Supreme Court dismisses appeal against Proceeds of Crime Act orders for forfeiture and receiver appointment.

[2006] IESC 63

THE SUPREME COURT

343/02 97/03 245/03 405/03

Murray C.J.

Denham J.

Hardiman J.

Between:

McK

Plaintiff/Respondent

and

THOMAS HOMAN AND JAMES HOMAN

Defendants/Appellants

and

TRACEY HOMAN

NOTICE PARTY

JUDGMENT of Mr. Justice Hardiman delivered the 28th day of November, 2006.

1. These are the appeals of the first and second-named defendants against the Order of the High Court (O’Sullivan J.) made the 7th

September, 2001, pursuant to s.3 of the Proceeds of Crime Act, 1996, principally in respect of premises at 67 Seannacloc Tower,

Blarney, Co. Cork. The other items to which the s.3 Order related were a motor car and a motor cycle. The appellants also appeal

against the order of the High Court (Finnegan P.) on the 26th October, 2001, whereby a receiver with power of sale was appointed

over the dwellinghouse pursuant to s.7 of the same Act.

2. It is possible to deal immediately with a number of points. First, Ms. Tracy Homan, wife of Thomas Homan, was made a Notice Party

to the proceedings in the High Court but no appeal has been lodged on her behalf. Accordingly no special consideration of her position

is necessary here.

3. Secondly, the first and second-named defendants are father and son, Thomas being the son and James the father. The evidence

on behalf of the plaintiff in the High Court included evidence of significant criminal activities on the part of Mr. Homan Junior. This

gentleman did not himself give evidence or contradict in any way the evidence on behalf of the plaintiff. Nor did he call any other

person to give evidence on his behalf. In the receivership proceedings, however, Thomas Homan swore an affidavit in which he denied

that he had at any time any beneficial interest in the premises 67 Seannacloc Tower, Blarney, Co. Cork. It would thus appear that he

lacks standing personally to appeal the order insofar as it relates to those premises.

4. It is undisputed that the real property at issue here is in the name of the second-named defendant, James Homan, father of

Thomas. The premises are subject to a mortgage in his name.

5. At the hearing in the High Court, a garda gave evidence about investigations he had carried out with a director of the Company

which had built the house in question. This gentleman said that the contract was signed by James Homan and stage payments were

received by cheque from James Homan. However, in the course of the construction project, between December 1998 and July 1999,

the builder saw James Homan only four or five times, but saw Thomas on the site about twice a week. At the time of the hearing,

Thomas was living in the house with his wife and two children but James was living in his own premises at 21, Kerryhall Road, Fairhill,

Co. Cork. The receipts for the stage payments in relation to the construction were found in the premises at Seannacloc together with

personal documents of Thomas Homan. It appears that James selected, and paid for in cash, a fireplace now fitted in the house in

question. There is a mortgage in the name of James Homan in the sum of £50,000 from the Allied Irish Banks which was used to pay

for the building of the house. The repayments were made through an account in the name of James Homan which is funded in cash. It

was the evidence of the plaintiff that these payments were in fact funded by Thomas Homan.

6. This case was at hearing in the High Court for a total of nine days. During this time the plaintiff, Chief Superintendent McKenna,

Detective Inspector Quilter, Detective Garda Flanagan and Detective Garda McGreevy gave evidence on behalf of the plaintiff and all

but Inspector Quilter were cross-examined. Mr. Homan Senior gave evidence on his own behalf. A number of rulings were given by the

learned trial judge during and after the hearing. Of particular relevance is the ruling of the 25th April, 2001, in relation to the

admissibility of evidence of the plaintiff’s belief that the property in issue in the proceedings represented the proceeds of crime. On

the 17th May, 2001, the learned trial judge accepted the evidence given for the plaintiff and rejected that of Mr. James Homan, for

the reasons given in that ruling.

7. Other rulings were given in the course of the hearing which are less relevant for the purpose of this appeal.

The nature of the s.3 hearing.

8. It is urged on behalf of the appellants that the s.3 hearing in the present case was wrongly treated as an interlocutory hearing. No

point was taken on this in the first submissions filed on behalf of the second-named defendant but subsequently further submissions,

said to “take precedence” of the first set of submissions were filed in which this point was taken. Reliance was naturally placed on the

decision of this Court in Murphy v. G.M. [2001] 1 IR 113. But no point to the effect that the Court was proceeding on a

misunderstanding of the nature of the s.3 proceedings was taken during the hearing; in the High Court the topic was never

mentioned.

