Corporate Documentation Management Pty Ltd (in Liquidation) v Bagshaw

THE PLEADINGS

1. These proceedings were commenced by a Summons filed on 12 November 2018, at which time (as duty judge) I granted an ex parte freezing order, since varied by an agreement between the parties recorded by Registrar Walton on 4 April 2019.
2. Upon commencement of the proceedings the only parties were the first plaintiff (not then in liquidation) and the first defendant.
3. An order for pleadings was made on 14 November 2018.
4. The first plaintiff filed a Statement of Claim on 27 February 2019, which was superseded by an Amended Statement of Claim filed on 16 December 2021 and by a Further Amended Statement of Claim filed on 28 March 2023. The Further Amended Statement of Claim is the plaintiffs' current pleading.
5. The second plaintiff was joined in the proceedings upon filing of the Amended Statement of Claim on 16 December 2021. The second defendant was joined in the proceedings on the filing of the Further Amended Statement of Claim on 28 March 2023.
6. The defendants on 26 April 2023 filed a Defence to the Further Amended Statement of Claim.
7. On 16 March 2023 the first defendant filed a statement of Cross Claim against the first plaintiff, to which the first plaintiff responded by a Defence filed on 19 May 2023.

Introduction

1. The parties are locked in a fundamental debate about the nature and scope of the case sought to be made by the plaintiffs on their Further Amended Statement of Claim.
2. The plaintiffs insist that the case for which they have contended in their closing submissions (MFI P33) is within the Further Amended Statement of Claim and established by the evidence. The defendants deny that proposition and contend that the evidence adduced by the plaintiffs does not prove the case pleaded by the plaintiffs (on the defendants' construction of the Further Amended Statement of Claim) as a consequence of which the Further Amended Statement of Claim should be dismissed.
3. The reality appears to be that the parties have, for their own forensic reasons, chosen to agree to disagree about what is in dispute.
4. In pursuit of an apparently deliberate forensic strategy, the plaintiffs opened wide, tendered a mass of documents (in some cases) then of doubtful relevance, offered witnesses for cross examination, and at the close of the hearing sought to rely on extensive, written "closing submissions" that invite analysis of a documentary morass on an "alternative case" should their primary case not succeed.
5. For their part, the defendants appear to have pursued a deliberate forensic strategy of constantly protesting that they had been called upon to meet only a limited case (of their choosing) and tailoring a brief course of cross examination to fit that narrative. They read no affidavits. The first defendant, in particular, gave no evidence. The defendants declined an opportunity to reopen the evidence to accommodate any unfairness allegedly arising from the "alternative case" advanced by the plaintiffs in their closing submissions.
6. The impasse was not broken by an attempt on my part to have the parties agree upon the issues to be determined. In essence, they filed competing written submissions reflecting their divergent perspectives of the proceedings: for the plaintiffs, written submissions marked for identification as MFI P34, P36 and P37; for the defendants, MFI D35 and D38.
7. As a consequence, I have been obliged to pay close attention to the pleadings.
8. On both sides of the record the pleadings are an exhausting read.
9. The Further Amended Statement of Claim comprises 338 pages, 219 of which detail more than 884 paragraphs (many of which are particularised by reference to the First Expert Report), the balance incorporating lengthy appendices in the form of schedules cross-referenced to the First Expert Report or invoices. The text of the Further Amended Statement of Claim alleges facts, summarises allegations of fact as pleaded and overlays allegations of fact with legal characterisations of the pleadings of fact and the elements of causes of action relied upon.
10. The Defence responds specifically to each paragraph of the Further Amended Statement of Claim with an admission, a qualified admission, a non-admission or a denial, reinforced by a disclaimer of the Expert Report as "joint" and a summary of the principal grounds upon which the defendants deny liability to the plaintiffs. On a defence of set off the Defence incorporates by reference the first defendant's Cross Claim, which, in turn, incorporates a lengthy "Table" of payments allegedly made by the first defendant on the first plaintiff's account.
11. In the absence of acquiescence in a different approach to definition of the questions in dispute between the parties, the Further Amended Statement of Claim must be taken as defining the plaintiffs' case. Nevertheless, in the circumstances of these proceedings, a reading of the Further Amended Statement of Claim can reasonably be taken to be informed by reference to the First Expert Report and affidavits of the plaintiffs served before the Further Amended Statement of Claim was filed, particularly the affidavit of Michael Jones sworn on 21 June 2022.
12. The structure of the Further Amended Statement of Claim reflects the Questions and Answers numbered 2-5 in the First Expert Report.
13. The individual amounts transferred from the first plaintiff's bank account to the first defendant's bank accounts are detailed in Appendix 14 to the First Expert Report; they total $9,755,513.86 (rounded up to $9,755,514 in the Further Amended Statement of Claim). The individual amounts transferred from the second plaintiff's bank account to the second defendant's accounts are detailed in Appendix 15 to the First Expert Report; they total $127,600. The factual accuracy of those appendices has not been challenged, although assumptions made by the Expert were explored in cross examination.
14. The total amount paid from the first defendant's Amex Account to the 10 Vendors was found by the Expert in her First Report to be $6,895,160 as recorded at pages 39-41 of the Report. (An adjustment was made in favour of the first defendant in the Supplementary Report, but for the purpose of analysing the structure of the Further Amended Statement of Claim the relevant figure is $6,895,160).
15. A summary of these figures appears on page 41 of the First Expert Report, which refers to a tabular form of reconciliation in Appendix 17.

