New South Wales Court of Appeal CITATION : Australian Crime Commission v Gray & Anor [2003] NSWCA 318 HEARING DATE(S) : 24/10/03 JUDGMENT DATE : 22 December 2003 JUDGMENT OF : Mason P at 1; Ipp JA at 67; Tobias JA at 313 DECISION : By majority: (1) Appeal upheld in part. (2) Cross-appeal dismissed. (3) Direct parties to bring in agreed short minutes withn 14 days, but, if agreement cannot be reached, each party is to file the proposed form of orders with accompanying written submssions on or before 6 February 2004. (4) No order as to costs in regard to the appeal and cross-appeal is made. (5) As regards the costs of the trial, the order made by Austin J stands unless there turns out to have been some relevant Calderbank-type settlement offer. CATCHWORDS : EQUITABLE ESTOPPEL - Representation made by appellant to protected witnesses - Whether representation was ambiguous - The effect of an ambiguous representation on promissory estoppel - Whether a memorandum of understanding (MOU) signed by the protected witnesses superseded any representation made to them by the appellant - Whether protected witnesses were estopped from denying that they were bound by MOU - Whether appellant was required to pay protected witnesses' income tax in respect of benefits afforded to witness under witness protection scheme - Whether protected witnesses relied on appellant's representations - Whether protected witnesses suffered detriment by going into the witness protection program - Whether failure of the appellant to keep its promise caused protected witnesses to suffer loss - Whether appellant's departure from representation was unconscionable - Whether protected witnesses' criminal conduct affected his and his estate's entitlement to equitable compensation - Whether compensation for the tax liability incurred by protected witness should be paid to administator of estate or to the Australlian Taxation Office. D Director of Public Prosecutions Act 1983 (Cth) Income Tax Assessment Act LEGISLATION CITED : National Crime Authority Act 1984 (Cth), s 4 National Crime Authority (State Provisions) Act 1984 (NSW) Proceeds of Crime Act 1987 (Cth), s 82(1) Witness Protection Act 1995 (NSW) ss 3, 8, 9, 10, 11, 12, 46 Akerhielm v De Mare [1959] AC 789 China-Pacific SA v Food Corporation of India [1981] QB 403 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Crabb v Arun District Council [1976] Ch 179 Flinn v Flinn (199) 3 VR 712 Fox v Percy (2003) 197 ALR 201 Holiday Inns Inc v Broadhead (1974) 232 EG 951 Jones v Watkins [1987] CATranscript 1200, EWCACiv CASES CITED : Krakowski v Eurolynx Properties Limited (1995) 183 CLR 563 Legione v Hateley (1983) 152 CLR 406 Low v Bouverie [1891] 3 Ch 82 Orgee v Orgee (UKCA, unreported, 5 November 1997) The Commonealth v Verwayen (1990) 170 CLR 394 Upper Hunter County District Council v Australian Chilling and Freezing Company Limited (1968) 118 CLR 429 Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 Western Australian Insurance Company Limited v Dayton (1924) 35 CLR 355 Woodhouse AC Israel Cocoa Limited SA v Nigerian Produce Marketing Company Limited [1972] AC 741 Wright v Hamilton Island Enterprises Limited [2003] QCA 36 Australian Crime Commission (successor to the National Crime Authority) (Appellant) PARTIES : Margaret Gray (As administrator of the Estate of John Gray) (First Respondent) Margaret Gray (Second Respondent) FILE NUMBER(S) : CA 40334/03 COUNSEL : H K Insall SC/M Dicker (Appellant) M Aldridge QC/P Livingstone (First & Second Respondents) SOLICITORS : Andrew Adams (Appellant) Horowitz & Bilinsky (First & Second Respondents) LOWER COURT Supreme Court - Equity Division JURISDICTION : LOWER COURT ED 2580/98 FILE NUMBER(S) : LOWER COURT Austin J JUDICIAL OFFICER : IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40334/03 SC 2580/98 MASON P IPP JA TOBIAS JA Monday 22 December 2003 AUSTRALIAN CRIME COMMISSION v MARGARET GRAY (as Administrator of the Estate of John Gray) & ANOR FACTS In the 1980s, Mr John Gray effected international transfers of large sums of monies on behalf of Mr Ian Saxon and Mr Tamas Schneider, members of a large drug dealing syndicate. In 1989, the National Crime Authority (the "NCA"), the predecessor of the appellant, identified Mr Gray as being involved in money laundering. Mr Gray provided the NCA with information regarding Schneider and Saxon, and agreed to wear a listening device and give evidence against Saxon and Schneider. Mr Gray and his wife were initially placed into a scheme of witness protection under the auspices of the NCA and later placed under the aegis of the witness protection scheme of the New South Wales Police Services. The NCA, prior to the Grays entering witness protection, promised to provide the Grays with financial support. When the Grays transferred to the New South Wales Police Services scheme, a Memorandum of Understanding ("MOU") was prepared. The MOU specified that the Grays would be provided with limited financial and other assistance consisting of amounts set out therein. Throughout their period in witness protection, this amount was provided to the Grays. During their period in witness protection, the Gray's financial situation was substantially less than that they had previously enjoyed. Furthermore, following the Gray's entering the witness protection scheme, the second respondent's hairdressing and beauty salon was sold. The sale resulted in a capital loss to the second respondent. In 1998, after the witness protection program had terminated, Mr Gray received a provisional tax notice and a notice of assessment from the Commissioner of taxation requiring him to pay tax in the sum of $127,457 based on the payments/benefits he had received whilst being a protected witness. The respondents alleged that the NCA, through its officer, Inspector Small, made representations to the Grays by which they were promised that, if they entered into a witness protection program and co-operated with the NCA, and if Mr Gray gave appropriate evidence, they would be "looked after" and "would not be financially disadvantaged". Mrs Gray asserted that the NCA had broken its promise and, thereby, acted in an unconscionable manner. She claimed (in her representative capacity and personally) equitable compensation from the appellant, basing her claims on promissory estoppel. Austin J ordered equitable compensation to be paid as follows: (a) $224,084.55 together with interest thereon calculated from 13 March 2003 at the rate of 11.84% per annum on a compounding basis being the amount of Mr Gray's liability to pay income tax in respect of the payments and benefits he and Mrs Gray received during the witness protection. (b) $62,144.30 being compensation representing the costs, over a period of three years, of Mr Gray rehabilitating himself within the community after the termination of the witness protection arrangements. (c) $117,144.29 made up of compensation representing the rehabilitation costs, over the same period, of Mrs Gray, and $18,500 being the loss she suffered in selling a hairdressing and beauty business in which she had an interest, plus interest. Austin J ordered equitable compensation, including $224,084.55 plus interest, being Mr Gray's liability to pay income tax on the benefits received from the NCA. His Honour ordered this to be paid by the appellant directly to the Australian Taxation Office. The appellant appeals against his Honour's orders. The respondents cross-appeal, arguing that Austin J erred in (i) failing to order that the sum of $224,084.55 plus interest be paid to the first respondent; (ii) his assessment of compensation; and (iii) setting off against the damages the amounts that the respondents received by way of pension benefits. HELD per Ipp JA (Mason P & Tobias JA agreeing) Austin J's acceptance of Inspector Small's evidence 1. The approach of an appellate court to challenges of a factual nature was laid down in Fox v Percy (2003) 197 ALR 201. Austin J was entitled to accept the evidence and account of Inspector Small despite the fact that (i) at the inception of his evidence, Inspector Small had said that his memory was "really exhausted"; (ii) there were inconsistencies between Inspector Small's evidence and the evidence of his superior, Mr Cashman; and (iii) there existed no documentary evidence in which there had been reference to the alleged representation until 1 November 1996. The ambiguity of the representation and its effect on the estoppel 2. Inspector Small's representations had legal effect by virtue of the principles of equitable estoppel. In the context of the case, the Grays (and Inspector Small) must have understood the representations of Inspector Small to mean that the promise that the Grays would suffer no financial disadvantage by entering into the witness protection program was subject to the constraint of reasonableness (with "reasonableness" to be measured in the context of the factors governing the case). There was no ambiguity in the promise that, subject to the constraint of reasonableness, the Grays would not suffer any financial disadvantage. Flinn v Flinn (1999) 3 VR 712 ; Legione v Hateley (1983) 152 CLR 406; Wright v Hamilton Island Enterprises Limited [2003] QCA 36 Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387; Western Australian Insurance Company Limited v Dayton (1924) 35 CLR 355 considered. 2. If the promise had contained some ambiguity or uncertainty, a promissory estoppel may still arise where reliance on the ambiguous representation, or the representation having an unclear or uncertain meaning, could give rise to an unconscionable result. Equity would intervene by fashioning relief based on the concept of "minimum detriment. Legione v Hateley (1983) 152 CLR 406; The Commonwealth v Verwayen (1990) 170 CLR 394 at 429; Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 at 404, 405 and 419, 423 and 457 considered. Valuation of the second respondent's business 1. The trial judge did not err in his valuation of the second respondent's business. The cross-appeal 1. Austin J did not err in his assessment of compensation and in setting off against the compensation the amounts that the Grays had received by way of pension benefits. Held per Mason P (Tobias JA agreeing, Ipp JA dissenting) The Memorandum of Understanding ("MOU") 1. The MOU was expressed in terms indicating that it was the framework of the relationship between the NSW Police Service, the NCA and Mr Gray. The drafting deficiencies of the MOU do not preclude this finding. The MOU operated as the framework that defined the "protection" afforded to Mr Gray during its currency. 2. Even if the MOU is seen as picking up and giving effect to the earlier representations of Inspector Small in futuro, it is neither reasonable nor equitable to ignore the express terms or the areas expressly addressed by the MOU, or to treat it as an arrangement that could be reneged unilaterally by Mr Gray. It would be inequitable for the Grays to have fully enjoyed the benefits offered under the MOU and then, after witness protection was properly withdrawn, to demand more as of right. No such entitlement can be rooted in Inspector Small's promises, which related to the consequences of going into protection, not the consequences of Mr Gray having been caught out and having to abandon the enjoyment of a lifestyle resting upon illegal earnings. Compensation for rehabilitation and inadequate notice of termination 1. The respondents are not entitled to compensation for "rehabilitation". i. The promise of Inspector Small was limited to the period of witness protection. To entitle the respondent to the "rehabilitation" component, which extends beyond the period of witness protection, effectively contradicts the "contractual" and statutory rights to terminate the MOU; ii. Compensation for "rehabilitation" goes beyond any assumption reasonably stemming from the terms of Inspector Small's representations that induced entry into witness protection; and iii. The representations were too vague to ground this "rehabilitation" entitlement. The promise that the Grays would not suffer "financial disadvantage" did not include the maintenance of their pre-existing lifestyle or lifetime sustenance at MOU rates. The "financial disadvantage" of witness protection ceased when protection ceased. iv. The notice of termination of witness protection was both lawful an adequate to place the Grays back in the position they would not have been in were it not for their entry into protection. Compensation for income tax liability 1. It is inequitable to grant an indemnity against, or immunity from, the operation of the Income Tax Assessment Act. Neither Inspector Small nor the NCA had authority to make representations as to the operation or enforcement of the Income Tax Assessment Act, and the promised saving from "financial disadvantage" cannot fairly be construed as going anywhere near that far. The terms of the MOU did not offer tax-free benefits. It was for the Grays to manage their own affairs, subject to the constraints, benefits and burdens of the witness protection programme and arrangements embodied in the MOU. Orders i. Appeal upheld in part. ii. Cross-appeal dismissed. iii. Direct parties to bring in agreed short minutes within 14 days, but, if agreement cannot be reached, each party is to file the proposed form of orders with accompanying written submissions on or before 6 February 2004. iv. No order as to costs in regard to the appeal and cross-appeal is made. v. As regards the costs of the trial, the order made by Austin J stands unless there turns out to have been some relevant Calderbank-type settlement offer. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40334/03 SC 2580/98 MASON P IPP JA TOBIAS JA Monday 22 December 2003 AUSTRALIAN CRIME COMMISSION v MARGARET GRAY (As Administrator of the Estate of John Gray) & ANOR Judgment 1 MASON P: I have had the benefit of reading the judgment of Ipp JA which sets out the facts and issues arising in this appeal. 2 I agree with Ipp JA as to Grounds 13, 14 and 15 (acceptance of the testimony of Inspector Small), 5 (reliance), 12 (detriment, at least on Mrs Gray's part) and 8-9 (the value of Mrs Gray's business). I also agree with his Honour's conclusions for dismissing the second and third limbs of the cross appeal. 3 I agree with Ipp JA as to Grounds 1 (ambiguity of the representation) and 10 (reasons in relation to Mr Gray's conduct), save as to what he has written in relation to continuing reasonable financial support and "rehabilitation". I do not agree that the compensation ordered by Austin J represented the consequential minimum detriment suffered by the Grays (Ipp JA at [207]). 4 I would uphold the appeal in part, substantially on Grounds 2, 3 (as regards the reasonable term for rehabilitation), 4, 7 and 11; and dismiss Ground 1 of the cross appeal for the reasons that follow. 5 On 24 January 1990 the NCA executed a search warrant in circumstances that brought home to Mr Gray that he had been detected. Inspector Small told him "We have got you. We have been following you around. We know you have been sending dirty money overseas." Everything indicates that this put an immediate stop to further unlawful conduct on Mr Gray's part. 6 The promissory representations were made on 25 January and 27 January 1990. Mr and Mrs Gray left their apartment and entered into NCA witness protection on 25 January. On 25 January Inspector Small told Mr Gray that neither he nor his wife "will be financially disadvantaged" provided they assisted. Saxon and Schneiders were arrested on 26 January. On 27 January Inspector Small told Mr and Mrs Gray that "you will not suffer any financial disadvantage for going into witness protection". 7 The latter assurance was given in response to Mrs Gray's expressed concern about having never to set foot again in her hair salon. She complied with the NCA to the letter, thereby indicating detrimental reliance from the earliest time. This explains why I have no difficulty in accepting the appellant's liability as regards the capital loss of the hair salon business. 8 However, it is not so simple with regard to the income side of the equation. 9 The speed of events between 25-27 January indicates why it would be churlish to examine the rights stemming from Inspector Small's assurances as if they were embodied in a solemnly negotiated formal contract. Inspector Small meant business and that was how his assurances were viewed by the Grays. 10 The speed also meant that all parties recognised that fine-tuning and further discussions would take place after the initial rush into protection. Ongoing financial requirements would depend, in part, on the particular arrangements reached by the parties about the relocation of the Grays and the Grays' particular needs from time to time. 11 There was never any suggestion that the NCA were about to recompense Mr Gray for the interruption of his business of "sending overseas" admittedly suspected "black tax money". 12 The NCA had no program of its own for providing long-term witness protection. Long-term arrangements had to be made through the Australian Federal Police Witsec or the New South Wales Police Witness Protection Unit. The need to involve one or other of the Police Forces is further understood when it is recognised that the NCA was a Commonwealth-State-Territory investigative body functioning under an interlocking legislative scheme (see National Crime Authority Act 1984 (Cth), National Crime Authority (State Provisions) Act 1984 (NSW) and counterparts in other States and Territories). Generally, the NCA investigated "relevant criminal activities" (cf s4 of the Commonwealth Act) and collected, analysed and disseminated information and intelligence in relation to those activities. It worked in cooperation with law enforcement agencies, including State and Federal Police Services. 13 On 25 January 1990 Ms Kelly of Gadens Ridgeway wrote to Inspector Small, confirming that she acted for Mr Gray. Ms Kelly had attended a meeting at the NCA on 24 January 1990. She confirmed Mr Gray's willingness to cooperate subject to various understandings, including that "all necessary and appropriate protection would be provided to our client as required". She also raised the issue of an indemnity for Mr Gray. 14 There were further correspondence and telephone discussions. On 28 February the NCA responded to various matters raised by Ms Kelly. The letter included the following: The question of protection for your client is dependent on the perceived risk to him. The Authority has provided short term protection through the Witness Protection Unit of the New South Wales Police Force. Long term protection is provided, on application, by the Witness Protection Branch of the Australian Federal Police. The Authority is conscious of your client's position and will continue to take appropriate steps to protect him, if necessary. 15 This was the context in which the details of the ongoing arrangements came to be bedded down. There was almost daily contact between the Grays and Inspector Small over the next few weeks. The place of relocation would have been negotiated. The question whether Mrs Gray would be able to work was certainly discussed (Blue 7). It would be surprising if Mr Gray's past and future income position was not considered as well (cf Blue 70R). I am unaware of evidence as to the nature of any legitimate business activity in the years 1984-1990, being a period in which no tax returns were filed by him (Blue 1622). Everything points to him having disclosed nothing more than that his business activities in recent years were nefarious (cf Blue 1486-1500). It seems likely that everyone proceeded on the basis that his capacity to earn any further income had been stopped for the time being, except perhaps in relation to any legitimate investments he held at the time. 16 It is relevant to a later issue to observe that this sudden but final interruption of his "business" occurred when he was detected, not when he later agreed to go into witness protection. 17 The upshot of the discussions was the signing of the Memorandum of Understanding. Its key terms are set out in the judgment of Ipp JA . The Memorandum was signed by Mr Gray without the benefit of legal advice, but it is not suggested that the arrangements recorded in it were unfair or deceptive. Ms Kelly continued to act for Mr Gray throughout this period (cf Blue 984). The case was not run on the basis that actionable representations accompanied the execution of the Memorandum. 