FEDERAL COURT OF AUSTRALIA

Hudson v National Australia Bank [2022] FCA 1222

ORDERS

THE COURT ORDERS THAT:

1.    The originating application filed on 8 August 2019 and the further amended statement of claim filed on 6 May 2020 be dismissed.

2.    The parties are to confer on the question of costs of the proceeding and either:

(a)    on or before 28 October 2022 provide the Associate to Markovic J with proposed consent orders addressing the costs of the proceeding; or

(b)    if the parties are unable to agree as to the proposed form of orders then:

(i)    on or before 4 November 2022 the respondents are to file and serve their submissions on the question of costs of the proceeding, not exceeding five pages in length; and

(ii)    on or before 11 November 2022 the applicants are to file and serve their submissions on the question of costs of the proceeding, not exceeding five pages in length; and

(c)    unless either party requests an oral hearing, the question of costs will be determined on the papers.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

TABLE OF CONTENTS

REASONS FOR JUDGMENT

MARKOVIC J:

1    Kerry Ann Hudson and Leaseworks Australia Pty Ltd, the first and second applicants (together, applicants), bring this proceeding against the National Australia Bank Limited (NAB) and Finance & Systems Technology Pty Ltd (FAST), as first and second respondents respectively (together, respondents). At the relevant time FAST was NAB’s wholly owned subsidiary. The relationships between the parties are described below but the proceeding essentially arises out of the dealings between FAST, which carries on business as a mortgage aggregator, and Leaseworks, which carries on business as a finance broker. Ms Hudson is and was a shareholder in and director of Leaseworks.

2    In summary Ms Hudson and Leaseworks allege that:

(1)    NAB and FAST:

(a)    engaged in misleading or deceptive conduct contrary to s 18 of the Australian Consumer Law being Sch 2 to the Competition and Consumer Act 2010 (Cth);

(b)    engaged in unconscionable conduct within the meaning of s 21 of the Australian Consumer Law; and

(c)    breached their duty by failing to provide Ms Hudson and Leaseworks with natural justice or procedural fairness in making certain decisions about them;

(2)    FAST breached its contract with Leaseworks; and

(3)    because of the conduct set out above the applicants have suffered loss and damage.

3    NAB and FAST deny the allegations made by the applicants.

THE STATUTORY CONTEXT

4    Before proceeding further it is instructive to set out the statutory framework within which both Ms Hudson and Leaseworks, on the one hand, and NAB and FAST, on the other, operate their respective businesses in relation to the provision of credit to consumers.

5    The National Consumer Credit Protection Act 2009 (Cth) (National Credit Act) regulates the provision of credit. It provides for a comprehensive licensing regime for persons or entities engaging in “credit activity” as defined in s 6 of that Act. In Australian Securities and Investments Commission v National Australia Bank Limited [2020] FCA 1494 at [83]-[85] Lee J identified the scope of the National Credit Act:

83    … Under this regime, those wishing to engage in a “credit activity” are required to apply for, be issued with, and hold, an [Australian credit licence]. The National Credit Act imposes entry standards for licensing and, once an ACL is granted, licensees must meet ongoing standards of conduct. ASIC has the power to suspend or cancel an ACL, or to ban individuals from engaging in a “credit activity”. The key aims of the licensing regime are to regulate credit industry participants and enhance consumer protection.

84    Section 27 provides a guide to Part 2-1 of the National Credit Act which makes this clear, comprising Division 2 – Engaging in credit activities without a licence (containing s 29) and Division 3 – Other prohibitions relating to the requirement to be licenced (containing s 31):

This Part is about the licensing of persons to engage in credit activities. In general, a person cannot engage in a credit activity if the person does not hold an Australian credit licence.

Division 2 prohibits a person from engaging in credit activities without an Australian credit licence. However, the prohibition does not apply to employees and directors of licensees or related bodies corporate of licensees, or to credit representatives of licensees.

Division 3 deals with other prohibitions relating to the requirement to be licensed and to credit activities. These prohibitions relate to holding out and advertising, conducting business with unlicensed persons, and charging fees for unlicensed conduct.

85    The National Credit Act also introduced industry-wide responsible lending conduct requirements for licensees. Those requirements aim to protect consumers (both from conduct of lenders and from consumers making poor borrowing decisions) by imposing standards of behaviour on licensees prior to and when entering into a credit contract. The conduct requirements apply only to persons who are licensed under the National Credit Act (that is, holders of an ACL). Relevantly, licensees are required to test the suitability of the proposed credit contract and assess the consumer’s ability to meet their financial obligations under the proposed credit contract. To do so requires direct dealings between the lender and the putative borrower, hence the prohibition on an unlicensed intermediary.

6    As set out above, s 6 of the National Credit Act defines “credit activity” and relevantly, for the purposes of this proceeding, provides that “a person engages in a credit activity”:

(1)    in relation to “credit contracts” if:

(a)    the person is a credit provider under a credit contract; or

(b)    the person carries on a business of providing credit, being credit the provision of which the National Credit Code applies to; or

(c)    the person performs the obligations, or exercises the rights, of a credit provider in relation to a credit contract or proposed credit contract (whether the person does so as the credit provider or on behalf of the credit provider);

(2)    in relation to “credit service” if “the person provides credit service”.

7    The term “credit service” is defined in s 7 of the National Credit Act as follows:

A person provides a credit service if the person:

(a)    provides credit assistance to a consumer; or

(b)    acts as an intermediary.

8    In turn, s 8 and s 9 of the National Credit Act define the terms “credit assistance” and “acts as an intermediary”. Those sections relevantly provide:

8    Meaning of credit assistance

A person provides credit assistance to a consumer if, by dealing directly with the consumer or the consumer’s agent in the course of, as part of, or incidentally to, a business carried on in this jurisdiction by the person or another person, the person:

(a)    suggests that the consumer apply for a particular credit contract with a particular credit provider; or

…

(d)    assists the consumer to apply for a particular credit contract with a particular credit provider; or

…

It does not matter whether the person does so on the person’s own behalf or on behalf of another person.

9    Meaning of acts as an intermediary

A person acts as an intermediary if, in the course of, as part of, or incidentally to, a business carried on in this jurisdiction by the person or another person, the person:

(a)    acts as an intermediary (whether directly or indirectly) between a credit provider and a consumer wholly or partly for the purposes of securing a provision of credit for the consumer under a credit contract for the consumer with the credit provider; or

(b)    acts as an intermediary (whether directly or indirectly) between a lessor and a consumer wholly or partly for the purposes of securing a consumer lease for the consumer with the lessor.

It does not matter whether the person does so on the person’s own behalf or on behalf of another person.

9    Section 29 of the National Credit Act prohibits a person from engaging in a credit activity unless the person holds a licence. Such a licence is known as an Australian credit licence (ACL). It authorises the licensee to engage in particular credit activities specified in a condition of the licence: see s 35 of the National Credit Act.

10    Section 47 of the National Credit Act sets out the general conduct obligations of a licensee. It relevantly provides:

(1)    A licensee must:

(a)    do all things necessary to ensure that the credit activities authorised by the licence are engaged in efficiently, honestly and fairly; and

(b)    have in place adequate arrangements to ensure that clients of the licensee are not disadvantaged by any conflict of interest that may arise wholly or partly in relation to credit activities engaged in by the licensee or its representatives; and

(c)    comply with the conditions on the licence; and

(d)    comply with the credit legislation; and

(e)    take reasonable steps to ensure that its representatives comply with the credit legislation; and

(ea)    comply with the Reference Checking and Information Sharing Protocol in relation to:

(i)    if the licensee is an individual to whom the Protocol applies—the licensee; and

(ii)    if a former, current or prospective representative of the licensee is an individual to whom the Protocol applies—the representative; and

(f)    maintain the competence to engage in the credit activities authorised by the licence; and

(g)    ensure that its representatives are adequately trained, and are competent, to engage in the credit activities authorised by the licence; and

(h)    have an internal dispute resolution procedure that:

(i)    complies with standards and requirements made or approved by ASIC in accordance with the regulations; and

(ii)    covers disputes in relation to the credit activities engaged in by the licensee or its representatives; and

(ha)    give to ASIC the same information it would be required to give under subparagraph 912A(1)(g)(ii) of the Corporations Act 2001 if it were a financial services licensee (within the meaning of Chapter 7 of that Act); and

(i)    be a member of the AFCA scheme; and

(j)    have compensation arrangements in accordance with section 48; and

(k)    have adequate arrangements and systems to ensure compliance with its obligations under this section, and a written plan that documents those arrangements and systems; and

(l)    unless the licensee is a body regulated by APRA:

(i)    have available adequate resources (including financial, technological and human resources) to engage in the credit activities authorised by the licence and to carry out supervisory arrangements; and

(ii)    have adequate risk management systems; and

(m)    comply with any other obligations that are prescribed by the regulations.

11    Section 64 of the National Credit Act permits a licensee to give a person a written notice authorising that person to engage in specified credit activities on behalf of the licensee and the person so authorised is a “credit representative” of the licensee.

12    Against that background I turn to set out the facts.

THE FACTS

The witnesses

13    The following witnesses gave evidence for the applicants:

(1)    Ms Hudson. She has been a director of Leaseworks since its incorporation save for the period from 30 July 2017 to 19 August 2018. Ms Hudson has worked in the finance industry for 20 years. She has a Certificate III in financial services and a Certificate IV in finance and mortgage broking. Since May 2012 Ms Hudson has been an accredited member of the Finance Brokers Association of Australia Limited, and as part of maintaining her membership, has completed various courses. Ms Hudson was the principal witness relied on by the applicants. She gave evidence about Leaseworks’ business, her own experience as a broker and her dealings with NAB and FAST. Ms Hudson was cross-examined. While I accept that she was doing her best, Ms Hudson’s evidence was unreliable in some respects which I have described below. While I accept that her recollection of events was likely affected by the passing of time and possibly by her health issues which, unbeknownst to her, she was experiencing at the time, there are instances where her recollection cannot not be accepted;

(2)    John Christopher Currie who was a director of Leaseworks from its incorporation in 2007 until 2012. He holds 41% of the shares in Leaseworks. Mr Currie gave evidence about his interactions with Anthony Hasham who had an interest in acquiring Leaseworks or its business. Mr Currie was cross-examined;

(3)    Anthony Hasham who is the sole director of Australian Consulting Engineers Pty Ltd (ACE), a multi-disciplinary firm that provides civil and structural engineering services. ACE has around 150 staff with offices in Lebanon, Abu Dhabi, the Philippines and Australia. Dr Hasham gave evidence about his interest in acquiring Leaseworks, or its business, and discussions he had in about 2015 to 2017 about that. He was cross-examined;

(4)    Professor Stan Sidhu, a specialist endocrine surgeon, who provided a report on Ms Hudson’s health as at July 2017. Professor Sidhu was not cross-examined; and

(5)    Trevor Monaghan, an accredited business valuation specialist under the Chartered Accountants Australia and New Zealand (CAANZ). Mr Monaghan prepared two reports on behalf of the applicants in which he opined as to the loss suffered by each of Ms Hudson and Leaseworks as a result of the conduct that they allege was engaged in by NAB and FAST. Mr Monaghan also prepared a joint report with the respondents’ expert, Adam Giliberti. Mr Monaghan gave evidence concurrently with Mr Giliberti.

14    The following witnesses gave evidence for the respondents:

(1)    Rob Ryan who was an employee of NAB from November 2006 until March 2021. From August 2013 until the sale of FAST in early 2021, Mr Ryan was the Head of Northern Region for FAST, a leadership and management function for New South Wales (NSW), the Australian Capital Territory (ACT) and Queensland (QLD). In that role, he was involved in managing operations in those states and leading and managing a team of eight partnership managers, including Patrick Clarkson and Hien Nguyen (see below), who together practice managed about 800 brokers in NSW, the ACT and QLD. Mr Ryan was also a member of the FAST Leadership Team. This involved managing, coaching and leading a distribution team. Mr Ryan was cross-examined;

(2)    Patrick Clarkson who has been employed by NAB since 2013 in the role of FAST partnership manager. In that role Mr Clarkson was responsible for:

(a)    developing and managing relationships with a portfolio of brokers aggregated with FAST;

(b)    assisting brokers to obtain accreditation with Panel Lenders (described at [24] below);

(c)    assisting brokers with compliance and risk management, commissions, managing broker relationships for FAST’s Panel Lenders, client relationship management (CRM) and training, including in the use of the CRM system.