The Further Amended Statement of Claim

1. On its face, at the risk of oversimplification, the Further Amended Statement of Claim can be analysed by reference to seven categories of allegations made by the plaintiffs in support of the relief claimed in the pleading.
2. First, there are introductory paragraphs (numbered 1-17 inclusive) that in substance: 1. identify the parties to the proceedings and the "Consultancy Agreement" between the first plaintiff and the first defendant or, in the alternative (to accommodate the defendants' case) between the first plaintiff and the second defendant. 2. plead the existence of an implied term of good faith in the "Consultancy Agreement". 3. plead that the defendants owed to the first plaintiff fiduciary obligations as a result of the first defendant's special position of trust and confidence. 4. identify the bank accounts and related facilities of the first defendant alleged to have been vehicles through which the first defendant fraudulently took a transfer of funds from the plaintiffs and, from those funds, appropriated monies to herself after payment of legitimate debts of the first plaintiff. 5. define as the "Relevant Period" the period between 31 December 2008 and 18 October 2018.
3. Secondly, paragraphs 17A-24GK identify, in the aggregate and largely by reference to the First Expert Report, categories of payments made by the first defendant alleged by the plaintiffs to have been unauthorised (and a breach of an implied term, and a fiduciary obligation, of good faith).
4. Paragraphs 17F-17H allege that each of the Account Transfers totalling $9,755,514 was made by the first defendant knowingly without the authorisation, knowledge or consent of the first plaintiff and without any legal entitlement to receive the transferred funds. Paragraph 24G makes similar allegations about the payments totalling $127,600 made from the second plaintiff's bank account to the defendants.
5. The plaintiffs allege that the core wrongdoing to be attributed to the defendants is the first defendant's unauthorised transfer of the plaintiffs' funds totalling $9,883,114 (the sum of $9,755,514 and $127,600) to accounts owned or controlled by her.
6. Accordingly, a foundational allegation (made in paragraphs 17B-17E) is that, during the "Relevant Period", the first defendant transferred a total amount of $9,755,514 from the first plaintiff's bank account to her own accounts and a further $127,600 from the second plaintiff's bank account to her own accounts (more particularly, an account in her name and accounts in the second defendant's name). As has been noted, the particular transfers making up the sums of $9,755,514 and $127,600 are dealt with in Appendices 14 and 15 of the First Expert Report respectively.
7. The plaintiffs contend that, save for transfers of a regular, agreed Consultation Fee (the quantum of which is the subject of controversy), the transfers making up that total amount were made without the knowledge, consent or authorisation of the first plaintiff.
8. Thirdly, paragraphs 24L-842 deal specifically with allegedly fraudulent transactions effected by the first defendant in relation to the following particular entities (defined in the particulars set out in paragraph 24M of the Further Amended Statement of Claim as the "Vendors" and referred to in submissions as "the 10 Vendors"): 1. NeoPost Australia Pty Ltd (paragraphs 24L-120MC, commencing on page 17 of the Further Amended Statement of Claim). 2. Spicer's Australia (paragraphs 120N-228C, commencing on page 40). 3. Ball & Doggett Pty Ltd (paragraphs 228D-324C, commencing on page 62). 4. Currie Group Pty Ltd (paragraphs 324D-420MC, commencing on page 81). 5. Cumberland (paragraphs 420N-516K, commencing on page 105). 6. Dominion Print Pty Ltd (paragraphs 516L-528C, commencing on page 127). 7. Fuji Xerox Australia Pty Ltd (paragraphs 528D-744E, commencing on page 135). 8. Allianz Australia Insurance Pty Ltd (paragraphs 744F-816C, commencing on page 161). 9. AON Insurance (paragraphs 816D-528C [sic], commencing on page 177). 10. Sensis Pty Ltd (paragraphs 830-842, commencing on page 200).
9. The general pattern of the Further Amended Statement of Claim concerning these paragraphs is that, for the several financial years between 1 July 2009 and 31 October 2018, a comparative reference is made to each of the following elements of transactions by which the first defendant applied funds of the first plaintiff (the unauthorised transfers totalling $9,755,514) in the transfer of money to an account surreptitiously controlled by her personally and appropriation of part of those monies to payment to a "Vendor", (on account of a debt owed by the first plaintiff to the "Vendor") retaining an unauthorised balance for her own use: 1. The dollar amount of allegedly false entries made by the first defendant in the "Purchases Summary" of the first plaintiff's computerised (MYOB) accounting records purportedly recording "purchases" of goods or services from a "Vendor". 2. Amounts falsely characterised by the first defendant as sums payable to the "Vendor" by the first plaintiff on a fraudulent "Recipient Created Tax Invoice" prepared by the first defendant. 3. Amounts actually invoiced to the first plaintiff by the "Vendor" for payment by the first plaintiff. 4. Amounts actually paid to the "Vendor" by the first defendant using funds of the first plaintiff. 5. Unauthorised amounts allegedly retained by the first defendant from funds of the first plaintiff, being the difference between the amounts actually paid to a "Vendor" and the false, inflated entries made by the first defendant in the first plaintiff's "Purchases Summary" or false Recipient Created Tax Invoices.
10. At the end of the treatment of each "Vendor" the Further Amended Statement of Claim includes what is described as a "subtotal" for the "Vendor" for "the Relevant Period" identifying: 1. The total of entries recorded in the Purchases Summary of the first plaintiff in relation to the "Vendor". 2. The total amount paid by the first defendant to the "Vendor" by the first defendant during the Relevant Period. 3. The total amount of the funds of the first plaintiff retained by the first defendant, calculated as the difference between the amounts recorded in the Purchases Summary (and false Recipient Created Tax Invoices) and the amounts paid by the first defendant to the "Vendor".
11. Those calculations are particularised by reference to the First Expert Report and earlier paragraphs of the Further Amended Statement of Claim relating to each "Vendor".
12. Fourthly, paragraphs 842A-842F, under the heading "Reconciliation for the Relevant Period", contain a summary of total amounts referable to: 1. Entries made by the first defendant in the first plaintiff's Purchases Summary. 2. False Recipient Created Tax Invoices prepared by the first defendant purporting to record an indebtedness of the first plaintiff. 3. The total amount of Purchases Summary entries recorded and Recipient Created Tax Invoices created by the first defendant in respect of all ten "Vendors". 4. The total amount paid by the first defendant into her personal accounts in respect of all ten "Vendors". 5. The total amount paid by the first defendant to the ten "Vendors".
13. Paragraph 842F alleges that each of the payments made by the first defendant to a "Vendor" as alleged in the Further Amended Statement of Claim was: 1. without any authorisation from the first plaintiff to make the payments from her own funds and reimburse herself from funds of the first plaintiff; 2. without the knowledge or consent of the first plaintiff; knowing that the first plaintiff did not have knowledge of, did not consent to, and did not authorise, the making of the "Vendor Payments" by the first defendant; 3. pursuant to a dishonest and fraudulent design in which the first defendant made the "Accounts Transfers" in sums exceeding the "Vendor Payments" over the Relevant Period and retained the balance for herself and/or the second defendant in the Accounts.
14. Fifthly, paragraphs 843-855AH allege that the first defendant overpaid herself for consultancy services and made other unauthorised payments, giving rise to liabilities in fraud, conversion, restitution and for equitable compensation.
15. Sixthly, paragraphs 855K-855E record "total" payments from various accounts, particularising references in the First Expert Report and earlier paragraphs of the Further Amended Statement of Claim.
16. Seventhly, paragraphs 859-884, under the heading "Vendor Payments - Causes of Action", repeat (in paragraph 859), with a qualification about Consultancy Fees, the allegation that the first defendant transferred to her own accounts the total (aggregate) sum of $9,755,514, via multiple transfers without authority, and attribute legal character to those transfers calling in aid "causes of action" in conversion, restitution, contract and fiduciary law.
17. The allegations of fact and law made in the text of the Further Amended Statement of Claim support the claims for relief made against the defendants in that pleading (save as to the quantum claimed against the first defendant) and in the plaintiffs' submissions. They closely follow the structure, and calculations, of the First Expert Report.
18. The defendants attribute significance to what, to my mind, is nothing more than a drafting error in paragraph 842D of the Further Amended Statement of Claim, if that. In substance, the paragraph is deployed by the defendants as a vehicle for presentation of their case in a comparison with that of the plaintiffs. Each side of the record views the Further Amended Statement of Claim through an adversarial prism.
19. Paragraph 842D records that the first defendant paid a total of $9,883,114 ($9,755,514 plus $127,600) into her own accounts "in respect of Vendors".
20. The defendants correctly contend that that sum represents payments made out of the plaintiffs' bank accounts by the first defendant "on any account" (not limited to the "10 Vendors"). They contend that, in order to demonstrate a failure to account on the part of the first defendant, the requisite comparison is not between: (a) all payments out of the plaintiffs' accounts "on all accounts" and (b) payments made to the 10 Vendors, but rather (c) payments made out of the plaintiffs' accounts referable to the 10 "Vendors" and (d) payments made to the 10 Vendors.
21. This reflects a basic contention on the part of the defendants that any accounting exercise should be modelled on a "vendor by vendor" approach with payments out of the plaintiffs' accounts matched with payments to each vendor (not limited to the "10 Vendors") rather than the "global "approach taken by the Expert (on instructions from the plaintiffs) and reflected in the Further Amended Statement of Claim in focusing on the total paid out of the plaintiffs' accounts by the first defendant and the total of credits to be allowed to the defendants for her payments to third party creditors of the first plaintiff, consultation fees and sundry payments.
22. The so-called "global approach" is one that "compares" the total of payments made out of the first plaintiff's bank account by the first defendant (on all accounts) with the total payments made by the first defendant (limited for the sake of expediency to the "10 Vendors") with allowances for the first defendant's consultancy fees and her payment of sundry business expenses on behalf of the first plaintiff.
23. As properly understood, the expression "global approach" is probably a misnomer in its use of the language of "comparison". As pleaded, the first plaintiff's claim against the first defendant is a claim for the first defendant to account for all funds of the first plaintiff transferred by the first defendant to herself without the authority of the first plaintiff (misappropriated) with credit allowances in her favour for her payments to the first plaintiff's legitimate third party creditors and for sundry business expenses of the first plaintiff paid by her.
24. The plaintiffs contend that the defendants bear the onus of proving that the first defendant has accounted for all funds misappropriated by her. Adopting their "comparative" case theory the defendants contend, in effect, the plaintiffs bear the onus of proving, on a "vendor by vendor" approach for all vendors (not limited to the "10 Vendors") that the first defendant, on a full accounting, is indebted to the first plaintiff for a balance (if any) found against her.
25. As will be noticed later in this judgment, the defendants place heavy reliance upon page 41 of the Expert Report (referred to in the particulars to paragraph 842D of the Further Amended Statement of Claim) which, inter alia, records the figure of $9,883,114 as the sum of $9,755,514 (the total payments from the first plaintiff's bank account to accounts associated with the first defendant) and $127,600 (the total sum paid from the second plaintiff's bank account to accounts associated with the first defendant, which, in my view, is consistent with paragraphs 855C-855E and 859, read with paragraphs 17B-17E of the Further Amended Statement of Claim.
26. Those claims, essentially, are claims for a money judgment: 1. in favour of the first plaintiff, in the sum of $2,016,968. 2. in favour of the second plaintiff, in the sum of $127,600.
27. Viewing the plaintiffs' claims together their combined claims total $2,144,568 ($2,016,968 plus $127,600).
28. The first plaintiff's claim for $2,016,968 (not including an allowance for $127,600 attributed to the second plaintiff) finds reflection in the text of the Further Amended Statement of Claim, calculated as follows: 1. The total amount of the gross Accounts Transfers of the first plaintiff's funds made by the first defendant to herself of $9,755,514 without authority, comprising: 1. a total of $8,077,229 transferred to the first defendant's AMEX Account; and 2. a total of $1,678,285 transferred to the first defendant's non-AMEX Accounts. 1. Less an allowance made by the first plaintiff in favour of the first defendant for Consultation Fees of $843,386. 2. Equals a subtotal of Net Accounts Transfer amounts of $8,912,128. 3. Less the total amount of payments made by the first defendant (from transferred funds of the first plaintiff) to "Vendors" of the first plaintiff in the sum of $6,895,160. 4. Equals the balance of the first plaintiff's funds retained by the first defendant for herself: $2,016,968.
29. These calculations were based upon the First Expert Report. After publication of that Report to the parties, the first defendant produced to the Expert evidence, not earlier provided to her, of payments totalling approximately $293,409 made by the first defendant to the "Vendors". The Expert took that evidence into account in the Supplementary Report.
30. Consequently, the first plaintiff remodelled and moderated its claim against the first defendant (not allowing for any liability referable to the second defendant), reducing it from $2,016,968 to $1,851,159 (which, reducing $2,016,968 by $293,409, should be $1,723,559) calculated as follows: 1. The total amount of allegedly unauthorised transfers of the first plaintiff's funds into accounts of the defendants: $9,755,514. 2. Less an allowance made by the first plaintiff in favour of the first defendant for Consultation Fees of $843,386. 3. Equals a notional subtotal of net unauthorised transfer amounts of $8,912,128. 4. Less the total amount of payments made by the first defendant (from transferred funds of the first plaintiff) to "Vendors" of the first plaintiff in the sum of $7,188,569 (being the sum of $6,895,160 and $293,409). 5. Equals the balance of the first plaintiff's funds retained by the first defendant for herself: $1,723,559.
31. This change does not affect the analytical structure of the Further Amended Statement of Claim.
32. These calculations do not allow, specifically at least, for a claim of the first plaintiff for $18,636.35 (referable to the first defendant's allegedly unauthorised payment of her American Express membership fees from funds of the first plaintiff) asserted in paragraphs 18-24AD of the Further Amended Statement of Claim.
33. Unless, perhaps, intended to colour an assessment of the conduct, or state of mind, of the first defendant any implicit claim for $18,636.35 referable to the first defendant's payment of her American Express membership fees ostensibly goes nowhere in presentation of the plaintiffs' case. The defendants contend that any claim referable to the sum of $18,636.35 should be taken to have been abandoned by the plaintiffs. Paragraph 22 of the First Expert Report suggests that, since the commencement of these proceedings, the first defendant, without admissions, has "repaid" the American Express membership fees. It is sufficient to record that the underlying allegation of misappropriation of $18,636.35 does not affect the analytical structure, or substance, of the plaintiffs' case.
34. The second plaintiff's claim against the second defendant for a judgment in the sum of $127,600 is articulated in paragraphs 17E and 24A-24GK of the Further Amended Statement of Claim. Paragraph 17E identifies the dates and amounts of transfers from the second plaintiff's bank account to the second defendant's accounts, ostensibly as consultancy fees charged by her for work done on the account of the second plaintiff. Paragraph 24F identifies appropriation of those amounts by the first defendant to herself and the second defendant.
35. In this summary of the Further Amended Statement of Claim I have not taken into account concessions made by the plaintiffs during the course of the hearing of these proceedings, which will be noted in due course. The purpose of the summary is to provide context for the defendants' challenge to the plaintiffs' pleading.
36. On my reading of the Further Amended Statement of Claim, the first plaintiff's claim for $2,016,968 was based upon the foundational allegation that the first defendant made unauthorised transfers to herself from funds of the first plaintiff in the total sum of $9,755,514.
37. On the face of the Further Amended Statement of Claim the first plaintiff arrived at its claim for $2,016,968 by allowing in favour of the defendants a "credit" in the total sum of $7,738,546, representing: 1. an allowance of $843,386 for "Consultancy Fees"; and 2. an allowance of $6,895,160 for payments made by the first defendant to "Vendors" (from the first defendant's unauthorised transfers of $9,755,514).
38. These same calculations were presented in a different form in paragraph [859] of the Further Amended Statement of Claim where the plaintiffs alleged that the first defendant effected unauthorised transfers in the sum of $8,912,100.28 after deducting from the sum of $9,755,514 (explained in paragraphs [17B] and [855C] of the Further Amended Statement of Claim as unauthorised "Accounts Transfers") the sum of $843,386 as an allowance for "Consultancy Fees". The primary allegation in the pleading remained that the first defendant made unauthorised transfers totalling $9,755,514.