18 The Memorandum is poorly drawn in some respects. But it certainly evidences a common understanding that the New South Wales Police Service Witness Protection Programme would be the vehicle through which the NCA would deliver the promised witness protection on a day-to-day basis. The Memorandum spelt out many of the details that had either been negotiated over the preceding weeks or were the terms upon which continuing protection was offered and accepted. Mr Gray would have been prepared to accept the clarification or variation of previous expectations as part of the give and take of a developing, long term relationship. 19 It is not irrelevant that each party (ie the NCA and Mr Gray) had much to expect from the other at this time. Mr Gray knew that he was facing lengthy imprisonment and was hoping for a favourable recommendation as regards an indemnity. The NCA was hoping that Mr Gray would continue to cooperate to the fullest as a key Crown witness. There was ample "consideration", to use the language of contract law. 20 Presently relevant terms of the Memorandum of Understanding include: Protection shall be limited to that specified herein unless or until altered by consent of all the parties in writing. … 3. I understand that any representations or promises previously made to me by persons in authority regarding my participation in this programme are null and void, except those that are set out in this Memorandum of Understanding. 4. I understand that I will be a client of the programme from 9th February, 1990. … 9. I understand that the agency is NOT responsible for my past or future debts. 10. I understand that the agency will NOT be liable for any financial loss to me which comes out of my voluntary involvement in the programme . … 26. The protection provided to the said witness shall consist of: - a) ... g) During the period you are in the programme you may be given limited financial and other assistance as deemed necessary by your Case Officer. That assistance shall consist of: a) Payment will be made for accommodation. b) Payment will be made for electricity accounts. c) Telephone accounts (private) will be subsidised up to $250.00 per qutr. d) $500.00 per week will be paid for sustenance. 29. I understand that protection may be terminated by any breach by me of any of the conditions set out in this Memorandum of Understanding. It may also be terminated by the Commander, State Investigative Group, by notice in writing served upon the witness. 21 The drafting deficiencies of the Memorandum do not preclude a finding that it was expressed in terms indicating that it was the framework of the relationship between the New South Wales Police Service, the National Crime Authority and Mr Gray after 9 February 1990. I respectfully disagree with Austin J and Ipp JA, who see the Memorandum as little more than documenting separate arrangements between Mr Gray and the New South Wales Police Service. The Memorandum was signed separately on behalf of the Police Force and the NCA as well as by Mr Gray. The NCA had an interest in the terms of an arrangement that it would be ultimately funding. 22 The Memorandum was not intended to unscramble the past. It commenced from 9 February 1990 (cl 4). Thus, it had no impact upon accrued rights as regards any losses stemming from the actions of the Grays in walking away from their earlier lives in late January 1990. 23 But it was expressed as a fresh departure (cf cl 3). It is both unrealistic and inequitable, in my view, to treat the Memorandum as a mere starting point for additional claims cognisable in Equity based on earlier general representations in order to top up the Grays' financial situation over seven years later. According to its terms, the Memorandum operated as the framework that defined the "protection" afforded to Mr Gray during its currency. It was not something that he could approbate and reprobate consistently with invoking the protection of Equity as the enforcer of the representations previously given by Inspector Small. (Curiously, the respondent's capacity to seek equitable compensation based upon equitable estoppel, as distinct from reliance upon the law of contract, was never put in issue.) 24 The rights asserted by the respondent and given effect in the portions of the judgment presently under consideration are not aspects of the drafting infelicities. If they were, the respondent would have a legitimate case for urging the Court to construe the Memorandum contra proferentes, treating the proferentes as including the NCA and its successor in title, the appellant. My present concern involves those portions of the award that disregarded the powers of termination expressed in the Memorandum and the Witness Protection Act 1995 (NSW) that later entered the field; and that rewrote the monetary benefits by making them tax-free, in the teeth of a fair construction of the detailed terms of the Memorandum or the spirit of the representations. 25 If it is correct to view the Memorandum as picking up and giving effect to the earlier representations in futuro, it would be wrong to ignore its express terms or areas squarely addressed, or to treat it as an arrangement that could be reneged unilaterally by Mr Gray. This is neither reasonable or equitable. 26 Ipp JA (at [227]-[229]) sets out the evidence of Mr and Mrs Gray and Inspector Small as to conversations immediately preceding the execution of the Memorandum. Mrs Gray's evidence substantially corroborates that of the other two witnesses and provides insight into Mr Gray's intentions and beliefs at that time. Mr Gray's affidavit evidence could not be tested, due to his death, but should be accepted in light of the trial judge's credibility findings. 27 Inspector Small's assurances that the existing agreement with the NCA would "be honoured" do not alter my conclusions. Nor does his (and his alone) reference to not being "left high and dry". The assurances were not part of the pleaded representations. Moreover, Inspector Small's authority to place some definitive interpretation upon the meaning of his earlier assurances and to make promises for the future inconsistent with the express terms of the Memorandum were unexplored and remain highly doubtful. The "existing agreement" could be and was honoured as regards any proven capital losses stemming from entry into witness protection (see further below). An assurance not to leave the Grays "high and dry" could not, in any event, be translated into a right to three years of "rehabilitation" at Memorandum rates after witness protection had been duly brought to an end in the measured way that occurred. 28 Only Mrs Gray's version speaks indirectly of an assurance that "our lifestyle will be maintained", a proposition entirely at variance with the text and context of the earlier assurances, as I explain below. 29 Key statements in the conversation as deposed to by Mr Gray and Inspector Small were statements that the Memorandum "can't be altered except by consent of all parties" (Mr Gray) / "can't be abandoned because it has to be agreed to by all parties before this agreement becomes null and void" (Inspector Small) did not render the Memorandum indefinite in duration. Austin J so held. I agree with his Honour's reasons and add that the supervening statutory regime overreached the situation in any event (see further below). 30 In May 1990 the Commonwealth Director of Public Prosecutions gave Mr Gray an undertaking pursuant to s9(6) of the Director of Public Prosecutions Act 1983 (Cth). Thereafter, criminal proceedings against Mr Gray under the Proceeds of Crimes Act 1987 (Cth) were abandoned. Mr Gray provided exemplary assistance, as he had promised. 31 In the meantime, financial and logistical arrangements continued under the Memorandum of Understanding. There was a degree of flexibility. For example, in October 1992 the Grays made a request through NSW WITSEC to move to better premises. The cost was approximately $4300 and this expenditure was met and funded by the NCA (Blue 1663). 32 Schneiders was committed for trial in September 1991. He was granted bail and absconded in March 1993. Saxon also absconded, but was located in the United States and brought back to Australia. In late 1995 or early 1996 he entered a guilty plea and was sentenced to 18 years imprisonment. 33 An NCA Minute of 5 September 1996 records that there were discussions with Mr Gray in March 1996 in which it was explained to him that his retention in the Witness Protection Program was being closely examined with a view to releasing him from it. The minute records that Mr Gray appeared happy with the proposition but was adamant that he receive an ex gratia payment for past loss of income and for some future security and independence (Blue 1663). The minute went into evidence on a limited basis, but Austin J held that Mr Gray's later conduct was consistent with such a meeting having taken place (at [111]). 34 By May 1997 the NCA concluded that any threat against Mr Gray was considered extremely minimal and that the NCA had no cause for concern for his safety. The Regional Director proposed that steps be taken to terminate the witness from the Programme. 35 It was obvious to all concerned that these matters were being looked at in the context of negotiations about what the NCA Regional Director described as a "one-off full and final severance payment to assist with the expenses of transition to life outside the witness protection framework" (Blue 1682-3). From at least as early as June 1991 the Grays had been pressing the NCA and others for an ex gratia payment by way of supplementation and/or cessation of the Memorandum rights. 36 On 4 July 1997, the New South Wales Police served notice on Mr Gray informing him that his position under the witness protection program would cease on 1 August 1997. Formal termination was effected by letter dated 1 August 1997 from the Acting Commander of the Witness Security Unit (Blue 1692). Pending further discussion, Mr Gray was thereafter included in the Witness Protection Program on a temporary basis in accordance with s10 of the Witness Protection Act 1995. It appears that the financial arrangements continued in the meantime, as did the settlement negotiations concerning an ex gratia payment. The temporary protection under the statute came to an end on 15 August 1997 (Blue 36). Nevertheless expenses and remuneration in accordance with the Memorandum of Understanding continued until 30 September 1997. 37 In late September 1997 the NCA offered, without admission, to pay $45,000 to the Grays. The offer was declined. 38 Little attention was directed at trial to the impact of the Witness Protection Act 1995 (NSW). But it forms part of the legal framework. The Act replaced informal arrangements previously administered by the New South Wales Police Service and it was part of an interlocking State/Federal/Territory scheme (see definition of "complementary witness protection law" in s3). The Act also adopted the framework of a memorandum of understanding as the basis for setting out the detailed rights and obligations of the protected witness (s8). The Act makes provision for variation and termination of arrangements (ss9, 11). An involuntary termination is reviewable by the Commissioner of Police in the first instance and thereafter appealable to the Ombudsman (s12). This statutory scheme commenced on 18 April 1996 and it engaged Mr Gray's Memorandum of Understanding because transitional provisions continued the current New South Wales Police Witness Protection Plan and gave effect to extant memoranda of understanding (s46 and Schedule 1). As indicated, there was a period in August-September 1997 when there was temporary protection in accordance with s10 to the express knowledge of Mr Gray (Blue 1692). 39 It has not been suggested that the termination of witness protection contravened the terms of the Memorandum of Understanding or the Act. Mr Gray did not seek any review or appeal under s12. 40 I am prepared to assume that Inspector Small's January promises had legal effect by virtue of the principles of equitable estoppel generously applied in favour of Mr and Mrs Gray and unchallenged as to their capacity to ground a monetary award, whatever the law of contract might possibly entail. But I am not prepared to hold that there was any proper basis for rights of "rehabilitation", extended notice of termination of the Memorandum regime or indemnity from proper tax liabilities to be treated as stemming from any reasonable reliance upon the discussions with Inspector Small in late January 1990. The language of the promises, the context in which they were made and the absence of any advertance to income loss or taxation liabilties stemming from the cessation of Mr Gray's illegal activities provide a most uncertain springboard for the particular rights presently under consideration. 41 When the parties turned their minds to the day-to-day needs of Mr and Mrs Gray, they agreed upon the detailed regime embodied in the Memorandum of Understanding. Neither then, nor at the earlier time of the Small representations, was there any intention to offer Mr Gray an indemnity for loss of an income stream. The agreed provision for "sustenance" on top of accommodation and other expenses was most generous in comparison with the pension or other types of safety net. Mrs Gray was entitled to the value of her lost business, calculated in capital terms. It is understandable that Mr Gray was prepared to accept what was offered under the Memorandum, given that he was a 67 year old man who had not lodged a tax return for at least six years and whose legitimate business activities during that period (if any) remained shrouded in total obscurity. 42 It strikes me as entirely inequitable for the Grays to have fully enjoyed the benefits offered under the Memorandum and then, after witness protection was properly withdrawn, to demand more as of right. No such entitlement can be rooted in Inspector Small's January promises. Those promises related to the consequences of going into protection, not the consequences of Mr Gray having been caught out and having to abandon the enjoyment of a lifestyle resting upon illegal earnings. 43 Nor can those promises be seen as continuing to hover above the regime put in place for many years under the Memorandum. Accepting for the sake of argument that the Memorandum became the agreed method whereby the NCA's promises were put into effect from 9 February 1990 onwards, it would be quite inequitable in the circumstances to permit the respondent to cast it aside and claim supplementary financial benefits extending beyond the terms and term of the Memorandum, especially since witness protection was no longer required. 44 The cessation of witness protection was not an issue at trial. Nor was it the direct springboard for the substantial equitable compensation awarded to the respondent in her own right and as administrator of her late husband's estate. 45 Austin J held at [232] that Inspector Small's promises made in late January 1990 extended to the future financial welfare of the Grays. So much may readily be accepted as may the conclusion that the Memorandum became the agreed means of performing that promise, at least during its pendency. 46 I have already indicated why I respectfully part company at this stage from Austin J and Ipp JA insofar as they would treat the Memorandum as no more than a starting point for claims greater than or even inconsistent with the financial arrangements spelt out in it. 47 Austin J held that the Small representations did not encourage an assumption that the Grays would not be financially disadvantaged for the rest of their lives (J[233]). I agree. 48 I go further. In my view the promise was limited expressly to the period of witness protection. 49 The substantial component of the compensation awards under challenge relates to the period of three years after the discontinuation of witness protection. The awards effectively continued the payments for accommodation, electricity, telephone and "sustenance" that were current in August 1997 for that further period. These represented the $500 stipulated in the Memorandum for sustenance and the arrangements currently in place at that date with respect to the other items (J[258]-[259], [264]-[266]). 50 The mathematics is complicated due among other things to the fact that it allows for a drop in "sustenance" entitlement consequent upon Mr Gray's death on 9 April 2000. There was also a later adjustment to offset old age pension entitlements (Red 117). I do not entirely understand the sums but they are not in dispute. But the entitlement to "rehabilitation" is. Austin J explained that entitlement in the following terms (J[234], [264]): 234 . It must have been understood by Mr and Mrs Gray that the witness protection arrangements were in place to protect them from risk, and that the arrangements would no longer be needed if the risk evaporated. That being so, the correct inference to draw is that Inspector Small's representations were not capable of encouraging an assumption on the part of Mr or Mrs Gray that they would be looked after and protected from financial disadvantage for the rest of their respective lives. It is therefore unlikely that Mr or Mrs Gray in fact made any assumption in January 1990 that this would be so. Rather, Inspector Small's representations implied that Mr and Mrs Gray would be looked after and protected from financial disadvantage for so long as they were at such a risk as to require witness protection. The protection from financial disadvantage would entail financial support not only during the period of witness protection, but also for some reasonable period thereafter so as to permit them to be "rehabilitated" into the community, but it would not entail financial support for the rest of their lives. … 264 . The Court must exercise judgment, taking into account all the circumstances, when deciding upon the measure of compensation for the reasonable period of rehabilitation. Taking into account the age of the plaintiffs in 1997, when the witness protection arrangements were terminated, Mr Gray's health, the substantial length of time during which the protection arrangements operated, the effect that those arrangements had on the ability of the plaintiffs to earn income after the termination, and the difficulties Mr Gray encountered in obtaining the old age pension, I have decided that lump sum compensation should be paid by the defendant, measured by the value of the payments and benefits Mr Gray would have received under the Witness Protection Program had the arrangements continued for another three years after August 1997. 51 In brief reasons explaining a later adjustment of the compensation having regard to the Grays' old age pension entitlements Austin J said (Red 117): It appears to me that in principle it is appropriate to reduce the amount of compensation by taking into account that those pensions were received. The compensation is compensation for the loss of net benefit of the sustenance allowance and other payments, and if (as was the case) after leaving the Witness Protection Program the plaintiffs were in a position to obtain something that they were not obtaining under the Witness Protection arrangements, then what they were able to obtain should reduce the amount of compensation that they were entitled to receive. 52 It may be observed that Austin J did not base the "rehabilitation" component upon the discussion that led to the signing of the Memorandum. 53 In my view, this "rehabilitation" entitlement effectively contradicts the "contractual" and statutory rights to terminate the Memorandum that were duly exercised in August 1997 and were not challenged at that time or at the trial. That is one reason why I would reject this component of the orders under appeal. 54 Secondly, I am of the view that this component of the award went beyond any assumption reasonably stemming from the terms of Inspector Small's representations that induced entry into witness protection. The "financial disadvantage" from entering witness protection cannot be equated with "compensation for the loss of the net benefit of the sustenance allowance and other payments" under the Memorandum, without applying some unstated premises as to (1) the basis on which the Memorandum became the binding way of making good the Small representations and (2) the basis upon which its terms could be disregarded at will. 55 Thirdly, the representations were too vague to ground this "rehabilitation" entitlement. Whatever was encompassed by a promise that the Grays would not suffer "financial disadvantage", it did not include maintenance of their pre-existing lifestyle or lifetime sustenance or even "rehabilitation" maintenance at what later became the Memorandum rates. 