On 6 November 2020, Walton J published reasons in The Commissioner of the Australian Federal Police v Pharmacy Depot Hurstville Pty Ltd (in liq) (No 2)  NSWSC 1571. In that case, a liquidator of a company which had its bank account restrained under section 18 of the Proceeds of Crime Act 2002 (POCA) sought a variation of the restraining order under s.24 of the POCA to pay his remuneration.
The application for variation of the restraining order was refused.
Although the decision concerned the unique circumstance of a liquidator seeking a variation for his remuneration, the decision touches on matters of general importance.
Section 24 of the POCA, which contains the variation power, permits the Court to vary a restraining order to meet “a specified debt incurred in good faith“. The Court can only make the variation order if “the person has disclosed all of his or her interests in property, and his or her liabilities, in a statement on oath that has been filed in the court” and “the court is satisfied that the person cannot meet the expense or debt out of property that is not covered by” a restraining order.
The liquidator sought to have an amount from the restrained account set aside for his future costs. The Court refused that application on the basis that it was not a “specified debt” which had been “incurred”. Walton J stated:
“It is plain that the subsection regards the allowance out of property covered by a restraining order for debts that have already materialised (that is, “incurred”). It follows that the subsection does not apply to any debt that is yet to be incurred.”
Hence, a variation application for the payment of a specified debt must relate to a debt already incurred; not a prospective liability.
The Court also found that the incurring of debts in circumstances where it is known that they can only be met from restrained assets does not meet the “good faith” test. Walton J stated:
In coming to these conclusion, Walton J relied on principles of statutory construction, including the observation by Edelman J in SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362;  HCA 34, where he observed (at ): “where a statute employs a term in its ordinary sense, there can be no warrant for the extension of the meaning beyond its ordinary sense”.
The above raises important considerations for practitioners acting for clients who seek a variation of a restraining order to meet debts. First, the debt must be quantifiable and presently owing. Secondly, the debt must have been incurred in circumstances where there was an expectation that it could be met from unrestrained assets, but is now no longer payable from unrestrained assets. A good example of such a debt may be a tax debt that is due to be paid and relates to income earned before a restraining order was made. More difficult situations arise where, before a restraining order is made, a person enters into a fixed term lease. After the fixed term expires, the tenant continues in overholding on a month by month basis. Each month a new liability to pay rent is incurred. Based on Walton J’s decision, the tenant would not be entitled to seek a variation to pay the rent after the expiration of the fixed term lease.