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Kingston Futures Pty Ltd v Waterhouse[2021] QDC 119

Kingston Futures Pty Ltd v Waterhouse[2021] QDC 119

DISTRICT COURT OF QUEENSLAND

CITATION:

Kingston Futures Pty Ltd v Waterhouse [2021] QDC 119

PARTIES:

KINGSTON FUTURES PTY LTD

(Plaintiff)

v

WATERHOUSE

(Defendant)

FILE NO/S:

BD 3879/2014

DIVISION:

Civil

DELIVERED ON:

23 June 2021

DELIVERED AT:

Brisbane

HEARING DATE:

16, 18 June 2021

JUDGE:

Barlow QC DCJ

ORDERS:

The plaintiff’s claim be dismissed.

CATCHWORDS:

RESTITUTION – MISTAKE – DEFENCES AND LIMITATIONS ON RECOVERY – CHANGE OF POSITION, DETRIMENT ETC – plaintiff conducted a discretionary investment fund under the control of a sole director – director induced by fraudulent third party to pay plaintiff’s money into betting account opened with defendant – plaintiff did not give instructions for third party to place bets from account but third party did anyway – defendant did not make any enquiries as to authority of third party to place bets – third party eventually left account with nil balance, the defendant having paid away the money – whether plaintiff could claim for restitution – whether defence of change of position applies.

Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662, cited

Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560, followed

David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, cited

Niru Battery Manufacturing Co v Milestone Trading Ltd [2004] QB 985, cited

Port of Brisbane Corporation v ANZ Securities Ltd (No 2) [2003] 2 Qd R 661, applied

Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516, cited

COUNSEL:

S T Lane, for the plaintiff

K C Kelso, for the defendant

SOLICITORS:

