FEDERAL COURT OF AUSTRALIA

TORT - Conversion - goods not the property of the applicant seized pursuant to search warrant from premises occupied by applicant - whether applicant had possessory title to recover goods from National Crime Authority where no longer needed for its purposes - whether knowledge of existence of goods prior to execution of search warrant necessary to establish possessory title - nature of possession considered - ability of owner/occupier to exercise control over premises and contents to be inferred where premises are dwelling house.

Administrative Decisions (Judicial Review) Act 1977

Judiciary Act 1903, s 39B

National Crime Authority Act 1984, s 57

Jurisdiction of Courts (Cross Vesting) Act 1987, s 4(2)

Proceeds of Crime Act 1987, s 82

Dunesky v Elder (1996) 54 FCR 540, distinguished

Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204, referred to

South Staffordshire Water Company v Sharman [1896] 2 QB 44, considered

Russell v Wilson (1923) 33 CLR 538, applied

Howe v Teefy (1927) 27 SR (NSW) 301, applied

Bridges v Hawkesworth (1851) 21 LJ (QB) 75, referred to

Parker v British Airways Board [1982] 2 WLR 503, considered and applied

Willey v Synan (1936-7) 57 CLR 200, considered

MARGARET ELIZABETH FLACK v CHAIRPERSON, NATIONAL CRIME AUTHORITY & ANOR

NG114 of 1997

HILL J

26 NOVEMBER 1997

SYDNEY

THE COURT ORDERS THAT:

1.         The second respondent deliver up to the applicant the briefcase seized pursuant to a search warrant on 13 April 1994 together with the contents thereof, namely the sum of $433,000.

2          The motion filed on 12 December 1996 be dismissed.

3.         The respondents pay the applicant’s cost of the application, including reserved costs and the costs of the motion filed on 12 December 1996.

Note:                Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

Does the lessee of premises have title to sue in conversion in respect of goods lawfully taken under search warrant from those premises, where the goods are admittedly not her property, have evidently not been abandoned and are of an unknown ownership so far as the lessee’s knowledge extends?  This is the problem raised for decision in the present proceedings brought by Mrs Margaret Elizabeth Flack against the Chairperson of the National Crime Authority (“the Authority”), the first respondent, and the Commonwealth, the second respondent.

JURISDICTION

Initially, the respondents filed a Notice of Objection to Competency contesting the jurisdiction of the Court to hear the application.  That was withdrawn at the proceedings.  Although the respondents do not now seek to argue the jurisdiction of the Court, that does not relieve the Court from having to determine whether its jurisdiction is attracted.

The basis for the Court’s jurisdiction lies initially in either the Administrative Decisions (Judicial Review) Act 1977 (“the ADJR Act”) or s 39B of the Judiciary Act 1903.  The applicant’s primary challenge is to the decision of the first respondent not to return to the applicant a briefcase containing $433,000 in notes which had been seized by the Australian Federal Police in the execution of a search warrant.  It may be noted that the jurisdiction under the ADJR Act is affected by s 57 of the National Crime Authority Act 1984 which contains its own mandatory time limits.  It is conceded, however, by the Authority, that the proceedings were brought within time.

Once the Court’s jurisdiction is thus attracted, and it is, the balance of the proceedings, for return of the briefcase and contents or damages in lieu, brought in conversion, falls within the Court’s accrued jurisdiction.  There is thus no need for the Court to consider the motion brought as a precautionary measure by the applicant for an order pursuant to s 4(2) of the Jurisdiction of Courts (Cross Vesting) Act 1987, to confer jurisdiction on the Court pursuant to that Act.

THE BACKGROUND FACTS

There is no dispute as to the facts.

Mrs Flack is a tenant of the premises 6 Broughton Street Glebe (“the Glebe premises”).  She holds under a residential tenancy agreement from the State Department of Housing as a weekly tenant.  She is the sole occupant of the Glebe premises and has lived alone there since the death of her husband in September 1990, save that her son, Glen has a few clothes in a back room, does not stay there but “visits about twice a week”. Glen has a key.  So, too, did a Mr Sinclair, who lived across the road from Mrs Flack and with whom Mrs Flack had had a close relationship until he too died in February 1994.  Mrs Flack also has a married daughter who lives with her husband and it would seem did not at any relevant time have a key to the Glebe premises.