56 The promises are to be construed according to the canons of interpretation set out by Ipp JA. I cannot, however, see how protection from the "financial disadvantage" of witness protection translates into a right to continue enjoying Memorandum benefits after its due termination. The "financial disadvantage" of witness protection ceased when protection ceased. Undoubtedly the Grays were unable to pick up their former life, but that had come to an end before the discussions with Inspector Small. It was interrupted by Mr Gray's detection and his decision to cease the unlawful activities that on the evidence were his sole source of income at the time. Those events occurred before entry into protection, both chronologically and conceptually. I cannot construe the letter or spirit of the Small representations as promising some start-up allowance after the witness role and the need for protection came to a lawful end. The notice of termination of witness protection was both lawful and adequate to place the Grays back in the position they would have been in were it not for their entry into protection. 57 It is in my view even more inequitable to contemplate an effective immunity from the Income Tax Assessment Act or some indemnity against its standard operation. 58 It would appear that no one considered the tax implications of the arrangements that became the subject of the Memorandum (cf Black 152). Austin J held that there were no representations as to tax, nor any implied term on the subject in the Memorandum (J [235]). I agree. I would go further, adding that clauses 3, 9 and 10 of the Memorandum expressly negated any such promise. 59 Austin J found for the respondent on the basis that "the assumptions encouraged by the defendant's conduct (here, its conduct in settling on amounts for sustenance on a net-of-tax basis) included the assumption that any tax payable in respect of the benefits under the Witness Protection Program would be met by the defendant" (J[237]). The evidence establishing these shared assumptions was described as follows (J[236]): On the other hand, however, while there was no implied term in the memorandum of understanding it was the understanding of the parties that the benefits made available to Mr and Mrs Gray reflected what was needed for their sustenance. In this respect, the evidence of Mr Cashman was significant. In cross-examination, he agreed that under the Witness Protection Program a determination had been made as to the appropriate level of accommodation and the amount needed for the sustenance of Mr and Mrs Gray, in circumstances where it was likely that they had no means of earning an income. Then he agreed that is [sic] the issue of income tax had been raised in 1990 it would have been treated as part of the payments to be made within the program. 60 The indemnity awarded in respect of Mr Gray's income tax liability that stemmed from the ordinary application of the Income Tax Assessment Act was not based upon any provision in the Memorandum. Indeed, it was in the teeth of the Memorandum which had purported to be the framework of the financial arrangements and had excluded responsibility for future debts. Neither Inspector Small nor the NCA had authority to make representations as to the operation or enforcement of the Income Tax Assessment Act, and the promised saving from "financial disadvantage" cannot fairly be construed as going anywhere near that far. 61 It was left to the Grays to manage their own affairs, subject to the constraints, benefits and burdens of the witness protection programme and the arrangements largely embodied in the Memorandum. If the moneys received under the Memorandum, taken with any other income earned from any source, less expenses, donations etc etc produced a tax liability in a particular year, that was for the Grays to attend to. 62 Mr Gray did not obtain alternative employment. This would have been no surprise to the NCA (cf Black 152-3). On the other hand, the payments he received for rent, "allowance" and other outgoings (Blue 52ff) were significantly greater than the aged pension or social security safety nets and they attracted income tax liabilities in accordance with the normal operation of the Income Tax Assessment Act. 63 Mr Gray filed no tax returns during the period of witness protection. When the Australian Taxation Office caught up with him, tax was levied pursuant to a Statement of Adjusted Incomes for the 1990-96 tax years (Blue 45-7). The Taxation Office remitted interest and penalties "due to the unique circumstances of [Mr Gray's] particular case" (Blue 45). 64 In my view, the appellant's refusal to pick up this residual tax bill was neither inequitable, nor in contravention of the Memorandum, nor in breach of the letter or spirit of the Small representations. Mr and Mrs Gray had no entitlement or legitimate expectation that their fairly luxurious lifestyle would continue after Mr Gray's activities were detected. Nor did the terms of the Memorandum offer tax-free benefits. 65 It was not suggested, nor could it be, that deduction of tax from such of the benefits as constituted "income" would have left the Grays below the breadline. The witness protection arrangements did not preclude the Grays from resort to social security if they otherwise qualified. The incurring of income tax year by year meant that their gross income did not represent their true financial position. That is the nature of income tax, which falls upon all, pensioners included, who earn more than the threshold amounts. Mr Cashman's concession about what might have happened had tax protection been raised when the Memorandum was signed cannot be used to convert the Small representations into something they were not. 66 I would therefore uphold the appeal except as regards the capital loss. The Cross appeal should be dismissed. I would make no order as to the costs in this Court. The respondent should keep the favourable costs order at trial, unless there turns out to have been some relevant Calderbank-type settlement offer. The parties should bring in agreed short minutes within 14 days. If agreement cannot be reached, each party should file the proposed form of orders with accompanying written submissions on or before 6 February 2004. The orders should address the question of restitution if it is in issue and if it is practical for the appellant to seek it. 67 IPP JA: Mrs Gray's claims for equitable compensation 68 The appellant is the Australian Crime Commission, the successor to the National Crime Authority (the "NCA"). The first respondent is Margaret Gray who is sued as administrator of the estate of her late husband John Gray. Margaret Gray, in her personal capacity, is the second respondent. The names "Margaret Gray" and "John Gray" are pseudonyms. Mr and Mrs Gray assumed these names when entering into a scheme of witness protection under the auspices of the NCA. 69 The trial judge, Austin J, found that the NCA, through its officer, Inspector Small, made representations to Mr and Mrs Gray by which they were promised that, if they entered into a witness protection program and co-operated with the NCA, and if Mr Gray gave appropriate evidence, they would be "looked after" and "would not be financially disadvantaged". This promise lies at the heart of this appeal. 70 At trial, Mrs Gray asserted that the NCA had broken its promise and, thereby, had acted in an unconscionable manner. She claimed (in her representative capacity and personally) equitable compensation from the appellant, basing her claims on promissory estoppel. As the judge observed, it was surprising that she did not bring her claims in contract, and her failure to do so remains unexplained. 71 Austin J held that Mrs Gray had succeeded, substantially, in making out her claims and ordered equitable compensation to be paid as follows: (a) $224,084.55 together with interest thereon calculated from 13 March 2003 at the rate of 11.84% per annum on a compounding basis being the amount of Mr Gray's liability to pay income tax in respect of the payments and benefits he and Mrs Gray received during the witness protection. (b) $62,144.30 being compensation representing the costs, over a period of three years, of Mr Gray rehabilitating himself within the community after the termination of the witness protection arrangements. (c) $117,144.29 made up of compensation representing the rehabilitation costs, over the same period, of Mrs Gray, and $18,500 being the loss she suffered in selling a hairdressing and beauty business in which she had an interest, plus interest. 72 His Honour ordered that the sum of $224,084.55 together with interest, being Mr Gray's liability to pay income tax on the benefits received from the NCA, should be paid by the appellant directly to the Australian Taxation Office. The grounds of appeal 73 The appellant relied on several grounds of appeal. It contended that Austin J had erred in the following respects: (a) In accepting the evidence of Inspector Small despite the fact that, at the inception of his evidence, he had said that his memory was "really exhausted" (Ground 13). (b) In failing properly to consider inconsistencies between Inspector Small's evidence and the evidence of his superior, Mr Cashman (Ground 14). (c) In accepting Inspector Small's account in that he failed to take properly into account the documentary evidence in which there had been no reference to the alleged representation until 1 November 1996 (Ground 15). (d) In finding that the representations made by Inspector Small on behalf of the NCA were sufficiently clear to found an estoppel (Ground 1). (e) In failing to find that the representations were invalidated or spent when Mr and Mrs Gray signed a certain Memorandum of Understanding ("the MOU") (Ground 2). (f) In failing to find that Mr and Mrs Gray had elected to affirm the MOU and were estopped from denying that they were bound by it (Ground 11). (g) In failing to find that the representations encouraged in Mr and Mrs Gray an assumption that they would be given financial support during the period of witness protection and also for some reasonable period thereafter so as to permit them to be rehabilitated into the community (Ground 3). (h) In finding that there was an assumption, encouraged by the appellant, to the effect that the NCA would pay Mr Gray's income tax in respect of the payments and benefits he received under the witness protection program (Ground 4). (i) In finding that Mr and Mrs Gray relied upon an assumption created by any representation by the NCA (Ground 5). (j) In failing to give any or, alternatively, any adequate reasons for finding that Mr Gray's conduct did not affect any entitlement to equitable compensation (Ground 10). (k) In holding that Mr and Mrs Gray suffered detriment as a result of reliance upon the representation (Ground 12). (l) In finding that the NCA's conduct caused Mr and Mrs Gray loss (Ground 7). (m) In finding that it would be unconscionable for the appellant to depart from any assumption created by the representation made on the NCA's behalf (Ground 6). (n) In accepting the evidence of an expert called on behalf of Mrs Gray as to the value of her business (Ground 8). (o) In failing to give any or any adequate reasons for accepting the valuation of the expert called on behalf of Mrs Gray (Ground 9). The cross-appeal 74 Mrs Gray (in both her capacities) cross-appealed on the following grounds: "1. The trial judge erred in failing to order that the sum of $224,084.55 plus interest be paid to the first respondent instead of ordering that it be paid to the Australian Taxation Office. 2. The trial judge erred in that his assessment of compensation (excluding that relating to the value of the [hairdressing and beauty salon]) was unreasonably low. 3. The trial judge erred in setting off against the damages the amounts that the respondents received by way of pension benefits". Mr and Mrs Gray 75 Mr Gray was born in New Zealand on 24 February 1923. He died, aged 77 years, in April 2000. The trial took place in October 2002, that is, after Mr Gray's death. 76 At a young age, Mr Gray commenced a career in commercial life and became involved in accounting and secretarial activities. As time went by, he progressed to hold senior positions with various employer organisations in the industrial relations field. Having reached the position of chief administrator of a particular organisation, he resigned in about 1967 and commenced carrying on business on his own account as the operator of a computer service bureau. In 1972 he came to Australia and was employed by a large finance company. Thereafter, he launched his own business in management consultancy and personnel recruitment. He also conducted a finance broking company and was involved in various other business activities. By 1990 he had acquired much experience in business administration and the running of small businesses. 77 Mrs Gray was born on 15 March 1938. In about 1985 Mr Gray and Mrs Gray were married. This was the second marriage of each. 78 Mrs Gray had worked in beauty salons for many years. In 1990, in partnership with her daughter, she was conducting a hairdressing and beauty salon named "The Cutting Bird". Mrs Gray was the beautician in the salon and her daughter was the hairdresser. Mr Gray's involvement in money laundering activities 79 By the early 1980's Mr Gray's various business projects had proved to be unsuccessful and he was faced with deficits in the order of $150,000. At this time an acquaintance asked him whether he would be able "to move funds from Australia offshore". He began to earn commission by transferring monies out of Australia. This business grew, progressively. He stated in an affidavit, "in all explanations given to me there was no doubt that this money was tax avoidance funds". Until 1990, Mr Gray earned income from commission earned in these illicit transactions. 80 Mr Gray's modus operandi was as follows. After receiving cash in Australian currency from a customer, he would deposit the money into his own bank account. He would then either personally deliver the funds overseas or transfer them according to instructions. Frequently, several hundred thousand dollars were involved in particular transactions. Initially, Mr Gray charged commission of the order of half a per cent on each transaction. 81 Notwithstanding that Mr Gray was gainfully occupied throughout the period 1983 to 1990, he filed no tax returns during this time. 82 At no time did Mrs Gray know that her husband was involved in unlawful dealings. Mr Gray generally kept his affairs private and did not discuss them with her. Mr Gray becomes involved with Schneiders and Saxon 83 Early in the 1980's, Mr Gray met one Tamas Schneiders. This came about through Schneiders being the recipient of certain cash monies which Mr Gray delivered overseas. 84 In 1989 Schneiders requested Mr Gray to move Australian dollars from Australia overseas in quantities "in the order of seven figures". The two of them agreed that Mr Gray would receive a commission of 5.5% on the money transferred. 85 Schneiders told Mr Gray that he was acting on behalf of a man who "was involved with performing artists, rock concerts and the general entertainment industry". He told Mr Gray that the money to be transferred had been earned from these sources and the use of the funds outside Australia would involve payments "to attract performing artists". 86 Mr Gray retained another person, a certain hotelier, to assist in the dealings involving Schneiders and agreed to pay the hotelier a commission of 2.5%. 87 Schneiders introduced Mr Gray to his "principal", a man known as Ian Saxon. Unbeknown to Mr Gray, Schneiders and Saxon were underworld figures and members of a large drug dealing syndicate. The initial transactions involving Schneiders and Saxon 88 In November 1989, Mr Gray, with the aid of his hotelier associate, effected a transfer of moneys on behalf of Saxon and Schneiders. Schneiders delivered over $900,000 in Australian currency in canvas carry bags to Mr Gray. Mr Gray removed his commission from the bags and delivered them to the hotelier. The hotelier caused the funds to be delivered to a bank account in Singapore from where they passed into the control of Schneiders. 89 Thereafter, in the same way, Mr Gray arranged for $900,000 given to him by Schneiders to be transferred to a bank account in Abu Dhabi. 90 Schneiders complained about delays in transferring the funds. Accordingly, Mr Gray decided to effect new transactions through a different associate – not the hotelier. He made appropriate inquiries and was put in touch with an organisation known as the "Pacific Islands Church". The Pacific Islands Church was registered as a tax exempt charitable organisation and seems to have been a genuine church. It was however short of funds and was willing to supplement its income by transferring money out of Australia on behalf of other people. It agreed to assist Mr Gray in carrying out transactions of this kind. In consideration, Mr Gray agreed to pay the Church commission of one per cent. 91 Towards the end of November 1989 Schneiders delivered cash in excess of $1.8m to Mr Gray. Mr Gray met with members of the Pacific Islands Church at the Bank of Singapore in Sydney. The cash was deposited into the Church's account at that bank and, on the instructions of the Church, was despatched to an Abu Dhabi account controlled by Saxon. 92 A few days later another transaction exceeding $900,000 was effected in a similar way, save that the funds were despatched to Saxon's bank account in the Channel Islands. 93 About a week later yet another transaction took place involving an amount in excess of $900,000. The Pacific Islands Church participated again and deposited the money into its Bank of Singapore account from where the money was transmitted to the Abu Dhabi account. The NCA become involved 94 In 1989 the NCA was undertaking an investigation (called Operation Omo) into money laundering in connection with the trading of narcotics. 95 Robin Small, at that stage a Detective Inspector in the New South Police Service, had been seconded to the NCA. He was Operation Omo's senior investigator. 96 Several other investigators reported to Inspector Small, including Senior Investigator Graham Clarke and Senior Investigator David Shorrocks. Inspector Small reported to Michael Cashman, who was the "Team Leader" for Operation Omo. Mr Cashman reported to Mr Geoffrey Sage who in turn reported to Mr Cusack, who was the senior person in charge of NCA operations. 97 In December 1989, Mr Sage or Mr Cashman received a telephone call from the manager of the Bank of Singapore in Sydney. The manager reported that unusual transactions had passed through the account of the Pacific Islands Church. He pointed out that the bank account of the Church had ordinarily been used only for small deposits. It was not a wealthy organisation and from time to time cheques drawn by it had not been met on representation. In recent times, however, the Church had deposited large amounts of money, involving millions of dollars in cash, and had caused these monies to be sent on to Singapore. 98 Mr Gray was identified as a person involved in these activities. By then investigators in Operation Omo were, in any event, conducting surveillance operations involving him. 99 The NCA suspected Saxon of having received $77m from the importation of prohibited drugs into Australia in 1989. It believed that he was endeavouring to launder that money by various means. It suspected that Mr Gray was remitting the money overseas as an agent of Saxon. 100 The NCA caused the funds deposited in the account of the Pacific Islands Church with the Bank of Singapore to be frozen. The monies so affected were the last two transactions arranged on behalf of Schneiders and Saxon totalling in excess of $1.8m. 101 During the week of 11 December 1989 an associate of the Pacific Islands Church informed Mr Gray that the funds had been frozen and were subject to investigation by the Australian Taxation Office. In the following week Mr Gray received a notice of assessment of income tax in respect of the year ended 30 June 1989. The notice required a payment of tax of $1,899,250.27 to be made on 15 January 1990. His taxable income had been assessed at $3,776,309. The latter figure appears to have been the total of the amounts despatched with the aid of the Pacific Islands Church. Events of 24 January 1990 102 On 23 January 1990, the NCA obtained a search warrant to search the Grays' apartment and, early on the morning of 24 January 1990, the warrant was executed. The police arrived and Mr Gray told Mrs Gray not to be frightened as they were merely making inquiries. She left for work. Inspector Small and Mr Gray then had a conversation. Inspector Small said to Mr Gray: "We have got you. We have been following you around. We know you have been sending dirty money overseas". 