues and membership fees. The expenditure of the association is/is
likely to be $20,000 per annum.” The form as lodged, included a statement, signed by the then
Secretary and President of the Club that,
―At a meeting of the Black Uhlans Motor Cycle Club Australia
held on the 15th day of May 1991, it was resolved that the
presently unincorporated body will be taken over by Black Uhlans
Incorporated.‖
20 That form was lodged with the appropriate government department on 25 June 1991. The
plaintiff was incorporated that same day, 25 June 1991.
21 Schedule 2 to the Associations Incorporation Act 1984 provides:
―2. (1) On the incorporation of an association … under this Act
the following provisions have effect:
(a) the assets of a former association
of the incorporated association vest
in the incorporated association
without the need for any
conveyance, transfer, assignment or
assurance,
(b) the rights and liabilities of a
former association of the
incorporated association become the
rights and liabilities of the
incorporated association.‖
22 There is a very wide definition of “assets”, and a very wide definition of “liabilities” in
schedule 2. The effect is that all assets and liabilities of the unincorporated club became, on
incorporation, assets and liabilities of the incorporated association. It is the incorporated
association which is the plaintiff in the present case.
23 On 11 August 1992 the plaintiff lodged, with the Department of Consumer Affairs, the
annual statement required by section 27 of the Associations Incorporation Act 1984. The
statement said that the last financial year of the incorporated association ended on 31 May 1992.
Particulars of the income and expenditure of the incorporated association during its last
financial year were set out. They were as follows:
INCOME
Subscriptions
26,264
Run Fees
4,345
Sales – Refreshments
17,023
T-Shirts, Badges
667
Donations
320
Other Income
3,445
52,064
EXPENDITURE
Rent 18,155
Light & Power 2,771
Telephone 1,325
Purchase – T-Shirts, Badges 5,593
Waste Disposal 712
Meeting Expenses 6,773
Run Expenses 4,907
Repairs & Maintenance 805
Purchase – Refreshments 15,518
15,559
DEFICIT FOR THE YEAR
$4,495
24 The assets and liabilities of the incorporated association at the end of its last financial year
were stated to be as follows:
ASSETS
Cash 1,283
Debtors 410
Loans Payable 15,601
$17,294
RETAINED CAPITAL
Reserves acquired following incorporation 21,789
Deficit for the period ended 31st May, 1992 4,495
$17,294
25 The form of the annual statement called for details to be provided of “particulars of
mortgage, charges and other securities of any description affecting any of the property of the
incorporated association as at the end of its last financial year”. That section of the form was
filled out by writing, “not applicable”. The form also contained a “certificate as to financial
affairs” which said,
―In the opinion of the members of the committee -
(a) the particulars set out in items 5-9 above are not misleading
and give a true and fair view of the matters to which those
particulars relate …‖
The statement of income and expenditure, statement of assets and liabilities, and
statement that the particulars of mortgage item was “not applicable” were items
5, 6 and 7 of the form. The certificate was signed by two members of the
committee, Mr Florence and Mr Gioffre.
26 Mr Florence (who happened also to be the Public Officer of the association) gave another
certificate, that “the particulars contained above are true”. Mr Gioffre gave a certificate that,
―I attended the annual general meeting of the association held on
10th June 1992. This annual statement was submitted to the
members of the association at its annual general meeting.‖
That annual statement was lodged by T E Gibbs & Co, Accountants.
27 T E Gibbs & Co also prepared, in October 1992, a tax return for Mr Jack Wilson. That return
showed him as having no income from salary and wages, as having earned (after deductions)
$36,800 from letting out on hire a refrigerated trailer, and as having suffered a net loss of
$9,272 from rental activities. The amount of that loss was derived from a total of $21,330 rental
having been received for the rental of units 1 and 2 at 15 Stanley Street, and total expenses
attributable to 15 Stanley Street, Peakhurst being paid of $30,602. A working paper of Mr Gibbs
shows that those expenses were made up of rates, repairs, agent’s fees and other like matters
connected with conducting the business of a landlord, together with interest in the sum of
$25,424. Mr Gibbs’ working papers included a summary statement, provided by Antipas Real
Estate, of the income derived from units 1 and 2 at 15 Stanley Peakhurst, and outgoings
connected with that property. The figures contained in the tax return, relating to the rental of 15
Stanley Street, matched the figures in the summary statement provided by Antipas Real Estate,
save only that the summary statement from Antipas Real Estate did not include any outgoing for
interest.
28 On 22 January 1993 Mr Wilson was arrested by police. Police seized some drugs, cash,
weapons and other items which Mr Wilson had in a hired storage unit.
29 On 5 January 1994 Mr Gibbs wrote a letter of advice to Mr Florence, as follows:
―Following our recent discussion I have given consideration to the
problem of the most appropriate method of ownership of club
property.
There are four alternatives to this problem with each of them
having advantages and disadvantages. We have set out your
options briefly below.
1. AN INDIVIDUAL NOMINEE
With ownership held by an individual nominee.
The principle advantage is ease of obtaining
finance. The principle disadvantage is of security
of the asset, especially in the case of personal
misfortune to the nominee. A change in the
nominee would also mean that full stamp duty on
the property value (eg $10,000) would be payable
upon each change of nominee.
2. PARTNERSHIP
A partnership has the same advantage as that of a
nominee (above).
The possible problems of risk with a nominee are
reduced as ownership would be spread. Risk would
be reduced and stamp duty payable on the change
of each nominee would be much smaller.
(Depending on how many partners existed in the
partnership)
3. COMPANY
A company could be established owning the
property with the company ownership being split
among a number of club members (shareholders).
The stamp duty problem could be limited by not
notifying the Stamp Duty Office of any changes in
shareholding, although we cannot professionally
advise you to follow such a practice.
The security of ownership can easily be covered by
having signed share transfer forms for all
shareholders kept on hand.
The big negative for the company is that there is no
provision for the inflationary increases in value to
be tax exempt. This exemption exists for all other
options and as the inflation component of the
capital gain will amount to close to 100% of that
gain then this exemption must be capitalised on.
Otherwise you will lose close to 33% on the gain
in value on the property in tax.
4. DISCRETIONARY TRUST
The final option is I believe your best alternative. It
involves the establishment of a discretionary trust
with a company acting in the capacity as trustee.
Members of the club would act as shareholders of
the trustee and the advantages available under the
Company option in regards to the change of
shareholders and stamp duty extend to this option.
As the actual property is owned by a Trust the
exemption from capital gains tax for the
inflationary increase in the value of the property
would also be available to this option.
Beneficiaries for the Trust would be required but
this requirement can be made very flexible. The
Trust also has a finite life (unlike a company) and
would only be expected to last for only 100 years.
All above changes will involve substantial costs to
establish. Stamp Duty and legals, with the
company option costing a further $1,000 and the
Trust option would be approximately $2,500
extra.‖
30 On 22 March 1994 Studdert J made a restraining order, under the Act then known as the
Drug Trafficking (Civil Proceedings) Act 1990 relating to, amongst other things, Mr Wilson’s
interest in the Peakhurst property. The New South Wales Crime Commission lodged a caveat
against the title of the Peakhurst property on 25 March 1994. It was also on 25 March 1994 that
Mr Wilson was served with the restraining order.
31 On 31 March 1994 a company called Peakhurst Nominees Pty Limited was incorporated as a
shelf company. On 5 April 1994 shares were allotted in the company to Mr Florence, and to
John Richard Nevin. According to Mr Florence, Mr Nevin had been appointed President of the
Club in January 1994. Mr Florence and Mr Nevin were appointed as directors of the Company
in place of the previous directors who were, I would infer, from the shelf company organisation
which had caused the company to be incorporated. Peakhurst Nominees Pty Limited did not, so
far as the evidence discloses, carry out any transactions after passing into the control of Mr
Florence and Mr Nevin. A death certificate establishes that Mr Nevin is now dead.
32 On 11 March 1996 a forfeiture order was made in relation to, inter alia, Mr Wilson’s interest
in the Peakhurst property. It is common ground that before that forfeiture order was made the
Crime Commission had received notice of a claim that the Peakhurst property was held, by Mr
Wilson, on trust for the plaintiff. Hence the defendants in these proceedings do not assert that
the Public Trustee took the property free of any trust which existed as between Mr Wilson and
the Club.
33 On 25 September 1996 a request was lodged with the Registrar General that the Peakhurst
land be vested in the Public Trustee on behalf of the Crown, pursuant to section 23 of the Drug
Trafficking (Civil Proceedings) Act 1990, in consequence of the taking effect of the forfeiture
order made on 11 March 1996. That request has resulted in the Public Trustee becoming the
registered proprietor of the Peakhurst land.
The Plaintiff’s Claim that Wilson Holds the Land on Trust for the Plaintiff 34 This paragraph of the judgment gives an account of the way the plaintiff puts its claim for
the existence of a trust over the Peakhurst premises. In about 1984 the Club began occupying
factory 3 at the Peakhurst land as its clubhouse. Those premises were leased from the owner by
Barry Keene, who was then a member of the Club, but the rent was paid out of the Club’s funds.
From time to time at meetings of the Sydney chapter of the Club there were discussions about
buying the property which contained the clubhouse. Mr Gioffre, who was President of the Club
from approximately 1989 to 1993 had various discussions from 1989 onwards with Mr Kevin
Vincent, a director of the company which owned the premises, about the possibility of the Club
purchasing the land. Mr Vincent was initially not interested in selling, then was interested in
selling, but for more money than the Club wished to pay, and only in 1991 was agreement in
principle arrived at that the premises would be sold for $400,000. From early 1991, there were
several meetings between office holders and a few other members of the Club, and Mr Hill. Mr
Hill was asked whose name the building should be put in. Mr Hill recommended putting it in
the name of someone who had a job and assets. He recommended Mr Wilson as being a good
person to present to an incoming mortgagee, because he had had a job for 10 years, and owned
his own home. Mr Hill recommended that the Club should start feeding money into Mr
Wilson’s bank accounts to give him a proven savings record, as that would improve the chances
of getting finance. Club money was used to increase the balances in some bank accounts which
Mr Wilson had, the records of which were duly shown to Citibank. There was some talk about
execution of a formal trust deed, but somehow no trust deed came to be executed. The Club
raised money in cash, which it gave to Mr Hill to pay the amount of the purchase price which
was not derived from the Citibank loan and from the BUMC Commonwealth Account. A
significant contributor to the Club’s cash contribution to the purchase price was a levy which
was imposed on club members in 1991, to help pay for the clubhouse. Wilson regarded himself
as the owner of the clubhouse property in name only. Wilson’s money found its way into the
purchase of the clubhouse to no greater extent than did the money of any other club member.
After the purchase was complete, the Club paid money into the Wilson Citibank Account from
time to time, to make up the amounts by which the net rental received from units 1 and 2 was
insufficient to pay the mortgage repayments. After Citibank ceased debiting the Wilson
Citibank Account in May 1994, the Club made payments from time to time to the Public
Trustee, with a view to meeting the shortfall between the mortgage repayments and the net
rental income from units 1 and 2.
35 The principal witnesses upon whom the Club relies to make good this case are Mr Florence,
Alan George Reardon, Mr Gioffre, and Mr Hill. The Club has explained the absence of Mr
Vincent by tendering his death certificate.
Alan George Reardon 36 Alan George Reardon is the real name of “Jack Andrew Wilson”, the person in whose name
the Peakhurst property was purchased. He has lived under the name of Jack Andrew Wilson for
many years, because he was once charged with a criminal offence in Queensland under his real
name, and skipped bail.
37 Mr Reardon has more than one false identity, however. As well, he is known as Peter John
Reardon, Graham Wilson, Andrew Spirou, Alan James Bennett, Michael John Wilson, and Alan
George Francis. He also had an identity, Trevor James Lane, which he was not sure that he had
used. For these false identities he had a variety of documents to establish the identity – he had
false birth certificates, false driver’s licences, and bank accounts in false names. When, in
January 1993, police seized property from the storage unit which he had rented since August
1990 (under the name of Graham Wilson) they found these proofs of identity. As well, they
found a 1989 newspaper article titled “How I Created a False Identity”, blank Birth Certificate
forms from New South Wales and Tasmania, blank Australian Certificate of Marriage forms,
and blank Western Australian driver’s licences. It was under one of his false names, Andrew
Spirou, that he was director of a company which was involved in importing and distributing
chemicals, for the purpose of manufacture of prohibited drugs.
38 Sometimes he would supply people with documents which would enable them to have a false
identity. At other times, he would supply people with blank documents, so that they could create
their own false identities.
39 By a transfer which was registered on 5 September 1991, a parcel of New South Wales land
was conveyed to Alan James Bennett. Mr Hill was the solicitor who acted for the purchaser in
that transaction. Alan James Bennett was one of the false identities of Mr Reardon. However,
Mr Reardon said that, so far as that transfer was concerned, the transferee was not him, but that
for that transaction he had lent his false identity to someone else. He did not say who that other
person was.
40 He made a practice of carrying only one false driver’s licence on him at a time (because there
had been an occasion earlier when the police had found two false driver’s licences in his wallet).
He did this so that if he were to be caught for a traffic offence, the penalty points connected with
that offence would accrue against one of his false identities.
41 Mr Reardon had a significant involvement with drug manufacturing and distribution. Arising
from his arrest on 23 January 1993, he pleaded guilty (in February 1996) to an indictment which
included a count of manufacturing a prohibited drug (methylamphetamine) in a large
commercial quantity between 1 January 1991 and 23 January 1993 at Granville and elsewhere
in the State of New South Wales. That charge was laid under the Drug Misuse and Trafficking
Act 1985. Schedule 1 to that Act defines a “large commercial quantity” of methylamphetamine
as being one kilogram. Eleven matters were taken into account on a Form 1 with that count of
the indictment. (This means that he admitted his guilt of eleven other offences, had those
offences taken into account in deciding the sentence, and thereby achieved immunity from any
future prosecution for those eleven offences.) Another count of the indictment, to which Mr
Reardon pleaded guilty, related to the deemed supply of a prohibited drug, namely cocaine, on
22 January 1993 at Kings Park in the State of New South Wales. This “deemed supply” arises
under section 29 of the Drug Misuse and Trafficking Act 1985, whereby a person who has in
his or her possession an amount of a prohibited drug which is not less than the traffickable
quantity of the prohibited drug is deemed to have it in his or her possession for supply, unless
able to prove otherwise. Schedule 1 of that Act nominates three grams as being the traffickable
quantity for cocaine. For the first count on the indictment, Mr Reardon was sentenced to a
minimum term of imprisonment of four years and two months, together with an additional term
of one year. For other counts on that indictment, he was sentenced to lesser terms of
imprisonment, to be served concurrently with the sentence for the first count.