In early 1994 the Authority commenced an investigation into possible offences involving the possession of prohibited imports of narcotic goods.  The investigation was originally conducted as a “general investigation” and subsequently as a special investigation pursuant to references granted by the Commonwealth of Australia on 26 May 1994 and the State of New South Wales on 26 May 1994.  Further references extending the scope of the investigations were granted in November 1995.  None of the references has been withdrawn.

On 12 April the Authority obtained, pursuant to s 10 of the Crimes Act 1914 (Cth), a search warrant to search the Glebe premises.  On 13 April 1994 that warrant was executed.  It was what is popularly referred to as a “three condition warrant”: cf Dunesky v Elder (1996) 54 FCR 540.  The offence referred to in it was possession of a prohibited import, namely cannabis resin, reasonably suspected of having been imported into Australia (see s 233B(1)(ca) of the Customs Act 1901).  It was a prerequisite that the goods searched for related to Glen Flack.  There is no suggestion that the execution of the warrant was unlawful.

There is a cupboard in the entrance/hallway of the Glebe premises.  The lower portion of the cupboard contained an ironing board and a fold-up hammock among other things.  These, it may safely be assumed, belonged to Mrs Flack.  The top half of the cupboard contained a Balmain bag, a Balmain Fleggs Bag and two travel bags.  Each was empty.  Behind was a large size black briefcase which was locked.  The lock was forced open and inside was a large number of notes predominantly of $50 denomination.  When counted, the briefcase was found to contain $433,000.  One of the notes bore a bank stamp dated 13 January 1994 from which it can be inferred that that note was put into the briefcase at a date later than 13 January 1994.  Further, evidence from an official of the Reserve bank shows that at least one of the notes in the bag only came into circulation in April 1994.

The bag itself was of a kind manufactured in Hong Kong exclusively for an importer who imported such bags into Australia in January 1993.

Mrs Flack was shown the briefcase by the police.  When asked who owned it she said that she had never seen it before and did not know whose briefcase it was.  When shown what was inside it Mrs Flack exclaimed: “Oh my God”.

When asked if there was anything she could tell the police about the bag with the money in it she said: “No, nothing.  I’ve never seen it before, I swear.”

Mrs Flack said that she never had need to go up to the top of the cupboard and that she had no idea at all how the bag came to be in the cupboard.  She said that of the other bags in the cupboard all but one belonged to Glen.  The remaining bag was hers.  When asked if she had seen anyone go to the cupboard she first said no, then mentioned that a “Tony” who did painting may have.  Otherwise she had no idea.

The bag and contents were taken away in execution of the warrant.  Subsequently there was an investigation conducted by the Authority in July 1994.  During the course of that investigation Mrs Flack was examined under oath.  She said in evidence virtually the same as she had initially stated to the police at the time the warrant was executed.  A copy of the transcript of her evidence was before me, confidentiality having been waived by the Authority.

No action was thereafter taken by the Authority.  No person was charged in respect of any offence.  Requests on behalf of Mrs Flack that the Authority return the bag and money to her were initially met by the response that they might be needed in evidence.  Now that some three and a half years have elapsed since the briefcase was seized it is clear that this excuse can no longer be availed of by the Authority.  At the hearing, and indeed only after the luncheon adjournment, the Authority by its counsel conceded that there was “no current operational necessity to retain the money”.  The Authority, however, maintains that it can retain the bag and money on the basis that Mrs Flack has not established a sufficient title to sue for it.  Whether she has is thus the real issue for decision.

POSSESSION, OWNERSHIP AND TITLE TO SUE IN CONVERSION

It is clear law that title to sue in conversion (and for present purposes there is no need to seek to draw a distinction between trespass to goods, detinue, trover and conversion) does not depend upon proof of ownership; it depends upon the right to possession.  So:

“The essence of conversion is a dealing with a chattel in a manner repugnant to the immediate right of possession of the person who has the property or special property in the chattel...An intent to do that which would deprive ‘the true owner’ of his immediate right to possession or impair it may be said to form the essential ground of the tort.”

(Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204 at 229 per Dixon J).

