JUDGMENT No. CATCHWORDS CUSTOMS AND EXCISE - Customs Act 1901 ~- Order directing Official Trustee to take control of property pending determination of proceedings for recovery by Commonwealth of pecuniary penalties for dealings in narcotic goods - Power of Court to make orders in relation to property vested in the Official Trustee - Power of Court to impose conditions subject to whch order applies to relevant property. Customs Act 1901 - ss. 243B, 243E, 243F. COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE v. ARTHUR JAMES BUTLER and DONALD EDGAR ANDERSON NSW G140 of 1987 LOCKHART J. SYDNEY 2 NOVEMBER 1987 IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G 140 of 1987 GENERAL DIVISION BETWEEN : COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE Applicant AND: ARTHUR JAMES BUTLER & DONALD EDGAR ANDERSON Respondents JUDGE MAKING ORDER: LOCKHART J. DATE OF ORDER: 2 NOVEMBER 1987 WHERE ORDER MADE: SYDNEY MINUTE OF ORDERS THE COURT ORDERS THAT: 1. The order made by the Honourable Mr. Justice Gummow on 10 April 1987 be varied to exclude from its terms the shares specified in the contract notes copies of which contract notes are annexures "D", "E", ""F" and "G" to the affidavit of Maurice Sullivan and 2 November 1987 filed herein. The Official Trustee in Bankruptcy pay, within seven (7) days of the date hereof, the sum of 655,518 to Messrs. P.A. Somerset & Co., Solicitors, on behalf of Edward Coutts & Co. Pty. Ltd. conditional upon and in exchange for the share scrip in respect of the said shares. Upon the payment referred to in paragraph 2 hereof and receipt of the said share scrip referred to 1n paragraph 2 hereof the Official Trustee shall take control thereof upon the same terms as the order made by Gummow J. on 10 April 1987. The Official Trustee be empowered to pay out of the property controlled by it such stamp duty and any other State or Federal Governmental duties or charges payable in respect of the transfer of the said shares into the name of Arthur James Butler. Costs of the notice of motion of 26 October 1987 be reserved. Liberty to all parties including the intervenor to apply on four (4) days notice. Settlement and entry of orders is dealt with in Order 36 of the Federai Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. Gi140 of 1987 ) GENERAL DIVISION ) BETWEEN : COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE Applicant E ARTHUR JAMES BUTLER & DONALD EDGAR ANDERSON Respondents 2 November 1987 REASONS FOR JUDGMENT LOCKHART J. On 10 April 1987 a Judge of this Court made orders, including an order pursuant to s. 243E of the Customs Act 1901 ("the Act"), directing the Official Trustee in Bankruptcy ("the Official Trustee") to take control of all the property of Arthur James Butler, whether situated in Australia or elsewhere, and to take control of all the property of Donald Edgar Anderson, the two gentlemen being the defendants in proceedings G 140 of 1987. Nothing turns on the order relating to Donald Edgar Anderson for the purposes of the present application to which I shall refer in a moment. Section 243E is one of a number of sections included in Division 3 of Part XIII of the Act relating to the recovery of pecuniary penalties by the Commonwealth for dealings in narcotic goods. The jurisdiction of this Court to make orders of the kind made on 10 April this year arises from the institution of proceedings under 2. 8s. 243B of the Act for an order that a defendant pay a pecuniary penaity in relation to certain narcotics dealings. The purpose of s. 243E is plain enough, namely, to ensure that in the case of defendants to proceedings for recovery of pecuniary penaities in relation to certain narcotics dealings, their property, either in whole or in part, may be taken out of their control and its custody vested in that of the Official Trustee. The Official Trustee stands in effect as a caretaker pending the determination of the substantive proceedings for the recovery of a penalty. If those proceedings should terminate in favour of the Commonwealth, the same Division of the Act empowers the Court to direct the Official Trustee to pay to the Commonwealth out of the property that has then come under his control an amount which equals the amount of the liability of the defendant in respect of the pecuniary penalty. The same Division also provides that the property to which the section 243 order is directed is charged 1n favour of the Commonwealth to secure the payment to it of any pecuniary penalty that may ultimately be ordered to be paid: s. 243J. The draftsman obviously had in mind possible bankruptcy of defendants and the interaction of the laws relating to bankruptcy with extant orders under s. 243: see, for example, ss. 243L and 243M. The Court is also empowered, once a sub-s. 243E(1) order has been made, to make further orders relating to the property covered by that initial order: s. 243F. The powers of the Court under that lastmentioned section are very wide. They include, in general terms, power to make such orders in relation to the property as the Court considers just. There is a specification by the legislature of the 3. Particular powers that the Court may exercise pursuant to that general provision. This includes the power, conferred by para. 243F(1)(a), that the Court may make an order: "varying the original order in respect of a property to which it relates or any provision included in the original order by virtue of para. 243E(2)(d)." However nothing turns on the operation of the last mentioned provision for present purposes. The Court is also empowered, pursuant to para. 243F(1)(c), to make orders: "determining any guestion relating to the property to which the original order