Irish Bentley for the plaintiff

JBT Lawyers for the defendant

  1. [1]
    In this case, the court must decide which of two parties must suffer the financial consequence of dealing with a fraudster.
  2. [2]
    In 2006, Dr Henry Mulherin was the sole director of the plaintiff.  He knew a man named Brett Best, who was a foreign exchange trader.  Mr Best told him that, as well as trading in foreign exchange, he made considerable gains from gambling by using a statistical betting system.  That system apparently worked in betting on horse races. 
  3. [3]
    Dr Mulherin decided to provide some money to Mr Best for Mr Best to utilise his statistical betting system in betting on horse races.  He said in evidence that he provided about $20,000 and instructed Mr Best to bet no more than $5,000 at a time.  He said that they agreed that Mr Best could retain 30% of any profits made, as a form of incentive payment.  Dr Mulherin said that, over a number of months, Mr Best reported to him that he had made significant returns on that money.
  4. [4]
    The defendant, Robert Waterhouse, was a bookmaker who operated at several race courses in New South Wales.  His evidence was that Mr Best had, before March 2006, placed substantial bets with both him and other bookmakers and, overall, had won substantial amounts.  Mr Best had told him that he was a currency trader.
  5. [5]
    The plaintiff was also the manager of a discretionary investment fund, referred to by Dr Mulherin as the Kingston Futures Fund.  Among other investments, the fund traded foreign exchange.  Dr Mulherin said that he met Mr Best after an introduction from a friend and, having come to know him, he decided to use his services to trade foreign exchange from Brisbane.  However, before that occurred, Mr Best became unable to do so because he lost his overnight trader (whom I understand to have been an employee who worked overnight, when the foreign markets were open).
  6. [6]
    Dr Mulherin said that, around late March 2006, Mr Best suggested that they meet one Wednesday (when Dr Mulherin was in Sydney for other business reasons) at the Randwick racecourse in Sydney.  There, Mr Best suggested that the plaintiff invest some of its moneys to gamble on horse races utilising the statistical betting system that Mr Best operated.  Dr Mulherin decided that it would be to the benefit of the fund for the plaintiff to allow Mr Best to apply his betting system in placing bets on behalf of the plaintiff, so he told Mr Best that he would open a company betting account with a bookmaker and would deposit $160,000 as a starting figure.  They agreed that Mr Best could retain 30% of any profits.  Mr Best left him, returning shortly with a well-dressed man wearing a hat.  That man gave Dr Mulherin a slip of paper on which were written some bank account details and the name Waterhouse.  (It turned out that they were the details of an account operated by the defendant for his business of bookmaking.)  Dr Mulherin gave the man his business card and asked him to send account opening documents to his email address.  The man said, “Okay” and left.  Mr Best then asked Dr Mulherin what company he was proposing to use for the account, so that Mr Best could keep a look out because Mr Waterhouse was very busy.  Dr Mulherin said it would be Kingston Futures.
  7. [7]
    Dr Mulherin said that, shortly after that day, he had to travel to Singapore to complete the purchase of an apartment there.  In order to arrange for funds to be transferred to Mr Waterhouse’s account, he needed to send a written authorisation to the plaintiff’s financial institution, Man Financial, and he would then receive a telephone call from an officer of that company to confirm that the instructions were from him.  He said that he was concerned that his Australian mobile telephone may not work in Singapore, so he would not be able successfully to transfer funds if he waited to receive the account opening documents first.  So instead he decided to arrange to transfer $160,000 to Mr Waterhouse’s bank account before he left Australia.  He sent a written instruction to that effect by facsimile to Man Financial on 31 March 2006 and he subsequently received a call in which he confirmed the instruction.
  8. [8]
    The evidence shows that the sum of $160,000 was credited to Mr Waterhouse’s bank account on 31 March 2006.  The account statement shows that the deposit was from Man Financial and the transaction detail said “Kingston Futures”.  Mr Waterhouse said – and his records show – that he did not open a betting account in the name of Kingston Futures until 11 April 2006.  He explained that, although his office staff had told him that the deposit had been credited to his bank account, he did not open a betting account until he was satisfied that the funds had been cleared.
  9. [9]
    In the meantime, on 28 March 2006, Mr Best had opened a betting account with Mr Waterhouse in the name of Henry Mulherin.  Mr Waterhouse said that Mr Best had told him that he wanted to open that account in the name of his associate, Henry Mulherin.  He deposited a winning ticket on a race for $21,000, which Mr Waterhouse credited to that account.  Mr Waterhouse’s records, as explained by him, show that, on that day and 30 March 2006, Mr Best placed two bets with Mr Waterhouse on that account, losing a total of $18,000.  However, on the latter day he also caused credits totalling $80,000 to be made to that account so that, at the close of business on 30 March, the account for Henry Mulherin was in credit of $83,000.
  10. [10]
    Mr Waterhouse said that, at some stage, Mr Best told him that Mr Best was arranging for $160,000 to be deposited in Mr Waterhouse’s bank account for the purpose of opening a betting account with Mr Waterhouse in the name of Kingston Futures.  When Mr Waterhouse found out that that sum had been deposited on 31 March 2006, it confirmed to him that Mr Best was telling him the truth.
  11. [11]
    Mr Waterhouse gave evidence that, on 1 April 2006, Mr Best asked him to change the name of the Henry Mulherin account to Kingston Futures, which Mr Waterhouse did.  His records show an account in that name being credited with $83,000 on that day.  Mr Best then made two bets, winning $29,000 between them.  Mr Best also withdrew $10,000 from the account on that day, leaving a balance in the account of $102,000.
  12. [12]
    Mr Waterhouse’s betting account records for Kingston Futures show that $160,000 was credited to it on 11 April 2006.  The records show that numerous bets were placed on the Kingston Futures account over the next few months, with considerable overall success.  Mr Waterhouse said those bets were all placed by Mr Best.  The account balance fluctuated substantially, reaching a maximum balance of $397,810 on 20 May 2006.  However, thereafter, despite winning substantial sums, Mr Best lost even more in bets on this account and, apparently, with other bookmakers (using funds from this account).  On 28 June 2006, the funds remaining in the account were transferred to other bookmakers, leaving it with a nil balance.  Those were the last transactions on the account.
  13. [13]