9. The complaints presently made about the consequences of the High Court’s understanding of the nature of the proceedings are

that the plaintiff was not ordered to deliver a statement of claim; that, accordingly, the defendants had no opportunity to seek

particulars and that Mr. Thomas Homan was refused an application for discovery. Accordingly, say the appellants, their right to

natural and constitutional justice was breached as was their audi alteram partem rights.

10. The plaintiff’s case in McK v. S.M., cited above, proceeded on precisely the same basis as this case did i.e. that the s.3 order was

interlocutory in the conventional sense of that term so that, for example, it was unnecessary to deliver a statement of claim. But the

respondent in that case challenged that belief and issued a motion to dismiss the plaintiff’s action for failure to deliver a statement of

claim. The present appellants took no such step. Mr. Thomas Homan equally did not appeal the refusal of his application for an order

for discovery, as an applicant similarly unsuccessful did in McK v. F.C. [2001] 4 IR 113.

11. In Murphy v. G.M. [2001] 4 IR 113, the High Court dealt with a very similar complaint as follows:

“The appellants complain that the maxim audi alteram partem was violated because, in the first case, the plaintiff was

not ordered to deliver a statement of claim, the appellant was not furnished with particulars of the crimes alleged to be

involved and no order for discovery was made. These orders were either made in a proper exercise of the jurisdiction of

the High Court or they were not. If they were not, the appropriate course for the appellant to have taken was to appeal

to this Court. It accordingly has to be assumed that the orders were made in accordance with the principles of

constitutional justice by the High Court judges concerned. In any event, the Court is satisfied that in any case brought

under the procedures laid down by the Act the affidavits grounding the interim and interlocutory applications of necessity

will indicate to the respondents the nature of the case being made on behalf of the appellant.”

12. It appears to me that both of the points made in the passage just quoted apply in the present case as well. The appellants were

represented throughout by solicitor and counsel. The transcript of the nine day hearing shows very clearly how minutely assiduous

these advisers were in the protection of their clients’ interests. The specific point which availed the appellant in McK. v. F., however,

was not taken on behalf of the present appellants nor, in fairness, was it taken on behalf of a considerable number of other

defendants in CAB proceedings either. But it is not open to a litigant who finds, after he has been unsuccessful in litigation, that he

might have done better had a point been urged on his behalf which was not in fact advanced by him or his advisers, to demand a

replay, so to speak. If this were permitted then the result of all proceedings would be in a sense contingent and lacking in finality.

They would be contingent in the sense that if another litigant urged successfully a point which might have been, but was not, taken

in the first hearing, the judgment of that hearing would be open to revision. Since, by definition, the point would not have been

argued in the High Court, and could not be argued for the first time on appeal, the case would have to be remitted to the Trial Court,

with a further right of appeal. No legal system whose decrees were contingent to that degree would meet the requirements of justice:

interest rei publicae ut sit finis litium.

13. The public interest and the interest of individual litigants alike requires that litigation should be conducted as expeditiously as

possible and that a person who has been successful in a claim or defence should not (save by the ordinary process of appeal) be

harassed by the other party reopening the subject of litigation. In what has become a classic passage, it was said in Henderson v.

Henderson [1843] 3 Hare 100, the Court will not normally:

“permit the same parties to open the same subject of litigation in respect of matter which might have been brought

forward as part of the subject in contest, but which was not brought forward, only because they have from negligence,

inadvertence or even accident omitted part of their case.”

14. This passage has often been cited with approval in the year since its delivery. In recent times in Ireland it has been applied in the

cases of Carroll and Ors. v. The Law Society of Ireland [2003] 1 IR 284 and Ahmed v. The Medical Counsel [2004] 1 ILRM 372. In the

latter case the history of the rule is explored in some detail.

