National Australia Bank Limited v Human Group Pty Ltd [2020] NSWSC 1900 | Case summary

Supreme Court of NSW|2020-12-11|Before: Henry J, Southwell J

Bathurst (Plaintiff) D Pritchard SC (Defendants)

Judgment

Before me for hearing on 11 December 2020 was a notice of motion filed by the plaintiff (NAB) in relation to the asset preservation orders it obtained against the first defendant (Human Group) and the second defendant (Ms Rosamond) on 19 August 2019 as extended and amended on 21 August 2019 (Freezing Orders).
NAB's motion was filed as the parties were in dispute about whether Ms Rosamond and Human Group are entitled to access $3.8 million of assets caught by the Freezing Orders that are held by the third defendant (ACN) to fund their expenses, including legal expenses relating to Ms Rosamond's defence to related criminal proceedings.
NAB objects to ACN's assets being used to fund Ms Rosamond's living and legal expenses and the business expenses of her companies. It says that the current form of the Freezing Orders do not permit ACN's assets to be used in that way. In the alternative, NAB says that the Court should vary the Freezing Orders in accordance with its notice of motion so as to prevent Ms Rosamond and Human Group from using ACN's assets over which NAB asserts a proprietary claim in these proceedings and to clarify other matters regarding Ms Rosamond, Human Group and ACN.
Ms Rosamond, Human Group and ACN contend that the Freezing Orders, as currently drafted, do not preclude them paying their expenses from ACN's assets. They also oppose NAB's motion for a variation to the Freezing Orders.
The hearing thus raises three issues for determination.
First, whether on a proper construction of the Freezing Orders, Ms Rosamond and Human Group are prohibited from accessing ACN's assets to pay for their ordinary living, reasonable legal and business expenses.
Second and if the answer to the first question is no, whether the Freezing Orders should be varied to prevent Ms Rosamond and Human Group having recourse to ACN's assets to fund their expenses. This requires a consideration of the following: 1. whether there has been any material change of circumstances since the Freezing Orders were made; 2. whether NAB has established a prima facie proprietary claim to ACN's assets; and 3. where the interests of justice lie.
The third issue is, what other variations, if any, should be made to the Freezing Orders.
NAB relies on the affidavits of its solicitor, Damian Lovell, sworn 5 November 2020 (Lovell 2) and 3 December 2020 (Lovell 3) and parts of Mr Lovell's affidavit sworn 19 August 2019.
Ms Rosamond, Human Group and ACN rely on an affidavit of their instructing solicitor, Rocco Panetta, sworn 27 November 2020; affidavits of their accountant, Scott Costain, sworn 27 November 2020 (Costain 1) and 8 December 2020 (Costain 2); and an affidavit of a costs consultant, Alan Adrian, sworn 27 November 2020. Evidence from Mr Panetta about Ms Rosamond and Human Group's financial position has been adduced by the defendants on the basis that it does not waive Ms Rosamond's privilege against self-incrimination and is intended to be confined to this application only.
In addition to the evidence, the parties provided detailed written submissions which were supplemented at the hearing by oral submissions and other documentary tenders. These reasons do not record every detail of the submissions and the evidence but seek to convey the substance and refer to those parts that I consider to be relevant to these reasons.
In view of the criminal charges that have been brought against Ms Rosamond (to which I refer below) and the interlocutory nature of this application, it is also appropriate to record that I do not make any final findings of fact on which NAB's claims are based. Nor do I make any findings of fact or draw any inferences in relation to defences that Ms Rosamond may or may not have to the claims advanced against her. The findings I make are those necessary for the resolution of the issues for determination and this judgment only.
Many of the factual matters to which I refer are not in dispute. To the extent I refer to factual matters that are in dispute, they are identified as such in these reasons.

Background

In these proceedings, NAB claims that Human Group, Ms Rosamond and Ms Rosemary Rogers, the ex-Chief of Staff to NAB's former CEO, engaged in a fraudulent scheme that involved Human Group issuing false or inflated invoices to NAB and Ms Rogers receiving secret profits and other benefits which caused significant financial loss to NAB.

Criminal proceedings

The facts asserted by NAB in these proceedings significantly overlap with the facts that gave rise to criminal charges brought against Ms Rosamond in March 2019.
Ms Rosamond has been charged with 59 counts of corruptly giving benefits to Ms Rogers or her family during the period 1 February 2013 to 6 December 2017; 13 counts of dishonestly obtaining a financial advantage by deception arising out of alleged falsified and inflated invoices issued to NAB in the period from 1 July 2014 to 5 February 2018; one count of publishing a false statement to NAB to obtain a financial advantage and one count of using false email communications to obtain a financial advantage. The total combined value of the charges against Ms Rosamond relating to Human Group and NAB offences is $25,688,773.50, of which Ms Rogers is alleged to have received actual benefits to the value of $5,594,445.02.
Ms Rosamond has availed herself of the right to silence in her criminal proceedings.
On 31 July 2020, Ms Rosamond entered a plea of not guilty and her criminal charges were set down for trial commencing on 26 July 2021 with an estimate of four months.
Ms Rogers has also been charged with 63 criminal offences arising from her dealings with NAB, Ms Rosamond and Human Group. On 20 February 2020, Ms Rogers pleaded guilty to those charges.

These proceedings

On 19 August 2019, NAB commenced these proceedings on an ex parte basis by summons seeking urgent interlocutory and final relief. On that day, the Court made freezing orders and NAB was given leave to file in Court a commercial list statement (CLS).
On 21 August 2019, Ms Rosamond and Human Group did not oppose the Freezing Orders being extended until further order and as varied to provide for further exceptions relating to the payment of certain reasonable legal expenses.
On 26 August 2019, the Freezing Orders were served on Shaw and Partners (Shaw), an Australian investment and wealth management firm, that manages and holds certain assets in ACN's name.

Stay of proceedings

On 16 October 2019, I made orders staying these proceedings as they relate to Ms Rosamond and limiting the steps required to be undertaken by Human Group pending final determination of the criminal proceedings. My judgment on the stay application sets out some further background to these proceedings and details regarding the parties, which I will not repeat here: National Australia Bank Limited v Human Group Pty Limited [2019] NSWSC 1404.
As a consequence of my orders, Ms Rosamond and Human Group have not filed any responses to the allegations made against them in these proceedings. Ms Rosamond has also objected to disclosing information to NAB about her and Human Group's assets in response to the Freezing Orders on the grounds that it may self-incriminate her.

Joinder of ACN

On 31 March 2020, NAB filed an amended summons and an amended commercial list statement (ACLS) joining ACN as the third defendant in these proceedings.
In the ACLS, NAB alleges that: 1. between 2013 and 2017, Human Group issued and NAB paid a series of invoices (totalling approximately $43.4 million) for consulting services purportedly provided by Human Group to NAB as part of the dishonest and fraudulent scheme devised by Human Group, Ms Rosamond and Ms Rogers: ACLS, Part A, [1], [2], [3]; 2. Ms Rosamond was the principal representative of Human Group who had direct contact with NAB and arranged for the invoices to be issued and sent to NAB as part of the fraudulent scheme: ACLS, Part C, [16], [34], [35]; 3. Ms Rogers held a senior role within NAB and was the person within NAB principally responsible for approving the Human Group invoices and that, as part of the fraudulent scheme, she received various financial benefits to ensure the invoices were paid: ACLS, Part C, [27]-[31], [34], [36]; and 4. fifty-seven secret commission payments were made by Ms Rosamond and/or Human Group to Ms Rogers between 2013 and 2017, which correspond to each of the offences relating to NAB the subject of the Criminal Proceedings: ACLS, Part C, [36], Schedule 1.
In the ACLS, NAB makes proprietary and non-proprietary claims against Human Group and Ms Rosamond.
The proprietary claims are made under the principles from Barnes v Addy (1874) LR 9 Ch App. 244: ACLS, Part C, [54] - [65]. NAB asserts that Ms Rogers was a fiduciary of NAB and that, by participating in the fraudulent scheme, she breached her duties, including her duties of "no conflicts" and "no profits". Based on the nature of the fraudulent scheme and their roles, NAB claims that Human Group knowingly received NAB property under the first limb of Barnes v Addy, and that Ms Rosamond and Human Group knowingly assisted in the fraudulent scheme under the second limb of Barnes v Addy. NAB seeks proprietary relief in the form of a constructive trust and a tracing remedy.
NAB's non-proprietary claims against Human Group and Ms Rosamond include breach of contract and tortious interference, misleading and deceptive conduct and tortious deceit and conspiracy. NAB seeks damages, equitable compensation and accounts.
In relation to ACN, NAB alleges that: 1. following Human Group's receipt of funds paid by NAB during the period 2013 to 2017 as part of the fraudulent scheme, Human Group made four payments of $1 million each to ACN on 15, 16, 17 and 18 May 2018: ACLS, Part C, [34A]; 2. Ms Rosamond had control of Human Group's bank accounts and directed the payments from Human Group to ACN: ACLS, Part C, [34B]; 3. the funds received by ACN from Human Group were subsequently transferred to or for the benefit of Ms Rosamond or transferred to various bank accounts held by ACN. These funds included funds from two term deposits held by Human Group: ACLS, Part C, [34C], [34D], [34F]; 4. certain of the funds transferred to bank accounts held by ACN were then invested by ACN through Shaw: ACLS, Part C, [34E]; 5. ACN knew of the dishonest and fraudulent design of the scheme on the part of Ms Rogers by reason of Ms Rosamond's knowledge: ACLS, Part C, [61A]; and 6. ACN knowingly received monies of NAB by reason of Ms Rogers' breaches of fiduciary duty and/or assisted her in the dishonest and fraudulent scheme and is liable to account to NAB for all amounts transferred to it from Human Group's bank account as constructive trustee: ACLS, Part C, [61B] to [61D] and [63A].

