FEATURE ARTICLE
Landmark settlement in NGN Case
News Group Newspapers (NGN) have issued an apology and paid $10 million in damages as part of a landmark settlement with Prince Harry, the Duke of Sussex. This is a momentous chapter in a series of court cases that began in 2011, where the publisher was accused by private citizens and public figures alike of unlawful intrusion into their lives and other unlawful activity carried out by private investigators engaged by NGN in pursuit of a story.
Prince Harry’s victory is so resounding as till now, NGN and other media groups have been at great pains to deny illegality in their actions, and have largely been able to quash cases by making a ‘Part 36 offer.’ This refers to legislation which allows defendants to make an offer to claimants that exceeds the amount of damages they are likely to recover. If this offer does exceed the amount of damages the claimant recovers, then the claimant is liable to cover both their own and the defendant’s legal costs. Oftentimes, damages recoverable are dwarfed by legal costs, meaning claimants are discouraged from pursuing litigation, and civil justice remains beyond the reach of most people.
Lord Tom Watson was also vindicated, as NGN apologised for falsely publishing that he had been covertly receiving information from News International. Lord Watson says he is passing his dossier to the Metropolitan Police, and asking them to further consider the situation. However, commentators are not optimistic that the criminal justice system will be able to provide any more satisfying results than the settlement reached this month.
Welcome to the January edition of View from the Hill – our regular newsletter containing information and insights regarding legal and investigative issues concerning fraud, corruption, and professional misconduct.
IN THIS ISSUE:
- FEATURE ARTICLE
- IN THE NEWS
- Domestic
- International
- CASES OF INTEREST
- OUT AND ABOUT
Contact for further information:
Andrew Tragardh
Managing Partner & Founder
Tam McLaughlin
Partner
IN THE NEWS – Domestic
Use of Legal Professional Privilege in Commonwealth Investigations – Discussion paper summary
A joint effort of the Attorney-General’s Department and the Treasury, this discussion paper reviews the use of legal professional privilege in Commonwealth investigations in response to concerns that privilege is misused to obstruct or frustrate these investigations. Systemic issues which have been exposed by recent matters, such as the PwC case, challenge existing regulatory frameworks, and this report provides a primary assessment of whether they are fit to purpose.
Key Points:
- Legal Professional Privilege (LPP) is important
- LPP can be raised in Commonwealth investigations where the Commonwealth in one of its information-gathering capacities requests documents from a person or corporation.
- ‘dominant purpose’ of a communication covered by LPP must be for the giving or receiving of legal advice, or a communication relating to anticipated litigation. Where multiple professionals are involved (accountants, consultants etc. this may not be the case)
- While most LPP claims are fine, some ‘bad actors’ use LPP to frustrate or delay Commonwealth investigations
- ‘Routing’ docs through a lawyer to try and get LPP
- Claiming LPP over broad categories of documents/communications
- Claim phase
- A Commonwealth body may ask for information to support a claim of LPP
- In some circumstances lawyers must provide particulars to an LPP claim but usually the provision of information is voluntary. This can delay investigations if a person is not forthcoming about their claim.
- Delays in the provision of information can be to deliberately withhold evidence, protect against penalties or reputational damage. Delays may also be due to growing complexity in organisational structures or large volumes of documents under a LPP claim.
- Dispute resolution phase
- When parties dispute LPP
- Arbitration or ADR may be a quicker way to resolve the matter. Engaging a third party e.g. barrister may enable the parties to resole the dispute more cost effectively. But not great when there are large numbers of documents, or when a determination will be significant or precedent-setting for either party (in which case court judgement is better)
- Court process can be lengthy and costly. Where there are a large number of documents, the court may decide based on a sample. This can be beneficial for the person claiming privilege (who has access to all docs), but not ideal for the Commonwealth who may be required to select a sample without seeing the documents.
- Dispute resolution can run down the clock when there are time constraints (incl. statutory time constraints like in some actions pursuant to the Taxation Administration Act.
- Remedies and/or penalties
- Breaches of Commonwealth law attract civil or criminal penalties (imposed by courts) or administrative penalties (imposed by agencies, regulators)
- Penalties may apply to LPP claims under the Criminal Code (knowingly giving false or misleading information to a Commonwealth entity) or under other legislative instruments which provide penalties for failing to provide particulars or making misleading claims.