103 Mr Gray replied that he had been sending the money on behalf of someone else. Inspector Small asked him to describe the person involved. Mr Gray described a person that Inspector Small recognised as Saxon. He told Mr Gray that the money was almost certainly drug money. Mr Gray became "quite ashen". He told Inspector Small that he believed that the money was "black tax money". Inspector Small warned Mr Gray that "they will be after you, they will be looking for the missing millions". Mr Gray then agreed to talk to Inspector Small at the offices of the NCA. 104 That day, at the NCA's offices, Inspector Small again told Mr Gray that the money he had been handling was almost certainly drug money and repeated that "they'll be after you for the money". Mr Gray told Inspector Small that he was to have a meeting that night with Tamas Schneiders, the man who gave him the money from Ian Saxon. Inspector Small asked Mr Gray whether he was prepared to wear a listening device to the meeting. Mr Gray agreed but asked if he could get his solicitor's advice. Inspector Small consented. 105 Mr Gray made a telephone call and shortly thereafter a solicitor, Joanne Kelly, from Gadens Ridgeway arrived. Inspector Small explained that he wished Mr Gray to wear a listening device at the meeting with Schneiders that evening but warned Mr Gray that, if he did this, he would be putting himself in a position of serious danger. Inspector Small said: "If, when you talk to them, they pull out a gun and shoot you in the eyes, there is nothing we can do about it even if we have police in the near vicinity. We will not be able to get to you in time. That's a risk you will have to take". Mr Gray agreed to take the risk. 106 According to Inspector Small, the following conversation took place at the offices of the NCA: "Mr Gray: This witness protection – will you tell me some more about it? Inspector Small: Well, depending on how it goes, it's likely that you will have to go into witness protection at some stage. That means you will be uprooted from your house, your family, your business, your friends, everything and given a new location and a new identity. Mr Gray: I've been in Rotary a long time. What will I do about that? Inspector Small: That will have to go by the board. Mr Gray: What about people being kicked out of witness protection, I have been reading about that in the papers. Inspector Small: You don't need to worry about that, that will not happen, the NCA is an organisation of integrity and provided you keep your end of the bargain up you will never be thrown out in the street". 107 The significant aspects of this conversation are the statement by Inspector Small that it was likely that Mr and Mrs Gray would have to go into witness protection, Mr Gray's expression of concern about suffering harm if he were to be "kicked out of witness protection" (as he had heard had happened to others) and Inspector Small's reassuring words, "the NCA is an organisation of integrity and provided you keep your end of the bargain up you will never be thrown out in the street". 108 Prior to the meeting with Schneiders, Mr Gray gave a recorded interview in several sessions and various officers of the NCA were involved in this process. One of the officers told Mr Gray that the information provided by him would not be used against him in any criminal proceedings and would be used to support an application for immunity from prosecution. Mr Gray agreed to proceed on that basis and said that he was attaching "considerable validity to your undertakings given to me this morning of indemnity, immunity protection or what have you as may be necessary or available". 109 Senior Investigator Clarke then warned Mr Gray that he could give him no undertakings regarding the bringing of charges or the provision of an indemnity. Mr Gray was told that all negotiations in relation to those matters were to be carried out with Inspector Small. 110 Later, Inspector Small met with Mr Gray and told him that he would have to go on witness protection. Mr Gray agreed. At some time during this conversation Inspector Small said to Mr Gray: "If this turns out like I think it will, either you or both you and your your wife, if you don't go into witness protection, will be found floating face down in Walsh Bay". 111 Mr Gray asked Inspector Small what would become of his wife's business if they went into witness protection. This was significant, he said, as she had a hairdressing salon that would not function without her. Inspector Small replied: "If you go into witness protection she will never set foot in that business again". 112 On the evening of 24 January, Mr Gray was fitted with a listening device and attended the meeting with Schneiders. Schneiders told Mr Gray that he and "Ian" (Saxon) were becoming increasingly impatient about the missing money. Mr Gray insisted that Schneiders arrange a further meeting with Saxon. Schneiders eventually agreed to do so and it was arranged that the meeting would take place the next day at 5.30 pm in the coffee shop of the Menzies Hotel in Sydney. 113 I pause to note that Mr Gray had agreed to assist the NCA in this way without any representation having been made to him about future financial support. Events of 25 January 1990 114 A listening device was obtained for Mr Gray's meeting with Saxon and Schneiders on 25 January 1990. Inspector Small again explained to Mr Gray the danger he was in, saying: "You are talking to the principals, you are taking a big risk because there is nothing we can do if they want to kill you on the spur of the moment". Mr Gray replied: "I will do it". 115 Inspector Small coached Mr Gray in preparation for the meeting. They decided that Mr Gray would blame an undercover police officer, Detective Sergeant Shorrocks, for the loss of the money. 116 According to Inspector Small, on that day (25 January 1990) he said to Mr Gray: "Okay, this is what we can offer if you have to go into witness protection. Neither you nor your wife will be financially disadvantaged provided you give honest and truthful evidence, you attend for briefings as required, to give statements as required, to give evidence as required, to give debriefings as required. And that the National Crime Authority will use its best endeavours to obtain an immunity from prosecution whatever for any offences whatever you have committed". Mr Gray replied: "Yes, okay". 117 Austin J accepted Inspector Small's account of the representations he so made to Mr and Mrs Gray. This was the first of the material representations (constituting the relevant promise) that specifically concerned financial support to be provided by the NCA. 118 Also on 25 January 1990, Mr Gray, together with his solicitors, had a conference with senior counsel. Austin J observed in this regard: "[Senior counsel] explained to Mr Gray that he was in a difficult position, as the information he had already given to the [NCA] could be used against him to found a prosecution. He noted that Mr Gray could be charged with any of a number of charges, the most likely of which was conspiracy. [Senior counsel] indicated to Mr Gray that in any proceedings, it was likely that the judge looking at the case would tend to the view that, in light of the large sums of money concerned, it was unlikely that the money was procured 'as a result of efforts behind the microphone', and might tend to the view that the money was a result of some illicit activity other than mere tax avoidance. It must have been obvious to Mr Gray after the conference, if not before, that there was a strong prospect that he would be prosecuted for serious criminal offences and that he would be in the weak position to defend himself". 119 After the conference, and on the advice of counsel, Ms Kelly (Mr Gray's solicitor) wrote to Inspector Small. Amongst other things, the letter stated: "I refer to the meeting with our client held at your premises on 24 January 1990 where I attended with Mr Smith of this office. At that meeting our client indicated that he was prepared to co-operate with you on the understanding that: 1. Any information provided to you by our client was induced and would not be used in evidence against him in any subsequent proceedings. 2. You would use your best endeavours to secure for him an appropriate indemnity from prosecution from the Director of Public Prosecutions. 3. That all necessary and appropriate protection would be provided to our client as required. At your request, our client has agreed to attend certain meetings and in doing so has placed himself at considerable risk. It is clear however, that any assistance given by our client may or may not lead to the identity of the principal or principals. Whether the identity of the principal does emerge is, however, not relevant to the peril in which our client currently finds himself". 120 Mr Gray's meeting with Schneiders and Saxon took place as arranged, with Mr Gray carrying a concealed listening device. Saxon demanded the names of Mr Gray's contacts and made increasingly ominous threats. Inspector Small described them as "chilling". 121 Austin J set out in detail the threats that were made to Mr Gray. I do not propose to do the same, save to state that they were terrifying. Mr Gray was told that, unless he gave Saxon the names of the persons who had transferred the money, his home would be ransacked and broken and he and his wife would be seriously harmed. Their lives would be interfered with in an unimaginable way. The threats culminated in a warning that "people" would move into the Gray's flat with them, they were "animals" and they would kill him. 122 Eventually, at the meeting, Mr Gray gave Saxon and Schneiders the name of one Norman Clarke. He told them that Clarke was in Sydney and that someone was looking for Clarke for him. After further very aggressive demands and general threats from Saxon, the meeting ended on the basis that Mr Gray would let Schneiders know as soon as he had a contact number for Clarke. 123 Mr Gray met with Inspector Small after the meeting. According to Inspector Small, Mr Gray was "absolutely totally shaken". 124 Mr Gray then gave Schneiders a telephone number for Norman Clarke. This was in fact Detective Sergeant Shorrocks' telephone number. Schneiders telephoned Detective Sergeant Shorrocks who agreed to meet with Saxon. Detective Sergeant Shorrocks was fitted with listening devices and the meeting took place. Saxon made similar threats to the those he had made to Mr Gray. Austin J noted: "Sergeant Shorrocks, posing as Norman Clark, explained that the Australian Taxation Office had frozen the relevant bank account. He provided Saxon with a copy of some papers from the Taxation Office and asked for more time to investigate. There was a heated discussion. Inspector Small gave evidence that the tone and manner of Saxon's conversation with Detective Sergeant Shorrocks indicated to him that 'they would go to any lengths to wipe Mr Gray off, take him out of the equation'. He said that at that stage the decision was made immediately to 'uplift' Mr and Mrs Gray and put them into witness protection". 125 Mrs Gray returned from work at about 7.00 pm. She found two police officers talking to her husband. She noticed one officer carrying a gun. She was told that Mr Gray was helping the police catch some criminals, that he had been threatened and that both and his and her lives were in danger. She was told that it would be necessary to leave the apartment. Mrs Gray did not understand what was happening and she was very frightened. Mr Gray assists the NCA and Schneiders and Saxon are arrested 126 Mr and Mrs Gray spent the whole of Friday 26 January 1990 at the offices of the NCA and Mr Gray was extensively interviewed. 127 Austin J observed: "The evidence obtained by Mr Gray's tape recording of his conversation with Saxon and Schneiders was of great significance to Operation Omo. Inspector Small later said, in his letter to the defendant dated 29 March 1996, that this evidence established that Saxon was the owner of an amount of about $4 million that had been remitted from Australia by Mr Gray, and that Schneiders was actively assisting Saxon, and was the 'accountant' of the Saxon enterprise. Search warrants were obtained for both Saxon's and Schneider's residences, and these warrants were executed on 26 January 1990. In Saxon's premises were found several hundred thousand dollars in cash, several kilograms of black hashish and a host of documentary evidence which linked Saxon to a 10 tonne importation of hashish. A floor safe was opened, which contained more money and a receipt in relation to a storage garage. On the same day the Australian Federal Police, as a result of evidence obtained from Saxon's house, obtained a search warrant for the house of his brother, Lloyd Saxon, and seized money and other evidence. The storage garage was searched and found to contain about $4.5 million in Australian currency, as well as gold and other currency. According to Inspector Small's letter of 29 March 1996, it was later accepted by courts that these funds were proceeds of narcotics sales. Saxon and Schneiders were arrested on 26 January 1990, and charged with various offences in relation to narcotics. Inspector Small later said, in his letter of 29 March 1996: 'There is no doubt, even with the benefit of hindsight, that without [Mr Gray]'s active co-operation on 24 and 25 January 1990 the arrest of Ian Saxon could not have occurred at that time. There is no doubt whatsoever that [Mr Gray]'s contribution on those days directly resulted in the arrest of the principals in an alleged drug importation network and the seizure of the $4.5 million. Subsequent to the arrest of Saxon a confiscation of profits order in the sum of seventy plus million dollars has been made against him by the courts'". 128 Mr Gray gave evidence at committal hearings relating to Schneiders and Saxon. Schneiders was committed for trial on 5 September 1991 and was granted bail. He absconded and his whereabouts are unknown. Saxon was also committed for trial. He escaped from gaol before the trial and the New South Wales Government posted a $250,000 reward for his rearrest. Saxon was eventually located in California and extradited back to Australia. In late 1995 or early 1996 he entered a guilty plea and was sentenced to 18 years imprisonment. Inspector Small's representation on 27 January 1990 129 On 27 January 1990, according to Inspector Small, he had the following conversation with Mr and Mrs Gray: "Inspector Small: It's as I thought, the money is drug money, and it's a big brief. You're both going to go on witness protection. Mrs Gray: What's going to happen to my hair salon? Inspector Small: You will never set foot in it again. Mrs Gray: What is going to happen? Inspector Small: Well, as I told [Mr Gray] yesterday, you will go into witness protection, you will not suffer any financial disadvantage from going into witness protection. Providing [Mr Gray] gives honest and truthful evidence, he makes himself available for de-briefings, gives evidence, making statements, conversations with the DPP etc. Mrs Gray: What is going to happen with the family? How will I see my family? Inspector Small: That's something that can be worked out. You will not necessarily, you won't be cut off from your family but contact is going to be much more difficult". 130 Austin J found that Inspector Small's account of the representations he made in this conversation should be accepted. This was the second of the material representations (constituting the relevant promise) as to financial support made to Mr Gray. Mr and Mrs Gray go into witness protection 131 Mr and Mrs Gray did not return to their apartment on the evening of 25 January. Their movements were controlled by the NCA and, even though the NCA had no formal witness protection program, initially they were brought under its protection. 132 On 31 January 1990, Mr Cashman spoke to Mr Cusack. He said that Mr Gray was in an "invidious position" as a result of his co-operation with authority investigators. Mr Cashman explained that, on 25 January 1990, serious threats of physical violence had been made by Saxon and Schneiders. He then said: "[Mr Gray] and his wife have been in the protection of authority investigators since 25.01.90. It is proposed to place them with the Witness Protection Unit of NSWPOL. Inquiries by Senior Investigator Small reveal that this unit can now provide long term protection on much the same basis as the AFP's Witsec". Mr Cashman recommended that Mr and Mrs Gray be placed with the New South Wales Police Witness Protection Unit. He said: "This will enable the freeing up of those authority investigators charged with the responsibility of protecting them. They will then be able to return to normal duties …". On 1 February 1990, Mr Cusack approved Mr Cashman's proposal that this be done. 133 On 2 February 1990, Mr Cusack wrote to the Commissioner of Police of New South Wales requesting as a matter of urgency that Mr Gray be placed into the New South Wales Witness Protection Scheme. Arrangements were accordingly made and these took effect on 7 February 1990. In February 1990 Mr Cusack approved a payment by the appellant to the New South Wales Police Witness Protection Unit of $5,000 to cover initial expenses. Eventually, Mr and Mrs Gray moved into leased premises in Terrigal. 134 On 28 February 1990, the NCA replied to the letter from Gadens Ridgeway of 25 January 1990. Paragraph 3 of that letter stated: "The question of protection for your client is dependent on the perceived risk to him. The Authority has provided short term protection through the Witness Protection Unit of the New South Wales Police Force. Long term protection is provided, on application, by the Witness Protection Branch of the Australian Federal Police. The Authority is conscious of your client's position and will continue to take appropriate steps to protect him, if necessary". 135 In fact, after the initial period when Mr and Mrs Gray were under the protection of the NCA, they were protected under the aegis of the witness protection scheme of the New South Wales Police Service, and the expenses of the latter were paid by the NCA. The Memorandum of Understanding 136 In March 1990 the New South Wales Police prepared a "Memorandum of Understanding" for signature by Inspector Small (on behalf of the NCA), Mr and Mrs Gray, and an officer of the New South Wales Police Service. 137 As Austin J observed, the MOU was poorly drafted. It is vague in parts and ambiguous in others. Be that as it may, it assumed considerable importance at the trial and the appellant relies heavily upon it. The appellant contends that the MOU is an agreement between the NCA, Mr and Mrs Gray, and the New South Wales police which "invalidates" or supersedes any representation or promise by the NCA to Mr and Mrs Gray. 138 At this stage it is sufficient to note that cl 26(g) of the MOU provided: "During the period you are in the program you may be given limited financial and other assistance as deemed necessary by your Case Officer. That assistance shall consist of: (a) Payment will be made for accommodation. (b) Payment will be made for electricity accounts. (c) Telephone accounts (private) will be subsidised up to $250.00 per qutr. (d) $500.00 per week will be paid for sustenance". 139 Throughout the period that Mr and Mrs Gray were in witness protection, they were given the assistance provided for in cl 26(g) of the MOU. Life in the witness protection program 140 After first going into witness protection, Mr and Mrs Gray resided in motel accommodation for several weeks where they were supervised by officers of the NCA. They were instructed not to leave their room and to order meals to be brought into them. They had almost daily contact with Inspector Small and reported in daily to other officers of the appellant. Inspector Small, on behalf of the NCA, paid their expenses. 141 When Mr and Mrs Gray moved to Terrigal under the New South Wales Police Service Protection program, their contact with officers of the NCA was less frequent, but Mr Gray nevertheless spent considerable time at intermittent intervals giving statements not only to the NCA but to representatives of other investigative bodies. He had to be available constantly. 