relates, including any question relating to the liabilities of the defendant, and the exercise of the powers, or of the performance of the duties, of the Official Trustee, with respect to the property to which the original order relates." Were it not for the amplitude of the powers conferred on the Court by the introductory provisions of sub-s. 243F(1) and the powers conferred by para. 243F(1)(a) there may be some question as to whether the initial s. 243 order operated with respect to all the property of the defendant or only some specified property. However, I think the language of sub-s. 243F(1) makes it plain that that is not the position. This Court can, 1f it wishes, vary an order of the kind made on 10 April 1987 so as to exclude from property under the control of the Official Trustee property formerly under his control pursuant to the initial order. 4. The application now before the Court is one made by the Official Trustee pursuant to notice of motion filed on 26 October 1987. The Official Trustee seeks directions as to whether moneys of Mr. Butler claimed by Edward Coutts & Co. Pty. Limited ("Edward Coutts") should be paid by the Official Trustee to that company and as to the terms upon which that payment should be made. Other parties in the proceeding, in addition to the Official Trustee, are Mr. Butler himself, the Commissioner for Police and an intervener to whom the court has given leave to intervene, namely, Edward Coutts. The real applicant for the substantive order in the matter is in fact Edward Coutts. I need not recite the facts on which that company asserts its claim; they appear sufficiently from the evidence which consists of the affidavit of Maurice Sullivan of 2 November 1987. Edward Coutts claims that it is entitled to the sum of $62,922.49 or, alternatively, the sum of 654,328, in each case together with an interest component, that interest component being moneys actually paid by it on behalf of Mr. Butler to persons to whom it was itself obligated pursuant to the financial transactions taken by it on Mr. Butler's behalf. Without any way abandoning Edward Coutt's claim to the difference between 662,992 and $54,328, Mr. Somerset, who appears for Edward Coutts, has fairly conceded that, for the purposes of this present application, there are difficulties in the path of sustaining an order under para. 243F(1)(a) in relation to the larger sum. In my view there are real difficulties in the path of an order being made under that provision in the case of the larger sum. It is plainly arguable that an order can be made in the circumstances of this case under para. 243F(1)(c); but in my view the appropriate vehicle for an order is para. 243F(1)(a). It is curious in one sense that the rights of third party claimants to moneys held by the Official Trustee pursuant to a section 243 order can be determined in proceedings under s. 243F; but I think that the apparent anomaly is resolved when it is remembered that proceedings for recovery of penalties with respect to narcotics transactions may take in some cases months, in other cases years, to resolve. In the meantime part or whole of the property of the defendant to those proceedings is covered by an order of the kind to which s. 243 is directed and it would be unjust if in appropriate cases the harsh consequences of such orders could not be ameloriated to fit changed circumstances in a particular case. More particularly 1s this so0 when it 15 remembered that the court has specific power under sub-s. 243E(4) of the Act to, amongst other things, impose conditions subject to which the order 15 to apply to the relevant property. In all the circumstances it is appropriate for an order to be made in effect requiring the release by the Official Trustee to Edward Coutts of the sum of $54,328 together with the sum of $1,190 interest, totalling $55,518. The interest claim is, s0 far as I can see, supportable on general principles. It does not appear to have been an interest bearing debt in the strict sense; nor is it based on any statutory provison; but on the evidence before me, which I have already briefly related, it falls fairly squarely within the common law rule allowing interest for the recovery of non-interest bearing debts. In substance the debt was incurred by Edward Coutts on behalf of Mr. Butler in circumstances where he either then knew or had reasonable grounds for knowing or suspecting that an interest obligation on the part of his broker or financial consultant could arise in the circumstances which in fact arose here. Mr. Butler does not contend to the contrary. Indeed, he joins in the application. There remains, however, an important question, namely, as to whether the payment by the Official Trustee to Edward Coutts should be without conditions or subject to a condition. Mr. Somerset has frankly conceded that the proper course is to impose a condition as to that payment broadly speaking along these lines: that before being entitied to payment of the sum of $55,518, Edward Coutts must procure the relevant scrip relating to the transactions which support the debt, and transfer the scrip into name of Mr. Butler. There would then attach to that scrip, of course, the order already in existence in favour of the Official Trustee. I make orders in accordance with the short minutes of order, anitialled by me and placed with the papers. I certify that this and the preceding five (5) pages are a true copy of the reasons for judgment herein of the Honourable Mr. Justice Lockhart. Dated: 2 November 1987 Solicitor for Applicant: Australian Government Solicitor Solicitor for Respondent: William P. O'Brien Date of Hearing: 2 November 1987 Date of Judgment: 2 November 1987