Bank of Valletta PLC v National Crime Authority [1999] FCA 1099 (13 August 1999)

Last Updated: 13 August 1999

FEDERAL COURT OF AUSTRALIA

Bank of Valletta PLC v National Crime Authority [1999] FCA 1099

ADMINISTRATIVE LAW - Investigation by National Crime Authority - Production of documents - Statutory notice requiring disclosure of documents held in Malta by Maltese bank - Documents related to financial transactions undertaken in Australia - Production of documents might involve bank in a contravention of Maltese law with the possibility of criminal action or restrictions on its banking licence - Whether bank had "reasonable excuse" to refuse or fail to comply with the notice - Matters relevant to determination of the question of "reasonable excuse" - Need for a balancing exercise between the consequences for the bank of compliance and the need to investigate possible criminal activity - Admissibility of statement by investigating office that information available to him does not identify a particular suspect.

Brannigan v Davison [1997] AC 238 referred to

National Crime Authority Act 1984, s29

Evidence Act 1995, s76

BANK OF VALLETTA PLC v NATIONAL CRIME AUTHORITY and AZIZ GREGORY MELICK

N616 of 1999

WILCOX, WHITLAM and LEHANE JJ

SYDNEY

13 AUGUST 1999

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N616 of 1999

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	BANK OF VALLETTA PLC Appellant
AND:	NATIONAL CRIME AUTHORITY First Respondent AZIZ GREGORY MELICK Second Respondent
JUDGES:	WILCOX, WHITLAM and LEHANE JJ
DATE OF ORDER:	6 AUGUST 1999
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The appeal be dismissed.

2. The appellant, Bank of Valletta PLC, pay the costs of the appeal of the respondents, National Crime Authority and Aziz Gregory Melick.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N616 of 1999

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	BANK OF VALLETTA PLC Appellant
AND:	NATIONAL CRIME AUTHORITY First Respondent AZIZ GREGORY MELICK Second Respondent

JUDGES:	WILCOX, WHITLAM and LEHANE JJ
DATE:	13 AUGUST 1999
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1 THE COURT: This appeal was heard last Friday. At the conclusion of argument we ordered that the appeal be dismissed with costs and indicated we would publish our reasons at a later date. These are our reasons.

2 The appeal was brought against a declaration made by Hely J in a proceeding instituted by the appellant, Bank of Valletta PLC ("the Bank"), to obtain relief to the opposite effect of the declaration ultimately made. The declaration made by Hely J was as follows:

"Any operation which s34 of the Banking Act 1994 (Malta) or s257 of the Criminal Code (Malta) may have in relation to the applicant by reason of its compliance with the Notice styled `Notice to Attend and Produce to the National Crime Authority' issued by the second respondent on 30 October 1998 does not constitute a reasonable excuse for failing to comply with that Notice."

3 The Bank is incorporated in Malta. It carries on a banking business in that country pursuant to a licence granted under Maltese legislation. The Bank also operates four offices in Sydney at which it carries on liaison activities, principally with the Australian Maltese community. These activities include the receipt of moneys and their remission to Malta. In order to avoid any impression that the Bank conducts a banking business in Australia, the financial records of Australian transactions are kept only for a limited time. The Bank maintains full records of these transactions in Malta.

4 The first respondent, National Crime Authority, received from the Minister for Justice of the Commonwealth of Australia a reference to investigate certain matters relating to financial transactions. The reference is being managed by Aziz Gregory Melick, a member of the Authority and the second respondent. Mr Melick served on the Bank in Australia a notice ("the Notice") under s29(1) of the National Crime Authority Act 1984 requiring production of certain financial records. The Bank admits it has documents in Malta that answer the description in the Notice but it objects to producing them to the Authority. The Bank claims compliance with the Notice would involve it in contravention of Maltese law and expose it to the possibilities of criminal prosecution and the imposition of restrictions on its banking licence.

5 The Bank put these objections to Mr Melick. He decided he was not satisfied the Bank had established a reasonable excuse for failing to comply with the Notice.