142 Austin J commented as follows in regard to the life of Mr and Mrs Gray while under witness protection: "By the time they moved into that accommodation, the plaintiffs had adopted new names and new identities. They remained in Terrigal until 1999, although they changed their accommodation once during that time. Their contact with relatives and friends was restricted under the witness protection program, and they were not able to maintain business contracts in their former names. Mr [sic] Gray was not able to continue in the salon business and her evidence, not challenged by the defendant, was that she was unable to establish any other business. There is some evidence of business activity by Mr Gray, but his own evidence was that he was unable to conduct any business or otherwise earn income while he was on the witness protection program. At the very least, his income-earning activities were substantially curtailed". 143 In late 1990 or early 1991 Mr Gray asked if he could go to London for business purposes for a few days. Permission, however, was refused on the grounds that he was too valuable to the NCA. 144 Austin J remarked, generally, with regard to the impact that being under witness protection had on Mr Gray's ability to earn income: "At around that time [late 1990 or early 1991] Mr Gray had discussions with Inspector Small about his prospects of obtaining work. Inspector Small said that it would be difficult, because Mr Gray was not permitted to use his contacts because he was too valuable a witness for the [appellant] to take any risk. This evidence shows that Mr Gray was continuing to co-operate with the defendant in late 1990/early 1991, and that his attempts to re-establish a business and earn an income were seriously impeded by his status as a protected witness". 145 In fact, while under witness protection, it was virtually impossible for Mr Gray to obtain work and earn income. For practical purposes he had no identity that could be utilised; he had no proof of qualifications, no references, no past business associates whom he could contact, no prior history. He was also at the beck and call of the NCA. 146 On 11 May 1990 three summonses were taken out against Mr Gray for money laundering offences contrary to the Proceeds of Crime Act 1987 (Cth). In September 1990, however, Mr Gray was discharged on all three matters after no evidence was offered by the Crown. As Austin J observed: "The outcome was that Mr Gray had effectively been immunised from criminal prosecution for his money transfer activities with Schneiders and Saxon …". 147 His Honour remarked: "Mr Gray co-operated with the [NCA] by providing statements and giving evidence. Officers of the [NCA] have assessed his co-operation favourably, describing his evidence as being of a high standard and saying that he was a model witness". The sale of the hairdressing and beauty salon 148 The Cutting Bird as run by Mrs Gray and her daughter was not a particularly successful business. It could not support any employees other than the two of them and they were both required to work there to make the business profitable. The business was substantially indebted to Mr Gray and the proprietors' equity was negative. 149 Austin J pointed out: "The net loss of the business in 1989 was $2,852.22 after deducting wages of $20,158.50 (presumably paid to Mrs Gray and her daughter), and in 1990 there was a net profit of $2,531.64 after deducting wages of $27,901.05". 150 From 26 January 1990, Mrs Gray's daughter attempted to run the beauty salon and hairdressing business of the Cutting Bird by herself. The beauty salon part of the business stopped immediately, however, because Mrs Gray's daughter was only qualified as a hairdresser and not as a beautician. 151 Eventually, in December 1990, the business of the salon was sold for the price of the fixtures and fittings, namely $8,000. His Honour found that this resulted in a capital loss to Mrs Gray. The termination of the witness protection program 152 By May 1997 the appellant, after investigations, concluded that any threat remaining against Mr Gray was minimal. On 4 July 1997, the New South Wales Police served notice on Mr Gray informing him that his position under the witness protection program would cease on 1 August 1997. 153 The witness protection program in fact terminated on 1 August 1997. Until then Mr and Mrs Gray were given accommodation, their electricity and telephone accounts were paid and they were given a "sustenance" allowance of $500 per week. All these benefits were provided to Mr and Mrs Gray in accordance with cl 26 (g) of the MOU. The cost of providing these benefits was approximately $45,000 per annum. The MOU provided that that cost was to be paid by the NCA. 154 After the termination of the program, Mr and Mrs Gray made various claims for compensation, but these were rejected by the appellant. 155 By letter dated 24 September 1997 the appellant, without conceding any liability, offered an ex gratia payment of $45,000 to Mr and Mrs Gray. This offer was rejected. 156 In August 1998, Mr Gray received a provisional tax notice and a notice of assessment from the Commissioner of Taxation requiring him to pay tax in the sum of $127,457 on or before 10 September 1998. The tax was calculated by reference to the payments and benefits Mr Gray had received from the appellant throughout his participation in the witness protection scheme. These included payment for his sustenance allowance of $500 per week and payment of rental, electricity and telephone accounts. 157 Austin J noted: "The assessment by the Australian Taxation Office had been made on the basis of a letter from the New South Wales Police Service dated 17 November 1997, which attached a schedule of payments and benefits said to have been expended on Mr and Mrs Gray under the witness protection program". 158 The assessment was directed at Mr Gray only, on the assumption that all of the income was that of Mr Gray. No assessment was issued to Mrs Gray. 159 In April 1999 Mr Gray was diagnosed as having lung and liver cancer. He underwent chemo-therapy for one week each month when he was hospitalised. At that stage, he spent most of his time in bed. As mentioned, he died in April 2000. The financial position of Mr and Mrs Gray 160 For several years before entering witness protection, Mr and Mrs Gray lived in a two-bedroom flat in Clarence Street, Sydney. In his affidavit Mr Gray said: "Prior to the end of January 1990 my wife and I led a good lifestyle and lived very comfortably. The Clarence Street flat was a two bedroom flat in the city centre with two bathrooms, a lounge room and a living room as well as a kitchen. Security car parking was provided and the building had additional benefits that my wife and I enjoyed including a heated indoor swimming pool, a spa, a roof top tennis court and barbecue area as well as a sauna. My wife and I ate out in restaurants on a regular basis and I travelled overseas regularly and on occasions my wife travelled with me". 161 This is to be contrasted with their financial position once the witness protection program had terminated. Austin J observed in this regard: "According to Mr Gray, he and Mrs Gray borrowed in excess of $60,000 to meet living costs, an amount which they were unable to repay. Inspector Small gave evidence that he lent them $6000, which has not been repaid. They moved out of their rented premises early in 1999, because they were unable to pay the rent, and placed some furniture in storage at a cost of $157 per month, later increased to $168 per month. They sold some items of furniture and jewellery to meet expenses and, according to their evidence, by October 1999 they had no assets of value. When they moved out of their rented premises, they moved in with Mrs Gray's son and his wife for three months. Mrs Gray's mother, who had been living with them, returned to South Africa as Mr and Mrs Gray could no longer provide her with accommodation. After the three-month period, they moved to a friend's house, where they remained at the time of swearing their affidavits in October 1999, occupying a single bedroom. In summary, by October 1999, when the plaintiffs swore their affidavits, Mr and Mrs Gray had no other income than the old aged pension, no assets of value, and an enormous tax bill related to the payments and benefits derived under the witness protection scheme over a seven year period. Mr Gray had a serious and terminal illness, and he and Mrs Gray were occupying a bedroom in the house of friends on a temporary basis. Prior to 25 January 1990 they had lived comfortably, in a two-bedroom city apartment in a building with many amenities including a heated indoor swimming pool and a roof-top tennis court. They commenced the proceeding to recover substantial compensation which, according to their case, they were promised but not paid". The findings of Austin J 162 His Honour found that: (a) On 24, 25 and 27 January 1990, Inspector Small made representations to Mr and Mrs Gray to the effect that, provided Mr Gray co-operated with the NCA and gave evidence against those accused of narcotics and money-laundering offences, they would be looked after and would not be financially disadvantaged. (b) Inspector Small had ostensible authority to make those representations (there is no appeal against this finding). (c) Mr and Mrs Gray believed that, if Mr Gray co-operated as required and they entered into the witness protection program, they would be looked after and not be financially disadvantaged. (d) Although Mr and Mrs Gray acted out of fear and (in Mr Gray's case) a very strong desire to secure immunity from prosecution, they also relied on Inspector Small's promise that they would not suffer any financial disadvantage. (e) Mr and Mrs Gray acted to their substantial detriment in reliance on those representations by giving up their names and identities, limiting their contacts with their relatives and friends, abandoning their business activities and putting themselves in a position where they were effectively unable to earn income, and selling the hairdressing and beauty business in which Mrs Gray was interested for much less than it had previously been worth. (f) The promise made on behalf of the NCA required the provision of financial support, not only during the period of witness protection, but also for some reasonable period thereafter so as to permit Mr and Mrs Gray to be "rehabilitated" into the community. (g) The reasonable period in question should be determined as being three years. (h) The promise made on behalf of the NCA required the NCA to pay Mr Gray's income tax in respect of the benefits he received under the witness protection program. (i) The NCA's conduct was unconscionable. (j) The NCA's unconscionable conduct caused Mr and Mrs Gray loss. (k) The MOU had no effect on the promises made to Mr and Mrs Gray. Austin J's acceptance of the testimony of Inspector Small (Grounds 13, 14 and 15) 163 Three of the appellant's grounds of appeal concern his Honour's finding that Inspector Small represented to Mr and Mrs Gray that they would be "looked after" and "would not be financially disadvantaged." The three grounds are: (a) His Honour should not have accepted the evidence of Inspector Small in the light of the fact that the Inspector volunteered, when he commenced giving evidence, that his memory was "really exhausted" (Ground 13). (b) His Honour erred in failing properly to consider inconsistencies between Inspector Small's evidence and the evidence of his superior, Mr Cashman (Ground 14). (c) His Honour failed to take properly into account documentary evidence in which there had been no reference to the alleged representation until 1 November 1996 (Ground 15). 164 These three grounds call into question factual findings made by his Honour. The approach of an appellate court to challenges of this nature has been restated in Fox v Percy (2003) 197 ALR 201. In summary, an appellant may establish that a trial judge's factual findings (based on demeanour) are erroneous where that is shown to be the case by "incontrovertible facts or uncontested testimony", or "in some quite rare cases" where, although the facts fall short of being "incontrovertible", the decision at trial is "glaringly improbable" or "contrary to compelling inferences", or where it is otherwise shown that the trial judge failed to use or misused his or her advantage of hearing or seeing the witnesses. The appellate court must be concerned as to whether the trial judge has too readily drawn conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses and their demeanour. In carrying out this exercise the appellate tribunal should examine "contemporary materials, objectively established facts and the apparent logic of events". 165 Inspector Small retired in 1997 with the rank of superintendent. Austin J was impressed by his credibility as a witness and concluded that Inspector Small was "a person of integrity, highly experienced in investigatory matters". His Honour accepted his evidence, generally. On my reading of the transcript there was nothing in Inspector Small's evidence that suggests that his Honour was wrong to come to this conclusion; to the extent that an impression may be discerned from a transcript, Inspector Small appeared me to have given his evidence in a careful, candid and reliable way. 166 When Inspector Small was cross examined as to what he said to Mr Gray on 24 January 1990, he said: "I said to him – my memory is really exhausted. I did make a statement out of this matter some time ago. If I could have recourse to that I would be able to give better evidence to this Court". Shortly thereafter he agreed with the proposition that he needed to look at the statement to refresh his memory and on yet another occasion asked if he could refresh his memory. 167 Austin J refused to allow Inspector Small to refresh his memory from his statement, as his Honour was not satisfied that the statement was made at a time when the facts set out therein were fresh in Inspector Small's mind. Inspector Small, therefore, proceeded to give evidence without looking at the statement. 168 Austin J had express regard to Inspector Small's request to refresh his memory, as well as the appellants' submission that his evidence should not be accepted by reason of his acknowledgment that his memory was "really exhausted". His Honour said in this regard: "He was a careful and thoughtful witness, who seemed to me to be doing his best to give an accurate account of the conversations and events about which he was questioned. Although he complained about his memory at the beginning of his evidence, he did not seem to be troubled by difficulties of recollection in answering particular questions as they were put to him. I think his memory was in fact better than he said it was. I specifically disagree with the defendant's submission that Inspector Small 'clearly struggled to recall what it was that was said and when'". 169 Nothing in Austin J's comments suggests that his Honour was thereby misusing his advantage of hearing and seeing Inspector Small give evidence. In discounting Inspector Small's avowed problems with his memory, Austin J, it seems to me, had regard to the general manner in which he gave his evidence, and the probity and the cogency of his testimony. His Honour, quite properly, balanced Inspector Small's initial lack of confidence in his own memory against the way in which his evidence actually came out. His Honour found that Inspector Small had underestimated his ability to recall the events and regarded his version as to what occurred as being reliable and correct. His Honour was perfectly entitled to come to this conclusion. I would reject this ground of appeal. 170 The appellant's next challenge to his Honour's finding concerning the reliability of Inspector Small is based on alleged inconsistencies between his evidence and that of Mr Cashman. 171 The inconsistencies on which the appellants rely relate to the authority given by Mr Cashman to Inspector Small to tell Mr Gray that, if he and his wife entered witness protection, he would not be financially disadvantaged. Inspector Small testified that Mr Cashman told him that he could inform Mr and Mrs Gray that they would not be financially disadvantaged if they entered the witness protection scheme. Mr Cashman denied having told Inspector Small this. 172 I see no reason why this difference in the evidence should have precluded Austin J from accepting Inspector Small's version of the representations he made. I would reject this ground of appeal. 173 The third challenge to Austin J's acceptance of the testimony of Inspector Small is based on the proposition that his Honour failed to have proper regard to certain documentary evidence. 174 The documentary evidence in question concerns a file note of Mr Gray's conference with counsel on 27 January 1990, a letter dated 19 June 1991 written by Mr Gray to the NCA and a letter of the same date by Mrs Gray to the NCA, a letter from Mr Gray to the NCA of 8 April 1996 and a letter written on 1 November 1996 by Mr Gray to the NCA. 175 His Honour noted that the focus of the meeting with counsel on 27 January 1990 and other conferences and telephone attendances in February and March 1990 in which Mr Gray's solicitors were involved was immunity from prosecution and not Mr Gray's financial security. The reason for this is not difficult to understand. According to Inspector Small he had made an unequivocal promise to Mr and Mrs Gray that they would not suffer financial disadvantage. However, he had made no such promise about immunity from prosecution. That issue, at that time, gave rise to considerable anxiety on the part of Mr and Mrs Gray. It is not surprising that they concentrated on this issue in their discussions with their legal advisors. 176 Austin J noted that neither of the two letters of 19 June 1991 claimed any entitlement to the financial compensation that they sought. The letters were expressed in the language of supplication and did not make claims based on a promise. The letter by Mr Gray to the NCA of 8 April 1996 adopted the same approach and it was not until Mr Gray's letter of 1 November 1996 that he asserted, in writing, an entitlement to compensation on the basis of "undertakings" given in 1990. This approach can readily be explained by Mr Gray's position of weakness and a view that it would be impolitic to make a claim based on a promise. I do not think that any reliable inference can be drawn from any omission to refer, in the letters in question, to the promise made by Inspector Small. 177 I would add that the very fact that the MOU was signed lends support to the assertion that Inspector Small promised Mr and Mrs Gray some financial support. In addition, the term "appropriate protection" in para 3 of Ms Kelly's letter of 25 January 1990 is capable of being construed as encompassing financial as well as physical protection. 178 I would reject this ground of appeal. The ambiguity of the representation and its effect on the estoppel (Ground 1) 179 The appellant drew attention to the well known statement by Mason and Deane JJ in Legione v Hateley (1983) 152 CLR 406 at 436: "The requirement that a representation must be clear before it can found an estoppel is, in our view, applicable to any doctrine of promissory estoppel (see Woodhouse AC Israel Cocoa Limited SA v Nigerian Produce Marketing Company Limited [1972] AC 741; China-Pacific SA v Food Corporation of India [1981] QB 403 at 429 to 430)". 180 The appellant submitted that the promise "you will not suffer any financial disadvantage from going into witness protection" was ambiguous and did not satisfy the requirements for promissory estoppel. 181 The appellant submitted that the promise could mean that Mr and Mrs Gray "would be provided with adequate financial and other assistance to lead a reasonably comfortable life until any risk subsided"; or it could mean that Mr and Mrs Gray "would be provided with an income which would be similar to their existing legally earned income until the risk associated with Mr Saxon and Mr Schneiders had passed". It was said: "Far more precise representations would be needed than those found in the oral evidence by Inspector Small. Phrases would be needed such as 'we will provide you with $1,000 a week until you are aged 65 irrespective of the level of risk that you are exposed to' or 'we will get an independent valuation of your business and will provide you with its value' or 'we will provide you until you die with $x per week and pay you for any loss in revenue of your business resulting from your inability to work in it'". 182 I accept that the well-settled approach to construing contracts (see Upper Hunter County District Council v Australian Chilling and Freezing Company Limited (1968) 118 CLR 429 at 436 to 437) does not apply to representations said to found a promissory estoppel. Unlike the approach adopted in regard to contracts, the court will not try to construe such representations in a manner that gives them some effect. 