Gray v National Crime Authority [2003] NSWSC 111 | Case summary

157 In my opinion Australian law provides a cause of action to a person in the position of the plaintiffs, enabling that person to obtain equitable relief when the ingredients of equitable estoppel summarised in Priestley JA's two judgments are satisfied. Those ingredients are, in summary: a. some representation or promise or conduct by the defendant, b. which creates or encourages in the plaintiff an assumption, c. the assumption being that a contract will come into existence or a promise be performed or an interest granted to the plaintiff by the defendant, d. reliance on that assumption by the plaintiff, and e. circumstances where departure from the assumption by the defendant would be unconscionable. 158 When these ingredients are present, there is a basis for equitable relief. Generally the relief will be designed to do the minimum equity necessary, by preventing the plaintiff from suffering detriment as a result of the defendant's unconscionable conduct, although on some occasions the minimum equity will not be satisfied by anything short of requiring the defendant to make good the assumption created by his representation or conduct. In designing the appropriate relief, the Court has available to it all of the remedies employed in equity's exclusive jurisdiction, including equitable compensation. 159 It is relevant in the present case to note that the representation or promise or conduct (ingredient (a)) must be clear. This was emphasised by Mason and Deane JJ in Legione v Hateley (1983) 152 CLR 406, 436. It appears from their Honours' remarks that the standard of clarity to be achieved is no less than the standard of clarity for a variation of contract, and may be a higher standard. Their Honours quoted, apparently with approval, some observations by Lord Denning MR in Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1971] 1 All ER 665 , in which his Lordship said (at 672): "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." What did Detective Inspector Small represent to the plaintiffs, and what authority did he have to do so? 160 These are centrally important questions of fact, upon which there is conflicting evidence. Inspector Small and Mr Gray had a conversation in the Clarence Street apartment on 24 January 1990, and they had further conversations at the defendant's offices later that day and during the next few days. Evidence of those conversations was given orally by Detective Inspector Small, in Mr Gray's affidavit, and by Mrs Gray in her affidavit and orally. Detective Inspector Small gave evidence that during the course of 24 January and subsequent days, he also had conversations with Mr Cusack and Mr Cashman. Mr Cusack and Mr Cashman have given affidavit and oral evidence of those conversations. I shall set out the competing accounts of the conversations, and make findings of fact on those points. Before doing so, I shall make some comments on the credit of the witnesses. Credit - Detective Inspector Small 161 Inspector Small did not provide an affidavit and gave only oral evidence. Apparently the view was taken that s 31 of the National Crime Authority (State Provisions) Act 1984 (NSW) prevented him from providing an affidavit. He said at the beginning of his evidence that his memory of the conversations of 1990 was "really exhausted". He sought to have recourse to a written statement that he had prepared in 1998 or 1999, when he wanted to see a solicitor to obtain legal advice as to his position in the present matter. After hearing evidence on a voir dire, I decided not to permit Inspector Small to refresh his recollection by recourse to that statement, on the ground that I was not satisfied that the evidence contained in the statement was fresh in his mind at the time when he prepared the statement, for the purposes of s 32 (2) (b) of the Evidence Act 1995 (NSW). 162 The defendant submitted that I should not accept Inspector Small's evidence, because of his acknowledgement that his memory was very poor. I do not agree with that submission. I was impressed by the demeanour of Inspector Small in the witness box. 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". 163 Inspector Small had a great deal of contact with Mr Gray, and to a lesser extent Mrs Gray, in the period from 1990 to 1997. After steering them into witness protection, he remained in contact with them, having many conversations with Mr Gray, even on a daily basis for quite some time. He explained this by saying that people in witness protection have to be kept happy. Operation OMO was a very big investigation which led to recovery of one of the largest sums of money ever recovered in Australia in relation to drug importations. Without Mr Gray, the case would have been foundering. Inspector Small said that in those circumstances, "I had to keep in contact with him, just to talk to him about anything and nothing, about his future, about his past". 164 They discussed the subject matter of Mr Gray's complaint, first made in November 1996 that undertakings had not been honoured. Therefore, submits the defendant, Inspector Small was exposed to Mr Gray's ex post facto assertions of what had been said years before. Inspector Small lent money to Mr Gray in the total amount of $6000, which has not been repaid. He said he had never lent money to an informant before. He wrote letters to the defendant and the Commonwealth Attorney-General to support Mr Gray's claim for compensation, which I have described. He even appeared on the "Sunday" programme on television to warn people thinking of informing on drug dealers, in light of Mr Gray's experience. 165 Counsel for the defendant submitted that in view of all these matters, Mr Small had become very close indeed to Mr Gray and had come to identify himself with Mr Gray's cause. Therefore Mr Gray's evidence should not be accepted. I disagree with this submission. It amounts to a submission, not fully articulated, that Inspector Small was biased in favour of the plaintiffs and consciously or unconsciously allowed his evidence to be distorted in favour of their case. Inspector Small categorically and emphatically denied that he had become too close to Mr Gray. That evidence is consistent with my impression of him as a person of integrity, highly experienced in investigatory matters. 166 The matters relied upon to support the defendant's submission are capable of other explanations. It is a plausible explanation of the frequency of conversations to say, as Inspector Small said in evidence, that a person in the witness protection program must be kept in constant contact with the investigating officer, so as to keep the witness happy. It is plausible to say that Inspector Small wrote letters supporting the plaintiffs' claim for compensation because he believed they were entitled to it for the reasons set out in the letters; and plausible to say that he appeared on television because he believed that the plaintiffs had been unfairly treated and he wanted to get something done to ensure that an organisation making promises to a witness would be required to keep them. 167 The defendant attacked Inspector Small's evidence in other specific ways. First, Inspector Small said of his letter of 29 March 1996 to Mr Cashman that it was a letter he "did cause to be published". The defendant submitted that this answer was not candid, because if the questioning had stopped there, the witness would not have revealed that Mr Gray had prepared the letter for Inspector Small from Inspector Small's notes. It seemed to me, however, that Inspector Small's careful choice of language invited the cross-examiner to seek clarification, which the witness unhesitatingly gave, and I therefore reject the submission that the witness's answer was lacking in candour. 168 Secondly, the defendant said that Inspector Small's rationale for his television appearance was that the end justified the means. In fact it was put to the witness in cross-examination that his television appearance would dissuade people from coming forward to the defendant and to the police, and he replied to the effect that his appearance was designed to get something done, so that when promises were made to people the organisation making those promises would be required to keep them. He was then asked whether he said that the end would justify the means, and his answer was that it would be very easy for the organisation to keep its promises. I do not see any reason to hold those answers against the witness. 