Events leading to NAB's notice of motion

On 15 July 2020, the defendant's solicitors, Panetta Lawyers, sent a letter to FIIG Securities Limited (FIIG) in relation to assets held and managed by FIIG in the name of ACN. FIIG is also an Australian investment and wealth management firm that manages and holds certain assets in ACN's name.
Panetta Lawyers' letter asked FIIG to confirm that it agreed to Shaw and the defendants dealing with ACN's assets so that they "may be properly managed and so [the defendants] can pay for their expenses as allowed for under the Exceptions" to the Freezing Orders. The exceptions to the Freezing Orders provide that the Freezing Orders do not prohibit Ms Rosamond and Human Group from paying their ordinary living, reasonable legal and certain business expenses. The letter identified that the defendants intended to use ACN's assets that FIIG held to pay: 1. all reasonable legal expenses in relation to these proceedings, the criminal proceedings and Family Court proceedings involving Ms Rosamond, which were estimated to be $2.75 million to $4.15 million; and 2. Ms Rosamond's ordinary living expenses and the business expenses for "her and all related entities", which were estimated until the end of 2021 or until the finalisation of the criminal proceedings to be $470,000 to $550,000 per annum.
Panetta Lawyers' 15 July 2020 letter and Mr Panetta's evidence suggest that Ms Rosamond and ACN had previously sought and received payments of ACN's accrued dividends from Shaw on the basis of the exceptions in the Freezing Orders following receipt of a statutory declaration from Ms Rosamond outlining her requirements for the dividends. Mr Panetta gives evidence that $134,000 of dividends were paid to the bank account of ACN by Shaw on 12 February 2020.
On 20 July 2020, FIIG responded to Panetta Lawyers' letter. FIIG declined to provide a "blanket confirmation" that it agreed that Shaw and the defendants could deal with ACN's assets in accordance with the permitted exceptions to the Freezing Orders and indicated that it would deal with any request for funds on a case-by-case basis.
On 6 August 2020, YPOL Lawyers, acting on behalf of FIIG and Shaw, provided a further response to Panetta Lawyers' 15 July 2020 letter. YPOL Lawyers took issue with Panetta Lawyers' request for access to ACN's funds asserting that there had been insufficient particularisation of the claimed expenses. YPOL Lawyers also asserted that paragraphs 8(a) and (b) of the Freezing Orders did not permit Shaw and FIIG to liquidate ACN's assets or make proceeds available to the defendants for their ordinary living and reasonable legal expenses. YPOL Lawyers' letter stated that Shaw and FIIG would not be dealing with ACN's assets as requested until such time as the Freezing Orders expressly accommodated the demands made in respect of the frozen assets.
On 7 August 2020, YPOL Lawyers sent a copy of its 6 August letter to Panetta Lawyers by email to NAB's solicitors, King & Wood Mallesons (KWM). YPOL Lawyers' email was tendered and accepted into evidence on this application to show that, as at 7 August 2020, NAB was aware of the position expressed by YPOL Lawyers that Shaw and FIIG would not consent to a release of ACN's assets without a variation to the Freezing Orders.
On 21 August 2020, NAB served its lay evidence in chief in these proceedings comprising seven affidavits.
On 27 August 2020, KWM sent a letter to Panetta Lawyers referring to the Freezing Orders and documents produced on subpoena that indicated that, in the period from December 2018 to March 2019, ACN had paid to or for the benefit of Ms Rosamond sums in excess of $1.1 million. The letter requested confirmation of whether ACN intended to make any further funds available to Ms Rosamond over the next twelve months and, if so, how much, on what basis (e.g. as a loan or dividend), for what purpose and, having regard to the nature of the claims made against ACN in these proceedings, how ACN planned to ensure it was solvent and was able to meet any judgment in favour of NAB.
On 18 September 2020, Panetta Lawyers responded to KWM's letter. Their letter asserted that Ms Rosamond would continue to make whatever sums ACN had available to fund her ordinary living, reasonable legal and business expenses in accordance with the exceptions to the Freezing Orders. Panetta Lawyers did not respond to the questions asked by KWM and stated that it was a matter for Ms Rosamond as to how she has or would characterise any drawdown of dividends or assets that may be held by ACN and its effect on ACN.
On 2 October 2020, Panetta Lawyers sent a letter to YPOL Lawyers enclosing a draft affidavit of Mr Panetta that provided details of Ms Rosamond's legal and living expenses. The letter asked YPOL Lawyers to confirm, on behalf of FIIG, that $210,563.36 in dividends would be transferred to the defendants to pay for outstanding legal, business and living expenses as outlined in the affidavit. The letter also proposed a staged sale of $2 million of ACN's assets to be made available in four $500,000 tranches between 31 October 2020 and 31 January 2021.
On 13 October 2020, KWM sent a letter to Panetta Lawyers in which KWM referred to the proprietary nature of NAB's claim against ACN; asserted that the Freezing Orders did not entitle Ms Rosamond to access funds held by ACN for her personal defence; advised that NAB objected to the sell down of ACN's assets and the payment of dividends to Ms Rosamond; and took issue with some of the matters referred to in Mr Panetta's draft affidavit. KWM's letter reserved NAB's rights to re-list these proceedings, seek amendments to the Freezing Orders or to seek interlocutory relief against ACN.
On 14 October 2020, YPOL Lawyers sent a letter to Panetta Lawyers and KWM indicating that, until such time as the Freezing Orders were varied to expressly accommodate the defendants' demands or there was agreement with NAB, FIIG would continue to hold ACN's assets in trust pending final determination of the civil proceedings.
On 21 and 29 October 2020, further correspondence was exchanged between Panetta Lawyers, YPOL Lawyers and KWM. In those letters, the defendants continued to rely on the form of, and the carve outs in, the Freezing Orders as entitling them to use ACN's assets to pay for their living and legal expenses. NAB maintained that the Freezing Orders did not give an unfettered right for ACN's assets to be used to fund Ms Rosamond and Human Group's living, legal and business expenses and indicated that it would file a motion for amendment given the issue between the parties on the construction of the Freezing Orders.
On 5 November 2020, NAB filed its notice of motion. The variations to the Freezing Orders sought by NAB's motion comprise: 1. including ACN as a subject of the Freezing Orders; 2. clarifying the exceptions to the Freezing Orders to prevent Human Group and Ms Rosamond from drawing on the assets of ACN for the purposes of their reasonable legal expenses and ordinary living expenses; 3. making it clear that the assets of Human Group and ACN are not within the power of Ms Rosamond to dispose of or deal with as if they were her own; 4. putting a cap on the ordinary living expenses of Ms Rosamond; and 5. requiring Ms Rosamond and Human Group to provide NAB's solicitor notice in writing of the amount of any proposed payment of legal expenses.