From March 2013 until 30 September 2014, Mr Clarkson was Ms Hudson’s FAST partnership manager. He gave evidence about his interactions with Ms Hudson. Mr Clarkson was cross-examined;

(3)    Hien Nguyen who was an employee of FAST from September 2015 to February 2019 and also held the role of FAST partnership manager. In that role she had the responsibilities described at (2)(a)-(c) above. From about July 2015 until Ms Hudson’s termination in 2018, Ms Nguyen was Ms Hudson’s FAST partnership manager. She gave evidence about her interactions with Ms Hudson in that role. Ms Nguyen was cross-examined;

(4)    Allison Smith who has been an employee of NAB since 23 January 1989. She is currently the manager of broker partnerships monitoring and the chair of the Broker Partnerships Lender Accreditation Committee (BPLAC), a committee within NAB (described at [38] below). Ms Smith gave evidence about her review of submissions for and attendance at relevant BPLAC meetings. She was cross-examined;

(5)    Nick Notaras, NAB’s “head of broker distribution for NSW/ACT”. Mr Notaras is responsible for managing a team of business development managers (BDM) and relationship associates who, in turn, support brokers submitting home loan applications to NAB in relation to, among other things: NAB policy; process; pricing and compliance. Mr Notaras’ team manages day to day interactions with the brokers in their respective portfolios, part of which involves reviewing and managing broker activity that may be a potential risk to NAB. Mr Notaras had limited direct involvement with individual brokers. Mr Notaras gave evidence about his role in completing and considering submissions prepared for BPLAC. Mr Notaras was cross-examined;

(6)    Brent Davidson, a NAB employee from May 2011 until March 2018. From August 2015 to March 2018, Mr Davidson held the role of “manager broker relationship team NSW/ACT, broker distribution”. In that role, he conducted file review meetings with brokers accredited with NAB for the purpose of reviewing a selection of files for loans the broker had submitted to NAB for approval. From August 2015 to March 2018, Mr Davidson attended approximately eight to 15 file review meetings each month with brokers accredited with NAB. Mr Davidson gave evidence about his attendance at file review meetings with Ms Hudson and subsequent reporting. Mr Davidson was cross-examined;

(7)    Mustafa Mohamed who has held the role of “BDM, broker distribution”, with NAB since 2015. Mr Mohamed is a member of the BDM team managed by Mr Notaras. He was Ms Hudson’s NAB BDM from 1 February 2015 to July 2017 and gave evidence about some of his discussions and other interactions with Ms Hudson. Mr Mohamed was cross-examined;

(8)    Shane Mahoney who is a senior consultant, cyber forensic and investigations, with NAB. Mr Mahoney gave evidence about conducting an “email recovery search” for emails sent between the emails addresses of Ms Hudson, Mr Ryan and Mr Clarkson between July and October 2014. Mr Mahoney was not cross-examined;

(9)    Monique Tavares, a solicitor in the employ of Dentons, the respondents’ solicitors. Ms Tavares gave evidence about her review of the material identified during the “email recovery search” undertaken by Mr Mahoney. Ms Tavares was not cross-examined; and

(10)    Adam Giliberti who is a member of CAANZ and is recognised by CAANZ as a forensic accounting specialist and a business valuation specialist. Mr Giliberti provided his expert opinion on Ms Hudson and Leaseworks’ claim for damages and responded to Mr Monaghan’s report. Mr Giliberti gave evidence concurrently with Mr Monaghan.

Ms Hudson and Leaseworks

15    As set out above, Ms Hudson has worked in the finance industry for 20 years.

16    Leaseworks was incorporated on 8 February 2007. It has a number of shareholders including Ms Hudson and Mr Currie who each hold approximately 41% of its shares while the balance of the shareholders hold the remaining 18%. Ms Hudson has been a director of Leaseworks since its incorporation, save for the period from 30 July 2017 to 19 August 2018, and worked in Leaseworks’ business.

17    On 20 December 2010 the Australian Securities & Investments Commission (ASIC) issued ACL 390454 to Leaseworks authorising it to:

(a)    Engage in credit activities other than as a credit provider by:

(i)    providing a credit service where the licensee is not or will not be:

(A)    where the service relates to a credit contract or proposed credit contract – the credit provider under the contract; or

(B)    where the service relates to a consumer lease or proposed consumer lease – the lessor; and/or

(ii)    performing the obligations or exercising the rights of a credit provider in relation to a credit contract or proposed credit contract under which the licensee is not or will not be the credit provider; and/or

(iii)    performing the obligations or exercising the rights of a mortgagee in relation to a mortgage or proposed mortgage that secures or will secure obligations under a credit contract under which the licensee is not the credit provider; and/or

(iv)    performing the obligations or exercising the rights of a beneficiary under a guarantee or proposed guarantee that guarantees obligations under a credit contract under which the licensee is not the credit provider; and/or

(v)    performing the obligations or exercising the rights of a lessor in relation to a consumer lease or proposed consumer lease where the licensee is not or will not be the lessor.

18    Leaseworks maintains required insurance and is a member of dispute resolution schemes including the Australian Financial Complaints Authority and before that, the Credit Ombudsman Service Limited.

19    Because Leaseworks was licensed at all relevant times, Ms Hudson was not required to hold any formal credit representative authorisation. However, under Leaseworks’ agreements with various lenders and financiers (described below), Ms Hudson also had accreditations, at least from the time of commencement of the National Credit Act.

20    Between July 2007 and about July 2014, Ms Hudson and Leaseworks were primarily engaged in broking for commercial equipment finance, vehicle finance, insurance products and extended warranties. In or about June 2014 they decided to expand Leaseworks’ broking business into both consumer and commercial real property lending.

21    Leaseworks has been, and continues to be, an authorised representative of a number of Australian financial services licensees. It also has and has had introducer agreements and accreditations with lenders to introduce vehicle finance, equipment finance and personal loan applications on behalf of loan applicants. It is not necessary to set out the detail of those relationships and arrangements.

FAST

22    FAST is a wholesale aggregator in the finance broking industry specialising in residential, commercial and asset finance. It does not have franchises. Its brand is known to brokers and lenders rather than the general public. NAB was, at the time of the events the subject of this proceeding and, as I understand it, until relatively recently, FAST’s ultimate holding company. All of the shares in FAST were held by NAB’s subsidiary, Advantedge Financial Services Holdings Pty Ltd.

23    An aggregator is an intermediary between lenders and mortgage and finance brokers. When the role of aggregator first emerged, they managed commission payments and lender accreditations, giving brokers access to more lenders and reducing their administration by having a centralised entity to manage them. The role of an aggregator has developed and now offers licensing solutions, CRM platforms, loan processing systems and compliance options, and broker professional development and training.

24    As an aggregator FAST has lender agreements with an extensive panel of residential, commercial and asset finance lenders including banks, building societies and credit unions (Panel Lenders). As at July 2020 FAST’s Panel Lenders comprised around 45 residential lenders and 25 commercial lenders.

25    FAST acts as an intermediary between brokers and lenders. Brokers accredited with FAST have access to, and source residential home loans, commercial loans and asset and equipment finance through its Panel Lenders. In addition, for those brokers, FAST provides access to:

(1)    CRM platforms for the transmission of loan applications to Panel Lenders;

(2)    an allocated partnership manager to assist a broker with obtaining accreditation with a selection of Panel Lenders and with various aspects of its business; and

(3)    training and development opportunities such as broker forums.

26    In order for a broker to become accredited with FAST, it had to complete and submit a “New Partner Accreditation Pack” (FAST Accreditation Application) together with the following:

(1)    copy of professional indemnity insurance certificate of currency and policy;

(2)    certificate of business registration;

(3)    certificate of registration of business name;

(4)    copy of trust deed (if applicable);

(5)    copy of current mortgage industry association membership certificate;

(6)    copy of current external dispute resolution scheme membership certificate;

(7)    company profile including resumes of directors/partners/proprietors;

(8)    letter of separation (if with another aggregator prior to joining FAST);

(9)    copy of current national police clearance; and

(10)    certificate IV in financial services (finance/mortgage broking).

27    Upon receipt by FAST of a FAST Accreditation Application, it was reviewed by partnership support officers or the associate operations and sales support team who would check that it had been completed in full and that all supporting documents had been provided and were in order.

28    Since September 2010 brokers accredited with FAST could either operate under their own ACL or they could apply to be authorised to engage in credit activities as a representative of BLSSA Pty Ltd, which holds an ACL. NAB was also the ultimate holding company of BLSSA. Brokers authorised to act as BLSSA’s representatives could provide mortgage broking services to consumers using BLSSA’s accreditation.

29    Once a FAST Accreditation Application was approved, the broker and FAST entered into a sub-originator agreement (see below) pursuant to which FAST carries on the business of providing mortgage bulking facilities for mortgage originators and the sub-originator, or broker, utilises FAST’s mortgage bulking facilities, which is the process of bulking loan volumes. This enables enhanced negotiations between brokers and lenders in relation to matters such as commissions and service levels. An individual broker may not otherwise have the volumes to negotiate in the same way.

30    Mr Ryan explained that each of NAB and FAST were independent of each other and had separate functions. FAST did not share information which was subject to privacy obligations with NAB, brokers were required to obtain accreditation with NAB separately, even if they had accreditation with FAST, and FAST did not have access to NAB’s lender accreditation reviews or internal processes.

NAB

31    As set out above, NAB was at the relevant time and until recently the ultimate holding company of FAST. There are a number of areas and processes within NAB relevant to this proceeding which I describe below.

32    Relevantly, despite the commonality in ownership between NAB and FAST, NAB through its relevant areas, BPLAC and Broker Partnerships Monitoring (BPM) (described below), treat FAST as it would any other aggregator. It follows all of the usual formalities when dealing with a FAST broker, including notifying FAST as aggregator of any suspension or termination of a broker and inviting the relevant broker and a FAST representative to attend any meeting (which usually takes place before a meeting of BPLAC) where broker conduct is discussed.

BPM

33    BPM, previously known as Broker Risk Review (BRR), is an area within NAB responsible for reviewing third parties accredited with NAB Broker Partnerships to ensure they adhere to the obligations and standards of their accreditation.

BPM broker reviews

34    A broker review generally arises in one of two ways:

(1)    as a monitoring review resulting from a member of the BPM team randomly selecting a broker to review; or

(2)    as an investigation based on intelligence being provided, by an internal or external source, to the BPM team about broker behaviour.

Reviews are completed according to their seriousness, as opposed to the date of receipt.

35    The BPM team member responsible for the review records his or her findings which includes details of the:

(1)    broker under review;

(2)    action to be taken after the review;

(3)    overall review rating which may be green, amber or red;

(4)    review purpose;

(5)    broker’s background information;

(6)    review summary; and

(7)    information in relation to each broker file review, presented in a tabulated form recording information for each loan review including the:

(a)    name of the loan applicants,

(b)    loan amount;

(c)    application date;

(d)    loan purpose;

(e)    security address; and

(f)    BPM reviewer’s loan score from 0 to 15 (Number Rating) and rating of green, amber or red (Colour Rating) allocated to various categories in relation to the loan application including credit, regulatory compliance, operational risk and file outcome, being the overall rating for the file.

36    In relation to:

(1)    the Number Rating:

(a)    0 = for noting only;

(b)    5 = minor finding. Attempt made to meet policy but has fallen short;

(c)    10 = failure to attempt to meet obligations or suspect fraud; and

(d)    15 = confirmed fraud, regulatory breach or other serious finding;

(2)    the Colour Rating:

(a)    green is generally satisfactory. However it may give rise to an opportunity to provide feedback to a broker;

(b)    amber generally indicates some concerns exist, but they are not considered material, or there may be insufficient information to prove the allegations; and

(c)    red is generally unsatisfactory and indicates that there are concerns which are serious in nature.

37    Following a BPM review: the matter may be referred to BPLAC; referred to broker distribution to request a formal response to matters arising from the review; or referred to broker distribution to provide feedback to the broker.

BPLAC

38    BPLAC’s role includes reviewing findings from file review meetings conducted by leaders from NAB’s broker introduced lending businesses, NAB Broker & Advantedge. It makes decisions on cases presented to it about broker accreditations including whether a broker’s accreditation is to remain active, be suspended or terminated.

39    As at 2017 the members of BPLAC included: Ms Smith as chair; Emily Black, a senior consultant, broker network assurance, as secretary; Steve Kane, general manager, NAB broker distribution; Christine McArthur, head of management assurance, broker partnerships; Brett Halliwell, general manager, Advantedge; and Gary Howard, described by Ms Smith as general manager operations. Ms Smith and Ms Black did not vote on outcomes. The decision making committee comprised Ms McArthur and Messrs Kane, Halliwell and Howard.