42 When Mr Reardon’s storage unit was searched by police in January 1993, it was found to
contain, inter alia, five books, and various other pieces of information, concerning the
manufacture of drugs. Even after his arrest, he “happened to notice once” that he was present at
a “cook” of amphetamines. A “cook” is part of the process of manufacturing amphetamines.
43 The charges to which Mr Reardon pleaded guilty also included two charges of possessing an
unlicensed firearm, and four charges of possessing a prohibited weapon. The firearms which the
police had found in the storage unit included rifles, and an Uzi semi-automatic pistol. As well,
there was a silencer for a gun.
44 Mr Reardon’s storage unit also contained a booklet titled, “Lock Picking Simplified”. Mr
Reardon said that somebody gave him that as a present, that he tried to use it, but it didn’t work.
45 Mr Reardon’s understanding about illegal drug use is informative:
―Q. I suggest to you that numbers of members of the Black
Uhlans were involved in illegal drugs?
A. Not that I know of. What do you mean by involved? With me?
Q. Users of illegal drugs?
A. With me?
Q. Not necessarily with you but, to your knowledge, users of
illegal drugs?
A. Everybody uses illegal drugs, everybody. Depends what you
call everybody. Everybody smokes pot or whatever you call it,
uses amphetamines, I suppose, you go down to the pub down the
road now on Friday and everybody uses it or what you suppose -
what do you mean? You mean as I understand it everybody uses
prohibited drugs?
Q. Not everybody but an awful lot of people?
A. Young people, sure.
Q. And that's what you're saying was included but not confined to
members of the Black Uhlans?
A. I can't comment about that. Maybe they did, maybe they didn't,
I'm not sure. You'd have to ask them.‖
46 Mr Reardon explained one aspect of his attitude to giving evidence:
―Q. Is one of the unwritten rules of the Black Uhlans that you
don't, if you're a member, put in other members?
A. That's right. You don't put in anybody whether they're
members or not.
Q. And you sit there as a witness reluctant to put in anyone?
A. I don't put in anybody.
Q. You can't?
A. No, I won't.
Q. You won't?
A. No.‖
47 Mr Reardon’s activities were such that he had significant sums of cash available to him. At
the time of his arrest in January 1993 he had $5,000 in cash in his car, $74,600 in his storage
unit, and a further $7,000 in a secret safe at home. In evidence he said that the $7,000 in the safe
at home was the product of dealing in motorbikes. Mr Reardon accepts that the chemicals which
go into the manufacture of amphetamines are quite cheap, and at the time were fairly readily
available. He also accepts that the amounts for which amphetamines, when manufactured, can
be sold illicitly are very large, depending on how expert the people operating the selling
operation are.
Justin Hill 48 Mr Hill was admitted as a solicitor in New South Wales in about July 1981. He stopped
practicing as a solicitor (both in New South Wales, and anywhere else) in about 1992. In 1996,
after having pleaded not guilty, he was found guilty, in South Australia, on counts of taking part
in the production of methylamphetamine, and of a conspiracy to produce 3, 4-
Methylenedioxymethamphetamine. For those crimes, he had been sentenced to eight years
imprisonment with a non-parole period of five years. Prior to his trial on these drug charges, he
had been charged in New South Wales with knowingly making a false statement in a passport
application. That charge concerned an attempt he made to obtain a passport in a false name.
After his drug trial, he pleaded guilty to that charge, and was fined. At some stage – Mr Hill is
not sure precisely when – his name was struck off the Roll of Solicitors in New South Wales.
Mr Reardon and Mr Hill Apply for Finance from Citibank 49 Citibank had a standard form for mortgage finance proposals. Mr Hill filled out the details on
that form, and Mr Reardon signed it, in the name “J Wilson”. That form, as filled out, said that
the applicant was Jack Andrew Wilson. This was, of course, not Mr Reardon’s real name. It said
his date of birth was 10/10/53. This was not his real date of birth. It said his private address was
96 Victoria Avenue Mortdale, and that he had been 1 ½ years at that address. In fact, Mr
Reardon/Wilson had never lived at that address.
50 The form said that Mr ―Wilson‖ had been identified by a particular numbered gold driver’s
licence. That was a driver’s licence which Mr Reardon/Wilson provided to Mr Hill, which was
one of his false driver’s licences. The form said that the applicant’s occupation was “General
Manager”. This was untrue.
51 The form said that the applicant’s gross monthly salary was $3,500. This was untrue – Mr
Reardon’s earnings from employment were of the order of $500 to $600 per week.
52 The form said that Mr ―Wilson‖ had a monthly gross income of $2,000 from investments,
and $601.25 from rental income. Alongside this listing of income, the form said, “note tax
returns for 1989 and 1990 annexed”. There were income tax forms, marked “Copy”, for the
1989 and 1990 tax years, annexed. Those forms were ones which were drawn up by T E Gibbs
& Co, accountants. Notwithstanding that they purported to be copies of income tax returns for
the 1989 and 1990 tax years, they were drawn up in 1991, after Mr Hill had referred Mr
Reardon/Wilson to Mr Gibbs. No original tax returns, in the form of these “copies” had ever
been, or ever were, lodged with the Taxation Department.
53 The 1989 “copy” return purported to be in the name of Jack Andrew Wilson, and gave his
residential address as 96 Victoria Avenue, Mortdale. It annexed what purported to be a 1989
Group Certificate for Jack Andrew Wilson, showing that he had received $35,862 gross salary,
from Nostalgia Motor Cycles. It also showed that he had received bank interest of $1,589, and a
net income (after registration, insurance and repairs) of $18,274 from truck hire.
54 The “copy” return for the 1990 tax year contained the same particulars as the 1989 year
about the identity and address of the taxpayer. It annexed a copy of what purported to be a 1990
Group Certificate for Jack Andrew Wilson, from Nostalgia Motor Cycles, showing a gross
salary of $39,204. It showed a net income of $22,069 (after deduction of expenses for
registration, insurance and repairs) from truck hire.
55 In fact, Mr Reardon did not own a truck, and had received no income from truck hire. He
was employed by Blacktown Harley Davidson, a company which traded under the name of
Nostalgia Motor Cycles, but was employed so that he was shown on the books under his real
name of Reardon, not under his assumed name of Wilson. Further, his salary or wages from
Nostalgia Motor Cycles was less than the amounts shown in the purported group certificates.
These “copy tax returns” were fabrications, created for the purpose of deceiving Citibank.
56 The Citibank application form also called for a listing of assets. Mr Hill filled out the form
by showing the assets of Mr ―Wilson‖ as including a refrigerated trailer worth $60,000, $24,000
with Westpac, a deposit of $40,000, and “investment Justin Hill Solicitor” of $100,000. In fact,
Mr ―Wilson‖ did not own any refrigerated trailer. While there were two Westpac Savings
accounts in the name of Jack Andrew Wilson, which had balances totalling approximately
$24,000, those amounts were almost entirely amounts which had been placed there very
recently. The only amount of “deposit” in the sum of $40,000, appears to have been the amount
which was sourced from the BUMC Commonwealth Account. There was no investment of
$100,000 with Justin Hill Solicitors.
57 The application form also stated “only commitment $500 per month rent”. It was not
disclosed that Mr ―Wilson‖ was not paying rent at all, but rather living in his own home. The
statement of assets did not disclose him as owning the residence he owned and lived in, but
rather as owning a rental property, worth $90,000. By failing to disclose to Citibank the
residence which Mr ―Wilson‖ actually owned, there was a departure from what some Club
witnesses say was the initial plan, of putting forward Mr Wilson as the applicant for finance
because he owned his own home.
58 The application form made provision for providing the name of a reference, being a close
relative or person not residing with the applicant. There, the form was filled in by nominating
“sister – Margaret Wilson”, and giving an address of 58 Renway Avenue, Lugarno. In fact, Mr
―Wilson‖ did not have a sister of that name, and the address of 58 Renway Avenue, Lugarno
was not the address of anyone known to Mr ―Wilson‖. A telephone number for this fictitious
sister was provided on the form. Mr Reardon claimed, in cross-examination, not to know whose
number that was.
59 On 23 July 1991 Mr Hill wrote to Citibank saying:
―We act for Jack Andrew Wilson with regard to the purchase of
the above property. Contract price is $400,000.00.
Mr Wilson hereby makes application for finance for an amount of
$250,000.00 – 15 year principal and interest loan. Security offered
being mortgage over the above property.
Pursuant to this application we enclose the following.
A. Completed Mortgage Finance Proposal.
B. Copy of Contract
C. Copy Tax Returns 1989 - 1990
D. Copy of leases re; 3 factory units and associated
correspondence.
Factory 1 Ty Pringle Motor Trimmer $1250 per month
2 Prestoo Pty Ltd $1120 per month
3 B Keene $1667 per month
$48,444.00 per year
E. Documentation re; Mr Wilson ownership of house in
Queensland Lot 20 Tregana Circuit Edens Landing.
F. Documentation re: Mr Wilson ownership of refrigerated trailer.
G. Copy of Savings bank account – Westpac Bank showing
present balance of $24,000.00
H. Letter from Justin Hill, Solicitor re 10% deposit and other
source of funds.
I. Signed EASI-PAY FORM.
J. Bank cheque to Citibank Limited for $1250.00 re:
Establishment fee.
K. Bank cheque for $250.00 for valuation fee.‖
60 The documentation provided to Citibank in that letter concerning Mr Wilson’s ownership of
a house in Queensland at Lot 20 Tregana Circuit Edens Landing is a letter purporting to be from
Salstar Pty Ltd to Mr Wilson, at 96 Victoria Avenue, Mortdale. It said:
―Dear Mr Wilson,
RE: YOUR PURCHASE FROM SALSTAR PTY LTD
PPTY: LOT 200 TREGANA CIRCUIT, EDENS
LANDING
We refer to the above matter and hereby confirm that settlement
of the above property took place on the 30th day of June, 1991.
We hereby enclose receipt for balance of purchase monies
received.
We also advise that the property is now being rented, with a rental
income of $138.75 nett per week.‖
61 Annexed to that letter were two receipts, purportedly given by Salstar Pty Ltd. One of them,
dated 1 April 1991, recorded receipt of a 10% deposit of $8,900. The other, dated 30 June 1991,
recorded the receipt of $80,100, as the balance of purchase monies for purchase of Lot 200
Tregana Circuit, Edens Landing. The evidence does not establish whether there had been a
purchase made in the name of Wilson of such a property in Queensland, or whether these
documents are also fabrications. From the fact that the letter is addressed to Mr Wilson at 96
Victoria Avenue, Mortdale, an address he did not occupy, from the fact that it is unusual for
residential property to be rented so as to provide an income of a fixed net amount per week,
from the fact that the two receipts total a round sum of $90,000 and thus that the unusual
conveyancing practice of adjusting outgoings on completion seems not to have been gone
through, as well as from the fact that this documentation was part of a concerted attempt to
convince Citibank that Mr ―Wilson‖ was a man of substance, there is quite some ground for
suspicion that these documents are fabrications also. However, I cannot positively conclude that
that is so.
62 The documentation sent to Citibank concerning Mr Wilson’s ownership of a refrigerated
trailer was a Certificate of Registration of Motor Vehicle, in Mr Wilson’s name. A cash register
imprint on it records that a transfer fee of $16 had been paid on 1 May 1991. Mr Reardon says
that this is a trailer that he did not have any actual ownership of, but which was registered in his
name for the purpose of getting finance. It remained registered in ―Wilson’s‖ name for a couple
of years, and then was transferred back into the name of the true owner. It is obvious enough
that this Certificate of Registration of Motor Vehicle, sent to Citibank, was designed to tie in
with the fabricated statements in the 1989 and 1990 “copy tax returns”, relating to income
being earned by Mr Wilson from truck rental.
63 The documents sent to Citibank as “copy of savings bank account – Westpac Bank showing
present balance of $24,000” were copies of the current page of two savings bank passbooks, in
the name of Jack Andrew Wilson. One account showed a balance of $10,115.04, another of
$13,881.93. The first of those savings accounts had had $10,000 deposited into it in May 1991.
The second of the accounts had had $13,500 deposited into it in May and June of 1991. The
evidence does not establish from what source those deposits were made.
64 The “letter from Justin Hill, Solicitor re 10% deposit and other source of funds”, sent to
Citibank on 23 July 1991, was a letter which Mr Hill wrote to Citibank dated 17 July 1991. It
said:
―RE: WILSON PURCHASE FROM
AUSTRAL PATTERN CO. PTY LTD
PROPERTY: 15 Stanley Street, Peakhurst
We act for Mr Jack Andrew Wilson with regard to the purchase of
the above property. Contracts in this matter are to be exchanged
this week. We are holding Bank cheques to $40,000.00 (note
photocopy annexed – payable to Vendors Solicitor being 10%
deposit.)
We are holding the sum of ONE HUNDRED THOUSAND
DOLLARS ($100,000.00) to be applied to the purchase. These
sums are from the sale of a property at 65 Ollier Crescent,
Prospect which belonged to Mr Wilson.‖
65 The statement that Mr Hill was holding $100,000 derived from the sale of the Prospect
property and to be applied to the purchase was false. Mr Reardon had, at one time, owned a
property at 65 Ollier Crescent, Prospect, which was registered in the name of Wilson. However,
that property had been sold in about 1984, when ―Wilson‖ purchased his next house. It was sold
for something like $62,000, not $100,000. Further, all the net proceeds of sale were put towards
the purchase of his next house.
66 The “Signed Easi-pay Form” sent to Citibank on 23 July 1991 was an authority to Citibank,
signed by ―Wilson‖ authorising Citibank to make periodical deductions to the account which
―Wilson‖ had opened with Citibank.