Evidence of flow of funds between NAB, Human Group, ACN and Ms Rosamond

Lovell 2 and 3 exhibit bank statements and other records which detail the flow of funds between NAB, Human Group, ACN, Ms Rosamond and some other entities, as well as the value of ACN's assets held by FIIG and Shaw. Many of the documents exhibited to the Lovell affidavits were obtained on subpoenas that had been issued by NAB to various entities during the course of these proceedings for the purposes of seeking to trace the funds that Human Group had received from NAB as part of the alleged fraudulent scheme.
A summary of some of the Lovell 2 and 3 evidence relating to payments made by NAB to Human Group, the subsequent flow of funds to ACN and ACN's assets is set out below.
From 10 January 2013 to 8 November 2017 (Relevant Period), Human Group issued 55 invoices to NAB. The total amount invoiced and paid to Human Group by NAB was $51,142,254.23 (including GST).
The payments to Human Group were made by NAB by deposit into a Human Group St George Freedom Business account. Funds from that account were subsequently transferred to other accounts held by Human Group, including a Human Group St George Business Access Saver account. During the Relevant Period, Human Group also had an account referred to as the Human Group St George Freedom Business Account 2. I refer to these three accounts as the Human Group St George accounts.
During the period from 1 January 2013 and 6 August 2013: 1. as at 1 January 2013, the combined balance of the Human Group St George accounts was $5,472,301.81; 2. six of the 55 invoices issued by Human Group were paid by NAB by way of five deposits totalling $5,988,911.32 into the Human Group St George Freedom Business account; 3. within days of receiving each of the five deposits referred to in (a), Human Group made five transfers from the Human Group St George Freedom Business account totalling $5,412,018.55 into the Human Group St George Business Access Saver account; 4. on 6 August 2013, $1 million and $700,000 were withdrawn from the Human Group St George Business Access Saver account to establish two Human Group St George term deposits (Term Deposits). These are the Term Deposits referred to at [34C] of Part C of the ACLS; and 5. as at 6 August 2013, immediately prior to the establishment of the Term Deposits, the combined balance of the Human Group St George accounts was $4,554,302.15, which was $1,434,609.17 less than the amount paid by NAB to Human Group as referred to at [49(b)] above.
During the period from 15 May 2018 to 26 July 2018, just over $5.95 million was transferred from Human Group's bank accounts into accounts in the name of ACN as follows: 1. four transfers of $1 million were made on 15, 16, 17 and 18 May 2018 from the Human Group St George Business Access saver account into an ACN St George Freedom Business account. Following receipt of those amounts, on 2 July 2018, a bank cheque in the sum of $4,113,511.74 was drawn from the ACN St George Freedom Business account and deposited into the ACN ANZ account; and 2. two transfers of $1,147,380.45 and $804,232.81 were made on 26 July 2018 following the closure of the Term Deposits into the ACN ANZ account.
The monies transferred by Human Group to ACN were subsequently transferred from the ACN ANZ account into ACN bank accounts with Bendigo Bank and Sandhurst Trustees Limited. The transfers included: 1. a transfer of $5,074,551.04 on 31 August 2018 to the ACN Sandhurst account 1; 2. two transfers of $500,000 on 3 September 2018 to the ACN Bendigo Bank account; 3. a transfer of $3.5 million from the ACN Sandhurst account 1 to the ACN Bendigo Bank account on 21 September 2018; and 4. a transfer of $1,581,762.22 from the ACN Sandhurst account 1 to the ACN Sandhurst account 2 on 26 September 2018.
In the period from 21 September 2018 to 17 September 2020, ACN transferred approximately $4.153 million from the ACN Bendigo Bank account to Shaw, who subsequently invested certain funds in bonds held with FIIG.
Shaw and FIIG hold investments in the name of ACN and accrued dividends valued at approximately $3,800,280.86, which comprises: 1. investments with Shaw valued at $1,495,914.50 (as at 30 June 2020); 2. investments with FIIG valued at $2,093,803 (as at 30 June 2020); and 3. dividends held by FIIG in the amount of $210,563.36, (as at 24 August 2020: see letter from Panetta Lawyers to YPOL dated 2 October 2020).
The Lovell evidence also refers to and exhibits bank statements and other records that refer to the transfers of funds from and between ACN, Human Group, Panetta Lawyers, Ms Rosamond and other entities during the period November 2018 to August 2020 that suggest that approximately $698,093.01 of funds held by ACN and Human Group have been utilised by Ms Rosamond and Human Group to finance their legal and living expenses. That evidence can be summarised as follows: 1. $1,000,000 was transferred from the ACN Sandhurst Account 2 on 5 and 6 December 2018 and $50,000 was transferred from the Human Group Sandhurst account on 21 November 2018 to accounts in the name of Panetta Lawyers; 2. $428,390.45 was transferred from Panetta Lawyers to ACN's Bendigo Bank account between 22 February and 13 June 2019; 3. $9,350 was transferred from Human Group's accounts to Mr Breeze in May and August 2019; 4. payments totalling $17,133.46 were made from Human Group and ACN's accounts to pay expenses relating to Ms Rosamond's family law proceedings in June 2019 and February 2020; 5. $76,587.61 was transferred from ACN's bank accounts to Human Group during the period October 2019 to August 2020; and 6. around $50,000 of the funds transferred from ACN to Human Group were transferred to Ms Rosamond's bank accounts or credited towards her Mastercard during the period January 2020 to August 2020.

Evidence of Ms Rosamond and Human Group's financial position and estimated expenses

Mr Panetta gives evidence, on information and belief from Ms Rosamond, that Ms Rosamond and Human Group do not have the financial resources to further fund any of the legal proceedings in which they are involved out of assets or potential borrowings. In addition to these and the criminal proceedings, Ms Rosamond is also currently involved in Family Court of Australia proceedings with her ex-husband in relation to parenting (family law proceedings).
Mr Panetta's evidence is that Human Group has no assets, is not trading at present and does not have the capacity to borrow funds. He also gives that Ms Rosamond has no personal assets save for personal effects, a half share in a boat valued at $31,250 and shares in private companies, of which the only shares of value are those held in ACN, and that Ms Rosamond and her children have been living from money borrowed from her parents and from her children's bank accounts totalling $64,000. The money in her children's accounts are now depleted and she is unable to borrow money from anyone else.
Mr Panetta's evidence is that Panetta Lawyers currently holds a total of $31,096.42 on trust for the defendants on account of costs and disbursements to be incurred in these proceedings, which is being retained to pay senior counsel's fees for NAB's motion.
Mr Panetta gives evidence of Ms Rosamond and Human Group's outstanding legal expenses, their future estimated legal expenses relating to these proceedings up to and including the hearing of NAB's motion, Ms Rosamond's future estimated legal expenses relating to the criminal proceedings and family law proceedings, and Ms Rosamond's estimated living expenses and the business expenses of Human Group, ACN and four other corporate entities subject to the Freezing Orders.
Mr Adrian's expert report considers the categories of costs incurred by Ms Rosamond and Human Group in relation to the various proceedings referred to by Mr Panetta and opines on what he considers to be fair, reasonable and proper amounts for past and future work, as well as the reasonableness of Ms Rosamond's claimed weekly living and business expenses.
In Mr Adrian's opinion, Ms Rosamond and Human Group's reasonably anticipated, necessary and proper solicitor and own client costs of defending the criminal proceedings, family law proceedings and these proceedings, and living and business expenses for a period of 12 months from the date of NAB's motion totals $5,966,953.33. This amount is made up of the following: 1. in relation to the criminal proceedings: 1. unpaid and incurred solicitor and counsel costs of $137,265.00; 2. estimated solicitor and other professional costs relating to the preparation and attendance at a trial of 80 days of $1,480,160.00; 3. estimated fees for Senior Counsel (Maurice Neil QC) of $1,104,400.00; 4. estimated fees for Junior Counsel (Matthew Breeze) of $872,000.00; 5. estimated forensic accounting fees to review McGrath Nicol's report of $1,588,400.00; 6. other estimated disbursements of $365,224.80; 1. in relation to these proceedings, unpaid solicitor costs, WIP to date and future solicitor and counsel fees relating to NAB's motion of $124,819.50; 2. in relation to the family law proceedings, outstanding solicitor costs and counsel fees of $73,112.03; and 3. in relation to living and business expenses, an amount of $221,572.00 for a period of 12 months from the date of NAB's motion, made up of: 1. living expenses for Ms Rosamond of $2,906 per week, based on her estimated total living expenses of $4,620 less her income of $1,714; and 2. business expenses for Human Group, ACN and four other entities referred to in the Freezing Orders of $1,335 per week based on the lower of Ms Rosamond's estimated expense figures.
For the purposes of this application, NAB does not take issue with the reasonableness of Mr Adrian's opinion that the amounts estimated are reasonable, particularly having regard to the volume and complexity of the evidence in the criminal proceedings.
The evidence relied on by the prosecution in the criminal proceedings includes an expert forensic report prepared by McGrath Nicol which, together with its footnoted supporting documents, comprises approximately 46,000 pages. It is not in dispute that the McGrath Nicol report cost $3 million and was paid for by NAB.
Mr Panetta's evidence is that Mr Breeze has been instructed in relation to the criminal proceedings on Ms Rosamond's behalf since November 2018 and in these proceedings since 19 August 2019.
Mr Panetta gives evidence that Ms Rosamond believes that she is unable to obtain Legal Aid as she conducted and failed the online means test indicator located on the Legal Aid website because ACN is considered a "financially associated person" who would normally give Ms Rosamond financial assistance.
Mr Panetta's evidence is that the defendants propose to meet their living, business and legal expenses by drawing down on the assets held by ACN with Shaw and FIIG (as referred to at [53] above) gradually and on an as needs basis with funds to be placed into Panetta Lawyers' trust account to pay expenses according to the following timeline: 1. payment of all accrued dividends and all outstanding living expenses (including any borrowings for those expenses), business expenses and legal expenses to be made by 15 December 2020; 2. sale of $500,000 of assets and payment to Panetta Lawyers' trust account to pay any outstanding expenses not satisfied including payment of 6 months of living expenses in advance; 3. sale of $1 million of assets and payment to be made by 15 January 2021; 4. sale of $1 million of assets and payment to be made by 15 March 2021; 5. sale of $1 million of assets and payment to be made by 15 April 2021; and 6. notification given on 15 May 2021 about whether further funds are required.

The construction issue

The first question raised by NAB's motion relates to the proper construction of the Freezing Orders.