169 Third, Inspector Small was cross-examined about the fact that his letter to Mr Cashman of 29 March 1996 did not refer to the undertakings upon which the plaintiffs subsequently sued. The witness said that the letter was written to reactivate Mr Gray's claim for an ex gratia payment. He said that Mr Cashman was aware of the discussions the witness had had with him, and "it was not for me to rattle the can again in Mr Cashman's ear", and that he just wanted to get the matter under way with the defendant. 170 I agree with the defendant that if Inspector Small believed, in November 1996, that the defendant was contractually obliged to make the payments being sought by Mr Gray, he would have expressed his letter differently. The letter pleads the plaintiffs' case on the basis that Mr Gray had given evidence that had led to the success of various prosecutions and the recovery of a large amount of money, rather than on the basis of any contractual undertakings given on behalf of the defendant. I infer that Inspector Small did not believe, when he wrote his letter or at any other time, that a binding contract had been entered into between the plaintiffs and himself as agent for the defendant. I also infer, however, from the terms of his letter and the remainder of his evidence, that Inspector Small believed at that time and all other relevant times that the plaintiffs had a just case for compensation and that it would be unconscionable for the defendant to provide less than adequate compensation in light of everything that had happened. In my view his explanation, in evidence, for not referring to the undertakings was adequate. At the time of his letter, the plaintiffs were still in witness protection and although the possibility of terminating the arrangements may have been raised, no steps had been taken to that end. A reasonable person in Inspector Small's shoes may have taken the view that the plaintiffs' position would be better vindicated by negotiating for an ex gratia payment than by putting the case in terms of undertakings from which it would be unconscionable to resile. 171 Fourth, the defendant drew attention to Inspector Small's evidence that he did not inform Senior Investigator Shorrocks or Senior Investigator Clarke that he had given the financial undertakings, because they did not need to know and it was not their business. The defendant submitted that this evidence was implausible, because Senior Investigator Clarke was Mr Gray's "handler", and Senior Investigator Shorrocks was intimately involved in the operation, more so than Inspector Small. Moreover, Mr Gray discussed the basis of his co-operation in meetings with these two officers. The defendant submitted that it would be conducive of confusion and ill will "at the coalface" for Inspector Small not to have told these officers of the alleged undertakings. I am not persuaded by this submission to reject the relevant portion of Inspector Small's evidence, or any other part of his evidence. As I have said, I was impressed by Inspector Small's demeanour in the witness box, and the overall cogency of his evidence. I do not find it implausible that Inspector Small may have chosen not to share with his subordinates every aspect of the arrangements he had made with Mr Gray. The financial arrangements did not relate to day-to-day matters, those being covered by the memorandum of understanding, and I cannot see how Inspector Small's not disclosing them to the other officers would create any legitimate basis for ill-will. 172 Finally, the defendant drew attention to the inconsistency between Inspector Small's evidence and the evidence of Mr Cashman with respect to their conversations going to Inspector Small's authority to give undertakings, and submitted that Mr Cashman presented as a fair and impartial witness whose evidence should be preferred. I shall return to Mr Cashman's evidence later. I do not regard the inconsistencies in their evidence as a matter affecting the credit of Inspector Small 173 My overall conclusion is that the defendant's attacks on Inspector Small's credit have been unsuccessful. Credit - Mr Gray 174 Mr Gray's death has the consequence that the hearsay rule does not apply to representations made in his affidavit: Evidence Act 1995 (NSW), s 63(2) and clause 4(1)(a) of Part 2 of the Dictionary. However, when a deponent is not available for cross-examination, the Court will generally give less weight to his affidavit evidence, on contentious matters, than to the evidence adduced by the other side to rebut it: Morley v Morley (1855) 25 Beav 253 [53 ER 633]; R v O'Neill [1972] VR 327. 175 I have decided that the correct approach to Mr Gray's affidavit evidence is to treat it with caution, by accepting it only when it is consistent with and not contested by other evidence, or is corroborated. I have reached this conclusion partly because it was untested, and no attempt was made to take evidence on commission after he became ill. It is also relevant that Mr Gray's evidence is self-interested. Additionally, there are some defects in the evidence that suggest to me that Mr Gray's recollection of the events of 1990 was not very clear when he deposed to them in October 1999. For example, Mr Gray gave evidence in his affidavit that the person called "David" was at the meeting he attended with Schneiders and Saxon on 25 January 1990, which he tape recorded. The transcript of the tape recording, which is in evidence, shows that David was not present at that meeting. Mr Gray gave evidence to the defendant in 1990 to the effect that David attended a meeting on about 23 January, before the defendant executed the search warrant in the plaintiffs' premises. Credit - Mrs Gray 176 I found Mrs Gray to be an unsatisfactory witness in some respects. She found it difficult to make concessions that did not support her case - for example, she prevaricated when it was put to her that her husband's letter of 19 June 1991 said nothing about representations or promises of the sort alleged in the statement of claim. She admitted that she and her husband "probably" talked about their evidence while preparing their affidavits together, but when asked about the phrase "set in concrete", which both Mr and Mrs Gray attributed to Inspector Small in their affidavits, Mrs Gray said it was a coincidence that she overheard a conversation between her husband and Inspector Small. 177 Mrs Gray claimed that she remembered clearly the conversations deposed to in her affidavit, in which she said that Inspector Small told her and her husband that they would not be financially disadvantaged if her husband co-operated and they entered into the Witness Protection Program. And yet she found it difficult to remember other events less advantageous to her cause. For example, she gave oral evidence that she could not recall signing the memorandum of understanding, or reading it. When her attention was drawn to paragraph 24 of her affidavit, in which she said she read the document and signed it in March 1990, she said she could not recall saying so in her affidavit and that she had signed the memorandum of understanding without reading it, because her husband told her to do so. When pressed, she said that if her affidavit said that she had read it, she must have done so, but she did not remember. Then later she said she had remembered that she signed the document on the dining room table when she and her husband were living in Terrigal. She also found it difficult to remember details of the transaction between her husband and Mrs Meredith, even though she said that Mrs Meredith was her friend. 178 I have decided that the correct approach to her evidence is the approach I have taken to Mr Gray's evidence. Credit - witnesses for the defendant 179 As I understood him, counsel for the plaintiffs did not challenge the evidence of the defendant's witnesses on credit. Instead, he drew attention to some ambiguities and submitted that when properly understood, parts of the evidence of the defendant's witnesses supported his client's case. The principal matters in contention related to the question of Inspector Small's authority to make representations on the defendant's behalf. I shall deal with them under that heading. Inspector Small's evidence of conversations about financial support 180 Inspector Small gave evidence that he made financial representations on three occasions in January 1990. 