183 That is not to say, however, that a representation should not be construed by reference to the context in which it was made and by giving it the natural and ordinary meaning which would be conveyed to a normal person (cf Akerhielm v De Mare [1959] AC 789; Krakowski v Eurolynx Properties Limited (1995) 183 CLR 563 at 576 to 577). Thus, for example, in Legione v Hateley and Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 the relevant representations were construed by having full regard to all relevant surrounding circumstances. 184 The need to determine how the representation would reasonably be understood by the person to whom it was addressed, was underlined by Isaacs ACJ in Western Australian Insurance Company Limited v Dayton (1924) 35 CLR 355 (when discussing the requirement that a representation must be "unambiguous" if it is to found an estoppel in pais). In a statement referred to by Mason and Deane JJ in Legione v Hateley at 435, Isaacs ACJ said at 375: "The word 'unambiguous' is explained by Kay LJ in Low v Bouverie [1891] 3 Ch 82 at 113, the word and its explanation occurring on the same page. The Lord Justice says: 'It is essential to show that the statement was of such a nature that it would have misled any reasonable man, and that the plaintiff was in fact misled by it'. Bowen LJ says (at 106): 'It must be such as will be reasonably understood in a particular sense by the person to whom it is addressed'". 185 In the present case the relevant context at the time the representations were made included the following matters: (a) The lives and property of Mr and Mrs Gray were at risk. (b) The exigencies of the situation were such that, for reasons of personal safety, there was a strong incentive for Mr and Mrs Gray to enter the witness protection program immediately, and there was no time to settle their affairs. (c) Mrs Gray would never again be able to enter the salon of the Cutting Bird and the probabilities were that the business would have to be sold at a loss. (d) Mr Gray had in the past earned his living substantially from transactions that he had not disclosed in his tax returns and which involved, at least to a significant degree, unlawfully transferring monies on behalf of other persons to foreign countries without the knowledge of the authorities. (e) Inspector Small and the NCA knew that Mr Gray's income over the past few years was likely to have been derived from activities that were contrary to the law (he had been under NCA surveillance because of suspicions to this effect, Inspector Small had referred to "dirty money" and Mr Gray himself had described the money he had transferred as "black tax money"). (f) It was obvious that, were Mr and Mrs Gray to enter witness protection, they were not likely to be able to earn a living from any source. Even after the heat engendered by the investigation and any consequential arrests had died down, it would be extremely difficult for either of them to earn an income. They would not be able to open bank accounts, obtain credit cards, provide character or credit references or rely on past business associations. They would be unable to reveal any of the professional qualifications they possessed. (g) In the circumstances, it was obvious that Mr and Mrs Gray would have to be maintained by the NCA. (h) It was also obvious that the longer Mr and Mrs Gray remained in witness protection, the more difficult it would become for them, after the witness protection had ceased, to re-establish themselves in society and begin earning a living again. That process was likely to take a long time. (i) Mr Gray had expressed concerns about being discharged summarily from witness protection and Inspector Small had assuaged his anxieties by the promises he had made. (j) Mr Gray's testimony was extremely important to the NCA as it was likely to lead to the successful prosecution of organised crime leaders who had perpetrated major drug-related crimes within Australia that involved the illegal removal of some $77m from the country. (k) The NCA was extremely anxious for Mr and Mrs Gray to co-operate with it and to assist in the gathering of evidence so that Saxon and Schneiders could be arrested and charged successfully (and the money that had been frozen could be seized). 186 Thus, when Inspector Small told Mr and Mrs Gray that they would not suffer any financial disadvantage by going into witness protection, all the abovementioned matters informed their understanding of what the representation meant. 187 These circumstances, in my view, compel the inference that Mr and Mrs Gray (as well as Inspector Small) must have understood the representations to mean that the promise that Mr and Mrs Gray would suffer no financial disadvantage by entering into the witness protection program was subject to the constraint of reasonableness (with "reasonableness" to be measured in the context of the factors I have mentioned). 188 This constraint meant that the promise was not open-ended. Reasonableness – in the context I have described – gave the promise a particular finite and objective quality. 189 Thus, the promise did not mean that the NCA would keep Mr and Mrs Gray according to the standard to which they were accustomed, nor did it mean that they would be reimbursed for every expense they incurred. The promise meant that Mr and Mrs Gray would be provided with reasonably comfortable accommodation and given a reasonable subsistence allowance, taking into account their prior living standard, the fact that a government authority was providing witness protection, the risks Mr and Mrs Gray would face were they not to enter the witness protection program, the fact that it was open to the NCA to proceed with the prosecution of Mr Gray for the offences that he was suspected of having committed (that might well result in a sentence of imprisonment) and all the other matters that I have set out. In addition, Mrs Gray would have to be recompensed for the capital loss she was likely to sustain in disposing of her business by way, in effect, of a forced sale. 190 In Flinn v Flinn (1999) 3 VR 712 Brooking JA, with whom Charles and Batt JJA agreed, said at 738: "The defendant repeatedly contended that to found an estoppel a representation must be 'unambiguous', or 'clear', or 'unequivocal'. But a promise may be definite in the sense that there is a clear promise to do something even though the something promised is not precisely defined, and this has always been recognised in the cases". 191 The Queensland case of Wright v Hamilton Island Enterprises Limited [2003] QCA 36 is also helpful in this regard. The trial judge had found that the defendant had represented that it would renew a licence granted to the first plaintiff "for further periods of five years from the expiry of the term of the licence on the 31st December 1995 for so long as the first plaintiff elects to have the licence so renewed provided that the first plaintiff was not in breach of the licence at the time of each renewal". It was argued that this representation was ambiguous and insufficiently clear and precise to found a promissory estoppel. Mackenzie J rejected the argument and pointed out at [87]: "The absence of specific reference to the mechanism and timing of exercise of the right to elect are not fatal. In the absence of specified times, reasonableness would be the criterion. That is an objective criterion not an uncertain one". Jerrard JA came to a similar conclusion (see [56] to [57]). McMurdo P agreed, saying at [9]: "An unambiguous representation is one which would not mislead any reasonable person and is not capable of being misinterpreted or misunderstood: see Legione v Hateley (1983) 152 CLR 406, 435, 436. On the judge's findings, which were open on the evidence, those representations were of this kind. The fact that the representations here did not contain details of the method of renewal does not make them ambiguous. The representations were sufficiently unambiguous and clear as to found an estoppel". 192 In my opinion, there was no ambiguity in the promise that, subject to the constraint of reasonableness in the sense I have explained, Mr and Mrs Gray would not suffer any financial disadvantage. It might be difficult to work out what was reasonable and what was not, and what constituted financial disadvantage, but this does not give to the promise any element of ambiguity or lack of clarity sufficient to preclude a promissory estoppel arising. The element of "reasonableness" requires an objective assessment; it is not an ambiguous term. The promise, as a whole, was unambiguous and clear, albeit that the monetary compensation required to satisfy the promise fell within a discretionary range and its determination was by no means a simple matter. 193 In any event, I do not think, with respect, that the statement made by Mason and Deane JJ in Legione v Hateley at 436 to 437 was intended to be an absolute rule. While, often, an ambiguous or imprecise representation will not give rise to a promissory estoppel, that could not inevitably be the case. In virtually every statement of existing fact or future intent some ambiguity or imprecision of language may be found. 194 In his illuminating judgment in Flinn v Flinn, Brooking JA discussed several cases in which equity has intervened, despite the fact that the nature of the promises or expectations has been difficult to determine. Many of the authorities involve the grant of equitable relief where acts were performed because of an assumption that there would be an easement, even though no agreement was reached about the terms of the contemplated easement. The cases are exhaustively reviewed by his Honour, and it is not necessary to refer to them in any detail. I would, however, point out that Crabb v Arun District Council [1976] Ch 179, Holiday Inns Inc v Broadhead (1974) 232 EG 951, the unreported decisions of the English Court of Appeal in Jones v Watkins [1987] CATranscript 1200, EWCACiv and Orgee v Orgee (UKCA unreported, 5 November 1997), mentioned by his Honour, are particularly instructive. The approach manifest in Crabb is typical. In regard to this case, Brooking JA observed (at 741): "[T]he fact that no terms had been agreed upon in relation to the right of way did not prevent the equity from arising. There had been no agreement as to the price; it was not clear whether what was to be granted was to be an easement or a licence, as Scarman LJ pointed out at 196; and other terms had to be agreed upon. But that did not matter: see 198-199". 195 As Flinn v Flinn demonstrates, there have been many instances where representors have not been able to escape responsibility merely because of ambiguity or lack of clarity in the representations they have made, even where it was difficult to resolve uncertainties inherent in them. 196 Waltons Stores (Interstate) Limited v Maher is itself an example of a promissory estoppel being upheld where the representation (implicit in the appellant's conduct) was difficult to construe with precision and was capable of more than one reasonable meaning. 197 The trial judge in Waltons held that the representation was that a concluded contract, by way an of exchange of contracts, existed between the parties. The Court of Appeal found that the parties knew that exchange had not taken place but held, nevertheless, that the appellant had represented that a binding contract existed (that is to say, it held that a representation different to that found by the trial judge had been made). The appellant argued that the differences in the findings between the trial judge and Court of Appeal disclosed such uncertainty that no estoppel could be said to arise. Before the High Court, reliance was placed on the proposition that "only a clear representation could found an estoppel" (see at 458). 198 Mason CJ and Wilson J attributed a third meaning to the appellant's representation, namely, that the exchange of contracts would take place as a matter of course. Brennan J held (at 430): "Waltons' silence induced Mr Maher to continue either on the assumption that Waltons was already bound or in the expectation that Waltons would execute and deliver the original deed as a matter of obligation". Deane J said (at 437) that any divergence between the findings of the trial judge and the Court of Appeal was not important; they had both found that the respondent had believed that there was a binding agreement. Gaudron J found that the appellant had represented that an exchange had taken place. 199 None of the justices, however, regarded the different meanings that could possibly be drawn from the appellant's conduct as obstacles to a finding that the respondent had established a promissory estoppel. All of their Honours stressed that unconscionability was the foundation of the estoppel and, in detail, explained why the conduct of the appellant, in making the representation and allowing the respondent to remain under a false assumption to his detriment, was unconscionable. Hence a promissory estoppel was established. 200 The underlying reason for the rule that, generally speaking, an ambiguous or unclear representation will not give rise to a promissory estoppel is that the foundation of promissory estoppel is unconscionability. Unconscionability is usually difficult to establish when the representation is ambiguous or unclear. 201 A typical example of ambiguity precluding unconscionability is Woodhouse AC Israel Cocoa Limited SA v Nigerian Produce Marketing Company Limited [1972] AC 741. In Legione v Hateley Mason and Deane JJ at 436 to 437 referred with approval to the following remarks of Lord Denning MR in the Court of Appeal decision in Woodhouse (reported in [1971] 2 QB 23 at 60): "If the representation is put forward as a variation , and is fairly capable of one or other of two meanings, the judge will decide between those two meanings and say which is right. But if it is put forward as an estoppel , the judge will not decide between the two meanings. He will reject it as an estoppel because it is not precise and unambiguous. There is good sense in this difference. When a contract is varied by correspondence, it is an agreed variation. It is the duty of the court to give effect to the agreement if it possibly can: and it does so by resolving ambiguities, no matter how difficult it may be. But, when a man is estopped , he has not agreed to anything. Quite the reverse. He is stopped from telling the truth. He should not be stopped on an ambiguity. To work an estoppel, the representation must be clear and unequivocal". 202 In the circumstances described, the ambiguity meant that no unconscionability could arise. The point was explained by Lord Cross in the House of Lords (at 767) as follows: "But it is, to my mind, a fatal objection to this contention that it makes the letter of September 30 bind the respondents as a representation though it would not have bound them had it been an acceptance of a misunderstood offer. Even if one assumes that a man who makes a representation of fact which he reasonably interprets in one way but which the representee reasonably interprets in another may in some circumstances be bound by the interpretation placed on it by the representee, it surely cannot be that a man who in response to a request for an indulgence which he reasonably interprets in one way makes an unenforceable promise as to his future conduct which the other party reasonably interprets in a sense different from that intended can be in a worse position than if the request for an indulgence had been an offer to contract and the granting of the indulgence an acceptance of the offer". 203 In Legione v Hateley Mason and Deane JJ were dealing with a representation that was reasonably capable of bearing an innocent meaning, in the sense that any reliance on that particular meaning would not give rise to detriment. In such circumstances, there was no promissory estoppel even though the representation was capable of bearing a different meaning than in fact was relied upon by Mr and Mrs Hateley to their detriment. The point is that it was not reasonable for Mr and Mrs Hateley to have relied on the meaning they attributed to the representation. Had they acted reasonably, they would have attributed the innocent meaning to the representation. Hence, it was not unconscionable for Mr and Mrs Legione to deny responsibility for the detriment that arose because of the Hateleys' unreasonable reliance. 204 But there may be circumstances where reliance on an ambiguous representation, or a representation having an unclear or uncertain meaning, could give rise to an unconscionable result. A promissory estoppel may then arise. In Woodhouse Lord Hailsham (at 757) said that in cases where the originator of an ambiguous document intends it to be acted upon, the originator, in appropriate circumstances, might have to bear the consequences of the ambiguity for which "he is himself responsible". In Flinn v Flinn Brooking JA refers to several examples of this kind of case. 205 I would proffer a hypothetical illustration of the point. Say, for example, a non-contractual representation was made whereby the representor orally promised to deliver a large quantity of produce specified by a nominated tonnage. Assume that the promise did not specify imperial tons or metric tonnes in circumstances where it was not reasonably possible to infer whether tons or tonnes were promised. Assume that the representee relied on the promise and altered its position to its detriment. Assume further that the representor made no delivery whatever and repudiated its promise. If, in these circumstances, the representee sued on the grounds of a promissory estoppel, I suggest that it would be self-evident that the representor would be liable to pay equitable compensation even though it was not possible to determine whether the quantity promised was in metric or imperial quantities. The unconscionability of the situation would not be negated by the ambiguity. Equity would intervene by fashioning relief based on the concept of "minimum detriment": see Waltons at 404, 405 and 419, 423 and 457; The Commonwealth v Verwayen (1990) 170 CLR 394 at 429. 206 The view so expressed is consistent with the following statement of Mason and Deane JJ in Legione v Hateley at 439: "[A] representation that a particular right will not be asserted for at least x days is not rendered, for the purposes of promissory estoppel, unclear or equivocal merely because the words used are equivocal as to whether the relevant period is x days, x plus one day or x plus two days. If what is said or done amounts to a clear and unequivocal representation that the particular right will not be asserted for a period of at least x days, a representation to that effect can be relied on to found an estoppel". 207 On the assumption that (despite the views to the contrary that I have expressed) the promise contained some ambiguity, that Mr and Mrs Gray relied on the promise, and that it was unconscionable for the appellant not to keep its promise, I think that the compensation ordered by Austin J represented the consequential minimum detriment suffered by Mr and Mrs Gray. I consider that, on this basis, also, a promissory estoppel was established. 208 I would not uphold this ground of appeal. The ground that the MOU caused Inspector Small's representations to be invalidated or spent (Ground 2) 209 On 2 March 1990 Inspector Small (on behalf of the NCA), Mr and Mrs Gray, and an officer of the New South Wales Police Service signed the MOU. The appellant argues that the MOU "invalidates" or supersedes any representation or promise by the NCA to Mr and Mrs Gray. 210 Austin J considered that the MOU did not set out comprehensively the terms of the legal relationship between Mr and Mrs Gray and the NCA. He held: "Inspector Small's oral representations were directed towards the arrangements between [Mr and Mrs Gray] and the [NCA] with respect to compensation for financial disadvantage, and the memorandum of understanding was about a different subject matter, namely the tripartite terms upon which the New South Wales Police Service would provide witness protection. It is clear from [Mr and Mrs Gray's] evidence that they regarded the memorandum of understanding as relating to this different subject matter. There are some specific indications in the evidence of Mr Cusack that he, as an officer of the [NCA], had a similar understanding. It appears that Mr Cusack, Mr Sage and Mr Cashman all saw the witness protection arrangements as different from the question of what they called 'ex gratia payment'. In these circumstances, clause 3, if effective at all, invalidated only representations or promises made to Mr Gray with respect to the provision of witness protection under the New South Wales Scheme. It did not, on its proper construction, have any application with respect to representations made on behalf of the [NCA] concerning compensation for overall financial disadvantage". 