67 On 26 July 1991, Mr Hill sent a fax to Citibank. The coversheet of that fax was handwritten,
by Mr Hill. It said:
―Re loan application
JACK ANDREW WILSON
Enclosed 1) Copy bill of mortgage for $100,000.00 plus copy C T
2) Copy Bank Statement for withdrawals
(a) 40,000.00 (10% deposit)
(b) 1,500.00 (est fee)‖
68 The enclosures with that letter included a document which took the form of a Queensland
Real Property Act Bill of Mortgage. It purported to be a bill of mortgage given by Richard
Charles Barber, of an address in Surfers Paradise, to “Jack Andrew Wilson of 96 Victoria
Avenue, Mortdale (General Manager) in the State of New South Wales”, over the land in an
identified certificate of title. The document was dated 20 August 1990. The consideration was
stated to be,
―$100,000 principal to be lent to Richard Charles
Barber at 16.0% percentum per annum interest
only loan for one (1) year. Interest payable at six
monthly intervals – 20th February 1991 and 20th
August 1991 – principal repayable on the 20th
August 1991.‖
69 The bill of mortgage bears a signature of the mortgagee ―J Wilson‖. Mr Reardon denies
having signed that bill of mortgage. He says he had not seen it before the time of an
examination to which he was subjected, under the Drug Trafficking (Civil Proceedings) Act
1990, in 1994. Mr Reardon says he did not have $100,000 owing to him, whether by Barber or
by anybody else, at that time. His explanation for the document is that Mr Hill must have
fabricated it. Mr Hill gave evidence that, in relation to all the information and documentation
which he sent to Citibank, he provided it in good faith, based on information which ―Mr
Wilson‖ gave him.
70 Also annexed to Mr Hill’s fax to Citibank of 26 July 1991 was a document purporting to be a
copy of a bank statement, from the Carlton New South Wales branch of the Commonwealth
Bank, relating to account number 2137 0079 0874. The document shows that account as being
in the name of J A Wilson. Mr Reardon says he had never seen that document before February
2001, and had never held the account referred to in the document, either in the name of “J A
Wilson” or in any other name. In fact, the account which has the number shown on that
document, at the Carlton branch of the Commonwealth Bank, is the BUMC Commonwealth
Account. The transactions shown in the document which was sent to Citibank are all
transactions which took place on the BUMC Commonwealth Account. The document shows the
withdrawal of $40,000 which took place on 21 June 1991, and the withdrawal of $1,500 which
took place on 19 July 1991 from the BUMC Commonwealth Account. The document is a
forgery, created by someone taking a copy of a statement of the BUMC Commonwealth
Account, and on that statement substituting the name “J A Wilson” for the name of the true
account holder.
71 On 29 July 1991 a document was faxed to Citibank, this time from the fax number of
Blacktown Harley Davidson. This is where Mr Reardon was employed. There, though Mr
Reardon was on the books, and paid, under his real name, he was known to staff members and
customers as “Jack Wilson”. The document faxed to Citibank from Blacktown Harley Davidson
read as follows:
―To Whom It May Concern:
Jack Andrew Wilson has been employed at Harley Davidson of
Blacktown for the last 8 years. His position is General Manager.
His income ending 30 June 1991 was $43,200 gross wage.
Yours faithfully
[signed: P Reardon]
P Reardon
Managing Director‖
This document is one which Mr Reardon fabricated. ―P Reardon‖ was one of his
aliases. His actual income was substantially less than $43,200 gross.
72 As mentioned earlier, it was on 30 July 1991 that Citibank issued its letter of approval for a
loan of $250,000. It is obvious, from the history I have just outlined, that Citibank’s approval,
and its subsequent lending of money for the purchase of the Peakhurst land, was the product of
a large number of serious misrepresentations, by both Mr Reardon and Mr Hill.
The 1991 Levy 73 The making of the levy, in 1991, is an important part of the plaintiff’s case about how it
raised money to pay for the clubhouse. There is not a single contemporaneous record of the
making of the levy, or of it being collected, or of its proceeds being paid to Mr Hill. Mr
Florence gave evidence of there being a meeting, in May or June of 1991, which imposed the
special levy. He says that he received payments of the levy in cash from a man called Glenn
Hammond (also known as ―Boots‖), who is now dead. It was not made clear, in Mr Florence’s
evidence, whether this levy was one which was imposed on only the members of the Sydney
chapter, or on the members of the Club nationwide. According to Mr Florence, in 1991 there
were between 25 and 30 members of the Sydney chapter of the Club. Mr Gioffre estimated that
in the second quarter of 1991 there would have been around 60 odd members of the Sydney
chapter on the books, of whom between 30 and 40 were active members. Mr Gioffre says that
there were approximately 120 members Australia wide at that time. Mr Gioffre’s evidence was
to the effect that the levy was a nationwide levy. If the levy was indeed a nationwide levy, no
explanation has been given of how it could happen that the Sydney chapter of the Club could
impose a nationwide levy.
74 Mr Florence gave evidence about what was done with the proceeds of the levy, as follows:
―Q. As the treasurer did you ultimately receive the moneys that
were paid?
A. I did.
Q. Who did you receive them from?
A. I received them from a member named Glen Hammond who
was in charge of collecting them, and also from members
themselves.
Q. What did you do with the money?
A. Gave it to Justin Hill in the end, who was the solicitor acting
for the purchase of the property.
Q. What did you do with it in the meantime before you gave it to
Mr Hill?
A. We had a safe at the clubhouse, it was kept in there, kept some
of it at home.
Q. As each payment was made to you did you count the money?
A. Yeah.
Q. When you paid the money to Mr Hill was it paid in cash?
A. Yes.
Q. Did you count it before you paid it to him?
A. Yes.
Q. How much did you pay to him?
A. It was varying amounts, I think there is one about 40,000, I
couldn't be positive of the other amounts.‖
This evidence is extremely vague, as to both the time the money was collected,
and the amount collected.
75 In support of the claim that there had been a levy, the plaintiff tendered three statutory
declarations made by deceased members of the Club. One of them, from John Nevin, said: “I
have paid a joining fee of $1,000 to the Black Uhlans Motor Cycle Club”. Another one said, “I
Stephen Hancock of the Black Uhlans Motor Cycle Club hereby solemnly and sincerely declare
that I donate $1,000 over a period of two years from when I joined the Black Uhlans”. The third
said, “During the period of my membership I did give of my own funds an amount of $1,000.
This was a donation to the Club to be used as part of the Club’s funds to acquire property and
general Club use”.
76 Five club members were called on this topic. Owen Moseley said he had paid $1,000 to the
Black Uhlans Motor Cycle Club as a joining fee. Cross-examination established that he had
joined in about 1985, and the joining fee was paid during the period of about 12 months after he
had joined.
77 Robert Carnegie gave evidence that he had donated $1,500 to the Black Uhlans on 16
October 1987 for the purpose of obtaining property.
78 Richard Griffiths said that he donated $1,000 towards purchase of property for the Black
Uhlans Motor Cycle Club. Cross-examination established that he had joined the Club in about
1987, and paid this $1,000 within 12 months or so of joining.
79 Malcolm Roche gave evidence that he donated $1,000 cash “to the Black Uhlans Motor
Cycle Club Inc for the purpose of purchasing property at 15 Stanley Street Peakhurst”. He said
he paid it in instalments of $100, when he could afford it, over a period of probably two years,
up to 1992. At the time he paid it, he was an associate member, not a full member, and was not
required to pay it.
80 Roy Brinson gave evidence that he donated $1,000 to the Club to be used in the purchase of
a clubroom whenever that time would be appropriate. That donation was made about the time
he joined the Club, in 1983.
81 The evidence of these eight club members fails to establish that there was any levy in 1991.
Rather, it suggests that there was a practice of members paying $1,000 to the Club at the time
of, or soon after, joining.
82 Mr Florence gave evidence of holding sums in cash in the clubhouse safe, and a large
amount in his home garage. He says at one stage he held about $40,000 in his garage for a
week. There was no attempt, in evidence, to identify when that occurred, or what happened to
the money immediately after it ceased being in his garage. Mr Florence says that he delivered a
total of approximately $90,000 in cash to Justin Hill before settlement.
83 Mr Hill, in evidence which he gave on the first day of the trial, told a significantly different
story. He said:
―Q. You say, I think, that there was some money that came to you
from club officials or members?
A. Yes, that's correct.
Q. Most of it in cash?
A. Dribs and drabs. I think they showed up with cash at different
times, they didn't quite understand that is not the way to do it. I
have got them to go away and put it in a bank account, I
understood they had a bank account, I think I saw a bank account
actually.
Q. You agree, don't you, that you actually received cash sums on a
number of occasions?
A. I think they showed up with cash and I got them to go down
and get bank cheques. They may have paid the stamp duty with
cash, I don't recall, I certainly saw some cash.
Q. On a number of occasions?
A. Several occasions, yes.‖ (emphasis added)
84 The next day, however, when his evidence continued, Mr Hill was concerned to make sure
that the Court understood that he had received some cash, even if that understanding of the
Court was arrived at through answers which were not responsive to the questions asked. It was
put to him that, to enable the settlement to occur, he had provided about $117,000 (namely, the
money derived from the sale of Ms Bernoth’s property). The evidence continued:
―Q. And provided so that the acquisition by Wilson of 15 Stanley
Street could proceed to settlement?
A. Yes, I already was, the week of settlement - or settling this
whole conveyancing was hard work because the money was
supposed to be coming in, when they were organising the money
over the plan of six months. It didn't happen and they turned up on
the week of settlement and they fell short of cash, and they were
supposed to turn up with cheques and it didn't happen. I think on
the day of the settlement they turned up with a certain amount of
cash. There is a shortfall and I arranged a cheque on the day of
settlement, as you can't turn up on settlement with the cash
accumulating - it doesn't work that way.
Q. And in any event there was a shortfall?
A. There was a shortfall, yes.
Q. Listen to my question, Mr Hill, if you would?
A. Yes.
Q. Do you agree that you provided a little less than $117,000
which was used to settle the purchase by Wilson of 15 Stanley
Street Peakhurst?
A. Yes, but in actual fact it wasn't 117. I was holding a whole lot
of cash to a certain extent, or on that week, or it was used - the
reality was the shortfall came from the sale of the property for the
purchase, but the reality was the shortfall was 40 or something. I
can't recall exactly now, but there was a shortfall in terms of
holding money, coming in with money on the day of settlement
but a cheque was directed in terms of a contra deal of the 117
which was the - beyond the monies that was provided that week,
but the reality—―
85 Section 61 of the Legal Profession Act 1987, in the form it had in 1991, provided:
―(2) Money received on behalf of another person by a solicitor, in
the course of practising as a solicitor:
(a) shall, except where the person on whose behalf
the money is received otherwise directs, be paid,
within the prescribed time, to the credit of a
general trust account at a bank in New South
Wales and be held in accordance with such
regulations as may be in force in relation to trust
money;
(b) shall, where the person on whose behalf the
money is received directs that it be paid otherwise
than to the credit of a general trust account and the
money is to be held under the direct or indirect
control of the solicitor for less than the prescribed
period, be paid as directed; or
(c) shall, in the case of money referred to in
paragraph (b) that is to be held for the prescribed
period or a longer period, be paid as directed and
held in accordance with such regulations as may be
in force in relation to controlled money,
and, in any case, shall be disbursed as directed by
the person on whose behalf it is held.‖
86 Section 62 of that Act required:
―(1) A solicitor shall keep:
(a) in the case of trust money (within the meaning
of section 61) – accounting records; or
(b) in the case of money other than trust money –
such accounting records or other records (if any) as
may be required by the regulations,
that disclose at all times the true position in
relation to money received by the solicitor on
behalf of another person.
(2) The accounting records referred to in subsection (1) shall be
kept in a manner that enables them to be conveniently and
properly audited.‖
87 Section 61(7), and section 62(4) had the effect that a wilful failure to comply with those
obligations, on the part of the solicitor, was professional misconduct.
88 There was no documentation to confirm that Mr Hill had received any money at all in cash.
In particular, there were no trust account records, of the kind the Legal Profession Act 1987
require to be kept, concerning the receipt of any cash money. Counsel for the plaintiff
submitted, with considerable justification, that, given what the evidence had revealed about Mr
Hill, it was hardly a surprise that there were no such records. Even so, it means that the plaintiff
is without one of the means of corroboration which would ordinarily be available for a story that
someone had paid a large sum of money in cash to a solicitor.
89 I am not satisfied that there was any special levy made by the Club in 1991, for the purpose
of raising money to buy a clubhouse.
Mr Florence 90 Mr Florence swore three affidavits in these proceedings. In his first affidavit, sworn 4
November 1999, he said:
―On 21 July 1991 I withdrew an amount of $40,000.00 from the
Club’s account no.2137 790 874 with the Commonwealth Bank of
Australia at Allawah. The money in this account belonged to the
Club. The amount of $40,000.00 was to be used as the deposit on
the property, but following Justin Hill’s advice I paid it to Justin
Hill. Justin Hill said to me words as follows or to the following
effect:
―I’ll pay this into one of Jack’s accounts‖.‖
91 Strictly, the BUMC Account was maintained with the Commonwealth Bank of Australia at
Carlton – but, as Carlton and Allawah are immediately adjacent suburbs, this error is of no
significance. Of more significance, however, is the fact that the affidavit gives no clue that the
$40,000 was taken out in the form of two bank cheques, neither of which was payable to Mr
Hill so as to make it available to him to pay into one of the accounts in the name of Wilson.
92 His second affidavit was sworn on 16 February 2001. It contains the following account:
―In June 1991 the President, Steve Gioffre, said to me:-
―We need to pay the deposit of $40,000.00 for the
property. Find out from Justin Hill what he wants
and then draw the cheque from the Club’s
account.‖
I then telephoned Justin Hill who said to me:-
―We need two bank cheques. Make one out to
Hancock Alldis & Co for $20,000.00 and the other
to Melville McGregor for $20,000.00‖
At the time I did not know who Hancock Alldis & Co or Melville
McGregor were. I accepted Justin Hill’s advice that the cheques
should be drawn in favour of those parties.
On 21 June 1991 Bob Piggott and I signed a withdrawal form, a
copy of which is annexed and marked ―B‖. I took the signed form
to the Commonwealth Bank at Carlton and withdrew the sum of
$40,000.00 from the BUMC Commonwealth Account. At my
request the Commonwealth Bank drew 2 bank cheques as follows:
Hancock Alldis & Co $20,000.00
Melville McGregor Solicitors $20,000.00‖
93 That account is one which fits with the objective evidence. It is of concern that the account
he gives of the withdrawal of the $40,000 on 21 June 1991 is different in the two affidavits.