181 First, at some stage on 24 January 1990, he and Mr Gray had the following conversation at the defendant's offices: 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." 182 Secondly, Inspector Small gave evidence that he saw Mr Gray on 25 January, just after he had spoken to Mr Cashman, and said to him, "Okay, this is what we can offer if you have to go into witness protection. Neither you or 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 the National Crime Authority will use its endeavours to obtain an immunity from prosecution for any offences whatever you have committed." Mr Gray said, "Yes, okay." 183 Thirdly, his evidence was that on 27 January he had the following conversation with Mr and Mrs Gray in the motel where they were staying: 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 [John] yesterday, you will go into witness protection, you will not suffer any financial disadvantage from going into witness protection. Providing [John] 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." 184 The first conversation does not contain anything more specific than the statement that the defendant, as an organisation of integrity, would not "throw them out into the street". The second and third conversations both contain the statement that if certain conditions were met, the plaintiffs would not suffer any financial disadvantage from going into witness protection. Mr Gray's evidence of conversations about financial support 185 Mr Gray's account of his conversations with Inspector Small was given in his affidavit made on 7 October 1999. He identified four conversations. 186 First, he said that at the time of execution of the search warrant on 24 January 1990, he had a conversation with Inspector Small in which the following was said: Inspector Small: "The NCA can protect you and we can put you into the Witness Protection Scheme. You and your wife will be looked after and protected." Mr Gray: "What happens after it's all over? I read in the newspapers the complaints that after people get assistance they get thrown out and aren't looked after." Inspector Small: "No, we will look after you. There are conditions attached and provided you do everything properly we will stick to our side of the bargain. You won't be thrown out and you will be looked after. You will have to give honest and truthful evidence against the persons who are involved and also take directions from the Witness Protection people." Inspector Small (later): "You might have committed offences by moving the money off shore but we should be able to organise an indemnity from prosecution. We won't take any action against you if you assist us." Mr Gray: "What does it all involve?" Inspector Small: "Well the whole Witness Protection Scheme will impact on your life and your wife's life. A new identity will have to be found for you and your wife and you'll have to move from where you are living, probably in Australia but it could also be overseas. You'll be required to disassociate yourself from your friends and your wife will also have to cut her ties. I understand your wife is in a business but she won't be ever allowed to return to that business. You'll be supplied with funding so that you can continue a lifestyle similar to what you enjoy now. You won't be cut off from your family, there is a system in place which allows you contact with your family by telephone and meetings. Once the Witness Protection people are involved, they will explain to you in detail what will occur. The protection is such that I won't even know where you are living." Mr Gray (later): Can you guarantee that when I have given all the evidence I won't just be thrown to the wolves and that I am not going to be financially disadvantaged?" Inspector Small: "The NCA is an organisation of its word. It won't happen under any circumstances but that is providing you keep up your side of the bargain." Mr Gray: "I'll help in any way I can. I will go to the meeting with a tape recorder but I would like to come to some specific agreement about what is going to happen to me and my wife in the future." Inspector Small: "It's getting late today and you have a meeting tonight. We have to get a warrant to tape the conversation and before we do that we want to get something on tape or in writing to back that up. It will all take time to do so I will talk to you later about that in the afternoon." 187 Secondly, Mr Gray said that during the afternoon of 24 January, and on 25 January, he had further discussions with Inspector Small, during which the following was said: Mr Gray: "How are we going to survive if we go on this Witness Protection Program?" Inspector Small: "In the short-term the NCA will look after you and provide you and your wife with security. We will then arrange for you to be admitted to the Witness Protection Program. If you and your wife enter the Witness Protection Program, the NCA will provide financial assistance in the short and long term to provide you with the necessities of life so that you can maintain the lifestyle you have been living. If you agree to help us and stick to the rules, you won't be financially disadvantaged. Anything that you have lost will be paid for and the NCA will also support an application to the Government for an ex gratia payment as compensation for stress and disruption that was caused in losing your identities by having to help the NCA. Let me assure you that you won't be left high and dry." 188 Thirdly, Mr Gray said that on 25 or 26 January 1990, he had a further discussion with Inspector Small as follows: Mr Gray: "I am really concerned that once my usefulness to the NCA is finished you'll just discard me and you won't assist me and my wife the way you said you would." Inspector Small: "The National Crime Authority will stick by its word. Let me assure you, you will not be financially disadvantaged in any way." 189 Fourthly, Mr Gray said that on 27 January 1990 he was with his wife at a motel, accommodation arranged by the defendant, and Inspector Small came to speak to them and said: "As expected, we are dealing with an organised gang which is involved in drugs and they are very dangerous. We are concerned about what may happen to you. Neither of you will be able to go back to your home. [Margaret], you will never be able to set foot in your business again. This is an organised gang and your lives have been threatened. These people are dangerous and could cause you harm. We think your lives are in danger and as a result we need to protect you. The NCA will provide you with short-term protection but you will then have to go into the Witness Protection Program. As I told you before you can never return to your previous employment and business and you can't even go back to your house. I have explained to [John] before that whatever happens you won't be disadvantaged financially. You need to follow instructions and do as you're told. This will cause both of you a great deal of disruption in your life but as I previously explained the NCA will support an application for an ex gratia payment for the stress and disruption you have been caused. … We have to put you into the Witness Protection Scheme and provided you do as you're told you will be looked after well and you won't be financially disadvantaged. We will look after you for life." 190 This evidence is generally consistent with Inspector Small's evidence. In particular, there is the earlier representation that the plaintiffs would be looked after, and then later the representation that they would not be financially disadvantaged. Mr Gray recounts four conversations rather than three, but he places them on the same three days as Inspector Small, and they both locate the last conversation in the motel. The similarity of the evidence is noteworthy, given that Inspector Small was not permitted to refresh his memory in the witness box by reference to his written statement. 