15. Apart from the foregoing, it is clear from a reading of the transcript that the appellants here have in fact suffered no injustice, or

even procedural disadvantage in their defence of the claim brought against them by the plaintiff, in the manner in which they elected

to defend it. The purely factual dispute involved in the hearing was in one sense quite narrow, because the first-named defendant did

not himself or by other witnesses adduce evidence, contradict the plaintiff’s claim that he was and had been for some time involved in

substantial crime relating to dealings in unlawful drugs. The issues raised in relation to the plaintiff’s evidence were legal issues and in

particular related to the range of hearsay or belief evidence permitted under the relative statutes. A considerable volume of detailed

cross-examination was engaged in, including cross-examination of lay witnesses as to the meaning of the statutory provisions in

question, which was of doubtful admissibility. The legal issues raised in relation to this evidence stood or fell on their own merits.

Insofar as there was a conflict of evidence, raised by the testimony of the second-named defendant, it is clear that the learned trial

judge who saw and heard the witnesses in the extensive cross-examination of them found the evidence called on behalf of the

plaintiff credible and satisfactory, as he was entitled to do.

Hearsay and belief evidence.

16. A number of points were made on behalf of the second-named defendant on this topic.. In order to deal with them it is necessary

first to set out the relevant statutory provisions which appear to me to be as follows.

17. Section 8 of the Proceeds of Crime Act, 1996, provides:

“8(1) Where a member or an authorised officer states

(a) In proceedings under s.2, on affidavit or if the Court so directs on oral evidence or

(b) In proceedings under s.3, in oral evidence, that he or she believes either or both of the following that is to say:

(i) That the respondent is in possession or control of specified property and that the property

constitutes, directly or indirectly, proceeds of crime,

(ii) That the respondent is in possession of or control of specified property and that property was

acquired, in whole or in part, with or in connection with the property that, directly or indirectly,

constituted the proceeds of crime,

And that the value of the property or as the case may be the total value of the property referred to is

not less than £10,000, then, if the Court is satisfied that there are reasonable grounds for the belief

aforesaid, the statements shall be evidence of the matters referred to in paragraph (i) or in paragraph

(ii) or in both as may be appropriate, and of the value of the property.

(2) The standard of proof required to determine any question arising under this Act shall be that applicable to civil

proceedings.

18. Section 8 of the Criminal Assets Bureau Act, 1996, insofar as relevant, provides as follows:

“(5) A bureau officer may exercise or perform his or her powers and duties on foot of any information received by him or

her from another bureau officer or on foot of any action taken by that other bureau officer in the exercise or performance

of that other bureau officer’s powers or duties for the purposes of this Act, and any information, documents or other

material obtained by bureau officers under this subsection shall be admitted in evidence in any subsequent proceedings.

(7) information, documents, or other material obtained by a bureau officer or any other person under the provisions of this

subsection shall be admitted in evidence in any subsequent proceedings”.

19. It is also instructive to recall what was said in the judgment of this Court in Murphy v. G.M. and Ors. [2001] 4 IR 113:

“As to the submission that there was no equality of arms between the parties because evidence of opinion was permitted

in the case of the applicant but not in the case of the respondents, the Court is satisfied that no such inequality has

been demonstrated: the respondents to an application under s.2 or s.3 will normally be the persons in possession or

control of the property and should be in a position to give evidence to the Court as to its provenance without calling in

aid opinion evidence. A similar submission was advanced with respect of the extent of which the onus of proof was

reversed in applications under the Act, but the Court is satisfied that, having regard to its conclusions that these are civil

proceedings, this did not, of itself, render the provisions unconstitutional”.

20. Just before this passage, and on the specific topic of hearsay evidence, the judgment of the Supreme Court stated:

“Nor is the provision for the admission of hearsay evidence of itself unconstitutional: it was a matter for the Court hearing

the application to decide what weight should be given to such evidence. The Court is satisfied that there is no substance

in these grounds of challenge to the constitutionality of the legislation.”

21. Against this background, it appears to me impossible to contend that the procedures adopted and the rulings given on the

admissibility of evidence in this case were in any way flawed. Any court will, of course, be conscious of the very great potential

unfairness of permitting hearsay evidence and belief evidence to be given in legal proceedings. They are capable of gross abuse, and

capable of undermining the ability of a person against whom they are deployed to defend himself by cross-examination. It is,

accordingly, essential to ensure that the conditions under which the Supreme Court held their use constitutionally justifiable in this

unique statutory context are in fact met:

“The respondents to an application under s.2 or s.3 will normally be the persons in possession or control of the property

and should be in a position to give evidence to the Court as to its provenance”.