- The current penalty regime is undercooked and not a fit deterrent for improper LPP claims, many of which may never be uncovered due to the nature of the privilege which may improperly protect them
Dipper’s son sentenced for $140,000 fraud
AFL Legend Robert DiPierdomenico’s son has been jailed for a series of 71 instances of fraud committed over 10 months in 2018. Dylan DiPierdomenico created fake invoices and PayPal accounts to funnel customer funds into his own bank account.
Since he was found out, DiPierdomenico has only paid $18,000 back to the business, a point scrutinised by Judge Maidment during sentencing. DiPierdomenico will spend nine months in prison and must comply with a two year community corrections order.
New scam laws deemed “unworkable” by telecommunications giants
The Australian government has proposed new rules to curb internet scamming, which cost Australians $2.7 billion in 2023. The rules would create new legal obligations for telecommunications, banks, social media and internet services to prevent and respond to scams, with penalties for non-compliance. Victims will also be able to seek compensation for losses suffered.
Telecommunications companies will be monitored by the Australian Communications and Media Authority (ACMA) and can impose up to $250,000 in fines for breaches, though the government would like to raise this to as much as $10 million.
Telstra and Optus have objected to these ‘unworkable and ineffective’ laws, claiming that compliance should be regulated by industry codes, which are not enforceable by law. The companies will be required to report on their compliance, which would require ‘massive amounts’ of information be divulged. Telstra also warned that the laws would require a highly risk averse approach be taken, so that information such as medical test results and parcel delivery notifications may also be blocked.
Federal Court Jurisdictional Changes: Opportunities and Challenges
Since new laws were enacted in mid-2024, the Federal Court now has the power to hear criminal cases brought under the ASIC and Corporations Acts. This quiet change could have significant ramifications for thew way fraud and financial crime prosecutions are run in Australia.
Critics of the change question whether the Federal Court has the necessary expertise and subject matter specialisation to manage new criminal trials. The current focus on civil commercial law may mean that Federal Court judges lack familiarity with the nuances of complex criminal trials. Federal Court Chief Justice Debra Mortimer insists that the court is ready to hear these cases, remarking to The Age that a number of current judges and new appointments have criminal expertise.
If there are substantive or operational differences between trials run in the Federal Court and other state courts,
a ‘forum-shopping’ effect may arise where prosecutors seek to have matters heard in particular courts to achieve favourable outcomes. However, this is not a novel concern, with the Federal Court already sharing jurisdiction with state courts over many kinds of matters.
Expanding the jurisdiction of the Federal Court may also increase the efficiency with which criminal prosecutions under the ASIC and Corporations Acts proceed. Currently white-collar crimes do not receive the highest priority in state courts as those courts prefer to hear cases where defendants are on remand. The Federal Court may now allow white-collar crime prosecutions to proceed at a much faster rate by opening up a more streamlined pathway for their progression to trial.
RFID: truths and misconceptions
RFID, or Radio Frequency Identification, is the technology that enables contactless payments on almost all modern credit cards. RFID technology is a critical component of modern transacting but leaves people potentially vulnerable to ‘skimming,’ a kind of copying that could allow criminals to read the RFID signals emitted by the electronics inside credit cards and access related data like the card number and other personal information.
Many companies offer ‘RFID blocking’ technology, including wallets and backpacks which claim to use special materials secure you from criminals who can steal your data simply by walking nearby. The evidence suggests that these claims are significantly overblown. Reports of RFID skimming taking place outside laboratory conditions are sparse to non-existent, and experts suggest that the cost of the equipment needed to accurately skim a card would far outweigh any potential gains. Most RFID cards are now encrypted which is another significant barrier for would-be data thieves.
There are many easier, more cost-effective ways for criminals to steal your data or information about your credit cards. You’re much more likely to leave your cards on the train than have them skimmed by a scammer – so it doesn’t really matter what material your wallet is made of, so long as it stays with you.
Stop. Check. Protect. Australian Government Launches New Anti-Scam Campaign
Amid a rise in the number and complexity of financial scams, the Australian Government has launched a new campaign to encourage a greater degree of caution amongst the general public for online scams.
