Zebra Wrecking Company Pty Ltd v Parry
[2016] QDC 10
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- Unreported Judgment
- Zebra Wrecking Company Pty Ltd v Parry[2016] QDC 10
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Zebra Wrecking Company Pty Ltd v Parry[2016] QDC 10
Zebra Wrecking Company Pty Ltd v Parry[2016] QDC 10
DISTRICT COURT OF QUEENSLAND
CITATION: | Zebra Wrecking Company Pty Ltd v Parry & Ors [2016] QDC 10 |
PARTIES: | ZEBRA WRECKING COMPANY PTY LTD (Plaintiff) v SHANNON PETA PARRY (First Defendant) And WAYNE LEE PARRY (Second Defendant) And SHAYNE INDUSTRIES PTY LTD (ACN 148 868 704) (Third Defendant) |
FILE NO/S: | ROCK – DIS - 71/12 |
DIVISION: | Civil |
PROCEEDING: | Trial |
ORIGINATING COURT: | District Court of Rockhampton |
DELIVERED ON: | 16 February 2016 |
DELIVERED AT: | Rockhampton |
HEARING DATE: | 18, 19, 20 January 2016. |
JUDGE: | Burnett DCJ |
ORDER: | Plaintiff is to circulate and submit a form of judgment giving effect to these findings including interest and costs within 14 days. In default of agreement as to a form of order there be liberty to apply. |
CATCHWORDS: | Money had and received – claim in restitution – strict liability – receipt – liability of innocent third party Fraud – payment of stolen monies into joint bank account – notice – constructive notice – liability of trustee for payment out of trust monies Conversion – damage to chattel – conversion of property by removal or pat of original chattel and replacement with substitute part – damages. |
COUNSEL: | SJ Deaves for the plaintiff S McLennan for the second defendant |
SOLICITORS: Introduction | Rees R & Sydney Jones Lawyers for the plaintiff Bressington & Partners for the second defendant |
- [1]On 26 October 2015 the first defendant, Shannon Peta Parry, was convicted of 1 count of fraud as an employee to the value of $30,000 or more and 1 count of stealing as a servant. She had been employed by the plaintiff as its financial controller and business manager between 21 June 2010 and 31 December 2011. A sum of $211,035.30 was misappropriated by her from the plaintiff. During that period she also stole a computer hard drive. A significant amount of that money was appropriated to a joint account operated by both the first defendant and the second defendant. The second defendant is also alleged to have been involved in the theft of the computer hard drive.
- [2]Unsurprisingly, much of this is not in issue in this proceeding. The principal issues in this proceeding are;
- The plaintiff’s entitlement to full restitution from the second defendant on the basis of a claim for money had and received;
- Alternatively, the plaintiff’s entitlement to partial restitution in respect of funds paid into the joint account of the first and second defendants from about April 2010 for breach of trust;
- When the second defendant came to have knowledge of funds held by him on trust, and
- Whether the second defendant converted the computer hard drive.
First and third defendants
- [3]It is not in contest that the first defendant is now a bankrupt. The proceeds of her defalcation have been dispersed. Leave was not sought to proceed against her and, accordingly, proceedings against her remain stayed. See s 58(3) Bankruptcy Act (Cth). She was sentenced to five years and four months’ imprisonment with parole eligibility from late 2018. Although it seems improbable that her financial position will recover before she is discharged from her bankruptcy, no orders are sought against her in these proceedings and none will be made.
- [4]The third defendant was a company which acted as trustee for a discretionary family trust. Each of the first and second defendants were beneficiaries of that trust and they were also shareholders of the third defendant. However, only the first defendant was a director of the third defendant. The trust itself operated a beauty salon business, Indulge Spa, which features significantly in this litigation. The third defendant has now been wound up. In the result, the only financially viable party remaining is the second defendant and it was against him that the litigation was vigorously pursued by the plaintiff.
Background
- [5]Although the first defendant’s conduct entailed considerable deceit, the fraud itself appears to have been relatively straightforward. On numerous occasions between 18 November 2010 and 29 December 2011 the first defendant manufactured false invoices and entered up false details into the company’s books and computer system and arranged for sums to be deposited to various accounts, including payment of personal creditors of both she and the second defendant.
- [6]A sum approaching $220,000 was fraudulently transferred by the first defendant to these various accounts, including the joint account of the first and second defendants. However, at trial the plaintiff limited its claim against the second defendant. First it claimed a sum of $76,930 in respect of those amounts transferred by the first defendant into the joint account operated by both she and the second defendant, and secondly, it claimed a sum of $5,095.32, representing the total of fraudulent transfers caused by the second defendant to be made by the plaintiff to those creditors of the first and second defendants. That is a total of $82,025.32 in respect of fraudulent transfers between those dates.
- [7]It is significant to note form a survey of the joint account bank statements that the first defendant would electronically transfer funds from time to time from the plaintiff’s businesses into the joint account operated by she and the second defendant and then draw down upon the account thereby dispersing those stolen moneys. Sometimes money would be drawn out almost immediately but on other occasions funds were dispersed over periods of up to two weeks. The second defendant swore that at no time did he exercise any oversight of the joint account. He says he left its management to the first defendant. He swore he only became aware of the use of the joint account for the conduct of the first defendant’s criminal enterprise after police informed him of the plaintiff’s allegations against his wife in mid-2012.
- [8]In addition, the plaintiff also claims damages in the sum of $340 for the conversion of the computer hard drive. In total the plaintiff’s claim against the second defendant approximates in a sum of $82,365.32.
- [9]In his defence the second defendant admitted each of the payments alleged to have been made by the first defendant into the joint account and the payments made to joint creditors alleged in those invoices. However, he expressly denied any knowledge of any of the payments made by the first defendant into the joint account on to their creditors. Additionally he pleaded in his amended defence filed the day before commencement of the trial:
“...that in 2008 the second defendant had a transient ischemic attack (‘TIA’). As a consequence of having a TIA, at all relevant times the first defendant had autonomous management of the first and second defendant’s financial affairs. This included, but was not limited to, management of the following bank accounts:
- (i)Australia and New Zealand Group Limited account number 014760268225833;
- (ii)Westpac Banking Corporation account number 734-064-618283;
- (iii)Westpac Banking Corporation account number 034064-223014.”
The absence of knowledge constituted the submissions substantive factual issue in the proceeding[1].