94 There was a repeated line of cross-examination of the Club’s witnesses, concerning whether
they, or any other of the Club’s witnesses, had ever worn a “1% badge”. Mr Gioffre was
familiar with such badges, and said that some members of the community “buy them as a 1%
outlaw”. It was suggested to him that the significance of the badge was that wearers were the
1% of society who reject the rules and laws of society. To that suggestion he replied, “That
doesn’t mean all the rules of society, no, it may be the government rules”. Mr Hill was aware
that a meaning of that kind was placed on the 1% badge by the press, the media and the
authorities, though possibly not by the people who actually wore the badges. I would not be
prepared to place any weight, in this case, on the evidence about whether in fact members of the
Club ever wore 1% badges. Even if some club members had worn such badges, I would not be
prepared, on the evidence before me, to regard such an act as a seriously intended statement of
the wearer’s attitude. Of some significance, though, is the fact that Mr Florence gave evidence
as follows:
―Q. What does the one per cent badge signify?
A. Um, I believe that it was in response to a statement made by a
bloke in America, that only one per cent of motorcyclists were in
clubs and the rest were just normal people that rode motorbikes.‖
It is a concern that Mr Florence’s evidence on this topic is out of line with that of
other witnesses, and makes me wonder whether his answer was truthful.
95 As well, even on his own account of things, Mr Florence was prepared to be party to the
scheme for deceiving Citibank by inflating the amounts in the bank account of Mr ―Wilson‖,
and presenting those bank records to Citibank as a true indication of the assets of Mr ―Wilson‖.
He is a witness about whose honesty I have some concern.
96 Mr Florence also gave evidence about a source of cash being from the sale and purchase of
some equipment from Albury. He gave evidence that, at a time which was not identified in the
evidence, two members of the Club, who were not identified, said to him that they needed some
money to buy air conditioning and hotel equipment. Mr Florence gives evidence:
―Q. How much money did you give them?
A. I believe I gave them two cheques.
Q. Totalling how much?
A. I couldn't be sure.‖
He says that, later, he was given back money by those members.
―Q. How much money did they give you?
A. Probably totalled around 40,000 …
Q. What did they tell you about the money, what did they tell you
about where it had come from?
A. This is the proceeds of sale of air conditioners and others, I
think there were some tables and chairs as well.‖
This last answer was allowed on the basis that it was admissible, but not for the
purpose of proving the truth of the assertion made in it.
97 When the cheques, the time, and the members involved were not identified, and when there
is no contemporaneous documentation to support this story, I am not persuaded that it is correct.
98 Taking these matters into account, together with the fact that I am unpersuaded by Mr
Florence’s evidence about the levy, Mr Florence’s evidence is not evidence I would be prepared
to act upon unless it was corroborated from a reliable source.
Mr Gioffre 99 Neither would I be prepared to accept the evidence of Mr Gioffre, unless it was corroborated
from a reliable source. He gives evidence about the making of the 1991 levy, which I am not
persuaded is correct. He was, on his own account, willing to be party to the scheme to deceive
Citibank by inflating the amount in the ―Wilson‖ bank accounts. He gives as a reason why
Wilson was chosen as the applicant for finance was “because nobody else had any jobs.” Yet
Mr Florence gives evidence that, though he had been made redundant in July 2002, he had been
employed for 24 ½ years prior to that with, essentially, the one organisation. Mr Gioffre gave
evidence that he had made a suggestion, to Justin Hill at one of the meetings, that another
solicitor was going to prepare a trust deed. He continued:
―Q. And why do you say - did you suggest to Hill that another
solicitor would prepare the trust deed?
A. That was our security, that was all done correctly - that was our
safety to us. We looked at it as a safety net that it was ours, you
know.
Q. Let me just make sure that we are not at cross-purposes?
A. Yes.
Q. You understood that Hill was to do the conveyancing?
A. Yes.
Q And you understood, you say that another solicitor was to
prepare the trust deed?
A. Yes.
Q. And tell his Honour again why Hill couldn't do that, but
another solicitor was going to?
A. I think our club position was for a safety zone to say it was
ours, that we were the beneficiaries as we understood.
Q. You say it was a club decision?
A. Yes.‖
That strikes me as an unlikely story. No other evidence was given of the “club
decision” concerning a solicitor other than Mr Hill preparing the trust deed.
The Significance of Criminal Convictions of Mr Florence and Mr Gioffre 100 Mr Florence had a conviction in Queensland in the very early 1980s for possession of an
“implement”. The implement was a water pipe or “bong”, used for smoking marijuana. Mr
Florence said he was aged “probably 20 at the very most” when he was convicted of that
offence. As well, he had a conviction for culpable driving at some stage in the 1990s.
101 Mr Gioffre had some convictions in 1981 and 1982 for offences involving drugs. He was
also convicted in the late 1980s on a number of offences involving drugs. For the latter
offences, fines were imposed, which Mr Gioffre thought were of the order of $300 or $400.
102 The evidence about convictions does not have any greater precision than I have here set out.
It was established through cross-examination and re-examination of the respective witnesses
whose convictions were proved.
103 At common law, evidence of the convictions of a witness seems to have been regarded as
always being admissible as tending to show that the witness was lacking credibility: Bugg v
Day (1949) 79 CLR 442 especially at 457-459 per Latham CJ, 464-467 per Dixon J, 471 per
McTiernan J, 474-475 per Williams J, 476 per Webb J; R v Aldridge (1990) 20 NSWLR 737 at
741; Clifford v Clifford [1961] 1 WLR 1274 at 1276; see also Katz “Extrinsic Proof of Prior
Convictions to Impeach Credibility in New South Wales” (1990) 6 Australian Bar Review 176.
104 This common law position was modified by section 56 of the Evidence Act 1898, which
provided:
―When any question put to a witness in cross-examination is not
relevant to the cause or proceeding, except so far as the truth of
the matter suggested by the question affects the credit of the
witness by injuring his character, the Court shall have a discretion
to disallow the question, if in its opinion the matter is so remote in
time, or of such a nature that an admission of its truth would not
materially affect the credibility of the witness.‖
105 The common law position was summarised by Hunt J (with whom Enderby and Grove JJ
agreed) in R v Aldridge (1990) 20 NSWLR 737, at 741, as follows:
―The purpose of cross-examination as to credit is to show that a
witness ought not to be believed on his oath. The conduct or
character of a witness cannot therefore be used to attack his credit
unless that conduct or character is of such a nature as to tend
logically and rationally to weaken confidence in his veracity or in
his trustworthiness as a witness of truth: Bickel v John Fairfax &
Sons Ltd [1981] 2 NSWLR 474 at 494.
The Crown has argued that, if the nature of a particular offence
does nothing to weaken such confidence, a witness' conviction for
such an offence is itself irrelevant to the credit of that witness.
Reliance is placed upon the judgment of Dixon J in Bugg v Day
(1949) 79 CLR 442 at 467. The restriction suggested by Dixon J
did not, however, find any support in the judgments of the other
members of the court. That case, it should be kept in mind,
concerned the admissibility upon the issue of his credit of the
defendant's previous traffic offences. It was held that (subject to
the discretion afforded by s 56) convictions for any offences (even
for offences which do not themselves involve any question of
dishonesty) are admissible in relation to credit, upon the basis that
a conviction for any offence against the law may have some effect
upon the credit of the witness (ibid at 458, 471, 475). The Crown's
argument as to irrelevance must therefore be rejected.‖
106 The Evidence Act 1995 provides:
―102 Evidence that is relevant only to a witness’s credibility is not
admissible.
103(1) The credibility rule does not apply to evidence adduced in
cross-examination of a witness if the evidence has substantial
probative value.
(2) Without limiting the matters to which the court may have
regard in deciding whether the evidence has substantial probative
value, it is to have regard to:
(a) whether the evidence tends to prove that the
witness knowingly or recklessly made a false
representation when the witness was under an
obligation to tell the truth, and
(b) the period that has elapsed since the acts or
events to which the evidence relates were done or
occurred.
106 The credibility rule does not apply to evidence that tends to
prove that a witness:
…
(b) has been convicted of an offence, including an
offence against the law of a foreign country, …
if the evidence is adduced otherwise than from the
witness and the witness has denied the substance of
the evidence.‖
107 The Evidence Act 1995 has the effect of modifying the previous law concerning cross-
examination of a witness as to convictions by permitting such evidence to be admissible only if
it has substantial probative value. The dictionary to the Evidence Act defines “probative value”
of evidence as meaning, “the extent to which the evidence could rationally affect the assessment
of the probability of the existence of a fact in issue”.
108 In the present case, evidence of these convictions was admitted without objection. I do not
find that the evidence of the convictions assists me in reaching a conclusion about any matter in
issue, and accordingly, even though it has been admitted, I have placed no weight on it.
Significance of the Annual Return 109 Section 26 of the Associations Incorporation Act 1984 requires an incorporated association
to hold annual general meetings. Section 26(6) provides:
―At the annual general meeting of an incorporated association, the
committee of the association shall submit to members of the
association a statement which is not misleading and which gives a
true and fair view of the following:
(a) the income and expenditure of the association during its last
financial year,
(b) the assets and liabilities of the association at the end of its last
financial year,
(c) the mortgages, charges and other securities of any description
affecting any of the property of the association at the end of its
last financial year,
(d) in respect of each trust of which the association was trustee
during a period, being the whole or any part of the last financial
year of the association:
(i) the income and expenditure of the trust during that period,
(ii) the assets and liabilities of the trust during that period, and
(iii) the mortgages, charges and other securities of any description
affecting any of the property of the trust at the end of that period.‖
Section 27 provides:
―The public officer of an incorporated association shall, within 1
month after the date of each annual general meeting of the
association, lodge with the Director-General in an approved form,
verified as prescribed, a statement:
(a) containing the particulars referred to in section 26 (6) and such
other particulars as may be prescribed,
(b) accompanied by a certificate signed by 2 members of the
committee of the incorporated association authorised by
resolution of the committee to the effect that the statement has
been submitted to the members at an annual general meeting of
the incorporated association,
(c) accompanied by a copy of the terms of any resolution passed
at that meeting concerning that statement, and
(d) accompanied by the prescribed fee.‖
110 It was pursuant to section 27 that the annual statement, details of which I have set out at
paragraphs 23 and 24 above, was prepared and lodged. That annual statement is inconsistent
with the Club’s contention that there was an express understanding that Wilson would hold the
premises as its nominee. The statement of income does not include any income from the rental
of units 1 and 2 in the premises. The statement of expenditure contains an item of “Rent”,
which, if the Club’s case about there being an express trust were correct, would not have needed
to have been paid. It is not as though the amounts involved are ones which, in the context of the
Club’s income and expenditure, could have been overlooked – Mr Gibbs’ working papers
connected with preparation of the ―Wilson‖ tax return (paragraph 27 above) showed that the
total income received from rental of units 1 and 2 in the year to 30 June 1992, was $21,330.
Only a proportionate part of that $21,330 would have been received in the period ending 31
May 1992, but even so, if the Club had been entitled to it, it would have been the second largest
item of income of the Club. The expenditure which was claimed for rent was the largest of the
items of expenditure in the statement of income and expenditure.
111 Further, the statement of income and expenditure does not include items of expenditure
which correct accounting would have included if there had been an express trust. There is no
claim made for expenditure for outgoings connected with the premises, like council rates and
water rates. Further, if the arrangement between the Club and Wilson was that the Club was to
be responsible for repayment of the mortgage, correct accounting would have included an item
of expenditure for interest on borrowings.
112 Similarly, the statement of assets and liabilities does not record the asset which the Club
would have had, if its case about express trust were correct, namely the land at Peakhurst. The
statement of assets and liabilities shows no liabilities at all, which points up a difficulty in the
Club’s case, namely that no arrangement at all seems to have been made about who was to meet
the ongoing mortgage obligations.
113 Mr Florence said that the reason the property at Peakhurst was not listed as an asset was
that it was not in the Club’s name. He said:
―At the time of the annual statement I thought that the property
belonged to the Club but, because it was in Jack Wilson’s name,
there was no need to list it as an asset of the Club.
Under the heading Expenditure in annexure A to the Annual
Statement is an item named “Rent” and an amount of $18,155
beside that item. This item represents the deposits which I made
into the Wilson Citibank Account … . The deposits were called
“Rent” in the Annual Statement because I could not think of a
better way to describe them. I did not think that they could be
described as ―mortgage payments‖ because the mortgage and the
property were not in the Club’s name. I did not think of the
payments as rent paid by a tenant.‖
114 Mr Gioffre gave a different explanation for these entries in the annual statement, that the
Club had not changed the entries in its ledger for the payments which were made. While these
explanations are different, they are not necessarily inconsistent. However, given my reservations
about Mr Florence and Mr Gioffre as witnesses, I am not prepared to regard those explanations
as completely negativing the effect of the annual statement, as being a significant admission by
the plaintiff that it does not hold a beneficial interest in the Peakhurst premises. The significance
of that admission is increased by the fact that the annual return was filed in August 1992
comparatively soon after the acquisition of the property, and before Mr Reardon’s arrest in
January 1993.
The Application for Incorporation of the Club 115 I have set out, at paragraph 19 above, relevant portions of the application for incorporation
of the Club, which was filled out on 3 May 1991, and lodged on 25 June 1991. According to the
Club’s case, as at both of those dates plans were well advanced to acquire the Peakhurst
premises. If those plans went ahead, the income and expenditure of the Association would be
quite different to the amounts stated in the application as being the expected amounts of income
and expenditure of the Association. However, as at both those dates, contracts had not been
exchanged, nor finance obtained. In those circumstances, I do not regard the terms of the
application for incorporation form as counting against the Club’s case.
The 1992 Tax Return of Mr “Wilson” 116 I have set out, in paragraph 27 above, relevant details of a tax return for the 1991/1992 tax
year of Mr ―Wilson‖. That tax return was not only prepared by T E Gibbs & Co, it was lodged
with the Taxation Department. In consequence, the Taxation Department issued a Notice of
Assessment of Income Tax to Mr ―Wilson‖. The evidences does not disclose whether that
assessment was ever paid. While the contents of that tax return are inconsistent with the Club
having any beneficial interest in the Peakhurst premises, that taxation return (unlike the annual
statement) does not have effect as an admission by the Club. It is a piece of evidence which is
inconsistent with the account Mr Reardon gave to the Court of his understanding of the basis on
which the Peakhurst property was being purchased. However it contains, as income, income
from letting out on hire of the refrigerated trailer which Mr ―Wilson‖ had never owned
beneficially. There is a real possibility that one of the purposes for its preparation was so that it
could be submitted to Citibank, and tell a story consistent with the false basis on which Citibank
had originally granted Mr ―Wilson‖ a loan. When there is a real possibility that the tax return
was part of an attempt to deceive, I am not prepared to place weight on it.
