Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Youssef v Commissioner of the Australian Federal Police [2019] NSWCA 272 Hearing dates: 21 October 2019 Decision date: 06 November 2019 Before: Gleeson JA at [1] Emmett AJA at [4] Barrett AJA at [19] Decision: (1) Dismiss the summons seeking leave to appeal. (2) Order that the applicants pay the respondent Commissioner's costs. Catchwords: CRIME – dealing with money suspected of being proceeds of crime – restraining order on property – Proceeds of Crime Act 2002 (Cth), s 44 – where applicants purchased real property using money alleged to be proceeds of crime – restraining order under s 18 made in respect of the property – applicants apply under s 44 for exclusion of the property from the restraining order upon their undertaking to use their best endeavours to obtain money from a particular bank account and pay it to the liquidator of the company from which they had received the alleged proceeds of crime – that bank account given "post credits only" status by bank – the application for the loan facility under which the money in the account was obtained from the bank was shown to contain material misstatements – no evidence from the applicants establishing that the bank would allow drawing on the account – whether primary judge erred in finding the undertaking not satisfactory and in refusing to make s 44 excluding order Legislation Cited: Conveyancing Act 1919 (NSW), s 187 Criminal Code (Cth), ss 134.2, 400.9 Proceeds of Crime Act 2002 (Cth), ss 18, 29, 34, 37, 44 Real Property Act 1900 (NSW), s 74F Supreme Court Act 1970 (NSW), s 101 Cases Cited: Australian Meat Industry Employees' Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98; [1986] HCA 46 Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194; [2000] HCA 47 Commissioner of the Australian Federal Police v Pharmacy Depot Hurstville Pty Ltd [2019] NSWSC 643 Duyvelshaff v Cathcart & Ritchie Ltd (1973) 47 ALJR 410 House v The King (1936) 55 CLR 499; [1936] HCA 40 Category: Principal judgment Parties: Zeinab Youssef (First Applicant) Hussein Mohamed Ali Haidar (Second Applicant) Commissioner of the Australian Federal Police (Respondent) Representation: Counsel: J Dooley (Applicants) EA Cheeseman SC / D Tang (Respondent) Solicitors: Streeton Lawyers (Applicants) HWL Ebsworth (Respondent) File Number(s): 2019/200888 Publication restriction: N/A Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Common Law Division Citation: [2019] NSWSC 643 Date of Decision: 03 June 2019 Before: R A Hulme J File Number(s): 2015/114787 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] headnote [This headnote is not to be read as part of the decision] The applicants owned and lived in an apartment which they purchased in 2014. They paid for the purchase in full using money received by them from Pharmacy Depot Hurstville Pty Ltd ("Pharmacy Depot"). The Commissioner commenced proceedings on the footing that Pharmacy Depot and its directors and shareholders, one of whom was the brother of one of the applicants, had defrauded the Pharmaceutical Benefits Scheme to the extent of some $18 million and thereby committed offences against the Criminal Code (Cth). In June 2015, the applicants obtained a loan of $600,000 from Westpac Banking Corporation ("Westpac") on the security of a mortgage of the property. The loan proceeds were placed in an offset account with Westpac in the names of the applicants. On 10 March 2017, a restraining order was made under s 18 of the Proceeds of Crime Act 2002 (Cth) ("the POC Act") restraining dealings with the property by any person (except by Westpac under its security) and vesting custody and control of the property in the Official Trustee in Bankruptcy. The applicants applied to the Supreme Court under s 44 of the POC Act for an order excluding the property from the restraining order upon the giving by the applicants to the Court of an undertaking that they would use their "best endeavours" to draw down funds standing to their credit in the offset account and pay those funds to the liquidator of Pharmacy Depot and that, pending such payment, they would not deal with the property. The primary judge found that the loan application made by the applicants to Westpac had contained materially misleading information, and there was significant doubt whether, with the offset account having "post credits only" status after the making of the restraining order, Westpac would reactivate the redraw authority on that account to allow drawings by the applicants. The primary judge dismissed the application because the undertaking was not, in terms of s 44, "satisfactory to the court". The applicants sought leave to appeal, alleging that the primary judge fell into error in making the finding. Held, dismissing the application for leave appeal (Barrett AJA, Gleeson JA and Emmett AJA agreeing): (i) The primary judge did not err in drawing inferences regarding the applicants' ability to access funds in the Westpac offset account when considering the s 44 application. (ii) The applicants' loan application presented a patently and materially false picture of their financial circumstances. (iii) The applicants did not adduce any evidence to engender confidence in the viability of the undertaking proposal they were propounding. (iv) The primary judge was astute to draw available and perfectly sensible inferences from the material the applicants had chosen to place before him. (v) The grounds of appeal lacked merit. Observations by Emmett AJA on considerations that may be relevant to any renewed application under s 44. Judgment 1. GLEESON JA: I agree with Barrett AJA. I have one brief comment. 