40    Where BPM refers a matter to BPLAC a document titled “BPLAC Submission” is prepared by a case presenter who is the “Head Of” the respective channel within NAB e.g. Head of NAB Broker, NSW. If BPM completes a “Broker Partnerships Review” form, it is also presented to BPLAC.

41    Once a matter is referred to BPLAC, NAB’s usual practice is to require a broker interview to take place in order to afford the broker a “right of reply”. Following the broker interview the matter is presented to BPLAC at its monthly meeting either for:

(1)    a decision to be made – this occurs where the chair of BPLAC and the case presenter do not agree on the recommended outcome and a decision needs to be made; or

(2)    endorsement – this occurs where the chair of BPLAC and the case presenter agree on the recommended outcome.

Any decision made by BPLAC must be unanimous. If it is not, the matter is referred to the Executive General Manager of Broker Partnerships for a final decision.

42    The outcomes following referral to BPLAC may include:

(1)    no further action;

(2)    coaching required;

(3)    process improvement required;

(4)    issue of a warning or of a final warning; or

(5)    termination of the broker’s accreditation.

43    Findings made by BPLAC in relation to a broker are communicated to an aggregator, where relevant, by the distribution team.

44    As at 2017 Ms Smith was aware that generally FAST would follow a decision made by NAB in relation to a broker, although it was for FAST to make its own decision about the broker. Ms Smith was also aware that FAST did not carry out the same type of investigations as NAB but would make its own decision following a NAB investigation. It is not always the case that where NAB terminates the accreditation of a broker with it, the aggregator also terminates its relationship with that broker.

Leaseworks is accredited and enters into a sub-originator agreement with FAST

45    On or about 23 September 2010 Ms Hudson signed, and submitted, on behalf of Leaseworks a FAST Accreditation Application (Hudson Accreditation Application).

46    On or about 1 October 2010 the Hudson Accreditation Application was approved.

47    On 27 October 2010 FAST and Leaseworks as “Sub-Originator” entered into a Sub-Originator Agreement. The recitals to that agreement provide that FAST carries on the business of providing mortgage bulking facilities for mortgage originators and that the Sub-Originator, in this case Leaseworks, wishes to utilise those facilities.

48    Clause 2 of the Sub-Originator Agreement is titled “Applications” and provides:

2.1    The Sub-Originator will use its best endeavours to source and generate finance applications through FAST.

2.2    Applications sourced by the Sub-Originator will be processed through FAST in accordance with this Agreement and any direction given by FAST to the Sub-Originator in writing from time to time.

2.3    The Sub-Originator will use FAST for the purposes of submitting finance applications to Lenders during the term of this Agreement unless otherwise approved by FAST in writing.

49    Clauses 3 and 4 respectively set out the obligations of FAST and the Sub-Originator. They relevantly provide:

3.    OBLIGATIONS OF FAST

3.1    FAST will at all times during the Term:-

3.1.1    maintain all licences and business registration required for the purposes of carrying on its business;

3.1.2    as requested co-ordinate training and accreditation of the Sub-Originator in regard to the products and lending guidelines for each Lender;

3.1.3    become obliged to pay commission to the Sub-Originator, subject to, and in accordance with, the terms of this agreement, when FAST becomes entitled to receive commission from a Lender.

4.    SUB-ORIGINATOR’S OBLIGATIONS

4.1    During the Term the Sub-Originator agrees that the Sub-Originator and (where applicable) its staff, agents and contractors who are involved in the preparation and submission of finance applications:-

…

4.1.2    comply with all relevant laws and rules of professional conduct applicable to it, including the Financial Transaction Report Act 1998, the Privacy Act 1998, the Trade Practices Act 1974, the Consumer Credit Code 1996, the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and the MFAA Code of Conduct;

…

4.1.4    act with absolute integrity with regard to all matters pertaining to finance applications;

…

4.1.7    provide FAST upon request with such other information as may from time to time be required by FAST to enable FAST to satisfy the compliance requirements pursuant to any relevant legislation or Codes of Conduct, or as required by any Lender;

…

4.2    The Sub-Originator must ensure that neither it, any member of its staff, nor any of its agents or contractors does anything which could give rise to a claim against FAST for loss or damage from any person who could become a borrower from FAST or a Lender including by:

4.2.1    making fraudulent, misleading, deceptive or false statements; or

4.2.2    acting unconscionably or unfairly.

4.5    The Sub-Originator will at all times maintain professional indemnity insurance cover of not less than one million dollars ($1,000,000) and where it engages employees, adequate Workers Compensation Insurance and separately where it owns or leases business premises, Public Liability Insurance of not less than ten million dollars ($10,000,000). The professional indemnity insurance is to be maintained in force for the Term and, following termination of this Agreement, for such further period as the Sub-Originator is entitled to receive further commissions under this Agreement. The Sub-Originator will upon request from FAST from time to time provided evidence of the currency of insurances required to be maintained pursuant to this clause.

4.6    The Sub-Originator will ensure at all times during the Term that the Sub-Originator’s employees, agents and contractors who are involved in the preparation and submissions of finance applications in relation to this Agreement comply with all provisions of this Agreement on the part of the Sub-Originator to be complied with.

50    Clause 7 is titled “Good faith and confidentiality” and provides:

7.1    The Sub-Originator and FAST agree:

7.1.1    to show the utmost good faith and attention to their mutual business activities and use their best endeavours to promote, develop and extend the mutual business interests of both parties;

7.1.2    the keep confidential all information, documents, dealings, transactions, client list, data, processes, apparatus, specifications, drawings, reports, operations, inventions, patents, technology, know-how, accounts or other documents and things, of whatever type of nature relating to the mutual business interests of both parties which is obtained by both parties or may be available to both parties or which both parties become aware of as a result of or during the term of this Agreement.

7.1.3    it is not FAST’s intention to market or contact for marketing purposes clients introduced to Lenders by the Sub-Originator without the prior consent of the Sub-Originator.

51    Clauses 10 and 11 respectively concern termination and suspension. Clause 10 provides:

10.1    This Agreement may be terminated by either Party, at its sole and absolute discretion at any time by giving one month’s notice in writing to the other Party. Termination of this Agreement by either Party in this manner does not affect the Sub-Originator’s entitlement to Commission where that entitlement arose from a right or event which occurs prior to termination.

10.2    If a party breaches a term of this Agreement (“Defaulting Party”), and that breach is not remedied within fourteen (14) Business Days of notice being given by the other party (“Non Defaulting Party”) to remedy that breach, the Non-Defaulting Party may termination this Agreement on giving written notice to the Defaulting Party.

10.3    FAST may terminate this Agreement upon giving written notice to the Sub-Originator if:

10.3.1    the Sub-Originator or any director, employee or contractor of the Sub-Originator is found to have made any fraudulent, dishonest, misleading, deceptive or false statement or has been knowingly concerned in any fraudulent, dishonest, misleading or deceptive conduct;

10.3.2    the Sub-Originator or any of the Directors of the Sub-Originator commits a Prescribed Offence;

10.3.3    a liquidator, trustee in bankruptcy or administrator is appointed of the Sub-Originator, or a Controller as defined in section 9 of the Corporations Act 2001 is appointed in respect of any property of the Sub-Originator.

10.4    In the event this Agreement is terminated, the Sub-Originator will immediately deliver to FAST all documents, reports, data, specifications, or other documents, and things of whatever type or nature bearing the name of FAST or otherwise relating to the business of FAST.

10.5    If this Agreement is terminated by FAST pursuant to clause 10.2 or 10.3, FAST shall, notwithstanding any other provision in this Agreement to the contrary, be entitled to immediately cease paying any further commissions to the Sub-Originator and retain those commissions for its own benefit without prejudice to FAST’s other rights and remedies under this Agreement or at law.

52    Clause 11 relevantly provides:

11.1    FAST may suspend the operation of this Agreement by notice in writing to the Sub-Originator to that effect if:

11.1.1    the Sub-Originator or any of its Directors are charged with a Prescribed Offence;

11.1.2    it has been alleged by a Lender, a mortgage insurer, an industry organisation, or a government or semi-government authority that the Sub-Originator has not complied with a statue or regulation relating to the provision of loans or the operation of the Sub-Originator’s business, or that the Sub-Originator or any of its Directors has engaged in fraudulent, misleading, deceptive or dishonest conduct;

11.1.3    the Sub-Originator fails to comply with any of the provisions of clause 4.5.

53    The term “Prescribed Offence” is defined in cl 1.1.6 to mean “an offence which may in the reasonable opinion of FAST reflect on the honesty, trustworthiness or integrity of the person charged with the offence”.

54    Mr Ryan explained that, typically, after a broker enters into a sub-originator agreement with FAST, the sub-originator will nominate the lenders it wants FAST to arrange accreditation with, usually around eight lenders. The nominated lenders would then contact the broker to notify it of the outcome of any accreditation application and to arrange for the broker to undertake any required training.

Submitting loan applications to Panel Lenders

55    Once accredited by FAST, a broker can submit loan applications for assessment and approval to Panel Lenders with whom the broker is accredited via FAST’s online portal known as Podium, which is used by the majority of FAST’s accredited brokers. Lending applications are processed through Podium to lender platforms called “NextGen” or “Apply Online” which link Podium with the particular Panel Lender’s online system.

56    For leasing applications, the broker will usually submit scanned documents to the lender via email.

57    When submitting documents to Panel Lenders, the onus is on the broker to ensure that it has complied with all applicable laws, practices and requirements of the particular Panel Lender and to ensure the integrity of documentation received from the loan applicant and submitted via Podium.

58    Mr Ryan, explained that, since at least 2010, brokers have been required to take the following steps when submitting loan applications (although particular Panel Lenders may have additional requirements which brokers are required to familiarise themselves with before submitting a loan application):

(1)    send a credit guide to the loan applicant(s) before submitting a loan application to a Panel Lender;

(2)    sight original documentation (unless certified copies are acceptable to a particular lender);

(3)    undertake a fact-find and needs analysis (also described as a preliminary assessment). A fact-find is a document which addresses the needs of the loan applicant and a needs analysis is a guide which documents those findings; and

(4)    make a recommendation of suitable lenders based on the broker’s preliminary assessment of the loan applicant’s needs.

59    Once a Panel Lender receives an application, it reviews and assesses it pursuant to its own internal assessment processes. FAST is not involved, nor does it contribute to, or engage in, this process. FAST’s function is to facilitate the relationship between the broker and Panel Lenders and to provide the Podium platform.

Leaseworks’ FAST affiliated accreditations

60    During the course of the Sub-Originator Agreement, FAST assisted Ms Hudson and/or Leaseworks to obtain accreditation from the following lenders for vehicle and other consumer loans not related to real property:

(1)    Liberty Financial Pty Ltd in the period 2010 to 2017 for consumer vehicle loans;

(2)    Commonwealth Bank of Australia (CBA) in the period 2016 to 2017 for commercial equipment and vehicle finance; and

(3)    Medfin Australia Pty Ltd in 2017 for medical equipment finance.

61    Ms Hudson explained that as at February 2020 the accreditation with Liberty had been suspended and the accreditations with CBA and Medfin had been suspended and were subsequently terminated.

62    In or about 2016 FAST assisted Ms Hudson to have her personal accreditations with Pepper Asset Finance Pty Ltd, for commercial equipment and vehicle finance, transferred. Ms Hudson had accreditations affiliated with a pre-existing aggregator for that lender transferred. After the transfer, applications were submitted to that lender pursuant to the accreditations affiliated with FAST.

63    In or around July 2014, FAST assisted Ms Hudson to obtain personal accreditation with lenders for residential and/or commercial property mortgages. The lenders included:

(1)    NAB;

(2)    Australia and New Zealand Banking Group Limited (ANZ) for commercial and residential property;

(3)    Pepper Home Loans for residential property;

(4)    Westpac Banking Corporation for residential property;

(5)    St George Bank for residential property;

(6)    CBA for residential property; and

(7)    Deposit Power for residential property.

64    Insofar as the accreditation with NAB was concerned, Ms Smith explained that Ms Hudson was personally accredited with NAB as a representative of FAST. NAB did not have a direct relationship with Ms Hudson, its agreement was with FAST and Ms Hudson was a representative under that agreement. Leaseworks had no agreement with NAB and was not accredited with it, only Ms Hudson was accredited with NAB.

Ms Hudson meets Mr Dandachli

65    In or about April 2014, a colleague of Ms Hudson’s, Alex Patsellis, contacted her. At the time of his call, Mr Patsellis was working at Platinum Direct. Mr Patsellis informed Ms Hudson that he was moving to Classic Funding and that he had a couple of referring brokers with whom he had dealt who he was going to direct to Ms Hudson. Ms Hudson recalls that Mr Patsellis mentioned a few first names including “Muzzi” but that she did not know any of the people mentioned.

