Commonwealth Bank of Australia v May [2007] NSWSC 1083 | Case summary

50023/07 COMMONWEALTH BANK OF AUSTRALIA v CHRISTIAN ORLANDO MAY JUDGMENT 1 The plaintiff in these proceedings, the Commonwealth Bank of Australia (the Bank), sues the defendant, Christian Orlando May, for damages and an order that he pay to the plaintiff an amount of $1,151,199.94. The plaintiff commenced the proceedings on an ex parte basis on 16 January 2007, at which time freezing orders were made in respect of the defendant's assets. When the matter was returnable inter partes orders were continued without admissions and the case was prepared for trial by way of case management. 2 On 1 March 2007 the plaintiff filed an Amended Summons and a Commercial List Statement. The Commercial List Statement claims that on various dates between 10 July 2003 and 9 January 2007 the defendant applied to the plaintiff for credit and debit card facilities in the names of customers of the Bank and that those applications were made without the knowledge or authority of those customers. It is claimed that the defendant made those applications for the purpose of deceiving the Bank into issuing credit cards and debit cards that the defendant intended to use to obtain money from the Bank to which he was not entitled. 3 The Commercial List Statement then claims that in response to those applications the Bank issued debit and credit cards in the names contained in the applications and sent those cards to addresses nominated in the applications. The Bank claims that it did not know that the applications had been made by the defendant. It is also claimed that between 1 August 2003 and 12 January 2007 the defendant used the cards to obtain money from the Bank by way of utilisation of personal identification numbers (PINs) without the knowledge or authority of the customers and without the Bank knowing that it was not an authorised transaction. 4 The Commercial List Statement claims that when using the cards and the PINs to obtain that money from the Bank the defendant knew that he was doing so without the authority of those customers and that the Bank did not know that these were unauthorised transactions. It is also claimed that the defendant knew that he was not entitled to that money. Annexed to the Commercial List Statement is a Schedule setting out the transactions upon which the Bank relies. 5 After the Commercial List Statement was filed and served, the case was the subject of further case management between March and the middle of May 2007. The defendant was represented by lawyers during that period and made an application for a stay of these proceedings whilst criminal proceedings brought against him were processed and heard. Einstein J refused the stay application and made orders requiring the defendant to serve an affidavit setting out his assets, Bank accounts, and the like, and subjected the proceedings to further case management. 6 On 21 May 2007 the matter was listed for hearing on 23 July 2007 for five days. At that time there was some consensual adjustment to the freezing orders that had been made earlier in the year. On 28 May 2007 the then solicitors for the defendant, Watson Stafford, filed the defendant's Commercial List Response. In that document the defendant denied that he had made the applications. He also denied that he received those cards and PIN numbers. However he admitted he used two customers' cards to withdraw $6,000 during the period 15 December 2006 and 8 January 2007. He also admitted that in respect of those transactions he knew that the customer did not know anything about it, that the Bank did not know the nature of the transaction and that he also knew he was not entitled to that money. The defendant otherwise did not admit the transactions after 15 December 2007 and otherwise denied the allegations in the Commercial List Statement. The defendant admitted that the plaintiff had suffered a loss of $6,000 as a result of the withdrawals made by him and did not admit that the Bank had suffered any other loss. 7 There appears to have been some difficulty for the plaintiff in obtaining all of its evidence to serve on the defendant, and orders were made extending the time within which the plaintiff could serve its evidence. On 29 June 2007 McDougall J vacated the trial date and the trial was subsequently listed for hearing commencing on 24 September 2007 for five days. It is apparent that the defendant's solicitors ceased to act and in August 2007 a legal officer of the plaintiff wrote to the defendant serving upon him, personally, a Notice to Admit Facts with various other documents. When this matter was called on for trial on Monday 24 September 2007 there was no appearance of or for the defendant and he has not appeared during the hearing of this matter over the last three days. 8 The defendant was an employee of the Bank between 1995 and January 1997. Ironically, for the period from 2001 until 2007 he worked in the Bank's Group Security Area. The Bank's case has been made difficult by reason of the defendant's modus operandi in respect of his fraudulent applications for credit cards and debit cards and the peculiarity of transferring moneys from other linked accounts into the accounts of the customers from which he took money at times after he had withdrawn amounts and in other instances between times that he withdrew amounts. 