22. Ordinary experience suggests the truth of this observation. This is a case of a man, the second-named respondent, who did not

himself reside in the house at issue in these proceedings. There was evidence that his son, the first respondent, rather than himself,

had taken the leading role in acquiring the site and having the house built. The son, and not the father, resided in the house with his

own wife and children. The mortgage was paid out of a cash funded account and the second-named respondents claim to be the

source of that cash was for stated reasons found to lack credibility. All this is against the background that, in the same proceedings,

admissible evidence was tendered that the first-named respondent was heavily engaged in criminal activities, and the latter

gentleman did not give evidence to deny what was said.

23. A considerable volume of the challenge to the belief expressed, with statutory evidential force, by the plaintiff was directed to

the question of whether there were reasonable grounds to support it, whether the plaintiff actually had the belief which he

proclaimed, whether it was rational for him to entertain it. His understanding of the law was explored at some considerable length.

This was directed at undermining the two statutory pre-conditions which must be met before the plaintiff’s statement of belief can

constitute evidence: that the plaintiff should have and express the belief and that there are reasonable grounds for it.

24. If the plaintiff surmounts these two hurdles then his belief constitutes evidence in relation to the defendants possession of the

property and the property constituting, directly or indirectly the proceeds of crime, or that the respondent is in possession of

property which was acquired wholly or partly with or within connection with property that, directly or indirectly, constituted the

proceeds of crime. This evidence is not conclusive and may be counteracted by evidence called by or on behalf of the defendant.

Accordingly, the effect of the expression of an admissible belief under the Section, if it is not undermined in cross-examination, is to

create a prima facie case which may be answered by the defendant if he has a credible explanation as to how he lawfully came into

possession or control of the property in question, and establish this in evidence.

25. The defendants here concede that s.3 allows for hearsay evidence (“will require a portion of oral evidence involving hearsay”, as

it is put in the written submissions on behalf of the second-named defendant). They say that the only hearsay evidence which is

provided for is the statement of belief referred to in s.8(1) and that it is to be inferred that no other hearsay is permitted. In

particular it is objected that statements and information alleged to have been received by identified third parties were used as the

basis for the plaintiff’s belief. Mr. Mason, the builder mentioned earlier in this judgment, is given as an example of this. Equally, the

plaintiff made use of evidence or information contained in the affidavits of other bureau officers.

26. These submissions, with respect, seem to ignore s.8(5) and (7) of the Criminal Assets Bureau Act, 1996. Subsection (7) permits

the disclosure of information or material obtained by a bureau officer for the purposes of the Act to be disclosed to another bureau

officer, a member of the Garda Síochána, and certain other classes of person. It is then provided that “information, documents or

other material obtained by a bureau officer or any other person under the provisions of this subsection shall be admitted in evidence

in any subsequent proceedings”.

27. The question of the admissibility of the plaintiff’s belief was lengthily debated and was the subject of a ruling of the learned trial

judge on the 25th April, 2001. From this it will be seen that the judge made a nuanced ruling, finding that there was reasonable

grounds for the plaintiff’s belief insofar as the first-named defendant was concerned, and that there were reasonable grounds for one

aspect, but not another, of the plaintiff’s belief in respect of the second-named respondent. It must be emphasised that this belief in

itself, once there were held to be reasonable grounds for it, would be sufficient to ground an order under s.3 if there were no

evidence to the contrary or if, as happened here, the second-named defendant’s evidence to the contrary were rejected.

28. A very considerable part of the submissions on behalf of the second-named defendant is based on an analysis of answers given in

cross-examination and on suggestions that the plaintiff did not understand particular statutory terms or legal propositions, and

suggestions that the learned trial judge should have interpreted the evidence differently. For example, it is claimed that the plaintiff’s

evidence and belief is worthless on the basis of his statement that “ we started at our investigation because we believed that the

property in the case was the proceeds of crime”. This is to said to indicate that the plaintiff’s belief was “predetermined” and

“flawed”. It does not seem to me logically to have this effect and the credibility of the belief and the finding that there were

reasonable grounds for it appear to me to be primarily matters for assessment by the learned trial judge. The judge came to the

determination that was required of him in three separate stages: as to the reasonableness of the grounds for the plaintiff’s belief on

the 6th April, 2001, as to the admissibility of that belief into evidence on the 25th April, 2001, and on the general issues in the

proceedings on the 17th May, 2001. In these circumstances it is apt to recall the very often cited terms of the judgment of this Court

(McCarthy J.) in Hay v. O’Grady [1992] 1 IR 210:

“(1) An appellate court does not enjoy the opportunity of seeing and hearing the witnesses as does the trial judge who

hears the substance of the evidence but also observes the manner in which it is given and the demeanour of those giving

it.. The arid pages of a transcript seldom reflect the atmosphere of a trial.