191 The main difference is that according to Mr Gray, the representations were first made before he agreed to co-operate, in circumstances where it would appear that he relied specifically on the representations in agreeing to do so. In Inspector Small's account, the representations were made after the process of co-operation had commenced. My discussion of the credit of witnesses provides a basis for generally preferring Inspector Small's evidence to Mr Gray's. Additionally, on this issue Inspector Small's evidence has a greater air of plausibility than Mr Gray's. On 24 January Mr Gray was confronted by police officers for the first time, and the evidence shows that he was very apprehensive about being prosecuted. It would be surprising if, under great pressure and reacting without time for reflection, he would have extracted undertakings about his financial security as a matter of first priority. I therefore prefer Inspector Small's account of conversations to Mr Gray's. Mrs Gray's evidence of conversations about financial support 192 Mrs Gray gave oral and affidavit evidence about various conversations she had with Inspector Small about her financial position. Her evidence was closely similar to the evidence of Mr Gray. For reasons I have given, I am not confident of Mrs Gray's ability to recall specific conversations and therefore, in my opinion, her evidence does not add anything significant to the evidence of Mr Gray and Inspector Small. It does not lead me to prefer Mr and Mrs Gray's evidence to Inspector Small's. Conclusions with respect to evidence about financial support 193 My conclusion is that, if Inspector Small made any representations to the plaintiffs about financial support, they were in the form given in his evidence rather than in theirs. The question is whether he made any such statements. The defendant urged me to find that no such representations were made. Counsel for the defendant submitted that it was implausible that Inspector Small would have told the plaintiffs they would be looked after and not be financially disadvantaged, because Inspector Small's role in the investigation did not extend to the making of any such representations, and it was plain that Mr Gray was most concerned with avoiding prosecution and obtaining physical protection, rather than with financial matters. 194 I do not regard Inspector Small's evidence as implausible in these ways. His evidence acknowledges the very considerable significance to Mr Gray of obtaining immunity from prosecution and physical protection, while also asserting that Mr Gray exhibited a concern for the future financial security of his wife and himself, which emerged after he had had a little time for reflection. I did not have the benefit of observing Mr Gray as the witness, but Inspector Small's evidence seems to me plausible as an account of a typical human reaction to very difficult circumstances. 195 I therefore accept Inspector Small's account of the representations he made to the plaintiffs about their financial position. 196 Were Inspector Small's representations sufficiently clear and unequivocal to found an equitable estoppel? It is important to distinguish between clarity and lack of ambiguity, on the one hand, and breadth and generality on the other. A statement may be expressed in very general terms but nevertheless be very clear. In my opinion a statement to the effect that if stated conditions are satisfied, "you will be looked after and not be financially disadvantaged" is sufficiently clear to satisfy the requirements of the doctrine of equitable estoppel as formulated by Mason and Deane JJ in Legione v Hateley, referred to above. Detective Inspector Small's authority Formal arrangements 197 Generally speaking, the authority of the defendant was exercised by the Chairman and Members. Mr Cusack, the Sydney Member of the defendant, had a personal delegation from the defendant, as at 1990, to approve expenditure in relation to the Sydney office, the maximum amount being the limit of the funds available for the whole of the defendant. Mr Cashman did not at that stage have any financial delegation. 198 The evidence contains minutes of a meeting of the defendant held on 14 August 1989, as follows: "The Authority resolved: (a) that no decisions were to be made about Authority witnesses being placed in witness protection arrangements without a resolution of the Authority; (b) that before it did so, the Authority would need to be properly briefed on the estimated cost of such arrangements, including relocation costs and any proposed cost sharing arrangements; (c) that any commitments by the Authority in respect of particular arrangements should be confirmed in writing and, as far as possible, should be set out before commitments are entered into." 199 In my opinion, the 1989 resolution does not address the sort of problem presented by Mr Gray's case, where the circumstances demanded urgent and decisive action. When Inspector Small made contact with him on 24 January, he was due to see Schneiders that night. Inspector Small realised that he would need to secure Mr Gray's co-operation very quickly, to maximise the prospect of obtaining useful evidence. According to Inspector Small's account, which I have accepted, he did not give any financial undertaking on 24 January, but he did so on 25 January prior to Mr Gray's crucial meeting with Saxon and Schneiders. This was an extremely busy time for Inspector Small and his colleagues. It would not have been feasible, in my view, for Inspector Small to follow the relatively leisurely procedures contemplated by the 1989 resolution. 200 Mr Cashman gave evidence, not contradicted, that as at January 1990 there was no formal written NCA policy in existence in relation to the management of informant witnesses. The development of a policy and procedures manual in relation to such matters commenced in about October 1990, and the manual was not published until 1992. Paragraph 14.35, Chapter 14, volume 2 of the NCA Policy and Procedures Manual states: "Where an informant raises questions of indemnity or indicates that he is willing to give evidence, the contact officer should immediately report the matter to his or her Team Leader, who will take the matter up with the Regional Manager (Operations) and the Member primarily responsible for the investigation. No undertakings of any kind - beyond raising the matter with senior officers - should be given by the contact officer to the informant." 201 Mr Cashman said that while paragraph 14.35 did not exist in January 1990, in his experience the procedure outlined there was followed by the defendant's officers at that time. I take this to be evidence that by January 1990, the defendant's practice had moved away from the formality envisaged by the 1989 resolution, and by that time the key question was whether Mr Cusack would approve the proposed commitment. 202 It appears that Mr Cashman's view about the limits of financial authority was not communicated to Inspector Small. Inspector Small gave evidence that he had a general authority to give financial undertakings on behalf of the defendant. 203 The following exchange occurred during his cross-examination: "Q. You, of course, didn't feel in January 1990 that you were free to make any sort of undertakings to any informants of the NCA? A. That is not quite right. Look, common sense was the name of the game. If it was necessary for me to make some undertakings, it was reasonable, it was sound and feasible and it was impossible for me to mention it higher up, I would quite freely give those undertakings. Q. Let's narrow it down, if I can. You knew in January 1990 you had no authority to approve any promises or undertakings or ongoing payments of money lasting perhaps for years to informants? A. The answer to that is common sense prevailed. It was at the time it showed it was a very, very large brief in relation to a large criminal enterprise. It certainly appeared that there would have been ongoing witness protection required. Common sense indicated that I would have spoken to the team leader and got approval for what was going - - what appeared to be going to be quite a large commitment by the National Crime Authority, and that is what I did." 204 He said that, apart from at the senior levels, there were no laid down or written criteria as to a chain of command and everybody appeared to just find their own level. He also said that the defendant had issued him, like other officers, with an American Express card and there was no limit placed on the use of it other than "commonsense limits", and he said he was never told what he could spend and not spend. 