O'Brien v Supercheap Security Pty Ltd trading as Supercheap Security Pty Ltd

Solicitors: Carmody Lawyers (Plaintiff/Applicant) Herbert Smith Freehills (Third Defendant/Respondent) File Number(s): 2022/241124

JUDGMENT

1. The plaintiff, Ms Joanne O'Brien, alleges that she has been defrauded by the first and second defendants, Supercheap Security Pty Ltd and Mr Hassan Mehdi, of $500,000. Mr Mehdi is the sole director and shareholder of Supercheap. Each has been served. Neither has appeared.
2. Ms O'Brien also seeks to make a claim against the third defendant, National Australia Bank Limited ("NAB"), on various bases to which I will return.
3. There were originally three other plaintiffs who also alleged that they had been defrauded by Supercheap and Mr Mehdi. They are no longer participating in the proceedings.
4. On 2 February 2023, Ball J summarily dismissed, pursuant to Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), r 13.4(1)(b), two of the claims made by Ms O'Brien and the former plaintiffs against NAB and struck out, pursuant to UCPR r 14.28(1), the other three claims. [1]
5. Ball J granted the former plaintiffs leave to replead the claims that had been struck out.
6. Now, by Notice of Motion filed on 28 April 2023, Ms O'Brien seeks leave to file an Amended Commercial List Statement ("the Proposed List Statement") which seeks to address the shortcomings the subject of Ball J's findings.
7. My conclusion is that leave to amend should be refused.

The alleged fraud

1. Ms O'Brien alleges that: 1. on 22 May 2022, she made enquiries about "best interest rates available" on a particular website; 2. she thereafter received emails and telephone calls from persons purporting to be employees of "AMP Bank" and who sent emails with addresses that suggested an association with "AMP"; [2] 3. individuals purporting to be from AMP represented to her that: 1. she could invest money by way of term deposit in her name; 2. she would receive interest payments at the rate of 3.65% per annum; and 3. to make the investment she should transfer funds to an account in her name and with a nominated BSB and account number; 1. she instructed her bank, Commonwealth Bank of Australia ("CBA") "as her agent" [3] to send five separate amounts of $100,000 to an account in her name with that BSB and account number ("the Nominated Account") on 9, 14, 15, 16 and 17 June 2022 ("the Payments"); 2. the account having that BSB and account number was in fact maintained by Supercheap at NAB ("the Supercheap Account"); 3. an amount equal to the five amounts of $100,000 was credited to the Supercheap Account and, almost immediately, withdrawn; and 4. on 20 June 2022, Ms O'Brien attempted to make a further transfer in the same manner but CBA blocked that transaction from proceeding on the stated basis that "NAB account has been blocked due to suspicious activity".

Ms O'Brien's claims against NAB

1. Ms O'Brien brings a number of claims against Supercheap and Mr Mehdi. Ms O'Brien alleges that Supercheap and Mr Mehdi engaged in a dishonest and fraudulent design.
2. Ms O'Brien seeks to make the following claims against NAB: 1. for money paid under a mistake of fact; 2. that NAB knowingly assisted the dishonest and fraudulent design of Supercheap and Mr Mehdi; 3. that NAB processed the payments in breach of alleged duty of care to Ms O'Brien; 4. that NAB engaged in misleading or deceptive conduct for the purpose of s 18 of the Australian Consumer Law ("ACL"); [4] 5. that NAB engaged in unconscionable conduct in contravention of ss 12CA or 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) ("the ASIC Act"), ss 20 or 21 of the ACL, and the general law.
3. In paragraphs prefatory to those in which Ms O'Brien sets out her contentions in relation to the five causes of action to which I have referred, Ms O'Brien makes a number of contentions concerning NAB's obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) ("the Anti-Money Laundering Act") and the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (Cth) ("the Anti-Money Laundering Rules"). These include NAB's alleged obligation to monitor its customers with a view to identifying, mitigating and managing the risk that the services provided by NAB may involve or facilitate money laundering.
4. It is common ground that, for the purpose of this application, I should assume the correctness of those allegations. They are said to be relevant to the contentions that Ms O'Brien makes concerning NAB's alleged knowing assistance of Supercheap's and Mr Mehdi's alleged dishonest and fraudulent design.

