Commonwealth Bank of Australia v Rees

Supreme Court of NSW|2013-05-06|Before: Pembroke J

Introduction 1These proceedings concern a fraudulent scheme by which the defendant caused the plaintiff, the Commonwealth Bank of Australia (the bank), to overpay him $277,200 by submitting duplicate timesheets to support his invoices for payment while the plaintiff employed him as a consultant. The defendant also submitted timesheets for public holidays on which he did not work.

Application for Adjournment 2I should first deal with the defendant's application for adjournment. It was made in an email to the Court on 2 May 2013. It was not supported by evidence and the defendant did not appear to support the application. He cited financial difficulties and a police investigation as reasons for his application. 3There are strong case management reasons why the application should fail, bearing in mind the 'just, quick and cheap' overriding purpose in Section 56 of the Civil Procedure Act. A summary of those reasons is as follows: (a)The application was not made by Notice of Motion, with supporting evidence, as required by Uniform Civil Procedure Rule 18.1. (b)This is the second time the proceedings have been set down for hearing before this Court. (c)The defendant's application was made almost five months after the first hearing was vacated and the matter was again set down for hearing. (d)The Court is under an obligation to take into account the impact, not only on the plaintiff but also on litigants in other cases: Aon Risk Services Australia v ANU (2009) 239 CLR 175 at [30], [93]. This is especially so in relation to matters in the Expedition List. (e)The defendant has remained overseas since December 2012, despite indicating to the court that he would return to Australia on 31 December 2012. (f)The defendant is presently in breach of his undertaking, to the Court and to the plaintiff, to give the plaintiff monthly written notice of the matters set out in paragraph 1(f) of Annexure A to the orders made on 20 September 2012. Specifically, the defendant has not given such notice to the plaintiff for the months of March and April 2013. (g)The increased costs to the plaintiff of the matter being adjourned are unlikely to be recoverable from the defendant. So much is clear from his present location overseas, his breaches of undertakings, and his recent emails to the Court in which he indicated that due to his current financial position, he was unable to secure representation for the directions hearing on 3 May 2013. (h)There is no evidence to support the defendant's contention that criminal charges have been, or will be, brought against him. The last contact between the plaintiff and the police suggests that criminal charges, if any, will only be brought at the conclusion of the civil proceedings, depending on the result. Further, even if I were to accept that criminal proceedings had been commenced against the defendant, which I do not, that of itself would not be grounds for an adjournment: McMahon v Gould (1982) 7 ACLR 202 at 206; Halabi v Westpac Banking Corporation (1999) 17 NSWLR 26 at 59; Niven v SS [2006] NSWCA 388 at [26]. 4For those reasons I reject the defendant's application.

Findings of Fact 5The defendant commenced employment with the bank as a consultant in June 2011. He was initially engaged for a seven week period at a rate of $2,000 per day plus GST for the purpose of assisting the bank in relation to regulatory changes. At the expiration of the initial term his contract was extended and his daily rate increased to $2,500 per day plus GST. The bank terminated the defendant's engagement in August 2012. 6In order to be paid for his services the defendant was required to: (a)prepare and sign a weekly timesheet recording the number of hours that he had worked that week; (b)submit the timesheet to Mr Powani, or in Mr Powani's absence to Mr Farr, for approval and sign off; (c)submit the approved timesheet, together with a corresponding tax invoice to Ms Thomas for processing and payment. 7When the defendant commenced work with the bank he provided Mr Powani with a signed timesheet once a week for approval. From about October 2011 the defendant started submitting timesheets at irregular intervals, two or three at a time. The invoices submitted by the defendant included the number of days, but not the dates, for which payment was sought. In each case, the number of days on the invoices matched the total number of days specified in the accompanying timesheets. It is unequivocal that each invoice was to be based on, and corroborated by, its accompanying timesheet.