The Freezing Orders

The Freezing Orders adopt the standard form of order as set out at Practice Note SC Gen 14 with some relevant variations that are referred to below. They are addressed to Human Group and Ms Rosamond as the defendants at the time the Freezing Orders were made.
Paragraph 4 of the Freezing Orders provides: 4. In this order: "you", where there is more than one of you, includes all of you and includes you if you are a corporation.
The "Freezing of Assets" section provides: 6. (a) You must not remove from Australia or in any way dispose of, transfer, deal with or diminish the value of any of your assets in Australia ('Australian assets') up to the unencumbered value of $23,000,000 ('the Relevant Amount'). … 7. For the purposes of this order: (1) Your assets include: (a) all your assets, whether or not they are in your name and whether they are solely or co-owned; (b) any asset which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as having such power if a third party holds or controls the asset in accordance with your direct or indirect instructions); and (c) assets held in the names of the following companies of which you are the sole director and beneficial shareholder: (i) Human Group Projects Pty Ltd ACN 606 717 061; (ii) Oliwilwins Pty Ltd ACN 606 714 623; (iii) Mytraining.net Pty Limited ACN 138 474 070; (iv) A.C.N. 137 384 662 Pty Ltd ACN 137 384 662; (v) GEPM Consulting Pty Ltd ACN 626 095 305; (vi) Rosamond Group Pty Limited ACN 109 042 935; (vii) VenueHire.Net Ply Ltd ACN 100 416 617; (2) The value of your assets is the value of the interest you have individually in your assets.
The "Exceptions to this Order" section provides: 8. This order does not prohibit you from: (a) paying your ordinary living expenses; (b) paying the reasonable legal expenses incurred by Human Group Pty Ltd and Ms Rosamond in respect of this proceeding, as well as reasonable legal expenses incurred in respect of the criminal proceedings commenced against Ms Rosamond and any related proceedings that may be brought by NSW Police or the Office of the Director of Public Prosecutions against Human Group Pty Ltd and/or Ms Rosamond and all reasonable legal expenses incurred in respect of Family Court proceedings against Mr Geoffrey Rosamond; (c) dealing with or disposing of any of your assets in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred; and (d) in relation to matters not falling within (a), (b) or (c), dealing with or disposing of any of your assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so you give the plaintiff, if possible, at least two (2) working days written notice of the particulars of the obligation. 9. You and the plaintiff may agree in writing that the exceptions in the preceding paragraph are to be varied...

Legal principles

Like an injunction, a failure to comply with the Freezing Orders would expose Ms Rosamond and Human Group to significant consequences. Thus, they should be drafted in clear and unambiguous terms which leave no room for Ms Rosamond and Human Group to wonder whether or not their future conduct falls within the scope or boundaries of the Orders: Brown Brothers Waste Contractors Pty Limited v Pittwater Council (2015) 90 NSWLR 717; [2015] NSWCA 215 (Brown Brothers) at [165].
The Freezing Orders are to be interpreted having regard to the meaning and effect of the words used as a whole and the context in which they were made in much the same way as one can when construing a contract. This means that the Court does not delve into the subjective intention of the parties or the judge who pronounced them: Kirkpatrick v Kotis (2004) 62 NSWLR 567; [2004] NSWSC 1265 at [39]; Bookarelli Pty Limited v Katanga Developments Pty Limited [2017] NSWCA 69 at [40]; Perry Herzfeld and Thomas Prince, Interpretation (2nd ed, 2020, Thomson Reuters) at [36.20] and [36.70].
The Freezing Orders should be construed to give them valid effect, if possible. Where ambiguity is found, the Court may have regard to extrinsic material, such as the reasons for judgment and the pleadings: Brown Brothers at [167]; Perry Herzfeld and Thomas Prince, Interpretation (2nd ed, 2020, Thomson Reuters) at [36.70].

Consideration and decision

NAB accepts that the exceptions in paragraphs 8(a) and (b) of the Freezing Orders do not prohibit Human Group and Ms Rosamond paying their own ordinary living and reasonable legal and business expenses. But it submits that the scope of those exceptions do not extend to Human Group and Ms Rosamond calling on the assets of ACN, a third party, to pay their expenses and that there is nothing in the text of paragraphs 8(a) and (b) that permits that to occur.
NAB advances this submission notwithstanding ACN's assets are included in the definition of "your assets" for the purposes of the Freezing Orders. It relies on the text and structure of the exceptions in paragraphs 8(a) and (b) to argue that the exceptions only permit "you", namely Ms Rosamond and Human Group, "paying your… expenses" and not providing for them "paying your …expenses" using "your assets", in contrast to the language used in sub-paragraphs (c) and (b), which permit "you… dealing with or disposing of any of your assets".
NAB argues that the absence of the words "your assets" in paragraphs 8(a) and (b) means that those exceptions to the Freezing Orders should be interpreted as only permitting Ms Rosamond and Human Group paying their ordinary living and reasonable legal expenses from the assets that each of them owns or holds from time to time, and not as extending to the frozen assets held by ACN.
NAB submits that its construction is consistent with well understood restrictions on the ability of a company (here ACN) to make company funds available to a shareholder and director for their personal use. It submits that the Court cannot "look through" a corporation and treat the moneys owned by the corporation of those of its members or directors, relying on the principles from Salomon v A Salomon & Co Ltd [1897] AC 22. It submits that Ms Rosamond's position as ACN's sole shareholder and director does not overcome these principles. NAB also points to there being no evidence from the defendants as to the basis upon which monies from ACN could properly be used to pay for Human Group and Ms Rosamond's living, legal or business expenses.
The defendants submit that, on a true construction of the Freezing Orders, Ms Rosamond is not presently restrained from having recourse to ACN's frozen assets to pay for her ordinary living and reasonable legal expenses. They rely on the unqualified language in paragraphs 8(a) and (b) and the definition of "your assets" in support of the submission that the exceptions extend to, and do not prohibit Ms Rosamond from, paying her ordinary living and reasonable legal expenses from whatever assets she has available to her, including the frozen assets of ACN.
The defendants also submit that, as ACN's sole director and shareholder, Ms Rosamond has the ability, legally, to cause ACN to do things, such as to declare dividends, wind up the company and make loans, as well as to cause funds to be paid to her or Human Group for the purposes of paying their living and legal expenses in accordance with the exceptions to the Freezing Orders.
In my view, the defendants' construction is correct. As currently drafted, I do not interpret the Freezing Orders as prohibiting Ms Rosamond and Human Group from having recourse to ACN's assets (or other frozen assets) to pay for their ordinary living or reasonable legal expenses in accordance with paragraphs 8(a) and (b).
The Freezing Orders provide that Ms Rosamond and Human Group are prohibited from dealing with, disposing of or diminishing the value of "your assets" up to a value of $23 million: paragraph 6(a). The object of the prohibition is the assets that are identified in paragraph 7(1) as "your assets" for the purposes of the Freezing Orders.
In this case, "your assets" include assets in the name of Ms Rosamond and Human Group, assets over which Ms Rosamond and Human Group have power to deal with as if they were their own, and assets held in the names of companies of which Ms Rosamond is the sole shareholder and director, including assets held in the name of ACN. For the purposes of the Freezing Orders, the assets listed in paragraph 7(1) are to be treated as belonging to "you", namely Ms Rosamond and Human Group.
Paragraph 8 provides for exceptions to the Freezing Orders. The chapeau states that "This order does not prohibit you from" and then goes onto to identify the specific dealings which are not prohibited.
Paragraphs 8(a) and (b) permit the payment by Ms Rosamond and Human Group of their ordinary living and reasonable legal expenses as exceptions to the Freezing Orders.
The language used in paragraphs 8(a) and (b) is unconfined in the sense that there is no text that identifies the assets or funds to which Ms Rosamond and Human Group may have recourse to make the relevant payments. To my mind, the absence of such words does not work to narrow the pool of assets to only those which Ms Rosamond and Human Group own or hold from time to time, as NAB submits.
To interpret exceptions that permit the payment of Ms Rosamond and Human Group's ordinary and reasonable legal expense as limited to only those assets they own or hold from time to time is, in my view, at odds with the breadth of the assets which are to be treated as Ms Rosamond and Human Group's assets for the purposes of the Freezing Orders. It also seems to me to require words of limitation which are not found elsewhere in the Freezing Orders to be read into paragraphs 8(a) and (b). To my mind, the unqualified language used in those paragraphs support an equivalency of treatment in respect of the asset pool on which the prohibition on dealings in paragraph 6(a) operate and from which the permissions to pay ordinary living and legal expenses can be made.
I am also unpersuaded by NAB's submission that the references to "your assets" in paragraphs 8(c) and (d) are indicative of a narrow reading of the assets to which recourse may be had to pay for Ms Rosamond and Human Group's living and legal expenses. Paragraphs 8(c) and (d) have different work to do. They identify more narrow and specific types of dealings with the frozen assets that are not dealt with in paragraphs 8(a) and (b).
In my view, in the context of the Freezing Orders as a whole, a plain and natural reading of paragraphs 8(a) and (b) together with the chapeau is as follows; the order prohibiting Ms Rosamond and Human Group from disposing of, dealing with or diminishing the value of "your assets" does not prohibit you [Ms Rosamond and Human Group] from doing so by paying your [their] ordinary living and reasonable legal expenses. In other words, the exceptions in paragraphs 8(a) and (b) are to be construed as permitting dealings that are otherwise prohibited by the Freezing Orders with "your [frozen] assets" in so far as those dealings are to pay Ms Rosamond and Human Group expenses as contemplated by and in accordance with paragraphs 8(a) and (b).
This construction is also consistent with what I consider to be the purpose of the Freezing Orders and the exceptions in paragraphs 8(a) and (b) as currently drafted.
The purpose of the Freezing Orders is to ensure that the processes of the court are not frustrated by the disposal, dissipation or misapplication of the frozen assets by Ms Rosamond or Human Group so that the assets may be available to satisfy any judgment NAB ultimately obtains against them. In contrast, the purpose of the exceptions is to identify those dealings with the frozen assets that are permitted and will not constitute illegitimate dissipation or misapplication.
As NAB submitted at the hearing, the purpose of paragraph 7(1)(c) of the Freezing Orders is to provide additional protection by ensuring that there is no attempt through a director or shareholder to dispose of assets that are not owned by that individual, but in respect to which they have a corporate relationship and a capacity to deal with. Just as the Freezing Orders can prohibit Ms Rosamond from disposing of or dissipating assets she does not own but has a capacity to deal with, they can, in my view, also provide that she be excused from the prohibitions on dealings with ACN's assets to pay for her expenses in accordance with the exceptions to the Freezing Orders in paragraphs 8(a) and (b).
That is not to say that I do not accept NAB's submission that Ms Rosamond has an unfettered legal entitlement or right to call on ACN's assets as her own to pay for her and Human Group's expenses.
As the sole director of ACN, Ms Rosamond is duty bound to safeguard ACN's assets and expend them only in discharge of liabilities properly incurred by ACN and otherwise in pursuit of corporate purposes. The discharge of her duties as a director does not allow the payment of funds to herself or her related companies by way of gift or for her personal benefit: Fodare Pty Ltd v Shearn [2011] NSWSC 479 at [26].
Whether ACN, as a separate legal entity but acting through its sole director, should make its assets available to Ms Rosamond or Human Group to pay for their expenses is also to be determined by ordinary principles of Corporations Law, such as whether making those funds available to them is in ACN's best interests: Corporations Act 2001 (Cth), s 181.
That said, in my view, the proper construction of the Freezing Orders is not determined by the application of the above corporations law principles but by reference to the language used in the Freezing Orders and ascertaining what the words of the orders mean: Katter v Melhem (2015) 90 NSWLR 164; [2015] NSWCA 213 at [63]. This is especially so where, as here, NAB composed the words of the Freezing Orders. For the reasons set out above, in my view, the current wording of the Freezing Orders does not prohibit Ms Rosamond and Human Group from dealing with ACN's assets to pay for their ordinary living and reasonable legal expenses in accordance with paragraphs 8(a) and (b) irrespective of whether Ms Rosamond is entitled to do so having regard to general corporations law principles.
I accept that it might be said that the exceptions in paragraphs 8(a) and (b) are ambiguous because they are silent as to the assets from which Ms Rosamond and Human Group may have access to pay their legal and living expenses. In such circumstances, the Court may consider evidence of the surrounding circumstances and extrinsic material relevant to the making of the Freezing Orders.
It is apparent from NAB's written submissions and the transcript of the ex parte application when the Freezing Orders were first made that the issue of whether the proposed orders prohibited Ms Rosamond and Human Group accessing ACN's assets to pay living and legal expenses was not raised. While NAB's submissions refer to the assets of companies that Ms Rosamond controls, they also refer to a general entitlement to reasonable legal expenses and ordinary living expenses "from the frozen monies", citing Deputy Commissioner of Taxation v Bollands [2012] FCA 1050 at [22] citing Goumas v McIntosh [2002] NSWSC 713 at [27]. They go on to note that this entitlement is reflected in Supreme Court Practice Note Gen 11 at [12], that the proposed freezing order makes provision for those matters and that the proposed order does not prohibit Ms Rosamond from paying her reasonable legal expenses incurred, not just in the present proceedings, but also in respect of her defence of the extant criminal proceedings: at [89].
Having regard to the above, I do not consider that the surrounding circumstances and extrinsic materials are inconsistent with or contradict my interpretation of the paragraphs 8(a) and (b) of the Freezing Orders. To the extent there is any such ambiguity, this case also seems to me to be one where it may be appropriate to construe the Freezing Orders against NAB's interests, as the applicant for the Freezing Orders, on the basis that they are silent and NAB made no submissions on the issue when seeking them: Wende v Horwath (NSW) Pty Limited (2014) 86 NSWLR 674; [2014] NSWCA 170 at [76].
Accordingly, I have concluded that the answer to the question of whether, on a proper construction of the Freezing Orders, Ms Rosamond and Human Group are prohibited from dealing with or disposing of ACN's assets to pay for their ordinary living and reasonable legal expenses in accordance with paragraphs 8(a) and (b), is no.
As to paragraphs 8(c) and (d) of the Freezing Orders, the words "your assets" make clear that, as a matter of interpretation, Ms Rosamond and Human Group may deal with or dispose of ACN's assets if those dealings are in accordance with the content of those exceptions.
However, NAB submits, and I accept, that the exception in paragraph 8(c) is of no assistance to the defendants in circumstances where the evidence indicates that Human Group is no longer trading and there is no evidence that Ms Rosamond has any relevant "business". Even if I were to assume that they each have a business, I accept NAB's submission that, in the circumstances of this case, the liquidation of the totality of ACN's assets to pay their living and legal expenses would not constitute dealing with or disposing of ACN's assets in the ordinary and proper course of Human Group or Ms Rosamond's "business".
Paragraph 8(d) permits Ms Rosamond or Human Group to deal with or dispose of ACN's assets in discharging obligations bona fide and properly incurred under contracts entered into by ACN before the Freezing Orders were made in relation to matters not falling within (a), (b) or (c). It follows that Ms Rosamond and Human Group are not permitted to have recourse to ACN's assets under paragraph 8(d) for the purposes of paying their legal, business and living expenses.
At the hearing NAB accepted, appropriately in my view, that ACN's assets may be deployed by Ms Rosamond to pay ACN's business expenses of $1,000 per annum.