Possession is thus not just evidence in support of ownership, it confers what the law refers to as a “possessory title”, which is as good as an absolute title of ownership, as against all the world except the true owner: Russell v Wilson (1923) 33 CLR 538 at 546.  If Mrs Flack does, as she asserts and the respondents deny, have possessory title, then the fact that that title has been interrupted by the seizure of the bag under the warrant will not provide to the respondents a defence.  That is what happened in Russell v Wilson.  The powers of the Australian Federal Police to search for and seize goods and impliedly to retain them for a reasonable period do not authorise continued retention beyond the time necessary for the investigation or subsequent prosecution.  Once the right to retain has expired, what Isaacs and Rich JJ referred to (at 547) as the “superior right” of the police no longer exists and a refusal to return the goods to the person having at the time of seizure the possessory title will be wrongful.

Professor Fleming in The Law of Torts (7th ed) at 59 instructs us that the emphasis on possession, rather than ownership, stems from earlier times when wealth was primarily associated with tangibles.  It flows also from the influence of forms of action on the development of the law.  Whatever the origin, the significance of possession as against ownership is now well established to the extent that an owner who dispossesses a bailee during the term of a bailment not determinable at will can be sued in conversion: Howe v Teefy (1927) 27 SR (NSW) 301, and the other cases cited by Fleming at n18 on p59.

Contrary to what I understand to be a submission of the respondents, a possessor of chattels is entitled to recover damages for the full value of the chattel converted, even though he is not the owner.  See Fleming, The Law of Torts (7th ed) at 65 where the learned author says:

“A possessor whose chattel has been converted by a stranger is entitled to recover its full value, even though he is not the owner.  As we have seen, modern law has retained the medieval axiom that possession is title against a wrongdoer;... damages are merely a substitute for such possession and must therefore be the equivalent of the chattel and amount to its full value.”

The decision of Santow J in Horsley v Phillips Fine Art Auctioneers Pty Ltd (unreported, Supreme Court of New South Wales, 31 July 1995) relied upon by the respondents is not authority to the contrary.  It is simply not a correct statement of law to say that no damage is done to the applicant’s title (she not having title) with the consequence that she can not succeed.  The measure of damages where conversion applies is the value of the chattel.  Special damage to the possessor need be proven but no special damage is claimed.

South Staffordshire Water Company v Sharman [1896] 2 QB 44 on its face appears to be authority for the proposition that a person in possession of land is entitled, as against anyone other than the true owner, to the possession of things on the land, whether or not he knows of the existence of those things, so that that person could maintain an action in conversion against a person who finds goods on the property and takes them away.  It stands in complete opposition to the submission of the respondents that there can be no possession unless the possessor is aware of the chattel alleged to have been converted.

There is, however, some controversy as to whether the case should be accepted as authority for such a wide proposition.

In South Staffordshire Water the defendant, who was an employee of the plaintiff, found two rings in the mud at the bottom of a pool owned by the plaintiff.  The plaintiff sued to recover them and succeeded.  Lord Russell CJ (at 46-7) stated the principle to be applied by reference to a passage in Pollock & Wright’s Essay on Possession in the Common Law p41 as follows:

“The possession of land carries with it in general, by our law, possession of everything which is attached to or under that land, and, in the absence of a better title elsewhere, the right to possess it also.  And it makes no difference that the possessor is not aware of the thing’s existence... It is free to any one who requires a specific intention as part of a de facto possession to treat this as a positive rule of law.  But it seems preferable to say that the legal possession rests on a real de facto possession constituted by the occupier’s general power and intent to exclude unauthorised interference.”(emphasis added)

The defendant relied upon Bridges v Hawkesworth (1851) 21 LJ (QB) 75, a case which like South Staffordshire Water itself has attracted a deal of academic comment; for example A L Goodhart “Three Cases on Possession”, Cambridge Law Journal, 1928, Vol III, p195, reprinted in Essays in Jurisprudence and Common Law,University Press, Cambridge, 1931, Ch IV, pp75-90.  In that case the finder of notes which had been accidentally dropped in a shop sought to recover them from the shop owner.  Although this does not seem to have been the ratio of the case, the notes were found in the part of the shop to which the public had, in practice, unrestricted access.  It was held the finder was entitled to recover the notes for they were never in the custody of the shopkeeper or “within the protection of his house”.