66    Ms Hudson assumed that, because Platinum Direct was regarded as a major broker, its referrers would have been vetted and that the referrers Mr Patsellis had mentioned in his call would work in the same field as Leaseworks.

67    In or around April 2014 Ms Hudson was contacted by Moustafa Dandachli (also known as Muzzi) who explained that Mr Patsellis had given him her number. They agreed to meet in the coming weeks.

68    Subsequently Mr Dandachli met with Ms Hudson at her office. Ms Hudson recalls that during the course of their meeting they had a conversation to the following effect:

Mr Dandachli:    I am moving into commercial property development and business mentoring. I was previously in home loan lending. I have a potential pipeline of commercial equipment and vehicle finance referrals I can send your way. I am also considering selling my residential trail book.

Ms Hudson:    I am interested. But I need to learn more about home loans as it is not an area that I have a lot of experience or knowledge in.

Mr Dandachli:    I can provide you with training and if you are still interested in the trail we can further discuss.

Ms Hudson:    OK. What kind of numbers are we talking about?

Mr Dandachli:    In or around $150,000.

69    In about June 2014 Mr Dandachli contacted Ms Hudson to inform her that he was moving office and ask if he could bring some files over to Ms Hudson’s office so that they could “at least start the process”. Ms Hudson agreed.

70    Despite Ms Hudson’s recollection that the conversation in the preceding paragraph took place in June 2014, she said that in about May 2014 Mr Dandachli brought four filing cabinets of files to Leaseworks’ office. In about June 2014 Mr Dandachli started to provide informal training to Ms Hudson in relation to home loans. Ms Hudson recalls that the training, which continued until about July 2014, included: the interview process; completion of forms; supporting documents required; and the loan approval process.

71    Ms Hudson was unaware, at the time of first meeting Mr Dandachli and thereafter until she was informed by Mr Clarkson (see [79] below), that Mr Dandachli had been permanently banned by ASIC from engaging in any credit activities as at 7 or 14 March 2014 and that he had been convicted of fraud in 2013.

Ms Hudson meets with Mr Maroun, ANZ

72    In about July 2014, Tony Maroun of ANZ, together with another ANZ employee, attended Leaseworks’ office to finalise Ms Hudson’s commercial real property accreditation with ANZ. Mr Dandachli was at Leaseworks’ office at the time and also joined in the meeting.

73    Ms Hudson recalls that at the meeting they discussed the lending market generally and the commercial property market in which she and Leaseworks were interested in working. The meeting concluded on the basis that Ms Hudson would hear from ANZ in relation to next steps.

Events following Ms Hudson’s meeting with Mr Maroun

74    Ms Hudson recalls that, as it was taking some time for ANZ to get back to her about her accreditation application, she telephoned Mr Maroun to find out the cause for the delay. They had a conversation to the following effect:

Ms Hudson:    Hi Tony, what is going on with the accreditation, when can I start?

Mr Maroun:    Well, about that, there’s an issue with who is in your office. You should contact your BDM, Patrick Clarkson.

75    Ms Hudson was perplexed by Mr Maroun’s comment. Accordingly, on 6 August 2014 she sent a text to Stefania Riotto, her FAST partnership manager at the time. The text message read (as written):

Hey Steph can you give me Patrick’s number? I just spoke to Tony @ ANZ. He told me whats going on. Its Kerry

76    According to Ms Hudson, on or about 7 August 2014 she telephoned Mr Clarkson and he informed her that he would come to her office to discuss the issue that had arisen following Mr Maroun’s visit.

77    Mr Clarkson recalls that Mr Maroun had contacted him to inform him that he had seen Mr Dandachli at Ms Hudson’s office. Mr Clarkson knew of Mr Dandachli from an ASIC release that reported that he had been convicted of falsifying loan documents after an ASIC investigation. Mr Clarkson accepted that he spoke to Ms Hudson on or about 6 or 7 August 2014. He recalled that he wanted to meet with Ms Hudson in person because she was a valued broker and he was concerned that the suggestion that Mr Dandachli had been at Leaseworks’ office posed a potential risk to her.

78    There is a dispute between the parties as to whether Ms Hudson and Mr Clarkson met on one or two occasions in early August 2014. The relevant evidence about that issue follows.

79    Ms Hudson recalls that on 7 August 2014 Mr Clarkson attended Leaseworks’ office and at that time they had a conversation to the following effect:

Mr Clarkson:    Look, we need to talk about Mr Dandachli. Are you aware of his background? Do you know anything about him?

Ms Hudson:    He’s a broker. I am looking to buy his book. He is asking for in or around $150,000. What is there to know?

Mr Clarkson:    He is a banned broker. He has been convicted of fraud.

Ms Hudson:    What?

Mr Clarkson:    Yes. You need permission from FAST to buy the book. You cannot use it without our approval.

Ms Hudson:    Of course.

80    Mr Clarkson recalls that he had minimal face to face contact with Ms Hudson during the time that he was her FAST partnership manager. He recalls that most of his contact with her was by telephone but, based on his outlook calendar, he was able to say that he went to Leaseworks’ office on two occasions: 13 August 2014 and 25 September 2014. As to the former, Mr Clarkson recalls the meeting at Leaseworks’ office in Parramatta on that day because it was the first time he had been to Leaseworks’ office. He recalled making a mental note of the office’s location for future meetings. Mr Clarkson’s evidence was that he only met with Ms Hudson about the issue that had arisen with Mr Dandachli’s files on one occasion, 13 August 2014. That recollection is borne out by the email referred to in the paragraph below.

81    On 10 August 2014 Ms Hudson sent an email to Mr Maroun, copied to Mr Clarkson, in which she wrote:

As discussed I was unaware of Muzi Dandachli’s conviction for fraud & my first reaction was of horror as he had come to me via a rather large brokerage, Platinum Direct Finance. As he had been vetted by them & had been referring equipment finance deals I never suspected for a moment that he had a criminal conviction for fraud.

Having said all that I didn’t think that I would have to disclose to anyone outside my business that we were in the process of looking at purchasing his Trail book. I am advising you that this is the reason why he made himself available to assist me with how to put together mortgages & how we would transition his customer base to Leaseworks, which included sitting in on some meetings.

When I asked him why he hadn’t revealed his conviction, he told (sic) that the information was widely available on the internet & ASIC’s website & then went on to state that he did not believe it was relevant to the purchase or sale of his trail book.

I assume that his trail book is not fraudulent, otherwise it would have been taken from him, but I have now been placed in a position that I have had to disclose confidential plans for my business. I thought this was a good way to progress the mortgage component of my business but now I am uncertain of whether the purchase will put me at odds with ANZ.

Can you please advise me if the purchase is in conflict with ANZ’s policies & if I were to continue the process would this exclude me from accessing ANZ’s commercial facility.

I will be having this conversation (sic) Patrick on Wednesday, to confirm with him that were I to proceed with the purchase that I would not be jeopardising my Fast accreditation.

(Emphasis added.)

82    At the time of his meeting with Ms Hudson on 13 August 2014, Mr Clarkson understood, from his previous dealings with her, that she was a car finance broker working predominantly in the area of commercial loans. He was not aware of Ms Hudson doing any work in relation to residential loans. Mr Clarkson recalls that during the meeting Ms Hudson informed him that she wanted to acquire Mr Dandachli’s loan book. Mr Clarkson denies telling Ms Hudson during the meeting that she needed FAST’s permission to purchase that loan book, as recalled by her and set out at [79] above, and does not recall Ms Hudson referring to the cost of Mr Dandachli’s loan book. Mr Clarkson explained that it is not usual practice to speak in dollar amounts around loan books, rather it is usual to speak in multiples when considering book values.

83    Mr Clarkson recalls that at their 13 August 2014 meeting he and Ms Hudson had a conversation to the following effect:

Ms Hudson:    I want more income streams so I am looking to buy a loan book from Moustafa Dandachli.

Mr Clarkson:    Whether you buy a book or not is a matter for you, but you should be careful. This guy [Dandachli] has been suspended by ASIC. There are risks. If it were me, I would not be buying the loan book.

Ms Hudson denies that Mr Clarkson said the words attributed to him above.

84    Mr Clarkson said that he did not give permission to Ms Hudson to introduce loans from Mr Dandachli’s book or to use it to generate leads. Mr Clarkson did not have authority to give any such approval or permission, it was not within the functions or duties of his role as a partnership manager.

85    With leave, Ms Hudson gave oral evidence about a meeting she had with Mr Clarkson in August 2014, which I infer to be the meeting on 13 August 2014. She said that during the course of that meeting they had a conversation relating to Mr Dandachli’s presence at her office to the following effect:

Ms Hudson:    What were you talking about a problem being in my office?

Mr Clarkson:    Are you aware who was in your office – Mr Dandachli?

Ms Hudson:    Yes, there was somebody in here. Tony Maroun was in at ANZ. What seems to be the problem?

Mr Clarkson:    Do you know that he’s a – been convicted of fraud?

Ms Hudson:    No I didn’t.

Mr Clarkson:    Well, you can look it up. It’s on Google.

86    Following his meeting with Ms Hudson Mr Clarkson posted a file note on Salesforce, a “customer management relationship system” used for entering and maintaining records in relation to broker groups and brokers. Mr Clarkson’s file note, which was entered on 14 August 2014 at 8.44 am records, among other things:

Visited Kerry due to an issue arising with a book she was looking at buying. The owner of the book m dandachli has just been prosecuted by ASIC and found guilty of fraud. ANZ BDM Tony Maroun was in her office and recognised him. He advised us as well as speaking to Kerry who was unaware of situation. She had advised ANZ of events by email.

Also looking to expand business and look at Residential lending. Advised would need to obtain Diploma as previously purely leasing. Has enrolled with Walker miller to complete via RPL.

Also interested in Podium have requested upgrade with 3 months free period.

Also looking to put on a new Consultant under her license. Have sent forms and requirements including checklist to her.

87    Ms Hudson said that she was shocked by what Mr Clarkson had told her and uncomfortable with the whole situation. In about mid August 2014 she had a conversation with Mr Dandachli in which she confirmed with him that he had been convicted of fraud and banned and told him that he could not return to Leaseworks’ office and that she did not want to proceed with the purchase of his book or referrals. According to Ms Hudson, at that time, Mr Dandachli told her that he did not “have any need for the files”, that she could “do with them what [she wanted]” and that “there’s nothing wrong with them. ASIC climbed all over them. The ones I got done for are with the lawyers or ASIC”.

88    While Ms Hudson maintained that she had two meetings with Mr Clarkson, on 7 and 13 August 2014, I do not accept that is so. Contrary to Ms Hudson’s recollection the objective evidence suggests, and I find, that the following occurred:

(1)    Mr Maroun attended Ms Hudson’s office in July 2014;

(2)    following that meeting Ms Hudson learnt from Mr Maroun that Mr Dandachli, who was present at her office at the time of the meeting with Mr Maroun and whose trail book she wished to purchase, had been banned by ASIC. This is borne out by:

(a)    Ms Hudson’s text message to Ms Riotto;

(b)    her 10 August 2014 email to Mr Maroun; and

(c)    Mr Clarkson’s file note dated 14 August;

(3)    on 7 August 2014 Ms Hudson telephoned Mr Clarkson. By that time Mr Clarkson was aware from Mr Maroun that Mr Dandachli had been at Ms Hudson’s office. They agreed to meet;

(4)    on 10 August 2014 Ms Hudson sent an email to Mr Maroun, copied to Mr Clarkson, explaining how she came to meet with Mr Dandachli, why he was at her office and that she wished to purchase his trail book. By that time she was aware of Mr Dandachli’s conviction; and

(5)    as foreshadowed in Ms Hudson’s 10 August 2014 email and recalled and, indeed, recorded by Mr Clarkson, Ms Hudson and Mr Clarkson met on 13 August 2014. This was the only meeting they had at the time. During that meeting, they discussed Mr Dandachli. I accept Mr Clarkson’s evidence to the effect that he did not tell Ms Hudson that she needed FAST’s permission to buy Mr Dandachli’s book, that he did not give any such permission and that he had no authority to give that permission in any event.