2. Given the refusal of leave to appeal, it is not necessary for this Court to address the second reason advanced by the Commissioner for why the undertaking offered by the applicants to exclude the Arncliffe property from the restraining order was not, in terms of s 44(2) of the Proceeds of Crime Act 2002 (Cth), "satisfactory to the court". That reason concerned the limitation of the quantum of the applicants' undertaking to $600,000, notwithstanding that the entirety of the Arncliffe property was proceeds of crime and the property was likely to be worth significantly more than $600,000. The applicants' response was to point to the circumstance referred to in [26] of the judgment of Barrett AJA, in short, that the applicants had acquired the Arncliffe property at a significant discount of about $200,000 to the selling price. 3. It was the contention of the applicants that they had made, in effect, a de facto contribution of $200,000 to the acquisition of the Arncliffe property, and that this should be taken into account in assessing whether the limitation of the quantum of the undertaking was "satisfactory to the court". This rather novel contention raises legal questions of some difficulty which are more appropriately addressed in a suitable case where the question is dispositive. 4. EMMETT AJA: These proceedings are concerned with the Proceeds of Crime Act 2002 (Cth) (the Proceeds Act). The applicants, Ms Zeinab Youssef (the Purchaser) and Mr Hussein Haidar (Mr Haidar), are the registered proprietors of an estate in fee simple in an apartment situated in Arncliffe (the Property). On 10 March 2017, a judge of the Common Law Division made an order, on the application of the respondent, the Commissioner of the Australian Federal Police (the Commissioner), that the Property must not be disposed of or otherwise dealt with by any person except in the manner and circumstances specified in the order (the Restraining Order). 5. By notice of motion filed on 13 April 2018, the applicants applied, in effect, for an order that the Restraining Order be revoked. On 3 June 2019, for reasons published on that day, a judge of the Common Law Division (the primary judge) ordered that their application be dismissed and that the applicants pay the Commissioner's costs. By summons filed on 28 June 2019, the applicants now seek leave to appeal from the orders made by the primary judge. Leave to appeal is required because the Restraining Order is interlocutory. 6. On 30 October 2014, the Purchaser entered into a contract for the purchase of the Property for the price of $550,000. The vendors under the contract were cousins of the second applicant and had developed the building in which the Property is located. The Property had been listed for sale at the price of $789,000 and the sale price was said to be a gift by the vendors to the applicants of difference between the price paid and the list price. The purchase of the Property was completed on 16 December 2014. 7. The whole of the purchase price of $550,000 was provided to the applicants by Pharmacy Depot Hurstville Pty Ltd (the Company). Jacob Youssef, the brother of the Purchaser, was a director and shareholder of the Company, together with Mr Hamza Zoghbi. In August 2014 the Company paid the sum of $250,000 to Mr Haidar, out of which the $55,000 deposit for the Property was paid. In December 2014 the Company paid the Purchaser a separate sum of $308,000, by way of bank cheque made out to the vendors of the Property. The balance of the purchase price for the Property was paid from the total amount of $558,000 paid by the Company to the applicants. The Commissioner contended that the funds so provided were derived by the Company making fraudulent claims under the Pharmaceutical Benefits Scheme. The applicants claimed that the funds provided were by way of loan by the Company. In the absence of documentary evidence of the making of a loan by the Company to the applicants, the primary judge was not satisfied as to that claim. 8. The objects of the Proceeds Act include depriving persons of the proceeds of offences and benefits derived from offences against the laws of the Commonwealth. Section 18 relevantly provides that a court must order that a property must not be disposed of or otherwise dealt with by any person if: * the Commissioner applies for the order; and * there are reasonable grounds to suspect that a person (the suspect) has committed a serious offence; and * the affidavit requirements of s 18(3) have been met. Those requirements are that an application for an order to restrain property of a person other than the suspect must be supported by an affidavit of an authorised officer stating that the authorised officer suspects that the suspect committed the offence and that the authorised officer suspects that the property is proceeds of the offence. Under s 329 of the Proceeds Act, property is proceeds of an offence if it is partly derived or realised, directly or indirectly, from the commission of the offence. It is not disputed that the Restraining Orders were authorised by s 18 of the Proceeds Act. 1. Section 44(2)(a) of the Proceeds Act relevantly provides that a court may revoke a restraining order that covers the property of a person who is not a suspect if: * the person applies to the court to revoke the order, * the person gives written notice of the application to the Commissioner, and * the person gives an undertaking concerning the person's property that is satisfactory to the court. In the course of the hearing before the primary judge, an undertaking on behalf of the applicants was proffered, relevantly, in the following terms: 1. This undertaking is given pursuant to s 44 of the [Proceeds Act] to exclude [the Property] from [the Restraining Order]. 