The judgment in Bridges v Hawkesworth is conveniently reproduced in full in the judgment of Donaldson LJ in Parker v British Airways Board [1982] 2 WLR 503 at 509-510.  It proceeded on the basis that there was nothing in the circumstances of the case to take it outside the general rule which Patteson J enunciated as follows:

“... that the finder of a lost article is entitled to it as against all persons except the real owner”

According to Patteson J, the place in which the goods were found made no legal difference. Notwithstanding this comment, and indeed in complete derogation from it, Lord Russell CJ distinguished Bridges v Hawkesworth as depending upon the location of the notes at the time they were found.  If there was any warrant at all for doing so it could only be found in the reference, seemingly en passant by Patteson J to the notes not being “within the protection of the house”, as suggesting that the result might nevertheless have been different had the finder come upon the notes in the private home of the shopkeeper.

Having thus disposed of Bridges v Hawkesworth Lord Russell CJ then continued (at 47):

“... the general principle seem to me to be that where a person has possession of house or land, with a manifest intention to exercise control over it and the things which may be upon or in it, then, if something is found on that land, whether by an employee of the owner or by a stranger, the presumption is that the possession of that thing is in the owner of the locus in quo”.

Lord Wills, who agreed with Lord Russell CJ, thought to do otherwise would be an “unwise encouragement to dishonesty”.

In a passage from Pollock & Wright not quoted by Lord Russell CJ, the learned writers, referring to Bridges v Hawkesworth, comment that while there could conceivably be a positive rule of law that things left in any part of a building pass at once into the legal possession of the occupier, the Court found neither authority nor reason for such a rule.  It is obvious that a rule so widely stated could not be accepted.  For example, much may turn on the nature of the premises, whether they are a home or accessible to the public and, if the latter, what control or dominion was exercised in respect of that part of the premises in which the goods were found.  Subject to appropriate modifications so as to restrict the rule to the case of an occupier of a private home, however, the applicant urges that I adopt a rule in these terms.  Indeed, they say that this was the rule which was established in South Staffordshire Water. 

I was urged, curiously by all parties, to put to one side the so-called “finders cases” of which Bridges v Hawkesworth is a notable example.  These cases proceed, it was said, and I think correctly, upon the basis that what has been found has theretofore been lost or abandoned by the true owner and has not come into the possession of any other person.  So, the finder of a wallet on the street would be entitled to retain it as against all but the true owner.  But where the finder comes upon the goods in the premises of another the question is more difficult, for the title of the finder will be subject to any prior possessory title.  There could be none in a public place such as the shop in Bridges v Hawkesworth.  On the other hand, where goods of A are deliberately left at the home of B, with the knowledge of B, B accepts an obligation with respect of them and in such case clearly has a prior possessory title which would defeat the right of a person who claimed to find them at the house.

It is the case of the respondents that the briefcase was never in the prior possession of Mrs Flack, although found in her cupboard, because, I should infer, that it was hidden there by an unknown person (probably the son, Glen) away from all the world, including Mrs Flack.  So, it is said, the facts do not support a possessory title in Mrs Flack.

The question, what is necessary to constitute a prior possessory title, arose for consideration in the United Kingdom before the Court of Appeal in the more recent case of Parker v British Airways Board.

In Parker an airline passenger in the airline’s international executive lounge found a gold bracelet lying on the floor.  The bracelet was subsequently sold by the airline and the passenger successfully sued the airline, notwithstanding that the lounge was occupied by the airline.  The airline relied upon what was said to be the common law right of an occupier.  Particularly, the airline relied upon the wide statement of principle in South Staffordshire Water.  The finder relied upon the principle that where goods have been lost or abandoned the finder of them is entitled to retain them as against everyone but the true owner.  It was held by the Court of Appeal that the rights of the finder could only be defeated if the airline could show that it intended to exercise control over the lounge and everything in it.  This, in the circumstances, the airline could not do.

The distinction between South Staffordshire Water and Bridges v Hawkesworth and the difficulty of reconciling the general principles enunciated in each was discussed by Dixon J in Willey v Synan (1936-7) 57 CLR 200 at 217.  His Honour’s discussion is, with respect, somewhat inconclusive.  I shall return to that discussion later.

Both cases are also the subject of discussion in Parker.  Donaldson LJ at 514-5 sets out under separate headings what his Lordship saw as the rights and obligations of the finder and the occupier.  Speaking of the finder, his Lordship expresses the principle to be that a finder of a chattel obtains no rights to it unless the chattel has been abandoned or lost and he takes it into his control.  So much may readily be accepted.  Speaking of the occupier and the relationship of the finder and occupier, his Lordship states the principles to be adopted as follows:

“1.       An occupier of land has rights superior to those of a finder over chattels in or attached to that land and an occupier of a building has similar rights in respect of chattels attached to that building, whether in either case the occupier is aware of the presence of the chattel.