Legal principles

To engage the Court's discretion to vary the Freezing Orders, NAB must establish that there has been a material change of circumstances since the original application for the orders was heard or the discovery of new material that was not reasonably available at the time they were made: Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 at 46; Short v Crawley (No 42) [2009] NSWSC 1110 at [75].
As NAB seeks to vary the Freezing Orders so as to prevent Ms Rosamond and Human Group from having recourse to ACN's assets for the purposes of paying their living, legal and business expenses, it must also establish that it has an prima facie or arguable case for a proprietary claim to ACN's assets generally and, in particular, the approximately $3.8 million of assets in the name of ACN held by Shaw and FIIG: Independent Trustee Services Ltd v GP Noble Trustees Ltd [2009] EWHC 161 (Ch) at [6]; In the matter of Courtenay House Capital Trading Group Pty Ltd (In Liq) [2018] NSWSC 1918 (Courtenay House) at [14]-[18], [48].
The Courts recognise juridical and practical distinctions between a freezing order where an applicant claims no proprietary interest and a claim made by an applicant who asserts a proprietary interest in assets possessed by another.
In circumstances where no proprietary claim is made, the object of a freezing order is to restrain an owner from dissipating their own property to preserve the integrity of the Courts' processes. Such an order operates in personam and not as an attachment on the property itself or as security for an anticipatory judgment. On the other hand, the object of a proprietary claim is to secure the property to which the plaintiff has at least a prima facie case of a proprietary interest and ensure that it is available to the plaintiff in the event it proves its claim to that property: Cardile v LED Builders Pty Limited (1999) 198 CLR 380; [1999] HCA 18 at 394-401; His Eminence Metropolitan Petar v The Macedonian Orthodox Community Church St Petka Inc [2006] NSWCA 277 (Petar) at [59] to [62]; Frigo v Culhaci [1998] NSWCA 88 at 16; Peter Biscoe, Freezing and Search Orders: Mareva and Anton Piller Orders (2nd ed, 2008, LexisNexis Butterworths) at [1.18].
This distinction is also of practical importance and particularly relevant to NAB's application for a variation to the Freezing Orders.
When freezing orders are made in relation to non-proprietary claims, the usual position is that defendants generally have an entitlement to use their assets for legitimate purposes, such as to pay their ordinary living and business expenses and their reasonable legal expenses in defending the claims made against them: Goumas v McIntosh [2002] NSWSC 713 at [27].
In contrast, there is no reason, in general, why defendants should be permitted to use property or money belonging to another in order to pay their legal costs or other expenses. There is an obvious risk of injustice if assets the subject of the proprietary claim are used to finance the defendants' litigation as the money is not the defendants at all but represents money which is held on trust for the plaintiff. The Courts will be attentive to the protection of trust property and a defendant may not be allowed to access money to which they have no legal or moral right to enable them to spend it on their own living expenses or on private representation of their choice: Commonwealth of Australia v Jansenberger (Supreme Court (Vic), Southwell J, 3 October 1985, unrep) at 8; Petar at [85]; Birketu Pty Ltd v Westpac Banking Corporation (No 2) [2018] NSWSC 494 (Birketu) at [60], [63]; Polly Peck International Plc v Nadir (No 2) [1992] 4 All ER 769 at 784; Sundt Wrigley & Co Ltd v Wrigley (Court of Appeal (UK), 23 June 1993, unrep).
In cases concerning proprietary claims, a "careful and anxious judgment" is required whereby the Court must assess whether any injustice to a plaintiff, such as NAB, would be outweighed by the potential injustice to the defendants, here Ms Rosamond and Human Group, if they were precluded from accessing funds and therefore perhaps denied the opportunity to advance an arguable defence: Birketu at [61] - [62]; Courtenay House at [49]; Cong v Shen [2020] NSWSC 945 at [163].
The weighing of the interests of justice may involve a consideration of whether a defendant has shown that it is necessary for them to have access to funds over which a proprietary claim is made in order to defend the proceedings and other relevant discretionary factors that may be relevant, such as delay: Birketu at [64]-[68].