211 His Honour said: "Mr and Mrs Gray drew a distinction between the witness protection arrangements that were the subject of the memorandum of understanding, and the financial arrangements they had made with Inspector Small on behalf of the defendant, and Mr Cusack's evidence is (as I have said) to the same effect. In my view, when Mr Gray signed the memorandum of understanding on 2 March 1990 he did not at that point cease to rely on Inspector Small's representations, notwithstanding clause 3, because (as I have said) clause 3 had no application to these representations". 212 The appellant challenged the finding that Inspector Small's representations concerned different subject matter to that to which the MOU was intended to apply. It argued that his Honour erred in finding that Inspector Small's representations continued to have force after the MOU was signed. According to the appellant, the MOU was "designed to formalise the relationship between the NCA and Mr and Mrs Gray". 213 In considering these arguments it must be borne in mind that Mrs Gray claims equitable relief; her claims are not based on the law of contract. The foundation of her claims is the asserted unconscionable conduct of the NCA. We are not here concerned with whether, by the law of contract, the MOU put an end to prior obligations incurred by the NCA. Rather, the question is whether Mr and Mrs Gray agreed that the MOU would be a complete record of the obligations owed by the NCA to them; and whether, for that reason, it would not be unconscionable for the NCA to deny liability under any promises made previously by Inspector Small. 214 Thus, the arguments raised give rise to broad considerations of equity. There is no room for arguments based strictly on the law of contract. The parol evidence rule has little relevance. All relevant factors must be considered to determine the purpose of the parties in signing the MOU. 215 By the time the MOU was signed, Mr and Mrs Gray had been in witness protection for about six weeks. The NCA itself had supplied the witness protection. It did not wish to continue with this arrangement. It intended that Mr and Mrs Gray enter either the witness protection program of the Australian Federal Police or that of the New South Wales Police. It decided to choose the latter and made arrangements with the New South Wales Police Service to become responsible for the day to day management of Mr and Mrs Gray. 216 As part of these arrangements, the MOU came to be signed. It was a standard form document emanating from the New South Wales Police Service. 217 The MOU recorded that Inspector Small of the NCA, "hereinafter called the 'Approved Body', acknowledge [sic] that a request has been made by 'the witness' for protection and that protection to the extent set out in this Memorandum of Understanding is to be provided." Mr Gray was "the witness" in question. 218 The MOU provided: "All expenses or remuneration, excepting police base wages and/or salaries, incurred in such protection shall be borne by the 'Approved Body'". It is apparent from this provision and the MOU generally, that one of its main purposes was to ensure that the NCA would pay all the expenses of the New South Wales Police Service in providing witness protection to Mr and Mrs Gray and to protect the latter institution by setting out the extent of its obligations, its power over "the witness", and its rights against the NCA. 219 Clause 1 of the MOU provided: "This Memorandum of Understanding supersedes any and all other Memorandums of Understanding between you, the "Approved Body" and the New South Wales Police Service". 220 Clause 3 provided: "I understand that any representations or promises previously made to me by persons in authority regarding my participation in this program are null and void, except those that are set out in this Memorandum of Understanding". 221 Clause 9 provided that "the agency is NOT responsible for my past or future debts." Clause 10 provided that "the agency will NOT be liable for any financial loss to me which comes out of my voluntary involvement in the program". 222 "Agency" was not defined in the MOU but it appears from the document as a whole that the term was intended to denote the New South Wales Police Service. The appellant submitted that "agency" meant the NCA, but I do not think that that is correct. The NCA was defined in the MOU as the "Approved Body" and there is no reasonable basis on which it could said that the MOU intended "agency" to mean the NCA. The New South Wales Police Service is the only other party to the MOU that could be regarded as the "agency" and the sense of the document as a whole is consistent with the term denoting that institution. 223 Clause 14 provided that Mr Gray was required to live at premises decided by his case officer. His case officer was an officer of the New South Wales Police Service. Clause 15 provided that he had to get the permission of his case officer before he incurred any debt. Clause 21 provided that he had to use the name provided by the case officer. Clause 25 provided that a number of special restrictions might be placed on him. These included not returning to his former abode without the authority of his case officer, not attending any meetings with existing associates without the prior authority of his case officer, and not frequenting the eastern suburbs of Sydney without the authority of his case officer. 224 I have mentioned that cl 26(g) of the MOU provided for the provision to Mr Gray, while he was in the program, of limited financial and other assistance as deemed necessary by his case officer (and gave specific details as to what, at least initially, this entailed). 225 Clause 29 of the MOU provided: "I understand that protection may be terminated by any breach by me of any of the conditions set out in this Memorandum of Understanding. It may also be terminated by the Commander, State Investigative Group, by notice in writing served upon the witness". 226 Mrs Gray's case, in effect, was that the arrangements recorded in the MOU were only in part fulfilment of Inspector Small's promise. On her argument, the arrangements recorded in the MOU represented the agreement of the NCA and Mr and Mrs Gray as to what financial assistance by way of income, net of income tax, was to be provided (pursuant to Inspector Small's promise) while Mr and Mrs Gray remained in witness protection. 227 Mr Gray, in his affidavit, explained how he came to sign the MOU. He said: "The document was given to me by Mr Small prior to me signing it at the offices of the Witsec office. I said to Small: 'Should I get legal advice before I sign this and who will pay for it.' Small said: 'Well in my opinion you don't need legal advice, it appears to be a standard document used by the New South Wales Police that governs your day to day behaviour whilst you are in their program.' I pointed out to him the first part of paragraph 4 on the first page and paragraph 28. He said to me: 'This is a fall back position. It can't be altered except by consent of all the parties so there is no way anybody can wriggle out of this by themselves.' I further said to him: 'What about the agreement we have. That doesn't appear in here.' Small said: 'That is an agreement between you and the NCA and provided that you give honest and truthful evidence and continue with debriefing on what you know. The payments in the memorandum of understanding are set out in concrete. Everything is above board, nobody is trying to take you for a ride.' I took the document and I showed it to my wife. We both signed the document". 228 Mrs Gray gave the following evidence as to how she came to sign the MOU: "The document was given to me by my husband. I read the document and signed it and gave it back to my husband. Nobody witnessed me sign such document. I did not receive legal advice in relation to the document. At the time that I read the document and signed it, I said to my husband: 'How does this affect compensation that we are entitled to?' My husband said: 'Bob's assured me that this is only in relation to the New South Wales Witness Protection Scheme and that the agreement with the NCA stands. We will be given compensation, our lifestyle will be maintained and the NCA is going to support any ex-gratia payment because of the stress and disruption to our lives including change of lifestyle". 229 Inspector Small testified that the following occurred immediately prior to Mr Gray signing the MOU: "He said, he showed it to me – but I had already seen similar – he said, 'Look what I have to sign. Will I get any – will I need any legal advice about this'. I said, 'Nobody is going to take you down. There is two places in it that says that the agreement can't be abandoned or' I can't think of the word I used, 'That it can't be abandoned because it has to be agreed to by all parties before this agreement becomes null and void. I don't believe you need any legal advice as to signing it'. I can't remember if it was that day or another day, but I was present when I placed – I was there. I placed my signature on this document and certainly, … Mr Gray was there too. Q. After you said to him, 'I don't believe you need legal advice', or words to that effect, did Mr Gray say anything to you? A. Did Mr Gray -- Q. -- say anything to you? A. He was always – I believe he said, something he was always frightened of being kicked out on the street at the end and I said to him, I was continually saying to him, 'You won't be left high and dry. We have – the agreement is in place, which will be honoured'". Inspector Small was not cross examined about this evidence or about the MOU. 230 Austin J accepted that Mr and Mrs Gray did not believe, when signing the MOU, that performance of its terms would discharge the NCA from its obligations under the promise made by Inspector Small. 231 His Honour said that there were "some specific indications in the evidence of Mr Cusack" of the NCA that he had a similar understanding. His Honour also made reference to the views of Mr Sage and Mr Cashman (both of the NCA) in regard to this issue. But, it seems to me, that as far as the NCA is concerned, Inspector Small's intention is conclusive. After all, he signed the MOU on behalf of the NCA and he had previously bound the NCA by making the promise in question to Mr and Mrs Gray. 232 It is undoubtedly the case that Inspector Small regarded the financial assistance given to Mr and Mrs Gray pursuant to the MOU as being only in part fulfilment of the promise made by him on behalf of the NCA. He assured Mr Gray that it was unnecessary for him, prior to signing the MOU, to seek legal advice as nobody was going to "take [Mr Gray] down". After the NCA had terminated the witness protection and refused to provide any further financial support to Mr and Mrs Gray, Inspector Small believed that the NCA still owed obligations under the promise he had made on its behalf to Mr and Mrs Gray. For that reason, he made strenuous efforts on behalf of Mr and Mrs Gray to persuade the NCA and the appellant to make additional payments to them. He went to the lengths of appearing on national television where he disparaged the behaviour of the NCA and said: "The only explanation I suggest to you, I think of his usefulness (that is Mr Gray) is now finished. The bean counters have moved this and are trying to get out of it as cheaply as possible leaving morals and ethics out of it". 233 Accordingly, it seems to me, Austin J was correct in holding that, as a matter of subjective intention, neither Inspector Small, on the one hand, nor Mr and Mrs Gray on the other, regarded the MOU as being a complete record of the financial assistance to be provided. I do not accept that they subjectively intended the MOU "to formalise the relationship between the NCA and Mr and Mrs Gray". 234 I turn now to the provisions of the MOU on which the appellant relies. 235 Mr Insall SC, who together with Mr M Dicker, appeared on behalf of the appellant, sought support from cl 1, which provides that the MOU "supersedes any and all other memorandums of understanding between you, the 'approved body' and the New South Wales Police Service". Mr Aldridge SC, who together with Mr P Livingstone appeared on behalf of Mrs Gray, submitted that cl 1 had no bearing on the issue as it provided only that other "memorandums of understanding" would be superseded; in fact, no other such document existed. 236 Mr Insall submitted that cl 3 rendered the promise made by Inspector Small "null and void". Mr Aldridge submitted that cl 3 only related to "this program" which was the New South Wales Police Service Witness Protection Program. Hence, cl 3 had no application to the representations made by Inspector Small on behalf of the NCA. Mr Aldridge submitted that cl 3 was only intended to protect the New South Wales Police Service and was not intended to detract from representations or promises made on behalf of the NCA, which he submitted, constituted parallel liability. 237 In my view, if no regard is had to all the surrounding circumstances (that is, considering only the four corners of the document) and applying a strictly literal construction, Mr Aldridge's submissions are correct. 238 I have held that, when regard is had to all the surrounding circumstances, including the statements made by Inspector Small and Mr and Mrs Gray before the MOU was signed – as well as their subjective states of mind, they did not intend the MOU to be a complete record of the obligations owed by the NCA to Mr and Mrs Gray. 239 What the result would be if the MOU were to be construed by reference to the surrounding circumstances determined according to the parol evidence rule, the precepts of the law of contract, and the principles expressed in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, has little relevance to the present inquiry. For the reasons I have explained, I think that the subjective intentions of the parties in entering into the MOU are paramount. 240 In the belief that Inspector Small's promise continued to apply, Mr and Mrs Gray remained in witness protection and co-operated with the police for more than seven years. Inspector Small, throughout this period (and thereafter) was of the same belief. At no time as from the signing of the MOU did any of them think that the MOU superseded or detracted from Inspector Small's promise and the NCA's obligations thereunder. 241 In these circumstances, the equity of the situation could not be affected by attributing to the MOU a meaning held by none of the parties throughout the relevant period (commencing from the signing of the MOU). 242 In my opinion, Austin J did not err in holding that the MOU should be treated as if it related to the tripartite terms upon which the New South Wales Police Service would provide witness protection, and, relevantly, nothing more. The election to affirm the MOU (Ground 11) 243 The appellant argued that Austin J erred in finding that Mr and Mrs Gray had not elected to affirm the MOU and in finding that they were not estopped from denying that they were bound by the MOU. 244 Austin J's findings in relation to these arguments are contained in the following passage: "The [NCA's] contention that [Mr and Mrs Gray] elected to affirm the [MOU] or that they were estopped from denying that they are bound by the [MOU] is unsuccessful on the facts. The [MOU] related to the protection provided by the New South Wales Police Service whereas the representation upon which [Mr and Mrs Gray's] claim was based were representations by the [NCA]. In any case, in my view nothing in the [MOU], properly construed, prevented the assertion of [Mr and Mrs Gray's] claims, for reasons I have given". 245 In my view, for the reasons I have expressed under the previous heading, these findings were correctly made. The assumption as to financial support (Ground 3) 246 The appellant contended in its notice of appeal that Austin J erred in failing to find that the representations encouraged in Mr and Mrs Gray an assumption that they would be given financial support during the period of witness protection and also for some reasonable period thereafter so as to permit them to be rehabilitated into the community. No submissions relating to the assumption during the period of witness protection were advanced, however, and I do not see how they could have been. The appellant persisted with the submission relating to the period after termination of witness protection. I shall, therefore, confine my comments to the latter argument. 247 Austin J held, in effect, in regard to this issue that it was implicit in the promise made by Inspector Small that the NCA would provide financial support to Mr and Mrs Gray "not only during the period of witness protection, but also for some reasonable period thereafter so as to permit them to be 'rehabilitated' into the community". 248 In challenging this finding, the appellant relied on the terms of the MOU. It is implicit in the MOU that the witness "protection" provided thereby included financial benefits. On that basis, according to the appellant, the provision of financial benefits ceased once witness protection came to an end, and, by cl 29 of the MOU, "protection" could be "terminated by the Commander, State Investigative Group, by notice in writing". This, in fact, occurred with effect from 1 August 1997. 249 In my opinion, however, for the reasons I have stated, the MOU did not detract from the promise made to Mr and Mrs Gray. That finding disposes of the argument based on the MOU. 250 The appellant submitted further that: "A finding that protection from financial disadvantage would entail financial support not only during the period of witness protection but also for some reasonable period thereafter … was not open on the evidence". 251 I have described the complete loss of identity that entering into a witness protection program involves and the difficulties that a witness would inevitably experience in attempting to obtain work while under their new identity and subject to police direction. When the witness protection program terminated in August 1997 Mr Gray was aged 74 years. Mrs Gray was then aged 59 years. Neither had worked since entering the program some seven and a half years previously. They still suffered from all the problems associated with their new identities. These consequences were reasonably foreseeable. In these circumstances, I consider that it was open to his Honour to find, as he did, that to comply with the promise made on behalf of the NCA, the NCA was required to provide reasonable financial assistance to Mr and Mrs Gray for a period of three years after the termination of the witness protection program (that being a reasonable period). 252 His Honour, in effect, treated the financial benefits payable in terms of the MOU as evidence of what reasonable financial support during the period of witness protection program entailed. In my opinion he was entitled to adopt this approach and to apply it when determining the compensation payable for the reasonable period after the termination of the witness protection program. 253 The appellant argued that the finding made by Austin J that Mr and Mrs Gray were entitled to financial support for a reasonable period after the witness protection program had terminated was not open on the pleadings. 254 The statement of claim, filed in 1998, alleged, by inference, that the NCA had promised financial support for an indefinite period and complained that the NCA had failed to provide financial support as promised. 255 During the trial, Mrs Gray's case was put on the basis that she and her husband were promised that they would not be financially disadvantaged for the rest of their lives. Austin J did not uphold this argument, but found that the promise was to the effect that financial support would be provided to Mr and Mrs Gray for a reasonable period after the termination of the witness protection program. In my opinion, on the pleadings and, having regard to the way in which the case was run, it was open to his Honour to make such a finding. The finding that the appellant was required to pay Mr Gray's income tax in respect of the benefits afforded to him (Ground 4) 256 Austin J held that: "[T]he assumptions encouraged by the [NCA's] conduct (here, its conduct in settling on amounts for sustenance on a net of tax basis) included the assumption that any tax payable in respect of the benefits under the witness protection program would be met by the [NCA]". 