2. Upon the exclusion of the Property from [the Restraining Order], [the applicants]: (a) must use their best endeavours to draw down funds standing to their credit in respect of the Westpac Bank account no … (b) undertake to pay (or to authorise payment of) the entirety of those funds to the liquidator of [the Company]; (c) undertake not to encumber or dispose of any interest in the Property prior to the making of the payment referred to in (b) above. 1. The Westpac bank account referred to in the undertaking (the Westpac Account) is a redraw account containing the proceeds of drawdown of a loan of $600,000 made by Westpac to the applicants on 18 June 2015. The full amount of the loan was placed in the Westpac Account so that no interest would be incurred on the loan funds. The Purchaser gave a mortgage of the Property to Westpac to secure the loan. 2. The approval of the loan by Westpac was based on an assessment of the financial position of the applicants set out in a loan application form, which the primary judge characterised as being "utterly misleading". His Honour found that Westpac was also misled as to the purposes for which the loan was sought and was not told that the loan was required to pay back funds provided by the directors of the Company, who were being investigated for an $18 million fraud. Rather, the applicants told Westpac that they wished to purchase an investment property. 3. The primary judge found that the entirety of the Property constituted proceeds of crime and not just the proportion of it represented by the funds received by the Purchaser from the Company. There was no evidence as to the current value of the Property although his Honour found that it had been on the market for $789,000 in 2014 when it was sold to the Purchaser. His Honour found that, in March 2016, the Purchaser had a willing buyer at a price of $920,000 but withdrew the Property from the market. 4. The primary judge had significant doubt as to whether Westpac would be willing to reactivate the redraw authority on the Westpac Account, since the loan made in 2015 was based on the "utterly misleading" statement of the applicants' financial position. His Honour considered that if a further assessment were to be carried out by Westpac, it was likely that Westpac would take a different view. His Honour said the applicants had placed no evidence before the Court to inspire any confidence that they would in fact be granted access to the funds in the Westpac Account. 5. Westpac wrote to the Purchaser on 20 March 2017 enclosing a copy of the Restraining Order. Westpac's letter said that, as a result of the Restraining Order, Westpac had placed a "Post Credits Only status", on the Westpac Account and that, while monies could be deposited into the Westpac Account, no further drawings would be allowed until such time as the Restraining Order was varied. Westpac said that, if the Restraining Order was "lifted", the Purchaser would be required to complete a new authority for redraw to be re-activated on the Westpac Account. 6. On 25 July 2017, the Purchaser sent an email to Westpac seeking clarification as to whether the funds in the Westpac Account would be available "once the order is lifted". Westpac replied on 26 July 2017 saying that, when "the Order is lifted", the applicants would be required to complete a new authority for redraw to be reactivated on the Westpac Account and that, once that authority had been processed by "The Mortgage Centre", the applicants would be able to access any funds available for redraw. 7. On 2 April 2019, the Purchaser sent a further email to Westpac asking whether there had been any change to what was set out in the email of 26 July 2017. Westpac replied on 3 April 2019 confirming that, in the event "the restraint is lifted", the applicants would be required to provide a new redraw authority for redraw to be reactivated by visiting their local Westpac branch. There is no evidence as to precisely what steps were required to achieve a reactivation. 8. I have had the advantage of reading in draft form the proposed reasons of Barrett AJA. I agree with Barrett AJA that the proposed grounds of appeal are without merit. Accordingly, I agree with the orders proposed by his Honour, that the summons seeking leave to appeal be dismissed and that the applicants pay the Commissioner's costs of the application. 9. However, neither those orders nor the orders made by the primary judge would preclude a further application under s 44(2) supported by evidence showing a relevant change of circumstances. That is to say, there would be nothing to prevent the applicants from making a further application for an order under s 44 of the Proceeds Act supported by evidence at least as to: * the value of the Property at the time of purchase and at the time of the further application; * funds definitely being available to them, either from the Westpac Account or a different source, to make an appropriate payment to the Company or the Commissioner based on those values; and * an undertaking by them that does not leave open any possibility of the Property being released from the Restraining Order prior to the payment of the appropriate sum to the Company or the Commissioner. There may (and I emphasise may) then be a possible basis for revoking the Restraining Order. 