2.         An occupier of a building has rights superior to those of a finder over chattels upon or in, but not attached to, that building if, but only if, before the chattel is found, he has manifested an intention to exercise control over the building and the things which may be upon it or in it.

3.         An occupier who manifests an intention to exercise control over a building and things which may be upon or in it so as to acquire rights superior to those of a finder is under an obligation to take such measures as in all the circumstances are reasonable to ensure that lost chattels are found and, upon their being found, whether by him or by a third party, to acquaint the true owner of the finding and to care for the chattels meanwhile.  The manifestation of intention may be express or implied from the circumstances including, in particular, the circumstance that the occupier manifestly accepts or is obliged by law to accept liability for chattels lost upon his ‘premises’ ...”

In the result, the passenger won because the airline did not have a manifest intention to exercise control over the lounge and all things in it.  There was no manifest intention to assert custody and control over lost articles.

Everleigh LJ in Parker agreed that manifest intention was the critical factor.  However, his Lordshipsaid (at 516-517):

“What is necessary to do this must depend on the circumstances.  Take the householder.  He has the key to the front door.  People do not enter at will.  They come by very special invitation.  They are not members of a large public group, even a restricted group of the public, as users of the executive lounge may be.  I would be inclined to say that the occupier of a house will almost invariably possess any lost article on the premises.  He may not have taken any positive steps to demonstrate his animus possidendi, but so firm is his control that the animus can be seen to attach to it ...”

It may have been noted that Donaldson LJ, in the first two numbered paragraphs quoted above, drew a distinction between chattels attached to land and those not.  The basis of that distinction is discussed by his Lordship earlier in his Lordship’s judgment and from that discussion it emerges that his Lordship treats South Staffordshire Water as depending upon the fact that the rings were “in the mud and thus part of the realty”.  Even if it be accepted that rings in the mud became attached to the realty, and that is, with respect, not something which readily requires acceptance, there is no indication at all that South Staffordshire Water was decided on that basis.

It would, no doubt, be self evident that if a chattel became affixed to the realty, the ownership of the chattel (and possession of it) would follow the ownership (and possession) of the realty.  So much was decided in Elwes v Brigg Gas Company (1886) 33 Ch D 562.  That was the case of an ancient boat, some two thousand years old, embedded in clay to a depth of four to six feet and ultimately discovered by the defendants who claimed to be entitled to it as against the owners of the land.  Chitty J held not only that the boat had become a fixture, having become permanently embedded by natural causes, but that the owner of the land had the better right.  If the boat was a fixture, this followed axiomatically as his Lordship indicated.  If it were correct to regard the boat still as a chattel, the possessor of the land was entitled to possession of the land and everything in it.  The case forms the basis for the passage cited from Pollock & Wright earlier in this judgment.

Yet, when South Staffordshire Water came to be decided some ten years later, no reference is made in the judgment to Elwes v Brigg Gas Co, although the case was cited by counsel for the plaintiff.  Further, although the passage from Pollock & Wright quoted by Lord Russell CJ referred to things “attached to or under that land”, which might be taken as referring only to fixtures, the later statement by Lord Russell of principle spoke of things “which may be upon or in it” as well as something which is found “on” the land.  For my part I would not take South Staffordshire Water as a case restricted to that which is embedded in or under land. 

Nevertheless, I accept, as clear from the authority of Elwes v Brigg Gas Co the first proposition of Donaldson LJ in Parker, namely, that where chattels have been embedded in the land, so as to form part of the land, the owner of the land has a right superior to a finder, and notwithstanding that the owner is unaware of the existence of the chattel embedded in the land.

Does it then follow that, where chattels have not been embedded in the land so as to form part of it, the owner of the land will only have a right superior to the finder, where there is a manifest intention on the part of the owner to exercise control over the specific chattel?  If this were the law, then it would be a prerequisite of the superior right of the owner of the land that he or she have knowledge of the existence of the chattel.  This, in effect, is the submission of the respondents.