    Dr Mulherin said that he never authorised Mr Best to undertake any transactions on the Kingston Futures account.  He believed that no transactions could be undertaken until he had had received account opening forms, on which he would set out the conditions on which transactions could be undertaken, including a maximum bet of $5,000.  However, he never received any forms and he did not take any steps to follow up with Mr Waterhouse.  He said he recalled Mr Best telling him at some time that Mr Waterhouse’s administration staff were somewhat behind in their work.  Dr Mulherin did nothing else to follow up the forms or to find out what had happened to the transferred funds.
  14. [14]
    Mr Waterhouse said that, in 2006, he did not have any account opening forms and he did not check the details of account holders, unless they asked him to provide them credit.  He believed Mr Best when he was told that he and Dr Mulherin were associates, he had some involvement with an entity or business called Kingston Futures and he was entitled to bet on behalf of Dr Mulherin first and then Kingston Futures.  There was nothing unusual in the transactions, apart from their amounts.
  15. [15]
    Mr Best was a fraudster.  In 2009 he was convicted, on his own pleas of guilty, of obtaining financial advantage by deception by an investment scheme in which investors apparently lost over $4,700,000.  He was sentenced to 13 years’ imprisonment.[1]  It seems that, in this case, he may have deliberately defrauded Kingston Futures by using its money to gamble on his own behalf.
  16. [16]
    Dr Mulherin did not ascertain that the moneys had been used up by Mr Best until, he said, in February 2007, when Mr Best told him that the money was all gone.  Dr Mulherin said in evidence that, some time later – perhaps in about October 2007 - he got his solicitors in Singapore to write to a person called Waterhouse to request the return of the money.  No such letter was in evidence and Dr Mulherin appeared to accept that, if it was sent, it may have been sent to the wrong person.  His solicitors received no response.  In June 2008, they wrote to Mr Waterhouse seeking a refund.  Mr Waterhouse apparently responded saying that he held no funds on behalf of the plaintiff.  Dr Mulherin’s solicitors wrote again in July 2008 and then followed it up in May 2009, apparently without any response.
  17. [17]
    Dr Mulherin then engaged a solicitor in Brisbane, who wrote to Mr Waterhouse in April 2011 and March 2012, again requesting the return of the funds.  It seems that again there was no response.
  18. [18]
    This proceeding was commenced in the Supreme Court of Queensland in 2012.  It was transferred to this court in 2014.  There have been substantial delays in its prosecution, with the plaintiff at times being deregistered as a company.  Finally, it has now reached the moment for determination.
  19. [19]
    The plaintiff contends that this is a simple case of money had and received by the defendant to the plaintiff’s use.  The money was paid to Mr Waterhouse for the purpose of the plaintiff, through Mr Best, placing bets when it chose.  That purpose failed:  the plaintiff neither placed bets nor authorised Mr Best or anyone else to do so on its behalf.  There has been a failure of consideration, in the sense of that term identified in similar cases:  it was “the failure to sustain itself of the state of affairs contemplated as a basis for the payments the [plaintiff seeks] to recover.”[2]  Therefore the plaintiff is entitled to be repaid its money by the recipient of the money, the defendant.  That claim is not defeated merely because the defendant has paid away the money. 
  20. [20]
    The defendant contends that the money was paid to his account, apparently at the behest of Mr Best, who forewarned the defendant that it would be received and told him that Kingston Futures was his entity.  So far as Mr Waterhouse was concerned, the funds were legitimately under Mr Best’s control and Mr Best was authorised to deal with them.  Mr Waterhouse had not met or had any dealings with Dr Mulherin or the plaintiff.  Mr Waterhouse has, in good faith and in reliance on receipt of the funds, paid away the moneys at Mr Best’s instructions.  Thus he has changed his position to his detriment and ought not be required to refund the money.
  21. [21]
    The defendant’s counsel sought to demonstrate that Dr Mulherin was untruthful in his description of the events at Randwick in March 2006, in particular in describing the exchange with the man in a hat.  Counsel for the defendant submitted that I should not accept Dr Mulherin’s evidence that he had not authorised Mr Best to place bets with Mr Waterhouse on behalf of the plaintiff, using the funds deposited by the plaintiff.  Instead I should find that he authorised Mr Best to make bets on the account once it was opened.  Dr Mulherin denied having given that authority, although he accepted that he had intended to do so once the account was opened with appropriate limits in place.
  22. [22]
    Counsel for the defendant also contended that there were other inconsistencies in Dr Mulherin’s evidence that also pointed to him not telling the truth.  For example, he said that Mr Best had been betting on his personal account for some months, but an account with Mr Waterhouse was only opened in Dr Mulherin’s name on 28 March 2006.  Also, counsel submitted that he was lying about having had his solicitors write a letter in October 2007:  a letter that has not been disclosed even though other letters from the same firm were disclosed.
  23. [23]
    I do not accept that Dr Mulherin was deliberately not telling the truth.  He presented to me as a truthful witness, doing his best to recall events of 14 to 15 years ago.  Although some of his evidence was unclear, or may appear to have been inconsistent with other parts, that can be explained by the long passage of time.  He was appropriately careful in answering the questions put to him.  In most respects his evidence appeared to be reliable, although I accept that he was mistaken in believing that a letter had been sent in October 2007.  However, I accept that he did provide his personal funds to Mr Best some time before March 2006 and Mr Best had placed bets with other bookmakers (and perhaps with Mr Waterhouse) on Dr Mulherin’s behalf, even though he did not open an account in Dr Mulherin’s name with Mr Waterhouse until March 2006.  The description of the facts to which I have already referred derives from both his and MrWaterhouse’s evidence and I find them to be correct.
  24. [24]
    The question, of course is whether Kingston Futures or Mr Waterhouse must bear the loss from the fraud perpetrated by Mr Best.
  25. [25]
    I do not accept the defendant’s submission that Dr Mulherin in fact authorised Mr Best to carry out the transactions.  I accept that he intended to do so but, given that he was dealing with company trust funds, he did not intend to do so until all formalities had been undertaken, including clearly setting out the limits of Mr Best’s authority in written instructions to Mr Best and to Mr Waterhouse.
  26. [26]
    Nonetheless, Dr Mulherin armed Mr Best with the knowledge that enabled him to persuade Mr Waterhouse that he was entitled to use the funds to create a betting account for “Kingston Futures” and to bet on that account without any restrictions.
  27. [27]
    The parties are not really at odds about the general principles governing their rights in this case.   In essence, the case falls to be decided on the principles comprehensively described by the High Court in a number of cases.  It is worth setting out the relevant passages.
  28. [28]
    In Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation,[3] the plurality relevantly said:

The basis of the common law action of money had and received for recovery of an amount paid under fundamental mistake of fact should now be recognized as lying not in implied contract but in restitution or unjust enrichment: …  In other words, receipt of a payment which has been made under a fundamental mistake is one of the categories of case in which the facts give rise to a prima facie obligation to make restitution, in the sense of compensation for the benefit of unjust enrichment, to the person who has sustained the countervailing detriment: …  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 of itself constitute an answer in a category of case in which the law imposes a prima facie liability to make restitution. Before that prima facie liability will be displaced, there must be circumstances (e.g … that there has been some adverse change of position by the recipient in good faith and in reliance on the payment) which the law recognizes would make an order for restitution unjust.

  1. [29]
    In David Securities Pty Ltd v Commonwealth Bank of Australia Ltd,[4] the plurality said:

If we accept the principle that payments made under a mistake of law should be prima facie recoverable, in the same way as payments made under a mistake of fact, a defence of change of position is necessary to ensure that enrichment of the recipient of the payment is prevented only in circumstances where it would be unjust. This does not mean that the concept of unjust enrichment needs to shift the primary focus of its attention from the moment of enrichment. From the point of view of the person making the payment, what happens after he or she has mistakenly paid over the money is irrelevant, for it is at that moment that the defendant is unjustly enriched. However, the defence of change of position is relevant to the enrichment of the defendant precisely because its central element is that the defendant has acted to his or her detriment on the faith of the receipt. In the jurisdictions in which it has been accepted (Canada and the United States), the defence operates in different ways but the common element in all cases is the requirement that the defendant point to expenditure or financial commitment which can be ascribed to the mistaken payment.

