Marundrury v Commonwealth Bank of Australia

The material before the Court 3 The material before the Court on the present application comprises: (a) an affidavit of Gabriel Kuek affirmed 31 March 2023, filed by the applicants; and (b) an affidavit of Bryony Adams affirmed 1 May 2023, filed by the Bank. 4 The parties have filed written submissions in advance of the hearing today.

Overview of the applicant's proposed case 5 The Proposed Pleading contains claims on behalf of only two applicants (unlike the earlier iterations, which contained claims on behalf of three or four applicants). 6 The first applicant, Ms Delania Marundrury (Delania), and the second applicant, Ms Widja Marandrury (Widja), held bank accounts with the Bank from February 2013 until September 2020. Widja is the mother of Delania. Mr Fona Marundrury (Fona) is the husband of Widja and the father of Delania. 7 The applicants allege that: in the period from April 2013 to October 2015, Fona caused money to be transferred from Indonesia to bank accounts held by Delania and Widya with the Bank in Australia; the amounts were not transferred using normal banking channels; rather, Fona engaged a money changer in Indonesia who charged a lower rate than that charged by banks. 8 The applicants allege that, unknown to the applicants, no funds were transferred directly from Indonesia into Delania's and Widya's accounts with the Bank; rather, funds equivalent to the amounts intended to be transferred were transferred by way of deposits into the accounts in multiple deposits of less than $10,000. At an early stage of this proceeding, senior counsel for the applicants submitted that the applicants were victims of "cuckoo-smurfing". This refers to a method of money laundering used by criminals to make money generated by criminal activities appear to have come from a legitimate source. In particular, the practice involves organised criminals using professional money laundering syndicates to target the bank accounts of people receiving money transfers in Australia.

The earlier applications 9 On 16 April 2021, the applicants filed an amended statement of claim (the ASOC). In that pleading, the applicants' case relied heavily on provisions of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (the AML/CTF Act). In summary, the applicants alleged that: the Bank was under contractual and other duties to comply with the AML/CTF Act; the Bank breached its obligations under the AML/CTF Act by, among other things, failing to report suspicious activity on Delania's and Widya's accounts; the Bank thereby breached its contractual and other duties to the applicants; and, as a result, the applicants had suffered loss and damage. In relation to loss and damage, the applicants alleged that: substantial sums of money in the accounts had been forfeited pursuant to proceeds of crime legislation; had the Bank complied with its duties, steps to forfeit money in the accounts would have commenced at a much earlier point in time than they did; had this occurred, Fona would not have caused further money to be transferred from Indonesia to the relevant bank accounts, and any further transfers from Indonesia to Australia would have been made by electronic bank transfer. 10 On 26 May 2021, the Bank filed an interlocutory application seeking summary dismissal of the applicants' claims, or an order that the whole or certain parts of the ASOC be struck out. In support of the summary dismissal application, the Bank made two broad contentions: (a) First, the Bank contended that the applicants had no reasonable prospect of establishing a breach of s 41 of the AML/CTF Act as a result of the operation of s 124 of the AML/CTF Act, which has the effect that evidence pertaining to reporting obligations under s 41 is relevantly rendered inadmissible in this proceeding. (b) Secondly, the Bank contended that s 123 of the AML/CTF Act operates to prohibit the Bank from properly defending the allegations in respect of s 41, such that the case as put against it was manifestly unfair and constituted an abuse of process. 