O’Brien v Supercheap Security Pty Ltd trading as Supercheap Security Pty Ltd (No 2)

1. [1]

   The plaintiff, Ms Joanne O’Brien, alleges that she has been defrauded by the first and second defendants, Supercheap Security Pty Ltd and Mr Hassan Mehdi, of $500,000. Mr Mehdi is the sole director and shareholder of Supercheap. Each has been served. Neither has appeared.

2. [2]

   Ms O’Brien also seeks to make a claim against the third defendant, National Australia Bank Limited (“NAB”), on various bases to which I will return.

3. [3]

   There were originally three other plaintiffs who also alleged that they had been defrauded by Supercheap and Mr Mehdi. They are no longer participating in the proceedings.

4. [4]

   On 2 February 2023, Ball J summarily dismissed, pursuant to Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”), r 13.4(1)(b), two of the claims made by Ms O’Brien and the former plaintiffs against NAB and struck out, pursuant to UCPR r 14.28(1), the other three claims. [1]

5. [5]

   Ball J granted the former plaintiffs leave to replead the claims that had been struck out.

6. [6]

   Now, by Notice of Motion filed on 28 April 2023, Ms O’Brien seeks leave to file an Amended Commercial List Statement (“the Proposed List Statement”) which seeks to address the shortcomings the subject of Ball J’s findings.

7. [7]

   My conclusion is that leave to amend should be refused.

The alleged fraud

1. [8]

   Ms O’Brien alleges that:

Ms O’Brien’s claims against NAB

1. [9]

   Ms O’Brien brings a number of claims against Supercheap and Mr Mehdi. Ms O’Brien alleges that Supercheap and Mr Mehdi engaged in a dishonest and fraudulent design.

2. [10]

   Ms O’Brien seeks to make the following claims against NAB:

3. [11]

   In paragraphs prefatory to those in which Ms O’Brien sets out her contentions in relation to the five causes of action to which I have referred, Ms O’Brien makes a number of contentions concerning NAB’s obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (“the Anti-Money Laundering Act”) and the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (Cth) (“the Anti-Money Laundering Rules”). These include NAB’s alleged obligation to monitor its customers with a view to identifying, mitigating and managing the risk that the services provided by NAB may involve or facilitate money laundering.

4. [12]

   It is common ground that, for the purpose of this application, I should assume the correctness of those allegations. They are said to be relevant to the contentions that Ms O’Brien makes concerning NAB’s alleged knowing assistance of Supercheap’s and Mr Mehdi’s alleged dishonest and fraudulent design.

Res Judicata point

1. [13]

   I heard submissions concerning the effect of s 91 of the Civil Procedure Act 2005 (NSW) on the ability of Ms O’Brien to re-agitate those claims that Ball J summarily dismissed, [5] as opposed to those that his Honour struck out, with liberty to replead. [6]

2. [14]

   Section 91 of the Civil Procedure Act provides:

3. [15]

   In view of the conclusions to which I have come concerning the merits of each of Ms O’Brien’s proposed claims against NAB, it is not necessary for me to deal with that question. That is because, whether or not Ms O’Brien remains entitled, following Ball J’s decision, to seek to propound a case against NAB for knowing assistance or money paid under a mistake of fact, she should not be given leave to do so.

Money paid under a mistake of fact

1. [16]

   Ms O’Brien’s proposed case for money paid under a mistake of fact is set out in [63A] to [68] of the Proposed List Statement. I attach a copy of these paragraphs to these reasons. Proposed List Statement [63A]-[68]

2. [17]

   The structure of the claim is as follows:

3. [18]

   There are a number of difficulties with this proposed claim.

4. [19]

   First, as to the matter in [17(b)], I cannot see how it could possibly be contended that NAB was acting as Ms O’Brien’s agent. As Ms O’Brien has herself alleged, [12] her agent was CBA, not NAB.

5. [20]

   Mr Kalyk, who appeared for Ms O’Brien, submitted that:

6. [21]

   I cannot see how that could possibly be so.

7. [22]

   As to the matter in [17(c)], on her own case, Ms O’Brien was not acting under such a mistake of fact. On her case, through her agent, CBA, she did instruct NAB to credit the Payments to the Nominated Account. Ms O’Brien was not acting under the stated mistake of fact.

8. [23]

   Finally, as to the matter in [17(e)], I see no basis upon which it could be concluded that NAB was enriched at all, let alone unjustly enriched. This matter was dealt with by Ball J in his judgment at [27] and [28]. As his Honour said:

9. [24]

   This proposed cause of action has no reasonable prospects of success. Leave to bring it should be refused.

Knowing assistance

1. [25]

   Ms O’Brien’s proposed case concerning knowing assistance is set out in [69] to [74] of the Proposed List Statement. I attach a copy of these paragraphs to these reasons. Proposed List Statement [69]-[74]

2. [26]

   The structure of this proposed cause of action is as follows.