205 His evidence was that while he was talking to Mr Gray on 24 January, he saw Mr Cusack walking through the foyer of the building. He went out and said to Mr Cusack, "I think we have got them. I think he is right, he is going to help us." According to Inspector Small, Mr Cusack replied, "Well, don't lose him." Inspector Small's evidence of specific authority 206 Inspector Small also gave evidence that he was specifically authorised to give the undertakings by Mr Cashman. Inspector Small said he had a conversation with Mr Cashman on 24 January. Chief Superintendent Coughlin was there. Inspector Small said that Mr Gray was going to help them. He said, "We have got a, it looks like a top brief. We have got a fair bit more work to do on it." According to Inspector Small, Mr Cashman said, "Yes, go ahead, see what he wants." 207 Inspector Small said that on the morning of 25 January he had another conversation with Mr Cashman. According to Inspector Small's evidence, Mr Cashman told Inspector Small to tell Mr Gray that "if he and his wife come into witness protection he will not be financially disadvantaged through coming into witness protection provided he gives whatever evidence is required, he carries whatever listening devices are required, he attends whatever conferences are required, he gives what statements are required, and he attends to debriefings as required." Mr Cusack's evidence 208 Mr Cusack gave affidavit evidence, by reference to his diary, that on 24 January 1990 he had a meeting with Mr Cashman and Inspector Small, and probably also Mr Sage. He said he recalled an NCA officer saying to him at about that time, and perhaps at that meeting, that Mr Gray was providing valuable information, that he and his wife would have to go into the Witness Protection Program because their safety was at risk, and that Mrs Gray had a hair salon which she would have to dispose of and it was likely that a loss would be incurred. He said that no specific information was given about any particular loss. He had another meeting with one or more NCA officers on 29 January 1990 in which he decided that Mr Gray should be charged with money-laundering offences. He said, however, that he did not recall the issue of payment of a reward to the plaintiffs ever being raised with him by any officer of the defendant or anyone else. 209 In cross-examination Mr Cusack said that Mr Gray was the first witness he was required to deal with after his appointment as a member of the defendant in 1989. He agreed that at some time on 24 or 25 January 1990, Inspector Small said to him "I think we have got them. I think he's right. He is going to help us", and he agreed that it was possible he said to Inspector Small, "Don't lose him". 210 When he was asked whether he was aware that on 24, 25 and 26 January 1990 Inspector Small had discussions with Mr and Mrs Gray about the financial implications of going into the Witness Protection Program, he replied: "I knew there had been discussions between Inspector Small and Mr Gray. As to the content of those discussions, I don't think I was made aware of. ..." 211 Mr Cusack also agreed, in cross-examination, with the proposition that financial loss to Mrs Gray had been raised with him in January 1990, and as far as he was concerned, it was recognised that there should be some recompense at an appropriate stage to Mr and Mrs Gray for any financial loss they might suffer, although that matter would have to be decided by the National Crime Authority. 212 He agreed with the proposition that when he wrote to the plaintiffs in 1991 saying that it was not appropriate to make an ex gratia payment at that stage, his opinion was that an ex gratia payment would be appropriate when Mr Gray's obligation to the defendant had been completed. By "ex gratia payment" he meant compensation for loss and to set the witness up so that he could lead his own life as a protected witness. He said that the compensation could include compensation for stress, where the witness's life was in danger. He agreed that the ex gratia payment he had in mind would be in addition to payments made under the memorandum of understanding. Mr Sage's evidence 213 Mr Sage gave evidence that some investigating officers of the defendant had credit cards that were ultimately charged back to the defendant, and their discretion had to be trusted in the use of the cards. The following exchange occurred during his cross-examination: "Q. Indeed, in 1989 and 1990, the general approach of the police investigation teams was to do whatever they regarded as necessary if it had to be done urgently? A. They had some autonomy in that, but there was a communication arrangement back, and it was relatively easy to make contact with senior people in the organisation if that needed to happen." 214 Mr Sage said he was a little surprised that Inspector Small signed the memorandum of understanding, rather than Mr Cusack or perhaps Mr Cashman. When he said he had no memory of approving the payments provided for under the memorandum of understanding, it was put to him that presumably either Inspector Small or Mr Cashman approved them, and he agreed. He did not say that any approval could only have come from Mr Cusack. Mr Cashman's evidence 215 In his affidavit Mr Cashman denied that he had made or authorised any statement to the plaintiffs to the effect that if they co-operated they would be provided with the financial means to sustain a lifestyle similar to that enjoyed by them prior to January 1990, or that they would be protected from financial disadvantage, or that the defendant would support an ex gratia payment for them for all their losses. Mr Cashman said he recalled some discussion about a possible ex gratia payment after January 1990 and before the middle of 1991, with respect to the loss on the sale of the salon business, but he denied that he ever instructed or authorised Inspector Small to give promises or undertakings to the plaintiffs about compensation to them (including compensation in relation to the salon business), or about payments for life or ex gratia payments. 216 To a degree, Mr Cashman's oral evidence was qualified by his evidence in cross-examination. In cross-examination Mr Cashman said he could not recollect whether he had seen the memorandum of understanding or discussed its financial provisions before or after it was signed. He agreed, however, that he did not disapprove of it. He said that in operational matters, he would rely on the recommendation of the chief investigator, who in this case was Inspector Small, and he said that he regarded the memorandum of understanding as an operational matter - even though, I would add, it provided for various payments to be made at the cost of the defendant. Mr Cashman said he was aware, in January 1990, that something would have to be done about Mrs Gray's salon business, which would be likely to run down because of her absence, and that ultimately some sort of compensation would have to be paid to her. However, later he denied that he had always understood that at the appropriate time there would be some form of payment to Mr and Mrs Gray over and above the benefits they received under the Witness Protection Program. 217 Listening to this evidence in light of his affidavit, I formed the view that Mr Cashman believed, in January 1990 and subsequently, that at an appropriate time it would be necessary for the defendant to consider whether to compensate the plaintiffs for any financial losses they had suffered due to Mr Gray's co-operation and their participation in the Witness Protection Program. Implied in such an attitude is the proposition that, if financial disadvantage were to be established at a later time, in circumstances where Mr Gray had fully co-operated, and if there were no other disentitling circumstances, compensation should be paid. That would be consistent with the views expressed in evidence by his superior, Mr Cusack. Mr Cashman's main points in cross-examination seemed to be that the question of financial compensation would have to be considered at a later stage, and that he did not authorise Inspector Small to give any open-ended commitment to the plaintiffs prior to that time. Detective Sergeant Shorrocks' evidence 218 Detective Sergeant Shorrocks had close contact with Mr Gray during 1990. He accepted that an officer in the position of Inspector Small may not pass on information about everything he was doing to a subordinate officer. He said he recollected that there were some discussions about an allowance to be paid to the plaintiffs in addition to the payment of expenses under the Witness Protection Program. He said it was a "realistic allowance" on top of the pension payments made under the program. Findings as to authority 219 The defendant was bound by Inspector Small's financial representations if, when he made them, he had express actual authority, or implied actual authority, or ostensible authority to do so. There is no suggestion of ratification, on the facts. 