Pleading issue
- [10]The pleadings in this case enlivened an issue in addresses. At no point prior to addresses had either side taken issue with the pleadings. Relevantly the plaintiff alleged at paragraph 22 of the Statement of Claim:
“22. The second defendant:
- (a)knew the facts alleged in paragraphs 11 to 19 and 21 above [being a reference to the various transfers made to the joint account and to joint creditors of the first and second defendants] and thereby participated in the first defendant’s breaches of fiduciary duty...”
- [11]Counsel for the second defendant submitted that in pleading that the second defendant “knew the facts alleged in paragraphs 11 to 19 and 21” of the Statement of Claim the plaintiff was asserting that the second defendant had actual knowledge of the first defendant’s breaches of fiduciary duty and was not seeking to rely upon constructive knowledge in terms that are described below. He complained that by reason of the Uniform Civil Procedure Rules (UCPR) r 150(1)(k), which requires the pleading of knowledge and notice, and UCPR r 150(2), which requires any fact from which any matter mentioned in subrule (1) is claimed to be the subject of an inference it is to be specifically pleaded. That is, if it was to be inferred by the second defendant that the plaintiff was relying solely upon actual knowledge and not constructive knowledge then those additional facts must be pleaded. It was submitted that in the absence of those allegations the plaintiff should be confined to running a case based on ‘actual’ and not ‘constructive’ knowledge by the second defendant.
- [12]It did not appear to be in dispute that knowledge in the context of this dispute could be established by demonstrating that a third party has either:
- (i)actual knowledge of the fraud or the breach of fiduciary duty from which the funds have been derived; or
- (ii)wilfully shut their eyes to the obvious; or
- (iii)wilfully and recklessly failed to make inquiries that an honest and reasonable person would make; or
- (iv)knowledge of circumstances that would indicate the facts to an honest and reasonable person.
See Gibson J in Baden v Societe Generale pour Favoriser le Developpement du Commerce et de l’Industrie en France SA [1993] 1 WLR 509 at 575-582; Counsul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 398 and 412-413.
- [13]It is plain that the bald assertion of knowledge was not supported by the particulars required by UCPR r 150(2). However: first, no complaint was made of this matter until after the trial and in addresses; and, secondly, the complaint was alive to the issue of constructive knowledge irrespective of which character knowledge is alleged to have taken, that is whether it was actual, Nelsonian, due to wilful and reckless failure to make inquiries that an honest and reasonable person would make, or, based on knowledge that would put a reasonable person on notice. That is because “knowledge” ultimately relates to a state of mind. In the absence of an admission as to knowledge by the subject (and there was none here) knowledge in the sense of the second defendant’s state of mind could only ever have been the subject of inference thereby requiring the particulars necessitated by UCPR r 150(2).
- [14]Although less than desirable, in this instance the pleadings served to put the parties on notice that “knowledge” was in issue and a factual contest on that issue was agitated. That is, including by reference to the second defendant’s allegation that his capacity to have knowledge was impeded by “TIA”.
- [15]I do not accept the second defendant’s submission that the plaintiff’s case is confined to establishing actual knowledge only and that it has not sought to rely upon any other category of knowledge. That is not how the case was conducted and it would be now unfair to confine it as the second defendant contends it ought to be.
Restitution/money had and received
- [16]The plaintiff’s principal claim against the second defendant is based upon a claim against him for monies being paid into the joint account by the plaintiff on the basis of they being monies had and received by him to the account of the plaintiff and/or restitution. The plaintiff contends that on either basis the claim should succeed as either is essentially one of strict liability.
- [17]In support of this submission the plaintiff particularly relies upon a number of UK decisions which it submits find support in Australia. It commenced relying upon the observations of Millett J in AGIP (Africa) Ltd v Jackson where at 285 his Honour observed:
“The cause of action for money had and received is complete when the plaintiff’s money is received by the defendant. It does not depend on the continued retention of the money by the defendant. Save in strictly limited circumstances it is no defence that he has parted with it. A fortiori it can be no defence for him to show that he has so mixed it with his own money that he cannot tell whether he still has it or not.
- [18]This principle was not disturbed judgment on appeal with Fox LJ with whom Butler-Sloss and Beldam LJJ agreeing stating:
“Since liability depends upon receipt the fact that a recipient has not retained the asset is irrelevant. For the same reason dishonesty or lack of inquiry on the part of the recipient are irrelevant.”
- [19]It follows liability depends upon ‘receipt’ by the defendant of the plaintiff’s money and the extent of the liability depends on the amount received.
- [20]Specific reliance was also placed upon the House of Lords decision of Lipkin (Gorman a firm v Karpnale Limited [1991] 2 AC 548. In particular reliance was placed on the observations by Lord Tembleton and Lord Goff. The plaintiff submitted those authorities had been followed in Australia in a number of instances: see ANZ Group Limited v Westpac Banking Corporation (1987) 164 CLR 662; and David Securities Pty Ltd v Commonwealth Banking Corporation (1992) 175 CLR 353.
- [21]The second defendant rejects the plaintiff’s contentions on this issue. It was submitted for him that a claim in unjust enrichment is based upon an obligation to restore the value of the retained benefit of funds from the time of notice. It was contended that this approach was entirely consistent with principles expressed by the courts binding this court. See Farah Constructions Pty Ltd & Ors v Say-Dee Pty Ltd (2007) 230 CLR 89 and Port of Brisbane Corporation v ANZ Securities Limited (No 2) [2003] 2 QDR 661 which authorities the second defendants submitted had been applied and cited with approval in other Australian jurisdictions. That is to say no principle of strict liability was applicable.
- [22]This is plainly a difficult area of law and there is a significant divergence of authority, particularly in the issue of ‘strict liability’. Much of the divergence concerns both the variety of factual scenarios concerning which relief is sought and also the common claims made for relief in both common law by claims for money had and received and in equity by way of claims in restitution. In ANZ v Westpac supra at 673 the court considered and explained the basis for the common law action of money had and received for recovery of an amount paid under fundamental mistake of fact. It noted the common law right of action might arise in circumstances which also give rise to a resulting trust which might lead a court to grant relief by way of constructive trust. Their Honours continued:
“However, notwithstanding that the grounds of the action for recovery are framed in the traditional words of trust or use and that contemporary legal principles of restitution or unjust enrichment can be equated with seminal equitable notions of good conscience, the action itself is not for the enforcement of a trust or for tracing or the recovery of specific money or property. It is a common law action for recovery of the value of the unjust enrichment and the fact that specific money or property received can no longer be identified in the hands of the recipient or traced into other specific property which he holds does not it itself constitute an answer in a category of case in which the law imposes a prima facie liability to make restitution.”