1. BARRETT AJA: These proceedings [1] arise from dismissal by a judge of the Common Law Division (R A Hulme J) of an application for an order that certain real property be excluded from a restraining order made under the Proceeds of Crime Act 2002 (Cth) ("the POC Act"). The restraining order was made on 10 March 2017. Background 1. The owners of the property are Mr Hussein Mohamed Ali Haidar and Ms Zeinab Youssef [2] (referred to, for convenience, as "the applicants") who are husband and wife. The property is a strata title unit at Arncliffe of which the applicants are the owners as joint tenants. They live there with their five children. 2. The restraining order of 10 March 2017 was made under s 18 of the POC Act on the application of the Commissioner of the Australian Federal Police. The order stated that the Arncliffe property "must not be disposed of or otherwise dealt with by any person" except in accordance with accompanying orders, one of which allowed Westpac Banking Corporation ("Westpac"), the registered mortgagee, to deal with the property in accordance with the terms of its mortgage. Another accompanying order vested custody and control of the property in the Official Trustee in Bankruptcy. 3. The application for the orders ultimately made on 10 March 2017 was by way of notice of motion filed in proceedings commenced by a summons filed by the Commissioner in April 2015 which named three defendants, being Pharmacy Depot Hurstville Pty Ltd ("Pharmacy Depot") [3] and its directors and shareholders, Jacob Youssef and Hamzi Amin Zoghbi. It was alleged that those defendants had defrauded the Pharmaceutical Benefits Scheme to the extent of some $18 million and had committed offences of obtaining a financial advantage from the Commonwealth by deception (Criminal Code (Cth), s 134.2) and dealing with money exceeding $100,000 reasonably suspected of being the proceeds of crime (Criminal Code (Cth), s 400.9(1)). There is no suggestion that the applicants were guilty of such criminal wrongdoing. 4. With a view to having the Arncliffe property excluded from the restraining order of 10 March 2017, the applicants made the application ultimately determined by the primary judge. They sought, in the alternative, an order under s 29 of the POC Act and an order under s 44. The latter (and alternative) application was made on the basis that the applicants would give a particular undertaking to the Court. 5. The application determined by the primary judge will be better understood in the light of a brief description of some of the relevant statutory provisions. Section 18 of the POC Act requires a relevant court to make a restraining order with respect to property if, among other things, "there are reasonable grounds to suspect" that the property is "the proceeds of… any… indictable offence". The person against whom such an order is made need not be a person who committed or was involved in the commission of that indictable offence. The order of 10 March 2017 affecting the applicants was made under s 18. Section 29(1) requires that a court exclude a specified interest in property from a restraining order made under any of several sections (including s 18) if it is satisfied that a reason for exclusion set out in s 29(2) or s 29(3) exists. Section 44(2) permits (but does not require) a court to exclude specified property from a restraining order affecting a person who (like each of the applicants) is not a "suspect" if, among other things, the person "gives an undertaking concerning the person's property that is satisfactory to the court". 6. Jacob Youssef (one of the directors and shareholders of Pharmacy Depot) and Ms Youssef (one of the applicants) are brother and sister. It is not in dispute that the applicants together received $558,000 from Pharmacy Depot and used that money to purchase the Arncliffe property. A sum of $250,000 was received by Mr Haidar in August 2014. A separate sum of $308,000 was received by Ms Youssef in December 2014. The Arncliffe property was purchased for $550,000 under a contract dated 30 October 2014. The deposit of $55,000 was satisfied out of the money Mr Haidar had received from Pharmacy Depot. The purchase was completed on or about 16 December 2014. The balance payable on completion was met wholly out of money received from Pharmacy Depot. In the first instance, Ms Youssef alone became the owner. Steps were taken to cause Mr Haidar and Ms Youssef to be co-owners as a preliminary to the execution of the mortgage to Westpac to be mentioned presently. 7. The vendors of the property were property developers who had constructed the block of units. They were cousins of one of the applicants (Mr Haidar) and it was found that the sale price of $550,000 represented a very significant discount to the market value of the property (of the order of $200,000) apparently granted as a gesture of family generosity. Decision of the primary judge 1. For reasons published on 3 June 2019, [4] the primary judge dismissed the application for an excluding order under s 29 or, in the alternative, s 44(2). The application under s 29 was advanced on the footing that the two sums making up $558,000 made available by Pharmacy Depot were loans. The primary judge found that the applicants had not proved that the payments were of that character and declined to make an order under s 29. The application under s 44(2) was pressed on the basis of the willingness of the applicants to give a particular undertaking, as follows: 1. This undertaking is given pursuant to s 44 of the Proceeds of Crime Act 2002 [(Cth)], to exclude the property located at [address] Arncliffe, NSW . . . (Property), from the order made in these proceedings on 10 March 2017 (Order). 