9 The evidence establishes that the defendant applied successfully for 87 credit cards and 9 debit cards over the last four years. It would appear that he started his illegal conduct in about July 2003. I say it appears that way because of the vast exercise the Bank has had to undertake in the last eight months after it was alerted to the defendant's conduct. The evidence establishes that the conduct commenced on 10 July 2003 when the first application was made in respect of one of the Bank's customers. It will be necessary for me to detail some of the evidence that establishes the methods used by the defendant to obtain the money as pleaded. During the trial the plaintiff prepared schedules of the chronological history of the defendant's alleged conduct over the four years in respect of each of the accounts, and it will be convenient after detailing some of the transactions to refer to the schedule which includes the evidence of each of the transactions identified in each of those schedules. 10 In late 2006 the Bank was alerted to the defendant's conduct and started in earnest on its investigations. One of the things it did was to obtain a series of documents that the defendant had apparently utilised in obtaining the credit cards and debit cards which referred to mobile telephone numbers. On 24 November 2006 a number of officers of the Bank telephoned the mobile telephone numbers and recorded the voice messages on those mobile telephones. The Bank officers who gave evidence in relation to the telephone messages identified a number of the messages as having been the defendant's voice. Two of those officers had been working closely with the defendant for six or seven years in close proximity and were superiors to whom he reported over part of those years. Others had met the defendant only in recent times, but the combined evidence of those Bank officers suggests that at least seven of those messages were recorded by the defendant. The Bank submits that this was a step taken by the defendant in case the Bank checked the telephone numbers provided in the false applications. 11 Another investigative method utilised by the Bank was the monitoring of the defendant's computer to covertly observe what the defendant was doing. The defendant worked in the very area that allowed him to have access to the Bank's customer's personal information, including passwords and/or details of their addresses, telephone numbers, numbers of accounts, the nature of the accounts and the like. He was thus exquisitely placed to perpetrate the conduct the subject of these proceedings. The Bank found that the defendant accessed customers' records, for which he had no good reason, other than to obtain the detail for the purpose of making the false applications for the credit and debit cards. The evidence in relation to that process describes the results that were obtained from the computer as "computer dumps". Those computer dumps show that the defendant was accessing the Bank's records in relation to a number of customers in close proximity to the date on which the applications for the debit or credit cards were made. 12 Another investigative method used by the Bank was video surveillance. There are a number of CDs in evidence, cross-referenced to affidavits in which Bank employees identified the defendant. The video surveillance films show the defendant attending Post Office boxes that were identified as addresses in the false applications to which the cards were sent. It also shows the defendant attending Automatic Teller Machines (ATMs) at times when the Bank records demonstrate that the cards, issued pursuant to the false applications, were utilised for the purpose of withdrawing cash or, alternatively, unsuccessfully attempting to withdraw cash from the customer's account and the card being captured. The Bank records identify such an event as a "pick-up". 13 The defendant was arrested in January 2007 and was charged with a number of offences in relation to his conduct. The Notice to Admit Facts, part of Exhibit P in these proceedings, proves that the defendant pleaded guilty to obtaining money by deception in respect of the customers in relation to which he had made admissions in these proceedings in the Commercial List Response. There appears to be an inconsistency in one of the pleas of guilty in respect of item number 4 on the Court Attendance Notice. Mr McLure, who appears for the Bank, submitted that the transaction particularised in that charge was one in which the defendant did not obtain money but attempted to obtain money. 