The August 2014 email

89    According to Ms Hudson in or about late August 2014 she sent an email to Mr Ryan, copied to Mr Clarkson. Despite her efforts to do so, Ms Hudson has been unable to obtain a copy of that email. However, she recalls that the email was to the following effect:

I/[Leaseworks] were planning on expanding our business into residential (and commercial) property;

We were looking for more income streams. We considered purchasing Mr Dandachli’s book for in or around $150,000. We saw the trail/ using the book as another potential income stream;

Since the meeting with Mr Clarkson, we had confronted Mr Dandachli. He admitted that he was a banned broker/had been convicted of fraud. We told him that we were no longer interested in the proposed purchase of his book/any dealings with him;

We told him to come and collect his files but he refused and has left them at our office;

We were unaware that we needed permission to use them;

Can we use the database to generate leads?

90    Ms Hudson did not receive a response to the email referred to in the preceding paragraph. She said that eventually she telephoned Mr Clarkson in late August 2014 and had a conversation to the following effect:

Ms Hudson:    I haven’t received a response to my email about using the Dandachli files.

Mr Clarkson:    Look - you can use the database to generate work. Just be very careful/take care with them, as you would with any other file.

91    Mr Ryan has reviewed his email inbox and has been unable to locate any record of the email referred to in [89] above, despite his practice of keeping all emails that he receives. He said that if he had received an email from Ms Hudson containing words to the effect set out in [89] above, it would have raised many “red flags” for him and he would have had serious concerns about its content. This was particularly so given its reference to the purchase/use of a loan book from an individual referred to as a “banned broker/[who] had been convicted of fraud” and the request to “use the database to generate leads”.

92    Had Mr Ryan received an email to the effect of that referred to in [89] above, he would have immediately asked Mr Clarkson to arrange a meeting with Ms Hudson to discuss its content and his concerns and to advise Ms Hudson not to have anything to do with Mr Dandachli and his database. Mr Ryan said that it is likely that he would have arranged for that meeting to be a site visit to Leaseworks’ premises to gain a better insight into the broker and the premises from where she was operating. Mr Ryan did neither of those things because he did not receive the email.

93    Similarly, Mr Clarkson does not recall receiving an email from Ms Hudson to the effect set out at [89] above. He has searched his inbox for emails sent and received around that time and has not located any such email from Ms Hudson. Mr Clarkson denies having a conversation with Ms Hudson to the effect set out at [90] above. In cross-examination Mr Clarkson said that if he had such a conversation, given its subject matter, he would have recorded it in the notes section of Salesforce.

94    In cross-examination Ms Hudson conceded that her email referred to at [89] above “obviously hadn’t gone through” and accepted that she had not located a copy of her “unsent email” on her computer. She recalled that she was having issues with her computer/IT system at the time. Ms Hudson said that at about that time Leaseworks’ office flooded, all of their equipment had to be replaced and that was possibly why the email went missing. However, Ms Hudson maintained that she had a “general conversation” with Mr Clarkson as set out at [90] above.

95    Ms Hudson said that from about late August 2014 to July 2017, in reliance on the permission given by Mr Clarkson regarding the use of Mr Dandachli’s files, set out at [90] above, (referred to as the Permission), they dealt with those files to generate work. This included by broking residential and/or commercial applications to NAB, including Advantedge, ANZ, Pepper Home Loans, Westpac, St George Bank and CBA.

96    Even if I accept that Ms Hudson drafted an email in the terms set out at [89] above, it is clear that the email was not received by Messrs Ryan and Clarkson. So much is apparent from their evidence which I accept. Further, comprehensive searches undertaken by Mr Mahoney, and reviewed by Ms Tavares, did not recover any email from Ms Hudson to Messrs Ryan and Clarkson to the effect set out at [89] above. In any event, Ms Hudson accepted that the email did not go through.

97    In light of that and Mr Clarkson’s evidence I do not accept that the conversation referred to by Ms Hudson at [90] above occurred. Ms Hudson is mistaken in her recollection of these events and her alleged conversation with Mr Clarkson. It follows that, contrary to Ms Hudson’s evidence, Mr Clarkson did not give permission on behalf of FAST or otherwise to use Mr Dandachli’s loan book to generate work or leads i.e. he did not give the Permission as alleged. It follows that I do not accept Ms Hudson’s evidence set out at [95] above, that in reliance on the Permission she dealt with Mr Dandachli’s files to generate work.

Accreditation with ANZ

98    As at October 2014, Ms Riotto had been reappointed as Ms Hudson/Leaseworks’ partnership manager.

99    By emails exchanged on 16 October 2014 Ms Hudson made inquiries of Ms Riotto about the progress of her ANZ accreditation application.

100    Ms Hudson recalls that ANZ approved her commercial property accreditation with conditions in about late October 2014 and that during October 2014 she and Ms Riotto had a conversation to the following effect:

Ms Riotto:    I’ve had to chase Mr Scott Wunderlich [of ANZ] a few times. He has approved it – subject to these conditions: (a) anything moving forward with the commercial property accreditation, the applicant/s had to be interviewed by the ANZ BDM; and (b) the applicant/s had to execute the loan documents at a local branch.

Ms Hudson:    For all applicants or just those from the Dandachli files?

Ms Riotto:    All applicants.

Ms Hudson:    OK-got it.

The Dandachli database of files

101    To assist with the generation of work from the database comprising the Dandachli files in about early 2015 Ms Hudson had that database, of about 300-400 files, uploaded onto FAST’s Salesforce system. Eventually all of Leaseworks’ other databases were also loaded onto Salesforce.

102    If a new application eventuated from the database, the loan application/submission process on Podium would be more efficient as the loan applicant’s details were pre-loaded. Where a lender was not on Podium, there was a need to scan and dispatch or load paper applications to individual website portals.

Mr Mohamed’s early interactions with Ms Hudson

103    Mr Mohamed, who was Ms Hudson’s NAB BDM, recalls that he met with Ms Hudson three or four times prior to 19 April 2016, the date of the first file review meeting (see [116] below). Jamie Brill, a small business commercial business development manager, attended some of those meetings with Mr Mohamed. The purpose of Mr Mohamed’s meetings at that time was to provide an update on NAB’s latest residential and small business commercial products and policies and to discuss any loan applications in the pipeline, where Ms Hudson may have needed assistance from Mr Mohamed, e.g. in liaising with other parts of NAB.

104    On 24 March 2015, Ms Hudson exchanged emails with Divya Choudary, an associate in the NAB broker mortgage services team, copied to Mr Mohamed. In her email Ms Hudson asked Ms Choudary a number of questions relating to a loan application in the name of Houssan Dandachli. Ms Choudary responded to Ms Hudson’s queries including her query as to whether NAB would accept a letter or statutory declaration “from the tenant confirming they pay the rent in cash”. In response to that query Ms Choudary noted that:

To use rental income - can we have it on tax returns? if yes, we need tax returns to confirm that applicant is receiving the funds and being declared to ATO. If not I won’t use this income, as there’s no evidence of income being received, hence it fails income verification process.

105    On 7 May 2015 Mr Mohamed received an email from Ms Riotto asking if he could “reach out for [Ms Hudson] in Parramatta” as she had “been recently ramping up her mortgage business”. Mr Mohamed knew that Ms Riotto was Ms Hudson’s FAST partnership manager. At the time of receiving Ms Riotto’s email, Mr Mohamed had held the position of BDM only for around three months and had a panel of around 400 FAST brokers. He was reliant on the FAST partnership managers to provide him with the contact details of FAST brokers who needed introduction to him as their new BDM. Based on his usual practice at the time, Mr Mohamed believes that after receiving Ms Riotto’s email he would have reached out to speak with Ms Hudson but he can no longer recall any specific conversation with her. He believes, based on his usual practice, that he would have telephoned Ms Hudson and introduced himself to her as her NAB broker BDM and sought to arrange a face to face meeting.

First BRR Report

106    In March 2016 Ms Hudson was selected for a review by BPM (which at the time was still known as BRR). The review was prompted by three suspect fraud alerts.

107    Maria Casano, an assurance analyst with BRR, prepared a report (First BRR Report) based on a review of six files. The First BRR Report gave an “overall review rating” of “red” and included:

Review Purpose

Kerry Ann Hudson of FAST has been selected for a review in order to ascertain the quality of their applications. This review was prompted by 3 suspect fraud alerts received by the broker. This report has been provided in order to assist you to discuss the findings with Kerry Ann Hudson and is not intended for distribution direct to the Broker.

And:

Action Required

1.    As this review has been referred to BPLAC for further consideration, conduct an investigation in conjunction with the Broker’s aggregator into the findings of Appendices 3, 4 & 5 of this report.

2.    Complete a BPLAC Submission which details your findings in regards to the issues identified above and the recommended course of action.

3.    Send the completed BPLAC submission to the Committee Secretary to enable scheduling at an upcoming meeting.

108    Pages 3, 4 and 5 of the First BRR Report each included:

(1)    a “File Type” of “NAB Broker (Suspect Fraud)”;

(2)    a “Settlement Date” recorded as “Withdrawn”, which Ms Smith explained signified that the broker withdrew the application; and

(3)    in relation to “Operational Risk”, among other things, that each of the applications was “originally alerted in Detica”, a fraud detection system.

109    By emails sent on 31 March 2016 Ms Casano provided the First BRR Report to Ms Smith, Ms Black and Messrs Notaras and Mohamed noting that the “review has been referred to [BPLAC] for further consideration”. This was because of the “following material concerns” identified in the report:

The review has been rated Red

•    Suspect Fraud: Appendices 1 - 3.

•    Payslips suspected to be manufactured: Appendices 3, 4 & 5.

110    On or about 31 March 2016 Mr Davidson also received a copy of the First BRR Report.

111    Where, as with the First BRR Report, the “Overall Review Rating” is red, part of the BPLAC process is to conduct a review, including conducting a voluntary interview with the broker. This gives the broker the opportunity to respond to any questions that NAB, as lender, might have. The aggregator, in this case FAST, is also given the opportunity to be involved. It is rare for an aggregator not to attend a meeting where a broker is aggregating under them.

112    Mr Notaras also explained that a representative from FAST, usually a partnership manager, attended file review meetings. This was to ensure that FAST had oversight of the review process and was aware of any concerns that NAB had about any of its brokers.

First file review meeting

113    On 4 April 2016 Mr Mohamed sent an email to Ms Nguyen, who by that time was Ms Hudson’s FAST partnership manager, copied to Ms Riotto and Mr Davidson, forwarding Ms Casano’s email (see [109] above) and noting:

See below - BPLAC review for Kerry Ann Hudson attached

I’ll have to get [Ms Riotto] or [Mr Davidson] to attend the interview as [Mr Notaras] is on annual leave the next 2 weeks

Please let me know you diary for April

114    On 4 April 2016 Mr Mohamed telephoned Ms Hudson to arrange a file review meeting. Following her telephone conversation with Mr Mohamed, Ms Hudson sent an email to him seeking further details about the proposed meeting including the list of files that were to be reviewed or the questions to be asked.

115    By email dated 4 April 2016 Mr Mohamed responded to Ms Hudson’s email notifying her of the date and venue for the meeting and the six files she would need to bring with her. They were:

•    Angela BITAR - $XXX,XXX - Application date 10/10/15

•    Minh & Trang NGUYEN - $XXX,XXX - Application date 10/6/15

•    Van NGUYEN - $XXX,XXX - Application date 16/7/15

•    Hassan SINARAM - $XXX,XXX - Application date 27/8/15

•    Nenad & Ljiljana TODIC - $XXX,XXX - Application date 8/11/15

•    Houssan DANDACHLI & Abeir TOUKAN - $XXX,XXX - Application date 10/4/15

116    The proposed file review meeting (which I will refer to as the first file review meeting) took place on 19 April 2016 at NAB’s offices at 105 Miller Street, North Sydney. In attendance were Ms Hudson, Mr Davidson, Mr Mohamed and Ms Nguyen, who by that time was Ms Hudson’s FAST partnership manager.

117    The first file review meeting was the first occasion on which Mr Davidson met Ms Hudson. Based on his practice at the time, Mr Davidson would prepare for a meeting of the nature of the first file review meeting by undertaking a comprehensive review of the relevant report, the applications and all supporting documents including the loan applications and other documents such as payslips, tax returns and credit files. He recalls that prior to the first file review meeting he printed the relevant documents in case Ms Hudson did not bring them with her.

118    Ms Nguyen engaged with brokers in her portfolio regularly, often meeting them over coffee or lunch. Ms Nguyen also explained that from time to time a Panel Lender would interview a broker whom it had accredited at FAST’s request and that this would occur when the lender had concerns about loans being introduced by that broker. Where such an interview was to proceed, Ms Nguyen arranged and attended the interview. She would usually take brief notes and thereafter provide an outline to her boss, Mr Ryan.