257 The appellant argued: "There was nothing in the evidence before the trial judge which suggested that there was ever any mention by anyone from the NCA about the question of the tax to be paid on the amounts referred to in the MOU. Also, there was no evidence by Mr and Mrs Gray as to any reference to the payment of tax. In those circumstances it is submitted that the facts could not establish that there was an encouraged assumption to the effect that the NCA would pay Mr Gray's income tax in respect of the payments and benefits he received under the witness protection program as found by the trial judge". 258 The appellant submitted that neither Mr or Mrs Gray nor Inspector Small "ever brought their minds to bear on the question of the taxability of the payments under the witness protection scheme at any time in 1990". 259 It is indeed the case that no party ever mentioned the question of income tax when the promise was made in 1990. I accept that no thought was given to the question of income tax at the time. But, in my view, that is not the issue. The true issue is whether, in order to fulfil its promise, the NCA was obliged to pay Mr Gray's income tax liability on the benefits he received from the NCA. 260 Austin J relied on the evidence of Mr Cashman that the amount under the witness protection program had been decided to be the appropriate level of accommodation and assistance needed for the sustenance of Mr and Mrs Gray, in circumstances where it was likely that they had no means of earning an income. The relevance of this finding is that, in such circumstances, to require Mr Gray to pay income tax on the benefits he received, would leave him with no funds with which to meet that liability. All the financial benefits he received from the NCA would be needed for the reasonable living expenses of himself and his wife. This, in effect, was accepted by Mr Cashman. It was also a view strongly held by Inspector Small. 261 It is a matter of some curiosity that the authorities did not advise the Commissioner of Income Tax of the benefits paid to Mr Gray during the period 1990 to 1997 until the witness protection program had been terminated. An inference arises that the reason for the delay in informing the Commissioner of Taxation was that the NCA or the police knew that if Mr Gray had been required to pay the income tax earlier, say in 1991 for the financial year ending 30 June 1991, he would have strenuously complained, as he and his wife would not then have been able to subsist on the benefits they were being paid. It is quite possible that in those circumstances the NCA may not have received his continued co-operation. 262 Accordingly, Mr Cashman's response, recorded in the following exchange, is not surprising: "Q. If the issue of income tax had been raised in 1990, it would have been part of the payments to be made as part of the witness protection program, that is to say, an income payment to be made as part of the witness protection program? A. That would have been contemplation, yes, if we were aware of that particular situation". 263 Mr Cashman accepted that the NCA intended, by the witness protection program, to provide "a level of sustenance" to Mr and Mrs Gray. This would involve paying their rent and some living expenses. He agreed that the financial benefits in fact afforded to Mr and Mrs Gray were intended to represent "the appropriate level of accommodation and amount for sustenance". 264 Once it was likely that Mr and Mrs Gray had no means of earning an income, which Mr Cashman knew when determining the appropriate level of living expenses, it followed that the benefits in fact paid to Mr and Mrs Gray represented a reasonable level of financial support net of tax. 265 Accordingly, in my view, Austin J correctly held that, in order to fulfil its promise to Mr and Mrs Gray, the NCA was obliged to meet the tax liability incurred by Mr Gray in consequence of the receipt of the benefits in question. Reliance (Ground 5) 266 The appellant submitted that Austin J should have placed little or no weight on the evidence of Mr and Mrs Gray on the issue of reliance. The appellant points to a number of matters that it contends should have persuaded Austin J to find against Mr and Mrs Gray on this issue. 267 The matters in question involve: (a) The absence of any reference to the question of reliance in any of the letters written by Mr and Mrs Gray when requesting greater financial assistance. (b) The fact that Mr Gray wore a listening device on 24 January 1990 without regard to financial considerations. (c) The very serious threats to the lives of Mr and Mrs Gray. 268 The matters raised by the appellant have force. They were, however, all taken into account by Austin J. 269 His Honour based his decision not only on the evidence of Mr and Mrs Gray but that of Inspector Small. He said: "A fair reading of Inspector Small's evidence demonstrates, in my view, that the question of financial security, involving both compensation for financial losses and payment of living expenses, was a substantial issue for the plaintiffs". 270 His Honour decided that Mr and Mrs Gray relied upon Inspector Small's representations about their future financial security as well as the other matters that bore upon their decision. In my view, this finding was readily open to his Honour and should not be overturned by an appellate court. His Honour's reasons for finding that Mr Gray's conduct did not affect his entitlement (Ground 10) 271 The appellant submitted that Austin J erred in failing to give any or, alternatively, any adequate reasons for finding that Mr Gray's conduct did not affect any entitlement to equitable compensation. 272 His Honour dealt expressly with the delay on the part of Mr and Mrs Gray in bringing their claim and also with the effect of the benefits they had received from the NCA. These were two of the matters on which the NCA had relied in contending that Mr Gray's conduct affected any entitlement that he might have to equitable compensation. The learned judge found that there was no unreasonable delay on the part of Mr and Mrs Gray. He said that there was no basis to reduce the compensation by reference to the benefits in fact received. He explained that the equitable compensation he ordered related to matters outside those benefits. 273 In regard to the other aspects of Mr Gray's conduct relied on by the appellant, his Honour said: "I see no basis for interfering with the award of equitable compensation by reference to any of those matters". 274 The appellant, in its defence, pleaded that it should not be ordered to pay equitable compensation to Mr and Mrs Gray, or alternatively, the equitable compensation should be reduced in view of: "(a) the protection provided to the Plaintiffs at the request of the Defendant under the witness protection program; (b) the fact that substantial financial benefits have been provided by the Defendant to the Plaintiffs in the period 1990-1997; (c) the fact that the Defendant provided non financial support to the Plaintiffs in the 1990-1997 period. (d) the fact that in or about late 1989 and January 1990 the First Plaintiff committed offences contrary to section 82(1) of the Proceeds of Crime Act 1987 (Cth) and the Plaintiffs agreed to assist the Defendant and enter the witness protection program as a direct result of that criminal conduct coming to the attention of the Defendant; (e) the fact that on 16 October 1990 the First Plaintiff said in proceedings before G Cusack QC that at the appropriate time if he was able he proposed to refund moneys paid to him by the Defendant; (f) the fact that the Plaintiffs did not appeal against the decision to terminate them from the witness protection program in accordance with the provisions of the Witness Protection Act 1995; and (g) the fact that any representations made were made by persons who were law enforcement officers who were seeking information from the First Plaintiff in order to bring to trial persons who had committed very serious offences against the laws of the Commonwealth". 275 The appellant submitted that in the light of the matters pleaded, Austin J did not give proper reasons for his finding that Mr Gray's conduct did not affect any entitlement to equitable compensation. 276 In my opinion, the reasons so given by his Honour, particularly when read with the judgment as a whole, which was fully detailed and comprehensive, were adequate. The effect of Mr Gray's conduct on the entitlement of his estate to compensation 277 The appellant submitted that, in any event, for the reasons pleaded in its defence, his Honour should have declined equitable compensation to Mr Gray's estate. This matter was not part of the grounds in the notice of appeal, but it was argued fully in the appellant's written submissions and I shall deal with it. 278 I agree with his Honour's observations in relation to the question of delay and the benefits in fact received. I need say no more about these matters. 279 I come now to the argument that Mr Gray's estate should receive nothing, or less than the promised benefits, because he was guilty of offences contrary to s 82(1) of the Proceeds of Crime Act. 280 Prior to the making of the representations, the NCA strongly suspected that Mr Gray had committed offences under the Proceeds of Crime Act. It was for that reason that he was put under surveillance. Moreover, on 24 January 1990, Inspector Small said to Mr Gray: "We have got you. We have been following you around. We know you have been sending dirty money overseas". Mr Gray, himself, told Inspector Small that he believed that the money was "black tax money". 281 Accordingly, the representations were made in the knowledge that it was likely that, in the past, Mr Gray had unlawfully transferred money overseas. 282 At no point during the trial was it suggested that, as a matter of public policy, Mr Gray was not entitled to compensation by reason of the promise that had been made to him. 283 It is quite apparent that, at the time, the NCA was desperate to obtain Mr Gray's co-operation and the promise was made to induce him to co-operate on a continuing basis. 284 The NCA did not promise to compensate Mr Gray for his inability to continue with his criminal activities. Rather, the promise assured Mr and Mrs Gray that they would live a reasonable existence, despite having to enter witness protection, and that Mrs Gray would receive compensation for having to sell the Cutting Bird. 285 In my view, it would be unconscionable, in the circumstances, to allow the NCA to break its promise to provide reasonable financial support to Mr Gray on the ground that he had previously earned money from criminal activities. That promise had been made deliberately, in full knowledge of what it entailed. I regard the argument that the NCA can escape liability to pay compensation on this ground as utterly without merit. 286 During the course of a special investigation by the NCA, Mr Gray said: "The matter of compensation was raised, the monies that were paid to me by the National Crime Authority were raised and it is on record, as far as I am concerned, that those monies are being used by me for sustenance at this moment. At the appropriate time if I am able I propose to refund those monies". The appellant submitted that this statement by Mr Gray should affect the compensation payable to him. 287 I see nothing in Mr Gray's remark that could affect the NCA's obligation to keep its promise. There is nothing to suggest that Mr Gray was ever in a financial position that would have allowed him to refund monies received and there is no evidence that his estate is in such a position. 288 As regards the omission on the part of Mr and Mrs Gray to appeal from the decision to terminate the witness protection program, the finding that the MOU has no bearing on the promise made by the NCA means that the omission in question has no bearing on the obligation owed by the NCA to Mr and Mrs Gray. In any event, the main complaint of Mr and Mrs Gray is not that the witness protection program was terminated, but that the NCA did not keep its promise by continuing to provide reasonable financial support for a reasonable time after the termination of the program. Detriment (Ground 12) 289 Austin J held that by going into the witness protection program Mr and Mrs Gray suffered detriment. He said: "The steps taken by Mr and Mrs Gray in reliance on the encouraged assumptions fundamentally changed their lives. They were severed from their lawful means of livelihood, and they placed themselves in the hands of the [NCA], thereby making themselves highly vulnerable. It would be outrageously unfair to permit the [NCA] to resile from the assumptions encouraged by Inspector Small's conduct". 290 The appellant submitted that Mr and Mrs Gray obtained very substantial benefits from entering into the witness protection program. These involved physical protection, new identities and sustenance and accommodation. The appellant submitted that, had they not entered the witness protection program, they would have had to face a serious risk of death or serious injury from the members or associates of the Saxon and Schneiders drug syndicate. For these reasons, the appellant submitted, Mr and Mrs Gray had not suffered detriment. 291 Mr Aldridge argued that the appellant's submissions ignore the continuing co-operation provided by Mr Gray over a period of seven years. He submitted: "Throughout that time Mr and Mrs Gray were subject to the control of the appellant and required to do its bidding. They were required to keep assumed names, stay away from their friends and business associates. This is far more than would have occurred had they not agreed to co-operate in the way they did. They suffered a real detriment by entering not just into the witness protection program but entering into the agreement to assist and co-operate with the appellant in such ways as the appellant saw fit. This they clearly did. Mr Gray clearly kept every part of his arrangement with the NCA yet the NCA seeks to renege from its part of the agreement now that he has so co-operated". 292 In my opinion, Mr Aldridge's submissions should be accepted. It is undoubtedly correct that at the time Mr and Mrs Gray agreed to enter the witness protection program they faced a risk of death or serious physical injury. The extent of this risk was, however, speculative and, while threats were made, it is not known to what extent they were likely to have been carried out. On the other hand, Mr and Mrs Gray remained in witness protection, giving full co-operation to the NCA and police authorities, long after Saxon was imprisoned and Schneiders had escaped and presumably left the country. 293 At the termination of the witness protection program, Mr and Mrs Gray were virtually destitute, to the degree that Inspector Small, himself, felt compelled to lend them $6,000 to assist them in living expenses. At no point in their lives, prior to entering into the witness protection program, had they been in such a position. There can be no doubt that the financial situation in which they found themselves resulted from being in the witness protection program. 294 In the circumstances I consider that his Honour's finding as to detriment was correct. Causation (Ground 7) 295 The appellant argued that Austin J erred in finding that the appellant's conduct caused the respondents' loss. The appellant submitted that Mr and Mrs Gray were, by the circumstances in which they found themselves, compelled to enter into the witness protection program. It was said that, accordingly, on a commonsense basis, the conduct of the NCA was not a cause of their loss. 296 It is sufficient to say, I think, that the relevant loss of Mr and Mrs Gray resulted from the failure of the NCA to keep its promise. They suffered serious financial disadvantage by reason of entering the witness protection program. On this basis causation is self-evident. Unconscionability (Ground 6) 297 The appellant argued that Austin J erred in finding that the appellant's departure from any assumption created by Inspector Small's representation was unconscionable. 298 The argument that Austin J erred in relation to his findings as to unconscionability is based on three propositions: (a) His Honour failed to give effect to the MOU. (b) His Honour failed to take into account the fact that Mr Gray's own acts had caused him to be in the position he was in. (c) His Honour failed to take into account that Mrs Gray simply followed the decision of Mr Gray, whose own acts were responsible for his position at the time. 299 I have dealt with all these arguments above. I consider them to be without merit. The value of Mrs Gray's business (Grounds 8 and 9) 300 In setting the value of the Cutting Bird, Austin J accepted the expert evidence of one Mr Mendel. I do not think it necessary to say more about this ground than that it was open to his Honour to accept the evidence of Mr Mendel in preference to the evidence of that of the appellant's witness Mr Weeks. In essence, the appellant's submissions are to the effect that his Honour should have accepted the evidence of the appellant's witness rather than Mr Mendel. In preferring Mr Mendel his Honour did not fall into any appealable error. 301 The appellant asserts that Austin J erred in failing to give any or any adequate reasons for preferring Mr Mendel. 302 His Honour's reasons for preferring the evidence of Mr Mendel were as follows: "Mr Weeks, the defendant's valuer, took an approach which asserted that Mrs Gray and her daughter worked for substantially less than a fair wage. I do not believe that the evidence supports any such assertion, when one takes into account the oral evidence. In all these circumstances, I have decided the best approach is to adopt Mr Mendel's methodology, which has the attraction of simplicity, but to take out the assumed additional profit of $10,000. That would produce a valuation of between $40,000 and $50,000. I shall take the midpoint, $45,000". 303 In my opinion, the reasons so given by his Honour were entirely adequate. The cross-appeal 304 Mrs Gray contended that his Honour erred in failing to order that the tax liability in respect of $224,084.55 plus interest be paid to her in her capacity as administrator of the late Mr Gray's estate, instead of ordering that it be paid to the Australian Taxation Office. 305 Mr Aldridge submitted that an order in those terms might affect the priority of payments in the estate and give the Australian Taxation Office a possible preference or advantage to which it otherwise might not be entitled. He submitted that the appropriate order would be that the amount be paid to the estate so that it could be dealt with according to law. 306 In my opinion, the argument advanced on behalf of Mr Aldridge should be accepted and I would uphold the cross-appeal in this respect. 307 Secondly, Mr Aldridge argued that Austin J had erred in that his assessment of compensation (excluding that relating to the value of the Cutting Bird) was unreasonably low. This proposition was not put with any enthusiasm and in my opinion it has no substance. 308 Thirdly, Mr Aldridge argued that Austin J erred in setting off against the compensation the amounts that Mr and Mrs Gray had received by way of pension benefits. In deducting the pension benefits, Austin J observed: "The compensation is compensation for the loss of the net benefit of the sustenance allowance and other payments, and if (as was the case) after leaving the witness protection program the Plaintiffs were in a position to obtain something that they were not obtaining under the witness protection arrangements, then what they were able to obtain should reduce the amount of compensation they were entitled to receive". 309 In my opinion, his Honour's reasoning is correct and I would dismiss this ground of the cross-appeal. Conclusion 310 I would dismiss the appeal with costs. 311 I would uphold the cross-appeal to the extent that I would set aside the order made by Austin J that the sum of $224,084.55 plus interest be paid to the Australian Taxation Office and would order, in lieu thereof, that sum and interest to be paid to Mrs Gray as administrator of the estate of the late Mr Gray. I would otherwise dismiss the cross-appeal. 312 I would make no order as to costs in regard to the cross-appeal. 313 TOBIAS JA: I agree with Mason P. ********** Last Modified: 03/19/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.