14 The Bank also obtained the assistance of a handwriting expert, Michelle Helena Novotny. Ms Novotny was provided with a number of exemplars of the defendant's handwriting and was then asked to express an opinion in relation to Identification References that accompanied applications the defendant made for the cards. Other investigation work carried out by the Bank included the tracking of the transactions geographically. The Investigations Manager within the Group Security Area of the Bank, Victoria Maree Misitano, swore numerous affidavits in the proceedings but, in particular, attached to one of her affidavits a very helpful chart setting out the addresses that were the subject of the applications and the ATMs utilised by the defendant to extract the cash. There is an eerie coincidence between those two charts. The plaintiff submits that it is powerful additional evidence to prove that this defendant did indeed make the applications and did indeed withdraw the cash, the subject of the proceedings. 15 I shall now turn to some of the examples of the defendant's conduct. 16 On 10 July 2003, an application for a credit card was submitted over the Internet in the name of Adrian Joseph Abbott. The address supplied on the application was PO Box A221 Fairfield Heights, New South Wales 2165. That application had with it the reference that Ms Novotny had analysed and concluded that the handwriting was probably that of the defendant. The card was issued and used on four occasions to make withdrawals totalling $6,800 between 1 August 2003 and 4 August 2003. On 19 August 2003 an officer of the Bank spoke with Mr Abbott and it was established that Mr Abbott did not apply for the card, nor did he transact the withdrawal of $6,800. 17 On 13 August 2003, an application for a credit card was submitted over the Internet in the name of Robert Reid. The address supplied on the application was PO Box W43, Fairfield Heights, New South Wales 2165. On 15 August that card was issued and sent to PO Box W43, Fairfield Heights. That particular post office box does not exist, but PO Box W43, Fairfield West exists and subsequently a card was sent to that address. Between 5 September 2003 and 10 September 2003, the card was used on seven occasions to make withdrawals totalling $11,490. In this particular case, Mr Reid's account was credited with two amounts, one on 8 September 2003 for $4,000 and one on 9 September 2003 for $2,000. In the period 5 September to 10 September 2003, there were withdrawals in the amount of $11,490 and deposits or credits by way of phone transfers, in the amount of $6,000. 18 As Einstein J said in Commonwealth Bank of Australia v Mohamad Saleh [2007] NSWSC 903 at [18]: "There is a plethora of authority in support of the proposition that the Court is bound to see that a case of fraud is clearly proved." In this particular instance, the Bank needed to prove that credits to the customer's account were not moneys repaid by the defendant, and that the defendant was not entitled to a credit for those amounts. Albeit that the plaintiff had taken a different approach to the case, once it appreciated this necessity, Ms Misitano swore an affidavit on 26 September 2007 describing the phone banking arrangements. 19 The phone banking service enables customers to manage their accounts and to conduct transactions on their accounts via the telephone, or to activate a debit or credit card via the telephone. The customer is required to enter a password or a nominated PIN which remains confidential to the customer. Where the customer calls the phone banking service for the first time, the customer is required to activate the account before it can be used, by providing certain account information and confirming their identity through a series of answers to questions. Once that information is provided and verified, the customer is then able to select a password or PIN that allows the customer to access the phone banking account. If the customer claims to have lost or been unable to remember the password or PIN, it is able to be reset. Once again, that involves provision of information to the Bank to confirm the identity of the customer. 20 In respect of Mr Reid's credits of $4,000 and $6,000 on 8 and 9 September 2003 respectively, the plaintiff has provided documentation which, I am satisfied, proves that the phone transfer system was utilised to transfer moneys from Mr Reid's linked account and it was certainly not a transfer of the defendant's money to credit the account from which he had taken the money. 21 The defendant utilised Mr Reid's account again in March 2005. An application for a credit card was submitted on 17 March 2005 over the Internet and the card was issued. The address was given as PO Box 509, Bonnyrigg, New South Wales 2177. Between 1 April 2005 and 13 April 2005, withdrawals totalling $25,990 were made and once again credits were made to this account: on 11 April, in the amount of $2,050; on 12 April 2005, in the amount of $2,020; and on the same day, two further amounts of $2,040 and $2,020, totalling $8,130. The plaintiff's evidence establishes that, once again, those transfers were made via the telephone banking service and the moneys came from Mr Reid's linked account and were not the defendant's money. 