Timesheet Scheme 8The evidence shows that on numerous occasions the defendant submitted duplicate, and in one case triplicate, timesheets to support invoices for work he had already invoiced. 9I am satisfied that the defendant submitted duplicate timesheets for the period: (a)29 August 2011 to 2 September 2011 attached to invoices 2005 and 2006. (b)17 October 2011 to 21 October 2011 attached to invoices 2010 and 2011. (c)24 October 2011 to 28 October 2011 attached to invoices 2010 and 2011. (d)31 October 2011 to 4 November 2011 attached to invoices 2011 and 2011. The defendant submitted two invoices both numbered 2011. (e)28 November 2011 to 2 December 2011 attached to invoices 2013 and 2014. (f)9 January 2012 to 13 January 2012 attached to invoices 2016 and 2017. (g)6 February 2012 to 10 February 2012 attached to invoices 2018 and 2019. (h)30 January 2012 to 3 February 2012 attached to invoices 2018 and 2019. (i)12 March 2012 to 16 March 2012 attached to invoices 2021 and 2022. (j)19 March 2012 to 23 March 2012 attached to invoices 2022 and 2023. (k)26 March 2012 to 30 March 2012 attached to invoices 2022 and 2023. (l)2 April 2012 to 6 April 2012 attached to invoices 2023 and 2024. (m)14 May 2012 to 18 May attached to invoices 2025 and 2026. (n)21 May 2012 to 25 May 2012 attached to invoices 2026 and 2028. (o)28 May 2012 to 1 June 2012 attached to invoices 2026 and 2028. (p)25 June 2012 to 29 June 2012 attached to invoices 2029 and 2030. (q)9 July 2012 to 13 July 2012 attached to invoices 2030 and 2031. 10The defendant also submitted triplicate timesheets for the period 23 January 2012 to 27 January 2012 attached to invoices 2017, 2018 and 2019. 11A total of 19 duplicate and triplicate timesheets over the course of his engagement with the bank were submitted by the defendant. In all cases, the duplicate timesheets were submitted on different dates and behind different invoices. The defendant also regularly described the dates in each duplicate timesheet differently, by reference either to the start or the end date of the relevant week. Further, in a majority of cases Mr Rees submitted one copy of each invoice, supported by a duplicate timesheet, to both Mr Farr and Mr Powani for signature. The reason for this behaviour is obvious - it minimised the likelihood of the discovery of the fraud. 12I am satisfied that at all material times the defendant knew that he did not have any contractual or any other lawful entitlement to receive the overpayments made by the bank. Both the number and frequency of repeated timesheets suggest that the defendant's behaviour was fraudulent and not merely mistaken. My conclusion is confirmed by the fact that the defendant continued to submit falsified invoices over a 13 month period until discovered.

Public Holiday Scheme 13There was another aspect of the defendant's fraud. During the course of his engagement with the bank, he submitted timesheets stating that he worked 8 hours on each of 7 public holidays: (a)1 August 2011 (a Bank Holiday) attached to invoice 2003. (b)3 October 2011 (Labour Day) attached to invoice 2008. (c)2 January 2012 (a pubic holiday in lieu of New Year's Day, which fell on a Sunday) attached to invoice 2016 (d)26 January 2012 (Australia Day) attached to invoice 2016, and claimed for a second time in invoice 2018. (e)6 April 2012 (Good Friday) attached to invoice 2023, and claimed for a second time in invoice 2024. (f)9 April 2012 (Easter Monday) attached to invoice 2024. (g)11 June 2012 (the Queen's Birthday holiday) attached to invoice 2029. 14The nature of the defendant's responsibilities at the bank predominately required him to be present at the bank's premises and to access the bank's IT system. The bank was closed on public holidays and accessible only by swipe card. The evidence shows that the defendant did not enter the premises by swipe card on the relevant dates. Nor did he access the bank's IT resources on any of the relevant public holidays. I am satisfied that the defendant did not undertake work for the plaintiff on the 7 public holidays for which he invoiced.