- [23]With these observations in mind I think the second defendant submissions on this point are correct as here the real issue to be resolved is “receipt”. First the plaintiff relies upon observations in AGIP. I do not think they are helpful. In that case the relevant issue on appeal concerned the capacity to trace at common law. The comments relied upon by the plaintiff were relevant to the question of whether tracing was open at common law. In AGIP there were funds in the hands of the defendant. They had not been dispersed but mixed with other funds. The “liability” being addressed by Fox LJ in the quote relied upon by the plaintiff concerned the “entitlement to trace”. At first instance the judge held there was no liability to trace at common law because of the mixing of funds. The unsuccessful plaintiff failed to persuade the Court of Appeal that that principle of law had changed. Respectfully here the plaintiff’s reliance upon this remark was out of context.
- [24]Here as in AGIP the funds had been transferred into another account and were subsequently mixed and remained unidentified such that here they were not amenable to tracing at common law or, indeed in this instance on the facts, equity.
- [25]Respectfully the position here is best explained by reference to both the facts and principles expressed by the High Court in National Commercial Banking Corporation of Australia v Batty (1986) 160 CLR 251.
- [26]In Batty the defendant, Batty was an accountant. He was in partnership with another, Davis. Davis misappropriated cheques payable to a third party and deposited them to the firm’s account. Batty was a joint account holder with Davis of that account. Davis then withdrew the proceeds and applied them to his own use. At no time was Batty aware the cheques had been paid into the joint account. Although issues relevant to partnership which are of no interest here were considered by the High Court the High Court examined liability of Batty to the bank on the basis of he having received the money to the bank’s use.
- [27]In Batty the issue of “strict liability” for funds in the hands of a third party was considered. There the applicants placed reliance upon an old authority, Marsh v Keating (1834) 2 Cl. & F. 250 [6 E.R. 1149] for the principle that actual knowledge of receipt was not essential: all that is required is that the recipient has the “means of knowledge”: See Gibbs CJ, with whom Wilson J at 269-270; Dawson J at 299-300 and Brennan J also agreed (although for slightly differing reasons but accepting the Chief Justice on this point); at 280-281. Deane J did not consider the point: p 298.
- [28]In summary the Chief Justice considered Marsh v Keating and in particular a subsequent decision of Jacobs v Morris (1901) 1 Ch. 261 where at first instance, following Marsh v Keating Farwell J said that for the plaintiff to succeed in an action for money had and received it was necessary to show that the recipient “knew or had means of knowing that the money had been paid into his account”: [1901] 1 Ch 261 at 269-271.
- [29]The Chief Justice’s views were significantly influenced by the decision of Dixon J in James v Oxley (1939) 61 CLR 433. There a solicitor’s clerk fraudulently obtained from the plaintiff a cheque which he paid into his employer’s trust account then secured two further cheques from the firm which he then misappropriated. There the firm was held liable because “the defendants knew that they had money belonging to someone else and one of the defendants dealt with it in such a way that it was misappropriated”: James v Oxley Supra at 444. In the Chief Justice’s view this was enough to render them liable: at 267. His Honour continued:
“… However, Latham CJ [in James v Oxley] suggested that the elements of knowledge or means of knowledge might have been material. Rich J did not deal with the question. Dixon J (with whom McTiernan J agreed) recognised the difficulty that arises when an agent, acting outside the course of his authority, pays the money of a stranger into a bank account in the name of his principal and then withdraws it under a general authority to sign cheques on the account. He said:
‘As the money has been credited to the principal or master, it has been placed at least theoretically under his control and received on his behalf. But it is evident that in such a case the agent may from first to last retain the power of dealing with the money as he chooses. Though the bank account is in the name of his principal, the latter may have no effective means of controlling the money and excluding the agent.’
After discussing Jacobs v Morris and Marsh v Keating Dixon J continued:
‘The explanation of the introduction into the question of the element of ‘means of knowledge’ may lie in the peculiarity of the position of partners in relation to a partnership bank account upon which each partner may be empowered to draw by himself. In substance, money, though temporarily there, may never be in the actual de facto control of any member of the firm except in the fraudulent partner. He may pay a cheque to the credit of the account and immediately draw against it. In such circumstances the technical ‘receipt’ by the firm may be considered as insufficient to make payment into the account a receipt to the use of the plaintiff unless the other partners knew or ought to have known of the credit and of its nature. In the same way, if an agent who operates on his principal’s account free of his actual control or supervision pays in money fraudulently obtained from a stranger and forthwith draws it out again, the principal may be regarded as never having really received it to the use of the stranger unless he knew or ought to have known of its presence before it was withdrawn.’
Although Dixon J did not need to express a concluded opinion on this question, in my respectful opinion the solution which he tentatively suggested is the correct one. It is quite unnecessary for present purposes to discuss the theoretical basis of the action for money had and received. Whether the action is based on an implied promise to pay, or on a principle designed to prevent unjust enrichment, the emphasis on justice and equity in both old and modern authority on this subject supports the view that the action will not lie unless the defendant in justice and equity ought to pay the money to the plaintiff. Where, because of the action of a servant or agent acting outside the scope of his authority, or for that matter because of the action of a complete stranger, money has been paid into the account of the defendant, who has technically received it, although he is quite unaware of that fact, and the money is then misappropriated, still without the knowledge or intervention of the defendant, there seems to be no reason in justice or equity why the defendant should be answerable for the money simply because theoretically he had the means of knowing that the money was in the account. In principle, in those circumstances, the defendant ought not to be liable unless, before the money was misappropriated, he knew or ought to have known that he had possession or control of it. In other words, where the defendant has not had the benefit of the money, has not played any part in disposing of it and was ignorant of the fact that it was theoretically under his control, he should not be liable in the absence of fault on his part.”
- [30]There is a strong analogy between the facts presented in Batty and those in this case. In this instance the joint account was that of a husband and wife. That relationship, in the words of Dixon J, provides “explanation of the introduction into the question of the element of ‘means of knowledge’”. In this case as in James v Oxley the stolen money, though temporarily there, may never be in the actual de facto control of [the joint account] except the fraudulent partner”: at 268. It follows that while Mrs Parry was able to arrange fraudulent EFT’s to the credit of the account and immediately draw against them the circumstances were such that there was a “technical receipt” by the joint account holders that fact alone, as Dixon J noted, “may be considered as insufficient to make a payment into the account a receipt to the use of the [defrauded entity] unless the other [account holder] knew or ought to have known of the credit and of its nature”. In the absence of ‘receipt’ the cause of action in moneys had and received cannot be made out in common law leaving the plaintiff to a remedy in equity.
