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]):