First, it must be said that unless South Staffordshire Water is confined to chattels which have become embedded in the soil (and in my view it should not be) or was wrongly decided (and in my respectful view it was not), the proposition can not be correct.  Second, as stated above, the proposition is inconsistent with Parker.  For, although the Court of Appeal spoke in terms of manifest intention to exercise control over the chattel, it did so in the overall context of a factual matrix where the existence of the chattel was unknown to the airline.  Had the Court intended to hold that the rights of the owner or occupier of land were always inferior to the rights of a finder when the chattel was not embedded in the land and its existence was unknown to the land owner/holder, it could have said so.  Indeed, it would have provided a simple basis for the decision.  But it is clear that that is not what the Court decided.

When Donaldson LJ spoke of intention to exercise control “over the building and the thing” he must, therefore, have meant that the control which it was intended would be exercised over the building extended generally to things in it, irrespective of knowledge of the existence of the things in question.  Put in another way, it is the general manifestation of intention to exercise control over chattels and building which is important, not any specific manifestation of intention to exercise control over a specific chattel in the building.  So, where the manifest intention in that sense existed, the right of the owner/occupier of the premises would prevail over the rights of a finder, whether or not, in respect of the particular chattel, there was any knowledge of its existence.

I return briefly now to the discussion of South Staffordshire Water undertaken by Dixon J in Willey v Synan.  At 217-7 Dixon J points out the difficulty in reconciling what was said by Lord Russell CJ in South Staffordshire Water with Bridges v Hawkesworth.  His Honour then discusses refinements in the case law of the United States where a distinction had been drawn between cases where the chattel was unintentionally lost on the one hand and where it was deposited on the premises of another with the intention of resuming custody but the person so doing had forgotten to do so or failed to remember where the goods were.  There is a later discussion of the American position to be found in “Problems in the Law of Finding: The US Approach” AES Tay (1964) 37 ALJ 350 and see too “Abandoned, Lost Etc, Property” (1962) 1 Am Jur 2d.

According to Dixon J the question should not depend upon the manner in which the owner came to relinquish possession, but in the nature of the possession enjoyed by the owner/occupier.  It was in this context that his Honour referred to theories of possession, implying, by so doing, that the outcome of cases might depend upon the theory adopted.  The first, espoused by Mr Justice Holmes (Holmes, Common Law, 1881), is that the right to possession depends upon an intent to exclude others.  In this case it would be sufficient if the occupier exercised a form of control over the premises so as to exclude others from the premises and all things in it.  If so, the rights of the owner/occupier would prevail over the rights of finders.  The alternative view is that there must be an “animus domini”.  In this event there would need to be, coupled with the intention on the part of the owner to leave the goods on the premises of another, an acceptance, general or particular, on the part of the occupier.  On this view, presumably a person seeking to assert a possessory title would need to show knowledge of the existence of the article so as to demonstrate the intention to control.  Unfortunately, his Honour did not carry the discussion further.

I think that the outcome of the cases, although not, it must be conceded, always the reasoning explicit in them, leads to the conclusion that the law has adopted the theory of possession which Dixon J attributed to Holmes J, namely that the right of the owner/occupier depends upon the intention, express or implied, by circumstance to exclude others from the premises and things in it rather than intention to exercise dominion over the particular item. 

It is a characteristic of possession that the possessor be in a position to exercise control over that which is possessed and assert a general right to do so.  In public premises, such as a shop or airport lounge, the owner/occupier of the premises is a fortiori not in a position to exercise control over goods which may happen to come onto the premises.  The owner/occupier may, in a particular case, accept that control and in that case will have possession of the goods.  The nature of the premises raises no inference in such a case as to the ability to exercise control.  In a particular case, even where the public has access to premises, the owner/occupier may be able to demonstrate the ability to control goods on the premises and may assert a right to do so.  The airline failed to do so in Parker but the case does not exclude the possibility that an owner/occupier might do so.  That will be a question of fact.

It is different in a private house or other non-public area.  Ordinarily the owner/occupier in such a case asserts control, not only over the property, but all that is within it.  It will be irrelevant that the owner/occupier is aware of the existence of the article in or on the property.  The ability to exclude others from the property includes the ability to exclude others from all goods which are in or on it.  In such a case the nature of the premises and the rights inherent in the owner/occupier of such premises of themselves raise an inference as to the ability to exercise control over goods in or on the premises or perhaps a presumption.  One may ask rhetorically, could a visitor to Mrs Flack’s premises take away the briefcase having found it in the cupboard and claim a superior right to Mrs Flack, whether or not the owner of the bag had intended to hide knowledge of it from Mrs Flack?  The answer is clearly no.  Then why should the respondents, who are clearly not entitled to possession of the goods, once the needs of the search warrant have been spent, be in any different position to such a visitor.