Res Judicata point

1. I heard submissions concerning the effect of s 91 of the Civil Procedure Act 2005 (NSW) on the ability of Ms O'Brien to re-agitate those claims that Ball J summarily dismissed, [5] as opposed to those that his Honour struck out, with liberty to replead. [6]
2. Section 91 of the Civil Procedure Act provides: "91 Effect of dismissal of proceedings (cf SCR Part 40, rule 8) (1) Dismissal of - (a) any proceedings, either generally or in relation to any cause of action, or (b) the whole or any part of a claim for relief in any proceedings, does not, subject to the terms on which any order for dismissal was made, prevent the plaintiff from bringing fresh proceedings or claiming the same relief in fresh proceedings. (2) Despite subsection (1), if, following a determination on the merits in any proceedings, the court dismisses the proceedings, or any claim for relief in the proceedings, the plaintiff is not entitled to claim any relief in respect of the same cause of action in any subsequent proceedings commenced in that or any other court."
3. In view of the conclusions to which I have come concerning the merits of each of Ms O'Brien's proposed claims against NAB, it is not necessary for me to deal with that question. That is because, whether or not Ms O'Brien remains entitled, following Ball J's decision, to seek to propound a case against NAB for knowing assistance or money paid under a mistake of fact, she should not be given leave to do so.

Money paid under a mistake of fact

1. Ms O'Brien's proposed case for money paid under a mistake of fact is set out in [63A] to [68] of the Proposed List Statement. I attach a copy of these paragraphs to these reasons. Proposed List Statement [63A]-[68]
2. The structure of the claim is as follows: 1. NAB had a system encouraging, facilitating or permitting a person to issue instructions to their bank to credit that person's funds to an account operated by NAB "including by nominating the account name of the account to be credited"; [7] 2. by acting on the instructions that Ms O'Brien gave to CBA to make the Payments to the Nominated Account, NAB was acting as Ms O'Brien's agent, or sub-agent, or in a capacity analogous to an agent; [8] 3. at the time of her instructions to CBA, Ms O'Brien was acting under a mistake of fact, namely that she was instructing NAB to credit the Payments to the Nominated Account; [9] 4. NAB knew, or should have known, of that mistake, "primarily" because Ms O'Brien was named as the "Account Name"; [10] 5. NAB was thereby unjustly enriched; [11] and 6. alternatively to (e), NAB acted "unconscientiously" in crediting the Payments to the Supercheap Account.
3. There are a number of difficulties with this proposed claim.
4. First, as to the matter in [17(b)], I cannot see how it could possibly be contended that NAB was acting as Ms O'Brien's agent. As Ms O'Brien has herself alleged, [12] her agent was CBA, not NAB.
5. Mr Kalyk, who appeared for Ms O'Brien, submitted that: "… when a bank offers itself out as being willing and able to receive and act on an instruction to transfer funds from an originator, it is acting as the originator's agent in giving effect to that instruction."
6. I cannot see how that could possibly be so.
7. As to the matter in [17(c)], on her own case, Ms O'Brien was not acting under such a mistake of fact. On her case, through her agent, CBA, she did instruct NAB to credit the Payments to the Nominated Account. Ms O'Brien was not acting under the stated mistake of fact.
8. Finally, as to the matter in [17(e)], I see no basis upon which it could be concluded that NAB was enriched at all, let alone unjustly enriched. This matter was dealt with by Ball J in his judgment at [27] and [28]. As his Honour said: "… amounts credited to a current account, which is not in overdraft, are not treated as having been received by the bank for the purpose of imposing an obligation in equity on the bank to account to the person said to be the true owner of the funds." [13]