- [31]Upon this analysis it does not appear that the High Court’s view is inconsistent with for instance the authority in AGIP. AGIP identified as central to the right of action in monies had and received as being a creditor for monies had and received in respect of something “you can, even at law, follow, but only so long as the relation of creditor and debtor has not superseded the right in rem”: at 564.
- [32]The authority in Batty still holds good today. Respectfully the authorities relied upon by the plaintiff can be readily distinguished. Mostly they considered situations which were more complex than simple defalcations and funds transfers through jointly held accounts. In Lipkin the law lords applied Marsh v Keating but without consideration of the views expressed by the High Court in Batty. The High Court binds and me is in any event more persuasive given the detailed consideration afforded by it to the seminal authority of Marsh v Keating. Although Lipkin is cited with approval in Australian authorities it is not cited as contrary to Batty. Its approval is limited to the issue of change of position as a defence to a claim for monies had and received. See David Securities Limited v The Commonwealth Bank of Australia supra at 385.
- [33]Respectfully nothing in the single judge decisions of Koorootang Nominees v ANZ [1998] 3 VR 16: Lurgi (Australia) Pty Ltd & Anor v Gratz & Ors [2000] VSC 278 or Alesco Corporation Limited v TT Maari [2015] NSW SC 469 suggest any departure from the High Court as expressed in Batty on this point.
- [34]The plaintiff also relies upon the observations of Hansen J in Koorootang with respect to the first limb of the rule in Barnes v Addy and his observation that there “is a strong argument that liability is strict liability subject to the defence of bona fide purchase and change of position”. However respectfully his Honour’s remarks are addressing the concerns of whether or not strict liability arises in circumstances where the cause of action is in restitution. His Honour did not address Batty as the case before him was advanced upon the basis of a certain degree of knowledge by a recipient of Trust Properties with restitution being sought in support of an equitable claim. There his Honour “… (left) for another day a determination of the issue of whether liability under the first limb of Barnes v Addy is strict”: supra at 105. I note here the plaintiff’s case was framed upon a claim for relief in restitution and breach of trust.
- [35]Perhaps the most persuasive authority that the plaintiff contended for was the decision of the New South Wales Court of Appeal in Russell Gould Pty Ltd v Ramangkura (2014) 313 ALR 367: [2014] NSW CA 310. Respectfully however I do not see it as assisting the plaintiff. There the Court of Appeal endorsed the conventional approach noted above in AGIP. That is, when pursuing relief at common law “... any ability to maintain the action against such a third party depends on the plaintiffs showing that money or property in that third party’s hands is the legal property of the plaintiff – a matter that, … involves common law rules as distinct from rules of equity regarding following and tracing”: at 373. That is the difficulty here when no funds can be followed or traced into the hands of the second defendant. In any event the plaintiff particularly relied upon obiter comments at paragraphs 27 and 28 that there was a “prima facie obligation on the part of the recipient to make restitution. The action thus lies principally against a receiving party.” Respectfully the decision is of limited utility in the current context given there the court’s conclusion that the appellant’s case failed at first instance and on appeal because of the nature of the relief sought rather than because of an apparent cause of action available but which had not been pursued.
- [36]It follows that I do not accept the plaintiff’s submission that it is entitled to judgment in the full sum claimed against the second defendant upon the basis of the first defendant’s fraudulent payment of funds into the joint account. There must be “receipt” and thus the plaintiff’s claim is not subject to an entitlement based upon a principle of strict liability. For reasons addressed below I am satisfied that in this case until about 31 march 2012 there was no technical “receipt” in the sense described by Dixon J in James v Oxley which principle was confirmed and applied in Batty. For reasons addressed below the Plaintiff’s claim succeeds only against the second defendant for misappropriated sums credited to the joint account from then because of ‘receipt’ liability arising from that time.
Trust claim
- [37]There is no dispute between the parties concerning the principles governing this aspect of the claim. The starting point are the often cited remarks of members of the High Court in Black v S. Freedman & Co (1910) 10 CLR 105. More recently, and relevantly to the facts of this case, in Robert Evans & Associates v European Bank Limited [2004] NSWCA 82, Spigelman CJ, with whom Handley and Santow JJ agreed, observed at 100:
“A case of simple theft involves a transfer of property, about which the transferor was entirely unaware. The transferee holds any property into which the stolen property has been converted on trust in a manner which should be seen as automatic. (See Chambers, Resulting Trusts, especially at 22-33, 116-118.)
The Australian authorities indicate that a trust arises immediately upon the acquisition of the property, not when recognised by a court. (As in Black v S. Freedman & Co, see also Rasmanis v Jurewitsch (1969) 70 SR (NSW) 407.”
- [38]Upon that basis it was submitted for the plaintiff, and not contested by the second defendant, that the sum of $76,930 paid into the joint account was impressed with the trust at the time of deposit of each instalment. However, the fund has been dispersed such that it no longer exists. Dissipation of funds by so-called “innocent” recipients is not without precedent. That event leaves the injured party to pursue the innocent party upon the rule in Barnes v Addy (1874) LR 9 Ch App 244. That rule was explained in Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Limited [1998] 3 VR 16 by Justice Hansen in the following terms at 76-77:
“There are, generally speaking, two situations in which a third party will find itself liable to account to a beneficiary of a trust where the trustee has breached his or her fiduciary duties. The principles which apply in those situations are often said to be derived from the judgment of Lord Selborne LC in Barnes v Addy at 251-252:
‘Those who create a trust clothe the trustee with a legal power and control over the trust property, imposing on him a corresponding responsibility. That responsibility may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees de son tort, or actually participating in any fraudulent conduct the trustee to the injury of the cestui que trust. But, on the other hand, strangers are not made to be constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees”.
It can at once be seen that the two situations in which a third party will be made a constructive trustee following a breach of trust by the trustee are, under Lord Selborne’s judgment:
- (i)where a third party receives trust property as a consequence of a breach of trust;
- (ii)where a third party knowingly assists a trustee to misapply trust assets.
These two situations have come to be known as the “two limbs” of Barnes v Addy, and for convenience sake I adopt that nomenclature here. This case concerns the first form of liability which has come to be known as “knowing receipt” or (more recently) “receipt liability”. The second form of liability was traditionally referred to as “knowing assistance”, but following the Privy Council’s decision in Royal Brunei Airlines v Tan [1995] 2 AC 378, it is probably more correct to refer to it as “accessory liability”.