Has there been a material change of circumstances since the Freezing Orders were made?

NAB points to five matters relating to ACN, its assets and NAB's proprietary claims that it submits amount to a material change of circumstances justifying the variations to the Freezing Orders sought by its motion.
The matters relied on by NAB are its awareness, through subpoenas served after 21 August 2019, that Human Group transferred significant sums to ACN; ACN being joined to these proceedings by the consent orders of 30 March 2020 with the addition of proprietary claims made against ACN; and NAB becoming aware, in September and October 2020, that Ms Rosamond intended to "continue to make whatever sums ACN has available" to fund her living, legal and business expenses, the proposal for a "staged and orderly sale" of $2 million worth of assets in ACN's name and the extent of the present and future legal expenses which, at the time, were estimated to be in excess of $4.8 million and living expenses of $4,975 per week.
The defendants say that there has been no relevant material change as, at the time the Freezing Orders were made, NAB was already advancing a proprietary claim against Human Group and was content not to seek orders that precluded Ms Rosamond paying her reasonable legal costs and the like.
I am not persuaded by the defendants' submissions and am satisfied that the matters relied on by NAB constitute material changes of circumstances for the purposes of its variation application.
At the time the Freezing Orders were made, NAB was aware of the facts that gave rise to the allegations about Ms Rosamond and Human Group's involvement in and knowledge of the fraudulent scheme and was aware of the existence of ACN. This is apparent from the terms of the CLS and the Freezing Orders themselves.
But, this application is not a rehearing of whether NAB is entitled to the Freezing Orders against Ms Rosamond and Human Group. It is an application to vary orders made in the light of the proprietary claims NAB now advances against ACN.
The matters that are relied on by NAB as constituting material changes of circumstances in support of the variations to the Freezing Orders, which relevantly relate to the protection of ACN's assets, are based on and underpinned by the discovery of facts and changes in the position of the parties to these proceedings that were unknown to NAB at the time the Freezing Orders were put in place. Indeed, some of them were yet to occur. For example, the new proprietary claims against ACN and its joinder as the third defendant in these proceedings occurred in March 2020.
The evidence relied on by NAB on this application to establish its prima facie proprietary claim against ACN and the other matters relevant to its application to vary the Freezing Orders is also new and quite distinct from the evidence relied on by NAB when it applied for the Freezing Orders ex parte. That evidence includes information regarding the flow of funds from Human Group to ACN and the location and value of assets held by FIIG and Shaw in ACN's name based on documents obtained by NAB on subpoena after the Freezing Orders were made. It also includes evidence relating to NAB's more recent awareness of the value of certain assets held by Shaw and FIIG in ACN's name and the defendants' proposal to use all of them to pay Ms Rosamond and Human Group's legal and living expenses.
In other words, this application involves a review of new facts that have emerged which go to a different case for final relief and to discretionary matters relevant to whether the Freezing Orders should be varied, rather than a review of the same facts that prevailed when the Freezing Orders were originally granted or declined or on facts which ought then reasonably have been in NAB's contemplation.
I am also unpersuaded by the defendants' submission that NAB should not have been surprised to learn that Ms Rosamond was making use of Human Group and ACN's funds to pay for their legal expenses or the extent of the expenses in circumstances where NAB had funded the cost of the forensic accountant's report in the criminal proceedings and the likely costs associated with a four month hearing. That submission seems to assume that the jurisdiction to vary the orders should not be exercised if the matters relied on by NAB as a change of circumstances were foreseeable. Even accepting that it might have been foreseeable to NAB when the Freezing Orders were made that Ms Rosamond and Human Group's legal expenses were to be paid from frozen assets, there was, at that time, no evidence, and thus no reason to believe, that there was a significant pool of assets held by ACN over which NAB would make a proprietary claim and that those assets would be made available to Ms Rosamond and Human Group to pay their expenses.

Has NAB established a good prima facie proprietary claim to ACN's assets?