Knowing assistance

1. Ms O'Brien's proposed case concerning knowing assistance is set out in [69] to [74] of the Proposed List Statement. I attach a copy of these paragraphs to these reasons. Proposed List Statement [69]-[74]
2. The structure of this proposed cause of action is as follows.
3. First, it is alleged that NAB knew the matters set out at [69] of the Proposed List Statement, particularly that: 1. it did not operate any account in the names of the four originators (that is, not only Ms O'Brien but the other three former plaintiffs); [14] 2. the instructions received by NAB from each of the originators (again, not only Ms O'Brien) were to credit an account in their name; [15] 3. there were indicators of a mistaken transfer, for example, references to "AMP" and to "fixed deposit amp"; [16] 4. Supercheap was a new customer of NAB; [17] 5. operations on the account were in excess of Supercheap's stated expectations; [18] 6. funds were withdrawn from the account very shortly after deposit, with some funds being transferred out of Australia; [19] and 7. there were a large number of deposits from a number of different persons. [20]
4. It is common ground that I should assume, for the purposes of this application, that Ms O'Brien will be able to establish that NAB actually knew each of these matters.
5. Next, it is alleged that because of that knowledge, NAB was required to take the steps set out in [69A] of the Proposed List Statement, including: 1. having systems in place to verify information it had received from Supercheap; [21] 2. the application of "an enhanced customer due diligence program" to the Supercheap Account; [22] 3. obtaining further information from Mr Mehdi "or third party sources"; [23] and 4. having suspicions that Supercheap and Mr Mehdi "were not who they claimed to be" or as to the veracity or adequacy of the information provided by them. [24]
6. It is not alleged that NAB did not take any of these steps, nor as to what would have been the position had it done so.
7. Next, it is alleged in [69B] of the Proposed List Statement that an honest and reasonable person in the position of NAB would have taken the steps specified in [69A] and/or had a system in place to ensure that such steps were taken, including: 1. speaking to Mr Mehdi; [25] 2. identifying persons other than Supercheap or Mr Mehdi "who were involved with" Supercheap or Mr Mehdi and who were "operating the account"; [26] 3. obtaining from Supercheap, or from "third party sources", or from "open source searches", to "verify the bona fides" of Supercheap or such other individuals as may have been involved in their activities; [27] and 4. generally, to gain an understanding and explanation of the transactions on the account. [28]

Duty of care

1. Ms O'Brien's case concerning the alleged duty of care is set out at [74A] to [82] of the Proposed List Statement. I attach a copy of those paragraphs to these reasons. Proposed List Statement [74A]-[82]
2. The structure of Ms O'Brien's claim concerning an alleged breach of duty of care is that: 1. NAB had a system encouraging, facilitating or permitting a person to issue instructions to their bank to credit that person's funds to an account operated by NAB "including by nominating the account name of the account to be credited"; [39] 2. the system and processes involving cashless transactions carry with them the risk of fraud; [40] 3. in those circumstances, Ms O'Brien relied on NAB to take reasonable precautions against such a risk; [41] 4. Ms O'Brien was vulnerable to loss or damage should NAB not take reasonable steps against that risk; [42] 5. such risk was foreseeable and not insignificant; [43] 6. that risk was such that a reasonable person in NAB's position would have had in force a system whereby, relevantly, funds were not credited to an account belonging to a person different from the account name specified in the instruction; [44] and 7. NAB had a duty to the plaintiff at common law to take reasonable care in acting or purporting to act on instructions to NAB to credit funds to an account operated by NAB. [45]
3. This alleged duty is narrower than that posited before Ball J, which was a duty to take reasonable care in the "oversight and effective cashless transfer of funds throughout Australia and internationally".
4. But the proposed case has the same inherent problems as identified by Ball J. At [44], his Honour referred to the principles to be applied when determining whether a novel duty of care arises, as summarised by Allsop P (as his Honour then was) in Caltex Refineries (Qld) Pty Limited v Stavar. [46]
5. Ball J concluded: "Notwithstanding the fact that the issue generally requires a careful examination of the facts, in my opinion, it is apparent that, applying these principles, it is not reasonably arguable that NAB owes the alleged duty. A number of matters identified by Allsop P tend against the existence of such a duty and none points in favour of it. The alleged duty is said to be a duty to avoid pure economic loss. It is one which, in effect, is said to be owed to the world at large. The alleged duty is broad and indeterminate in scope. Those factors, particularly in combination, count against the existence of the alleged duty. There is no personal or other connection between the plaintiffs and NAB. The duty in effect is said to be a duty to take reasonable care to prevent the plaintiffs from being defrauded by customers of NAB. But none of the facts pleaded by the plaintiffs provide a basis for saying that NAB assumed that responsibility or that the plaintiffs reasonably relied on NAB to prevent them from being defrauded by NAB's customer. Moreover, the existence of the pleaded duty would raise the possibility of conflict between the duty a bank owes to its customer and a duty that it is said to owe to anyone who chooses to deal with that customer. The relevant obligations of a bank, and NAB in particular, are dealt with in detail by legislation. There is nothing in that legislation that suggests that breach of it gives rise to civil liability on the part of the bank to any person who deals with its customer. Vulnerability to the harm said to be caused by the alleged conduct is an important, if not critical, indicator of the existence of a duty of care. [47] The List Statement suggests that the plaintiffs were vulnerable to harm caused by NAB's conduct - or, more accurately, inaction - and that the plaintiffs had limited ability to protect themselves. That submission cannot be accepted. It was open to the plaintiffs to make their own enquiries, including taking steps to check that they were dealing with persons employed by AMP by contacting AMP themselves." [48]

Misleading or deceptive conduct

1. Ms O'Brien's proposed case in relation to misleading or deceptive conduct is set out at [83] to [90] of the Proposed List Statement. I attach a copy of those paragraphs to these reasons. Proposed List Statement [83]-[90]
2. Ms O'Brien's proposed case is that NAB represented to her that when she instructed NAB to credit funds to an account operated by NAB: "a. the instructions to credit funds would be followed; b. the funds would not [be] credited to an account that did not exist; and/or c. where instructions are ambiguous, the details of the instruction would be checked with the originator or their agent." [50]
3. The particulars of the alleged representation are: "The representations were implied from the conduct pleaded at paragraph 63A, seen in context of the legal obligations applying to banks as pleaded at paragraphs 55 to 63."
4. Paragraph [63A] [51] alleges that NAB: "Operated a system that encouraged, facilitated or permitted a person (the originator) to issue instructions through the originator's bank to [NAB] to credit funds held in accounts operated by [NAB] including by nominating the account name of the account to be credited."
5. Paragraphs [55] to [63] of the Proposed List Statement set out the matters that I have summarised at [11] above.
6. I cannot see how the alleged representation could possibly be implied from these matters. Mr Kalyk's submissions concerning this aspect of Ms O'Brien's case proceeded upon the basis that NAB had a system which required an originator to include an account name as part of transfer instructions.
7. There is a further problem. The Proposed List Statement contends that the alleged representation was relied upon by Ms O'Brien in: "a. forming the view that [her] instructions to [NAB] would be followed, that the funds would be credited to an account operated by [NAB] in the name [she] nominated, that the funds would not be credited to an account that did not exist and that if the instructions were ambiguous the details would be checked with [her] or [her] bank; and b. forming the view that it was desirable and reasonable to instruct [NAB] to credit the nominated accounts operated by [NAB] as pleaded above at paragraph 21; c. taking comfort in the security of the transaction being effected; and d. not taking further steps to verify or confirm that [Ms O'Brien] did in fact have an account operated with [NAB]."