Mr Gibbs’ letter of 5 January 1994
The text of this letter is set out at paragraph 29 above. This letter is, as the Crime
Commission points out, one which is prospective – it gives advice about how
Club property could be owned in the future. There is no basis for believing that it
related to any property other than the Peakhurst property. The terms of the letter
do not sit well with any suggestion that the Peakhurst property was already held
by Mr ―Wilson‖ as nominee for the Club.
Mr Reardon’s Understanding of the Basis on Which the Club Occupied the Property after
Purchase 117 Mr Reardon’s understanding of the basis on which the Club occupied the property after it
had been purchased emerged in some cross-examination about the Wilson Citibank Account:
―Q. Into which--
A. The rent went, yeah.
Q. The rent went?
A. That's right.
Q. And there were payments on unit 1 which were made to the
real estate agency called Antipas?
A. Yeah.
Q. And paid by them into that account?
A. Right.
Q. And the mortgage payments came out of that account
automatically month by month?
A Yep.
Q. And with respect to unit 2 there were payments made by
whoever occupied that unit to Antipas Real Estate?
A. I suppose so, yeah.
Q. Paid into the City Bank account?
A. Yes.
Q. Correct?
A. Yep.
Q. And the third stream of moneys that went into that account
were amounts paid by the club, correct?
A. For the rent on that clubhouse, yeah. Three different rents were
paid, I think.
Q. The third stream was moneys paid by the Black Uhlans by way
of rent on the clubhouse?
A. Yes.‖
(emphasis added)
118 Mr Reardon was, soon afterwards, cross-examined about his 1992 tax return, which
included rent from units 1 and 2.
―Q. So do you see that the rent item is at the top of the page as
listed there, relating to unit 1 and unit 2?
A Yep.
Q. But not to unit 3?
A. I don't even know the clubhouse was numbered 3. I just knew
where it was but I take your word for it.
Q. Because, as you just said, the club was, in fact, paying rent on
the clubhouse to you?
A. Not to me personally. The rent was used to pay the payments. I
mean, I wasn't getting any money out of it, put it that way.‖
119 It is of some significance that Mr Reardon regarded the payments that the Club was making
as being “rent”, and that he volunteered the use of that word, repeatedly, rather than adopted it
from the language of a question which was put to him by the cross-examiner. While Mr
Reardon’s credit is such that I would not be prepared to simply accept and act on anything he
said, even in cross-examination, the fact that he gives this evidence is a further obstacle in the
way of my being persuaded that the Club’s case concerning express trust is correct.
Existence of Express Trust – The Law 120 Before there is an express trust, there must be an intention to create a trust: Commissioner
of Stamp Duties (QLD) v Jolliffe (1920) 28 CLR 178 at 181.
―To create a trust no formal words are required once the intention
is clear. The relevant intention, if a trust is to be held to be
created, must be that the [legal title holder’s] legal ownership of
the land is to be held beneficially, in the case of a private trust, for
ascertained persons, or in the case of a permanent public trust, for
charitable purposes.‖ (Brisbane City Council v Attorney General
for Queensland [1979] AC 411, at 421).
121 The intention can be inferred: see cases collected in Commonwealth of Australia v Booker
International Pty Ltd [2002] NSWSC 292 at [34]-[45]. As well,
―… unless there is something in the circumstances of the case to
indicate otherwise, a person who has “the custody and
administration of property on behalf of others” (Taylor v Davies
[1920] AC 636 at 651) or who “has received, as and for the
beneficial property of another, something which he is to hold,
apply or account for specifically for his benefit” (Cohen v Cohen
(1929) 42 CLR 91 at 100 per Dixon J) is a trustee in the ordinary
sense‖ (Registrar of the Accident Compensation Tribunal v
Federal Commissioner of Taxation (1993) 178 CLR 145, at 165-
166.
Existence of Express Trust – Conclusion on Facts 122 I did not regard any of the principal witnesses called by the Club (that is, those apart from
the five members called to give brief evidence on the topic of the supposed levy) as witnesses I
could rely on. There is nothing implausible, or inconsistent with the objective evidence, in the
hypothesis that Mr Reardon was in need of an investment for profits from drug dealing, and that
the Club was prepared to assist him by making some of its money available for the purchase of
the Peakhurst property. Even though it is not necessary for me to make a positive finding that
this hypothesis is correct, the fact that there is a plausible explanation for the objective evidence,
inconsistent with the oral testimony, makes it harder for the oral testimony to be accepted than
would be the case if there were no such plausible alternative hypothesis. The calculated
dishonesty of Mr Reardon, Mr Hill and Mr Gibbs, in preparing false documents to raise money,
which the Club was privy to at least to the extent of intending to inflate the bank accounts of
―Wilson‖ for the purpose of deceiving Citibank, casts a cloud over the whole transaction – if I
know that one aspect of the transaction was fraudulent, it is harder for me to be satisfied about
the true nature of the rest of the transaction, than would be the case with a transaction where
everything was honest and straightforward.
123 While the Club was an unincorporated association, it would have been necessary for some
person, or people, to hold land in trust for it, if the Club was to acquire land at all. However,
once the Club was incorporated, there was nothing to stop it from holding land in its own name.
Mr Hill must have been aware of that. There was no attempt to explain why a trust was
necessary or desirable, apart from the evidence to the effect that the only way of raising money
was by putting forward to a bank a borrower who was falsely made to appear to be a man of
some financial substance. No explanation was offered for why the transaction was not
structured so that ―Wilson‖ guarantee a borrowing by the Club.
124 It also seems to me that there is some implausibility in the story which the Club tells about
the acquisition of the premises, so far as what it does not contain is concerned. There is no
account given of there being any investigation of what the net return from units 1 and 2 would
be, or of any consideration being given to how the amount which either ―Wilson‖ or the Club
would need to pay, to make up the shortfall in payment of the mortgage money, compared to the
rental which the Club was previously paying. There is no account given of the Club saying
anything to Mr Reardon, to make it clear that it would be the Club which would be responsible
for the ongoing payments of the mortgage loan. That ―Wilson‖ has borrowed from Citibank
well over half of the total purchase price, and undertaken a personal obligation to repay that
money to Citibank, tells significantly against either ―Wilson‖, or the Club, having an intention
that the property should belong beneficially to the Club.
125 There is not a single contemporaneous document, emerging either from Mr Hill, Mr Gibbs,
the Club, or Mr Reardon, which supports the Club’s case. When the Club’s case involves
payment of large parts of the purchase price by large sums of cash – a type of story about which
one should scrutinise the evidence with care – the absence of documentation is particularly
important. Mr Florence gave some evidence in very general terms, seeking to explain the
absence of at least some of these types of records. He said that there were minutes of Club
meetings in existence at one stage, and “a lot of our records have been removed by the Police
on different occasions, either from peoples houses when they raided them, or from the
clubhouse”. However, if such documents exist, and are in police custody, it is still possible for
those documents to be placed before a civil court for the purposes of evidence. No explanation
has been proffered for the absence of any file notes of Mr Hill, or Mr Gibbs.
126 In the result, I am not satisfied that (whether it be the intention of the Club that matters, or
the intention of Mr Reardon) either of them had an intention that, in substance, the beneficial
interest in the Peakhurst property would be held by Mr Reardon for the Club.
Absence of Writing 127 The Crime Commission has submitted that if there is an intention to create an express trust,
that intention cannot be given effect to because section 23(1)(a) and (b) of the Conveyancing
Act 1919 would require writing. The Club submits that, if there were an intention which (were it
not for the lack of writing) would be sufficient to establish an express trust, in circumstances
where Mr Reardon has taken title to the land on the basis that he would be a trustee, it would be
fraudulent for the Crime Commission (as Mr Reardon’s successor in title) to rely on the absence
of writing, and that equity would enforce the trust notwithstanding the absence of writing:
Rochefoucauld v Boustead [1897] 1 Ch 196; Last v Rosenfeld [1972] 2 NSWLR 923; Wratten
v Hunter [1978] 2 NSWLR 367 at 369-370. Given the conclusion I have come to concerning
whether there was an intention to create an express trust, it is not necessary to consider these
submissions.
Existence of Resulting Trust – The Law 128 Judicial findings about who holds the beneficial interest in land are made with the
assistance of presumptions. The first is “… that prima facie the beneficial ownership of real
property is commensurate with the legal title.” (Currie v Hamilton (1984) 1 NSWLR 687 at
690 per McLelland J.) In some situations this first presumption is displaced by a presumption of
a resulting trust, while in other factual situations a presumption of advancement operates. The
fundamental nature of the presumption that the beneficial interest is the same as the legal
interest is illustrated in the explanation of Deane J in Calverley v Green (1984) 155 CLR 242 at
267 of how the presumption of advancement operates.
―The third "presumption", usually called the "presumption of
advancement", is not, if viewed in isolation, strictly a presumption
at all. It is simply that there are certain relationships in which
equity infers that any benefit which was provided for one party at
the cost of the other has been so provided by way of
"advancement" with the result that the prima facie position
remains that the equitable interest is presumed to follow the legal
estate and to be at home with the legal title or, in the words of
Dixon CJ, McTiernan, Fullagar and Windeyer JJ in Martin v
Martin (1959) 110 CLR 297, at p 303, that there is an "absence of
any reason for assuming that a trust arose". "The child or wife
has the legal title. The fact of his being a child or wife of the
purchaser prevents any equitable presumption from arising"
(1959) 110 CLR, at p 304 (quoting Ashburner's Principles of
Equity, 2nd ed (1933), p 110n).‖ See also Nelson v Nelson (1995)
184 CLR 538 at 547 per Deane and Gummow JJ, 584 per Toohey
J.
129 A presumption of a resulting trust can operate in, broadly, three different types of factual
situation. The first is where property is conveyed at law, but the entire beneficial interest in that
property is not disposed of. The second is where property has been conveyed at law, on a basis
which, initially, disposes of the entire beneficial interest, but at a later time equitable obligations
attaching to the property fail or are set aside. The third situation is that a presumption of
resulting trust arises where one person provides the purchase price of property, which is
conveyed into the name of another person.
130 Bogert, The Law of Trusts and Trustees, revised 2nd edition 1991, paragraph 454, page
240-241 explains the origin of a resulting trust arising from payment of the purchase price of
property.
―These purchase money transactions first arose in England in the
middle ages, when the holding of land to uses was a very common
practice, and when secret uses were numerous. It was easy to infer
that the payor desired to follow the common usage of having the
land held to uses, and that he (the payor of the price) was to be the
beneficiary of the use. Modern courts have not felt that altered
social or economic customs warranted a change from inference of
a trust to an inference of a gift. While trusts may not be as
common nowadays as were uses of land in England in the middle
ages, nevertheless they are sufficiently numerous to make them
natural devices for property holding.
The courts of equity have therefore established a doctrine that
normally the payor of the purchase price of property is entitled to
be decreed the beneficiary of a trust where the conveyance was
absolute and was made to another with the consent of the payor.‖
131 Bogert, op cit, page 244-246 explains the naming of this type of trust:
―This trust has been called “resulting” on the theory that it results
or arises from the peculiar facts about payment and the form of
the conveyance.‖
132 Jacobs Law of Trusts in Australia, 6th edition paragraph [1201] has a different explanation:
―The term “resulting” applied to these trusts expresses the view
that the property comes back to him after it has been given away,
although in truth the beneficial interests may never have left him.‖
133 Bogert, op cit, page 249 explains the juristic nature of this type of trust:
―This resulting trust depends for its existence on the actual intent
of the creator, expressed in acts other than writing or the spoken
word. The conduct of the payor with reference to the price and
deed lead the court to infer an intent to have a trust for himself.
The theory of enforcement is that of carrying out the intent of the
settlor, just as truly as if he had reduced his trust to writing and
inserted it in the deed. Resulting trusts are “intent enforcing” just
as much as are the usual express trusts. They bear little or no
relationship to constructive trusts, which do not arise out of intent
but depend for their existence on the wrongful conduct of the
defendant which induces a court to adjudge him a trustee.‖
134 This account of the nature of the resulting trust arising from payment of the purchase price
accords with the law in Australia. In Napier v Public Trustee (Western Australia) (1980) 32
ALR 153 Aickin J (with whom Gibbs ACJ, Mason, Murphy and Wilson JJ agreed) said, at 158:
―The law with respect to resulting trusts is not in doubt. Where
property is transferred by one person into the name of another
without consideration, and where a purchaser pays the vendor and
directs him to transfer the property into the name of another
person without consideration passing from that person, there is a
presumption that the transferee holds the property upon trust for
the transferor or the purchaser as the case may be. This
proposition is subject to the exception that in the case of transfers
to a wife or a child (including someone in respect to whom the
transferor or purchaser stands in loco parentas) there is a
presumption of advancement so that the beneficial as well as the
legal interest will pass. Each of the presumptions may be rebutted
by evidence.‖
135 In Napier at 158-159 Aickin J quoted with approval the following passage from the
judgment of Jordan CJ in Re Kerrigan; ex parte Jones (1946) 47 SR (NSW) 76 at 82-3.
―In my opinion in every case of the present type, where there are
facts which, unaided by evidence of actual intention, would give
rise either to a presumption of resulting trust or such a
presumption in collision with a presumption of advancement, the
question of how far either trust prevails, and to what extent,
depends upon the intention of the parties as gathered from all
available relevant facts, due consideration being given to the
relevant weight of the two presumptions when they collide.‖
136 That the presumption of resulting trust, and presumption of advancement, are the starting
point of a factual enquiry about with what intention A provided the purchase price for a
purchase of property in B’s name is stated by Deane and Gummow JJ in Nelson v Nelson
(1995) 184 CLR 538 at 547:
―The presumptions operate to place the burden of proof, if there
be a paucity of evidence upon such a relevant matter as the
intention of the party who provided the funds for the purchase.‖
137 The sort of evidence which can rebut a presumption of advancement was considered, in
Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353, at 365:
―The presumption can be rebutted or qualified by evidence which
manifests an intention to the contrary. Apart from admissions the
only evidence that is relevant and admissible comprises the acts
and declarations of the parties before or at the time of the
purchase … or so immediately thereafter as to constitute a part of
the transaction. If that evidence is insufficient to rebut the
presumption the beneficial gift, absolute or subject only to
qualifications imposed upon it at the time, is complete and no
subsequent changes of mind or dealings with the property
inconsistent with the trust by the donor can as between himself
and the donees alter the beneficial interest.‖
In Calverley v Green (1984) 155 CLR 242, at 262 Mason and Brennan JJ (in a
portion of the judgment which Deane J agreed in at 271) applied this principle to
identify the evidence which can rebut a presumption of resulting trust.