6 Ordinarily, the next step, if the Bank so wished, would have been for the Bank's objection to be considered by the Authority itself. However, before that could be done, the Bank instituted a proceeding in this Court in which it sought orders of prohibition and certiorari, directed to both the Authority and Mr Melick, a declaration that the Bank has a reasonable excuse for failure to comply with the Notice, so far as it calls for production of documents held by it in Malta, and other relief.

7 The proceeding came before Hely J. He received evidence from two expert witnesses concerning relevant Maltese law. The result was not entirely satisfactory. The experts' evidence differed in some respects; moreover neither of them was asked to deal with all the issues. One important issue was whether remission of the documents from Malta to Australia, with the intent they be produced to Mr Melick, would constitute a "disclosure" of the documents within the meaning of s257 of the Maltese Criminal Code. Another question was whether that Code had an extra-territorial operation, so as to apply to action taken by the Bank in Australia. There was also a question whether a disclosure of confidential banking records was an "offence against the person" within the meaning of the Code.

8 It is apparent from his reasons that Hely J was sceptical of the suggestion that compliance by the Bank with the requirements of the Notice would breach Maltese law. However, he decided to deal with the case on the basis (the basis most favourable to the Bank) that it would do so. Even so, he held, the Bank failed to establish a reasonable excuse for failing to comply with the Notice.

9 In coming to that conclusion, Hely J adverted to numerous decided cases, in various countries, in which a court has considered the possible effect upon a person, under the law of another country, of compliance with a demand to give evidence, or produce documents, to that court. Hely J observed that the factual situation in those cases was somewhat different from that in the case before him, but he thought they provided some assistance by way of analogy. The thrust of the decisions is that it is not a sufficient answer to a requirement that a person give evidence or produce documents to say that to do so will or may constitute a breach of a foreign law; nonetheless, a court will weigh the effect of compliance on the person in determining whether or not to insist upon it. In Brannigan v Davison [1997] AC 238, the Judicial Committee of the Privy Council held that statutory exceptions such as "sufficient cause" and "just excuse" "provide ample scope for all the circumstances to be taken into account". At 251 the Committee said:

"Inherent in these two expressions, which are synonymous in this context, is the concept of weighing all the consequences of the refusal to give evidence: the adverse consequences to the inquiry if the questions are not answered, and the adverse consequences to the witness if he is compelled to answer."

10 We agree with Hely J that this approach ought to be taken to determination of the question whether the possibility of breach of a foreign law constitutes a reasonable excuse for failing to comply with a notice under s29 of the National Crime Authority Act.

11 Hely J noted the Bank accepted that the documents called for by the Notice are relevant to the Authority's inquiry. In referring to the "balancing exercise" that he felt required to undertake, he said:

"The most important factor, in any balancing exercise, is that the documents called for by the Notice relate to transactions undertaken by, or in relation to, the Bank in Australia, with persons in Australia, where the records which once existed in Australia relating to those transactions have either been destroyed, or removed, to Malta because it was convenient for the Bank to proceed in that way. I use the expression `transactions undertaken by, or in relation to, the Bank' so as not to convey any view as to whether the Bank was or was not conducting the business of banking in Australia in the years in question, as that matter has not been the subject of submissions by either side. And it will be recalled that I have already found that the Bank's procedures were not adopted for the purpose of circumventing investigation of the Bank or its customers by Australian regulatory authorities.

In those circumstances, a reasonable person would conclude (subject to the issue of the availability of alternative means of securing the information in question, to which I shall return), that the Australian public interest in the investigation of criminal activity in Australia, possibly involving organised crime, outweighs any public or private interest in the maintenance of banker/customer confidentiality under the laws of Malta. This is particularly so when those laws themselves recognise that the confidentiality of that relationship is, in some circumstances, to be displaced in favour of the investigation and prosecution of particular criminal activity, and when it is suspected that the Australian banking system has been used in connection with criminal activity, or the proceeds thereof."