‘Stop. Check. Protect’ centres three straightforward steps which they hope will make sense to all Australians regardless of their level of financial literacy. ‘Stop’ encourages hesitance when giving out personal information or making payments. ‘Check’ asks individuals to consider who they are dealing with and investigate the possibility of a scam. ‘Protect’ encourages action when a potential scam is identified by reporting to Scamwatch.
These three steps form the central part of a larger campaign which aims to raise awareness of sophisticated scam tactics, encourage healthy suspicion when conducting dealings online, and promote the government’s Scamwatch and IDCARE services. Key messaging includes reassurances that being scammed is not something to be embarrassed about, and that reporting scams can help keep others safe from fraudulent or criminal activity.
Mule accounts remain prevalent in big banks
Over 100,000 bank accounts are being used as ‘mule accounts,’ or accounts which are used to funnel illicitly obtained funds, says the Australian Business Review. This is despite a government and industry wide crackdown on scams, with only 13.000 of these accounts being shut down in the last financial year.
Mule accounts are especially difficult to track as they are often are often set up legitimately. For example, scammers target student or short term visa holder’s accounts and ‘rent’ their accounts for illicit purposes. Sometimes however, accounts are obtained through manipulation and fraud.
IN THE NEWS – INTERNATIONAL – US
Apple settles US lawsuit alleging Siri recorded private conversations
A proposed US class action alleged that Apple used their virtual assistant, Siri, to eavesdrop on private conversations and share data with third parties. Plaintiffs reported receiving targeted advertisements based on conversations picked up by Siri-enabled Apple devices, including restaurant ads and promotions for branded medical treatments. The alleged recordings took place when users had not activated Siri either manually or by voice command.
A proposed settlement of $95 million USD (AUD $152 million) is set to bring a years-long lawsuit to a close. The claim relates to all Siri-enabled devices sold by Apple over a period of ten years, meaning there are tens of millions of potential US claimants. Lawyers are set to take 30% of the settlement fee plus expenses, which in this case would be almost $30 million USD (AUD $48 million).
With Apple publicly centring online privacy as a key feature of its products and corporate ethos, the settlement may damage their brand and public reputation. Despite not admitting to any wrongdoing, this settlement comes after a number of high-profile claims made against Apple including settling a January 2024 lawsuit in the US which claimed Apple deliberately slowed down phones to allegedly force obsolescence.
IN THE NEWS – INTERNATIONAL – UK
Opinion: Fare Dodging is Out of Control
Ben Clatworthy, writing for the Times UK, says that fare dodging is rampant on UK railways. In an impassioned article he expresses incredulity at the boldness of fare-evaders who seem, in his eyes, totally unbothered by their wrongdoing.
Clatworthy chalks up the rise in fare evasion to a perfect storm of factors including easy-to-dodge gates and understaffed compliance units. In response to a proposed relaxation in enforcement suggested by passenger watchdog Transport Focus, Clatworthy has one thing to say: ‘ludicrous.’
Though conceding that occasionally revenue officers can be heavy-handed, as apparent in their decision to enforce penalties against a student who underpaid by no more than a couple of pounds, he says a ‘real threat of punishment’ is needed to deter fare evaders.
Here in Australia, after a temporary rise during the Coronavirus pandemic, fare evasion is back down to near 10-year lows with metro rail compliance at 97.4% and metro bus compliance at 95.6%, according to statistics published by Public Transport Victoria. Despite relatively low rates of fare evasion, revenue loss is nonetheless sustained, with the estimated cost to taxpayers from fare evasion on the metro network in the first half of 2024 being $12.6 million.
Bitcoin seized could be used to pad public finances
Five billion pounds worth of cryptocurrency has been seized from online wallets held by Jian Wen, who was jailed for money laundering and cryptocurrency fraud last May. The Crown Prosecution Service (CPS) is seeking permission from the High Court to keep the seized bitcoin, which would then pass to the Treasury. New laws made in 2023 permitted seized cryptocurrency to be sold for funds, though the amount that the government will be left with is dependent on victim compensation, recovery costs and a consideration for ‘international obligations.
Opinion – Are we becoming a land of cheats and shoplifters?
In his editorial for The Times on 17 January, Rhys Blakely delivers a scathing assessment of the British youth, who he describes as ‘dishonest’ and willing to cheat, commit fraud and steal at higher rates than other generations.