22 Another example is that of the customer Pappas, being a customer in respect of whom the defendant made admissions and also pleaded guilty. The transactions in respect of which he made admissions and pleaded guilty are the transactions totalling $4,000 on 15 and 16 December 2006 by the use of a debit card. On the day prior to the admitted fraudulent transaction on 15 December a phone transfer credit of $2,100 was made to the account from Mr Pappas' linked account. On the day after the transaction on 16 December 2006, two phone transfers were made from Mr Pappas's linked account of $2,100 and $2,000. Although the defendant only admitted the use of Mr Pappas' card on 15 and 16 December 2006, there are a series of transactions between 11 December 2006 and 18 December 2006 on the same debit card. Mr McLure, in a measured way, highlighted the absurdity of the admission of use of the card without any further admissions, asking rhetorically what on earth this defendant was doing with Mr Pappas' debit card. 23 Mr McLure urges upon the Court what he claims to be the irresistible conclusion that it was the defendant who made the application for the debit card on 5 December 2006 by telephoning the Bank and requesting that an existing keycard, linked to the Pappas account, be stopped and reissued, and, on the same day, manipulating the Bank's records to change the address details for the account to PO Box 305, Guildford, New South Wales 2161. The new card was issued on 6 December 2006 and it was submitted that the defendant telephoned the Bank on 9 December 2006, increasing the withdrawal limit on the card to $2,000. 24 A number of common features to these applications have been identified. Firstly, all of the applications were made in the names of males who had been customers of the plaintiff for at least three years. Secondly, the vast majority of the applications, approximately 72 of them, related to customers who had accounts with balances greater than $5,000. Thirdly, all applications were submitted over the Internet. Fourthly, all applications contained personal information of customers which matched the Bank's records at the time of each application. Fifthly, approximately 84 of the applications shared a mailing address with at least one other application. Sixthly, the mailing address given for most of the applications was a post office box. Seventhly, in some cases, the cards were used at points of sale transactions, but the majority of the cards were used for cash withdrawals at ATMs until the available credit was exhausted, or, until the Bank placed a stop on the card; and eighthly, the cards were used at ATMs that did not have video camera surveillance. 25 Another customer, whose identity was utilised to make an application, was Michael Finch. On 1 January 2007 the defendant, it is claimed, purporting to be Michael Finch, telephoned the Bank and ordered a keycard for the existing account. In the same conversation he changed the address details on the account. The Bank issued the new card on 3 January 2007 and, on 5 January 2007, the defendant, again purporting to be Mr Finch, asked for the card to be issued to a new address. On 8 January 2007 that card was issued. On 10 and 12 January 2007 four withdrawals from Mr Finch's account occurred, totalling $6,000; and, on 11 January 2007, three credits or deposits were made into the account, totalling $6,000. On 15 January 2007, Mr Finch signed a statutory declaration denying ordering the card or changing his mailing address. 26 On 1 January 2007, the defendant, purporting to be Robert Finch, telephoned the Bank and requested that an existing keycard to the account be stopped and reissued. The card was issued on 3 January but the defendant then rang the Bank on 5 January increasing the withdrawal limit to $2,000. On 5, 6 and 7 January 2007, transactions were made on the card totalling a withdrawal of $2,000. One of these transactions was admitted by the defendant in the Commercial List Response. On 7 January 2007, Mr Finch contacted the Bank and had a stop placed on the card. On 8 January 2007, the defendant was observed using Mr Finch's card at the ATM when it was captured by the ATM. 27 The plaintiff has prepared a narrative identified as "Plaintiff's Narrative Summary". That summary is cross-referenced to the evidence and I am satisfied that it sets out the history of the transactions, both by way of applications made for either credit or debit cards and the utilisation of those cards for the withdrawal of cash. There are also two EFTPOS transactions utilising the cards, contained in Schedule M1. The plaintiff has prepared Schedule M1, the source documents for which are Exhibits M1A and M1B. They are also cross-referenced in the evidence to the transaction documents contained in Exhibit F and Exhibit G. The plaintiff has also prepared a Schedule of Debit Cards, Exhibit M2, which is cross-referenced to Exhibit M2A, which is the source material from which the schedule has been prepared. 