220 There is a case for saying that Inspector Small had express actual authority. He gave evidence to the effect that the arrangements for delegation were loose and depended on common sense. That is consistent with Mr Sage's evidence. He contemplated that someone other than Mr Cusack might have authorised Inspector Small to sign the memorandum of understanding, notwithstanding that only Mr Cusack had a formal financial delegation at the time. Mr Sage also said that the senior investigating officer had some autonomy, subject to a requirement to report back. It is also consistent with Inspector Small's evidence, not contradicted by Mr Cusack, that Mr Cusack said to him "Don't lose him", arguably implying an assumption that Inspector Small had authority to do what was necessary to gain Mr Gray's co-operation. 221 On balance, however, I find it to be unlikely that Inspector Small had express actual authority to make the representations. That conclusion would be inconsistent with not only the 1989 resolution, which appears to have been departed from by January 1990, but also with Mr Cashman's evidence that the proposition in the Manual written in October 1990 was in fact followed in January. In my opinion, the true position was as stated in the Manual, but from time to time officers of the defendant acted in disregard of that position, without any actual authority to do so. 222 I am not persuaded that Mr Cashman authorised Inspector Small to promise the plaintiffs that they would be looked after and would not be financially disadvantaged. I accept Inspector Small's evidence that there was a discussion of some kind between Mr Cashman and Inspector Small on 25 January. Their offices were on the same floor, and Mr Cashman was the team leader for Project OMO. Dramatic and exciting events were unfolding, and one would expect the senior investigating officer to brief the team leader about them. Given that Mr Gray had raised the general question of the financial implications of co-operation with Inspector Small, in my view it is more likely than not that the question of financial loss was raised in the conversation, in general terms. Mr Cashman believed, at the time, that any financial disadvantage to the plaintiffs would be addressed at an appropriate future time. In the light of his evidence in cross-examination, which I accept, I find it implausible that he would have authorised Inspector Small to bind the defendant immediately to a promise to make compensation for whatever financial losses there may be. Whether he might have said something that Inspector Small misinterpreted is a matter upon which one can only speculate. In any event, I am satisfied that Mr Cashman had no actual authority to commit the defendant to financial expenditure at that time, having regard to the terms of the financial delegations and paragraph 14.35 of the Manual. 223 As to implied actual authority, Inspector Small was the senior investigating officer in Project OMO, charged with the task of obtaining the co-operation of Mr Gray. The nature of his office was such, in my opinion, as to imply authority to commit the defendant to representations or promises with respect to the financial arrangements associated with witness protection. However, I had decided that there was no implied actual authority for the same reason that there was no express actual authority. On balance, I accept Mr Cashman's evidence that the arrangements with respect to authority were as reflected in paragraph 14.35 of the Manual. That amounts to a finding that there was a restriction on the authority that would otherwise be implied by virtue of Inspector Small's office. 224 Ostensible authority is a different matter. I am satisfied that Inspector Small had ostensible authority to make the financial representations. As I have said, Inspector Small, as senior investigating officer, occupied an office which carried with it the responsibility of negotiating with Mr Gray for his co-operation. The authority to conduct those negotiations implied, as part of the usual authority of the office, authority to bind the defendant to financial arrangements for the purpose of securing witness co-operation. The express limitation on Inspector Small's actual authority that I have found to exist was not communicated to Mr or Mrs Gray. Indeed, it was not communicated to Inspector Small, who believed he had the authority to act in a common sense way. 225 Mr Cusack, who had actual authority to give a financial undertaking on behalf of the defendant, was aware on 24 January that Inspector Small was negotiating for the co-operation of Mr Gray. He knew at about that time that a loss was anticipated in respect of the salon business. He recognised that there should be recompense for financial losses at an appropriate stage. Knowing these things, he did not seek to restrict Inspector Small's negotiations concerning financial matters. On the contrary, on 24 January he encouraged Inspector Small not to lose Mr Gray as a co-operating witness. 226 By appointing Inspector Small to the office of senior investigating officer and acquiescing, through its principal officer Mr Cusack, in Inspector Small conducting negotiations to secure witness co-operation, the defendant held out Inspector Small as having the authority to bind it to the financial undertakings that he gave: see Freeman & Lockyer v Buckhurst Park Properties [1964] 2 QB 480 at 503-505; Crabtree-Vickers v Australian Direct Mail (1975) 133 CLR 72 at 78ff. That holding out was confirmed by the fact that Inspector Small was authorised by the defendant to sign the memorandum of understanding, which contained undertakings of financial assistance funded by the defendant. Were Inspector Small's representations invalidated when the memorandum of understanding was signed? 227 The defendant drew attention to clause 3 of the memorandum of understanding, according to which representations or promises previously made to the witness by persons in authority regarding his participation in the program were null and void, except those set out in the memorandum of understanding. 228 In my opinion clause 3 would not have the effect of invalidating the financial representations made on behalf of the defendant by Inspector Small, if those representations were otherwise of legal or equitable effect. If the plaintiffs and the defendant had entered into a new written contract which was intended to set out comprehensively the terms of their legal relationship, a provision of that new contract saying that it replaced any previous representations, which were no longer to be of any effect, may well be valid and operative. In the present case, however, Inspector Small's oral representations were directed towards the arrangements between the plaintiffs and the defendant 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. 229 It is clear from the plaintiffs' 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 defendant, 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". 230 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 defendant concerning compensation for overall financial disadvantage. Encouraged assumptions 231 The second and third ingredients of equitable estoppel, as presented above, are that the defendant's representations, promises or conduct must have created or encouraged in the plaintiff an assumption, the assumption being that a contract will come into existence or a promise be performed or an interest granted to the plaintiff by the defendant. One of the difficult factual issues in this case is to ascertain what assumptions or beliefs were created in the minds of Mr and Mrs Gray in January 1990, when they heard Inspector Small's representations about their financial security. 