Blakely remarks on a rise in casual shoplifting, suggesting that a shift in social attitudes now sees young people now celebrating and joking about shoplifting achievements, including on social media platforms like TikTok where he takes aim at a group of shoplifters who identify themselves as the ‘borrowing’ community. But beyond shoplifting, Blakely points to a general increase in support for benefits fraud, bribery and purchase of stolen goods. Professor of Criminology Emmeline Taylor of City, University of London, suggests that the decline in honesty is particularly associated with younger people.
As for why younger generations are apparently becoming more dishonest, Blakely points to tawdry public figures and politicians who have eroded confidence in the rules of law and public order. Professor Taylor said that after watching their government during the Coronavirus pandemic display a ‘casual relationship with the truth and doing the right thing and following the law,’ many Britons now regard the social contract as broken. Combine that with rationalising behaviour which uses record supermarket profits or poor treatment of suppliers by retailers as justification for shoplifting, and a clearer picture emerges as to why Britons may be tending towards this new kind of ‘dishonesty.’
CASES OF INTEREST
‘Fundamental duties’ – when lawyers should refuse client instructions
Victorian Legal Services Commissioner v Raniga (Legal Practice) [2024] VCAT 1195 (13 December 2024)
Victorian solicitor Prakash Raniga acted on instructions from his client to make a settlement offer in family law proceedings contingent on his ex-wife making a statement of no complaint regarding a historical rape allegation, and an agreement to make no further complaint to police regarding matters prior to their separation. Mr Raninga agreed with the Victorian Legal Services Commissioner that by acting on ‘inappropriate instructions,’ he engaged in professional misconduct and ought to be reprimanded.
The VCAT senior member Jonathan Smithers said the case highlights the need for lawyers to adhere to the ‘fundamental duties of legal practitioners’ even when those duties may conflict with instructions received from a client. Even where a client may have reasons for giving instructions, lawyers must be aware of their ‘higher duties’ to not diminish the public confidence in the administration of justice.
The senior member acknowledged that Mr Raniga was not acting in bad faith when he had communicated the instructions to his ex-wife’s solicitors, and had made fulsome admissions to VCAT which allowed the matter to proceed. Mr Raniga was reprimanded, ordered to undertake CPD courses in ethics and professional responsibility, and pay costs.
Failing to be electronically secure: a novel cyber tort?
Mobius Group Pty Ltd v Inoteq Pty Ltd [2024] WADC 114
A judge in the WA District Court has weighed the possibility of setting out a new cyber tort; failing to take reasonable steps to ensure that an electronic system is not being used to send fraudulent messages.
In this case, electrical contractor Mobius performed work for Inoteq. Before Inoteq paid for the work, a fraudulent email was sent by a hacker-fraudster from a genuine Mobius email address which amended the bank details of a prior invoice. Inoteq noticed the irregularity but failed to confirm the new details with Mobius, so payment was made to the fraudster’s bank account. Mobius subsequently sued Inoteq for the sum of the invoice which remained unpaid.
Counsel for Inoteq argued that Mobius had breached a duty of care by failing to implement reasonable cybersecurity measures and access controls to ensure that fraudulent emails were not sent from their business email address. In assessing what could have been a novel tort, the court referred to the judgement in Factory Direct Fencing Pty Ltd and the ‘salient features’ from Caltex Refineries to examine the relationship between the plaintiff and tortfeasor. With an absence of evidence about what measures might be taken to prevent this kind of hacking fraud, and the efficacy and costs of those measures, Massey DCJ was hesitant to impute a duty of care on Mobius to protect their customers from pure economic loss due to hacking.
In this case, Inoteq’s failure to make enquiries about the suspicious email was a contributing factor in the judgement against them. Inoteq was ordered to pay the full amount of the invoice plus interest. This judgement is particularly significant because even though Inoteq received correspondence from a genuine (albeit compromised) email address, they were still liable to pay Mobius.
This case has the potential to be a precedent-setting one, given the factual scenario is similar to many other instances of fraud in Australian business. Recipients of invoices should always be suspicious when bank details are changed, particularly by email correspondence. Current best practice is to confirm bank details with a business representative over the phone any time they are changed, or any time there are suspicions of fraud.