2. Upon the exclusion of the Property from the Order, Zeinab Youssef and Hussein Mohamed Ali Haidar (Applicants): a. must use their best endeavours to draw down funds standing to their credit in respect of the Westpac bank account number [number]; b. undertake to pay (or to authorise payment of) the entirety of those funds to the liquidator of Pharmacy Depot Hurstville Pty Ltd (in liquidation) ([ACN] 163 892 939); c. undertake not to encumber or dispose of any interest in the Property prior to the making of the payment referred to in (b) above. 1. The proposal put forward by the applicants was thus that the restraining order affecting the Arncliffe property should be removed in return for their undertaking to the Court, first, to use their best endeavours to draw down $600,000 from an account they had with Westpac (which funds, if obtained, would be paid to the liquidator of Pharmacy Depot) and, second (and if the funds were not obtained from Westpac and passed to the liquidator), to refrain from encumbering or disposing of any interest in the Arncliffe property. The likely availability of the $600,000 was crucial to an appraisal of that proposal. 2. The primary judge declined to find that that undertaking was, in terms of s 44(2), "satisfactory to the court". His Honour's reason was, in summary, that it had not been sufficiently shown by the applicants that the $600,000 would be forthcoming. The result was that the discretion under s 44(2) to make an excluding order was not activated and the order sought was not made. The applicants' case in this Court 1. In this Court, the applicants challenge only the decision on the application made under s 44(2). Their grounds of appeal are, quite simply, that the primary judge erred in deciding not to exercise the s 44(2) discretion in their favour and should have done so upon their giving the particular undertaking. The contention is, clearly enough, that the primary judge's discretion miscarried. 2. Central to the applicants' case are paragraphs [111] to [119] of the primary judge's reasons which should be set out in full: 111. There is a very powerful subjective case raised by the applicants in support of exclusion pursuant to the Court's discretion. Counsel developed the case persuasively in written and oral submissions. Without meaning to discount the force of the submissions at all, the argument can be summarised quite briefly: the consequences of not excluding the applicants' family home from restraint are potentially ruinous for them financially, they being a married couple with very modest incomes who now have five children. It was submitted that such consequences should be considered in the light of there being no suggestion of criminal wrongdoing on their part. Rather they are "innocent participants" in "an incredible series of events". 112. Counsel pointed out that the effect of the undertaking is that the entire $558,000 the applicants received from Pharmacy Depot would be returned and a further sum of $42,000 would be paid. 113. It is the entirety of the Property which is proceeds of crime, not just the proportion of it represented by the $558,000 the applicants received from Pharmacy Depot. There is no evidence as to what the Property might be worth now. It was on the market for $789,000 in 2014 when it was sold to the applicants by Mr Haidar's cousins at a discounted price. In March 2016, the applicants had a willing buyer at a price of $920,000 but they withdrew the Property from the market. 114. The $600,000 the applicants are prepared to repay now was the amount Westpac lent the applicants in 2015, no doubt based upon its assessment of their financial situation – as disclosed – at that time. There is no evidence as to whether the applicants might be in a position to borrow a greater amount now. 115. There are reasons to have significant doubt as to whether Westpac would be willing to reactivate the applicants' redraw authority on the offset account. The loan advance made in 2015 was based upon an assessment of the applicants' financial situation as set out in the loan application form. That financial situation was utterly misleading (for example, the applicants jointly owned assets valued at $1,078,093 and had very minimal liabilities). The bank was also misled as to the purpose for which the loan was sought. It was not told that the loan was required to pay back funds provided by the directors of a company who were being investigated for an $18 million fraud; rather, it was told that the applicants wished to purchase an investment property. 116. If a further assessment were to be carried out now, it is quite likely that Westpac would take a different view. The applicants have placed no evidence before the Court to inspire any confidence that they will in fact be granted access to the funds in the offset account. 