State of Queensland v Bank of Queensland & Anor

In this unusual matter a Bank’s customer’s accounts had been made subject to certain freezing orders under the Criminal Proceeds Confiscation Act. These orders prohibited any dealings on the customer’s accounts including a loan facility which the customer held with the Bank. Certain property of the customer was sold and the proceeds were paid to the Bank which then credited the amount against the indebtedness on the loan account. The customer thereupon further drew down on the loan account and increased the indebtedness again. On the sale of certain land over which the Bank held security in respect of the indebtedness on the customer’s accounts, the Bank claimed that it was entitled to retain an amount sufficient to satisfy all of the customer’s indebtedness to it. It was accepted that the dealing by the Bank with the proceeds of the sale of property paid to it and allowing additional credit to be withdrawn was a dealing with the customer’s property in breach of the freezing orders. The question for the Court of Appeal was whether or not the transaction by which the customer withdrew money from the loan facility and thereby increased the Bank’s interest in the land was void by reason of the illegality arising because the transaction was in breach of the freezing orders. The Court (Gotterson JA and Martin J) passed a number of observations as to the operation of s 53 of the Criminal Proceeds Confiscation Act which operates in some circumstances to render void transactions which have been made in breach of a court order freezing assets. However, in relation to the issue of whether or not the transaction was void by reason of illegality at common law, the majority held that the mere fact that a transaction is in breach of a court order does not render it void. Their Honours held that much will depend upon the circumstances of the case and the intent with which the act was done. Further, there was nothing in the legislation from which a legislative intention could be found that anything done in breach of an order made under the Act was void. It should be noted that Atkinson J wrote a strong decision in dissent which is well worth considering.