232 In my view the evidence shows that both Mr and Mrs Gray came to believe, when they heard Inspector Small make and repeat his representations on 24, 25 and 27 January 1990, that a promise would be performed by the defendant with respect to their future financial welfare. The promise was that they would be looked after and not be financially disadvantaged, if Mr Gray co-operated as required and they entered into the Witness Protection Program. 233 The plaintiffs' case is that their encouraged assumption was that they would not be financially disadvantaged for the rest of their lives. Inspector Small did not say to them that his representations about financial disadvantage would operate for the rest of their lives. I cannot draw from the evidence any inference that his statements were intended to extend for the whole of their lives, or that they made any contemporaneous assumption to that effect. In my view the natural meaning of a promise to make good any financial disadvantage through witness co-operation and entry into the Witness Protection Program is that the promise extends through the period of co-operation and witness protection, rather than for life (unless the witness dies before the protection arrangements come to an end). 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. 235 In my opinion, the facts establish on balance, that there was an encouraged assumption to the effect that the defendant would pay Mr Gray's income tax in respect of the payments and benefits he received under the Witness Protection Program. There was no specific representation by Inspector Small or anyone else as to whether the payments and benefits received by Mr Gray under the Witness Protection Program were or were not subject to tax. As I have said, no such implied term can be extracted from the memorandum of understanding, which is the source of Mr Gray's entitlement to the payments and benefits that have been taxed. As a general proposition, it can hardly be the responsibility of the payer to draw the payee's attention to the tax consequences of the payments. A person who acquires a contractual entitlement to periodical payments would assume, absent any specific warranty or very special circumstances, that the payments would be subject to income tax and that the tax would be borne by the receiving party. 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 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. 237 This evidence has persuaded me that, in the very unusual circumstances of this case, 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. Reliance and unconscionability 238 The fourth ingredient of equitable estoppel, as presented above, is reliance by the plaintiff on the assumption created by the defendant's representation, promise or conduct. The fifth ingredient is that the reliance must be such that it would be unconscionable for the defendant to depart from the assumption. 239 Counsel for the defendant helpfully submitted that it is not necessary that reliance on the representation, promise or conduct of the defendant be the sole reason why the plaintiff has acted to his or her detriment. He said that, consistently with other areas of law, it is sufficient that the defendant's representation, promise or conduct is one of the matters relied upon by the plaintiff for altering his or her position: see Ricochet Pty Ltd v Equity Trustees Executors and Agency Company Limited (1993) 41 FCR 229 at 234 (Full Federal Court, in relation to s 52 of the Trade Practices Act 1974 (Cth)); Alexander v Cambridge Credit Limited (1987) 9 NSWLR 310, at 357 per McHugh J, in relation to tort). However, he insisted that it is necessary that the plaintiff's reliance upon the encouraged assumption is such as to make it unconscionable for the defendant to resile, having regard to all of the circumstances. I agree with these principles. 240 The conversations between Mr Gray and Inspector Small on 24 and 25 January, and the conversation between Mr and Mrs Gray and Inspector Small on 27 January, demonstrate to my mind that the plaintiffs were concerned about three things during that time. First, they were both frightened that they would suffer physical injury at the hands of Saxon and Schneiders or their henchmen. Mr Gray realised that immediate protection was necessary, and Mrs Gray trusted his judgment, even though her life was falling apart. 241 Secondly, Mr Gray was very anxious to secure, as best he could, immunity from prosecution. The risk that he would go to gaol probably weighed heavily on his mind from the moment the police arrived at his apartment on 24 January, and certainly once he discovered that the money was drug money and "went ashen". Mr Morris QC confirmed on the following day that there were grounds for prosecution and a probability of conviction. Thereafter Mr Gray and his solicitors lost no opportunity to record that Mr Gray's co-operation was conditional upon the defendant doing what it could to secure that immunity. I have referred to Gadens Ridgeway's letter of 25 January, and various occasions when statements about immunity were made in the course of witness interviews. Counsel for the defendant handed me a list identifying references, in the Gadens file which is in evidence, to immunity from prosecution. There are 16 in all. Clearly the issue was a very important one to Mr Gray and, I infer, Mrs Gray as well. 242 The importance of those other two matters is no obstacle to a finding that there was a third matter of concern for Mr and Mrs Gray, namely the question of their financial security. That concern arose in specific form when Mrs Gray discovered that it would be necessary for her to leave her salon business, never to return. But the issue was raised in more general terms by Mr Gray on 24 and 25 January. 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. Consequently Inspector Small's representations, that they would be looked after and would not suffer financial disadvantage, were significant to the decision of Mr Gray to co-operate with the defendant and the decision of the plaintiffs to enter the witness protection program. The plaintiffs relied on representations about immunity from prosecution in making the decision, but they also relied upon Inspector Small's representations about their future financial security. 243 The defendant emphasised that according to Inspector Small's account, the financial representations were first made only after Mr Gray had decided to co-operate by wearing a listening device to his meeting with Schneiders. Therefore, it was said, the plaintiffs had not proved that they relied on those representations in acting to their detriment, or that those representations caused them to suffer the financial loss that occurred after they put themselves in the protection of the defendant. 244 It seems to me clear from Inspector Small's account that Mr Gray's initial decision on 24 January to co-operate by wearing a listening device to his meeting with Schneiders that evening was taken without regard to financial considerations. However, later in the day he raised the financial question and received some assurances from Inspector Small, and he returned to the matter the following day, before wearing a listening device to the meeting with Schneiders and Saxon that evening. Mr Gray's co-operation with the defendant comprised several elements. One was to attend the two meetings wearing a listening device; another was to give witness interviews and eventually to sign witness statements; a third was to attend meetings of various kinds, with counsel and others; a fourth was to give evidence in court; and a fifth was to have discussions with overseas investigators. That is not necessarily comprehensive. The present point is that many of those elements of co-operation occurred after Inspector Small had made the full set of financial representations. It was open to Mr Gray to limit or discontinue his co-operation, especially after he discovered, in May 1990, that summonses had been issued against him for money laundering offences, notwithstanding his best efforts to secure immunity from prosecution. Yet he remained committed to the process of co-operation throughout the period from 1990 to 1996, when the need for co-operation ceased. 