117. It is not the end of the matter if the application for discretionary exclusion from restraint pursuant to s 44 is not granted. Senior counsel for the [Australian Federal Police] carefully set out the statutory scheme which allows for further applications for relief at subsequent stages of the processes engaged, from restraint through to forfeiture. The relevant provisions include s 47(4) (exclusion from forfeiture if not in the public interest); s 48(3) (consideration of hardship and other matters); s 72 (ordering the Commonwealth to pay a specified amount to relieve hardship to dependents); and s 73 (exclusion of property from forfeiture if the applicant's interest is neither proceeds of unlawful activity or an instrument of a serious offence). I have borne in mind these possible alternative forms of relief that might become available to the applicants, but I acknowledge that they would probably offer them little comfort. Time and cost will be very real issues for them. 118. While it would be easy to decide this application on the basis of sympathy, the reality is that the applicants became the registered proprietors of the Property on a completely wrong basis and they now seek to extricate the Property from restraint by the use of bank funds which they also obtained on a wrong basis. 119. The applicants have not discharged their onus of establishing on the balance of probabilities that an order for discretionary exclusion from restraint should be made. Principles relevant to the applicants' case 1. As described in Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194; [2000] HCA 47 at [21], the primary judge's decision whether the undertaking proffered by the applicants was, in terms of s 44(2), "satisfactory to the court" was one in which any of many considerations could have been determinative and on which the statute allowed choice of outcome, so that review on appeal can only be on the basis of error of the kind identified in House v The King (1936) 55 CLR 499 at 504-505; [1936] HCA 40: It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred. The errors alleged 1. The applicants accept that House v The King applies and contend that the primary judge mistook the facts in a way described in that case. The three factual findings said to involve such error are: 1. the finding that "[t]here are reasons to have significant doubt as to whether Westpac would be willing to reactivate the applicants' redraw authority on the offset account"; 2. the finding that "[i]f a further assessment were to be carried out now, it is quite likely that Westpac would take a different view"; and 3. the finding that "[t]he applicants have placed no evidence before the Court to inspire any confidence that they will in fact be granted access to the funds in the offset account. Assessment 1. As the paragraphs of his judgment set out at [31] above show, the primary judge made a close examination of the facts surrounding the finance arrangements that the applicants had made with Westpac and upon which they placed heavy reliance as a basis for the proffering of the proposed undertaking. Westpac had approved a loan to the applicants in June 2015 against a mortgage of the Arncliffe property. As I have said, they completed the purchase of that property on or about 16 December 2014. The mortgage was granted and registered and the full amount of the facility, being $600,000, was advanced to the applicants but placed immediately in a redraw or offset account so that no interest became payable on the principal borrowed. The drawdown of funds contemplated by the undertaking was a drawing from this redraw or offset account. 2. The free availability (or otherwise) to the applicants of the full amount standing to the credit of that Westpac account was, as I have said, crucial to an appraisal of proposal that the undertaking replace the restraining order. The regime envisaged by that proposal was such that the following steps would be taken in the following order: 1. The applicants would give the undertaking to the Court. 2. The Court would make an order under s 44(2) of the POC Act excluding the Arncliffe property from the restraining order made on 10 March 2017. 3. Upon the making of the excluding order, the applicants would be constrained by their undertaking from encumbering or disposing of any interest in the property unless and until they had made a payment as referred to in (5) below. 4. The applicants would, in obedience to their undertaking, "use their best endeavours to draw down funds standing to their credit" in the identified Westpac bank account. 5. If their "best endeavours" caused the funds standing to their credit in the Westpac bank account to be received by them, the applicants would, again in obedience to their undertaking, pay the whole of those funds to the liquidator of Pharmacy Depot. 1. In summary, therefore, the property would become free from the operation of the statutory restraining order at the same time as the applicants became bound by an undertaking to the Court; and this would happen regardless of the success or otherwise of the steps envisaged by the undertaking to obtain funds from the Westpac account. In that way, restraint imposed by an order made under statute would be replaced, at the very outset of the proposed sequence of events (and regardless of what happened later), by restraint flowing from an undertaking given to the Court. From that point, the applicants would be bound by the undertaking not to encumber or dispose of the property unless and until they had caused to be paid to the liquidator of Pharmacy Depot the whole of the funds in the nominated Westpac account; but whether or not such a payment was ever made would depend on the success of the applicants' "best endeavours" to make a withdrawal from that account. As far as positive action by the applicants was concerned, performance of their proposed undertaking required, in the first instance, the use of "best endeavours" to draw the full amount available from the Westpac account. If that full amount was obtained by them, the applicants would be required by their undertaking to pay it to the liquidator, whereupon they (being already free from the restraint on disposal created through the order of 10 March 2017) would be free also from restraint on disposal derived from an undertaking given to the Court. But if the applicants' "best endeavours" did not cause them to obtain the full proceeds of the Westpac account, they would continue to be free from the statutory restraint but would be bound indefinitely by the restraint derived from the undertaking to the Court. 