  1. [30]
    Much more recently, in Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd,[5] the High Court considered at length the circumstances in which money paid under a mistake should or need not be returned by the recipient.  In particular, the court considered in some detail the defence of change of position.  That case had distinct similarities to this, in that the parties were defrauded by a person who induced the appellant to pay money to the respondents on the basis of forged documents.  The respondents applied that money in reduction of the fraudster’s company’s debts to them and then continued to trade with the fraudster’s company.
  2. [31]
    It is convenient to set out relevant principles as stated by the Court in that case, as the Court’s statements of the principles are directly apposite here.
  3. [32]
    First, the Chief Justice said:

[27] A recipient of a payment made under mistake may suffer a detriment by acting on the faith of the payment. If the detriment cannot be reversed at the time that demand is made of the recipient, the recipient can be said to have changed its position and to have a defence to a claim for repayment of the money as money had and received. Whether or not the defence is available depends upon whether it would be inequitable for the recipient to refuse to repay the money. That is a judgment which the recipient, properly advised, must be able to make within a reasonable time and at a reasonable cost.

[29] In this case, at the time when the appellant demanded repayment, the respondents had suffered economic detriment of a kind that falls well within the class of detriment relevant to the change of position defence.  …  The existence of that detriment did not depend upon whether the debts owed to the respondents by TCP could be said to have been or released, irreversibly or otherwise. The detriment was attributable in part to the passage of time from when the payments were made to the date of demand. That is not to say the delay was the appellant’s fault. Fault is not relevant to the outcome of this appeal.

  1. [33]
    The plurality said:

[67] … payment caused by mistake is sufficient to give rise to a prima facie obligation on the part of the recipient to make restitution. Before that prima facie liability is displaced, the recipient must point to circumstances which would make an order for restitution unjust. … in order to show that retention of the payment is not unjust, the recipient is entitled to raise “by way of answer any matter or circumstance”.

[72] In Lipkin Gorman v Karpnale Ltd,[6] Lord Goff of Chieveley stated that a defendant may rely upon a defence of change of position whenever “it would be inequitable in all the circumstances to require him to make restitution”.

[80] In Lipkin Gorman,[7] Lord Goff used similar language in explaining the basis of the change of position defence: “[W]here an innocent defendant’s position is so changed that he will suffer an injustice if called upon to repay or to repay in full, the injustice of requiring him so to repay outweighs the injustice of denying the plaintiff restitution.”

[81] In David Securities, … the “central element” of the defence was identified as being “that the defendant has acted to his or her detriment on the faith of the receipt”[8] (emphasis in original).

[84] The equitable doctrine concerning detriment is concerned with the consequences that would enure to the disadvantage of a person who has been induced to change his or her position if the state of affairs so brought about were to be altered by the reversal of the assumption on which the change of position occurred. On this view, the injustice which precludes such a result lies in the disadvantage which would result to the recipient if the payer were to be permitted to recover payments as mistakenly made where they have been applied by the recipient.

  1. [34]
    Finally, Gageler J said:

[157] The defence of change of position is established where a defendant proves the existence of two conditions. The first condition is that the defendant has acted (that is, done something the defendant would not otherwise have done) or refrained from acting (that is, not done something the defendant would otherwise have done) in good faith on the assumption that the defendant was entitled to deal with the payment which the defendant received. The defendant need not for the purpose of meeting this condition have acted on knowledge derived from the payer.  …  The second condition is that, by reason of having so acted or refrained from acting, the defendant would be placed in a worse position if ordered to make restitution of the payment than if the defendant had not received the payment at all.  …

[158] Where the defence is so established, the prima facie entitlement of the defendant is to maintain the assumption on which the defendant acted and, on that basis, to retain the whole of the payment.  …