The Defendants' Pleading Point

1. The defendants do not challenge the logic of the Further Amended Statement of Claim if a global approach such as that addressed by the Expert is the correct approach to accounting for dealings between the parties. They insist that what is required is a vendor by vendor approach, matching payments made into and out of the defendants' accounts in respect of each vendor, on a full accounting for funds transferred (by the first defendant) out of the bank accounts of the plaintiffs.
2. The defendants' challenge to the case presented by the plaintiffs on the basis of the Further Amended Statement of Claim is based upon the following propositions: 1. The defendants, they contend, were entitled to read the Further Amended Statement of Claim as a mere claim (untainted by any allegation or finding of fraud) for an accounting between the parties of the difference between amounts "paid" by the first plaintiff to the defendants ("reimbursing" the first defendant for her payment of the first plaintiff's expenses "from her personal resources") less the amounts paid by the defendants on account of the first plaintiff's expenses to the "Vendors" and amounts the defendants were entitled to be paid by the plaintiffs for "Consultation Fees". 2. By limiting the accounting exercise for which the Further Amended Statement of Claim provides to "the 10 Vendors", and not taking into account all "vendors" (that is, suppliers of goods and services) to the first plaintiff, the plaintiffs seek, impermissibly, to take advantage of something less than a full taking of accounts between the parties. 3. If, on a proper taking of accounts, the Court were to find that the defendants have been "overpaid" they could, as they accept, be required to refund any overpayment "by way of a restitutionary order (not, strictly speaking, an order requiring the payment of damages or equitable compensation)", based on a finding of "mistake" - in respect of which they expressly advance no defence of a change in position. 4. In fact, the defendants contend, there have been no overpayments made by the plaintiffs to the defendants; but, on the contrary, the first defendant, from her own resources, has paid out on account of the first plaintiff's expenses more than she has been "reimbursed" by the defendants. 5. A flaw in the plaintiffs' calculations, and in the Expert Reports relied upon by the plaintiffs, is that the "10 Vendors" identified in the Further Amended Statement of Claim (and in the Expert Report) are only some of the "creditors" of the first plaintiff whose accounts have been, or may have been, paid by the first defendant from her own resources. 6. A logical problem with the case of the plaintiffs, characterised by the defendants as a "accounting case", is that "an entitlement [in the first plaintiff] to compensation of the kind [characterised by the defendants as an accounting exercise limited to the "10 Vendors"] cannot logically be established by comparing the amounts paid by [the first plaintiff] to the Defendants on any account whatsoever with the expenses paid to an incomplete selection of [the first plaintiff's "vendors"] in circumstances where, as now appears to be common ground, the Defendants paid expenses owed by [the first plaintiffs] to "vendors" other than the 10 identified by [the first plaintiff] in the [Further Amended Statement of Claim]." This, the defendants label "The 10 Vendors problem". 7. The plaintiffs bear the onus of proving that the first defendant received more of the first plaintiff's funds than she paid out to third parties (not limited to the 10 "Vendors") on the account, and in the interests, of the first plaintiff; and the plaintiffs have not discharged that onus and (on the current pleadings) cannot do so.
3. In my opinion, the defendants' criticism of the plaintiffs' case as conceptually flawed is itself misconceived. The outcome of these proceedings ultimately depends upon characterisation of the nature of the proceedings and, incidentally, who bears the onus of proof in the accounting for funds passing between the plaintiffs, the defendants and third party creditors of the first plaintiff.
4. The plaintiffs characterise the proceedings as a claim for compensation arising from a fraudulent misappropriation of funds by an accounts manager/bookkeeper/financial administrator who owed them (in particular, the first plaintiff) obligations, at law and in equity, of good faith.
5. The defendants characterise the proceedings as an unexceptional, ordinary claim made by the plaintiffs based upon an incomplete accounting between parties who had reciprocal obligations to account in management of funds in payment of third party debts of the first plaintiff.
6. The nature of the parties' dispute does not necessitate, or justify, a finding that the Further Amended Statement of Claim is defective.
7. The point taken by the defendants is not so much a "pleading point" as one about an insistence on the part of the defendants (in pursuit of their case theory) that the plaintiffs be held to their case theory (which the defendants characterise as erroneous) about the nature of the accounting process required to be undertaken in accounting for dealings between the plaintiffs, the defendants and third party suppliers of goods and services (creditors) to the first plaintiff.
8. In my opinion, on a fair reading of the Further Amended Statement of Claim as a whole: 1. The plaintiffs' case relating to the first plaintiff's claim for a money judgment in the sum of $2,016,968 (subject to adjustments) is plainly based upon an allegation that each of the unauthorised account transfers totalling $9,755,514 was in character fraudulent and recoverable by the first plaintiff subject to due allowances for "Consultation Fees" and amounts paid to the "Vendors" on the first plaintiff's account. 2. The plaintiffs' case is not one of a mere accounting for funds of the first plaintiff "paid" into, and out of, the first defendant's accounts, together with an allowance for "Consultation Fees". 3. A forensic significance of the analysis of dealings with the "10 Vendors" in the Further Amended Statement of Claim is that: 1. that analysis establishes, as a matter of pleading, a foundation for the plaintiffs' allegation that the first defendant engaged in a process of systematic fraud in the purported performance of her duties as the first plaintiff's "Financial Administrator" (by whatever name known); 2. characterisation of the first defendant's conduct as systematically fraudulent, involving concealment of transactions (and, as the evidence demonstrates, the destruction of records) provides a justification for what the parties have described as a "global approach" to accounting for the plaintiffs' funds (favoured by the plaintiffs) over the "vendor by vendor" approach of matching particular money flows out, into and out of accounts (insisted upon by the defendants); and 3. an analysis of the "10 Vendors" provides, in its identification of actual amounts paid by the first defendant to the "Vendors" from funds of the first plaintiff, a quantification of allowances that (as recognised by the plaintiffs) should be made in favour of the first defendant as a credit against the unauthorised account transfers totalling $9,755,514. 1. The plaintiffs' case is not flawed by reason of the possibility (not proven by the defendants or otherwise established on the evidence) that the first defendant may have paid out of her own resources on the account of the first plaintiff "vendors" other than the "10 Vendors" identified in the Further Amended Statement of Claim and the First Expert Report.
9. Although the Further Amended Statement of Claim particularises the plaintiffs' allegations by reference to the First Expert Report the Report is not to be read, as the defendants intend, as itself a pleading, open to challenge as such. The defendants' criticism of the Expert's methodology may, in an evidentiary sense, impact on the plaintiffs' case but it is not of itself a ground for displacement of the plaintiffs' pleaded allegations.
10. Incidentally, the defendants have not disclaimed the benefit of the Supplementary Expert Report, in which the Expert, with the benefit of information provided to her by the first defendant after the publication of the First Expert Report, brought to account in favour of the first defendant payments made by the first defendant to "the Ten Vendors" not earlier disclosed by the defendants.
11. Whether by means of a defence of set-off, or by way of a Cross Claim (with the benefit of a grant of leave under section 500(3) of the Corporations Act 2001 Cth not obtained), it was open to the first defendant to lead evidence explaining her conduct and demonstrating that she, "from her own resources" (to paraphrase her written submissions), paid, and bore the burden of, expenses properly attributable to the first plaintiff. As it happens, she made a forensic decision to rely only upon a documentary case; cross examination of the plaintiffs' principal and the Expert; and submissions of counsel (inter alia, about onus of proof), without herself giving evidence. Her case depends, ultimately, upon a proper characterisation of the proceedings.
12. The defendants contend that "the wrong" alleged against the first defendant in the Further Amended Statement of Claim is confined by the first plaintiff's claim for $2,106,968, not accommodating a claim for a larger sum (they say $8,912,128, which represents the sum of $9,755,514 referrable to unauthorised transfers of funds, less an allowance of $843,386 for consultancy fees) and that, because the plaintiffs have not (by pleading or evidence) accounted for all dealings between the parties, they have not proven an entitlement to $2,106,968 or any other amount.
13. The defendants contend that they were entitled to proceed on the basis that the first plaintiff seeks in the Further Amended Statement of Claim $2,016,968 in damages or equitable compensation as calculated on page 41 of the First Expert Report in a table that demonstrates how one proceeds from the sum of $9,755,514 to the sum of $2,144,568 (the sum of $2,016,968 claimed by the first plaintiff and $127,600 claimed by the second plaintiff).
14. Fairly read, the table records an amount of $9,755,514 for the first defendant's total unauthorised transfers from the bank account of the first plaintiff; $127,600 for the second defendant's unauthorised transfers from the bank account of the second plaintiff; $842,386 as an estimate of consultancy fees; and $6,895,180 as an allowance for payments made by the first defendant to [the 10] Vendors. That route to calculation of the claim of $2,016,968 cannot be ignored and is not inconsistent with the structure of the Further Amended Statement of Claim.
15. On the contrary, those calculations are reflected in the pleading, particularly paragraph 859, referring back to the "Accounts Transfers" (defined in paragraph 855C, which in turn refers back to paragraph 17A of the pleading and page 41 of the First Expert Report). The reference to paragraph 17A should be a reference to paragraph 17B, a clerical error which becomes apparent when one inevitably notices that both paragraph 17B and paragraph 855C refer to the (unauthorised) payments totalling $9,755,514. The particulars to paragraph 17B refer to both page 41 of the First Expert Report and appendix 14 of the Report which identify "each Account Transfer" the first defendant allegedly caused the first plaintiff to make "over the Relevant Period". Each of those transfers is alleged, in paragraph 859, to have been made by the first defendant without the knowledge or consent of the first plaintiff; for no proper purpose; in the absence of any legal entitlement of the defendants to receive those funds; and dishonestly.
16. On a fair reading of the Further Amended Statement of Claim it is clear that a foundational "wrong" alleged against the first defendant is her succession of unauthorised payments totalling $9,755,514. That is not inconsistent with an allegation that, after credits duly made in favour of the first defendant, she has wrongfully retained $2,016,968.
17. The Further Amended Statement of Claim is not an easy read, but the nature of the "wrongdoing" alleged against the first defendant, to my mind, clearly starts with unauthorised transfers totalling $9,755,514 and then allows credits in favour of the first defendant for consultancy fees and payments on the first plaintiff's account. To my mind, this must have been understood by the defendants when they pleaded a set off defence and a cross claim in which the "set off" they advanced (not established at the hearing) compared sums of the order of $8-$9 million. The defendants could not reasonably have been misled.

A Review of the Defence and the First Defendant's Cross Claim

1. The Defence. The defendants' Defence largely puts the plaintiffs to proof of their allegations of misappropriation, in a sense responding principally to the First Expert Report upon which the accounting exercise relied upon by the plaintiffs is based.
2. In opening submissions, senior counsel for the defendants made the following observations (at transcript page 6): "… I just want to make clear my position: we won't be asking your Honour to hunt through, as if a forensic accountant, 23 volumes of material. … But further, as we understand the plaintiffs' position, the plaintiff isn't in effect going to ask my client [the first defendant] to do that either. So, the case that we've come to meet is the case that [the Expert] identifies in her Report, it's picked up on the pleadings, and we'll ultimately be saying that [the plaintiffs] case is as good or as bad as the [Expert] Report. But we haven't [attended to] answer some other alternative case that says, 'well, even if [the Expert's] Report doesn't pass muster for some reason, if you look at these pages of volume 23 and volume 17, you'd come up with some other answer.' I don't understand the plaintiffs to run that case, but I can't meet that case. … I don't understand my learned friends to be saying, 'well, if [the Expert's] Reports don't pass muster for whatever reason, there is some other way to demonstrate a deficiency in payments versus reimbursements'. I think that's common ground."
3. Counsel for the plaintiffs did not challenge this view of the case until, in final submissions, the plaintiffs advanced an "alternative case" in addition to that specifically pleaded in the Further Amended Statement of Claim.
4. In substance (having traversed each paragraph of the Further Amended Statement of Claim with an admission, non admission or denial) the Defence advances the following case: 1. The defendants admit the allegations in paragraphs 17A, 17B, 17C, 17D and 17E of the Further Amended Statement of Claim (which allege that the first defendant transferred from the first plaintiff's bank account to her own accounts the total sum of $9,755,514 and from the second plaintiff's bank account to her own accounts, the sum of $127,600) so far as they allege the contents of the Expert Report but do not admit the accuracy, truth or admissibility of the Expert Report. 2. All payments made by the plaintiffs into the defendants' accounts were utilised for the payment of the following: 1. Consulting fees payable to the second defendant. 2. Reimbursement to the defendants for payments made by them to the first plaintiff's creditors on the first plaintiff's behalf. 3. Reimbursement to the defendants for payments made by them to or for the first plaintiff's staff expenses (including telephone accounts and for 'outside work' expenses), staff amenities, office furniture and clearing expenses. 1. The creditors to whom payments were made by the defendants on behalf of the first plaintiff included: 1. the "Vendors" as defined by the Further Amended Statement of Claim; and 2. several other "Subject Vendors" as defined in orders made by the Court on 16 December 2021 for interlocutory discovery. 1. The defendants are entitled to set off against the plaintiffs' claims all payments made by the defendants on the first plaintiff's behalf, which have not been accounted for in the Further Amended Statement of Claim. 2. Particulars of the payments made by the defendants comprising the set off they claim against any liability they may have to the plaintiffs appear in the first defendant's Cross Claim.
5. In their closing submissions the defendants expressly abandoned defences under the Limitation Act 1969 NSW, formerly pleaded as follows: 1. In respect of each claim for damages (whether for conversion, restitution, breach of contract, or otherwise) the cause of action for which first accrued on or before 12 November 2012, the cause of action is not maintainable and is extinguished by operation of sections 14 and 68A of the Limitation Act 1969 NSW. 2. In respect of each claim for equitable compensation (whether for breach of a fiduciary or other equitable duty, breach of trust or otherwise) the cause of action for which first accrued on or before 12 November 2012, the cause of action is not maintainable and is extinguished by operation of sections 14, 23 and 68A of the Limitation Act 1969."
6. The date 12 November 2012 represents the date six years before the date upon which these proceedings were commenced by the first plaintiff's filing a Summons addressed to the first defendant.
7. The defendants' abandonment of their Limitation Act defences appears, at least temporally, to have been a response to the plaintiffs' closing submissions in which reliance was placed upon section 55(1) of the Act as a complete answer to the Limitation Act defences. Section 55(1) postpones the date upon which a cause of action commences to run (in a case in which there is a cause of action based upon fraud or deceit or which is fraudulently concealed) until the person having the cause of action "first discovers, or may with reasonable diligence discover, the fraud, deceit or concealment".
8. The plaintiffs' reliance on section 55(1) was expressly based upon a submission that the evidence before the Court "proves that [the first defendant] acted dishonestly over the Relevant Period by causing [the first plaintiff and the second plaintiff] to make payments to the [first defendant's Accounts] without those companies' knowledge or authorisation, and concealed that dishonest conduct".
9. That submission has both an evidentiary foundation and in allegations made by the plaintiffs in the Further Amended Statement of Claim.
10. In abandonment of their Limitation Act defences (in paragraphs 116-119 of their written submissions, MFI D38) the defendants made the following submissions (with editorial adaption and omitting footnotes): "Limitation 'defence' not pressed; implications for the Plaintiffs' allegations of fraud [116] The Defendants do not press the Limitation Act 'defence' pleaded in paragraph 12 of its [sic] Defence to the Further Amended Statement of Claim. As they said in their written opening: 'The Defendants accept that - if [it] were the case that [the first plaintiff] paid [the first defendant] and/or [the second defendant] an amount exceeding the amount to which they were entitled by way of reimbursement or expenses paid for the benefit of [the first plaintiff] and consultancy fees - the relevant Defendant would be obliged to refund to [the first plaintiff] the remainder.' [117] In light of that concession and the correct view as to the scope and application of the so-called 'presumption against wrongdoers' [a reference to Houghton v Immer (1997) 44 NSWLR 46 at 59, citing LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1990) 24 NSWLR 499 at 508 and Armory v Delamirie (1722) 3 Stra 505; 93 ER 664], it is unnecessary and it would be inappropriate for the Court to make findings on the Plaintiffs' allegations of fraud. [118] Put simply, if what is said above, and what was said orally on behalf of the Defendants as to the Plaintiffs' failure to prove their case is rejected, the Plaintiffs will succeed without having to demonstrate that the evidence rises to the very high level required to support a finding of fraud. [119] Suffice to say, the Defendants deny that they engaged in the fraud alleged against them. What the Plaintiffs submit to the contrary relies on the assertions of a lay witness [the principal of the plaintiffs, Mr Michael Jones] who, by his own admission, 'does not have any formal training in accounting, finance, or the like, and … [has] never been comfortable or confident in dealing with formal accounting'. Those assertions are unsupported by any expert evidence and, to some extent, are directly inconsistent with the expert evidence [of the Expert, Ms Cusack]. They do not provide a sufficient basis for the grave, life-destroying and, in any event, unnecessary findings sought by the Plaintiffs by their written submissions".
11. I do not, here, pause to reflect on the strength or otherwise of the plaintiffs' allegations of fraud or the like, but to highlight the different paradigms within which each side of the record seeks to make a case.
12. The plaintiffs advance a case of misappropriation, coloured by dishonesty. The defendants advance a case of a mere, morally innocent accounting between the parties.
13. In dealing with the plaintiffs' allegations of misappropriation, and their characterisation of misappropriations as fraudulent, I am mindful of the seriousness of all allegations made against the defendants and the imperative force of section 140 of the Evidence Act 1995 NSW, the statutory embodiment of Briginshaw v Briginshaw (1938) 60 CLR 336.
14. The Defendants' Set-Off Claim (by Reference to the First Defendant's Cross Claim). The defendants' set-off defence incorporates the first defendant's Cross Claim by reference. The structure of the Cross Claim is similar to that of the Further Amended Statement of Claim in that it is based upon "global" allegations of fund transfers, not a tracing of matched transactions.
15. The Cross Claim (verified by the first defendant) in essence alleges that: 1. Between 22 December 2008 and 13 February 2019, on behalf of the first plaintiff, the first defendant "and her agents" paid debts owed by the first plaintiff to third parties (including debts which accrued since 22 December 2009) from time-to-time in the total sum of $9,042,515.39; and 2. Between about 26 February 2009 and 13 February 2019, the first plaintiff "or its agent" reimbursed the first defendant a total of $8,862,320.73; and 3. Since about 13 February 2019, the first plaintiff has been indebted to the first defendant in the net sum of $180,194.66, which the first plaintiff has neglected to pay to the first defendant.
16. The third party creditors alleged to have been paid a total of $9,042,515.39 are listed in Table A to the Cross Claim. They include the "10 Vendors" identified in the Further Amended Statement of Claim (although the amounts paid to them are not separately summarised and reconciled with the Further Amended Statement of Claim) and the second defendant, to which regular payments of $4,840 are said to have been made.
17. In the Cross Claim the first defendant alleges that she "and her agents" paid debts of the first plaintiff in the total sum of $9,042,515.39 at the request of the principal of the first plaintiff (Mr Michael Jones) in circumstances in which, it is alleged, that the first plaintiff was unable "from at least December 2008" to pay its debts to creditors as and when they fell due and "in about 26 February 2009, Mr Jones caused American Express to open an Amex account in the name of the first defendant and requested her to use that account to pay the first plaintiff's creditors.
18. The First Plaintiff's Defence to the Cross Claim. The first plaintiff's Defence to the Cross Claim joins issue with the first defendant in a manner consistent with the Further Amended Statement of Claim, save that (by reference to paragraphs 88-90 of the affidavit of Michael Jones sworn 21 June 2020) the first plaintiff admits that in 2018 it requested the first defendant to attend the payment of a limited number of its debts.
19. In its Defence to the Cross Claim the first plaintiff admits that the first defendant repaid "the 10 Vendors"(between 22 December 2008 at 18 October 2018) the total sum of $6,895,160, as particularised in paragraph 842E of the Further Amended Statement of Claim.
20. In its Defence to the Cross Claim the first plaintiff alleges that between 22 December 2008 and 18 October 2018, the first defendant caused it to reimburse [sic] her and entities associated with her in full in respect of the repayment of its debts by her and entities associated with her, and further caused it to pay sums to or for the benefit of her and her related entities in excess of any of its debts paid by her or entities associated with her, "as set out in the [Further Amended Statement of Claim], including at paragraph [859].
21. Paragraph 859 of the Further Amended Statement of Claim is a paragraph which, by reference back to other paragraphs of the pleading, alleges that the first defendant caused the first plaintiff "to make each Accounts Transfer" (in the total sum of $9,755,514, exclusive of the $127,600 referrable to the second defendant): 1. without the knowledge or consent of the first plaintiff; 2. for no proper purpose; and 3. in the absence of any legal entitlement of the defendants to receive those funds; and dishonestly.