2. In the paragraphs of his judgment extracted at [31] above, the primary judge identified what he described (at [56]) as "a considerable number of anomalies" in the applicants' application for the Westpac facility. In doing so, his Honour was obviously alive to the possibility that those "anomalies" might defeat or hinder the applicants' ability to access the funds in the Westpac account. The facility application was made on 8 May 2015. The applicants' residential address was given as the address of the rental property at Banksia they had occupied before buying and moving into the Arncliffe property in December 2014. The statement that they were living there in May 2015 was false. The application stated that the applicants had no dependants. That statement was false. As at May 2015, they had four children, including a newborn. [5] The application said that the Westpac loan was required in order to purchase the Arncliffe property. That statement was false. In fact, that property had already been owned for something over four months. The application stated that the applicants owned "Property assets" of $780,000 and "Shares/Unit Trusts/Bonds/Debentures" of $125,000. The latter was simply false. The former, if referring to the Arncliffe property, was at least misleading in that that property was identified as one to be purchased with the aid of the loan proceeds, whereas it was in fact the applicants' home and, as the primary judge said, the bank was not told that the real purpose of the loan was "to pay back funds provided by the directors of a company who were being investigated for an $18 million fraud". The credit application also indicated that the applicants, between them, had monthly expenses of $936, being rent of $886 (thus reinforcing the falsehood of residence in rented premises), $50 for "Mobile Phone/Internet/Pay TV" and "$0" for a catalogue of other items, most of which are essential to ordinary living, including groceries, petrol, transport, utilities, rates, clothing, education expenses, childcare fees, insurance, holidays and entertainment. To the extent that the application thus indicated that a family of two adults and four children spent nothing on the necessities of daily life, including groceries and clothing, it can be nothing but a false statement. 3. In these ways, the facility application presented a patently and materially false picture obviously calculated to enhance the applicants' chances of obtaining the loan they sought. They signed the application. A suggestion that some unidentified bank officer played a part in the inclusion of the false statements is no more than groundless speculation. The only available inference is that the applicants knowingly and deliberately set out to deceive the bank to their own financial advantage. 4. There was no evidence of the terms of the Westpac facility or of the accompanying mortgage. There was, however, evidence that the account had been placed on "post credits only" status by Westpac when it was served with the restraining order, so that, although money could be deposited into the account, no drawings would be available. There was also evidence of an inquiry made by the applicants of Westpac as to whether the funds in the account would "be available" if "the freezing order on the bank account is removed" (a reference to removal of the restraining order). Westpac's response was: When the Order is lifted you will be required to complete a new authority for re-draw to be reactivated on your loan account. Once this authority has been processed by The Mortgage Centre you will be able to access any funds available for redraw on your loan account. 1. This response was given by Westpac in ignorance of the material falsehoods in the facility application. That focuses particular attention on the words, "Once this authority has been processed by The Mortgage Centre". Those words imply that undefined action within Westpac would be necessary after the new authority had been given by the applicants and before they could draw on the account. The nature of that action ("has been processed") – in particular, whether it involved any element of discretion on Westpac's part – is not clear. 2. This significant gap in the evidence must be laid at the feet of the applicants. It was for them to place before the Court evidence to engender objectively based confidence in the viability of the undertaking proposal they were propounding. They needed to show that there would not be, in any practical sense, real doubt that the $600,000 would flow as the undertaking envisaged. If the $600,000 did not flow in that way, the consequence of acceptance of the undertaking would be that the constraint imposed upon the applicants by the order of 10 March 2017 would cease and be replaced by the applicants' undertaking to the Court not to encumber or dispose of any interest in the property – which undertaking would be of indefinite duration. 