245 My view is that, looking at the evidence as a whole, and in particular the evidence of Inspector Small's conversations with Mr Gray on 24 and 25 January and with the plaintiffs on 27 January, it is reasonably plain that Mr Gray relied on Inspector Small's representations in continuing to co-operate and not resiling on and after 25 January 1990, and that both plaintiffs relied on Inspector Small's representations of 27 January when they are allowed themselves to remain thereafter in the protection of the defendant and subsequently when they entered into the Witness Protection Program. 246 As to the last point, 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. 247 A principal point advanced on behalf of the defendant related to letters written by Mr and Mrs Gray and Inspector Small in 1991 and 1996. None of those letters makes the claim that the plaintiffs were entitled to compensation because of promises made by Inspector Small. That, says the defendant, is a good indication that the idea of recovery for breach of binding undertakings was invented much later, and that it in fact had no part to play in the plaintiffs' conduct during the period 1990 to 1997. I have already rejected this contention, so far as it relates to Inspector Small's evidence. 248 As to the plaintiffs' position, it is helpful to consider separately the 1991 letters and the 1996 letters. In 1991 committal proceedings were under way and the plaintiffs were still at considerable risk and in need of protection. The threat of prosecution had passed but they were relying on the Witness Protection Program for their daily needs. They were familiar with the idea of an ex gratia payment from other cases, as their correspondence indicates. They were on friendly terms with certain officers of the defendant. There is no evidence as to why Mr Gray chose to write in terms of supplication rather than entitlement, and I found Mrs Gray's attempt to explain herself to be totally inadequate. However, it seems to me that reasonable people in their shoes might have thought it politic, and most likely to produce a good outcome, to write the kind of letters they wrote and to avoid appearing assertive and aggressive. As with Inspector Small, it might have been a different matter if the representations were contained in a contract, especially if they were reduced to writing. But as lay people they may not have understood the potential for enforcing obligations of conscience in equity, until the possibility was eventually explained to them by their present solicitors. 249 By March 1996 the plaintiffs' positions had changed significantly. Saxon had pleaded guilty and Schneiders had absconded, and it was unlikely that Mr Gray would be needed in future as a witness. Inspector Small and the plaintiffs believed the time had come to pursue the claim the plaintiffs had made in 1991, which had merely been deferred and not rejected by Mr Cusack's reply. But as far as I can see, they had no incentive to alter their tactical approach from supplication to demand. Essentially they were reviving and re-asserting their 1991 claim. It was only in November 1996, when their 1996 letters had been unsuccessful and Mr Gray turned to the Prime Minister for assistance, that he saw fit to put the matter in terms of unfulfilled undertakings. 250 Taking all these things into consideration, I do not regard the absence, in the 1991 and 1996 letters, of claims based on breach of undertaking as demonstrating or even indicating that no undertakings were made or relied upon in 1990. 251 Having concluded that Mr and Mrs Gray relied upon the assumption encouraged by Inspector Small's representations (made with the ostensible authority of the defendant) when they are allowed themselves to remain after 27 January in the protection of the defendant and subsequently when they entered into the Witness Protection Program, I do not find it difficult to conclude that it would be unconscionable for the defendant to depart from the assumption. 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 defendant, thereby making themselves highly vulnerable. It would be outrageously unfair to permit the defendant to resile from the assumptions encouraged by Inspector Small's conduct. By terminating the witness protection arrangements without meeting the plaintiffs' encouraged assumptions -that is, by failing to provide full compensation to the plaintiffs for their recoverable losses - the defendant acted unconscionably within the meaning of the equitable estoppel doctrine. Causation 252 In the present case the relief sought by the plaintiffs is equitable compensation. In a case such as this, equitable compensation is clearly an appropriate remedy. Recovery is limited, however, to compensation for the loss caused by the defendant's unconscionable conduct. What is the test of causation in this context? 253 Counsel for the defendant submitted that the applicable test is the common law test enunciated in March v Stramare (1991) 171 CLR 506, that is, whether the defendant's conduct was a "common sense cause" of the plaintiffs' loss. The plaintiff did not challenge the defendant's submission on this point. 254 I agree that the common sense test of causation is the appropriate one to use in the circumstances of this case. There is authority that this test may be used to establish causation in equity's exclusive jurisdiction. In Maguire v Makaronis (1997) 198 CLR 449, Brennan CJ, Gaudron, McHugh and Gummow JJ referred (at 473) to the requirement, in a case of breach of fiduciary duty, that there must be "an adequate or sufficient connection between the equitable compensation claim and the breach of fiduciary duty". In O'Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262, Spigelman CJ and Meagher JA held, applying Target Holdings Limited v Redferns [1996] 1 AC 421, that in Australia a "common sense view" of causation was to be applied in determining whether a loss was caused by a breach of trust. 255 In some cases in the exclusive jurisdiction, courts have adopted a "but for" test of causation: see Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1, 93; Youyang v Minter Ellison [2001] NSWCA 198 (8 October 2001) and White v Illawarra Building Society [2002] NSWCA 164 (19 July 2002) per Powell JA at paragraph 137 and the Hodgson JA at paragraph 145. In my view, the choice of a "common sense" test in some cases and a "but for" test in others does not mean that the authorities are inconsistent. Rather, it demonstrates that the principles governing the availability of equitable compensation have about them a measure of flexibility, which enables the Court to choose the most appropriate means to redress unconscionable behaviour in the circumstances of the case. In some cases a "but for" approach is the common sense approach. In other cases, a strict "but for" approach may produce a distorted outcome. 256 In the present case, it seems to me an accurate analysis of the case to say that the defendant's conduct was, from a common sense point of view a cause of the plaintiffs' loss. This is because the totality of the evidence that I have reviewed shows that the financial representation was an important, though by no means the only or even the most important, consideration leading to the plaintiffs' action. It is a little more difficult to say that the plaintiffs would not have suffered their losses but for the defendant's representations, from which it subsequently departed. However, it seems to me that the importance of the financial considerations as shown by the evidence, points to the conclusion that neither Mr Gray nor Mrs Gray would have acted just as they did but for Inspector Small's representations. Measuring the plaintiffs' recoverable losses 257 My conclusions are that the plaintiffs have established the ingredients of equitable estoppel, and that they are entitled to recover losses caused, as a matter of common sense, by the defendant's conduct. 258 In final submissions Council for the plaintiffs handed out two schedules purporting to calculate "damages". In Schedule 1, the plaintiffs claimed the following: 1. Cutting Bird business: $67,500 2. Less proceeds received: ($8,000) 3. Taxation assessments: $127,457 4. Value of $500 per week discounted at 10%: $248,350 5. Accommodation $19,535 per annum or $375 per week: $186,262 6. Electricity $821.20 per annum or $15.79 per week: $7,844 7. Telephone $1000 per annum or $19.23 per week: $9,551 Total: $638,964

Gray v National Crime Authority

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Judgment (7 paragraphs)

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Legislation Cited (8)

Cases Cited (16)

Cited By (2)