119    Ms Nguyen attended the first file review meeting as an “Aggregator Representative”. She was required to attend the meeting because Ms Hudson was one of FAST’s brokers. It was FAST’s preference to send a representative to support its brokers at file review meetings. Ms Nguyen recalls that Mr Davidson led the meeting and did most of the talking and that she mostly observed. Mr Davidson also recalls that he led the meeting and asked questions relevant to the First BRR Report.

120    According to Ms Hudson only three of the six files listed in Mr Mohamed’s email referred to at [115] above were discussed at the first file review meeting. They were the Van Nguyen, Todic and Sinaram files. Ms Hudson recalls that she had exchanges with Mr Davidson to the following effect about those files:

(1)    in relation to the Van Nguyen file:

Mr Davidson:    Where did you meet Mr Van Nguyen?

Ms Hudson:    He was a referral from his cousin, Mr Minh Nguyen (whom we did a personal loan application and CTP for), another file that you have asked me to bring along.

Mr Davidson:    Where did you get supporting documents for Mr Van Nguyen’s application?

Ms Hudson:    Some documents came from him personally. Others came from his employer. I believe it’s all in the file.

Mr Davidson:    Why didn’t the application proceed?

Ms Hudson:    There were follow up questions regarding his existing unencumbered property and how that was acquired. He couldn’t provide evidence as to how he had acquired the property. I recall he stopped responding to our enquiries. Given the lack of response/information, the application was withdrawn.

(2)    in relation to the Todic file:

Mr Davidson:    Where did you meet the Todic?

Ms Hudson:    We had a preliminary meeting. I believe this would have followed a round of marketing to our database.

Mr Davidson:    Where did you get the supporting documents?

Ms Hudson:    This was provided to us by the Todic. What is the issue with this one? The refinance application eventually proceeded (following some back and forth about Liliana’s part time position) and was unconditionally approved/ settled by NAB?

Mr Davidson:    Yes – we will come back to that.

(3)    in relation to the Sinaram file:

Mr Davidson:    Where did you meet him?

Ms Hudson:    We had a preliminary meeting. He cold called us. This was his first property and so I doubt that we had any pre-existing details on our database.

Mr Davidson:    Where did you get the supporting documents?

Ms Hudson:    Like the Todics and any others – either at the preliminary meeting or afterwards via email.

(4)    and, in relation to all three files:

Mr Davidson:    Have a look at the three payslips.

Ms Hudson:    Yes, what about them?

Mr Davidson:    Look at the bank account details on the payslips. The last four numbers for each end in 1038.

At this point Ms Hudson looked at the payslips and observed that the same bank account had been provided for each of the Van Nguyen, Todic and Sinaram applications. She was stunned and recalls that she told Mr Davidson that she “was shocked”.

121    Ms Hudson said that her conversation with Mr Davidson then continued in words to the following effect:

Mr Davidson:    What more do you know about these people? Anything that may explain the similarity?

Ms Hudson:    I’m not sure. The Todics are a refinance out of the Dandachli files. I recall looking at the physical file.

Mr Davidson:    What files are you talking about?

Ms Hudson:    The files that Mr Dandachli left at my office. You know, Moustafa Dandachli. He was convicted of fraud - a banned broker. I have his files.

Mr Davidson:    What?

Ms Hudson:    Patrick Clarkson knows. I was going to buy his book but the deal was canned after Mr Clarkson told me about him. Mr Dandachli then left the files at my office. I was given permission to use them. You can check with Mr Clarkson.

Mr Davidson:    Right.

Ms Hudson:    I am going to get to the bottom of this.

Mr Davidson:    We are investigating. In the meantime, this will have to go the Board about your accreditation. They have a meeting in the middle of each month. I will present this to them and they will decide whether or not you can keep your accreditation with us.

Look, I can understand that you didn’t appreciate the issue with the payslips. We can usually tell who are the dodgy brokers as their files are a mess and paperwork is often nowhere to be seen. You are lucky that your files are in good order.

You are not on suspension. Not at this point. Ms Nguyen will keep you updated. We will keep you going. But I am telling you now, you only get one warning.

122    At the conclusion of the meeting Ms Hudson was in a state of shock and did not know what to do, other than to leave.

123    Mr Davidson denies that only three of the six files notified to Ms Hudson were discussed at the first file review meeting. He recalls that all of the files were discussed.

124    In relation to the exchange set out at [121] above, Mr Davidson:

(1)    does not recall what, if anything, he knew about Mr Dandachli or Mr Dandachli’s loan book prior to attending the first file review meeting;

(2)    disagrees that in the course of that exchange he said:

We are investigating. In the meantime, this will have to go the Board about your accreditation. They have a meeting in the middle of each month. I will present this to them and they will decide whether or not you can keep your accreditation with us.

Look, I can understand that you didn’t appreciate the issue with the payslips. We can usually tell who are the dodgy brokers as their files are a mess and paperwork is often nowhere to be seen. You are lucky that your files are in good order.

And:

We will keep you going. But I am telling you now, you only get one warning.

(3)    expressly denies using the phrase “dodgy brokers” and telling Ms Hudson “you only get one warning”;

(4)    reinforced this evidence in cross-examination, noting that he would not have made any reference to “dodgy brokers” and that he would not have told Ms Hudson that her files “were in good order” because they were not; and

(5)    recalls that, rather, he said words to the following effect:

Kerry, we will need to consider and investigate this further. I will prepare a report and this will be presented to the Board. The Board will then meet to consider your accreditation with us. I will keep Ms Nguyen updated.

125    In relation to the issue concerning the payslips, Mr Davidson recalls drawing Ms Hudson’s attention to three payslips for three different customers, including Mr Sinaram, which each recorded a bank account number ending in “1038”. He said that typically when an anomaly such as this was identified, he would ask the broker a number of specific questions to determine whether the identical payslips may be a result of either customer or broker fraud. At that time he had not determined why three payslips for three different customers had the same bank account details recorded on them. Accordingly, he asked Ms Hudson questions to determine how this had occurred. Mr Davidson recalls that they had an exchange to the following effect:

Mr Davidson:    Here are three payslips which are identical. The payslips all have the same format and these three customers appear to have the same account number – 1038.

Ms Hudson:    Yes.

Mr Davidson:    How did you receive these supporting documents?

Ms Hudson:    Some I received from customers personally, others were sent to me by customers after our meeting.

126    As Ms Hudson did not have an explanation for why the payslips were the same, Mr Davidson asked her the following further questions:

Mr Davidson:    How did you receive the payslips? Were the payslips provided electronically?

Ms Hudson:    Some were provided electronically after the meeting, some were provided in person.

Mr Davidson:    Was Mr Sinaram known to the other parties.

Ms Hudson:    Mr Sinaram was referred by other parties.

127    Mr Davidson recalls that towards the end of the meeting he told Ms Hudson that she was not to introduce any new loans to NAB from Mr Dandachli’s loan book and that he had an exchange with Ms Hudson to the following effect:

Mr Davidson:    We have got 3 of the 6 files reviewed with fraudulent payslips.

Ms Hudson:    Two of the three are from the Dandachli loan book.

Mr Davidson:    The risk of fraud in the rest of the loan book is clearly high so do not introduce any new loans from the Dandachli loan book to the NAB Group, including NAB Broker or FASTLend.

Mr Davidson does not recall Ms Hudson’s response. He recalls that Ms Hudson appeared shocked and used the word “shocked” a number of times. In cross-examination Mr Davidson accepted that he did not put this instruction in writing to Ms Hudson nor did he include it in these terms in the draft BPLAC submission he subsequently prepared (see [142] below), which he accepted was an oversight. Rather, as described below, he included a less emphatic description of his instruction. However, he felt at the time that Ms Hudson understood what he had conveyed. Ms Hudson disagreed that she was given any such instruction.

128    Despite Ms Hudson’s disagreement, I accept that Mr Davidson gave an instruction to Ms Hudson that was either in the terms described above or, at the very least, a warning about Mr Dandachli’s files and the way she should proceed. This is for the following reasons. First, Mr Davidson struck me as a thoughtful witness who had considered his evidence and was prepared to make concessions where necessary. Secondly, given Mr Davidson is no longer an employee of NAB he has no particular interest in the outcome of this proceeding. Thirdly, because of Ms Nguyen’s evidence about the second file review meeting (see [221] below). Fourthly, because it is apparent from the terms of the draft BPLAC submission prepared by Mr Davidson that Ms Hudson was cautioned about the danger of dealing with files from Mr Dandachli’s loan book. Finally, because in the Third BPLAC Submission (see [225] below), which was prepared just over one year after the first file review meeting, Mr Davidson in fact records that such an instruction was given at that meeting.

129    Mr Mohamed attended the first file review meeting because he had a relationship with Ms Hudson as a broker in his NAB broker BDM role. He recalls that the purpose of the first file review meeting was to review the six files identified in the First BRR Report and recalls that Ms Hudson attended the meeting with hard copies of those files. Mr Mohamed was an observer at the meeting, which, as a BDM, is his usual approach to such a meeting. Mr Mohamed cannot recall all of the discussions that took place during the meeting. He said that there was nothing about the meeting that was so unusual or significant that would cause him to remember it. However, Mr Mohamed does recall that Mr Davidson asked Ms Hudson a number of questions in relation to each of the six files and that they were the type of questions he would typically expect a broker to be asked in any review meeting. For example, he recalls Mr Davidson asking Ms Hudson “can you confirm the source of the supporting loan documents for this file?”. He does not recall Ms Hudson’s response. He recalls that he also asked a few questions about the payslips in some of the files but does not recall exactly what he asked.

130    Ms Nguyen recalls that Ms Hudson brought a number of files with her to the first file review meeting. She does not recall all of the files that were discussed but recalls discussion about the Dandachli and Nguyen files, which were two of the six files referred to in Mr Mohamed’s email (see [115] above). Ms Nguyen recalls that Mr Davidson went through each file, one by one, with Ms Hudson and asked a series of questions to which Ms Hudson responded.

131    Ms Nguyen also recalls that Mr Davidson asked questions about how Ms Hudson had acquired a particular loan book and expressed concern about the loan book as it had been purchased from a broker who ASIC had banned. Ms Nguyen said that at some point in time, she cannot now recall when, Mr Clarkson, Ms Hudson’s former FAST partnership manager, informed her that Ms Hudson had obtained or purchased a loan book from a broker who ASIC had banned.

132    After the first file review meeting Mr Davidson had a conversation, either in person or by telephone, with Ms Nguyen and Mr Ryan to the following effect:

Mr Davidson:    I have just met with Kerry Hudson. NAB is undertaking this investigation but, I have a major concern for the other lenders, as the aggregator, you should consider notifying other lenders. As an example, if Kerry is providing fraudulent documentation to ANZ, ANZ also needs to know about it.

Mr Ryan:    We will discuss further and determine next steps.

133    Mr Ryan recalls that he had a conversation with Ms Nguyen after the first file review meeting, although he has no notes of that conversation. He described FAST’s role at that meeting, which was a lender accreditation review undertaken by NAB, to be as a support for the broker.

Events following the first file review meeting

134    After the first file review meeting Ms Hudson did not contact NAB or FAST. She was told that NAB was investigating and she did not wish to prejudice its investigation. However, in order to deal with the risk going forward Ms Hudson put in place the following systems:

(1)    she uploaded all verified supporting documents to Podium herself (to ensure that only properly verified applications were lodged); and

(2)    the use of www.bankstatements.com.au (which she now understands is an industry standard).

135    On 26 April 2016 Ms Nguyen sent an email to Ms Hudson which included (as written):

Following on from the Risk review meeting with nabbroker I thought it would be a good opportunity to refer you to QED.

They provide assistance to Australian Credit License holders to review and audit your files and offer NCCP support.

Link is below, we do organise workshops where they can come out to North Sydney to run a session on their offering, I will try to arrange one soon and advise the date.

https://www.qedrisk.com.au/

Please let me know if you have any questions. I am yet to hear back from nabbroker, their risk team meet once a month to review and make their decision.

Ms Nguyen explained that QED provide assistance to ACL holders to review and audit files and offer National Credit Act support. Ms Nguyen sent the email referred to above to Ms Hudson because part of her role was to ensure that brokers had access to workshops that would assist them in complying with their broker obligations. At the time FAST was promoting QED to all of its brokers.

136    By email of the same date Ms Hudson responded to Ms Nguyen as follows:

As you can understand it is upsetting awaiting the outcome of the Nab audit on one hand & then giving me unconditionals & settling my deals on the other hand.

…

Do you think this workshop would help? They did say my files were in great order ...

However, if it helps me to better detect fraudulent documents then I’m all for it.

