By Paul Gregoire and Ugur Nedim
When Luke Brett Moore opened his Complete Freedom savings account at the Goulburn branch of St George bank, he was unaware just how much freedom the financial institution would afford him. But Mr Moore soon found that he was at liberty to make quite a range of large withdrawals.
Moore opened the account on 11 March 2010. On the following day, his fortnightly Centrelink payments started being credited into the account, which were accompanied by an occasional compensation payment.
In May that year, mortgage repayments began being deducted from the account. It was after a few of these transactions left his balance in the negative that it became apparent to Moore that he could significantly overdraw his account.
Pennies from heaven
Over the following six months, mainly automated transactions were made, which left the account overdrawn in excess of $9,000.
But around Christmas time, five mortgage repayments were manually debited from the account for $4,999 each. These were followed by another two $49,000 repayment transactions.
Moore then began making a series of substantial debit transactions on the account, many of which were recorded as being made to “PayPal Australia.”
Each of the 50 overdraft transactions resulted in a $9 “payment honour fee”, and Moore was charged a high rate of interest on the money he owed. The overdrafts were made via a combination of cash withdrawals, periodic payments and direct debits.
All the while, the bank sent out regular account statements, which recorded all the debits and fees, as well as the interest charged.
Quite the booty
By the time the bank shut down the account on 10 August 2012, it had accumulated a negative balance exceeding $2.1 million.
NSW police executed a search warrant on Moore’s home on 12 December that year. Officers found pictures signed by Led Zeppelin, Kylie Minogue, Bob Dylan and Guns N’ Roses. Moore also had a frisbee signed by Amy Winehouse, and a photo autographed by the presenters of Top Gear.
He had bought an Aston Martin DB7 Vantage coupe, a 2001 Maserati sedan, a 2012 Hyundai sedan and a 6.1 metre boat. He also had $733,000 deposited into a National Bank of Australia account, and $394,000 into his PayPal account.
Convicted, but out on bail
In February 2015, Mr Moore pleaded not guilty to two criminal charges and the matter proceeded to a jury trial in the NSW District Court.
The first charge was fraud under section 192E(1)(b) of the Crimes Act 1900. The allegation was that he dishonestly obtained a financial advantage by deception. The offence carries a maximum penalty of 10 years imprisonment.
The second charge was one count of money laundering, namely dealing with the proceeds of crime, under second 193B(2) of the Act. The maximum penalty for that offence is 20 years behind bars.
The jury ultimately found Mr Moore guilty on both charges. On 17 April 2015, District Court Judge Stephen Norrish sentenced him to 4 years and 6 months for the fraud charge, and 3 years for the money laundering charge.
The sentences were to be served concurrently, with a non-parole period of 2 years and 3 months.
In May, Moore lodged a notice of intention to appeal his conviction, along with a bail application.
NSW Court of Criminal Appeal Justice (NSWCCA) Peter Hamill granted him bail in August that year, finding that “special or exceptional circumstances” had been established.
Mr Moore’s case went before the NSWCCA on 28 October 2016. During the hearing, Justice Mark Leeming remarked that “the notion sourced in board games of a windfall “bank error in your favour” is a very poor guide to the position at law.”
The justice added that the law has found for centuries that a party who makes a payment by mistake is entitled to the recovery of that sum.
His Honour noted that in Moore’s case, the bank’s mistake was about a single payment. It concerned repeatedly loaning the account holder large sums of money. The NSWCCA had no difficulty finding that Moore had acted dishonestly – the issue was whether he had engaged in a deception.
Justice Leeming explained that an individual who lies in order to obtain a loan is guilty of a crime, but noted there was nothing “covert” about Moore’s actions. In fact, St George recorded each loan, charged a fee and interest against it, and issued statements documenting the large amounts he owed.
A question of authority
As there was no overt act of deceiving the bank, the Crown relied on the expanded statutory definition of deception under section 192B(1)(b) of the Act, which states:
“In this Part, “deception” means any deception, by words or other conduct, as to fact or as to law, including:
(b) 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.”
So, it boiled down to whether Moore had the authority to take out the loans. Moore’s criminal lawyers submitted at the trial and on his appeal that he was authorised to make the transactions, even though it was due to an oversight by the bank.
The bank’s own terms and conditions
Justice Leeming pointed to the “Overdrawing Your Account” section of the Complete Freedom Account Terms and Conditions booklet, which was tendered as evidence. The booklet initially states that the bank is under no obligation to allow a customer to overdraw their account.
But it then goes on to outline the four conditions in the event the bank authorises a customer to overdraw on their account.
The stipulations are: the bank charges a fee, the customer agrees to pay interest, the customer is required to pay back the overdrawn amount immediately, and the customer agrees to pay any legal fees incurred by the bank whilst trying to recover the overdrawn amount.
Under the terms and conditions, Moore was indeed allowed to request the loan, and the bank reserved the right to allow him to overdraw his account, his Honour found.
The Crown argued that, be that as it may, Moore had breached the agreement, as he had not paid back the overdraft immediately.
Justice Leeming rejected this argument, despite the fact Moore had failed to pay the money back straight away. This is because the bank agreed with the further loans being issued after the initial overdrafts, as evidenced by the fact it “continued to lend Mr Moore funds, and the imposition of fees and interest are consistent only with its doing so consensually.”
A human error
NSWCCA Justice Des Fagan pointed out that, during the initial trial, Westpac group senior investigator Mr Hayes stood as a witness for the Crown and testified that a bank officer had accidentally given Mr Moore’s account “relationship officer status.”
This meant the regular procedure whereby a relationship officer has to approve each overdraft was overlooked in the system.
In regard to the periodic payments that were deducted by third parties, a bank officer was required to manually process these transactions and load them into the system in order for these debits to be deducted, Mr Hayes explained.
So, his Honour explained, each of these transactions had obviously been “authorised” by the bank.
According to Justice Leeming, criminal liability for dealing with the proceeds of crime was wholly dependent on the conviction for fraud.
And since the essential ingredient of ‘deception’ could not be proved beyond reasonable doubt, there could be no conviction for either fraud or the money laundering charge.
“I propose that there be a grant of leave to appeal, that the appeal be allowed, that the conviction on counts one and two be quashed, and that the appellant be acquitted in respect of those counts,” his Honour ordered on 1 December 2016.