Unconscionable conduct

1. Ms O'Brien's case concerning NAB's alleged unconscionable conduct is set out at [91] to [93] of the Proposed List Statement. I attach a copy of those paragraphs to these reasons. Proposed List Statement [91]-[93]
2. The structure of the proposed claim is that: 1. NAB operated the system alleged at [63A] of the Proposed List Statement; [52] 2. Ms O'Brien was in a position of special disadvantage to NAB for the reasons set out at [91B]; 3. NAB knew or should have known that Ms O'Brien was at such a special disadvantage; [53] 4. notwithstanding knowing of that special disadvantage, NAB permitted the continued operation of the Supercheap Account "for its own commercial interests"; [54] 5. NAB engaged in the conduct at [91] of the Proposed List Statement, which conduct was in connection with the supply or possible supply of financial services within the meaning of s 12CB of the ASIC Act, or the supply of services within the meaning of ss 20 and 21 of the ACL; and 6. such conduct was unconscionable under the general law, or in contravention of s 12CB of the ASIC Act or ss 20 or 21 of the ACL.
3. There are a number of difficulties with this claim.
4. The first is that the supply of "financial services" and "services" referred to at [91] of the Proposed List Statement and "in connection with" NAB is alleged to have engaged in unconscionable conduct, comprised services provided to Supercheap and Mr Mehdi and not to Ms O'Brien.
5. Thus, the "financial services" and "services" alleged at [91] are: 1. opening and operating an account for Supercheap; 2. allowing Mr Mehdi to become a signatory to the Supercheap Account; 3. allowing the "operator" of the Supercheap Account to transfer funds out of that account; and 4. crediting funds to the Supercheap Account as a result of electronic funds transfer instructions.
6. As Ball J pointed out: [55] "Section 12CC(1) provides that '[w]ithout limiting the matters to which the [C]ourt may have regard for the purpose of determining whether a person (the supplier) has contravened section 12CB in connection with the supply or possible supply of financial services to a person (the service recipient), the [C]ourt may have regard to' a list of matters relating to the relationship between the supplier and service recipient. It is apparent from s 12CC that the person with which s 12CB is concerned is the service recipient. Consequently, s 12CB must be read as stating that a person must not in connection with the supply or possible supply of financial services to the recipient of those services engage in conduct that is in all the circumstances unconscionable. A person who suffers loss 'by' that conduct is entitled to recover damages from the supplier under s 12GF. Consequently, in order to make out a case under s 12CB the plaintiffs must plead and prove the financial services that NAB supplied or proposed to supply to them and the conduct that NAB engaged in in connection with that supply or possible supply which could be said in all the circumstances to be unconscionable. The plaintiffs have made no attempt to identify what they say was the financial service provided to them. Indeed, the pleaded supply of financial services appears to be a supply to the first defendant."

Conclusion

1. Ms O'Brien's proposed case has no reasonable prospects of success. I refuse her application for leave to further amend her List Statement.
2. I will now invite submissions as to why the proceedings, as against NAB, should not now be dismissed with costs.

Endnotes

1. O'Brien v Supercheap Security Pty Ltd [2023] NSWSC 21.
2. Such as enquiry@amp-enquiry.com and client@amp-client.com.
3. I return to this at [19] below.
4. Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law.
5. The claims for knowing receipt and negligence.
6. The claims for a constructive or resulting trust arising from a mistaken payment, misleading or deceptive conduct and unconscionable conduct.
7. [63A].
8. [65].
9. [66].
10. [66A].
11. [66B(a)].
12. See [8(d)] above.
13. O'Brien v Supercheap Security Pty Ltd (supra) at [28] and, see generally, Robb Evans of Robb Evans & Associates v European Bank Limited (2004) 61 NSWLR 75; [2004] NSWCA 82 at [167] (Spigelman CJ, with whom Handley and Santow JJA agreed).
14. Subparagraph (r).
15. Subparagraphs (o) and (p).
16. Subparagraph (t).
17. Subparagraph (c).
18. Subparagraphs (g), (l) and (m).
19. Subparagraph (v).
20. Subparagraph (k).
21. Subparagraphs (a), (b) and (c).
22. Subparagraph (e).
23. Subparagraph (f).
24. Subparagraph (d).
25. Subparagraph (a).
26. Subparagraph (b).
27. Subparagraphs (c), (d) and (e).
28. Subparagraphs (h) and (i).
29. Subparagraph (a).
30. Subparagraph (b).
31. Subparagraph (d).
32. Subparagraph (e).
33. Subparagraph (l).
34. Subparagraph (k).
35. Odtojan v Condon [2023] NSWCA 129 at [25] and [30] (Leeming and Kirk JJA).
36. [1992] 4 All ER 161; [1993] 1 WLR 509 at 575-6.
37. See [8(g)] above.
38. Consul Development Pty Limited v DPC Estates Pty Limited (1975) 132 CLR 373 at 412; [1975] HCA 8 (Stephen J, Barwick CJ and Gibbs J agreeing, McTiernan J in dissent); Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at [160], [176]-[178] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ); Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 at [259]-[262] (Finn, Stone and Perram JJ).