12 Hely J's reference to Maltese law recognising that the confidentiality of the banker/customer relationship may be displaced in favour of the investigation and prosecution of particular criminal activity arose out of a submission made to him by counsel for the Bank. Counsel argued it was unnecessary for the Authority to proceed by way of a s29 notice; it could arrange the making of an application under s8A(1) of the Maltese Prevention of Money Laundering Act. That sub-section provides:

"8A.(1) Where the Attorney General receives a request made by the judicial or prosecuting authority of any place outside Malta for investigations to take place in Malta in respect of a person (hereinafter referred to as `the suspect') suspected by that authority of an act or omission which if committed in these Islands, or in corresponding circumstances, would constitute an offence under section 3 of this Act, the Attorney General may apply to the Criminal Court for an investigation order or an attachment order or for both and the provisions of section 24A of the Dangerous Drugs Ordinance shall mutatis mutandis apply to that application and to the suspect and to any investigation or attachment order made by the Court as a result of that application."

13 The National Crime Authority is not a "judicial or prosecuting authority", but Hely J did not regard that as an insuperable problem. He assumed it would be possible for the Commonwealth Attorney General to make a request on behalf of the Authority. The difficulty, in his view, was that it appeared from Mr Melick's evidence that the Authority was not yet able to identify a particular person as a "suspect" within the meaning of s8A(1). The subsection appears not to apply to an investigation at large. Accordingly, he concluded, "[e]ven though the Bank may be exposed to a liability under s257 of the Criminal Code of Malta if it complies with the Notice issued by the NCA, that exposure does not establish a reasonable excuse for not complying with the Notice ..."

14 We agree with his Honour's reasons. However, in deference to counsel's argument we will deal briefly with each of the three points put to us in support of the appeal.

15 First, counsel contend that Hely J failed properly to undertake what he called the "balancing exercise". They say his Honour failed to give sufficient weight to a number of facts: the sovereignty of Malta, the principle that a State should ordinarily refrain from demanding obedience to its authority by foreigners in respect of their conduct abroad, especially having regard to the special position of banks, the absence of any evidence to indicate the importance, urgency or necessity of production of the documents, the seriousness to the Bank of any contravention of s257 of the Criminal Code, the existence of Maltese legislation dealing with money laundering, the Bank's good faith and aspects of the history of the Authority's investigation.

16 We accept all these were proper matters for consideration by Hely J. They were in fact considered by him. His Honour was conscious of the possibility that compliance with the Notice might involve the Bank in a contravention of s257 of the Maltese Criminal Code, but he took the view that the importance of that consideration was outweighed by the lack of any alternative method of obtaining the necessary information. Hely J had before him evidence from Mr Melick about the background to the investigation. It appears that another Maltese bank, Mid-Med Bank, had conducted offices in Australia which received moneys on deposit. These offices remitted the funds to Malta and then destroyed the Australian records of the transaction. A number of people have been charged with offences related to the Mid-Med transactions. Mr Melick said information made available to the Authority under the Financial Transaction Reports Act 1988 indicated a similar pattern of transactions in relation to the Bank of Valletta.

17 In relation to the balancing exercise, it is important to remember that, although the Notice was addressed to a Maltese corporation and required it to take steps in relation to documents now located in Malta, the requirement related to transactions undertaken in Australia. If his Honour was correct in discerning no feasible alternative, the result of upholding the Bank's position would be to deny to the Authority an opportunity of investigating transactions that occurred in Australia and may have involved criminality.

18 Recognising the significance of a lack of any alternative method of obtaining the information, counsel's second point is that Hely J should not have admitted Mr Melick's evidence that the Authority had not yet identified a particular "suspect". Counsel say it was unfair to admit this evidence because the Authority was not prepared to reveal the full facts regarding the investigation. They also say his evidence was inadmissible; it constituted opinion evidence from observed and communicable data that was tendered to prove the non-existence of a fact.

19 We do not think there is any substance in the complaint of unfairness. Counsel for the Bank had Mr Melick's affidavit some days before he gave evidence. Senior counsel cross-examined him at some length. No application was made for an adjournment to reply to his evidence.