3. [27]

   First, it is alleged that NAB knew the matters set out at [69] of the Proposed List Statement, particularly that:

4. [28]

   It is common ground that I should assume, for the purposes of this application, that Ms O’Brien will be able to establish that NAB actually knew each of these matters.

5. [29]

   Next, it is alleged that because of that knowledge, NAB was required to take the steps set out in [69A] of the Proposed List Statement, including:

6. [30]

   It is not alleged that NAB did not take any of these steps, nor as to what would have been the position had it done so.

7. [31]

   Next, it is alleged in [69B] of the Proposed List Statement that an honest and reasonable person in the position of NAB would have taken the steps specified in [69A] and/or had a system in place to ensure that such steps were taken, including:

8. [32]

   The Proposed List Statement then alleges, in [69C], that by reason of the matters in [69], [69A] and [69B], NAB knew – that is, actually knew – or “should have known … some or all” of a large number of matters, including that:

9. [33]

   Finally, the Proposed List Statement alleges at [70] that, by reason of the matters in [69], [69A], [69B] and [69C]:

10. [34]

    Ultimately, the question is whether, assuming, as I must for this purpose, NAB knew the matters at [69] of the Proposed List Statement, such knowledge is capable of leading to the extremely serious conclusions alleged at [70] of the Proposed List Statement.

11. [35]

    That is because:

12. [36]

    As Ms Ellicott, who appeared for NAB, submitted, apart from the knowledge alleged at [69], the Proposed List Statement relies on matters of constructive knowledge to found an allegation of actual knowledge.

13. [37]

    Turning to the knowledge of NAB alleged at [69], I cannot see how it could be concluded that, by reason of knowing those matters, NAB had knowledge of the kind alleged at [70].

14. [38]

    That is particularly so in relation to Ms O’Brien’s “primary case” that NAB actually knew or was wilfully blind to the alleged dishonest and fraudulent design of Supercheap and Mr Mehdi, “and others”.

15. [39]

    Each of the allegations at [70] attributes wilful conduct to NAB:

16. [40]

    These are grave allegations; especially the first, that NAB actually knew of the alleged dishonest and fraudulent design. As the Court of Appeal very recently reiterated, such allegations should only be made where there is a proper basis to do so and are not lightly to be made. Legal practitioners, including those advising Ms O’Brien, are bound by rules of ethical conduct not to make such allegations without specific instructions and on an appropriate evidentiary foundation. [35]

17. [41]

    It may be that knowledge alleged at [69] of the Proposed List Statement might amount to circumstances that would put an honest and reasonable person in the position of NAB on enquiry. This is the fifth of the five categories of knowing involvement propounded by Peter Gibson J in Baden v Société Générale pour Favoriser le Développement du Commerce et de l’Industrie en France SA. [36] Indeed, according to the allegations made in the Proposed List Statement, on 20 June 2022 NAB informed CBA that the Supercheap Account had been “blocked due to suspicious activity”. [37] Evidently, by then NAB was on enquiry. However, as the Proposed List Statement implicitly acknowledges, that is not sufficient for the purposes of a knowing assistance case. [38]

18. [42]

    The difficulty is highlighted in the following passage from Mr Kalyk’s submissions:

19. [43]

    The knowledge attributed to NAB at [69] of the Proposed List Statement is only capable of establishing, at the very most, that Ms O’Brien has some prospect of establishing the matter that I have emphasised, namely that NAB “should have known about the fraud”.

20. [44]

    That is not a sufficient basis to make the very serious allegations that the Proposed List Statement posits, nor to propound a case for knowing assistance of a dishonest and fraudulent design.

21. [45]

    Mr Kalyk submitted that the “present pleaded case goes beyond mere suspicion”. But that is the problem. The allegations of what NAB actually knew cannot justify the proposed case.

Duty of care

1. [46]

   Ms O’Brien’s case concerning the alleged duty of care is set out at [74A] to [82] of the Proposed List Statement. I attach a copy of those paragraphs to these reasons. Proposed List Statement [74A]-[82]

2. [47]

   The structure of Ms O’Brien’s claim concerning an alleged breach of duty of care is that:

3. [48]

   This alleged duty is narrower than that posited before Ball J, which was a duty to take reasonable care in the “oversight and effective cashless transfer of funds throughout Australia and internationally”.

4. [49]

   But the proposed case has the same inherent problems as identified by Ball J. At [44], his Honour referred to the principles to be applied when determining whether a novel duty of care arises, as summarised by Allsop P (as his Honour then was) in Caltex Refineries (Qld) Pty Limited v Stavar. [46]

5. [50]

   Ball J concluded:

6. [51]

   The Proposed List Statement does not cure these problems. In particular:

7. [52]

   Ms O’Brien’s negligence case remains not reasonably arguable. [49]

Misleading or deceptive conduct

1. [53]

   Ms O’Brien’s proposed case in relation to misleading or deceptive conduct is set out at [83] to [90] of the Proposed List Statement. I attach a copy of those paragraphs to these reasons. Proposed List Statement [83]-[90]

2. [54]

   Ms O’Brien’s proposed case is that NAB represented to her that when she instructed NAB to credit funds to an account operated by NAB:

3. [55]

   The particulars of the alleged representation are:

4. [56]

   Paragraph [63A] [51] alleges that NAB:

5. [57]

   Paragraphs [55] to [63] of the Proposed List Statement set out the matters that I have summarised at [11] above.

6. [58]

   I cannot see how the alleged representation could possibly be implied from these matters. Mr Kalyk’s submissions concerning this aspect of Ms O’Brien’s case proceeded upon the basis that NAB had a system which required an originator to include an account name as part of transfer instructions.

7. [59]

   There is a further problem. The Proposed List Statement contends that the alleged representation was relied upon by Ms O’Brien in:

8. [60]

   But, as Ms Ellicott pointed out, it is Ms O’Brien’s case that she was told by persons purporting to be from AMP that an account had been set up in her name with AMP.

9. [61]

   On her own case, that is what Ms O’Brien relied on, not on any implied representation from NAB. Ms O’Brien did not think she was transferring funds into an account operated by NAB.

10. [62]

    In response to Ms Ellicott’s submission, Mr Kalyk submitted:

11. [63]

    That submission is misconceived. On her own case, Ms O’Brien did not rely on any representation from NAB.

12. [64]

    I do not propose to give Ms O’Brien leave to make this claim.

Unconscionable conduct

1. [65]

   Ms O’Brien’s case concerning NAB’s alleged unconscionable conduct is set out at [91] to [93] of the Proposed List Statement. I attach a copy of those paragraphs to these reasons. Proposed List Statement [91]-[93]

2. [66]

   The structure of the proposed claim is that:

3. [67]

   There are a number of difficulties with this claim.

4. [68]

   The first is that the supply of “financial services” and “services” referred to at [91] of the Proposed List Statement and “in connection with” NAB is alleged to have engaged in unconscionable conduct, comprised services provided to Supercheap and Mr Mehdi and not to Ms O’Brien.

5. [69]

   Thus, the “financial services” and “services” alleged at [91] are:

6. [70]

   As Ball J pointed out: [55]

7. [71]

   Thus, s 12CB of the ASIC Act is directed to conduct engaged in connection with the supply of financial services to the “service recipient”. If that person can show loss “because” of that conduct, that person may recover damages. The same applies to the conduct proscribed by s 21 of the ACL, as is made clear by s 22(1) of the ACL, which is the analogue to s 12CC of the ASIC Act. The conduct proscribed by s 21 is conduct engaged in connection with the supply of services to the “customer”.

8. [72]

   But, here, Ms O’Brien was not the “service recipient” of any “financial services” provided by NAB nor the “customer” in respect of any “services” provided by NAB. The “service recipient” and “customer” was Supercheap and Mr Mehdi. NAB was not providing those financial services, or indeed any financial services, to Ms O’Brien.

9. [73]

   Unlike the pleading with which Ball J was concerned, the current proposed pleading recognises the necessity for a person in Ms O’Brien’s position to allege that she was at a “special disadvantage” to NAB.

10. [74]

    The allegations of special disadvantage are set forth in proposed [91B] to be:

11. [75]

    In substance, these allegations amount to an alleged disparity of knowledge between Ms O’Brien and NAB. There is authority that the mere unawareness of a matter material to the interests of a party to a transaction is not, itself, a special disadvantage. [57]

12. [76]

    However, there is a further difficulty.

13. [77]

    That is that it is not alleged, as the authorities make clear is an essential prerequisite to such a claim, that not only is one party at a special disadvantage but that the stronger party had “unconscientiously” exploited such disadvantage.

14. [78]

    The nearest the Proposed List Statement comes to making that allegation is [91D] which provides:

15. [79]

    This appears to me to fall far short of an allegation of an “unconscientious” exploitation by NAB of Ms O’Brien’s alleged position of special disadvantage.

16. [80]

    Finally, and in any event, I cannot see upon what basis it could be concluded that NAB’s conduct could be characterised as being unconscionable.

17. [81]

    It is true, as Ball J observed, [59] that s 12CB of the ASIC Act “has a far wider reach than the unwritten law”.

18. [82]

    Nonetheless, what must be shown is conduct that:

19. [83]

    As Ball J observed, [64] in this case, the relevant conduct the subject of the allegations against NAB is permitting a customer to open and operate a bank account without taking reasonable care to prevent the account from being used to perpetrate a fraud. I cannot see how that conduct could possibly, alone, amount to unconscionable conduct.

Conclusion

1. [84]

   Ms O’Brien’s proposed case has no reasonable prospects of success. I refuse her application for leave to further amend her List Statement.

2. [85]

   I will now invite submissions as to why the proceedings, as against NAB, should not now be dismissed with costs.