NAB's application to vary the Freezing Orders is made on the basis that it has a strong prima facie proprietary claim to ACN's assets.
It submits that there is a strong prima facie claim that ACN knowingly received just over $5.95 million from Human Group that can be traced to funds received from NAB as part of and with ACN's knowledge of the fraudulent scheme.
The defendants do not accept that NAB has established an arguable case for a proprietary claim against ACN's assets generally, in relation to the $3.8 million held by Shaw and FIIG or, more particularly, to that part of the money and assets held by Shaw and FIIG that they submit correspond with the sums transferred from Human Group to ACN from the Term Deposits which totals around $1.95 million.
At the hearing, the defendants' Senior Counsel submitted that NAB had not established an arguable proprietary claim to the Term Deposit because the evidence did not demonstrate that Human Group had knowingly received or assisted in Ms Rogers' breaches of fiduciary duties prior to 6 August 2013, when the Term Deposits were first established. He also submitted that NAB's evidence on this aspect of the claim against ACN was weak and that the Court should draw a Jones v Dunkel inference against NAB that the lay evidence it served on 21 August 2020 would not have assisted it to establish an arguable proprietary claim against ACN as none of that evidence had been relied on by NAB for this application.
The defendants also rely on evidence from their accountant, Mr Costain, in support of the submission that the funds in the Term Deposits were not drawn from NAB funds but were actually funds of Human Group from before 2013.
Mr Costain's evidence seeks to respond to the flow of funds evidence and tracing analysis referred to in Mr Lovell's evidence. Large parts of Costain 1 and 2 were the subject of objections, some of which were upheld. Some parts of his evidence were treated as submission only.
Mr Costain's evidence is that Human Group had other clients during the period 2013 to 2017 and was owed money from them, including as at 30 June 2015. Costain 1 exhibits two invoices issued by Human Group to other clients. Both invoices were issued prior to the Relevant Period on 31 July 2012 and 19 October 2012 and each had a nil balance showing. Costain 2 exhibits a receivables reconciliation summary as at 30 June 2015 that refers to $19,000 as owing to Human Group by two clients. Mr Costain did not adduce any evidence that the $19,000 referred to as outstanding for more than 120 days was ever paid. I also note that Mr Costain's evidence that Human Group had other clients during the period 2015 to 2017 is at odds with other evidence on this application that indicates that NAB had been Human Group's only client since 2015.
Mr Costain also gives evidence that Human Group had significant cash reserves; with its balance sheets for 2011, 2012 and 2013 showing cash balances of $5 million, $6.6 million, and $3.6 million respectively. He asserts that a forensic exercise that considered the effect of a range of transactions and the flow of funds between the greater Human Group entities would be required to properly ascertain the actual nature of cash held in Human Group's accounts as at 15 May 2018 and which funds paid by NAB to Human Group were on paid to ACN. He also gives evidence that the bank accounts identified in Lovell 3 did not represent all the bank accounts held by Human Group during the Relevant Period.
Mr Costain's evidence does not persuade me that the funds in the Term Deposits were not drawn from NAB funds but were Human Group's funds before 2013. For the purposes of this application, I prefer Mr Lovell's evidence. His documentary evidence and analysis as to the quantum and timing of NAB's payments to Human Group during the period from 1 January to 6 August 2013; the subsequent transfers of funds to the Human Group St George Business Access Saver account and the balances of the Human Group St George accounts (as summarised at [49]), satisfies me that NAB has established a good prima facie case that the Term Deposits were established from monies received from NAB during the period 10 January to 6 August 2013.
I also note that Senior Counsel for the defendants accepted at the hearing that it is arguable that the Term Deposits included money received from NAB based on Mr Lovell's recent material.
As to the $4 million transferred from Human Group to ACN in May 2018, the defendants did not concede that those funds were from monies paid by NAB to Human Group or that ACN knowingly received them. However, they did not contest those propositions at the hearing and the status of the $4 million was not addressed in their written submissions.
Having considered the evidence and the submissions made by the parties, I am satisfied that NAB has demonstrated a strong prime facie proprietary claim to ACN's assets which in this application have been identified as the $5.95 million transferred by Human Group to ACN in 2018 and to the $3.8 million of ACN's assets held by Shaw and FIIG. I have come to this view for the following reasons.
First, the starting position is that this Court, and presumably Ms Rosamond and Human Group, accepted that NAB had demonstrated a good arguable case against them when the Freezing Orders were made and then extended.
To the extent that it is necessary for me to consider that issue again, based on the evidence before the Court, I am satisfied that NAB has demonstrated it has a strong inferential case of the existence of a dishonest and fraudulent scheme with the features identified at ACLS [35] that was implemented during the Relevant Period by Human Group issuing invoices to NAB that were inflated and did not reflect the cost of services provided to NAB and Human Group and Ms Rosamond providing secret profits and benefits to Ms Rogers which were not disclosed by Ms Rogers to NAB in breach of her fiduciary obligations. I am also satisfied that the evidence demonstrates an good arguable case that Ms Rosamond and Human Group were each knowingly involved in the fraudulent scheme and gave assistance to Ms Rogers' breaches, and that Human Group knowingly received funds and held monies as constructive trustee based on the first and second limbs of Barnes v Addy.
The evidence and other material before the Court that leads me to be satisfied of these matters includes: 1. the 55 invoices issued by Human Group during the Relevant Period (as referred to at [47]), about half of which are addressed to Ms Rogers for payment and almost all of which identify Ms Rosamond as the NAB account manager or executive. The invoices lack detail and most are for significant sums, including the six invoices issued to NAB prior to the establishment of the Term Deposits; 2. the payments made by NAB to Human Group on the 55 invoices totalling $51,142,254.23, as referred to at [47]; 3. Ms Rogers' status as a senior NAB employee who reported to NAB's CEO; 4. bank cheques totalling $350,000 that were drawn from the Human Group's Freedom Business Account in favour of Rosemary and Anthony Rogers between 12 September and 30 September 2013; 5. the sum of $145,000 that was transferred from Ms Rosamond's St George account to the Rogers NAB account on 23 December 2013 with the transaction description "Rogers"; 6. the "Project Eagle" invoice that was issued by Human Group to NAB on 27 September 2017 for $2.2 million and paid by NAB. The evidence indicates that Ms Rogers authorised payment of this invoice, having explained internally that it was related to the recruitment of NAB's Chief Customer Officer in circumstances where the only third party costs incurred in relation to the on-boarding of that officer were those invoiced by a different third party consultant and Ms Rogers was aware of this. NAB also alleges that the funds it paid on the Project Eagle invoice may have been used by Human Group, Ms Rosamond and/or Ms Rogers as part payment for a property for Ms Rogers in Williamstown, Victoria; 7. the particulars of the alleged benefits received by Ms Rogers as outlined in Schedule 1 to the ACLS and Ms Rosamond's fact sheet relating to the criminal proceedings (Fact Sheet), both of which detail alleged secret profits and benefits received by Ms Rogers (or her family) from Ms Rosamond and/or Human Group during the period 1 February 2013 to 6 December 2017; and 8. NAB being unaware of the matters referred to in [137(f)] above and some of the matters referred to in Ms Rosamond's Fact Sheet prior to terminating NAB's relationship with Human Group and that, if it had been aware of those matters at any time during the period 1 February 2013 to the end of December 2017, it would have terminated the Consulting Services Agreement with Human Group.
Second, I accept NAB's submission that, given the nature of the alleged fraudulent scheme and without the benefit of disclosure from Ms Rosamond or Human Group in these proceedings, it is not possible for it to demonstrate the particular or total number of invoices that were inflated or false or give evidence in respect of each of the alleged secret profits and benefits during the Relevant Period.
Nevertheless, the overall picture painted by the above evidence leads me to be comfortably satisfied that NAB has established an inferential prima facie case that Human Group, through Ms Rosamond, knowingly received monies from NAB as part of the fraudulent scheme, and thereby also knowingly assisted in Ms Rogers' breaches of fiduciary duty, prior to the establishment of the Term Deposits. I rely in particular on Ms Rosamond's role as Human Group's company secretary at the time; her role as "NAB account manager" as recorded on the six invoices issued between 1 January and 6 August 2013; the proximity of the matters referred to in [137(d)] above to the establishment of the Term Deposits; and the nature and value of the six Human Group invoices and the corresponding NAB payments and transfers, as referred to at [49].
I also reject the defendants' submission that the Court should draw a Jones v Dunkel inference against NAB in respect of its claim to the Term Deposit monies or ACN's assets more generally because it did not rely on the evidence it has filed in support of its claim for final relief. I see no basis for doing so having regard to the detailed and extensive evidence that NAB has put before the Court and the interlocutory nature of this application.
Third, the evidence as summarised at [49] to [53], is persuasive and, in my view, demonstrates a good prima facie claim that the sum of $4 million transferred by Human Group to ACN in May 2018, the $1.95 Term Deposit monies transferred by Human Group to ACN in July 2018, the funds transferred from ACN to Shaw and FIIG between from 21 September 2018 to 17 September 2020 and the $3.8 million of assets Shaw and FIIG currently hold in ACN's name are traceable proceeds of funds paid by NAB to Human Group pursuant to invoices issued by Human Group as part of the fraudulent scheme.
Fourth, since August 2015, Ms Rosamond has been the sole director and shareholder of ACN and the sole director of Human Group and thus, has had control over and knowledge of their bank accounts and the receipt and transfer of monies by each entity. By reason of Ms Rosamond's position, I am satisfied that NAB has demonstrated a strong prima facie case that ACN had knowledge of the fraudulent scheme, knowingly received the NAB monies referred to at [141] as a result of Ms Rogers' breaches of fiduciary duty, and is liable to account to NAB for those monies as constructive trustee.
Fifth, I do not accept the defendants' submission that NAB has not established a prima facie proprietary claim to that part of the $3.8 million of money and assets held Shaw and FIIG that they submit "corresponds with Human Group's Term Deposits totalling $1,951,613.26". As noted above (at [52]), following the $5.95 million transferred from Human Group to ACN, around $4.153 million was transferred from ACN to Shaw. On that basis, I am not satisfied that the evidence demonstrates that the Term Deposit monies of $1.95 million necessarily transferred to Shaw and FIIG and that ACN's assets now held by them "correspond" with the Term Deposit monies such that they could be quarantined in some way, as the defendants' submissions propose.
The defendants' submission that parts of the $3.8 million of assets held by Shaw and FIIG correspond with the Term Deposit monies could or should be quarantined for the defendants' benefit is also seemingly premised on those monies comprising Human Group's funds only, a submission that I have already rejected: at [131]. Even if I were to accept that the funds invested in the Term Deposits in 2013 came from a mixed pool of funds in Human Group's St George Business Access Saver account, the evidence referred to at [49] would satisfy me that the vast majority of the funds in that account came from NAB. In such a case, it is to be assumed that any withdrawals from Human Group's account, prior to the establishment of the Term Deposits, were taken first from Human Group's own funds, rather than the funds held in it over which NAB makes a proprietary claim: Heperu Pty Ltd v Belle (2009) 76 NSWLR 230; [2009] NSWCA 252 at [114].
Similarly, if the Term Deposit monies transferred to ACN on 26 July 2018 comprised a mixed pool of funds from Human Group and NAB, it is to be assumed that the subsequent transfers and then the withdrawals made from ACN's accounts on 21 November and 5 and 6 December 2018 to Panetta Lawyers (as referred to in [54]) were taken first from Human Group's own funds, rather than the funds transferred to ACN over which NAB makes a proprietary claim.
Sixth, and while not in any way determinative, I accept NAB's submission that the fact that criminal charges have been laid against Ms Rosamond that arise out of the same factual matrix as those in these proceedings and the evidence that suggests that Ms Rogers has agreed to facts which record that she received benefits from Ms Rosamond via Human Group from 2013 to the end of 2017 are matters which reinforce NAB's prima facie proprietary case and is relevant to the risk of dissipation of ACN's assets.

Does the balance of justice favour permitting Ms Rosamond and Human Group to use ACN's assets to pay their living and legal expenses?