  1. [35]
    The plaintiff relied in part on the failure of consideration, as explained by Gummow J in Roxborough v Rothmans at [104].[9]  I accept that there was a failure of the plaintiff’s purpose here, but that was not a failure of the “state of affairs contemplated as the basis for the payment.”  I read his Honour’s description as referring to the state of affairs contemplated by both parties.  The plaintiff and the defendant in this case contemplated different states of affairs.  The plaintiff contemplated that the funds it deposited into the defendant’s bank account would not be used until Dr Mulherin had received and completed account opening forms in which he would place limits on the use of the money.  Mr Waterhouse contemplated that the funds received had been paid on behalf of, or for the use of, an entity associated with Mr Best for the purpose of betting by Mr Best.
  2. [36]
    Neither party really treated these funds with any degree of care.  Dr Mulherin paid them into Mr Waterhouse’s bank account without first having any contact with Mr Waterhouse and giving precise instructions as to the use to which the funds could be put.  He did so in circumstances that had no real urgency, apart from an apparent desire to make funds available as soon as possible for Mr Best to use for betting on horse races.  In doing so he took the risk that the funds might not be used in accordance with his wishes.
  3. [37]
    Mr Waterhouse, for his part, took no steps to verify the identity or legitimacy of the entity that had caused the funds to be deposited into his account and simply accepted Mr Best’s word.  I find that astonishing, even in the less regulated times of 2006.  There is a good argument that, in doing so, Mr Waterhouse did not act in accordance with the Rules of Racing of Racing New South Wales, which required that every bookmaker must enter all book bets in a recognisable name of the person with whom they are made and not enter or permit to be entered in his or her betting sheets, false, misleading or fictitious entries, or bets made in fictitious names.[10]  How he could comply with those rules without checking the bona fides and proper identity of the entity on whose behalf he entered book bets I do not know.
  4. [38]
    However, as the Court of Appeal held in Port of Brisbane Corporation v ANZ Securities Ltd (No 2),[11] which was a very similar case to this, the payee of money mistakenly paid to it is not liable in restitution if it acted in good faith to its detriment in reliance on its having received the money.  The concept of constructive notice of facts that would or even ought to have been discovered on further investigation does not apply in claims for restitution.  Nor is there any additional requirement that a payee act reasonably or with due care.  All that is required is that the recipient act in good faith in reliance on the receipt.
  5. [39]
    Counsel for the plaintiff submitted that Mr Waterhouse should have been on notice that he should verify the source of the funds and the identity of the owner of the funds deposited to his account, because it was a larger sum than he had ever seen deposited to a betting account before, he had not met or had any dealings directly with Henry Mulherin - who was clearly associated with Kingston Futures - and he was required to comply with the betting rules.  But he wanted to get Mr Best’s business and was wilfully blind to the interests of the owner of the funds and his own interests.  In the circumstances, counsel for the plaintiff submitted, he ought not be entitled to say that he relied on the receipt of the funds in allowing Mr Best to bet them away.  Particularly because of the rules, he ought to have made further inquiries that would have revealed the true state of affairs and I should therefore find that he had constructive notice of those facts, or was wilfully blind to them.  Therefore, on the basis of the principles stated in Port of Brisbane Corporation, he was wilfully blind in not making further inquiries and cannot rely on the defence of change of position.
  6. [40]
    I do not accept that Mr Waterhouse was wilfully blind.  He was aware that there was some connection between Dr Mulherin and Mr Best, having been told that by Mr Best and having seen them together at the Randwick race course.  He knew Mr Best was a regular, and apparently successful, better at that race course and he had no reason to disbelieve him.  He did not know how to contact Dr Mulherin.[12]  The only source of further inquiries would have been Mr Best.  (Although he could see from his bank account statement that the money had been transferred by Man Financial, once the funds had been cleared he had no reason to doubt the legitimacy of that transaction and therefore to make inquiries of that entity.)  He believed that he had sufficient information that meant he complied with the rules in opening the account in the name of Kingston Futures and permitting Mr Best to bet on that account.
  7. [41]
    The plaintiff relies on the propositions that there may be cases where a payee has grounds for believing that the payment may have been made by mistake, but cannot be sure and, in such cases, good faith may dictate that an inquiry be made of the payer.  The nature and extent of the inquiry called for will depend on the circumstances of the case, but a payee who has reason to believe that the payment was made by mistake is unlikely to be acting in good faith if he or she pays away the money without first making inquiries of the payer.[13]
  8. [42]
    There was nothing to alert Mr Waterhouse in this case to the possibility that the money had been paid to him by mistake.  He may have been remiss, and may have breached the relevant rules, in not making inquiries to confirm the betting entity and Mr Best’s authority to bet on the account, but absence of care is not relevant to good faith and does not exclude the defence of change of position.