- [39]The plaintiff did not contend it could make out a case on the second limb of the rule in Barnes v Addy. It relies solely on the receipt limb. Although Hansen J conducted a detailed survey and analysis of the authorities he concluded with an observation that given the manner in which that case was run before him the issue of whether a claim under the first limb in Barnes v Addy is one of strict liability remains open and as matters stand is not the law.
- [40]It is not in contention that insofar as breach of trust is concerned no issue of strict liability arises, even for the innocent recipient of funds impressed with a trust. In those circumstances an innocent recipient only becomes liable for the disposition of trust property once he/she acquires relevant knowledge of the trust: Black v S. Freedman & Co supra; Robert Evans & Associates v European Bank Limited supra.
- [41]Likewise in a decision of Lurgi (Australia) Pty Ltd & Anor v Gratz & Ors [2000] VSC 278, a case that was factually on all fours with this case, Byrne J stated, commencing part-way through paragraph 74:
“...In Black v Freedman the High Court treated stolen funds as being subject to a similar trust in favour of the true owner. Where, as in this case, the thief makes a gift of the funds to another, that other is amenable to equitable jurisdiction notwithstanding that the recipient had no notice of the theft for there is no valuable consideration for the payment. In that case, however, the recipient had no notice of the theft at the time of receipt but discovered it while the funds were still in her hand. In such a case the equitable obligation arises when this knowledge is acquired. The trust in such a case attaches only to stolen funds then in the hands of the recipient. Where these funds are no longer held by the recipient and tracing is possible, it would attach to other property in the hands of the recipient which has been purchased with those stolen funds.”
At paragraph 75 his Honour continued:
“...The funds in the joint account which, in accordance with conventional principle, represent the fruits of the frauds of Mrs Gratz are fixed with a trust in the hands of the account holders only when this fraudulent source is known., I will treat as sufficient knowledge for this purpose any of the first four categories identified by Peter Gibson J in Baden v Societe Generale pour Favoriser le Developpement du Commerce et de l’Industrie en France SA. The recipient has knowledge from my purposes where it is shown that they have:
- (i)actual knowledge of the fraud or the breach of fiduciary duty from which the funds have been derived; or
- (ii)wilfully shut where eyes to the obvious; or
- (iii)wilfully and recklessly failed to make inquiries that an honest and reasonable person would make; or
- (iv)knowledge of circumstances that would indicate the facts to an honest and reasonable person.”
- [42]Although the knowledge requirement in respect of recipient liability was not settled in Farah the Baden classification has been broadly adopted in Australia and should be applied: Grimaldi v Chameleon Mining NL (no 2) (2012) 287 ALR 22 at [269] at p 86.
- [43]As noted earlier the issue of receipt is central to this litigation. Critical to resolution of that issue is the question of when and if the second defendant came into knowledge that he was in receipt of the funds in the joint account which had been fraudulently transferred into it by the first defendant.
Knowledge
- [44]In his evidence the second defendant denied any knowledge of the first defendant’s conduct before he was spoken to by police about it in June 2010. Even in that respect he swore that he only came to know the true extent of the fraud at the time of the trial late in 2015.[2]He swore that he did not authorise the first defendant to use the joint account for any criminal enterprise[3]and that he had no idea that the misappropriated money was being paid into the joint account.
- [45]It is not in dispute that by the time these matters were brought to his attention by police all the funds that had been deposited by the first defendant into the joint account had been dissipated. Accordingly, on the second defendant’s case, he had not “received” in a legal sense any of the misappropriated funds.
- [46]The plaintiff contends that I should reject the second defendant’s evidence on this matter as either false or unreliable and, in fact, find that he did have knowledge in the material sense, being in a ‘constructive’ sense expressed in Baden v Societe. The plaintiffs contend knowledge could be found by evidence that the defendant either:
- Deliberately shut his eyes to these things; or,
- Abstained in a calculated way from making such inquiries as an honest and reasonable person would make about the trust and the application of trust property; or,
- Knew of facts which an honest and reasonable person would indicate the existence of the trust and the fact of misappropriation.
- [47]The second defendant denied the existence of any facts that would lend support to such constructive knowledge. However, the plaintiff contended that there were such facts that would support such a conclusion if the plaintiff’s evidence were preferred. Beyond submitting that the second defendant’s evidence ought not be relied upon, the plaintiff could not produce any evidence to disprove the second defendant’s evidence that he had;
- handed full control of all financial matters to the first defendant; and,
- never accessed or investigated the joint account including by examining its bank statements or balance from time to time.
- [48]If the second defendant’s evidence is rejected then the court can only be left with the evidence adduced by the plaintiff on this topic. Relevantly, the plaintiff contends that if accepted the evidence demonstrates:
- Shortly before the first amount was drawn across, an exchange of emails suggested that the financial position of the first and second defendant’s household was perilous or parlous. The first defendant described their financial situation as being “skint”, a description accepted by the second defendant;
- Each of the first and second defendants were employed on comfortable but modest salaries; and
- The defendants shared their household with two teenage daughters of the first defendant - from the bank statements it can be seen that expenses such as school fees were being incurred;
- The defendants had other debt commitments with two investment properties at Hervey Bay; and
- The defendant had property at Yeppoon subject to a significant but manageable mortgage.
- [49]In summary, the joint household was subject to the customary financial pressures that might be expected in the circumstances. So much was consistent with the second defendant’s evidence that:
“The whole thing [being the allegations against the first defendant] to me – to me it seemed like a mistake, like there was – it didn’t seem real because I look at my own – I look at the house, I look at my life, I look around, and there’s nothing visual, there’s nothing – you know, even today I go through it and it’s just so surreal to think that – so I always thought, yes, okay, that Ron had agreed to do bonuses, but the figure was – there’s a mistake. Okay. So...
Mistake with the figure?‑‑‑Yeah. It couldn’t possibly be 180,000. It couldn’t. It absolutely couldn’t.”[4]
- [50]In context, the second defendant’s meaning was that there was nothing in the household or lifestyle to show for the first defendant’s defalcation.