11 On 9 November 2021, I gave judgment on the Bank's interlocutory application dated 26 May 2021: see the November 2021 Reasons. In relation to the application for summary dismissal, I was not satisfied that it was appropriate to summarily dismiss the proceeding having regard, in particular, to the discretion conferred on the AUSTRAC CEO by s 248 of the AML/CTF Act, which could potentially address the Bank's contentions based on ss 123 and 124. I considered it appropriate to allow a period of time (approximately four months) to enable the parties to explore whether the AUSTRAC CEO would be prepared to exercise the discretion. In relation to the strike-out application, I was not satisfied that the whole of the ASOC should be struck out. However, I considered that certain paragraphs were not properly pleaded and should be struck out (with a right to re-plead) and that certain paragraphs needed to be supplemented by further and better particulars. 12 On 8 December 2021, the applicants provided to the Bank a proposed second amended statement of claim. This document was subsequently slightly revised to correct typographical or minor errors. The revised document was the applicants' proposed second amended statement of claim dated 21 May 2022 (the Proposed SASOC). 13 On 21 December 2021, Herbert Smith Freehills, the solicitors acting for the Bank, wrote to AUSTRAC seeking an exemption and modification of ss 123 and 124 of the AML/CTF Act under s 248 of the Act. 14 On 24 March 2022, the Deputy CEO, Regulation, Education and Policy of AUSTRAC (as delegate for the AUSTRAC CEO) decided not to modify s 124 of the AML/CTF Act and that, in light of this, it was unnecessary to determine the proposed exemption from s 123. 15 On 23 May 2022, a case management hearing in this proceeding took place. It was arranged that the following two interlocutory applications would be listed for hearing without the need for the parties to file formal interlocutory applications: (a) an application by the applicants for leave to file the Proposed SASOC; and (b) an application by the Bank for summary dismissal or strike-out of the applicants' claims. 16 On 10 August 2022, I gave judgment on those applications: see the August 2022 Reasons. I concluded that: (a) the application for leave to file the Proposed SASOC should be dismissed; (b) the whole of the ASOC should be struck out with a right to re-plead; and (c) the Bank's interlocutory application should otherwise be dismissed. 17 In summary, I was of the view that, whether one had regard to the ASOC or the Proposed SASOC, the applicants' claims were largely based on alleged breaches of s 41 of the AML/CTF Act. In these circumstances, s 124 of the AML/CTF Act presented a substantial obstacle to the applicants being able to successfully prosecute the proceeding. I noted that, at the time the November 2021 Reasons had been given, there had been the possibility that these difficulties could be overcome by the AUSTRAC CEO exercising the discretion in s 248. However, by the time of the August 2022 Reasons, the AUSTRAC CEO (through the Deputy CEO) had decided not to exercise the discretion to modify the operation of s 124. 18 Further, in the August 2022 Reasons, I observed that, although it was not necessary to consider the Bank's submissions based on s 123 of the AML/CTF Act, had it been necessary to do so, I would have accepted those submissions. I stated that, in circumstances where the applicants' claims (in the ASOC and the Proposed SASOC) were largely based on alleged breaches of s 41 of the AML/CTF Act, and s 123 prevented the Bank from disclosing (if it be the case) that it complied with its reporting obligations under that provision, the Bank was placed in a manifestly unfair position and the proceeding (as framed in the ASOC and the Proposed SASOC) constituted an abuse of process. 19 It followed that the applicants' application for leave to file the Proposed SASOC was refused. While the Bank had sought summary dismissal of the applicants' claims, I considered it appropriate to give the applicants one more opportunity to attempt to plead a case that did not rely on alleged breaches of s 41 of the AML/CTF Act: see the August 2022 Reasons at [64]-[65]. 20 I now turn to consider the present applications.