  9. [43]
    Counsel for the plaintiff submitted that, in order for it to succeed in its claim for restitution, no proof is required that the defendant retains the money paid, a claim will not be defeated merely because the money has been paid away and a recipient of funds who pays away money in circumstances that do not attract the defence of change of position is liable to repay the money to its true owner.[14]  I accept those propositions, but they beg the question whether the defence of change of position has been established in this case.
  10. [44]
    The plaintiff also appears to rely separately on a claim for unjust enrichment of the defendant at the plaintiff’s expense.  If it relies on that as a cause of action distinct from its claim for money had and received, it is, with respect, misguided.  The High Court has made clear that unjust enrichment is not itself a cause of action.  It is an underlying concept that informs restitutionary claims such as money had and received or recovery of a payment made on the basis of a mistake of fact or law.
  11. [45]
    The plaintiff relies on having paid the money under a mistake of fact, the mistakes being that he understood that the man in a hat was the defendant’s representative and he believed that he would in due course receive account opening documents and the funds would remain untouched until he had completed them.  I accept that those were mistakes on Dr Mulherin’s part that, in part, induced him to cause the plaintiff to deposit the money in Mr Waterhouse’s account. 
  12. [46]
    Having paid the money for a purpose that has failed and under the mistaken belief that the defendant would not open a betting account without first receiving written instructions from the plaintiff, the plaintiff is prima facie entitled to recover the money it paid to Mr Waterhouse.
  13. [47]
    However, the real question is whether Mr Waterhouse has changed his position, to his detriment, on the faith of receipt of the payment and therefore ought to be relieved from the obligation to repay the money to the plaintiff.
  14. [48]
    The plaintiff submits that Mr Waterhouse was not acting on the faith of the receipt of the payment because he was not acting on any instructions from the plaintiff as the payer of the money and “knowledge derived otherwise than from the payer cannot be relevant in deciding whether a change of position by the payee occurred on the faith of the receipt.”[15]  Mr Waterhouse did not glean the knowledge on which he acted from the plaintiff, but from Mr Best.  Therefore, this court cannot find that he acted on the faith of the receipt. 
  15. [49]
    However that proposition was not accepted by the Queensland Court of Appeal in Port of Brisbane Corporation at [15] and the New South Wales Court of Appeal has also subsequently agreed that it is incorrect.[16]  It is also inconsistent with the proposition by Gageler J in AFSL v Hills Industries, referring to the Queensland Court of Appeal’s decision, that “The defendant need not for the purpose of this condition have acted on knowledge derived from the payer.”[17]
  16. [50]
    I find that, in allowing Mr Best to place bets on the Kingston Futures betting account that Mr Waterhouse established, Mr Waterhouse was acting on the faith of the receipt of the funds, in the light of what he had been told by Mr Best about the anticipation and purpose of that receipt.  That was supported by the information from Man Financial that the money was for “Kingston Futures”.  Mr Best told Mr Waterhouse about Kingston Futures, that he was associated with it and that $160,000 would be deposited to Mr Waterhouse’s bank account by that entity.  Therefore, Mr Waterhouse having paid away those funds in reliance on that receipt, he has changed his position to his detriment.
  17. [51]
    The plaintiff sought to dispute that Mr Waterhouse had proved that he had paid out the funds.  But Mr Waterhouse’s description of the system of applying “contras” between bookmakers – namely paying or receiving money or winning tickets representing money in satisfaction of customers’ debts to the payee bookmaker – demonstrated sufficiently to me that, by debiting the account as a “contra” to other bookmakers, Mr Waterhouse had in fact paid out the funds, either in cash or, in some cases, by giving them other value. 
  18. [52]
    There is no doubt that Mr Waterhouse, over time, paid away the money he received and he has thereby suffered a detriment.  He was put into that position, in part, by Dr Mulherin’s unnecessary haste in transferring funds to Mr Waterhouse’s bank account without providing proper instructions about their use, Dr Mulherin arming Mr Best with the funds and information that enabled him to trick Mr Waterhouse into allowing him to bet using those funds and Dr Mulherin’s delay in taking steps that might have alerted both him and Mr Waterhouse to the unauthorised use of the funds by Mr Best.  Had Dr Mulherin not deposited the funds until he had completed appropriate documentation, or had he promptly followed up with Mr Waterhouse when he did not receive the account opening documents, then Mr Waterhouse would have had sufficient money in the account to repay the funds to the plaintiff, if the plaintiff had made a prompt demand for them.  But, by the end of June 2006, Dr Mulherin had taken no real steps to follow up the documents he expected to receive (apart from one enquiry to Mr Best) and Mr Waterhouse had paid out all the funds.  That delay enabled Mr Best to cause Mr Waterhouse to pay away the funds he had received.
  19. [53]
    Therefore I find that Mr Waterhouse changed his position, to his detriment, in reliance on the receipt of the funds.  His defence to the claim must succeed on this ground.  It is therefore unnecessary to consider the other defences raised by him.
  20. [54]
    For these reasons, I find for the defendant and I dismiss the plaintiff’s claim.