It follows, in my view, that the rights of an owner/occupier of premises where goods are found will prevail over the rights of a finder, irrespective of knowledge of the existence of the goods on the part of the owner/occupier and irrespective of an acceptance on the part of the owner/occupier of the obligation to exercise dominion over the goods so long as it can be shown that the owner/occupier manifested an intention to exercise control over the premises in which the goods are and all items in those premises.  Such manifestation of intention will be presumed where the premises are residential premises of which the owner/occupier has exclusive possession.

Conversely, where the goods in question are found in a private residence a finder can not assert a better title than the owner/occupier on the basis that the owner/occupier had no knowledge of the existence of the goods and, they not belonging to the owner/occupier, he or she had not accepted an obligation to keep them safe.  The owner/occupier does not need to prove that he or she is the owner of the chattels, nor to prove who the owner is.  This is the crux of the present case.

One way of testing the outcome in the present case is to ask whether the owner of the briefcase who had put it in the cupboard had possession of it.  Except where goods have been lost or abandoned there will be a presumption that goods will be in the possession of somebody.  It could hardly be suggested in the present case that the owner was in possession for he or she could at any time at the whim of Mrs Flack be excluded from access to the premises.  So if Mrs Flack did not have possession, and in my view she did, then the situation would be that no-one did.  That is contrary to common sense.

I was referred on behalf of the respondents to a number of cases in the area of criminal law, of which He Kaw Teh v The King (1985) 157 CLR 523 is a good example.  In addition, other cases referred to were:  Moors v Burke (1919) 26 CLR 265; R v Boyesen [1982] AC 768 at 773-4; Kural v R (1987) 70 ALR 658; Saad v R (1987) 70 ALR 667; Williams v Douglas; Director of Public Prosecutions v Brooks [1947] AC 862; Williams v R (1978) 140 CLR 591 and Pereira v Director of Public Prosecutions (1988) 82 ALR 217.

In He Kaw Teh a defendant escaped conviction of an offence involving possession of prohibited imports on the basis that the Crown had not proven that he knew what a bag (in fact containing heroin) contained.  The case was cited on the basis that there could not be possession in law unless the person claiming possession knew of it.  With respect, the case does not stand for this proposition at all.  It stands for two propositions.  First, that mens rea was an element in the offence of which the defendant was charged, so that the Crown had to prove knowledge on the part of the defendant that he was importing prohibited goods and that the goods were in his exclusive physical control.  Second, it stands for the proposition that in the context of the statutory crime of which the defendant was charged the word “possession” necessarily imported a mental element (see at 537-9 per Gibbs CJ).  The case, and other cases cited, assist not at all in throwing light on what is necessary to establish a possessory title for the purposes of the tort of conversion.

For completeness, reference may be made to dicta in other cases which broadly support the view I have taken.  In Ranger v Giffen (1968) 87 WN (Pt 1) (NSW) 531 the owner of land was held to have a superior right to a finder in respect of a tin of money buried under the house.  The case does not appear to have been decided upon the basis that the tin was a fixture, but on the broader basis that the owner of the land was entitled to the tin because it was on the land, although the tin was not owned by or known to the owner of the land.

In Johnson v Pickering [1907] 2 KB 437 Lawrence J applied the Pollock & Wright dictum to goods in a drawer in the house.  In Hannah v Peel [1945] 1 KB 509Birkett J refused an application for return of a broach by the owner of land who had never had possession of the land, observing that the authorities were in an unsatisfactory state.

Finally, in Grafstein v Holme and Freeman (1957) 12 DLR (2d) 727 the Ontario Court of Appeal said (at 734) that South Staffordshire Water  should be taken as establishing the broad proposition cited earlier in this judgment provided it is established that the occupier has in fact “possession of house or land with a manifest intention to exercise control over it [ie, the land or the house] and the things which may be upon or in it”.  It must, however, be said that the judgment of Le Bel JA in that case introduces a qualification which may support the respondents.  In his Honour’s view it would be relevant whether the occupier would be liable to the true owner for ill and negligent keeping of the goods.  The qualification does not find support in other cases.

But even if I accept that the briefcase and contents were hidden in the cupboard away from Mrs Flack (and there is no evidence which supports this) they were still within the protection of Mrs Flack who, once she knew of them (and she did before they were taken away, albeit briefly), came under the implied obligations the law imports to a voluntary bailee.  In my view, Mrs Flack had sufficient possessory right to prevail over the, now, wrongful possession of the respondents.