- [51]Despite the general financial position of the defendants’ household, in February 2011 the first defendant embarked upon the purchase of the Indulge Spa for a sum of $65,000. The second defendant says that the first defendant told him, and he believed, that the purchase was to be financed by a National Australia Bank loan. The bank statements support the assertion that a loan was put in place about this time and that there was some financing, although it is evident that the borrowings appear to have been limited to about $35,000. Entries in the bank statement demonstrate drawdowns on the 18th of March of $15,000, on the 28th of March of $15,000. Each of those drawdowns from the loan account and deposit into the joint account precede a withdrawal on the 31st of March of $36,186.66. That date, the 31st of March, was the settlement date for the contract, and at that time $34,000 remained owing on the face of the formal REIQ endorsed account.
- [52]It is reasonable to infer that the finance sums which had been transferred into the joint account had been directed to the drawdown on the 31st of March and were to be applied to settlement of the purchase contract.
- [53]However, the contract itself was unusual. It comprised two parts. The first part comprised a standard REIQ business contract for the purchase and sale of the business at a nominated sum of $36,000. In addition there was a side agreement in handwritten form which provided on its face that the third defendant would pay $26,000 cash in addition to the consideration of $36,000 stated in the REIQ form contract.
- [54]The second defendant accepted that he knew that the consideration of the contract was $60,000, (although other evidence suggests it was $65,000,) and that he witnessed the REIQ form contract. He denied expressing any distinct interest in the specific terms of the contract and did not accept that he had any familiarity with it. He said he did not witness the side agreement which was executed the same day.
- [55]He stated he believed statements made to him by the first defendant that the purchase would be funded by bank finance, and he also stated that he was generally familiar with the manner in which such transactions proceeded. Under cross-examination he accepted that ordinarily banks would require evidence that the advanced funds would be applied to the purpose of the loan, and commonly that the funds would be provided by means of bank cheque or transfer. Yet despite these matters he accepted that he paid one instalment of the contract on one occasion in a sum of either by $5000 or $6,000 cash. That sum was paid by him in cash to the vendor, Mrs Barnes, at a meeting arranged at a Coffee Club cafe shortly after the settlement on 31 March. Those matters put the case at its best for the defendant.
- [56]However, other evidence suggests that the second defendant’s involvement in this transaction was more consequential than he was prepared to accept. Mrs Barnes, the vendor, said that following interest shown by the first defendant in purchasing the business a meeting was conducted between she and each of the defendants. She said the first meeting went late into the evening and progressed over a number of hours. She said that there were subsequent meetings of which she said the second defendant attended at least eight or nine. She says the second defendant participated in the negotiations which ultimately produced the agreement between she and the third defendant for the purchase price of $65,000 with the consideration to be paid in three tranches; first a deposit; second a settlement sum, and third a series of post settlement instalments totalling $65,000.
- [57]The REIQ contract was endorsed with a provision noting a solicitor acted for the vendor, Mrs Barnes. However, the side agreement was handwritten by the first defendant. The side agreement provided for the payment of $26,000 cash. At the time of initial contract preparation a sum of $4000 cash was paid. That sum together with the further sum of $26,000 referred to in the side agreement accounted for the extra $30,000 to be paid in addition to the sum endorsed on the REIQ contract. In her evidence under cross-examination Mrs Barnes rejected the suggestion that the requirement for cash was at her insistence. However she could not state it was required by the first defendant. However, given the side agreement was drafted by the first defendant and it clearly reflected her preferred view, it seems apparent to me that Mrs Barnes’ position was simply one of her not demurring to that proposal.
- [58]In accordance with the side deal cash was paid over. Mrs Barnes swore that in addition to the initial $4000 paid by the first defendant on execution of the contract a sum of $10,000 was paid by the second defendant at or about the time of settlement and a further $6000 was paid by the second defendant at the Coffee Club meeting. She said the balance was paid in “bits and pieces”. This seemed to be a reference to the balance cash being paid over the remaining two occasions of the four occasions referred to by Mrs Barnes.
- [59]While there is some commonality between the evidence of each of the second defendant and Mrs Barnes, a significant point of material distinction rests on whether the second defendant paid her a sum of cash of $6000 at the Coffee Club on one occasion, and whether the second defendant paid Mrs Barnes other sums of cash over the remaining three occasions commencing from about the 31st of March 2011.
- [60]These differences can only be resolved by reference to credit. Ultimately I prefer the evidence of Mrs Barnes. She has no interest in the proceeding and can be seen, in the context of these proceedings, to be the most impartial witness. However criticism was made of her evidence. For instance, efforts were made to highlight subtle differences between the evidence given by her in the criminal proceedings and these proceedings concerning the number of payments made pursuant to the contract. I think her answer to that criticism was provided by both an adequate and truthful explanation; that is, that she answered the questions at the criminal proceedings as she understood them in their context. Her essential evidence was not inconsistent; that is, she was paid in three tranches. How she explained matters in the criminal proceedings, of course, was differently focused to these proceedings. In evidence in this case she expanded upon the discrete payments made in each tranche as here the details of those matters had particular relevance.
- [61]She was also criticised about receiving cash. It was suggested that the requirement for cash was done on her insistence with a view to avoiding tax. As I’ve noted earlier, she did not draft the side agreement. It was prepared by the first defendant, and Ms Barnes has simply acquiesced without demurrer to the draft. At the time she had both a solicitor and accountant who she says were advising her and who were aware of the side arrangement. I do not think it is appropriate to draw any adverse inference in the circumstances. From my impression Mrs Barnes was a relatively unsophisticated commercial person. She did not impress me as a person who sought to do the wrong thing. She kept her advisers informed of events. Given the arcane nature of tax law relevant to small business and her own limited insight it is understandable that there would be some element of vagueness about these matters. Additionally her recollection was not aided by the significant amount of time which has elapsed since these events upon which she was cross-examined without the benefit of her tax returns and other records.
- [62]It is, in the circumstances, I think, understandable that it would be difficult for her to explain precisely what and how her income was declared. I do not think it fair or reasonable to be too critical of her evidence on that point as was submitted by counsel for the second defendant Accordingly I, do not draw any adverse inference against her credit and generally accept as a witness of credit although as earlier stated, given the time that has elapsed and the arcane nature of the topic, and the absence of documents to assist in refreshing her memory some unreliability is to be expected. In any event I am satisfied her evidence on material matters was not infected by any unreliability. Additionally, she gave evidence which tended to demonstrate her honesty in the sense that she was prepared to answer questions to the best of her ability despite them potentially having an adverse bearing upon her credit.
- [63]Likewise so far as the other criticisms were concerned such as inconsistencies, I thought they were more reasonably explained by the passing of time between the relevant events and trial and the absence of documentation available to her to refresh her memory. Further, her status as a witness to one issue in a proceeding between two other parties with whom she had no significant or material connection adds to this matter.