Footnotes

[1]R v Best, sentencing remarks of Judge McGinness, District Court of Queensland, 29 October 2009.

[2]Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516, 557 [104].

[3](1988) 164 CLR 662, 673 (citations omitted).

[4](1992) 175 CLR 353, 385 (citations omitted).

[5](2014) 253 CLR 560.

[6][1991] 2 AC 548, 580.

[7][1991] 2 AC 548, 579.

[8]Birks, An Introduction to the Law of Restitution (1989), p 410.

[9]See footnote 2 above.

[10]Exhibit 2, Rules of Racing of Racing NSW, Local Rule 91(q), (r).

[11][2003] 2 Qd R 661, [22].

[12]The man in a hat had no connection with Mr Waterhouse and he never received Dr Mulherin’s business card.

[13]Niru Battery Manufacturing Co v Milestone Trading Ltd [2004] QB 985, [164], per Clarke LJ (the President and Sedley LJ agreeing).

[14]Plaintiff’s written submission, [33] to [35].

[15]Relying on a passage from the NSW Court of Appeal in State Bank of NSW Ltd v Swiss Bank Corporation (1995) 39 NSWLR 350, 355), quoted by McPherson JA in Port of Brisbane v ANZ Securities, [14].

[16]Citigroup Pty Ltd v National Australia Bank Ltd (2012) 82 NSWLR 391, [4]-[6].

[17]See [34] above.

Close

Editorial Notes

  • Published Case Name:

    Kingston Futures Pty Ltd v Waterhouse

  • Shortened Case Name:

    Kingston Futures Pty Ltd v Waterhouse

  • MNC:

    [2021] QDC 119

  • Court:

    QDC

  • Judge(s):

    Barlow QC DCJ

  • Date:

    23 Jun 2021

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662
2 citations
Jump To
Cite 1 - (1988) 164 CLR 662
Cite 2 - (1988) 164 CLR 662
Australian Financial Services Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560
2 citations
Jump To
Cite 1 - (2014) 253 CLR 560
Cite 2 - (2014) 253 CLR 560
Citigroup Pty Ltd v National Australia Bank Ltd (2012) 82 NSWLR 391
1 citation
Jump To
Cite 1 - (2012) 82 NSWLR 391
David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353
2 citations
Jump To
Cite 1 - (1992) 175 CLR 353
Cite 2 - (1992) 175 CLR 353
Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548
2 citations
Jump To
Cite 1 - [1991] 2 AC 548
Cite 2 - [1991] 2 AC 548
Niru Battery Manufacturing Co v Milestone Trading Ltd [2004] QB 985
2 citations
Jump To
Cite 1 - [2004] QB 985
Cite 2 - [2004] QB 985
Port of Brisbane Corp v ANZ Securities[2003] 2 Qd R 661; [2002] QCA 158
3 citations
Jump To
Cite 1 - [2003] 2 Qd R 661
Cite 2 - [2003] 2 Qd R 661
Cite 3 - [2003] 2 Qd R 661
Roxburgh v Rothmans of Pall Mall (2001) 208 CLR 516
2 citations
Jump To
Cite 1 - (2001) 208 CLR 516
Cite 2 - (2001) 208 CLR 516
State Bank of New South Wales Ltd v Swiss Bank Corporation (1995) 39 NSWLR 350
1 citation
Jump To
Cite 1 - (1995) 39 NSWLR 350

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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