3. The restraint on dealing with the property that would arise from such an undertaking is obviously less secure and less effective than the restraint created by the restraining order of 10 March 2017. Apart from anything else, a restraining order made under the POC Act which affects land held under the provisions of the Real Property Act 1900 (NSW) may be recorded in the register maintained under the latter Act and anyone dealing with the land after such a recording has been made is deemed to do so with notice of the order and may be guilty of an offence. This is the effect of ss 34 and 37 of the POC Act. An undertaking to the Court not to deal with such land does not create any estate or interest which may become the subject of a caveat under s 74F of the Real Property Act or form a basis for an entry in the register of causes, writs and orders maintained under s 187 of the Conveyancing Act 1919 (NSW). In addition and more broadly, the POC Act contains an array of ancillary and enforcement provisions which underwrite the effectiveness of restraining orders and other orders made under the POC Act. Breach of an undertaking given to the Court, by contrast, activates the jurisdiction to punish for contempt, but the powers of the Court in that respect are exercised in the public interest to vindicate judicial authority and to maintain the integrity of the judicial process: Australian Meat Industry Employees' Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 106; [1986] HCA 46. The contempt powers of the Court could not produce with respect to land the same protective and coercive results as ancillary orders under the POC Act. 4. Having chosen not to inform the primary judge of the terms of their loan agreement with Westpac and the accompanying mortgage, the applicants now say that his Honour drew impermissible inferences when he found that there were reasons for significant doubt as to whether Westpac would be willing to reactivate the redraw authority, that if Westpac were to make a new credit assessment it would be quite likely that Westpac would take a different view and that, in the absence of evidence adduced by the applicants, there could be no confidence that they would be granted access to the funds in the offset account. 5. In my opinion, the primary judge did not draw impermissible inferences. On the contrary, his Honour was astute to draw available and perfectly sensible inferences from the material the applicants had chosen to place before him. In Duyvelshaff v Cathcart & Ritchie Ltd (1973) 47 ALJR 410 at 419, Mason J said, in relation to a workman using a ladder: In general it would be easy to draw the inference that the plaintiff would use a safety belt if it were available, that being the course which a reasonable person mindful of their own safety would take. 1. With the evidence as it was, it was likewise easy for the primary judge, making permissible use of common sense and experience, to draw an inference that Westpac, having become aware of the deceit practised upon it and mindful of its own interests, would avoid paying funds to the perpetrators of the deceit, if legally permitted to do so. Having advanced funds on the faith of a false credit application, Westpac very likely had several causes of action against the applicants, under the general law, by statute and under the loan agreement and mortgage. Being in that position, Westpac would in all probability do everything that it legally could to resist a demand for payment of the $600,000. The applicants did not show that Westpac was precluded from acting in that way. Conclusions 1. The grounds of appeal advanced by the applicants are without merit. 2. In the course of the hearing, a number of matters were canvassed relevant to ways in which the applicants might re-frame their undertaking or otherwise act to retrieve control of their property, noting that they appear to have a significant "equity" in it because of their contribution in the form of the price concession granted by Mr Haidar's cousins when it was purchased. While the predicament in which the applicants find themselves warrants some sympathy, it is not for the Court to suggest ways in which they might extricate themselves. 3. The primary judge's orders of 3 June 2019 were interlocutory orders made in the proceedings commenced by the filing of the Commissioner's summons in April 2015. Leave to appeal is therefore necessary. [6] Because, as I have said, the grounds of appeal are without merit, the appropriate course is to refuse leave to appeal. I propose that the following orders be made: 1. Dismiss the summons seeking leave to appeal. 2. Order that the applicants pay the respondent Commissioner's costs. ********* Endnotes 1. A summons seeking leave to appeal and, subject to leave being granted, an appeal. 2. Sometimes identified instead as Zeinab Haidar. 3. An order appointing a provisional liquidator of Pharmacy Depot was made on 4 December 2017. A winding up order was made on 25 June 2018. 4. Commissioner of the Australian Federal Police v Pharmacy Depot Hurstville Pty Ltd [2019] NSWSC 643. 5. A fifth child was born subsequently. 6. Supreme Court Act 1970 (NSW), s 101(2)(e). Amendments 26 November 2019 - coversheet, headnote para 4, judgment paras 21 and 24 - changed "s 19" to "s 18" 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. Decision last updated: 26 November 2019