137    Ms Nguyen and Ms Hudson then had a further email exchange on 26 April 2016. Ms Nguyen informed Ms Hudson that she would advise her when she organised “the next QED session”, said that it was “worth attending to see if it will help” and noted that “[t]he files [Ms Hudson] bought may not be as clean due to the previous owner so it may help to audit them”. Ms Hudson expressed her thanks to Ms Nguyen.

138    At around that time Ms Hudson had a number of what she described as “life events”:

(1)    on 1 May 2016 her mother passed away following a battle with cancer;

(2)    in August 2016 her partner, Chris, almost died from a torn artery;

(3)    in December 2016 Chris underwent major surgery; and

(4)    she began to lose her voice from time to time, could not eat or swallow properly, had “high place phenomenon” (if near an elevated ledge her mind would tell her to jump) and was having difficulty concentrating and remembering basic things like numbers that someone had just told her.

First BPLAC Submission

139    Mr Davidson took handwritten notes at the first file review meeting. Shortly after the meeting, in accordance with his usual practice, he prepared a draft submission to BPLAC (Draft First BPLAC Submission) from his handwritten notes taken at the meeting. In cross-examination, Mr Davidson explained that he took handwritten notes at these meetings which he then typed up into the required form as a BPLAC submission. When he left NAB he left his handwritten notes in his locker and informed his “people leader” that he had done so. Mr Davidson provided the Draft First BPLAC Submission to BPLAC. After doing so, in accordance with his usual practice, he discussed the case and the recommendation he had made over the telephone with the secretary of the BPLAC Committee, at that time Ms Black. She then made any necessary adjustments to the draft submission, for example changing the name of the “Case Presenter” from Mr Davidson to Mr Notaras, who was Mr Davidson’s “people leader” at the time.

140    Mr Davidson noted that the last item in a BPLAC submission is “Chair Recommended Outcome”. He did not usually complete that item. Rather it was completed by the chair or secretary of BPLAC, Ms Smith or Ms Black.

141    By email sent on 26 May 2016 Mr Davidson forwarded the Draft First BPLAC Submission to Ms Smith, copied to Ms Casano. Ms Smith and Mr Notaras were jointly responsible for preparing BPLAC submissions, with input from other teams and the aggregator who, in the case of Ms Hudson, was FAST. As “Head of”, Mr Notaras was responsible for reviewing BPLAC submissions prepared by his team before they were submitted to BPLAC.

142    The final version of the Draft First BPLAC Submission (First BPLAC Submission) recorded:

(1)    Mr Notaras as the “Case Presenter”;

(2)    under the heading “Background”:

Kerry has been in the finance industry since 2007 writing mainly asset finance. To assist in starting to write residential home loans Kerry purchased a loan book from a Broker (Mustafa Dandashly (sic)) who was later terminated by ASIC dues to fraudulent activities. The files reviewed were all repeat customers from this loan book. Rob Ryan (FAST) confirmed this and Kerry has been advised to proceed with caution on any clients coming from this source. All files reviewed were from Kerry’s first few months (May to Sept 2015) writing residential home loans, at the time the broker was unaware of the issues with the loan book. Face to face interviews were performed in all cases, file notes, fact find and needs analysis viewed for all. Original documents were received in all cases and held on file (hard copy in folder) which were all presented during BPLAC Interview.

(3)    under the heading “Member Feedback”, among other things:

Employment verification - From April to December in 2015 Kerry had a loan processer assisting in her business who was assigned tasks to complete including verifying employment, ABN Searches etc. This persons attention to detail and quality of work were clearly not up to scratch, Kerry terminated their employment and they are no longer in the business. Kerry now completes all of these tasks herself and fully understands that it is her responsibility to ensure this is done.

Suspect payslips - When all 3 payslips were reviewed and submitted in isolation Kerry felt they were legitimate. On closer inspection side by side they clearly do look very similar and manufactured. Clients coming from the same source (purchase loan book from Mustafa Dandashly) there are clearly issues with the credibility and authenticity of these clients. During the BPl.AC Interview coaching was provided on how to identify fraudulent documents, further coaching to be provided by Aggregator PM and nabbroker BDM.

(4)    the “Case Presenter Recommended Outcome” of a first and final warning with a further review in six months, for Ms Hudson “to become a BLSSA representative and further credit reviews to be completed” and for “how to spot fraud” coaching to be provided by the FAST partnership manager and the NAB broker BDM; and

(5)    the “Chair Recommended Outcome” as supporting a first and final warning.

143    I note that in the First BPLAC Submission Mr Davidson recorded that Ms Hudson was “advised to proceed with caution on any clients coming from” Mr Dandachli’s loan book. As I have already observed he accepted that he did not record his instruction not to write any new loans from that source, which was an oversight. That of course does not mean that the instruction was not given. It perhaps demonstrates a lack of proper attention to recording the events in a fulsome way. In any event it is clear from the record constituted by the First BPLAC Submission, which is the only available written record of the first file review meeting, that some form of caution was given.

May 2016 BPLAC meeting

144    BPLAC met on 31 May 2016. There were eight attendees at that meeting including Ms Smith as chair and Ms Black as secretary. Included on the agenda for the meeting, as one of the “Cases for Endorsement”, was “Kerry Ann Hudson (FAST) – Recommendation for First & Final warning”. The First BPLAC Submission was presented at the meeting.

145    The minutes of that meeting record the following in relation to Ms Hudson (as written):

•    AS advised broker has been referred to the committee due to 3 suspect fraud alerts from AFT. During the interview it was revealed the broker had purchased a loan book from another broker who happened to have been permanently banned by ASIC in 2015 and the 3 files involved were from that loan book. Further training has been undertaken by the Aggregator PM regarding on the importance of comprehensive enquiries regarding living expenses. Broker also had an administrative assistant who assigned to completing employment verifications, ABN searches etc however the person’s attention to detail was inadequate and the broker subsequently terminated her employment.

•    CMc, BH, SK & DB endorsed the recommendation to retain the broker with a First & Final warning with a further review in 6 months.

First and final warning letter

146    On 6 June 2016 NAB issued a “first & final warning” letter to FAST in relation to Ms Hudson. That letter, which was from Mr Notaras to Brendan Wright, FAST, included:

Subsequent to our recent discussions with Hien Nguyen this letter acts as a first and final warning in relation to your representative’s Kerry Ann Hudson ability to continue to submit lending applications to NAB Broker.

This warning is being given as a result of the following issues being identified:

•    Falsified documentation being provided.

•    We will continue to accept new lending applications from your representative Kerry Ann Hudson on the following basis:

•    Verification of customer’s employment undertaken on all loan applications;

•    Coaching and education of how identifying suspect documentation to be provided by Aggregator and NAB Broker BDM’s.

Should we identify any further areas of concern in regards to your representative Kerry Ann Hudson, we will immediately revoke all systems access and take further action in regard to their ongoing ability to submit lending applications to NAB Broker.

147    Ms Hudson said that she was not aware of the NAB “first & final warning letter” at the time of its dispatch despite engaging in a series of email exchanges with Ms Nguyen on 7 June 2016. That exchange commenced with Ms Hudson explaining that she had not been in contact for several weeks due to her mother’s death on 1 May 2016 and noting that she assumed that there had been “no negative outcome from the NAB”. Ms Nguyen responded stating that the “NAB review will be finalised early July”. The email exchange continued with no further mention of the “first & final warning letter”.

148    According to Ms Hudson, in the course of a subsequent conversation at about this time, Ms Nguyen informed her that “NAB have issued a warning”. Ms Hudson said that Ms Nguyen did not elaborate on the content of the warning or what was in the “first & final warning” letter nor did she provide her with a copy of it. According to Ms Hudson, they also discussed the recent passing of their respective mothers.

149    Ms Nguyen cannot recall having a telephone conversation with Ms Hudson on 7 June 2016. She denies that she spoke to Ms Hudson about the death of her own mother, who had passed away in 2000; does not recall Ms Hudson telling her that her mother had passed away; and does not recall telling Ms Hudson in a telephone conversation at about that time that “NAB have issued a warning”.

150    On 9 June 2016 Ms Hudson saw Ms Nguyen at a forum meeting, a professional development meeting attended by brokers for the purpose of obtaining CPD points. According to Ms Hudson, their conversation was general at the meeting, as is typical at a large gathering.

151    Between 14 and 16 June 2016 Ms Hudson and Ms Nguyen exchanged emails about her accreditation with ME Bank, which was subsequently approved. Ms Nguyen recalls a conversation with Ms Hudson on 16 June 2016 which she recorded in Salesforce. Her note includes:

Kerry has been quieter on the resi side, AF still busy and commercial consistent. Strong Nabbroker supporter however was reviewed on a few files, outcome is first and final warning, just submitted an increase to nab.

152    Ms Hudson recalls that she and Ms Nguyen regularly caught up over lunch or coffee and that discussion at these meetings usually involved her partnership manager promoting a new product, rates, providing updates on systems or introducing a new partnership manager or staff. According to Ms Hudson she met with Ms Nguyen on 28 June 2016 and 2 November 2016 for lunch and coffee respectively. At the 28 June lunch meeting Ms Hudson recalls discussing the recent trauma both she and Ms Nguyen had experienced.

153    Ms Nguyen recalls meeting with Ms Hudson for lunch on 28 June 2016 but denies that they had a conversation about “recent trauma” they had both experienced, as she had not recently experienced any trauma. Following that meeting Ms Nguyen made a note in Salesforce which included:

154    On the afternoon of 28 June 2016 Ms Nguyen sent an email to Ms Hudson in which she wrote:

Great to see you today!

As of end of May your figures are

$22,669,433.93

I think that is great considering all you have been through in the past year!

Ms Nguyen typically sent emails to the brokers in her portfolio updating them on their figures for a particular month to inform them of how they were tracking. It was part of Ms Nguyen’s role to ensure that brokers in her portfolio were aware of their sales targets and KPIs.

Second BRR Review

155    One of the outcomes recorded in the First BPLAC Submission was for Ms Hudson’s files to be reviewed again in six months. Accordingly, on 11 January 2017, at the request of BPLAC, BRR undertook a further review of Ms Hudson’s files. Philip Murton, an assurance analyst in the broker risk review team, prepared a report (Second BRR Report) which included:

(1)    an “Overall Review Rating” of “Green”;

(2)    as “Action Taken” that the report be “Referred to BPLAC”;

(3)    under the heading “Review Purpose” that:

Kerry Ann Hudson has been selected for a review at the request of BPLAC following a first and final warning in regard to suspect and confirmed fraud in May 2016. This report has been provided in order to assist you to discuss the findings with Kerry Ann Hudson and is not intended for distribution direct to the Broker;

(4)    that in the last 12 months Ms Hudson had submitted 37 loans of which 16 had been approved and 11 had settled;

(5)    six files were the subject of the review; and

(6)    under the heading “Action Required”:

The Head Of is to investigate the issues identified in this review by conducting an interview with [Ms Hudson]. Findings are to be detailed on the BPLAC submission provided and returned to the BPLAC Secretary to enable scheduling at an upcoming meeting.

156    By email sent on 11 January 2017 Mr Murton provided the Second BRR Report to Mr Notaras, Ms Smith and Ms Black noting that (as written):

This review has been referred to the Broker Partnerships Lenders Accreditation Committee (BPLAC) for further consideration as this review has been BPLAC mandated follow up from a previous decision in May 2016.

The review has been rated Green with the main issue identified relating to disclosure concerns on appendices 4 & 6.

Action Required

1.    Review the contents of the attached report.

2.    Complete the actions detailed under “Action Required” in the report, including preparing and submitting your recommendation to BPLAC.

157    Mr Notaras explained that the Second BRR Report recorded an overall green rating because all but one of the files reviewed received green ratings for all aspects of the review. The exception was the “Assoud and Selman” file which was rated amber for the “Credit” category. Notwithstanding the anomalies identified with that file (which concerned the number of dependants disclosed on the application and the lack of updated rental income for an investment property) the file received an overall green rating. Mr Notaras also explained that a green rating usually means that a further broker interview is not required. However, in some circumstances an interview may still be held, including where information not known at the time of the review is later identified. A green rating means that the issues identified during the review can be dealt with by a BDM through a follow up call with the broker, simple coaching processes over the telephone with the broker or a meeting to discuss any items raised by the review.

158    On 17 March 2017 Ms Casano emailed a copy of the Second BRR Report to Mr Mohamed. On or around 22 March 2017 Mr Mohamed telephoned Ms Hudson to discuss the review that had been undertaken. Mr Mohamed can no longer recall his exact conversation but does recall that he would have congratulated Ms Hudson on the overall result of the review, which had very few adverse findings, and that the discussion centred around two of the six files reviewed.