(2) If the findings of fact made by the trial judge are supported by credible evidence, this Court is bound by those

findings however voluminous and apparently weighty the testimony of the evidence against them. The truth is not the

monopoly of any majority.

(3) Inferences of fact are drawn in most trials: it is said that an appellate court is as good a position as the trial judge to

draw inferences of fact. I do not accept that this is always necessarily so. It may be that the demeanour of a witness in

giving evidence will, itself, lead to an appropriate inference which an appellate court would not draw. In my judgement, an

appellate court should be slow to substitute its own inference of fact where such depends upon oral evidence or

recollection of fact and a different inference has been drawn by the trial judge. In the drawing of inferences from

circumstantial evidence an appellate tribunal is as good a position as the trial judge”.

I can find no ground to differ from the findings of the learned trial judge in this case.

Statute of Limitations.

29. The defendants claimed for the first time in this Court that the plaintiff’s claim was statute barred by virtue of the provisions of

s.11(7)(b) of the Statute of Limitations, 1957, since it claimed a “forfeiture”. The judgment of this Court in McK. v. D [2004] 2 ILRM

419 has already dealt with this issue, finding that an order under s.3 “is not, in any normal sense, an order of forfeiture. It would do

violence to the language of s.3 to hold that it effects a forfeiture”.

30. In any event, I would not entertain a reliance on the Statute which occurs for the first time on appeal. In a case governed by the

ordinary rules of pleading, the Statute must be expressly pleaded. This case is not so bound and its procedures are, to some extent,

sui generis. Nevertheless I would hold that reliance on the Statute must be indicated at an early stage and certainly cannot be kept

in reserve until after the defendant relying on it has been unsuccessful in the High Court.

Car and motorcycle.

31. It does not appear to me that any stateable legal point was taken in respect of the application of the order to the car and

motorcycle in question that has not been dealt with above.

Appointment of receiver.

32. By order of the 26th October, 2001, the High Court (Finnegan P.) made an order appointing a receiver with power of sale over the

dwellinghouse at issue in these proceedings. This was done pursuant to s.7 of the Proceeds of Crime Act, 1996. This order was

appealed on the grounds, firstly, that it is invalid as it flows from the s.3 order. Secondly it is contended that there was no equitable

reason in all the circumstances for the appointment of the receiver over the property. This in turn was on the basis that the

mortgage was paid up-to-date and that the premises were then occupied then by a family.

33. Since I favour upholding the s.3 order made in this case it follows that the first ground of objection to the receivership order is of

no weight.

34. It is indeed true that an application for an order under s.7 of the Proceeds of Crime Act requires to be considered on equitable

principles. Finnegan P. adverted to this saying:

“I am mindful that the office of receiver (including a receiver appointed pursuant to statute) has its origins in the Courts

of Chancery: it is appropriate to have regard to equitable principles in exercising the statutory discretion conferred by the

Proceeds of Crime Act, 1996, s.7, and I do so.”

35. Having regard to the earlier conclusion of the High Court, which I would affirm, that the premises represented the proceeds of

crime, it is difficult to see any basis, equitable or otherwise, for setting aside the receivership.

36. Moreover, the purpose of a receivership is to preserve the property over which the receiver is appointed for the benefit of the

party ultimately found to be entitled to it. A vital aspect of this preservation, in the case of a building, is to ensure that the premises

are at all times properly and validly insured. In my view the evidence before the learned President to the effect that the policy of

insurance was likely to be or to become void, which was not contradicted, was quite sufficient in itself to justify the appointment of a

receiver with power of sale.

Conclusion.

37. I would dismiss the appeal and affirm the orders of the High Court.