Duty of Honesty 15There is no doubt that during his engagement the defendant owed a duty of honesty to the bank. The duty was implicit in the employment contract regardless of whether its terms were oral or in accordance with the bank's standard terms and conditions as submitted by the plaintiff. 16In addition, the employment relationship is an accepted fiduciary relationship: Mainland Holdings Ltd v Szady [2002] NSWSC 699 at [61] (Gzell J); Concut v Worrell [2000] HCA 64; (2000) 176 ALR 693 at [17], characterised by obligations of fidelity and honesty by the employee. 17Those duties of an employee were enumerated by Hodgson CJ in Eq in Efg Australia Limited v Kennedy [1999] NSWSC 922 at [31] and include: (i)to act honestly in the service of the employer. This is sometimes expressed as a duty of loyalty or good faith and in appropriate cases survives the termination of the employment. Breaches of this duty include the taking of bribes or secret commissions or acting in one's own interests or the interests of another rather than in the interests of the employer; (ii)not to benefit him or herself to the detriment of the employer. 18Having regard to the evidence that was adduced, I have no hesitation in concluding that the defendant behaved dishonestly towards the bank; that he breached his contractual and fiduciary obligation of honesty and fidelity; and that his breaches resulted in the following loss to the bank: (a)$2,200 paid to the defendant for 1 August 2011, a Bank Holiday. (b)$13,750 overpaid to the defendant for the period 29 August 2011 to 2 September 2011. (c)$2,750 paid to the defendant for 3 October 2011, Labour Day. (d)$13,750 overpaid to the defendant for the period 17 October 2011 to 21 October 2011. (e)$13,750 overpaid to the defendant for the period 24 October 2011 to 28 October 2011. (f)$13,750 overpaid to the defendant for the period 31 October 2011 to 4 November 2011. (g)$13,750 overpaid to the defendant for the period 28 November 2011 to 2 December 2011. (h)$2,750 paid to the defendant for 2 January 2012, the New Years Day Holiday. (i)$13,750 overpaid to the defendant for the period 9 January 2012 to 13 January 2012. (j)$27,500 overpaid to the defendant for the period 23 January 2012 to 27 January 2012. (k)$13,750 overpaid to the defendant for the period 30 January 2012 to 3 February 2012. (l)$13,750 overpaid to the defendant for the period 6 February 2012 to 10 February 2012. (m)$13,750 overpaid to the defendant for the period 12 March 2012 to 16 March 2012. (n)$13,750 overpaid to the defendant for the period 19 March 2012 to 23 March 2012. (o)$13,750 overpaid to the defendant for the period 26 March 2012 to 30 March 2012. (p)$16,500 overpaid to the defendant for the period 2 April 2012 to 6 April 2012. (q)$2,750 paid to the defendant for 9 April 2012, Easter Monday. (r)$13,750 overpaid to the defendant for the period 14 May 2012 to 18 May 2012. (s)$13,750 overpaid to the defendant for the period 21 May 2012 to 25 May 2012. (t)$13,750 overpaid to the defendant for the period 28 May 2012 to 1 June 2012. (u)$2,750 paid to the defendant for 11 June 2012, the Queen's Birthday Holiday. (v)$13,750 overpaid to the defendant for the period 25 June 2012 to 29 June 2012. (w)$13, 750 overpaid to the defendant for the period 9 July 2012 to 13 July 2012. 19The bank made overpayments totalling $277,200 to the defendant. The plaintiff is therefore entitled to contractual damages in the amount of $277,200. The overpayments were misappropriated and were never in truth the property of the defendant. They constituted property that was held by the defendant on trust for the bank: Black v S Freedman & Company (1910) 12 CLR 105; Robb Evans of Robb Evans & Associates v European Bank Ltd (2004) 61 NSWLR 75 at [111] (Spigelman CJ). The bank is entitled to a proprietary remedy enabling it to trace those monies, if necessary. 20Finally and naturally, the defendant's dishonest conduct was destructive of the necessary confidence between employer and employee and constituted a ground that justified his dismissal: Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66; [1933] HCA 8 at 81-2; applied in Concut Pty Ltd v Worrell at [51] (Kirby J).

Orders 21For those reasons, I make the following orders: (1)Verdict and judgment for the plaintiff against the defendant in the amount of $293,174.03 being $277,200 plus simple interest calculated daily, in accordance with Section 100 of the Civil Procedure Act, from 1 August 2012, which is the date of the most recent payment made by the plaintiff to the defendant. (2)Cross-claim dismissed. (3)I order the defendant to pay the plaintiff's costs of the proceedings. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 May 2013

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