Second BPLAC Submission

159    Following his telephone interview with Ms Hudson referred to in the preceding paragraph, Mr Mohamed prepared a BPLAC submission dated 22 March 2017 (Second BPLAC Submission).

160    On 22 March 2017 Mr Mohamed sent an email to Mr Notaras, copied to Melanie Pumomo, which relevantly included:

See my response to the BPLAC submission attached

Spoke with Christine Taket of Distribution Risk today who advised to Email your recommendation as “no further action required” and they will close the file.

Chris advised she spoke with Allison Smith if it was OK that I completed the review over the phone with the broker - she confirmed all good.

Mr Mohamed’s email attached the Second BPLAC Submission. Mr Mohamed explained that Christine Taket, referred to in his email above, was a member of the distribution risk review team situated on the same level as him. He informed Ms Taket that he had conducted a review with Ms Hudson, told her which files he had discussed and of the feedback that he provided.

161    By email dated 23 March 2017 Mr Notaras forwarded Mr Mohamed’s email to Ms Smith and Ms Black.

162    While Mr Mohammed was noted as the case presenter for the Second BPLAC Submission, Ms Smith considered this to be an error as the “case presenter” is the “Head of”, in this case Mr Notaras.

163    The Second BPLAC Submission recorded that Mr Mohamed had contacted Ms Hudson in order to discuss the Second BRR Review. Her response to some of the findings in the review were recorded in the Second BPLAC Submission. In addition, under the heading “Agreed Recommendation”, the following was recorded:

Case Presenter Comments:

Recommending no further action.

Ms Nguyen recommends that Ms Hudson undertake a compliance audit

164    In the meantime, on about 8 February 2017 Ms Hudson had a breakfast meeting with Ms Nguyen. While the conversation was generally social Ms Hudson recalls that she and Ms Nguyen may have had a conversation to the following effect:

Ms Nguyen:    I recommend that you engage QED. They can perform an end-to-end compliance audit of your business against not only the NCCP requirements but against the benchmark of other brokers.

Ms Hudson:    I will make some enquiries.

165    Ms Nguyen recalls attending a breakfast meeting with Ms Hudson on or around 8 February 2017. She believes that she also invited one of FAST’s lenders to attend, but no longer recalls who that person was. Ms Nguyen said that at the meeting she continued to push QED compliance with Ms Hudson. This was part of the conversation she was having with all of the brokers in her portfolio at that time as FAST was encouraging all brokers to engage QED. While it was part of Ms Nguyen’s role to make brokers aware of the training it was ultimately up to Ms Hudson to arrange her training.

166    Ms Hudson recalls that Ms Nguyen provided QED’s contact number by text, which she called. She spoke to a receptionist and left a message but no one returned her call.

167    On 15 February 2017 Ms Hudson received an email from Ms Nguyen attaching a communication from QED. That communication included:

Yesterday you would have received communication from Brendan Wright, CEO of FAST, about partnering with QED to assist ACL holders with their compliance.

As a subscriber of CompliFast, we know you understand and are committed to meeting all your NCCP compliance obligations and using the recommendations from your CompliFast reports to strengthen your business.

From viewing Brendan Wright’s video, you will know that FAST would like you to participate as well, by having QED conduct an independent verification of your loan files and this data then being shared with FAST (your individual results will be anonymous, with high level results of responsible lending, CPD training and information security components shared with FAST). QED has shared with FAST our belief that, as a group, CompliFast subscribers’ results will be exemplary compared to those that are not.

The main benefit of having QED verify your loan file review is that we do this for hundreds of brokers and we are very specific with our recommendations. Your CompliFast report will detail the key recommendations from your Self-Review and any additional recommendations from our audit team. This will give you peace of mind about the great work you’ve been doing with CompliFast.

(Emphasis in original.)

168    On 20 March 2017 Ms Nguyen sent Ms Hudson a further email which included:

Look forward to seeing you at our Broker Forum on Thursday.

I know this webinar was last week but we will be putting on another one next week. Did you hear back from QED the last time we caught up we discussed you arranging a time for them to have a chat with you.

ASIC spotlight is on ACL holders so FAST are doing what we can to support our ACL holders to ensure they have strong Compliance processes in place.

QED will also be at our Broker Forum on Thursday and there will be a presentation on risk as well.

Ms Hudson responded to Ms Nguyen by email of the same date noting that she was not yet sure if she could make the conference as her partner was having an operation the following day. Ms Nguyen sent a subsequent email asking Ms Hudson to “look into the QED when you have a chance”.

169    On 28 March 2017 Ms Hudson subscribed to, and attended, the QED webinar “CompliFast Compliance Report Demonstration”.

170    On 7 April 2017 Ms Hudson sent an email to “julian@qedrisk” in which she noted that Ms Nguyen had provided Julian’s “details to [her] regarding compliancing [her] company” and asked him “to advise what the process is”. On 11 April 2017 Ms Hudson was contacted by Kellie Ross of QED. They discussed the services that QED could provide to Leaseworks. Later on 11 April 2017 Ms Ross emailed a proposal to Ms Hudson setting out QED’s recommended “best way forward for Leaseworks”.

April to June 2017

171    On 10 April 2017 Ms Black informed Ms Smith and Mr Notaras of her further concerns in relation to Ms Hudson. In her email sent on 10 April 2017 to Mr Notaras and Ms Smith, copied to Mr Mohamed, Ms Black wrote (as written):

I am going through the BPLAC submission for the above broker and have concerns.

While the review is rated green and there really aren’t too many issues identified, my concern triggered when l saw the name Moustafa Dandachli noted in appendix 6.

Kerry Ann was issued a First and Final warning back in May 2016 due to suspect and confirmed fraud and the only reason she was not terminated was because the loans in question were from the loan book she purchased from broker Moustafa Dandachli who had been terminated by BPLAC and banned by ASlC for major fraud concerns. It was noted in the BPLAC submission from May 2016 that the broker was specifically warning to be cautious when dealing with clients from the purchased loan book and yet 2 months after our warning she is doing a loan that inadvertently involves the terminated broker (the security property was in the joint name of Nadia Assoud and Moustafa Dandachli and was being transferred to the joint applicants).

Before we can determine the right recommendation with this one, we need to better understand her relationship and dealings with this party.

172    Following receipt of Ms Black’s email, Mr Notaras sought, by way of further email, clarification of what Ms Black meant when she referred to “a security in the name of the joint applicants being transferred to the joint applicants”. Ms Black responded noting that the loan under review was “in the names of Nadia Assoud & Mona Selman” and that “[t]he security for the loan is being transferred from Nadia Assoud and Moustafa Dandachli to Nadia and Mona”. Ms Black clarified that she wanted to know “if there are closer ties here; if only just for monitoring” and noted that Ms Hudson “was not warned not to have any kind of dealings but told to be cautious about [Mr Dandachli’s] loan book”.

173    As a result of Ms Black’s concerns, on or about 12 April 2017 Mr Mohamed was instructed by the NAB compliance team to contact Ms Hudson and follow up on issues that had arisen from the first file review meeting and the Second BPLAC Submission. Mr Mohamed recalls having a telephone conversation with Ms Hudson at the time, but he cannot recall what was said.

174    Ms Hudson recalls that she was driving at the time she received Mr Mohamed’s call on or about 12 April 2017 and that she was running late for a client interview. She recalls that they had a discussion to the following effect:

Mr Mohamed:    Can you tell me the background with the Mona Selman and Nadia Assoud application - from July 2016.

Ms Hudson:    Yes. Mona Selman is Mr Moustafa Dandachli’s former partner. They were splitting up. Mrs Nadia Assoud is married to Dr Assoud, a reputable dentist in Sydney. Mrs Assoud and Mr Dandachli were transferring half of the property to Mrs Assoud and Ms Selman (a separation payout). The sale price was half the mortgage payout balance. Ms Selman needed finance for that. She already banked with NAB. NAB also had the existing home loan for Mrs Assoud and Mr Dandachli. The application for Ms Selman and Mrs Assoud was submitted. The background is all set out in the application. I then recall that there were follow up enquires from NAB as to supporting documents for Dr Assoud. I think eventually Mrs Assoud simply used her/ her husband’s line of credit with CBA and ended up becoming the sole registered proprietor / buying Ms Selman out. The settlement funds went into Ms Selman’s NAB account.

Mr Mohamed:    Right. How did you come across it?

Ms Hudson:    The application? It was sourced from the Dandachli Files.

Mr Mohamed:    The Dandachli Files. The files you bought?

Ms Hudson:    Yes the Dandachli Files I have. I thought we were done with this/ I had been cleared”.

Mr Mohamed:    Yes, we are just tying up a few loose ends. I will send you an email and if you can confirm the same the review will be over.

175    Ms Hudson recalls that in or about April 2017 she also had a telephone conversation with Mr Davidson to the following effect:

Mr Davidson:    What are your processes now when you are dealing with any applications that come from the Dandachli Files? How are you ensuring that any deals that come from them are clean?

Ms Hudson:    I’ve just had similar questions from Mr Mohamed about this. Have you not spoken with him?

Mr Davidson:    I will talk to him. In the meantime, can you spell it out for me.

Ms Hudson:    After the April 2016 interview, I am far more thorough with the interview process. I am also the only one who loads the applications, giving me another opportunity to vet the supporting documents. Also, I use www.bankstatements.com.au which allows us to further increase the ability to vet supporting bank statements. And of course, payslips and income information is verified by www.bankstatements.com.au.

176    Mr Davidson also recalls that he had a conversation with Ms Hudson in about April 2017, the purpose of which was to follow up on his instruction to Ms Hudson at the first file review meeting that she no longer introduce any loans from Mr Dandachli’s loan book. During that conversation he recalls that he had an exchange with Ms Hudson to the following effect:

Mr Davidson:    Are you still writing loans from the Dandachli book?

Ms Hudson:    I am only doing a few, but not too many.

Mr Davidson:    You know that’s not the answer we were looking for, we have confirmed fraudulent files come out of that loan book. We asked you not to write any loans from that loan book with NAB.

Ms Hudson:    There were only a few with problem payslips, it wasn’t all of them, there was 2.

Mr Davidson:    Three of the six were confirmed fraudulent. What processes do you have in place when dealing with any applications that come from the Dandachli Book?

Ms Hudson:    I am being more thorough and I am using bankstatement.com.au.

177    With the exception of the final statement attributed to her, Ms Hudson denies that she had a conversation with Mr Davidson to the effect recorded in the preceding paragraph and relies on her recollection of the conversation at the relevant time recorded at [175] above.

178    On 12 April 2017, after his telephone discussion with her, Mr Mohamed sent Ms Hudson an email which included:

As discussed this morning, please send me a quick Email re the particular file which involved ppty transfer from Moustafa Dandachli and your process now with dealing with the book you bought from him.

Just a few bullet points so we can have this matter closed - In the next few days is fine.

179    On 13 April 2017 Ms Hudson responded to Mr Mohamed’s email referred to in the preceding paragraph. Her email included:

As discussed the file in question was one that was inherited when I purchased the book from Moustafa Dandachli. As the other party was the wife of a reputable Sydney dentist I decided to take on the application. In the end Dr & Mrs Assoud decided to use their CBA line of credit so the file was withdrawn.

Since my interview with NAB last April I no longer allow anyone to load the applications into FAST except myself so that I can further inspect the documents before submitting.

I now also use a product called bankstatements.com.au, this allows us to receive customers banks statements directly from the banks. This is to further reduce incidents of receiving fraudulent documents from potential customers.

Please advise if you need anything further from me to close this matter?

In cross-examination Ms Hudson said that she did not know why her email referred to “purchasing” Mr Dandachli’s loan book, she just followed Mr Mohammed’s lead. She maintained that she did not purchase his loan book, she just had access to it. That evidence seems disingenuous. If Mr Mohammed had misdescribed the nature of the transaction, I would expect that Ms Hudson would, in the circumstances, correct him. It was an important issue, given the concerns that had been raised. However, ultimately, whether Ms Hudson purchased the loan book or simply had access to it, is of no consequence. NAB was concerned by her use of the files. That said, Ms Hudson’s reference to a purchase of Mr Dandachli’s loan book in her own correspondence explains why NAB in its internal documents would have equally described how Ms Hudson came to have access to the files as a consequence of a purchase of Mr Dandachli’s loan book.

180    On 13 April 2017 Mr Mohamed provided Ms Hudson’s email referred to in the preceding paragraph to Mr Notaras, Ms Black and Ms Smith. Ms Smith responded to Mr Mohamed by email of the same date stating (as written):