NAB submits that it is in the interests of justice to refuse the defendants access to ACN's assets to expend on their living and legal expenses in this case.
It relies on the principles referred to at [106] to [110], and submits that there would be an "obvious risk of injustice" if ACN's assets over which it has established a strong prima facie proprietary claim are expended on the defendants' living and legal expenses. NAB submits that, if it ultimately succeeds, its funds will have been used to finance the defendants' unsuccessful defence compounding NAB's significant losses as a consequence of the alleged fraudulent scheme.
While accepting that the criminal charges that Ms Rosamond faces are serious and not to be treated lightly, NAB submits that ACN's assets are not necessary for the defence of the criminal proceedings because the relevant consideration is whether recourse to the frozen funds of a party is necessary for that party's defence to proceedings. As ACN is not a party to the criminal proceedings, NAB argues that its funds are not necessary for the defence to those proceedings and Ms Rosamond cannot treat monies held by ACN as her own for the purposes of that consideration. NAB also submits that there is no presumption that the Court will permit access to frozen funds for a criminal defendant, particularly where a strong prima facie case has been established to the funds in question.
NAB does not accept that the Court would conclude that Ms Rosamond has established that, without access to ACN's assets, she would be without representation in the criminal proceedings. It submits that Legal Aid may be available, noting that that there is no evidence that the outcome of her application would be the same if she disclosed that the assets of ACN were frozen. It also contends that Ms Rosamond has no right to representation of her choice in the criminal proceedings, relying on Dietrich v The Queen (1992) 177 CLR 292; [1992] HCA 57 (Dietrich).
NAB also submits that, based on Mr Adrian's fair and reasonable estimates, ACN's funds would be depleted before the conclusion of the criminal proceedings which would result in a waste of alleged trust funds because the defence could not be funded to completion: Petar at [83].
The defendants submit that the usual position when making freezing orders is that they would be entitled to have recourse to the frozen assets for their living and legal expenses, as was provided for by the Freezing Orders when first made. They also take issue with NAB's assertion that proprietary claims should be treated differently.
They also submit that NAB's proprietary claim is weak. At this point, I note that I do not share that view. While not commenting on the strength or otherwise of any possible defences, for the reasons referred to earlier, I am satisfied that NAB's proprietary claim to ACN's assets is not weak and that NAB has demonstrated a strong prima facie proprietary claim to the $5.95 million transferred from Human Group to ACN and the $3.8 million of cash and assets held by Shaw and FIIG.
I also disagree with the defendants' submission regarding the treatment of proprietary claims in the context of an application such as this. In my view, the cases to which I have referred make clear that there is no predisposition to allow a defendant access to frozen funds that are subject to a proprietary claim to pay their living and legal expenses. To the contrary, it seems to me that the starting position is that a defendant will not be entitled to such access unless they can demonstrate that the interests of justice weigh in their favour.
In their written submissions, the defendants submit that NAB had delayed unconscientiously and prejudicially to Ms Rosamond by its belated application to expand and vary the Freezing Orders to effectively preclude Ms Rosamond from making use of "her assets".
There are two issues with that submission. First, I do not accept that ACN's assets are "Ms Rosamond's assets". Leaving to one side that they are subject to a proprietary claim by NAB, the assets in question are held by a third party and Ms Rosamond has no right to treat them as her own under general corporations law principles. While I have construed the current Freezing Orders as not prohibiting Ms Rosamond and Human Group from dealing with ACN's assets to pay her ordinary living and legal expenses, as noted earlier, the corporate distinction between ACN and Ms Rosamond raises different considerations. It is also a discretionary matter which, in my view, tends to weigh against Ms Rosamond rather than in her favour on the application to vary.
The second issue is the timing and impact of the asserted delay. At the hearing, Senior Counsel for the defendants contended that the relevant prejudicial delay has been since 31 July 2020, when Ms Rosamond took a date for the four-month hearing. He submitted that the prejudice to Ms Rosamond arises from 31 July 2020 as it was on that day that she pleaded not guilty, committed to a lengthy hearing and her proper defence to the criminal proceedings was then put at risk without access to ACN's funds, noting Mr Panetta's estimate that the case would need four months preparation time and that senior and junior counsel require money upfront.
Mr Panetta also gives evidence that he does not have sufficient monies on trust to pay what is owing to junior counsel and that it is getting increasingly difficult to expect counsel to continue to make themselves available for the hearing and do any work if monies are not made available to them soon.
Based on the Mr Panetta's evidence and Mr Adrian's estimates, I accept that ordering a variation to the Freezing Orders to exclude the exception for legal expenses from ACN's assets may mean that Ms Rosamond will be unable to defend her criminal proceedings with her current legal and accounting team and that she would likely face the prospect of having to apply for Legal Aid, which may require a 'grace and favour' application.
I also accept that the changes faced by Ms Rosamond are serious and that the consequences of being found guilty are significant for her and her family.
However, as an accused, Ms Rosamond does not have a right to the provision of counsel in her criminal proceedings. Rather, she has a right to a fair trial. If she is ultimately denied legal representation by lack of means and the unavailability of other assistance, such as having been refused Legal Aid, the Court at her criminal hearing has the jurisdiction to stay the proceedings until she is provided with the legal representation necessary for a fair trial: Dietrich at 315. While the criminal law recognises that an unrepresented accused may face disadvantages in the conduct of a trial, Ms Rosamond also has no right to be provided counsel at public expense: Attorney-General for New South Wales v Milat (1995) 37 NSWLR 370 at 373D-F; R v Warwick (No. 64) [2019] NSWSC 163 at [18].
As to delay, as NAB submits, Ms Rosamond chose to accept a hearing date in the criminal proceedings at a time when she had not secured the release of ACN's funds for her defence or obtained approval from FIIG to access them other than by way of consideration of her requests on a case-by-case basis. By 6 August 2020, it was also clear that FIIG and Shaw would not release the funds without a variation to the Freezing Orders. Despite this, no application was made by the defendants to have Ms Rosamond's position under the Freezing Orders clarified.
On the other hand, I also accept there has been some delay on NAB's part in bringing its application for a variation to the Freezing Orders, although I would not characterise it as excessive. NAB was on notice from 7 August 2020 that Ms Rosamond and Human Group wished to have recourse to ACN's assets to pay for their expenses. There is also some evidence to suggest that NAB may have been on notice from the documents obtained on a subpoena issued late last year that some of ACN's funds had been transferred from ACN to Human Group on 20 October 2019, when the Freezing Orders were in place. That said, the amount in question, $1,749.23, was not significant and could be expected not to have created the concerns raised by the defendants' current proposal, which was only detailed to YPOL Lawyers on 2 October 2020.
As noted above, a "careful and anxious judgment" is required in this case, whereby the Court must assess the injustice to NAB if the Freezing Orders are not varied to preclude access to ACN's assets, compared to the potential injustice to Ms Rosamond and Human Group if they are precluded for accessing those assets to pay for their past and future legal and living expenses.
I am comfortably satisfied that the interests of justice lie in favour of varying the Freezing Orders in so far as it relates to Human Group. Human Group is not a party to the criminal proceedings, is no longer trading and is not required to take any steps in these proceedings for some time.
The position in relation to Ms Rosamond is less clear as there are factors that point in both directions. Having carefully weighed up the submissions and various factors as they relate to Ms Rosamond, I have come to the conclusion that the interests of justice lie in NAB's favour and that I should exercise my discretion by varying the Freezing Orders to preclude her from accessing ACN's assets to pay her future living and legal expenses. This is primarily for the reason that to allow Ms Rosamond access to ACN's assets for those purposes would lead to the liquidation of all of ACN's assets held by Shaw and FIIG, with the consequence that NAB will have no prospect of recovering assets over which it has demonstrated a strong prima facie proprietary claim or its loss being made good in circumstances where ACN's assets are valued at less than the costs outlaid and estimate of Ms Rosamond and Human Group's future expenses.
In addition, and irrespective of NAB's proprietary claim, the assets to which Ms Rosamond wishes to have recourse are held by a third party and are, thus, not her own assets to use as she pleases.
I also consider it to be significant that, according to the evidence on this application, Ms Rosamond and Human Group have already accessed around $670,000 of ACN's funds to pay their legal and other expenses, of which $76,587.61 has been paid to them since the Freezing Orders were made.
These proceedings involve a private plaintiff seeking to vindicate its proprietary claims arising out of serious allegations concerning a fraudulent scheme involving the issuing and payment of over $51 million of false or inflated invoices, secret commissions and other benefits over a period of some nearly five years. While the criminal proceedings that have been brought against Ms Rosamond are significant, I am not satisfied that the existence of those serious criminal charges and her upcoming four-month trial justifies the conclusion that Ms Rosamond's interests outweigh NAB's such that she should be allowed access to assets of a third party to which NAB has established, on a strong prima facie basis, that she has no legal right, let alone a moral right, to enable her to spend those assets on private legal representation of her choice in different proceedings to these or to pay her own living expenses.
As to past expenses, in my view, the interests of justice lie in favour of not varying the Freezing Orders to prohibit Ms Rosamond and Human Group from dealing with ACN's assets to pay for their legal expenses incurred to date. Those expenses were incurred in circumstances where I have found that the Freezing Orders, as currently framed, have not prohibited Ms Rosamond and Human Group from dealing with ACN's assets for that purpose and the past prejudice caused as a consequence of their reliance on those Orders should, in my view, be cured. In coming to this view, I have proceeded on the basis that the expenses which may be paid are only those expenses identified in Mr Adrian's report and referred to at [60(a)(i)], [60(b)] and [60(c)] of these reasons.

What, if any, other variations should be made to the Freezing Orders?

As to the other variations to the Freezing Orders sought by NAB's motion, I am satisfied that ACN should be added as a subject of the orders. ACN is a party to these proceedings and NAB has demonstrated a strong prima facie proprietary claim to its assets. NAB submits, and I accept, that there is no need for any specific living expenses exception for ACN.
In my view, the exceptions provided for under paragraphs 8(c) and 8(d) are potentially necessary and should remain for ACN given the ongoing management of its assets by Shaw and FIIG.
I also consider that they should remain in place for Human Group. While the evidence indicates that Human Group has ceased trading, it is to be expected that it may have continuing expenses and liabilities, such as to the ATO and ASIC. As was accepted at the hearing, Human Group has no living expenses and the orders should be varied to reflect that fact. As I have concluded that the Freezing Orders should be varied to prevent Ms Rosamond and Human Group from accessing ACN's assets, I consider that a similar variation should be made to prevent Ms Rosamond from accessing Human Group's assets to pay for her personal living expenses.
I see no reason at this stage to place a cap on Ms Rosamond's living expenses, particularly in view of the other findings I have made. While there is precedent for such an approach (see for example, Cong v Shen [2020] NSWSC 945), the evidence does not suggest that Ms Rosamond's living expenses are not "ordinary".
For completeness, I note that, at the hearing, NAB did not press for a variation to include an order that details be given of the legal fees being incurred by Human Group and Ms Rosamond if the Court concluded that Ms Rosamond should be prevented from having access to ACN's assets to pay her legal fees.

Orders

I have deferred making any orders at this stage as the parties requested an opportunity to consider these reasons and seek to agree on the orders to be made or bring in competing short minutes in the event of any disagreement.
If the parties reach agreement on the orders to be made, including as to costs, they are to notify my Associate by email so that they can be made in chambers. If the parties are unable to agree on any aspect of the orders, they should confer as to a timetable for the provision of draft orders and short written submissions and notify my chambers by 12 January 2021 whether they are content for me to deal with the issue on the papers.
In the event a party requires orders to be made as a matter of urgency, they have liberty to contact my Associate by email.

Amendments 06 January 2021 - Plaintiff's counsel amended from "D Thomas" to "D Thomas SC". 13 January 2021 - Correction of amounts at paragraphs 60(i), (ii) and (vi). DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 January 2021

National Australia Bank Limited v Human Group Pty Ltd

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