Observations on the Real Questions in Dispute

1. At core, the real questions in dispute in these proceedings turn on each party's determination to frame the nature of the dispute.
2. The plaintiffs' case is grounded upon foundational allegations to the effect that, without the authorisation, consent or knowledge of Mr Jones (representing the plaintiffs), the first defendant transferred funds of the plaintiffs to her own accounts (including accounts of the second defendant) and has dishonestly failed to account for those funds.
3. As part of an accounting exercise predicated upon those fundamental allegations, the plaintiffs accept that the first defendant should receive an allowance in her favour for: (a) "Consultancy Fees" (as agreed or, in default of agreement, determined by the Court); (b) payments actually made to "the 10 Vendors" as third party creditors of the first plaintiff; and (c) reimbursement of sundry work-related expenses paid by the first defendant.
4. On one view, this case implicitly proceeds on the basis that, having received funds of the plaintiffs (not as a gift, but for the commercial purpose of paying third party creditors of the first defendant and allowing for consultancy fees) the defendants bear the onus of proving "repayment"; that is, the burden of proving the first defendant's faithful service of the purpose underlying her transfer of funds. This view of the case may be lent support by the following observations of the Court of Appeal (per Spigelman CJ) in Coshott v Sakic (1998) 44 NSWLR 667 at 671D-672A: "There is a useful analogy in the authorities which determine which party bears the onus of proof that an advance of money was a loan, not a gift In Australia, the burden of proving the fact that an advance of money was by way of loan, rather than by way of gift, is on the plaintiff. In Heydon v Perpetual Executors Trustees & Agency Co (WA) Ltd (1930) 45 CLR 111 at 113, the defendant, who alleged that money advanced was a gift, was held not to bear the onus. This case is to be contrasted with the High Court's decision in Young v Queensland Trustees Ltd (1956) 99 CLR 560. The issue in that case was not the characterisation of the arrangement between the parties, because it was conceded that the original payment to the defendant was by way of loan. The issue was who bore the onus of proving, as the defendant alleged, that the money had been repaid. The High Court said (at 569-570): 'The law was and is that, speaking generally, the defendant must allege and prove payment by way of discharge as a defence to an action of indebtedness in respect of an executed consideration.' Heydon has been consistently applied in Australia. … A different approach has been taken in England and New Zealand. …"
5. On the plaintiffs' case, the analysis in the Further Amended Statement of Claim of the affairs of the "10 Vendors" is directed not only to quantification of the amount of the first plaintiff's funds applied to the payment of third party creditors and amounts "retained" by the first defendant. A proper forensic purpose of that analysis is to lay the groundwork for a submission that the first defendant engaged, systematically in a deliberate, fraudulent scheme to misappropriate money of the plaintiffs and has failed to account for all funds misappropriated.
6. On a fair reading of the Further Amended Statement of Claim the plaintiffs' case is, in my opinion, objectively clear despite the Byzantian character of the pleading. The clarity of that case is reinforced by reference to the Expert Reports and the affidavits served by the plaintiffs on the defendants.
7. The defendants' case is, on one view, predicated upon an assumption that the plaintiffs and the defendants are each, vis-à-vis the other, merely accounting parties, each with an obligation to account to the other for transfers of funds for the ultimate purpose of payment of the first plaintiff's third party creditors and an allowance in favour of the defendants for Consultancy Fees and sundry work expenses paid by the first defendant.
8. Adopting for the moment that perspective of these proceedings, this characterisation of the nature of the questions in dispute explains why: (a) by reference to "the 10 Vendors problem", the plaintiffs have not proved their case; (b) the onus of dealing with any "gap" between the defendants' receipt and expenditure of funds on behalf of the plaintiffs must be borne by the plaintiffs, not the defendants; and (c) the analysis of the "10 Vendors" dealings in the Further Amended Statement of Claim is essentially irrelevant to the accounting process.
9. Implicit in the defendants' case may be a proposition (not expressly articulated) that, where parties are under mutual obligations to account, there can only be one account (Adams v Bank of New South Wales [1984] 1 NSWLR 285 at 296C) and, given the accounting nature of the current proceedings, the plaintiffs must fail entirely because they have not established a net liability on the part of the defendants across all accounts, matching particular transactions transaction by transaction.
10. There are two particular problems with the case theory that characterises the first plaintiff as an accounting party vis-à-vis the first defendant.
11. First, in the absence of evidence from the first defendant there is no evidence of an agreement between her and the first plaintiff that she could, or should, routinely interpose herself between the first plaintiff and its creditors or pay the first plaintiff's debts and reimburse herself from funds of the first plaintiff.
12. In any event, no such agreement appears in the defendants' pleadings unless it is implied in those parts of the first defendant's Cross Claim (incorporated by reference in the defendants' Defence to the Further Amended Statement of Claim as a defence of set off) alleging that the first defendant made payments on the account of the first plaintiff "on the actual and implied request" of the first plaintiff, entitling her to reimburse herself. The allegation of a "request" appears, on the face of the Cross Claim, to be essentially an implied rather than an express request. The first defendant's forensic decision not to give evidence deprived this allegation of an evidentiary foundation.
13. Secondly, in the absence of any evidence from the first defendant there is in the evidence no discernible pattern of transfers from the first plaintiff's bank account being made in reimbursement of the first defendant's payment of the first plaintiff's debts.
14. Forensic choices and consequences. The deliberate forensic decision of the defendants to adduce no evidence from the first defendant might operate at a level that affects inferences that can be drawn from the evidence before the Court. However, the defendants were perfectly entitled to wait until the close of the plaintiffs' case before deciding whether to read their affidavits (which I have not read) and too much significance should not be attributed to their exercise of that entitlement.
15. The fact remains, however, that in the absence of evidence from the first defendant (in particular), the Court is left with evidence of the plaintiffs which is plausible, uncontradicted, supportive of the plaintiffs' case and inconsistent with the defendants' case.
16. Had the first defendant given evidence and subjected herself to cross examination, some fundamental questions might have been asked which must, in the absence of her evidence, remain in the realm of speculation. One such question, which may be noticed, but perhaps must remain unresolved, is why she thought it necessary, and appropriate, that payments of the first plaintiff's creditors, with funds of the first plaintiff, be channelled through a myriad of accounts (or, indeed, any accounts) owned or controlled by the first defendant as an intermediary.
17. In the absence of evidence from the defendants contradicting the plaintiffs' evidence, it is difficult to discount the evidence of the plaintiffs about the context in which fund transfers were effected unless, as the defendants submit, these proceedings are merely an exercise of accounts being taken between parties under mutual obligations to account for a course of dealings involving an agreement providing for offsetting transfers of funds.
18. With a single, possible exception (in which Mr Jones in 2018 accepted offers of the first defendant to pay some bills and reimburse herself from the first plaintiff's funds) there was no such agreement. The exception proves the rule. There is no evidence that the defendants offered, agreed or were financially able to act as a financier for the plaintiffs.

THE COURSE OF THE HEARING

1. Much of the evidence adduced at the final hearing of these proceedings was documentary, principally primary business records admitted into evidence without objection.
2. The focus of much of the evidence adduced at the hearing was the evidence of Lauren Cusack, the Expert author of the First Report (referred to in the Further Amended Statement of Claim as "the Joint Expert Report") and the Supplementary Report and the deponent of an affidavit sworn 4 September 2023, all of which (after a complaint by the defendants about late service of the Supplementary Report) were admitted into evidence without objection.
3. Ms Cusack's evidence was formally led by senior counsel for the plaintiffs, and she was cross examined by senior counsel for the defendants.
4. Over objection by the defendants, she was at the commencement of the hearing presented to the Court by the plaintiffs as a "Joint Expert" of the parties (which, at least initially, she may well have been) but, in the way the proceedings unfolded, nothing turns on attribution to her of such a label. Her independence and expertise were not challenged. The primary challenge to her evidence related to the scope of her investigation, limited (on instructions) to an analysis of dealings with only 10 (not all) of the first plaintiff's "vendors". This is a central focus of the defendants' challenge to the plaintiffs' Further Amended Statement of Claim.
5. The plaintiffs adduced evidence from three witnesses. The first was Mr Jones. He swore two affidavits (on 21 June 2022 and 31 July 2023 respectively), admitted into evidence with a few formal objections confined to qualifying (by orders under section 136 of the Evidence Act 1995 NSW) the evidentiary effect of expressions of opinion. The second of his affidavits was sworn in reply to an affidavit of the first defendant which, as events unfolded, was not read. He was, but lightly cross examined, and only about a single issue (the disputed entitlement of the second defendant to "Consultancy Fees").
6. The plaintiffs' second witness was Andrew Yacoub (a Production Manager employed by the first plaintiff), whose affidavit sworn on 21 June 2022 was read without objection and who was not required for cross examination.
7. The third witness was Matthew Clayton Kennett (a solicitor), whose relatively formal affidavit sworn on 31 July 2023 was read without objection and who was not required for cross examination.
8. At the close of the evidence of the plaintiffs, and having cross examined Mr Jones and the Expert, the defendants elected to give no evidence and did not read foreshadowed affidavits. Accordingly, no witness on the defendants' side of the record made available for cross examination.
9. The basic forensic position of the defendants was that the plaintiffs' case "is as good or as bad as the Cusack Report".