A JONES V DUNKEL PROBLEM?

A matter heavily relied upon by senior counsel for the respondents was that Mrs Flack had chosen not to go into evidence, therefore all the consequences which the rule in Jones v Dunkel (1959) 101 CLR 298 requires, must, it is submitted, follow.  Particularly it is said that not only must I conclude that any evidence she may have given would not have supported her case (and for what it is worth I would so conclude) but also that any inference favourable to her should not be drawn. 

There is nothing in Jones v Dunkel, or for that matter the numerous cases which have followed or applied it, which supports so wide a proposition.  It may well be the case that where two inferences are equally open one favourable and one unfavourable, and the evidence of the witness might confirm one inference, that the failure of that witness to give evidence would lead to the conclusion that the other inference should be drawn.  That may follow from the proposition that it can be assumed that the evidence of the witness who fails to give evidence would not support the witness’ case.  But except in a case where the inferences are equally open, each case will involve the Court weighing up all the relevant evidence to determine whether an inference should be drawn.  Put another way, I do not think that Jones v Dunkel will ever lead to the conclusion that where there are competing inferences one inference will, in all cases, of necessity have to be accepted by the Court where the inference to be drawn does not depend upon evidence which the non-participating witness might give, or even where it might, if other evidence justifies the drawing of the inference.

No questions of competing inferences in any event really arise in the present circumstances.  Indeed, the present case is not one where it is necessary to draw any inference which would depend upon Mrs Flack’s testimony at all.  To demonstrate that this is so it is useful to consider what it is that Mrs Flack needs to prove?  First, and she has obviously succeeded in this, she must prove that the continued retention by the Authority is wrongful.  Second, she has to prove that she is the owner/occupier of the premises.  She has done that.  The respondents have not suggested that anyone other than Mrs Flack is in possession of the premises or any part thereof.  It is known that Glen Flack has some clothes there and visits.  That is not a matter which depends upon inference.  As to the ownership of the briefcase and Mrs Flack’s knowledge of that matter there are two possibilities, either Mrs Flack knows or she does not.  But the matter is not relevant to the outcome of the present proceedings.  If she knew that the bag belonged to her son and that he had left it in the cupboard she would be entitled to succeed, because the law would then impose upon her the duty of a bailee to look after and thus control the bag.  It would thus be in her possession.  The strongest case against her is indeed the case based upon the fact that she had no knowledge of the bag.  So, if any inference were to be made, that is the inference which would be made.  But it does not assist the respondents where it is clear that Mrs Flack has exercised possession of her home in such a way as to show an intention to exclude others from possession of it and things in or upon it.

The possibility of unlawful possession

A final argument that was raised on behalf of the respondents was that I should refuse to order the return of the briefcase and contents on the basis, if I understood the submission correctly, that the receipt by Mrs Flack of the money would be unlawful by force of s 82 of the Proceeds of Crime Act 1987.  Subsection 1 of that section provides:

“A person who ... receives, possesses ... any money, or other property, that may reasonably be suspected of being proceeds of crime is guilty of an offence against this section.”

Let it be assumed that it would be a defence to an action for recovery of the briefcase and money that the return of them would constitute an ingredient of an offence: cf Gollan v Nugent (1988) 166 CLR 18, perhaps on the ground that the Court would not lend its process for a criminal purpose or assist illegal conduct.  Nevertheless there is no evidence at all that the money might reasonably be suspected of being the proceeds of crime.  The fact that there is no evidence of ownership of the bag and money in it does not lead to the conclusion that the money might reasonably be suspected of being the proceeds of crime.  For that conclusion to be drawn there must be reason not mere assertion. 

Conclusion

For the reasons I have given I am of the view that the respondents are not entitled to retain the briefcase and contents.  Any decision to do so which has been taken would be wrongful, once a demand had been made, as it had, by or on behalf of Mrs Flack as being the person with possessory title prior to the execution of the search warrant.  However, there seems no purpose in the Court ordering that the decision be set aside.  Rather I would order that the respondents return the briefcase and contents.  As these are still held by the Commonwealth there is no need for an order that in lieu there be damages.  The respondents must pay the applicant’s costs.

Associate:

Dated:              26 November 1997