- [64]On the contrary, the second defendant had a significant interest in the outcome of the litigation. He now stands as the only defendant against whom an efficacious judgment may be obtained. He did not impress me as an honest witness. I acknowledge he may have been an anxious witness and that anxiety may explain his frequently verbose answers, often times non-responsive to questions asked of him. However, some matters simply did not gel. For instance, early in his evidence he stated he was informed the value of the defendant’s fraud was $180,000. At the time the first defendant told him it was all “a mistake” and that the sum represented “bonuses”. In evidence-in-chief he was asked:
“What did you learn when you watched the trial that you weren’t aware of previously that led you to change your mind about that?‑‑‑
How much money, first. That was the first thing. I always thought it was 180 something because that’s what was said on the day when she was arrested, and then it’s 220. That was my first – like, that’s the first time I heard of it, when it was in the trial.”
- [65]In cross-examination it was pointed out to the second defendant that prior to the criminal proceeding he had been served with the writ and Statement of Claim in this proceeding. In cross-examination in respect of that matter the following exchange occurred:
“Well, that’s the point, isn’t it, from in or about October of 2012 you knew very well that the plaintiff was alleging that the total amount of the theft was $220,000 because that’s what you were being sued for?‑‑‑That I was being sued for, yes.
So how could it have come to a surprise to you to hear that $220,000 at the criminal trial?‑‑‑The 220,000 – well, the 220,000 I’m being sued for included costs. Right.
Well, no ‑ ‑ ‑?‑‑‑Shannon ‑ ‑ ‑
‑ ‑ ‑ it doesn’t and if you – if you – if you’d like to see that – the Statement of Claim, I can have that made available to you?‑‑‑No. No. No, it’s all right. I can clarify it.
All right?‑‑‑The 180 something was the original charge. Later I was told that included Telstra bills or something. But on the – on the only very little evidence that I was – I saw from Shannon – because I was just blacked out from it – was that the Telstra bills were part of the employment agreement. So her charge was 180 – something because Telstra was part and parcel of her employment agreement. My charge was 220,000 and something about costs.
You understood that’s what you were being sued for, didn’t you?‑‑‑Plus costs.
Yes?‑‑‑Okay.
So – so it was no surprise to you, at the beginning of the criminal trial, when you heard that the allegation being made against the first defendant was that she had stolen 220,000 from the plaintiff, was it?‑‑‑The surprise was that the Telstra thing wasn’t included.”[5]
- [66]The clear impression I had from his evidence was that he had been caught out in respect of this matter and that he was simply fashioning answers on the run.
- [67]He also swore that the money was to be provided by a bank but cash payments were also to be made. In that context he was reminded of earlier evidence that he was said to be “skint” and that in earlier evidence he’d agreed that the defendant’s household essentially lived hand to mouth.[6]However after these matters were raised for comment in the context of cash being available for the spa purchase the position was expressed as follows:
“...You didn’t ever think about where that – that fund came from – where that money came from?‑‑‑
Honestly, I did not think where the money came from...the idea of the skint thing was, I believed that she was keeping me on the level. The skint. I didn’t entirely believe that we were poor or going broke or anything like that. That was just the – the whip crack. That was the – to keep me in line, that I didn’t go blowing $300 on fuel or to go fishing...so skint is – I would put – I would just put down as our normal everyday living.”
- [68]Again, the clear impression I formed was that the second defendant was seeking to divert attention from the central issue in this case, namely the significant and unexplained amounts of cash that he was handling at the time of this purchase. To acknowledge otherwise would have highlighted the central weakness in his case; that is, accepting as I do that he handled the significant cash sums, why didn’t he make better inquiries given his general appreciation of the joint financial position of the defendants. Generally I didn’t consider him an honest or persuasive witness. He impressed me as a witness who now seeks to rewrite the history of this matter conveniently airbrushing from the evidence those matters which he intuitively knew were adverse to his case.
- [69]Ultimately I do not accept any of the second defendant’s evidence in respect of these matters, and it follows that I make the following findings of fact concerning the defendants’ state of being at or about the beginning of April 2011: At that time it was apparent that the first and second defendants were living literally hand to mouth. While they enjoyed comfortable incomes, they were also subject to the usual day-to-day costs of living pressures associated with a household of two adults and two children. They were required to budget carefully in order to meet their expenses, which included mortgages. That is notwithstanding equity which they had on their principal place. Although I am inclined to accept, that the second defendant had eschewed any detailed involvement in the management of the affairs of the household, he was fully informed about the proposed purchase of the Indulge Spa, and aware that the consideration for the purchase was $65,000. Furthermore, by reason of his involvement in the negotiations for the purchase and sale of the spa, he was aware that there was a side deal providing for the payment of $30,000 cash in addition to the $35,000 nominated on the face of the REIQ form contract. He was also aware that financially the defendant’s financial position was parlous. Consistent with that side deal, I am satisfied that the second defendant made three or four cash payments of sums of not less than $4000 to the vendor, Mrs Barnes. The first cash payment was a sum of $10,000 paid on or shortly after the 31st of March 2011. He subsequently made a further cash payment of $6000 at the Coffee Club, and there were at least two further payments making up the balance; that is, a sum of about $5,000 which to that point remained owing. Furthermore, he was aware that finance, insofar as it was to be provided by a bank, would have been subject to the usual requirements of a bank that such funds that were advanced would be advanced solely for the purpose of the loan, in this instance the purchase of the business, and that the bank would make such funds available by bank cheque on settlement or by bank transfer, but not cash.
- [70]Given that the second defendant was armed with knowledge from about 2 February 2011 (the date of execution of the contract) about the prospect of these cash transfers and the prospect of a bank loan, it was at least possible for him to believe that the financing arrangement may have covered financing to the date of settlement. However, beyond that date, the second defendant should have been alert to the prospect that any cash funds had a nefarious origin.
- [71]I am satisfied that from about 31 March the second defendant made the first cash payment of $10,000 to Mrs Barnes which cash could not be explained by reference to the legitimate household income or borrowings he acquired relevant knowledge that the funds were from an unaccounted source. From that time he ought to have been aware that there was no apparent source for these large sums of cash, given the other matters I have found. That matter alone ought to have put him on inquiry. I am so satisfied despite the faith he professed to have in the first defendant’s ability to administer their financial affairs or his disinterest in those matters.