The Plaintiffs' Witnesses

1. Mr Michael Jones. To paraphrase the defendants' closing written submissions, "the whole of Mr Jones' cross examination [on behalf of the defendants] was directed to the question whether there was no contract between [the second plaintiff] and either of the defendants as alleged by [the second plaintiff]".
2. On my own reading of the cross examination I would say, with a pretension to greater precision, that it was directed to the question whether there was a contractual relationship between the second plaintiff and the second defendant (or perhaps between the plaintiffs and the defendants) such as to establish a legitimate reason for the second defendant to receive (implicitly via transfers effected by the first defendant), and to retain, funds of the second plaintiff as "consultation fees".
3. When challenged in cross examination Mr Jones denied that there was a contractual relationship between the plaintiffs and the second defendant or that there was a legitimate reason for the second defendant to receive "Consultation Fees" from funds of the second plaintiff. He adhered to his affidavit evidence to the effect that the work done by the first defendant in keeping "the books" of the second plaintiff was work done by her as an incident of her consultancy agreement with the first plaintiff. He nevertheless accepted the cross examiner's propositions that the first defendant "had some involvement in the books of" the second plaintiff and that "[that] was for the benefit, or that assisted, that advanced [the second plaintiff]".
4. Mr Jones accepted the cross examiner's proposition that his "position" was that the first defendant "was just doing that extra work for [the second plaintiff] for free" and denied the cross examiner's suggestion that "there was an agreed consultancy fee for that work of $1,000 per fortnight plus GST".
5. Confronted with financial statements of the second plaintiff for the several years ended 30 June in 2013 to 2017 (which he had signed off with a declaration that they fairly represented the company's financial position at the year's end and its performance for the year just ended) he could not explain entries relating to "consultancy fees" in the financial statements or deny that those entries related to "fees payable from [the second plaintiff] to [the first defendant] or to her company [the second defendant]". He nevertheless maintained his denial that he had agreed, on behalf of the second plaintiff, to pay "consultancy fees" to the defendants on the account of the second defendant.
6. In the absence of any evidence from the first defendant deposing to the circumstances in which she contends there was an agreement for the payment of consultancy fees by the second plaintiff to the second defendant, and explaining her input into the preparation of the second plaintiff's financial statements (by external accountants), I accept the evidence of Mr Jones. There was no contractual relationship between either of the plaintiffs and the defendants providing for payment of fees to the second defendant. The work performed by the first defendant on "the books" of the second plaintiff was an incident of the consultancy work done by the first defendant for the first plaintiff.
7. Although, after the first defendant's retirement, Mr Jones located an isolated invoice (addressed to the first plaintiff) for work allegedly done by the second defendant in respect of the books of the second plaintiff, there was no routine pattern of such invoices (or anything similar) contemporaneous with the first defendant's transfer of funds of the second plaintiff to the second defendant.
8. Mr Jones' evidence, which I accept, is that he "never authorised [the first defendant] or anyone else to cause [the second plaintiff] to pay [the first defendant] any money whatsoever, and [he] did not attend to any of these payments.
9. Mr Jones' cross examiner did not challenge the evidence of Mr Jones in his first affidavit that: (a) he did not "recall ever hearing about or discussing the company Stavshaw Pty Ltd [the second defendant] at the time at which [the first defendant] was engaged"; (b) he had not located any written agreement between the first plaintiff and the first or second defendants; (c) "[the] first time [he] became aware of the existence of [the second defendant] … was after [the first defendant] retired and [he] began to look through [the first plaintiff's] accounts [himself and he saw the second defendant] mentioned in [the first plaintiff's] MYOB records; or (d) "[from] the time [the first defendant] was engaged by [the first plaintiff, he] never personally saw or received any invoice issued by [the first or second defendants … to the first plaintiff]".
10. The limited nature of the defendants' objections to the affidavits of Mr Jones and the limited scope of their cross examination of him, have left large parts of his affidavits unchallenged by evidentiary objection, contradiction or cross examination. The defendants' submissions did not in detail engage with his evidence depicting conduct of the first defendant (in channelling funds of the plaintiffs through bank accounts owned or controlled by her) as unauthorised, without his knowledge or consent and fraudulent.
11. Mr Jones' evidence, read with the accounting evidence of the Expert, provides a substantial factual foundation for the plaintiffs' case as pleaded in the Further Amended Statement of Claim.
12. No challenge having been made to the credibility or reliability of Mr Jones' evidence, and it being both plausible upon an objective review and probative of the plaintiffs' case without contradiction, I accept the substance of his evidence as true and correct.
13. That conclusion should not come as a surprise to the defendants, having made a forensic decision to present a case based upon an analytical challenge to the plaintiffs' Further Amended Statement of Claim (and the logic of that pleading) in the absence of a full accounting for all money flows between the plaintiffs, the defendants, and all third party creditors of the first plaintiff, not limited to the 10 Vendors.
14. Mr Andrew Yacoub. Mr Yacoub's affidavit sworn 21 June 2022 was read without objection. He was not required for cross examination. His evidence was not contradicted by other evidence. What he says is objectively plausible. No submission has been made that what he says should not be accepted as true.
15. It should not be surprising to the defendants, therefore, that I accept his evidence as true and correct. It provides factual support for the case presented in the Further Amended Statement of Claim, including evidence that, towards the end of her tenure as the first plaintiff's financial administrator, the first defendant, in the absence of Mr Jones, shredded documents which (as Mr Jones found on his return from a vacation) may have been material to any claim against the first defendant.
16. A curious feature of Mr Yacoub's evidence is a statement he tributes to the first defendant (sometime between June to September 2018) to the following effect: "You watch, when I leave, Mike [Mr Jones] is going to say that I've been stealing money".
17. Mr Yacoub remembers this as curious because, as he records in his affidavit, no one had suggested to the first defendant that she had stolen money or that Mr Jones or anyone else thought she had stolen money.
18. The words attributed to the first defendant are tendered as evidence of a consciousness of guilt on her part. They may be read that way but I do not ground this judgment on that possibility.
19. The Expert. The defendants' cross examination of the Expert was largely directed to identifying assumptions made by the Expert, testing her methodology and demonstrating the different perspective inherent in the defendants' rejection of a "global approach" to the accounting process and their insistence upon a "vendor by vendor" approach, not addressed by the Expert Reports (and, perhaps, not able to be addressed in the absence of further primary records or evidence of the first defendant).
20. The defendants contend that, in comparing the total of funds of the plaintiffs paid out by the first defendant to the defendants "on all accounts" (a total of $9,883,114, representing the sum of $9,755,514 and $127,600) and the total sum established as having been paid out of the defendants' accounts to the 10 Vendors ($6,895,160) without taking into account the dealings with vendors other than the "10 Vendors" or other payments made by the defendants on the account of the plaintiffs, the Expert (in accordance with her instructions) was addressing the wrong question, comparing apples and oranges rather than apples and apples, as counsel for the defendants put the point.
21. A nuance that may be worthy of notice in cross examination of the Expert is that on two occasions the cross examiner put to the Expert a question that presupposed that payments made out of the plaintiffs' accounts, by the first defendant, into the defendants' accounts bore the character of "reimbursements" by the plaintiffs to the defendants. On each occasion the Expert queried the question and it was not pressed in that form.
22. If particular transfers of funds of the plaintiffs to accounts of the defendants should bear the character of "reimbursement" of the defendants for payments earlier made by the defendants on the account of the plaintiffs there is nothing in the evidence that establishes that.

THE FACTUAL MATRIX AND CONSEQUENCES

1. In summarising the factual matrix of these proceedings relating to the relationships between the plaintiffs and the defendants and their financial dealings I proceed on the basis that, in the absence of evidence from the first defendant, the truth and accuracy of the facts stated in the evidence of Messrs Jones and Yacoub (not challenged in cross examination) is accepted.
2. Mr Yacoub was not challenged at all. The defendants' challenge to the evidence of Mr Jones was limited to the question whether there was a contractual relationship between the second plaintiff and the defendants or, more particularly, the second defendant so as to establish a legitimate reason for the second defendant to receive, and to retain, funds of the second plaintiff as "consultation fees".
3. There is no dispute that Mr Jones is and was at all material times the alter ego of the plaintiffs and the first defendant was at all material times the alter ego of the second defendant.
4. The evidence of Mr Jones bearing upon the existence of a relationship of trust and confidence between the first plaintiff (represented by him) and the first defendant; the reliance of the first plaintiff (represented by Mr Jones) upon the honesty and good faith of the first defendant; and an implied undertaking on the part of the first defendant to provide her services honestly, faithfully and well has not been contradicted.
5. Accordingly, accepting in particular, the evidence of Mr Jones, I proceed on the basis that, in dealing with funds of the first plaintiff, the first defendant owed to the first plaintiff the obligations of a fiduciary. She was at all material times under an obligation to the first plaintiff to account for her dealings with funds of the first plaintiff.
6. Those obligations were no less operative by reason of the fact, as pleaded in the Further Amended Statement of Claim, an implied term of the Consultancy Agreement between the first plaintiff and the first defendant was (in accordance with principles enunciated in Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234) that the first defendant would act honestly and in good faith in undertaking the services contemplated by the Consultancy Agreement and that she would use her best endeavours to promote the interests and welfare of the first plaintiff.
7. The first defendant's insistence at the time of her engagement by the first plaintiff that she be a "consultant" rather than an "employee" does not exempt her from the obligations of a fiduciary, and no submission to that effect has been made on her behalf. In the work she did, exercising control over the accounting system of the plaintiffs and managing their funds, rendering the plaintiffs (particularly in the person of Mr Jones) dependent upon her services and reliant upon her integrity as well as her competence, she undertook to act for or on behalf of or in the interests of the plaintiffs in the exercise of her functions affecting the interests of the plaintiffs. She voluntarily assumed the obligations of a fiduciary: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 96-97.

The Second Plaintiff's Claim against the Second Defendant

1. No Contractual Relationship. On my findings of fact, earlier made, there was no contractual relationship between the plaintiffs and the second defendant; Mr Jones (whether on behalf of the first plaintiff or on behalf of the second plaintiff) never authorised the first defendant (whether in her own capacity or as a representative of the second defendant) to transfer funds of the second plaintiff to the second defendant. Whatever work may have been done "for" the second plaintiff was done by the first defendant as an incident of her consultancy agreement with the first plaintiff. The second defendant did not on its own account perform services for the plaintiffs.
2. The second defendant had no right to receive, and it has no right to retain, the amounts totalling $127,600 ostensibly transferred (by the first defendant) to its accounts from the second plaintiff's bank account.
3. In recording this conclusion, I note that the parties appear to have proceeded on the basis that the whole of the $127,600 paid out of the second plaintiff's account was paid into bank accounts of the second defendant whereas the First Expert Report records that $15,400 was paid into an account of the first defendant and $112,200 was paid into accounts of the second defendant. On orders being made in disposition of the proceedings I will allow the parties an opportunity to address this anomaly. In the meantime, I will adhere to convention.
4. Remedy. On this basis, the sum of $127,600 is recoverable by the second plaintiff from the second defendant in restitution, as monies had and received. The second defendant has explicitly disclaimed any defence based upon an allegation of change in position.
5. A judgment in favour of the second plaintiff in the sum of $127,600 (plus interest under section 100 of the Civil Procedure Act 2005 NSW) should be entered against the second defendant.
6. The major contest between the parties is the first plaintiff's claim for a money judgment against the first defendant.