138 In deciding whether a presumption of resulting trust had been rebutted, it would be
necessary for the court to take into account not only evidence going to the intention of the
provider of the money which tended to cut down the presumption of resulting trust, but also any
evidence which tended to strengthen the finding about intention which that presumption
dictates. Only by taking into account both evidence which tends to cut down the presumption,
and evidence which tends to strengthen the finding about intention which the presumption
dictates can the Court reach a conclusion about whether, on the whole of the evidence, the
presumption has been rebutted. The sort of conduct which could possibly be taken into account
in this way could include who took occupation and control of the property, who made
improvements to it and in what circumstances, who paid periodical outgoings on the property,
who received any rent from the property, and who paid income tax on any rent received from
the property. To the extent that any of these types of transaction occurred at a time which was
not “so immediately thereafter as to constitute a part of the transaction”, they could be taken
into account only to the extent that they were admissions.
139 The admissions which can be taken into account in deciding whether a resulting trust exists
would include admissions by a predecessor in title: Falcon v Famous Players Film Company
[1926] 2 KB 474 at 488-489 per Bankes LJ, 498 per Atkin LJ (Scrutton LJ at 494 not deciding);
Nowell v Palmer (1993) 32 NSWLR 574 at 578 per Mahoney JA (with whom Meagher and
Hanley JJA agreed); Cross on Evidence, 5th Australian edition, paragraph 33530; Phipson on
Evidence, 12th edition, paragraph 705-714. In the present case, if there were any admissions
made by Mr Reardon, during the time he was still the owner of the land, those admissions
would be admissible against his successor in title, the Public Trustee.
140 It has been repeatedly reiterated that the presumption of resulting trust is one which “should
not … give way to slight circumstances”: Shepherd v Cartwright [1955] AC 431 at 445;
Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 365; Brown v Brown (1993) 31
NSWLR 582 at 596.
141 The extent of the beneficial interest of the parties, arising by reason of a resulting trust,
must be determined at the time when the property was purchased and the trust created:
Calverley v Green (1984) 155 CLR 242 at 252 per Gibbs CJ, 262 per Mason and Brennan JJ (a
portion of the judgment with which Deane J at 271 agreed).
142 As a consequence of these principles, if part of the purchase price is provided by being
borrowed on mortgage, the presumption of resulting trust is applied by treating the monies
raised on mortgage as a contribution by the person who is liable to repay that money: Calverley
v Green at 251 per Gibbs CJ, 257-258 per Mason and Brennan JJ, 267-268 per Deane J. That
particular application of the presumption, like any other, can be rebutted if there is evidence to
show that the parties had some other intention at the time the property was acquired. Thus,
Bloch v Bloch (1981) 180 CLR 390, a case “where the relevant property which the parties
intended to acquire was seen to be not the title to land subject to mortgage but the land freed of
the mortgage” (Calverley v Green (1984) 155 CLR 242 at 262-263 per Mason and Brennan JJ,
a passage with which Deane J at 271 agreed) was a case where, to the extent that the Court
could make such a finding about what the property which the parties intended to acquire was, to
that extent the presumption of resulting trust had been rebutted - but otherwise the presumption
of resulting trust was left operating.
143 As well, sometimes conduct after the acquisition of title might provide a basis for someone
who has made contributions to payment of mortgage instalments to claim a proprietary interest
on some basis other than that of a resulting trust, such as constructive trust, or equitable charge
or lien. Alternatively, payment of contribution to mortgage instalments might give rise, in some
factual situations, to a claim for reimbursement, on the basis of an equity of contribution, or
some restitutionary basis.
144 There was formerly doubt about whether the “purchase price” for the purpose of the
application of the presumption of resulting trust, included incidental costs, fees and
disbursements involved in the acquisition of the property (such as stamp duty, legal costs, bank
charges and registration fees, or whether it extended only to the amount actually paid to the
vendor (including in that expression any mortgagees of the vendor) as the purchase price of the
land: Currie v Hamilton [1984] 1 NSWLR 687 at 691; Atilgan v Atilgan [1999] NSWSC 324
at [111], cf Little v Little (1988) 15 NSWLR 43 at 45-46. That doubt has now been removed by
the decision of the Court of Appeal in Ryan v Dries [2002] NSWCA 3 at [52]-[53], which held
that the broader concept of “purchase price” was the appropriate one to apply.
145 If two or more people provide the purchase price of property taken in the name of one of
them, or in the name of some other person, the presumption of resulting trust applies so as to
presume that the beneficial title is taken in the same proportions as the purchase money was
provided: Calverley v Green (1984) 155 CLR 242 at 246, 258-259.
146 The presumption of a resulting trust, in circumstances where there have been two or more
contributors to the purchase price is frequently stated in terms like those used by Deane J in
Calverley v Green (1984) 155 CLR 242, at 266-267:
―Where two or more persons advance the purchase price of
property in different shares, it is presumed that the person or
persons to whom the legal title is transferred holds or hold the
property upon resulting trust in favour of those who provided the
purchase price in the shares in which they provided it.‖
147 That way of formulating the presumption assumes that it is possible to know the shares in
which the purchase price was provided. That assumption is one which does not apply in the
present case on the findings of fact which I have made so far. While the likelihood is that the
two contributions to the purchase price of the Peakhurst land which were provided by cheques
from Advance Bank (see paragraph 12 above), and which were, in reality, the proceeds of sale
of Ms Bernoth’s property, were probably treated as a loan, and were probably repaid, I am not
satisfied that this “loan” was something which was actually agreed to by either the Club or Mr
Reardon, rather than being an expedient improvised by Mr Hill without their knowledge.
Neither am I satisfied about who provided the money which was ultimately used to repay Ms
Bernoth.
148 In these circumstances, it seems to me that the presumption of resulting trust should be
applied so that, to the extent to which a party who asserts that it has provided part of the
purchase price can demonstrate what part of the purchase price it has provided, to that extent it
should be presumed that the party has a proportionate beneficial interest in the property. This
way of applying the presumption is consistent with two different principles. The first is the
fundamental principle that, to the extent that it is not demonstrated otherwise, the beneficial
interest is presumed to be the same as the legal title. The second is that the rationale for the
existence of a resulting trust depends upon presumptions about the intention of the person who
provides part of the purchase price for property, when title is taken in the name of another, not
on the intention of anyone else.
Resulting Trust – Conclusion on Facts 149 The total purchase price of the Peakhurst land (in the extended sense relevant for the law of
resulting trust) is $419,910.46, made up as follows:
ITEM JUDGMENT PARA AMOUNT
Deposit 7 $40,000.00
Citibank Application Fee and
Valuation Fee
8 $1,500.00
Stamp duty 10 $14,361.00
Solicitor’s fees 11 $3,484.46
Payment to vendor on settlement 12 $360,565.00
TOTAL
$419,910.46
150 The amounts provided from the funds of the Club towards this purchase price were:
ITEM JUDGMENT PARA AMOUNT
Deposit 7 $40,000.00
Citibank Application Fee and
Valuation Fee
8 $1,500.00
Stamp duty 10 $14,361.00
Solicitor’s fees 11 $3,484.46
Cheque provided for settlement 12 $16,222.53
TOTAL
$75,567.99
151 The application of the presumption of resulting trust would confer on the Club a beneficial
interest in the Peakhurst property so that it and the Public Trustee now hold the title in the ratio
(ignoring cents as de minimis by rounding to the nearest dollar) 75,568:344,342.
152 I turn now to consider whether the presumption of resulting trust has been rebutted.
153 Mr Florence gives evidence that all the amounts which were paid into the Wilson Citibank
Account to make up the difference between the net rents obtained from units 1 and 2, and the
amount which needed to be paid to Citibank each month on the mortgage, were paid from the
Club’s own funds. He also says that after the Public Trustee took control of the property in
March 1994 he made payments out of the Club’s funds to the Public Trustee, and also one
payment directly to Citibank, and one to Citibank’s solicitors, on account of mortgage
repayments. He says that the total amount paid up to 31 December 1999, in this fashion was
$143,283.64. He also says that since September 1991 the Club has paid from its own funds for
repairs to the property, including the following:
―(a) new guttering was installed in Factory 1 because of water
leakage in 1993;
(b) an agricultural pipe and blue metal sump were installed behind
Factory 1 in 1993;
(c) the exterior of the Factories were painted in early 1994;
(d) a new electrical submain was installed in Factory 3 in early
1994 for three phase electricity; and
(e) painting of the interior of Factory 2 and installation of new
lighting in Factory 2 in 1994 or 1995.‖
154 The periodical outgoings of the property were paid from the proceeds of the rental of units
1 and 2. So far as the evidence discloses, no one has paid income tax on any rent received from
the property. The Club has continued to occupy unit 3 of the property as its clubhouse, in the
same way as it did before the property was purchased by Mr Reardon.
155 Even if I were to accept Mr Florence’s evidence about the various payments which were
made in connection with the property from Club funds after the property was purchased
(evidence which is not supported by any documents, but which was also not the subject of any
cross-examination) this would not assist the Club in seeking to rebut any presumption of
resulting trust. The various actions of the Club in paying money in connection with the
mortgage, and otherwise in connection with the property, are not actions which occurred so
immediately after the purchase as to constitute a part of the transaction, and they are not
admissions on the part of either the Club, or Mr Reardon. Hence they cannot be used to rebut
the presumption of a resulting trust.
156 The Crime Commission submits that the 1992 annual return of the Club rebuts the
presumption of a resulting trust, by showing that it was the intention of the parties that Mr
Reardon was to have the full beneficial ownership of the property. That annual return, being a
document of the Club and one which proceeds on the basis that the Club was paying rent for its
occupation of its clubhouse, is an admission by the Club that it did not have a beneficial interest
in the Peakhurst property. However, in my view that admission is not enough to displace the
presumption of resulting trust. If the presumption of resulting trust were to be rebutted, I would
need to be in a state of mind where I was actually persuaded that the intention of Mr Reardon
and the Club in purchasing the property was that the beneficial interest would be held in a
manner different to the manner which would result from application of the presumption of
resulting trust, and persuaded about what that different intention was. I am not so persuaded.
The presumption of resulting trust has not been rebutted.
Unclean Hands 157 The defendants submit that the plaintiff ought not receive any equitable relief, by way of
enforcing the existence of a resulting trust, because of unclean hands on the part of the plaintiff.
They say that the only way in which the Peakhurst property was able to be purchased was
through obtaining a loan from Citibank. Further, that loan from Citibank was obtained only by
Mr Reardon and Mr Hill telling Citibank a pack of lies, and submitting to Citibank a set of
fabricated documents. The Club was party to the deception of Citibank, in that its officers
agreed to the scheme that involved Mr ―Wilson‖ being presented to Citibank as a man of
substance. The defendants say that even though officers of the Club might not have known all
the details about the way in which Citibank was deceived, there was still a joint enterprise to
deceive, under circumstances such that the conduct of Mr Reardon and Mr Hill, in carrying
through that joint enterprise, is to be attributed to the Club: Tripodi v R (1961) 104 CLR 1;
McAuliffe v R (1995) 183 CLR 108; Capricorn Financial Planners Pty Ltd v Australian
Securities and Investment Commission (1999) 31 ACSR 46.
158 That someone who comes to equity must have clean hands is an equitable maxim. Such a
maxim provides an explanation for the circumstances in which equity recognises rights, and
confers remedies, across a broad range of equity’s jurisdiction. The approach to the recognition
of rights and conferring of remedies which the maxim articulates has resulted in various specific
principles of law which are recognised as part of the substantive law of equity. The law of
promissory estoppel provides one example. However, the maxim remains of ongoing
importance, as a guide to how cases not governed by specific rules of substantive law ought be
decided, or as a guide to how specific rules of substantive law ought be extrapolated.
159 The unclean hands maxim requires the Court to look at the conduct of the litigant who
seeks the assistance of equity, rather than the conduct of the defendant. Further, it is conduct
which the litigant who seeks the assistance of equity has engaged in in the past which is
required to be looked at. In this way it differs from the maxim that he who seeks equity must do
equity, which looks at the conduct which a litigant who seeks the assistance of equity
undertakes to engage in in the future.
160 Some examples of the circumstances in which the maxim has been the basis on which a
case has been decided illustrate the breadth of application of the maxim. Thus, specific
performance of a contract will not be granted at the suit of a plaintiff who has made a relevant
misrepresentation to the defendant: Cadman v Horner (1810) 18 Ves Jun 10; 34 ER 221; Wall
v Stubbs (1815) 1 Madd 80; 56 ER 31. Unclean hands can be a ground for refusing relief
against forfeiture of a lease: Litvinoff v Kent (1918) TLR 298; Gill v Lewis [1956] 2 QB 1. It
can be a ground on which a court declines to enforce a trust: Gascoigne v Gascoigne [1918] 1
QB 223; In Re Emery’s Investment Trusts (1959) Ch 410; Tinker v Tinker [1970] P 136. It
can be a basis upon which the beneficiary of a trust, who has led the trustee to commit a breach
of trust, can be denied a remedy for that breach; Cory v Gertcken (1816) 2 Madd 40; 56 ER
250. It can provide a ground for refusing an injunction to enforce a negative contractual
stipulation, if that contract has been procured by a misrepresentation of the plaintiff: Hewson v
Sydney Stock Exchange Ltd [1968] 2 NSWR 224. It can provide a basis for refusing an
injunction to enforce a restrictive covenant, if a person entitled to the benefit of the covenant has
represented it will not be enforced, and that representation is acted upon by the person bound by
the covenant: Greater Sydney Development Association Ltd v Rivett (1929) 29 SR (NSW) 356,
at 360-361. Where the plaintiff and the defendant are both bound by restrictive covenants
arising under a common building scheme, and the plaintiff is in serious breach of the covenant,
unclean hands provides a basis on which the plaintiff cannot obtain an injunction to require the
defendant to observe the restrictive covenant: Goddard v Midland Railway Company (1891) 8
TLR 126. It can provide a basis for refusing an injunction to prevent passing off, where the
reputation which the plaintiff seeks to have protected has itself been built up by deceptive
means: Kettles and Gas Appliances Ltd v Anthony Hordern and Sons Ltd (1934) 35 SR
(NSW) 108. It can provide a basis for refusing equitable relief to prevent a breach of copyright
where the work contained false statements calculated to deceive the public: Slingsby v Bradford
Patent Truck and Trolley Co [1905] WN 122; [1906] WN 51. Further, some cases have held
that it can provide a basis for refusing equitable relief in circumstances where a plaintiff has
engaged in, or advocated, immorality of some kind: Bodly v —— (1679) 2 Chan Cas 15; 22 ER
824; Glyn v Weston Feature Film Company [1916] 1 Ch 261, and cases referred to in
Ashburner’s Principles of Equity, 2nd ed, p 467, cf now Stephens v Avery [1988] 1 Ch 449.