28 Additionally, the plaintiff has prepared a schedule entitled "Liability Schedule" dated 26 September 2007, which is cross-referenced to Exhibit F, containing reference to the evidence in relation to the false applications made by the defendant for the various credit cards at the various addresses contained in those applications. The chronological transaction schedule setting out the history of the transactions over the years is instructive. Albeit that it is not possible to know the reason for the defendant's utilisation of the cards at these particular times, it can be seen, for instance, in the period December 2004 through to the end of January 2005, there emerged a pattern of withdrawals and credits on a regular basis. Thereafter, in March 2005, there were withdrawals of large sums of money with very few credits to any of the subject accounts. One might query why these credits were made. One obvious answer is so that the customer would not twig to what had happened and might have assumed that the Bank made an error, seeing a withdrawal and a fairly prompt adjustment, so that the account was not in deficit; in other words, so that the defendant could cover his tracks whilst he proceeded to extract these large amounts of money from the customers' accounts with the Bank. 29 It is clear from the surveillance films that when the defendant went to the Post Offices he behaved very furtively. When he went to the ATMs he was either wearing sunglasses, or sunglasses and a cap, so that it was not as easy to identify him, but the professional video surveillance officer managed to keep the camera running whilst he returned to his usual vehicle. Having seen the series of video surveillance records, I have no doubt that the person in those films is the defendant. This is based specifically on the likeness in each of the films, and also on the affidavit evidence of the Bank officers who identified the defendant in those films. 30 The Liability Schedule to which I have referred sets out the various addresses identified in the false applications. It also includes the name of the customer and a section cross-referencing it to the source documents and the evidence linking each of the addresses to the defendant. The nature of that evidence is either audio identification, visual identification or handwriting identification. The balance that are not the subject of cross-referenced direct evidence are relied upon with the submission that the irresistible conclusion to be reached in the circumstances is that it was the defendant who made the false applications and withdrew the cash from the accounts with the cards that were issued pursuant to the false applications. 31 A number of customers targeted by the defendant were in contact with the Bank in respect of problems with their accounts. The Bank's legal representatives have prepared a further document entitled "References to Customers Denying Transfers of Funds". That document is Exhibit Q, together with the Plaintiff's Narrative Summary and the Liability Schedule. The communications between the customers and the Bank outlined in that document indicates that twenty of the customers had complained to the Bank at various times over the last four years, mainly in 2004, albeit that there were some complaints in 2005 and 2006. It is not necessary to make an analysis of the Bank's safety mechanisms for preventing this conduct. The Bank would be exquisitely aware of the need to protect itself against a defendant of this ilk. He was obviously very clever and very cunning and secreted himself into the place where it was so easy for him to pretend to be the very people he was there to serve. 32 Schedule M1 and Schedule M2, and the evidence in support of them, satisfy me on the balance of probabilities that the conduct of the defendant has caused the loss to the Bank. 33 The plaintiff seeks relief by way of Declarations and Orders consequent upon the defendant's conduct in removing these funds from the plaintiff in the manner described in the evidence. Mr McLure submitted that, in each instance, the defendant withdrew cash using cards fraudulently applied for and, thus, he immediately held the cash as trustee for the plaintiff: Beatty v Guggenheim Exploration Co, 122 NE 378 (NY, 1919) at 380; Robb Evans v European Bank Limited (2004) 61 NSWLR 75 at 99; Orix Australia Corporation Limited v Moody Kiddell & Partners Pty Limited [2005] NSWSC 1209 at [155]-[156]. Mr McLure also submitted that the false representations made by the defendant, in applying for the credit cards, caused the Bank to issue the cards and ultimately caused the loss suffered by the Bank. The Declaration sought by the plaintiff is that, in the period 10 July 2003 to 9 January 2007, the defendant received, as trustee for the plaintiff, the amount of $1,151,199.94. It then seeks consequential orders, being the entry of judgment in its favour in that amount plus interest. 34 The defendant has not appeared or taken part in these proceedings. I am satisfied that the plaintiff has proved overwhelmingly that this defendant engaged in the conduct, as alleged, and is liable to the plaintiff for the amount claimed. 35 Accordingly, I make the declaration in paragraph 1 of the Short Minutes of Order initialled by me and dated today. I enter judgment in accordance with paragraph 2 of those Short Minutes. I make the order in paragraphs 3 and 4 of those Short Minutes. I order that those orders may be entered forthwith. I list the matter for directions on 5 October 2007. I grant liberty to restore on one day's notice.

Commonwealth Bank of Australia v May

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Judgment (12 paragraphs)

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Cases Cited (3)