The First Plaintiff's Claim against the First Defendant

1. The Consultancy Agreement. Between 23 March 2003 and 31 August 2018 or thereabouts the first defendant provided accounting and related services to the first plaintiff (initially with the job description of "accounts manager and bookkeeper" and, by her own election, from 1 July 2005 with the title "financial administrator"), as a consultant, not an employee, pursuant to an oral contract (never reduced to writing) made by Mr Jones on behalf of the first plaintiff and the first defendant on her own behalf.
2. The terms of the Consultancy Agreement, upon commencement, were that, for the provision of her services, the first defendant would be entitled, upon provision of an invoice, to receive a fee (in these proceedings characterised as a "Consultancy Fee") of $3,300 per fortnight, including an allowance for a goods and services tax ("GST"). In practice, Mr Jones never personally saw or received an invoice from, or generated by, the first defendant for consultation fees during the period the first defendant worked for the first plaintiff.
3. Incidental Work for the Second Plaintiff. Early in the first defendant's relationship with the first plaintiff, between 2003-2005, Mr Jones requested the first defendant to attend to the first plaintiff's payment of rent to the second plaintiff and the second plaintiff's payments to its mortgagee bank, and to do the bookkeeping for the second plaintiff. The first defendant agreed to that request. There was no discussion of remuneration beyond the Consultancy Fee payable by the first plaintiff to the first defendant. Nor was there any discussion authorising the first defendant (in whatever capacity) to apply funds of the second plaintiff in payment of a "Consultancy Fee".
4. Variation of Consultancy Fee Arrangement. The evidence of Mr Jones establishes that on two occasions before "the Relevant Period" as defined in the Further Amended Statement of Claim (first, in April 2004 and, secondly, in May 2007) Mr Jones agreed to an increase in the first defendant's consultancy fees, expressed as an increase of $5 per hour despite the fact that the consultancy fees as originally agreed were expressed as a sum (of $3,300, inclusive of GST) payable per fortnight without any breakdown in hourly rates or hours of work required, and the first defendant's working hours and days were variable, not the least because she had remote access to the plaintiffs' electronic accounts and could work from home.
5. The evidence of Mr Jones about variations of the Consultancy Fee arrangements is inherently uncertain because of these considerations and because, as his second affidavit concedes, at the time he swore his first affidavit he had forgotten about the 2007 increase in the first defendant's Consultancy Fee.
6. In calculation of an allowance for "Consultation Fees" over the Relevant Period the plaintiffs, with qualified resistance on the part of the defendants, invite the Court to infer from the underlying transaction documents summarised in Appendices 14 and 15 of the First Expert Report that the total Consultancy Fees in fact appropriated by the first defendant to her accounts or an account of the second defendant was charged, more or less, at the rate of $4,400 (inclusive of GST) per fortnight.
7. On that basis the plaintiffs invited the Court to proceed on the basis that the total amount of consultancy fees allowable by the first plaintiff in favour of the first defendant over the Relevant Period should be $1,010,240 instead of $843,386, a difference of $166,854, which should be allowed as a credit in favour of the first defendant in addition to the allowance of $843,386 recognised in the Further Amended Statement of Claim.
8. The defendants' resistance to these calculations, apart from their general objection to the plaintiffs' "global" methodology, was that the plaintiffs' calculations omitted one year's worth of fees which, when taken into account, require the allowance to be made in favour of the first defendant to be $281,254 rather than $166,854.
9. Accepting the defendants' calculation (as have the plaintiffs), I propose to allow in favour of the first defendant total Consultation Fees of $1,124,640 in lieu of the sum of $843,386 referred to in the Further Amended Statement of Claim. That requires an adjustment in favour of the first defendant in the sum of $281,254 in addition to the $843,386 allowed in the Further Amended Statement of Claim.
10. The Nature and Scope of the First Defendant's Duties. Between March 2003 and May 2007 or thereabouts Mr Jones became increasingly reliant upon the first defendant in administration of the financial affairs of the first plaintiff which, one infers, justified the first defendant's assumption of the title "Financial Administrator" on or about 1 July 2005. In Mr Jones' assessment, she proved her worth to the first plaintiff when she demonstrated competence in late 2006 in managing a payroll tax audit conducted by the NSW Office of State Revenue.
11. On Mr Jones' evidence, it was from about May or June 2007 that the first defendant was performing the duties she described as her duties in an email dated 25 May 2018.
12. Addressed by the first defendant to Mr Jones, with the subject heading "List of Duties -Accounts Administration", that email was in the following terms: "Hi Mike I attach List of my Duties as you requested: DAILY DUTIES: *Print Bank Statement of previous business day *Input to MYOB all Remittances deposited electronically previous day to relevant customer. *Input to MYOB all Direct Debits withdrawn from COM account eg. IT/Loan repayments etc *Check all Bills received by email against PO input by Stuart *action all correspondence received via email/telephone *respond to any queries from MJ/ MOYES and other customers/creditors *Make any alterations/addition to Debtors/Creditors file as directed WEEKLY DUTIES: *Process Wages/Salaries for all employees, noting all Annual Leave, L/S/L, Sick Leave taken and overtime worked. *Process Deductions from employee's wages/ Motor Vehicle Allowance *Keep employee records up to date *Reconcile NAB cheque account *Reconcile Electronic Payment account *Send electronic payments for creditors/Utilities due to NAB (approved subject to Bank balance) *Contact overdue Debtors for payment *Check payables Report for urgent due and payable Bills eg. FXA Clicks/Leases /Origin/Post etc MONTHLY DUTIES: *Reconcile Payroll Tax liability for the previous month *Pay OSR Payroll Tax by 7th monthly *Reconcile all Superannuation and allocate to appropriate QuickSuper electronic sites. *Pay all SGC liabilities by 28th monthly *Prepare BAS for previous month PAYG and GST liabilities *Lodge and pay ATO BAS by 21st monthly *Pay RENT/Insurances/WK Comp/all other statutory payments *Prepare next month's creditor payments *Prepare Balance Sheet and Profit & Loss Reports for previous month *Issue Tax invoice to Evotec for Rubbish reimbursement. *Prepare Cheques for cleaning/Petty Cash etc *liaise with NAB regarding Loan/interest payments & other matters YEARLY DUTIES: *Prepare and issue Payment Summaries to Employees *Lodge Emdupe File with ATO * Reconcile all Superanuation [sic] Entitlements * Reconcile and pay year- end OSR Payroll Tax * Reconcile Long Service leave Provisions Report * Enter Journal entries to MYOB file for depreciation/loans etc *Prepare Asset Register *Prepare EOFY Stocktake Report (stuart) *Review and renew Workers Compensation Declaration *Review and renew Equipment Maintenance Agreements *Review and renew Insurance Policies *Review and renew Telephone/Vodafone facilities *Prepare FBT Report to 31st March *Renew ASIC Annual Return *Prepare all EOFY Reports to 30 June (including Bank statements/loan Agreements, Profit & Loss Balance Sheet, Trial Balance/Bank Reconciliation. *Forward all reports and MYOB file to MOYES for preparation of Financial Reports/ATC lodgement. *Liaise with MOYES regarding any queries they might have. *receive 13th period Journal entries from MOYES and input to MYOB. *Close off previous Payroll and Financial Years on MYOB *File away all previous years Financial Records/Documents/Bills etc *Begin New Financial Year and update MYOB file with new PAYG Tax Tables on Payroll Year Please note: Receptionist prepares Tax invoices from Job Tickets/Purchasing Manager enters Purchase Orders. I'm not sure if I missed anything, but I think that's it ... Cheers Kathy"
13. This email, in itself, corroborates the evidence of Mr Jones that he trusted the first defendant and relied heavily upon her competency and honesty in allowing her to play a dominant role in administration of the financial affairs of the first plaintiff. The first plaintiff did not employ or engage any other accountant or bookkeeper to assist or supervise the first defendant.
14. Mr Jones deposes that by May 2007 the first defendant had primary responsibility for and control over the following matters for the first plaintiff: 1. Bookkeeping including using the accounting software MYOB. 2. Making payments to suppliers, the Tax Office etc. 3. Liaising with customers to arrange for payment to the first plaintiff in respect of the first plaintiff's services. 4. Reconciling bank accounts with the first plaintiff's accounting records maintained on MYOB. 5. Liaising with the first plaintiff's banks as required. 6. Attending to the payment of the first plaintiff's employees and the management of the company's payroll, including in relation to leave entitlements and superannuation. 7. Preparing tax returns, BAS statements and similar documents, together with the first plaintiff's external accountants. 8. Preparing statutory accounts together with the external accountants.
15. Mr Jones increasingly left conduct of the financial affairs of the first plaintiff to the first defendant without supervision until her retirement in 2018, and the necessity for him in her absence to attend to business she had formerly done pressed upon him.
16. On 23 May 2006 the first defendant sent an email instructing an employee of the first plaintiff that "only Michael [Mr Jones] and I [the first defendant] are to have complete access to MYOB", an instruction which was carried out shortly after the email was sent.
17. Mr Jones deposes that, from about this time, the first defendant was the primary user of the first plaintiff's MYOB software service, although other employees used the software for particular purposes. She was the only employee of the company who recorded invoices issued by the company's suppliers and vendors within MYOB, and who caused payments to be made by the company to suppliers, vendors, employees, superannuation funds, the Australian Tax Office or anyone else.
18. Mr Jones deposes that, as far as he can recall, the first defendant was the only user of the first plaintiff's MYOB account and bank accounts, subject to the following: 1. an employee of the company (Stuart Brindle) was responsible for entering purchase orders issued by the company to its vendors and suppliers into MYOB; and 2. other employees of the company performed, created and recorded invoices issued by the company to its customers within MYOB.
19. During her engagement with the first plaintiff the first defendant routinely used the company's MYOB software in combination with the online banking platform of the company's bank for the purpose of making "electronic payments" on behalf of the company from the company's single bank account with the National Australia Bank.
20. Unauthorised, Sham Recipient Created Tax Invoices. Mr Jones' evidence, which I accept, is that the first plaintiff never had any agreements in place with any of its vendors or suppliers which permitted it to issue Recipient Created Tax Invoices in respect of goods or services received by the first defendant. Until he reviewed records of the first plaintiff formerly maintained by the first defendant after the first defendant's departure from the business, he was not aware of any practice within the company of raising Recipient Created Tax Invoices in respect of money paid to vendors or suppliers.
21. I accept the evidence of Mr Jones that he never authorised the first defendant or anyone else to generate Recipient Created Tax Invoices in respect of any money paid to a vendor or supplier of the first plaintiff. He expressed a strong preference, inherently plausible, to have vendors and suppliers issue a correct and final invoice in respect of any money paid to it.
22. The first defendant was responsible for the first plaintiff's bookkeeping and the making of payments on behalf of the first plaintiff. She was also the primary user of the first plaintiff's MYOB software. A fair inference arising from those facts is that the first defendant created or edited each Recipient Created Tax Invoice in the first plaintiff's MYOB system and, where a Recipient Created Tax Invoice does not match with an invoice issued by the relevant vendor, she misstated the amount payable in the Recipient Created Tax Invoice.
23. The First Defendant's Interposition of Herself between the First Plaintiff and its Creditors. There is no evidence that at any time before 2018 Mr Jones authorised the first defendant to pay the first plaintiff's suppliers and vendors from her own personal resources or authorised her to interpose herself, or an entity or entities associated with her, between the first plaintiff and third party creditors of the first plaintiff in the payment of the first plaintiff's debts.
24. I accept Mr Jones' evidence that, with a single exception, he never authorised the first defendant or anyone else, to pay debts of the first plaintiff from the first defendant's personal bank accounts or using her personal credit card on the basis that she would later cause the first plaintiff to reimburse her. In a sense, "the exception proves the rule".
25. The only exception to Mr Jones' denial of authority is dealt with in paragraphs 88-90 of his first affidavit. Those paragraphs are in the following terms [with editorial adaptation]: "[88] In early 2018, I had a conversation with [the first defendant] to the effect of the following: [First defendant]: Mike we have some invoices overdue from Interlinked [a vendor to the first plaintiff other than one of the 10 vendors] and a couple of couriers and there isn't cash in the bank account at the moment to meet the expense. I can pay them with my credit card, and I will reimburse myself when little more cash is in the bank. [Mr Jones]: Cathy, thanks so much. That would be a big help, and as soon we've got some dough, please reimburse herself. Thank you. [First defendant]: No problem, Mike, I'm glad to help. [89] This was the first time I ever discussed the idea that [the first defendant] would pay an expense on behalf of [the first plaintiff] and then reimburse herself. Over the course of 2018, [the first plaintiff] experienced similar cash flow problems on a few further occasions. Each time this happened, I would have a discussion with [the first defendant] and work out what to do. On some occasions, I was able to agree delayed payment terms with the supplier. On other occasions, I met the expense personally and [the first defendant] arranged for [the first plaintiff] is to reimburse me later on. Sometimes, [the first defendant] offered, and I accepted for her to pay an expense of [the first plaintiff] and reimburse herself. I estimate that, to my knowledge, [the first defendant] paid an expense of [the first plaintiff] on several occasions in 2018 throughout her last 6-8 months at [the first plaintiff]. To the best of my recollection, [the first defendant] made about 25-30 such payments after discussing them with me. I did not supervise any of the actual transactions or reimbursements as I trusted that [the first defendant] would attend to each payment and reimbursement properly herself. [90] Other than these instances in 2018, … the only instances I can think of in which [the first defendant] covered an expense of [the first plaintiff] would be if [the first defendant] paid for some food or drinks at a [first plaintiff] staff Christmas party or some movie tickets at staff social events. [The first plaintiff] would have reimbursed [the first defendant] on such occasions, and [the first defendant] would have been the one to attend to the reimbursement. I certainly cannot recall ever asking or authorising [the first defendant] to pay [the first plaintiff's] suppliers and vendors from her own personal resources prior to the instances referred to above."
26. In the course of inquiries made during the interlocutory stage of these proceedings Mr Jones became aware for the first time that there were payments from the first plaintiff's bank account (which payments were not authorised by him) to a number of different bank accounts owned by the first defendant and/or her husband and to her "KB Amex Account" dating back beyond August 2009 (the time from which bank records were able to be retrieved) and continuing until October 2018, commencing (according to the first plaintiff's MYOB records) in 2006.
27. I am satisfied on the evidence that throughout the Relevant Period the first defendant routinely made unauthorised payments from the bank account of the first plaintiff ostensibly for the purpose of paying debts of the first plaintiff but directing them to accounts owned or controlled by her for her own purposes and benefit.
28. Discovery of Irregularities after the First Defendant's Retirement. After the first defendant's retirement from her consultancy with the first plaintiff there was a delay in securing a replacement bookkeeper, during which time Mr Jones was required, with the assistance of Mr Yacoub (the company's Production Manager), to renew his long lost familiarity with the company's MYOB system and online banking facilities with the National Australia Bank.
29. The manner in which he came to discover irregularities in the company's accounts, and to associate them with the first defendant, is consistent with attribution to the first defendant of a modus operandi in interposing herself between the first plaintiff and its creditors, and with Mr Jones' denial that he knew about, or authorised, that method of operation.
30. On each of 21 and 22 August 2018 Mr Jones received an email from an officer of Fuji Xerox Australia Pty Ltd (a vendor of goods and services to the first plaintiff) drawing to his attention that the first plaintiff's account with "FXA" was nearly 150 days in arrears, followed by a further "follow-up" email on 20 September 2018. Shortly after that time, when he became aware (through Mr Yacoub) that the first plaintiff's account with FXA was "on hold", with the result that the company was unable to place a service call to FXA, he spoke to the FXA officer who said that he would have the "hold" lifted if the first plaintiff paid two outstanding accounts (invoices respectively dated 30 April 2018 and 1 May 2018) totalling $22,347.
31. When Mr Jones transferred that amount electronically, he thought, to FXA (using the first plaintiff's MYOB system and NAB's online banking system) he did not realise that the funds were (by a pre-direction by the first defendant of the plaintiffs' MYOB electronic payments system) directed to an account (styled "KB Amex Account") owned or controlled by the first defendant. He only discovered the disconnection between his intent and the unintended outcome several days later when, to the puzzlement of himself, Mr Yacoub and the FXA officer with whom he was dealing, no money had reached FXA (and the first plaintiff's account with FXA remained "on hold").
32. The first defendant was, at that time, on a holiday to Greece with her husband. On 8 October 2018 Mr Jones sent an email to her, copying in the FXA officer, asking her to make the payment from her account to FXA.
33. Mr Jones' email (under the subject heading "Xerox payment needs transfer") was in the following terms: "Hi Cathy, "Hope holiday going well. By error I paid Xerox account into your Amex. Can you very quickly pay that directly to FXA … please. It was amount of $22,347.40 for lease, Clicks etc … Thank you in advance and please can you let me know when done. Cheers, Mike"
