In this interesting case, Bond J considered whether the plaintiffs could claim the proceeds of a life insurance policy in circumstances where the last premium was paid with monies which were stolen from the plaintiffs. The case bears a striking resemblance to the leading case on the law of tracing, Foskett v McKeown  1 AC 102, in which the claimants were entitled to a proportionate share of insurance proceeds after misappropriated funds were used to pay certain premiums. In the result, Bond J distinguished Foskett on the basis that in this case the policy provided cover on a month to month basis such that the payout of the life insurance policy was attributable to the payment of the premium made in advance for that month. Bond J declared that the plaintiffs were entitled to the entirety of the proceeds.
12 June 2018
The first defendant to this proceeding was the estate of Ms Hanson. . Ms Hanson was employed by the first plaintiff, Goomboorian Transport Pty Ltd. . Goomboorian Transport was one of the corporate plaintiffs, through which Mr John Belling, the tenth plaintiff, operated a number of business enterprises. . Ms Hanson remained employed by Goomboorian Transport until the date of her death in September 2014. .
After her death, it was discovered that Ms Hanson had stolen more than $2.5 million from the plaintiff companies. . The plaintiffs contended that the final premium of a term life insurance policy had been paid out of the funds stolen by Ms Hanson. . The plaintiffs sought a declaration that the proceeds of the policy, which had been received by Ms Hanson’s parents (the second and third defendants), were held on trust for the third and sixth plaintiffs. . In the alternative, the plaintiffs sought a declaration that they were entitled to 4/95ths of the proceeds on the basis that 4 of the 95 premium payments were made with the stolen monies. .
Bond J applied the rule in Re Hallett’s Estate (1880) 13 Ch D 696, which attributes the first payments out of a fund to the wrongdoer, to conclude that the balance of Ms Hanson’s bank account immediately prior to the payment of the final premium was entirely reflective of stolen monies. . His Honour therefore concluded that the final premium was paid from stolen funds, and that these funds were stolen from the third and sixth plaintiffs. , .
As for the plaintiffs’ contention that they could engage the tracing process to conclude that the proceeds of the insurance policy represented the stolen monies, Bond J started with the accepted proposition that stolen monies are trust monies in the hands of the thief: Black v S Freedman & Co (1910) 12 CLR 105. . His Honour then considered whether it was possible to trace into the proceeds of the insurance policy. .
The parties accepted the authority of Foskett v McKeown  1 AC 102, in which the claimants were able to trace into an insurance policy and thence into its proceeds, but disputed its application to the present facts. .
Ms Hanson’s parents contended that the chose in action which represented the policy had been acquired by the payment of all 95 premiums, so that “at most the plaintiff was entitled to a proportionate share of the death benefit”. The plaintiffs contended that “the asset” concerned was insurance cover for the month of September 2014, and “that insurance cover was acquired by the payment of the premium which was paid in advance for that month”. .
Bond J observed, in accordance with Foskett v McKeown, that the question is not one of causation (would the benefit have been paid but for the payment of premiums?) but rather one of attribution (was the death benefit attributable to all the premiums or only some of them?). . This, in turn, required an examination of “the nature of the contract which gave rise to the chose in action”. .
His Honour ultimately distinguished Foskett v McKeown, which concerned a “whole life policy” where the “insurance company undertakes to pay a stated sum on the death of the assured in return for fixed annual premiums payable throughout his life”. . In Foskett, the House of Lords held that in such circumstances claimants whose funds had been used to make premium payments were entitled to a proportionate share of the death benefit. As Bond J explained, whole life policies have been regarded as entire contracts, and therefore indivisible. –.
The “present insurance policy was very different to that which was dealt with in Foskett v McKeown”. . On the “specific terms of this policy, cover was provided on a month by month basis by paying the monthly premiums in advance as required”. . “The fact that Ms Hanson had insurance cover for the month she died was attributable … to the payment which was made in advance for that month”. .
Bond J concluded that the chose in action which was the insurance cover “should properly be regarded as representing the property of the particular plaintiffs whose monies had been taken and used to pay the premium”. . Further, as the proceeds of the chose in action were taken by Ms Hanson’s parents as volunteers, the plaintiffs were entitled to a declaration that the proceeds were received by Ms Hanson’s parents as trustees for the third and sixth plaintiffs. –.