The Proposed Pleading 21 The Proposed Pleading is, in my view, substantially different from the earlier iterations. It primarily relies on an alleged breach of a common law duty of care. It contains some other causes of action that largely overlap with that claim. Importantly, it does not allege that the Bank breached any obligation to report any transaction to AUSTRAC under s 41 of the AML/CTF Act. 22 In the course of discussion with senior counsel for the applicants, it was accepted that the following amendments should be made to the Proposed Pleading: (a) the removal of paragraphs 45 and 46; and (b) the amendment of paragraph 47 so that it makes an allegation to the effect that the Bank knew or ought to have known that the transactions referred to in paragraph 38 were or might be illegal by reason of s 142 of the AML/CTF Act. I will refer to paragraph 47 as so amended as revised paragraph 47.

Applicable provisions and principles 23 The relevant provisions of the AML/CTF Act were set out in my earlier reasons. I do not set them out again. Also relevant for the purposes of this hearing are ss 142 and 235. Section 142 (as at 1 December 2014) provided: 142 Conducting transactions so as to avoid reporting requirements relating to threshold transactions (1) A person (the first person) commits an offence if: (a) the first person is, or causes another person to become, a party to 2 or more non-reportable transactions; and (b) having regard to: (i) the manner and form in which the transactions were conducted, including the matters to which subsection (3) applies; and (ii) any explanation made by the first person as to the manner or form in which the transactions were conducted; it would be reasonable to conclude that the first person conducted, or caused the transactions to be conducted, in that manner or form for the sole or dominant purpose of ensuring, or attempting to ensure, that the money or property involved in the transactions was transferred in a manner and form that would not give rise to a threshold transaction that would have been required to have been reported under section 43. Penalty: Imprisonment for 5 years or 300 penalty units, or both. (2) Subsection (1) does not apply if the defendant proves that the first person did not conduct the transactions, or cause the transactions to be conducted, as the case may be, for the sole or dominant purpose of ensuring, or attempting to ensure, that the money or property involved in the transactions was transferred in a manner and form that would not give rise to a threshold transaction that would have been required to have been reported under section 43. Note: A defendant bears a legal burden in relation to the matters in subsection (2) - see section 13.4 of the Criminal Code. (3) This subsection applies to the following matters: (a) the value of the money or property involved in each transaction; (b) the total value of the transactions; (c) the period of time over which the transactions took place; (d) the interval of time between any of the transactions; (e) the locations at which the transactions took place. 24 Section 235 (as at 1 December 2014) provided: 235 Protection from liability (1) An action, suit or proceeding (whether criminal or civil) does not lie against: (a) a person (the first person); or (b) an officer, employee or agent of the first person acting in the course of his or her office, employment or agency; in relation to anything done, or omitted to be done, in good faith by the first person, officer, employee or agent: (c) in carrying out an applicable customer identification procedure under this Act; or (d) in fulfilment, or purported fulfilment, of a requirement under this Act not to commence to provide a designated service, or not to continue to provide a designated service; or (e) in compliance, or in purported compliance, with any other requirement under: (i) this Act; or (ii) the regulations; or (iii) the AML/CTF Rules. (2) Subsection (1) does not apply to the following proceedings: (a) criminal proceedings for an offence against this Act or the regulations; (b) section 175 proceedings for a contravention of a civil penalty provision; (c) proceedings under the Proceeds of Crime Act 2002 that relate to this Act. 25 The applicable principles regarding summary dismissal and abuse of process were set out in the November 2021 Reasons at [31]-[38].

Consideration 26 The main issue raised by the Bank on the present applications concerns s 123 (and also s 124) of the AML/CTF Act. In summary, the Bank contends that revised paragraph 47 of the Proposed Pleading will require the parties to enter the territory covered by s 123(1)(b). The Bank submits that, although the proposed claim as now formulated does not directly allege that the Bank breached the reporting obligation in s 41 of the AML/CTF Act, in order to respond to the allegation that it had actual or constructive knowledge of the allegedly illegal transactions in revised paragraph 47 of the Proposed Pleading, the Bank will need to disclose information "from which it could reasonably be inferred that the reporting entity has given, or is required to give, [a] report" (s 123(1)(b)). 27 Further, the Bank submits that it may wish to rely on the immunity in s 235 of the AML/CTF Act and that, in order to make out that defence, it would need to disclose information falling within s 123(1)(b). 28 I accept that these difficulties do appear likely to arise. However, given the very different form of the Proposed Pleading, which does not contain any allegation that the Bank breached its reporting obligations under s 41 of the AML/CTF Act, the s 123 issue arises in only an indirect way. Putting it simply, the case as now proposed is not concerned with whether the Bank was under an obligation to report the relevant transactions to AUSTRAC or whether the Bank breached any such obligation. It is, rather, concerned with whether the Bank breached a common law duty of care as alleged in the Proposed Pleading. While the allegation of knowledge or constructive knowledge in revised paragraph 47 is likely to require the Bank to disclose information about its processes and monitoring (both generally and in the specific case), it may well be the case that the CEO of AUSTRAC takes a different view of any application under s 248 for an exemption or modification, given that the case is now not concerned with whether the Bank was under an obligation to report under s 41 or whether it breached any such obligation. I note that, were an exemption or modification to be given, all of the evidence pertaining to these matters could be the subject of confidentiality orders, including orders that did not permit the applicants themselves to have access to this material (that is, only their legal representatives would have access). I note that an exemption or modification under s 248 could be conditional upon such confidentiality orders having been made. 29 In my view, given the way in which the proposed claim is now cast, there is a reasonable prospect of an exemption or modification being granted by the AUSTRAC CEO permitting the Bank to disclose to the Court and the applicant's legal representatives on a confidential basis information relevant to the allegation in revised paragraph 47 of the Proposed Pleading and any defence raised by the Bank in reliance on s 235. I consider that it would be open to the AUSTRAC CEO to form the view that such an exemption or modification would not undermine the integrity of the AML/CTF Act. 30 In these circumstances, I consider it appropriate to give leave to the applicants to file the Proposed Pleading (subject to the amendments referred to above), while relieving the Bank of the obligation to plead to revised paragraph 47 (at least at this stage) and reserving the right of the Bank to apply for a stay of the proceeding in the event that it is unable to obtain an exemption or modification from the CEO of AUSTRAC. It follows that I will dismiss the Bank's application for summary dismissal of the proceeding. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Moshinsky.