34. The first defendant attended to the payment of FXA that same day and the next day (on 9 October 2018) sent the following email to Mr Jones, which caused him to be surprised and puzzled because of its unexpected aggressive tone: "Hi Mike, I refer to your email yesterday regarding the FXA payment which I have now paid and receipt acknowledged by Fuji. I am however really disappointed that you just assumed that I somehow deposited $22K into my Amex, when in fact you advised that you transferred that money into my account in error. I was rather confused when you said in your previous email that $22K was transferred into my account, when firstly I was not even there and secondly have never reimbursed myself for [first plaintiff] expenses paid by me for such a large amount. I was always very conscious of our cash flow problems and only reimbursed [the first plaintiff] expenses over a period of months, which in fact proved a financial burden to me. I have never reimbursed myself for [first plaintiff] expenses that were not genuine expenses, and am rather distressed that you assumed I had taken [first plaintiff] funds when I left. In regards to my consulting fees that were future dated with your salaries in October. They were my fees til end of December for training of my replacement. They have NOT been paid, nor do I expect these payment now that I will not be returning to [the first plaintiff]. Finally, I think an apology from you would be in order for your unwarranted assumptions. Cheers Cathy"
35. That email was closely followed by a further email addressed by the first defendant to Mr Jones on the following terms: "Hi Mike Would you please reimburse the Amex charge of $335.21 for the below [sic] payment to Fuji. Thanks Cathy"
36. Mr Jones was surprised and perplexed because he had not, at that stage, suspected the first defendant of wrongdoing, did not believe that he had accused her of wrongdoing, and had made no arrangements with her for a continuation of her Consulting Fees (note, "my consulting fees") beyond her retirement or for her formal engagement in training of her replacement.
37. The first defendant's emails caused Mr Jones for the first time to suspect that the first defendant might have done something wrong. Whether he was fully conscious at that time that she may have pre-programmed the first plaintiff's MYOB system to pay an FXA transfer to herself and to continue payment of a consultancy fee beyond the date of her retirement, is not clear but his trust in her had been profoundly challenged.
38. That trust was further eroded by Mr Jones' discovery on or about 18 October 2018, for the first time, that bank statements of the first plaintiff recorded multiple payments to the first defendant, her "KB Amex Account" and the second defendant.
39. On 18 October 2018 he sent three emails to the plaintiffs' external accountants which provide contemporaneous evidence of a "eureka" moment that corroborates his evidence that he did not authorise, consent to or have knowledge of the first defendant's irregular pattern of behaviour in administration of the plaintiffs' financial affairs.
40. In the first email (timed at 9.59 am) Mr Jones described as "illegitimate" the first defendant's charge to the first plaintiff's account on each of 8 November 2017 and 26 September 2018 of $5,000 for her "American Express - CDM [first plaintiff's] Corporate" Account, which he had not authorised or known about, recording a desire to have those charges reimbursed as soon as possible into the first plaintiff's account.
41. The second email (timed at 11.31 am), under the heading "NAB payments to K Bagshaw for 2018 part only of CDM", was in the following terms: "These are samples of NAB payment into K Bagshaw accounts include bogus Senis, Aon, GBC, Currie and wages. And, got plenty of others to provide ASAP. I am speechless and is this the sort of stuff you guys were eluding [sic] to earlier this year?"
42. The third email (timed at 4.03 pm), under the heading "Suppliers K Bagshaw altered orders x 4 companies of CDM", was in the following terms: "These are 3 samples 3 separate suppliers of orders altered by KB to include a bogus amount. Sorry by accident, found another company … Spicer's!!!! And, got plenty of them to provide ASAP. Meanwhile, I'm going through the bogus Insurance ones like AON, Allianz and Sensis … You isn't [sic] seen nothing yet."
43. Between 19-23 October 2018 Mr Jones and the first defendant exchanged emails (with a subject heading I infer was chosen by Mr Jones, "Incorrect receipt of payments to KB from CDM") in which the first defendant sought to justify her conduct. The email from Mr Jones initiating that correspondence does not appear to be in evidence. The chain of correspondence appears to have come to an end on 23 October 2018. Whether a follow up email of Mr Jones dated 2 November 2018 received a response is not apparent on the evidence.
44. Generally, the first defendant presented herself in this correspondence as misunderstood: "… My intent was to keep CDM afloat during the last 16 years, however my attempts have failed and apparently been mistaken as dubious."
45. One aspect of the correspondence should be specifically drawn to attention. It relates to the first defendant's destruction of business records of the first plaintiff.
46. In an email timed at 11.32am on 22 October 2018, addressed to the first defendant and copied to the plaintiff's external accountants, Mr Jones put the following questions to the first defendant: "In my absence, you and your husband spent a day at CDM going through all documents and records for the business of CDM. Is this true? And shredding documents and records? If so, why didn't you ask me? And why would you have done this? Please advise as this has caused me some distress and I don't feel all is in order and intend to look further into this matter."
47. By her email timed at 4.03pm on 22 October 2018 the first defendant responded as follows: "… Surely you are aware that company records need to be kept for only five years by law. This is nothing new and every year as part of my duties, I have cleaned out records no longer required to be kept, always discarding/shredding those documents in the destruction bins. Stuart [an employee of the first plaintiff] has organised destruction bins specifically for that purpose since I commenced at CDM and so I am totally amazed that you now claim to be unaware of this standard procedure and expect an explanation from me as to why I didn't get your approval first????? All Payroll And Financial Reports are not discarded, you can find them in the locked cabinet at the back wall of the storage room as has been the case for years. My husband volunteered to help in this exercise by lifting and carrying the old boxes for me. He did so purely to help me and has never claimed payment for the time spent. Additionally, he simply emptied the old records straight into the destruction bins and at no time bothered to look at any details of those documents. You should note that those discarded records comprised of paid supplier invoices over five years old. Prior to my retirement, I had tried to show you the computer procedures for processing all necessary items to no avail. You always had some excuse to leave. As you know, I then offered to return temporarily to train a replacement. Then, while overseas on holiday I started getting emails from you concerning incorrectly processed payments to which I responded (with some difficulty given the intermittent Internet connections) and corrected those errors. Since returning home, those emails have not stopped and now this latest demand. This constant harassment is having a detrimental effect on my health, of which you are well aware of my condition. Are you now insinuating that I have deliberately misled you, charged CDM for unwarranted expenses and stealthily shredded documents with the help of my husband? Are you blaming me for all of CDM woes??? Please let me know urgently."
48. The first defendant followed up this email with another timed at 7.58 pm on 23 October 2018 which included the following observations material to the destruction of records and termination of the correspondence: "… I don't need to get permission from you to destroy old records … That was part of my annual list of duties as standard procedure (Refer [the external accountants]) only payroll and ato statutory reports are kept for longer than five years. They are all locked up in the cabinet. Lastly, this continuous questioning of my duties at CDM is causing me untold distress … I have always tried to work with you and for CDM interests. I have now retired from CDM and do not wish to engage in this intimidating and harassing slinging match with you. Due to my deteriorating health, I would not be responding to any further CDM correspondence. Please respect my privacy."
49. It should be noted, in passing, that the comprehensive list of her duties compiled by the first defendant on 25 May 2018 does not include a duty to destroy documents.
50. In the absence of evidence from the first defendant, her statements about the nature and limits of her destruction of documents during the absence of Mr Jones (on vacation in June or July 2018) cannot be accepted at face value.
51. The evidence of Mr Jones, corroborated by that of Mr Yacoub, supports a finding that substantial primary records formerly held in filing cabinets in or near the office of the first defendant were destroyed by her.
52. Contrary to his expectation based upon experience of office procedures, when he was investigating the first defendant's activities, he did not find in the cabinets: 1. any copies of invoices issued to the first defendant by its vendors or suppliers; 2. any copies of purchase orders issued by the first plaintiff to its vendors or suppliers; or 3. any copies of any contracts, agreements or quotes between the first plaintiff and its vendors or suppliers.
53. Given that the first defendant admits that she destroyed records, a fair inference from the evidence is that she was the cause of destruction of invoices, purchase orders, contracts or quotations that might have had a bearing upon the plaintiffs' claims against the defendants.
54. A Pattern of Conduct. In his first affidavit (sworn on 21 June 2022) Mr Jones (in paragraphs 135-204) deposes to facts relating to irregular dealings between the first plaintiff and the "ten Vendors", and (in paragraphs 205-225) a selection of other irregular transactions, all of which evidence (I infer) relates to the first defendant's irregular conduct of the first plaintiff's financial affairs. That evidence includes references to factual findings made by the Expert in her First Report (dated 23 December 2020) not the subject of any evidentiary objection.
55. In the absence of any evidence from the first defendant, and having regard to the evidence as a whole, I accept as true and correct the statements of fact in Mr Jones' affidavit and the First Expert Report. I have previously recorded my acceptance of the evidence of Messrs Jones and Yacoub.
56. For the avoidance of doubt, I specifically note that I have not had regard to those few parts of Mr Jones' affidavit that were formally "not read" (the last sentence of paragraph 106, the major heading to paragraph 205 and paragraph 225), or to those paragraphs or part-paragraphs (numbered 134, 210, 216; the second numbers 209, 210 and 214, 218, 221 or 222) in respect of which orders were made under section 136 of the Evidence Act 1995 NSW limiting the evidentiary effect of Mr Jones' statements of belief or opinion.
57. Although Mr Jones' second affidavit (sworn on 31 July 2023) was read in advance of the defendants' decision to read no affidavits of their own, and was the subject of evidentiary rulings, I approach it with caution because it is expressed to be responsive to an affidavit of the first defendant which was ultimately not read. As far as I am aware, apart from Mr Jones' correction of an error about consultancy fees in his first affidavit, nothing in the second affidavit sheds greater light on the questions in dispute in these proceedings than can be had by reference to Mr Jones' first affidavit and the Expert Reports.
58. In my assessment, upon a review of statements of fact in the affidavits of Messrs Jones and Yacoub and the two Reports and affidavit of the Expert, a pattern of conduct on the part of the first defendant (correctly characterised by the plaintiffs as a "fraudulent scheme to misappropriate money from the plaintiffs for herself") during the "Relevant Period" (between 31 December 2008 and 18 October 2018) can fairly be discerned, making full allowance for the gravity of findings made: 1. Without the authority, consent or knowledge of Mr Jones, in transferring money out of the bank account of the first plaintiff the first defendant routinely and deliberately interposed herself, and entities associated with her, between the first plaintiff and its creditors and, in that process, intermingled her affairs with those of the first plaintiff (by bulk transfers out of the first plaintiff's bank account ostensibly directed to payment at the one time of multiple invoices of creditors) that presented a complex, if not impenetrable audit trail. 2. Without the authority, consent or knowledge of Mr Jones, the first defendant routinely and deliberately created false Recipient Created Tax Invoices calculated to give the impression of the existence of a debt to a third party. 3. Without the authority, consent or knowledge of Mr Jones, the first defendant created false Recipient Created Tax Invoices and purchase orders on the first plaintiff's MYOB system ostensibly recognising allowances for sham "delivery" or "urgent delivery" charges, including unlikely, inflated amounts disproportionate to the value of goods and services ostensibly supplied to the first plaintiff. 4. Without the authority, consent or knowledge of Mr Jones, the first defendant routinely and deliberately retained for her own benefit funds generated by false Recipient Created Tax Invoices and purchase orders in excess of amounts actually paid to the first plaintiff's creditors in payment of legitimate debts. 5. Without the authority, consent or knowledge of Mr Jones, the first defendant purportedly paid (to herself or associated entities) non-existent debts of the first plaintiff. 6. The first defendant concealed irregular transactions by limiting day-to-day access of employees of the first plaintiff to the company's MYOB system and NAB online banking facility and encouraging Mr Jones to believe that all financial transactions were regular.
59. The unauthorised transactions here summarised, coloured by dishonesty and concealment on the part of the first defendant, are illustrated by the analyses of the first defendant's dealings with, or with reference to, the ten Vendors. In substance, the evidence of Mr Jones (particularly at paragraphs 129-204, but also at paragraphs 205-224, of his first affidavit), read with the evidence of Mr Jacoub and the Expert, establishes the facts pleaded and particularised in paragraphs 24L-842 of the Further Amended Statement of Claim.
60. Leaving aside for the moment the question whether the first plaintiff is entitled to curial relief based upon a global approach to the accounting process, and any associated criticism of the Expert's methodology, I am satisfied that over the Relevant Period the first defendant transferred from the first plaintiff's bank account to her own accounts (without the authority of the first plaintiff) the total sum of $9,755,514 by the several transactions itemised in Appendix 14 to the First Expert Report.
61. On my view of the evidence adduced by the plaintiffs and the evidence of the Expert, there is no discernible pattern of the first defendant systematically paying debts owed by the first plaintiff to third party creditors and subsequently reimbursing herself from the first plaintiff's bank account.
62. The first defendant's pattern of conduct, as evidenced by primary records (comparing false Recipient Created Tax Invoices and MYOB entries, third party invoices and bank statements) and in the absence of any discernible pattern of payments made by the first defendant matched by reimbursements by the first plaintiff, militates against any finding that the process of accounting between the parties is in the nature of a common money account for "account stated" or otherwise of accounts been taken between parties who, in good faith, have mutual accounting obligations.
63. The first defendant's pattern of conduct, largely grounded upon the foundation of interposing herself between the first defendant and its creditors, is consistent with the case theory underlying the Further Amended Statement of Claim that the first defendant has failed to account for funds of the first plaintiff which, without authority, she transferred to herself. The fact (as I find) that she owed the obligations of a fiduciary to the plaintiffs in dealing with their funds strengthens a case against her, which, in any event, could be found against her on the basis that funds the subject of unauthorised transfers in her favour were, to be blunt, stolen by her. A constructive (or resulting) trust attaches to stolen money: Black v S Freedman & Co (1910) 12 CLR 105; Robb Evans of Robb Evans and Associates v European Bank Ltd (2004) 61 NSWLR 75 at 100; Zobory v Commissioner of Taxation (Cth) (1995) 64 FCR 86; Young, Croft and Smith, On Equity (LBC, Sydney, 2009), paragraphs [6.700], [6.1010] and [12.840].
64. The systemic nature of the first defendant's conduct in interposing herself between the first plaintiff and its creditors, coupled with her creation and concealment of false records and a complex audit trail covering her tracks, tell against characterisation of her conduct as a mistake or innocent and warrant characterisation of her conduct, at least, as unconscionable, justifying the grant of a curial remedy.
65. No proprietary claim is made in the Further Amended Statement of Claim and the pleading speaks of a claim for "damages" or "equitable compensation". As what is claimed is a monetary judgment, different jurisprudential paths can, and do, lead to the same outcome.
66. An Allowance for Sundry Business Expenses. The plaintiffs invite the Court to allow in favour of the first defendant a nominal sum (proposed as $5,000) to cover any sundry business expenses of the first plaintiff she may have paid from her own resources. No contrary submission has been made on behalf of the defendants, and, accordingly, I propose to make the allowance suggested by the plaintiffs.
67. The Expert's Evidence. There being no substantial challenge to the Expert's evidence as to the facts investigated by her or (independently of the defendants' objection to a "global" accounting process) her methodology, I find as a fact that: 1. the total amount of unauthorised transfers of the first plaintiff's funds into accounts of the first defendant or entities controlled by her, during the Relevant Period, was $9,755,514; 2. the total amount of payments made by the first defendant (from transferred funds of the first plaintiff) to creditors of the first plaintiff during the Relevant Period was $7,188,569.
68. Remedy. Subject to a determination of the defendants' objection to the "global" approach to the accounting process relied upon by the plaintiffs, the first plaintiff is entitled to a judgment against the first defendant in the sum of $1,437,305 plus interest under the Civil Procedure Act 2005 NSW, section 100, calculated as follows: 1. The total amount of unauthorised transfers of the first plaintiff's funds to the first defendant, or entities associated with her, over the Relevant Period: $9,755,514; 2. Less an allowance to be made by the first plaintiff in favour of the first defendant for Consultancy Fees: $1,124,640; 3. Equals a notional subtotal of unauthorised transfer amounts: $8,630,874; 4. Less the total amount of payments made by the first defendant (from transferred funds of the first plaintiff) to creditors of the first plaintiff in the sum of $7,188,569; 5. Equals a notional subtotal of $1,442,305; 6. Less an allowance for sundry business expenses of the first plaintiff that may have been paid by the first defendant from her own resources: $5,000; 7. Equals the amount for which the first defendant should be held liable to account for to the first plaintiff: $1,437,305.

