Australia: How the fine print can affect criminal prosecutions: defeating fraudsters with terms and conditions

Last Updated: 26 May 2017
Article by Andrew Moore

The decision in Moore v The Queen illustrates the importance of getting your terms and conditions right.

What would you do if you had an extra million dollars or so? For one man, it meant boys' toys, some personal pampering - and a criminal prosecution.

Luke Moore's convictions were overturned on appeal, a decision which got a lot of press (Moore v R [2016] NSWCCA 260; no relation to the author). Missing from the media commentary were the lessons for the rest of us, especially when it comes to contractual terms and risk mitigation.

Mr Moore enjoys Complete Freedom

On 11 March 2010, Mr Moore, somewhat ironically, opened a "Complete Freedom" bank account with St George Bank.

Under the terms and conditions of the account, Mr Moore could ask for a loan of funds greater than the account balance, by cash withdrawal, periodic payments or direct debit. The bank charged a $9 payment dishonour fee whenever a withdrawal was made from the account when the balance was negative.

The sum of $441 was credited to the account the following day by Centrelink and similar payments were subsequently made on a fortnightly basis. A small number of other deposits were made from another source.

After a series of debits and withdrawals from the account, it reached a negative balance by early June 2010. It remained in a negative balance from this point onwards.

After realising that the account was subject to a system error, Mr Moore exploited this to make mortgage repayments and lavish purchases, including signed memorabilia, sports cars and boats. He also made deposits into a PayPal account.

By the time the account was closed on 10 August 2012, the negative balance was $2.1 million, of which the bank recovered over $1.2 million in property from Mr Moore.

Was this obtaining a financial advantage by deception?

Mr Moore was charged with obtaining a financial advantage by deception under section 192E(1) of the Crimes Act. Deception is defined in section 192B of the Crimes Act 1900 (NSW):

"(1)In this Part, deception means any deception, by words or other conduct, as to fact or as to law, including:
  1. a deception as to the intentions of the person using the deception or any other person, or
  2. conduct by a person that causes a computer, a machine or any electronic device to make a response that the person is not authorised to cause it to make."

He was also charged with dealing with the proceeds of crimes contrary to section 192(2) of the Act.

The Crown argued that Mr Moore must have known there was a problem with the bank's system. However, he did nothing to alert the bank to this; instead he continued to request transactions. Given there was no money in his account, he was not authorised to cause "a computer, a machine or any electronic device to make a response".

In particular, the Crown relied upon clause 13.8(c) of the relevant terms and conditions which stated:

"you must repay the overdrawn amount immediately without further demand from us."

The Crown maintained that this clause implied that Mr Moore was not authorised to make a further debit into his account if it was already overdrawn.

Counsel for Mr Moore disagreed and argued there was no clause expressly precluding a customer from making further debits from an already overdrawn account. He "was in fact authorised, albeit by an oversight, to act on the [account] as he did".

The NSW Court of Criminal Appeal overturns Mr Moore's conviction

The Court of Appeal rejected the Crown's arguments and ordered that both convictions be quashed.

In his judgment, Justice Leeming observed that Mr Moore "behaved not only extremely foolishly but dishonestly" and that he "continued to borrow and consume funds, knowing that he had no realistic prospect of repaying them".

Despite his undoubted civil liability to the bank, there was a real question as to whether his conducted constituted a crime:

  • the terms and conditions did not forbid electronic transactions which caused the account to become overdrawn or increased an existing debit balance, nor was there anything express to indicate that the bank could not exercise its discretion and approve transactions while the account was overdrawn;
  • "the terms of the contract gave the Bank power to approve a debit which left the account overdrawn" (according to Justice Leeming);
  • "the only available conclusion was that the Bank's systems were so configured with respect to this account that all overdraft transactions would be allowed because there was no relationship officer assigned to take responsibility for allowing them" (according to Justice Fagan); and
  • there was nothing covert about Mr Moore's conduct; he had communicated nothing untrue to the bank which induced it to continue and increase its lending.

In effect, as Justice Fagan put it, "each submitted transaction was, in fact, 'allowed' by the Bank. That is, each was, in fact, authorised."

So what can we learn from this decision?

While the present case obviously highlights the need for perpetually improving risk management systems for overdraft transactions, it also illustrates the importance of getting your terms and conditions right.

Those terms and conditions are the foundation of your relationship with your customer, supplier or other business party. They need to set out not only the key deliverables in your business relationship, but also the responsibilities. That means designing them backwards - what do you want the parties to do in any given situation? In this case, for example, Mr Moore did not have to alert the bank to the system error, or stop making debits. This did not mean he got to keep the money, but it did have repercussions down the track, not least when it came to the criminal prosecution.

A successful criminal prosecution actually can have benefits for a business in the same position as the bank in this case. Although the bank was able to use civil recovery methods, these can be expensive and exposed to delay. Where a company has sustained loss by reason of an offence, it can use the victim's compensation scheme to claw back funds from the convicted wrongdoer, at least in New South Wales.

The key lesson for financial institutions is that when preparing or amending account terms and conditions, not only can they assist their civil recovery position but also their victim's compensation recovery position which is dependent on the Crown successfully prosecuting individuals who dishonestly exploit system errors.

More broadly, it's a great reminder to ensure your terms and conditions do what they need to do.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions