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[2025] NSWCA 239
respondent. Appeal dismissed. The appellant was ordered to pay the respondent's costs of the appeal.
The Court of Appeal upheld the finding that El-Ahmad knew the invoices she submitted through the Bank's system were false. It rejected her challenge to evidence about debtor checks and concluded that the primary judge's inference was supported by the combined evidence and credibility findings. The appeal was dismissed, with appeal costs payable by El-Ahmad.
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1,872 words · generated 06/10/2026
Westpac funded Sentox Pty Ltd under an invoice discounting facility. Sentox was a fruit and vegetable wholesaler trading as Fresh Xpress. Under the facility, the Bank purchased debts at 80 per cent of face value, and Sentox could request advances by submitting invoice information through the Bank's Cashflow Connect portal ([13], [16]-[17]).
The primary judge found that Sentox used two accounting systems. The MYOB records supplied to the Bank were fictitious, while Wizard represented Sentox's true financial position. The fraud included generating false invoices, placing them in MYOB, preparing financial information from that system, and uploading false information through Cashflow Connect to obtain advances ([3]). Some funds were used to create the appearance that debtors were repaying real invoices. Other funds were used for unrelated ventures, which contributed to repeated increases in the facility limit ([3], [18], [20]).
2 cited instruments linked from this judgment.
El-Ahmad had worked in the business since about 2003, initially in quality assurance, with administrative responsibilities expanding over time ([11]). Her work included entering information into accounting systems. When submitting invoices through Cashflow Connect, the user had to certify that the goods had been delivered, the debts transferred, and original invoices provided to customers ([17], [33]).
The primary judge found that El-Ahmad knew from at least 2014 that the invoice details she uploaded were false and found her liable in deceit. The Court of Appeal considered two broad challenges: whether a receiver's evidence about debtor verification was admitted improperly, and whether the inference of El-Ahmad's knowledge was unavailable on the evidence ([5]-[7]). The Court dismissed the appeal and ordered her to pay the Bank's appeal costs ([71]).
The principal reasons were given by Mitchelmore JA. Payne JA and McHugh JA agreed ([1], [72]).
The Court treated the appellant's challenge to the knowledge finding as a challenge to a cumulative factual conclusion, not as a series of independent evidential points. Mitchelmore JA said that disaggregating the matters relied on by the primary judge was “an artificial approach” and that the evidence, assessed as a whole, amply supported the inference ([38]). The primary judge's adverse assessment of El-Ahmad's credibility formed part of that evidential picture.
The appeal court emphasised the trial judge's advantage in seeing and hearing the witnesses and being immersed in the trial ([8], [39]). It referred to Fox v Percy and Lee v Lee on appellate review, and to Vagg v McPhee concerning credibility findings ([39]). The Court rejected the suggestion that describing evidence as evasive or implausible could be set aside from the context of the witness's presentation and the rest of the evidence ([39], [63]).
The primary judge's reasoning drew on a range of matters. These included El-Ahmad's evidence about the two accounting systems, the apparent duplication of customers across MYOB and Wizard, her dealings with customers and debt follow-up, her involvement in reconciling accounts, her role in a small business, and transactions involving her bank account and Gem Fruitz ([35], [40]-[68]). The Court did not hold that each item, standing alone, proved knowledge. Its point was that the combined body of evidence supported the trial judge's inference, and the appeal arguments did not show that the findings were glaringly improbable or contrary to compelling inferences ([8], [38], [45], [69]).
The Court also rejected the claimed material shift in the Bank's case. The pleading alleged that El-Ahmad provided or caused financial information and documents to be provided to the Bank, and its particulars referred to Cashflow Connect. The Bank's opening expressly alleged that she made false representations by uploading invoice information through that system ([31]). The Court noted that no pleading or procedural-fairness ground was included in the appeal, and concluded that the allegation was within the case pleaded and opened ([29]-[31]).