COMPETING CASE THEORIES SUMMARISED AND ASSESSED

1. The defendants contend that the "global" accounting case theory that informs both the Further Amended Statement of Claim and the evidence of the Expert is not sound and, if viewed correctly, means that the first plaintiff has not (to put the point simply) established that the first defendant is indebted to it. On the defendants' case theory, the first plaintiff can establish a liability in the first defendant only if it presents a full accounting for all dealings between it, the first defendant and all third party creditors of the first plaintiff over the Relevant Period, which it has not done.
2. In my opinion, the defendants' contention must fail for several interrelated reasons.
3. First, the defendants' contention is based upon a mischaracterisation of the first plaintiff's claim.
4. The first plaintiff's claim is not a claim for a net balance arising from a comparison between receipts and expenditure viewed, in a simple framework, through the perspective of the first defendant. The defendants' "comparison" theory is misplaced.
5. The first plaintiff's claim is based upon the foundational fact that (without the authority, consent or knowledge of the first plaintiff) the first defendant transferred to herself, or entities associated with her, funds of the first plaintiff in circumstances in which the first plaintiff is entitled to have her account for misappropriated funds.
6. The fact that the first plaintiff has conceded that the first defendant be allowed a credit for "Consultancy Fees" does not alter the nature of the first plaintiff's case.
7. Nor does the fact that the first defendant is entitled to a credit for amounts paid by her to third party creditors of the first plaintiff.
8. Neither does the fact that, in analysis of the first defendant's conduct, the first plaintiff limited itself to ten of its "vendors" rather than attempting a more comprehensive review of all dealings between itself, the first defendant and all its third party creditors.
9. It was open to the first defendant to plead and prove a set off defence or a cross claim to similar effect which, in the event, she chose not to do. She expressly disclaimed her cross claim (reserving whatever, if any, right, she might have to prove in the winding up of the first plaintiff) and she did not attempt to prove an entitlement to a set off beyond that which was taken into account in the Supplementary Expert Report and conceded by the first plaintiff.
10. The irony of the first defendant's opposition to the "alternative case" advanced by the plaintiffs in final submissions (which it is not necessary for me to consider) is that, if the first plaintiff was allowed to run that case and if it succeeded, it could have provided the first defendant with a further set off against the claim of the first plaintiff (without altering the character of the first plaintiff's claim) albeit, possibly, at the cost of abandoning her conceptual "pleading point" objection to the first plaintiff's case.
11. Secondly, although the first plaintiff may have borne the onus of proving that the first defendant had misappropriated its funds (which it did by proof that the first defendant had, without authority, transferred funds from its account to accounts of her own), the first defendant bore the onus of proving that the misappropriated funds had been repaid, restored to the first plaintiff or otherwise properly applied so as to ground a set off or cross claim.
12. That approach is consistent with the approach adopted in Coshott v Sakic (1998) 44 NSWLR 667D-E by reference to Heydon v Perpetual Executors, Trustees and Agency Co (WA) Ltd (1930) 45 CLR 111 at 113 and Young v Queensland Trustees Ltd (1956) 99 CLR 560 at 569-570 relating to claims in debt. It is also consistent with the approach taken on a claim in debt on an account stated, where there has been an admission or acknowledgement of a sum owed: Webster v Strang; Steiner v Strang [2018] NSWSC 495 at [238]-[246]. It is consistent also with the procedure where a plaintiff seeks an order for an account: Mulherin v Quinn Villages Pty Ltd [2007] QSC 231. It is consistent moreover with the procedure for holding a fiduciary liable to account for profits: Warman International Ltd v Dwyer (1995) 182 CLR 544 at 557-562. If there is a liability to account, the only defences are release, that the defendant has already rendered proper accounts and that the account has already been paid or that there are settled accounts between the parties: Young, Croft and Smith, On Equity, paragraph [16.1340]; Meagher, Gummow and Lehane, Equity: Doctrines and Remedies (LexisNexis Butterworths, Australia, 5th ed, 2015), paragraphs [23-030]-[23-045] and [23-175]-[23-190].
13. In these proceedings, the plaintiffs having established unauthorised transfers of funds properly characterised as misappropriations, the first defendant bears the onus of proving repayment or a set off or cross claim.
14. This is not, as the defendants might have it, a case involving accounts being taken as between a set of accounting parties. The first plaintiff is not an accounting party vis-à-vis the first defendant. She is an accounting party vis-à-vis it. The first plaintiff seeks redress for misappropriations.
15. Thirdly, the first defendant cannot fairly complain that the first plaintiff's claim should be dismissed in the absence of a full accounting in circumstances in which, as I find, a full accounting could not be had (or at least would most likely not reasonably be able to be had) because of her concealment of her fraudulent activities via transactions disguised in a complex audit trail and her destruction of documents bearing upon any transaction-by-transaction audit of her dealings with the first plaintiff's funds.
16. If (which I doubt) the first plaintiff was under an obligation arising from the contractual relationship between it and the first defendant to conduct a full accounting of all transactions involving the parties and third party creditors (or anything like such an accounting) it would have been relieved of that obligation by the first defendant's obstruction of the process in the complex audit trail she constructed and in her destruction of primary records: Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (90 CLR 235 at 246-247; Mahoney v Lindsay (1980) 55 ALJR 118; (3)3 ALR 601.
17. Fourthly, in the absence of any substantial challenge to the evidence adduced by the plaintiffs, and in the absence of any evidence from the first defendant in particular, the evidence adduced by the plaintiffs is supported by an inference that nothing that the first defendant could say in evidence would have assisted her case.
18. Whether justified by reference to Jones v Dunkel (1959) 101 CLR 298 (bearing in mind the need for caution in the application of that case noted in Fabre v Arenales (1992) 27 NSWLR 437) because of the decision of the first defendant to give no evidence or reinforced by reference to Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 because of her forensic decision to limit her cross examination, or by analogous principles, the fact remains that the case of the plaintiffs (not lacking in an evidentiary foundation) draws strength from the absence of evidence of the first defendant bearing upon questions which might reasonably be thought to call for an explanation by her in support of the case she advances.
19. In my opinion, it is not necessary in these proceedings to explore the precise nature and limits of what the Court of Appeal (in Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 at 59D) described as "the presumption against wrongdoers", noticed in Meagher, Gummow and Lehane (5th ed) at paragraph [23-275]. It is sufficient to record that the defendants' forensic decision to adduce no evidence, and to limit their cross examination of the plaintiffs' witnesses and the expert did the plaintiffs' case no harm.
20. Nevertheless, the plaintiffs having proved the fact of misappropriation were not obliged to embark on a full accounting in circumstances in which the onus was on the defendants to explain, or to submit to remedial orders in respect of, any gap between misappropriation and restitution. Evidence of the first defendant's deliberate pattern of dishonest conduct in the misappropriation of funds, the creation of false records and a complex audit trail, the concealment of irregular transactions and the destruction of primary records all serve to explain why it is reasonable, if not necessary, for the plaintiffs to prove their case as they have and to justify their invitation to the Court to draw inferences from the available evidence. At least in the context of these proceedings I take references to "the presumption against wrongdoers" to be a convenient label to describe a circumstance in which inferences can be drawn from the available evidence when evidence that might ordinarily be expected to be available is, without explanation, not adduced by a party against whom a remedy is sought and within whose power it is to adduce the evidence or explain its unavailability.
21. Fifthly, the defendants' case theory that the first defendant only ever applied funds of the first plaintiff in reimbursement of funds of her own that she had earlier applied in the payment of debts of the first plaintiff has no factual foundation in the evidence before the Court.

CONCLUSION

1. Subject to allowing the parties an opportunity to make submissions about the form of the orders proposed to be made, the correction of any arithmetical errors, any agreed adjustments, the calculation of pre-judgment interest and costs, I propose to make orders to the following effect: 1. ORDER that judgment be entered for the first plaintiff against the first defendant in the sum of $1,437,305. 2. ORDER that judgment be entered for the second plaintiff against the second defendant in the sum of $127,600. 3. ORDER that the Further Amended Statement of Claim and Cross Claim otherwise be dismissed.
2. I invite the parties to draw to attention any interlocutory orders or arrangements that might require orders to be made in final disposition of the proceedings.
3. In closing submissions the defendants foreshadowed an intention to apply for a stay pending their consideration of an appeal should they lose. An application for a stay, if made, should be made formally and in the ordinary course, supported by draft grounds of appeal and evidence of the defendants' financial circumstances.

Amendments 01 July 2024 - Coversheet - Order 1 - $1,442,300 amended to read $1,437,305; [40] $9,833,114 amended to read $9,883,114; [60] $9,555,514 amended to read $9,755,514; [86] $9,555,514 amended to read $9,755,514; [241] $1,442,300 amended to read $1,437,305; 241 $1,442,300 amended to read $1,437,305; and 263 $1,442,300 amended to read $1,437,305 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: 01 July 2024