- [72]Had he been minded to make reasonable inquiries his first point of inquiry would have been the joint account. Examination of the statements for that account would have revealed to him on their face that there were a significant number of large and sporadic deposits of differing amounts into that account from accounts identified as relating to the plaintiff’s businesses such as ‘Qld Cruisers Used Parts’, ‘Zebra Wreckingco Used Parts’ and ‘Bowes Investments’. Additionally a quick survey would have revealed the individual deposits approached and on some occasions exceeded her net weekly pay. In those circumstances I do not think any reasonable person would have accepted them as bonuses on their face. It follows that although he denies actual knowledge of the theft by the first defendant and deposit of those stolen monies into the joint account the second defendant had relevant knowledge. I am satisfied he deliberately shut his eyes to the obvious in the sense that realizing the first defendant was providing him with significant unexplained amounts of cash to make payments to Mrs Barnes he nevertheless refrained for asking any questions or make in any inquires as the to source of those funds. I am satisfied that in those circumstances they are the type of inquiry which any honest or reasonable person would have made.
- [73]The degree of knowledge required was described by Ungoed-Thomas J in Selangor United Rubber Estates Ltd v Cradock (No 3) [1968] 1 W.L.R. 1555 at 1590 as circumstances which would indicate to an honest and reasonable man that such a design was being committed or would put him on inquiry whether it was being committed. In my view that it’s the only reasonable conclusion that an honest and reasonable person could have drawn in this instance given my findings.
- [74]His failure to act upon that knowledge represented either a deliberate refusal on his part to investigate the prospect that the funds had come from a source other than a regular source, or represented an abstinence in a calculated way from making such inquiries as an honest and reasonable person would make about funds that were being presented to him.
- [75]It follows that I am satisfied that from the 1st of April 2011 the second defendant had a constructive knowledge of the funds at that point and subsequently transferred by the first defendant from the plaintiff’s account into the joint account and held those funds in trust from that occasion. It follows that he is liable to account for the dissipation of funds from that time.
- [76]It is admitted from the table at Tab 2 of Exhibit 2 that the sums deposited by the first defendant into the joint account of the first and second defendants between 31 March 2011 and 29 December 2011 totalled $57290. The plaintiff is entitled to restitution from the second defendant in respect of this sum. In addition it is agreed the first defendant caused joint creditors of the first and second defendants to the value of $5104.77 to be paid from the plaintiff’s account. All these payments post-date 31 March 2011. The plaintiff is also entitled to restitution of that amount from the second defendant.
Damages for conversion/trespass
- [77]The second defendant admits that he removed the plaintiff’s laptop from the plaintiff’s premises and caused the hard drive of the lap top to be removed. A deprivation of goods which deprives the plaintiff of the use of them for however short a period of time amounts to conversion. Likewise the altering of goods without damaging or destroying them is a conversion. As was noted by the learned authors of Law of Torts Balkan & Davis 4th Edition Lexis Nexus 2009 at 61:
“Conversion may be defined as an intentional dealing of goods which is seriously inconsistent with the possession or right to immediate possession of another person. This tort does not involve any element of dishonesty on the defendant’s part; nor is it a requirement that the defendant intended to deny the plaintiff’s rights. It follows that whilst conduct must be intentional mistake and good faith are irrelevant and it is no defence for a defendant to say that he honestly believed that he was authorised to deal with the goods. Likewise a mistake as to the true owner of the goods or the defendant’s right to deal with them is no defence: Clissold v Cratchley [1910] 2 KB 244.
- [78]The plaintiff submitted its claim for conversion and trespass in respect of the lap top was established on the admissions in the pleadings. In that regard the second defendant admits that the plaintiff had paid the sum of $346.50 in connection with the reinstallation of the hard drive, into the laptop and that the plaintiff is accordingly entitled to claim damages in respect of that sum.
- [79]The defendant contended however that the plaintiff’s action could only succeed if it had an immediate right to possession of the computer in question. The computer was in the possession of the first defendant at the time it was taken by the second defendant and that the first defendant had consented to that conduct. It was submitted that without evidence of any contract governing the plaintiff’s rights to take immediate possession of the computer the plaintiff has not established either cause of action.
- [80]Respectfully I disagree. The conversion itself does not concern the computer specifically but rather the hard drive which was a component within the computer. While the computer was in the actual possession of the first defendant at the time it was taken by the second defendant and the first defendant consented to that it was beyond the authority of the first defendant to authorise the removal of the hard drive. The plaintiff provided the laptop to the first defendant for her use. The second defendant admitted the allegations contained in the statement of claim that he removed the laptop from the plaintiff’s premises, caused the hard drive to be removed and that he retained possession of it at this residence. Evidence that the laptop was owned by the plaintiff and that the hard drive was removed was not challenged.[7] The only reasonable inference open on those facts and admissions was that the second defendant knew the computer was the property of the plaintiff and had been provided to the first defendant by the plaintiff for her use. Accordingly he ought to have appreciated that the removal of the hard drive from the computer constituted a removal of a constituent element of the computer belonging to the plaintiff. It is not to the point that he sought to replace it because he had been informed by the first defendant that the hard drive was damaged and in need of replacement. The removed hard drive remained the property of the plaintiff.
- [81]The plaintiff’s action for trespass to goods and/or conversion is allowed. It is entitled to damages in the sum of $346.50 for this claim.
Conclusion
- [82]In summary:
- The second defendant had constructive knowledge of the first defendant’s deposition of stolen monies into the joint account of the first and second defendants from or about 31 March 2011;
- The plaintiff’s claim for moneys had and received can only succeed in respect of the sums received by the second defendant which sums I assess at $62,394.77;
- Alternatively, the second defendant is in breach of trust in respect of the dispersal of $62,394.77 being the total amount received by him with constructive knowledge of the trust; and
- The second defendant is liable to the plaintiff in the sum of $346.50 for damages for trespass.
Orders
- [83]Direct the plaintiff circulate and submit a form of judgment giving effect to these findings including interest and costs within 14 days. In default of agreement as to a form of order there be liberty to apply.
Footnotes
[1] Although the first defendant tendered by consent hospital admission records relevant to a diagnosis of TIA the nature of that condition was not the subject of expert opinion evidence to explain its severity, its impact upon his cognitive processes and relevance to the first defendant’s passing management of financial affairs of those matters to his wife.
[2]See T1-51.
[3]See T1-67.
[4]T1-63 line 12-15.
[5]T2-30 line 35 – T2-31 line 18.
[6]See T2-6 line 30 and T2-8 and T2-14.
[7] T 1-18 Ln 32