161 However, the operation of the maxim is not triggered by any act of wrongful conduct by a
defendant, regardless of its nature or connection to the subject matter of the suit. A maxim
which is a verbal variant of the “clean hands” maxim was recognised by Richard Francis,
Maxims of Equity (1727, reprinted Garland Publishing Inc 1978). Francis recognises as his
second maxim “he that hath committed Iniquity shall not have Equity”. A note to that maxim
(at page 5) says:
"but it seems, the Iniquity must have been done to the Defendant
himself; for where the Plaintiff had, to avoid a Sequestration in
the Time of the Great Rebellion, sworn in an Answer that he was
satisfied the Debt, and after the Restoration brought a Bill for it;
tho’ such Answer was objected to him, yet the Court would not
suffer it to be read, but decreed the plaintiff his Debt."
162 The case Francis relied upon for that note was Jones v Lenthal (1669) 1 Chan Cas 154; 22
ER 739. It was a case where the plaintiff sought to recover a debt, owing by a deceased person
of whom the defendant was executrix. The plaintiff had, in previous litigation, sworn that that
debt had been fully satisfied to him. In so doing, the plaintiff had sworn falsely, for the purpose
of avoiding a sequestration of the debt. Sir Harbottle Grimstone MR required the debt to be
paid. An editorial note in the report explains the decision:
"For though the Rule be, That he who has committed Iniquity (as
here, in the false Answer) shall not have Equity; yet it seems, that
is to be understood, when the Iniquity is done to the Defendant
himself: As where a Lessee is sued at Law on a Forfeiture of his
Lease, for Non-payment of Rent or the like; if such Lease was
obtained by Fraud or false Suggestion, Equity will not relieve;
contra if no Fraud, &C, was done to or imposed on the Lessor."
163 Similarly, Brandeis J has referred to there being a limitation on the types of bad conduct
which trigger the operation of the maxim by saying: “Equity does not demand that its suitors
shall have led blameless lives”: Loughrin v Loughrin 292 US 216 at 229 (1934). Young J has
expressed the limitations on the operation of the maxim by saying, “Unless there is established
one of the equitable defences, then general naughtiness or the desire of the court to censor the
plaintiff’s conduct, does not enter into the equation when one is considering whether the
plaintiff should get relief”: FAI Insurances Ltd v Pioneer Concrete Services Ltd (1987) 15
NSWLR 552, at 554.
164 A test for the circumstances in which the maxim operates was provided in Dering v Earl of
Winchelsea (1787) 1 Cox 318; 29 ER 1184. That case arose from the appointment of a Mr
Dering as a collector of customs duties. In connection with the appointment, bonds for his
proper performance were given to the Crown by his elder brother (Sir Edward Dering) and two
others. When Mr Dearing fell into arrears in making payments to the Crown, the Crown sued
Sir Edward Dering on his bond, and recovered the full amount of the arrears. In this action, Sir
Edward Dering sought contribution from the other two sureties. Those sureties resisted the
action on the ground that Sir Edward Dering had unclean hands. This argument was dealt with
by Lord Chief Baron Eyre at 319-320 Cox; 1184-1185 of ER as follows:
―The misconduct imputed to Sir Edward is that he encourages his
brother in gaming and other irregularities; that he knew his
brother had no fortune of his own, and must necessarily be
making use of the public money, and that Sir Edward was privy to
his brother’s breaking the orders of the Lords of the Treasury, to
keep the money in a particular box, and in a particular manner, &c
this may all be true, and such a representation of Sir Edward’s
conduct certainly places him in a bad point of view; and perhaps it
is not a very decorous proceeding in Sir Edward to come into this
Court under these circumstances: he might possibly have involved
his brother in some measure, but yet it is not made out to the
satisfaction of the Court, that these facts will constitute a defence.
It is argued that the author of the loss shall not have the benefit of
a contribution; but no cases have been cited to this point, nor any
principle which applies to this case. It is not laying down any
principle to say that his ill conduct disables him from having any
relief in this court. If this can be founded on any principle, it must
be, that a man must come into a Court of Equity with clean hands;
but when this is said, it does not mean a general depravity; it must
have an immediate and necessary relation to the equity sued for; it
must be a depravity in a legal as well as in a moral sense. In a
moral sense, the companion, and perhaps the conductor, of Mr
Dering, may be said to be the author of the loss, but to legal
purposes, Mr Dering himself is the author of it, and if the evil
example of Sir Edward led him on, this is not what the Court can
take cognisance of.‖
165 What is meant by the expression “an immediate and necessary relation to the equity sued
for” is best explained by reference, first, to cases where an allegation of unclean hands was
made, but did not result in the plaintiff failing to be granted relief.
166 Notwithstanding that a misrepresentation made by one contracting party to another can
disentitle the first contracting party to specific performance (Cadman v Horner (supra); Wall v
Stubbs (supra)) if the misrepresentation is not shown to have actually misled the other
contracting party, specific performance can still be granted: Clapham v Shillito (1844) 7 Beav
146; 49 ER 1019; Learmonth v Morris (1868-9) 6 WW & A’B (E) 74. This result arises
because, notwithstanding the wrongfulness of the plaintiff having made the representation, if it
did not mislead, the fact that it was made does not make it unjust for the court to award specific
performance. When there is no causal link between the misrepresentation and the entering of the
contract, and the equity sued for is to have the contract specifically enforced, there is no
immediate and necessary relation between the plaintiff’s wrongful conduct, and the equity sued
for.
167 If the trustee is induced to transfer part of the trust property to an infant, after being assured
that the infant is in fact of full age, and the trustee thereupon receives (but without
consideration) a release from the infant from all claims in respect of her share of the trust funds,
there is no bar in equity to the beneficiary later seeking an account of the administration of the
trust, and payment of what might actually be due to her after allowing for the amount she has
actually received: Overton v Banister (1844) 3 Hare 503; 67 ER 479. Notwithstanding the
wrongfulness of the beneficiary obtaining a transfer of some of the trust property by a
misrepresentation, that wrongfulness does not affect the justice of the beneficiary being given a
proper accounting for the trust property which she has not received through that
misrepresentation; there is no immediate and necessary relation between the misrepresentation,
and the particular relief claimed.
168 Meyers v Casey (1913) 17 CLR 90 concerned a horse-owner who had been disqualified for
12 months for "suspicious practices" in connection with a particular race. The disqualification
had initially been effected by the stewards at Mooney Valley. He had appealed against that
decision to the committee of the Victoria Racing Club, which had received fresh evidence, and
upheld the decision. He also sought an injunction restraining the Victoria Racing Club from
expelling him. In fact the stewards did not have power to disqualify a person (as opposed to a
horse) for "suspicious practices", but the committee had such power. The majority in the High
Court held that the decision of the committee was valid, even though it was taken on appeal
from an invalid decision. The majority in the High Court also held that the injunction restraining
the Victoria Racing Club from expelling him should be granted, because there was a threat to
expel him without according him natural justice. Barton ACJ said that the "clean hands"
doctrine should have had no role to play in connection with the challenge to the validity of the
decision of the committee. He said, at 101-102:
―His Honour who tried the case dismissed the action on the
ground that the plaintiff, in seeking the assistance of equity, did
not come into Court with clean hands. I do not think that his case
can be met by the application of the maxim. The merits of the
plaintiff’s conduct were not in issue before his Honour. The case
raised by the claim and met by the defence was based purely on
the asserted illegality of the decision against him. It was not its
correctness, but its validity, that was contested in the Supreme
Court. Its correctness was assumed for the purpose of the
argument, but was not admitted as a fact. The plaintiff could not
have been heard to declare his innocence in that proceeding.
Evidence as to the turpitude or integrity of his conduct was not
admissible on the case made.‖
169 In other words, the equity which the plaintiff was suing for was an injunction to prevent
him being disqualified by a decision made by a body which had no power to disqualify him.
When that was the equity being sued for, the fact that (as the committee held) he had engaged in
conduct which warranted his disqualification did not have a sufficient connection to the equity
which was sued for.
170 Isaacs J (with whom Rich J agreed) considered the "clean hands" doctrine in relation to all
the relief the plaintiff claimed. He said, at 123-124:
―… the rights asserted by the appellant, namely, membership of
the club and public right under the by-laws to enter the
racecourse, of course exist, if at all, by reason of circumstances
wholly independent of the alleged misconduct; the wrong he
complains of, namely, his condemnation by an incompetent and
unauthorised tribunal in the one case, and a disregard of natural
justice in the other, are equally independent of any misconduct by
him. It is therefore impossible to say, in the Lord Chief Baron’s
words, that his alleged misconduct has “an immediate and
necessary relation to the equity sued for,” or that it was “a
depravity in a legal as well as in a moral sense.”
It is altogether different from the cases where the right relied on,
and which the Court of equity is asked to protect or assist, is itself
to some extent brought into existence or induced by some illegal
or unconscionable conduct of the plaintiff, so that protection for
what he claims involves protection for his own wrong. No Court
of equity will aid a man to derive advantage from his own wrong,
and this is really the meaning of the maxim.‖
171 In Moody v Cox [1917] 2 Ch 71 the plaintiff was a purchaser of real estate who sought to
rescind the contract of purchase, on grounds of misrepresentation and nondisclosure. The
defendants were trustees, and were also solicitors who, it was held, were acting as solicitors for
the plaintiff in that particular transaction. The court held the defendants guilty of both
misrepresentation, and breach of an obligation to disclose material facts known to the
defendants. The plaintiff had given one of the solicitors a bribe, at a time when the plaintiff
wished the transaction to proceed. The defendants, by seeking specific performance of the
contract, waived their entitlement to rescind by reason of that bribe. Even so, the defendants
argued that the giving of the bribe amounted to unclean hands on the part of the plaintiff, which
disentitled him to the equitable remedy of rescission. That argument failed. Lord Cozens- Hardy
MR said, at 82:
"But then it is said ... the plaintiff, who gave the bribe, cannot
obtain any equitable relief in respect of this contract, and in
equitable relief is included rescission of the contract. Well, I ask
myself what principle is there which can compel the court to say
"we will not rescind the contract which has been obtained quite
apart from the objection of bribes, which objection has been
waived by the other party, who does not desire to raise it"? It
strikes me as little short of shocking that we should be in that
position. The beneficiaries do not repudiate the contract; they hold
a considerable deposit in respect of this property, and they
seriously suggest that, even assuming that the plaintiff has a good
right to rescind the contract on the ground of nondisclosure, or
would have but for the bribe, we ought to allow this deposit to
remain in the pockets of the trustees and refuse to give any relief
to the plaintiff in respect of it. The relief which is sought for in no
way depends upon the bribe; it is something quite independent of
it, and it is in a certain sense irrelevant to consider it in this
connection."
172 Warrington LJ said, at 85-86:
"... In order to prevent a man coming for relief in connection with
a transaction so tainted it must be shown that the taint has a
necessary and essential relation to the contract which is sued
upon, and it is not enough to say in general of the man is not
coming with clean hands when the relief he seeks is not based on
the contract which was obtained by fraud, but is to have the
contract annulled on a ground which exists quite independently of
the fact that the bribe has been given and received."
173 Scrutton LJ said, at 87-88:
"... Equity will not apply the principle about clean hands unless
the depravity, the dirt in question on the hand, has an immediate
and necessary relation to the equity sued for. In this case the bribe
has no immediate relation to rectification, if rectification were
asked, or to rescission in connection with a matter not in any way
connected with the bribe."
174 Argyle v Argyle [1967] 1 Ch 302 involved an application by the Duchess to restrain her
former husband, the Duke, from publishing newspaper articles which revealed various
confidential communications which had passed between them while the marriage was on foot.
The Duke claimed that she was disentitled to an injunction because she herself had published
newspaper articles which revealed some other confidential information which had passed
between them, and because her conduct (which the judge hearing their divorce case had
described as "wholly immoral") showed that she had no regard for the sanctity of marriage.
Those submissions failed. The disclosures which the plaintiff had made in her article included
that the Duke had been taking drugs called "purple hearts", and that he had had certain financial
embarrassments. Ungoed-Thomas J said, at 329 – 330‖
"none of the matters complained of in the plaintiff's articles
disclosed anything complained of in the Duke’s articles. The
Duke does not say that he can disclose matters because the
plaintiff has already disclosed those same matters; but what he
says is that the plaintiff has betrayed the marriage relationship in
some ways and so he should be free to betray it in others. … but
even after allowing for the disclosure about the purple hearts the
accumulation of the Duke’s breaches of most intimate
confidences in his articles are, to my mind, of an altogether
different order of perfidy…. A person coming to Equity for relief
-- and this is equitable relief which the plaintiff seeks -- must
come with clean hands; but the cleanliness required is to be
judged in relation to the relief that is sought. First, with regard to
the plaintiff's articles, for the reason is already indicated I do not
consider that the plaintiff's own articles justify the objectionable
passages in the Duke’s articles, or, of themselves, should
disentitle the plaintiff to the court’s protection."
Notwithstanding that Ungoed-Thomas J accepted that the plaintiff’s immorality
was the basis for the divorce and the termination of the marriage, he held, at 332-
3 that confidentiality still attached to communications which had initially been
made in circumstances of confidence.
175 Dow Securities Pty Ltd v Manufacturing Investments Ltd (1981) 5 ACLR 501 was an
application by corporation to restrain presentation of a winding up petition. The plaintiff
admitted that it owed the debt referred to in a statutory demand, but asserted it had a cross-claim
for a greater amount. The defendant submitted that the plaintiff ought not be granted an
injunction because of its unclean hands, in that the admitted debt of the plaintiff to the defendant
arose from a transaction which was illegal under section 125 of the Companies Act 1961, and
that to grant relief will enable the plaintiff to avoid repayment of a loan which should never
have been made. Wootten J accepted that if there had been a breach of section 125, that would
be conduct of a type appropriate to attract the doctrine of unclean hands, because it would be
misconduct "in a legal as well as a moral sense". However, that conduct did not have "an
immediate and necessary relation to the equity sued for". He said, at 508-509:
"the equity here arises out of [the plaintiff's] substantial and bona
fides claim under the 1976 agreement; no part of its case depends
on asserting the loan transaction, liability under which is admitted.