20 The argument on inadmissibility is that Mr Melick's evidence was excluded by s76 of the Evidence Act 1995. That section reads: "Evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed". In Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No.5) (1996) 64 FCR 73 Lindgren J considered the meaning of the word "opinion" in that section. He observed at 75 that the term is not defined in the Act but that, in the context of the general law of evidence, it has been defined as "an inference from observed and communicable data"

21 The evidence referred to by counsel is the following affidavit statement by Mr Melick:

"The information then available did not identify any particular suspect person in relation to any offence, upon which an application could be made to the Maltese Attorney-General for assistance."

Hely J admitted that evidence, along with a subsequent paragraph of his affidavit that read: "At no time since the making of my decision has the NCA obtained any further information which identifies any relevant offence or any suspect". His Honour took that course, over the objections of counsel for the Bank, because he thought Mr Melick's evidence was not opinion evidence. In an oral ruling, he said:

"Objection is taken to paragraph three to the first sentence of paragraph four and to paragraph five of the affidavit of Mr Melick of the 13 May 1999. The basis of which the objection is taken appears in an outline of submissions which I will place with the papers and which I won't attempt to reproduce. Section 8A of the relevant Maltese legislation which enables a request to be made to the Attorney General of Malta in respect of a person suspected, in this case by the National Crime Authority of having committed an offence. The substance of Mr Melick's affidavit, that is that he being the person in charge at the National Crime Authority of this particular investigation, doesn't suspect nor does anybody else in the Authority suspect a person of having committed an offence.

I really don't think this has got anything to do with opinion evidence. It is a pure question of fact as to whether the National Crime Authority does or doesn't suspect something and I think Mr Melick is in a position to depose to the fact that the Authority does not. Accordingly, I propose to admit it."

22 We agree. Mr Melick was at all material times the person in charge of the Authority's investigation. The substance of his evidence is that the Authority has no information that enables it to identify a particular offence or suspect. That is a statement of fact. It is true it is made by a person who has knowledge of the material currently before the Authority and is made after that person has read the material. But it is a statement about a negative fact. The circumstance that the statement concerns that material does not make it an inference from observed and communicable data; any more than it would be such an inference if a witness were to depose that a file did not contain any document printed on yellow paper.

23 The matter was taken further when Mr Melick was cross-examined. In order to clarify the position, Hely J asked Mr Melick the direct question: "Do you suspect any particular person of having committed a money laundering type offence". Mr Melick replied "No, your Honour". Counsel's cross-examination then continued:

"When you say no, what you mean is you don't suspect any particular person of having committed a money laundering offence involving a transaction conducted through the Bank of Valletta, is that right?---That is correct.

You do suspect persons and you know persons have committed such offences involving transactions conducted through the Mid Med Bank?---That's correct.

You do suspect that the Bank of Valletta's facilities were being used at the relevant time for criminal purposes, including money laundering?---Yes, by clients of the bank, yes."

24 Hely J accepted this evidence. Leaving aside any reference to documents, it was enough to justify his view about the inapplicability of s8A of the Prevention of Money Laundering Act.

25 Counsel's final point is that Hely J should have held there would be a "disclosure", within the meaning of s257 of the Maltese Criminal Code, if the Bank collected the documents required by the notice and dispatched them to Australia for production to the Authority. Having regard to the fact that Hely J determined the case on the basis that compliance with a notice might involve a contravention of s257, there is no utility in determining this point.

26 It was for these reasons that we dismissed the appeal with costs.

I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Wilcox, Whitlam and Lehane.

Associate:

Dated: 13 August 1999

Counsel for the Appellant:	M A Pembroke SC and Dr J G Renwick
Solicitor for the Appellant:	Mallesons Stephen Jaques
Counsel for the Respondent:	J Sheahan SC and R Wilson
Solicitor for the Respondent:	National Crime Authority
Date of Hearing:	6 August 1999