No protection for mortgage lenders
You have no credits left. To view this article subscribe to Business News.
You have used {{points}} and have {{current_points}} remaining. Your credits will reset on {{reset_date}}.
This article is part of a special report and is available to paid Business News subscribers only.
You can purchase access to this special report or subscribe to Business News.
You can purchase access to this special report or subscribe to Business News.
This article is premium content and is available to paid Business News subscribers only.
Subscribe to Business News.
Subscribe to Business News.
Tuesday, 26 February, 2002 - 21:00
LENDERS are becoming concerned about their security after one mortgagee lost a challenge against WA’s Criminal Property Confiscation Act in the WA Supreme Court.
Under the Act, the Director of Public Prosecutions for WA can take control of assets belonging to a person believed to be a drug trafficker until the case is proven either way.
If the person is convicted as a drug trafficker, the frozen assets become forfeited to the Crown.
This means the mortgagee risks losing both the property and the unpaid amount of the loan.
The Act was brought in to prevent criminals from using the proceeds of crime to fund their defence.
Sydney-based lender Permanent Trustee Co holds a mortgage over 213 Riseley Street, Booragoon, which was seized in September under the Act.
It lent the property’s owners – Colin and Margaret Ritchie – $200,000 in January 2000 to buy it.
However, Mrs Ritchie was charged under the Misuse of Drugs Act, triggering the freeze order.
Both Permanent and Mr Ritchie, who faces no charges, applied to have the freezing order lifted from the property, but Justice John McKechnie ruled their applications be dismissed.
However, Mr McKechnie said the summonses highlighted “the potential for injustice that may be created by the operation of the Act”.
Director of Public Prosecutions Robert Cock QC did not believe Permanent and Mr Ritchie would lose out.
“In my view, the lender is the innocent party,” Mr Cock said.
He said if the property was forfeited to the Crown, then it would be sold and the proceeds split between the innocent co-interests.
A BankWest spokesman said the bank agreed with the Act in principle, but felt it did not provide protection for the lender.
“There is some protection for innocent spouses and others, but not for the lender,” he said.
“We would have to show the property was not used for the purposes of crime.”
Under the Act, the Director of Public Prosecutions for WA can take control of assets belonging to a person believed to be a drug trafficker until the case is proven either way.
If the person is convicted as a drug trafficker, the frozen assets become forfeited to the Crown.
This means the mortgagee risks losing both the property and the unpaid amount of the loan.
The Act was brought in to prevent criminals from using the proceeds of crime to fund their defence.
Sydney-based lender Permanent Trustee Co holds a mortgage over 213 Riseley Street, Booragoon, which was seized in September under the Act.
It lent the property’s owners – Colin and Margaret Ritchie – $200,000 in January 2000 to buy it.
However, Mrs Ritchie was charged under the Misuse of Drugs Act, triggering the freeze order.
Both Permanent and Mr Ritchie, who faces no charges, applied to have the freezing order lifted from the property, but Justice John McKechnie ruled their applications be dismissed.
However, Mr McKechnie said the summonses highlighted “the potential for injustice that may be created by the operation of the Act”.
Director of Public Prosecutions Robert Cock QC did not believe Permanent and Mr Ritchie would lose out.
“In my view, the lender is the innocent party,” Mr Cock said.
He said if the property was forfeited to the Crown, then it would be sold and the proceeds split between the innocent co-interests.
A BankWest spokesman said the bank agreed with the Act in principle, but felt it did not provide protection for the lender.
“There is some protection for innocent spouses and others, but not for the lender,” he said.
“We would have to show the property was not used for the purposes of crime.”