That transaction would not be in issue in a winding a petition, nor
in the common-law action, and is not an issue in this case except
in so far as it is important to found the "clean hands" argument (cf
Meyers v Casey (1913) 17 CLR 90 and 101-2,124). [The
plaintiff’s] rights, viz, to have its counterclaim determined by due
process, exists, if at all, by reason of circumstances wholly
independent of the alleged misconduct; the wrong it complains of,
viz, the threat to winding up when it has not in fact "neglected" to
pay its debt, is wholly independent of the misconduct (ibid at
123). The right which the court of equity is asked to protect or
assist was not itself brought into existence or induced by the
conduct complained of."
176 R v Deputy Commissioner of Taxation (WA) (1987) 72 ALR 365 was an application by a
taxpayer for, inter alia, an injunction to restrain the Deputy Commissioner of Taxation from
acting upon some assessment notices which had been issued. The taxpayer (who had submitted
no tax returns) alleged that the notices of assessment were mere guesswork, not truly the
product of a process of "assessment", and hence were nullities. The taxpayer lost that issue.
However Sheppard J also considered, obiter, a subsidiary argument which had been raised. The
Deputy Commissioner had argued that the taxpayer was disentitled to an injunction on the
grounds of unclean hands, because he had deceived the Commissioner and had engaged in
fraudulent practices and/or innovative schemes for the avoidance of liability for income tax.
Sheppard J held that, if the notices of assessment were truly nullities, that argument would not
have prevented the issue of an injunction, because the impropriety alleged would not have had
an immediate and necessary relation to the equity sued for. He said, at 389:
"In this case the prosecutor seeks an injunction to restrain the
Commissioner proceeding on assessments and notices of
assessment which, in his submission, were no assessments at all;
they were nullities. In my opinion, the matters relied upon by the
Commissioner bear no relation to what may be described as the
prosecutor's cause of action -- by analogy, his "equity" -- or to the
relief which he sought. The assessments were either invalid or
they were not. If they be invalid, the Commissioner ought to be
restrained from enforcing them, irrespective of what conduct the
prosecutor had engaged in prior thereto, because the amounts
would, in that event, have been an unlawful exercise of the
Commissioner's powers."
177 With these cases are to be contrasted cases where the plaintiff’s unclean hands have
resulted in relief being denied. That an injunction to restrain passing off is refused when the
public has been misled by the conduct of the plaintiff (Kettles and Gas Appliances Ltd v
Anthony Hordern and Sons Ltd (1934) 35 SR (NSW) 108, shows that the statements in
Francis’ Maxims (paragraph 161 above) and Jones v Lenthal (paragraph 162 above), to the
effect that it is only iniquity practiced on the defendant which matters, is too narrow. (That
unclean hands can exist when a plaintiff misleads the Court (Armstrong v Sheppard & Short
Ltd [1959] 2 QB 384 at 397) would also show that the statements in Francis’ Maxims and Jones
v Lenthal were too narrow.) However, Kettles still illustrates the principle that unclean hands is
a reason for denying equitable relief only when it has an immediate relation to the equity sued
for – an injunction to restrain passing off requires that the plaintiff prove that it has a reputation
with the public, and seeks to protect that reputation, so if the plaintiff’s reputation has been built
up through its own deception the granting of an injunction would enable the plaintiff to benefit
from its own wrongful conduct.
178 Gascoigne v Gascoigne [1918] 1 KB 223 was a case where a husband put a lease of land in
his wife's name and built a house upon the land with his own money. He used his wife's name in
the transaction, with her knowledge and connivance, for the purpose of misleading, defeating
and delaying present or future creditors. After the parties separated, the husband sought a
declaration that the wife was trustee for him of the property. He succeeded at first instance, but
on appeal he failed. The Divisional Court (Lawrence and Lush JJ) said, at 226:
"... What the learned judge has done is this: he has permitted the
plaintiff to rebut the presumption [of advancement] which the law
raises by setting up his own illegality and fraud, and to obtain
relief in equity because he has succeeded in proving it. The
plaintiff cannot do this; and, whether the point was taken or not in
the County Court this court cannot allow a judgment to stand
which has given relief under such circumstances as that."
179 Gascoigne was a case where it was necessary for the plaintiff to prove his own bad conduct
to rebut the presumption of advancement and thus to establish the trust he sued to enforce.
Gascoigne was followed in In Re Emery’s Investment Trusts [1959] Ch 410 (property intended
to be held equally by husband and wife put in name of wife only, to enable husband to avoid
American withholding tax) and approved by the English Court of Appeal in Tinker v Tinker
[1970] P 136. If a plaintiff needs to prove his own bad conduct to be able to prove the
circumstances which he says entitles him to an equitable remedy, that bad conduct has an
immediate and necessary relation to the equity sued for.
180 By contrast, Griffiths v Griffiths [1973] 1 WLR 1454 was a case where a husband claimed
an enlarged beneficial interest in the matrimonial home (which had been conveyed into the
name of his wife) by reason of having effected improvements. The wife alleged that his claim
must fail because of his unclean hands, in that he had represented to the Law Society for the
purpose of obtaining a legal aid certificate, and to a court bailiff for the purpose of avoiding a
distraint, that the house belonged exclusively to the wife. Arnold J rejected this argument, at
1456-1457:
"in my judgement the point is a bad one because he is not, in
preferring his claim to the improvements, relying upon his own
disreputable act, as, for example, does a man who seeks to enforce
a resulting or express trust of property transferred by him to his
wife by saying "oh, the transfer was only to defraud my
creditors." Nor is he doing the other thing which is forbidden, by
the doctrine of promissory estoppel, of reversing a previous
contention where, but only where, the party against whom the
contention is made it has in the meantime all that his or her
position in reliance on the previous contention. He falls between
the two stalls; for it is no ingredient in the claim that he behaved
wrongly, and therefore he escapes from the principle of
Gascoigne v Gascoigne [1918] 1 KB 223, and it is not suggested
that the wife relied on his disclaimer or either of his disclaimer is
in such a way as to make it unfair to her that the position should
now be reversed."
(This decision was upheld the Court of Appeal (Griffiths v Griffiths [1974] 1
WLR 1350), but with the present point being regarded (at 1359-1360) as
depending only on estoppel.)
181 The two tests emerging from the portion quoted at paragraph 164 above, from Dering v
Earl of Winchelsea (“immediate and necessary relation to the equity sued for” and “a
depravity in a legal as well as in a moral sense”) do not provide a complete guide to the
circumstances in which the “unclean hands” maxim will be applied to deprive the litigant with
the unclean hands of a remedy. Those two tests are a necessary condition for the application of
the “unclean hands” maxim, but not a sufficient condition. Equitable relief is always
discretionary, and other factors can influence the exercise of the discretion. For example, a
restrictive covenant arising under a common building scheme, which binds both plaintiff and
defendant, might be enforced at the suit of the plaintiff even if the plaintiff has committed some
slight breaches of the covenant: Goddard v Midland Railway Company (1891) 8 TLR 126. If a
plaintiff who seeks an injunction has, previously, engaged in conduct of a type which, if
continuing, might have provided a ground for refusing the injunction on the basis of unclean
hands, but prior to trial the plaintiff has ceased that activity and undertaken not to continue it, an
injunction might be granted: Mrs Pomeroy Ltd v Scalé (1907) 24 RPC 177. In Littlewood v
Caldwell (1822) 11 Price 97; 147 ER a plaintiff was refused an injunction to restrain the
plaintiff’s former partner from interfering in the partnership business, receiving debts or
drawing bills, and for an account and dissolution of the partnership, on the ground that the
plaintiff had removed the partnership books and refused the defendant access to them. The
defendant said that, because the partnership books were missing, he was unable to file an
answer to the plaintiff’s claim. The plaintiff’s application was refused because of his removal of
the books – but that refusal was expressly stated to be without prejudice to any future
application which might thereafter be made. Thus, the order specifically left open the possibility
of the plaintiff returning the books and of a situation arising where his having once removed
them no longer made it unjust to grant an injunction.
182 Further, the weight which is accorded to bad conduct on the part of the plaintiff can differ
depending upon the relief which is sought, and the alternatives for relief which the plaintiff has
open to him. In Vigers v Pike (1842) 8 Clark & Finnelly 562; 8 ER 220 Lord Cottenham (at 645
of C & F, 251 – 252 of ER) noted that there is a,
"… marked distinction made by the Court of Equity between what
is necessary to resist a suit for the specific performance of a
contract, and what is necessary to support a suit to set aside a deed
executed and an arrangement completed, and consequently to
resist a suit founded upon such deed and growing out of such
arrangement. When the Court simply refuses to enforce the
specific performance of the contract it leaves the party to his
remedy at Law; but if it were to refuse to administer equities
founded upon a deed executed, it would leave the party applying
without remedy, and his opponent in possession of that for which
what was sought to be obtained was reserved as an equivalent."
183 If refusal of relief might occasion injustice to people who are not parties, the court might
decide to grant relief notwithstanding bad conduct on the part of the plaintiff, if the transaction
is objectionable on the grounds of public policy, “the relief not being given for their sake but
for the sake of the public” (Vauxhall Bridge Co v Spence (Earl) (1821) Jac 64 at 67; Money v
Money (No2) [1966] 1 NSWR 348 at 351-352 per Jacobs J; New South Wales Diary
Corporation v Murray Goulbourn Co-Operative Company Limited (1990) 171 CLR 363, at
409).
184 In applying the unclean hands principle in the present case, it is necessary first to identify
what is the equity which (absent unclean hands) I would be prepared to uphold. It is the equity
of resulting trust, relating to those contributions which the Club has made to the purchase price
of the Peakhurst property from its own money.
185 It is not necessary for the Club to prove anything about the circumstances in which Citibank
was misled to be able to prove the facts which make good that claim to a beneficial interest. The
equity which the Club asserts is one which originally arose against Mr Reardon by reason of the
Club’s money providing part of the purchase price, and operated to impose equitable obligations
on him, concerning his legal ownership of the property – the circumstances in which Mr
Reardon came to have money to make his own contribution to the purchase price of the property
have no immediate and necessary relation to that. Another way of putting this is that even
accepting (as I do) that the Peakhurst property would probably not have been purchased at all if
Citibank had not been misled, that misleading of Citibank did not make any contribution to the
proportionate beneficial interest which recognition of the resulting trust would give to the Club.
The entirety of the fruits of the deception of Citibank have been treated, on my findings, as a
contribution to the purchase price by Mr Reardon. Even if the defendants were right in
submitting that all of the wrongful conduct of Mr Hill and Mr Reardon, in their dealings with
Citibank, could be attributed to the Club (a matter which I do not find it necessary to decide),
recognising the particular resulting trust which I would be prepared to uphold does not involve
the plaintiff in receiving a benefit from its own wrongful conduct. Recognition of that trust is
nothing more than recognising a proprietary interest into which the Club’s own money, not
shown to be derived from any wrongful conduct, can be traced. No attempt was made to show
that the Club is better off by having had its asset in the form of a partial beneficial interest in the
Peakhurst property, rather than remaining as cash. In my view the principle of unclean hands
provides no reason for refusing to recognise that particular resulting trust. If the Club were to
claim an entitlement to part of the beneficial interest in the property derived from Mr Reardon’s
contributions the position might be different – but I do not need to decide that question.
186 The defendants also submitted that the circumstances in which the Peakhurst property came
to be purchased gave rise to discretionary grounds for denying relief, separate to unclean hands.
This submission was not expanded upon in any way, and I do not accept it.
Consequences of Payment by the Club of Mortgage Payments, and Repairs 187 At the conclusion of the hearing, Mr Sexton SC, counsel for the plaintiff, foreshadowed
that, if I were to come to the conclusion which I have actually reached, some further evidence
and submissions might be necessary to work out the consequences of payments which the Club
has made in connection with the property after title was acquired (see paragraphs 153 and 154
above). He pointed out that the High Court, in Calverley v Green (1984) 155 CLR 242, made
provision for remitting the matter to the Supreme Court once it had been decided that there was
a resulting trust to a certain extent.
188 In Calverley v Green a man and woman were jointly liable under a mortgage, in
consequence of which the money raised on mortgage was treated as a contribution by each of
them. Although the proportionate interests in which the purchase price had been provided were
calculated on the basis that the two of them had contributed the amount raised on mortgage (and
hence, the resulting trust on which the property was held was calculated on that basis, thus
giving the woman the benefit of a beneficial interest arising from her having contributed half the
amount raised) the man had, after the purchse, made payments of mortgage instalments. Mason
and Brennan JJ, at 263 said:
―If it is right to regard the payment of the mortgage instalments as
having been made by the defendant out of his own funds and on
his own account – that is, if he made those payments not intending
the plaintiff ultimately to have the benefit of those payments – the
defendant may be entitled to contribution from the plaintiff for her
share of the payments and an equitable charge to secure the
making of her contribution: see Ingram v Ingram (1941) VLR 95,
at 102‖
189 That basis upon which the payment of mortgage instalments might have conferred an
equitable interest in the property upon the person who paid them was available only because
both the man and the woman were liable to pay the instalments, but the man had made all the
payments – he could assert an equity of contributions against her, and possibly have the amount
payable pursuant to that equity of contribution secured by an equitable charge. That situation
cannot arise in the present case, where it is Mr Reardon alone who had a liability to Citibank to
make the payments. If the plaintiff wishes to advance some other basis upon which it says that
the making of the mortgage payments, or anything else which the Club did concerning the
property after it was purchased, confers any beneficial interest on the Club, it will be necessary
for the Club to make application to further argue the case.
Orders 190 The orders I make are:
1. Declare that the interest in fee simple of Alan George Reardon (also known as
Jack Andrew Wilson) in the land in certificate of title folio identifier C/404554
known as 15 Stanley Street Peakhurst was, immediately after the purchase of the
said property held on trust for the plaintiff and the fourth defendant in the
proportions 75,568:344,342.
2. Direct that any party wishing to make any further application concerning this
matter make, within 21 days of the date of handing down of these reasons for
judgment, an appointment with my Associate, of which not less than five days
notice shall be given to the other parties, for the hearing of such further
application.
**********