On the evidence issue, the remaining complaint concerned the lack of evidence said to address the conditions in s 64(2) of the Evidence Act 1995 (NSW). The Court held that s 64 does not require a separate application for admission, noting the role of the notice provision in s 67 ([25]-[26]). It also accepted that the trial judge could assess expense, delay and practicability using what he knew of the entire case as it developed. In the appeal, counsel accepted that the judge probably did not need more than that knowledge ([26]). The Court therefore dismissed grounds 5 and 6 ([27]).
The judgment does not purport to change the law of deceit or announce a new general test for appellate intervention. It applies the five elements of deceit as set out in the primary judge's reasons by reference to Magill v Magill: a false representation, knowledge of falsity or recklessness, intention to induce reliance, reliance, and resulting damage ([32]). The appeal focused on whether the primary judge was entitled to infer the knowledge element from the evidence.
On appellate review, the Court applied the established approach reflected in Fox v Percy and Lee v Lee, taking account of the trial judge's advantage in assessing witnesses ([39]). It also relied on Vagg v McPhee in explaining why witness presentation may be relevant to credit even where the trial judge's stated concerns relate to the substance of answers ([39]). The decision reinforces, on its facts, that an inference based on several connected findings should be assessed in context rather than reconstructed by considering each finding in isolation ([8], [38]).
For hearsay, the judgment's stated conclusion is specific: there is no separate requirement for an application under s 64, having regard to the notice provision in s 67, and the judge could evaluate the s 64(2) matters against the whole trial as it unfolded ([25]-[27]). It does not suggest that statutory requirements may be ignored. Rather, the appeal failed because the challenge did not establish error in the circumstances before the primary judge.
At [8], Mitchelmore JA said the appellant's arguments involved “disaggregating the bases of the primary judge’s conclusion rather than understanding his Honour’s reasons in context”. In plain English, the appeal could not fairly be assessed by isolating each piece of evidence and asking whether it independently proved knowledge. The trial judge had drawn an overall inference from the evidence and his assessment of the witness.
At [38], the Court said that, “Viewed as a whole, there was ample evidence” to support the inference that El-Ahmad knew the invoice information was false. This describes the appellate court's approach: it examined the combined force of the evidence, rather than requiring every subsidiary fact to carry the conclusion by itself.
At [39], the judgment emphasised the trial judge's advantages, including the opportunity to observe the witness and the context of the trial. The practical point is that an appeal court does not decide credibility afresh simply because the appeal involves an argument about what the evidence means. The trial judge's assessment remains relevant to review.
At [26], the Court addressed the s 64 objection. It considered that the trial judge could rely on what he knew of “the whole of the case, as it was appearing and evolving in front of him” when assessing expense, delay and practicability. The passage explains why the Court did not require a separate body of evidence for the judge to consider those matters in this particular trial.
At [69], the Court concluded that El-Ahmad had not demonstrated error in the finding that she knew, from at least 2014, that the uploaded invoice details were false. This was a conclusion about the appeal and the findings in this case, not a general determination of every issue that might arise in a future deceit claim.
The decision is most directly relevant where a party appeals findings of knowledge or dishonesty that a trial judge reached by drawing an inference from several strands of circumstantial evidence, particularly where the primary judge also made adverse credibility findings. It indicates that an appeal argument focused on each strand separately may not address the reasoning actually used by the trial judge ([8], [38]-[39]).
It is also relevant where the alleged representation was made by an employee through an electronic business process. Here, the Court recorded that Cashflow Connect required certification about delivery, assignment and provision of original invoices, and that El-Ahmad had accepted uploading invoices many times ([17], [33]). The appeal did not establish that the Bank's case required proof that she designed or created the underlying false documents, or profited from the fraud ([70]).
The evidentiary aspect may be relevant where a party challenges first-hand hearsay admitted under s 64. This judgment addresses whether a separate application was required and whether the judge could consider the trial's unfolding context in assessing the statutory conditions ([25]-[27]). The ruling is tied to the arguments and concessions recorded in this appeal; it does not remove the need to consider ss 64 and 67 in the relevant circumstances.
The judgment does not establish that an employee who uploads business records will necessarily know those records are false. Its significance depends on the particular combination of the employee's role, the nature of the certification, the surrounding business records, the evidence about transactions, and the primary judge's assessment of the witness.
The supplied judgment contains no later judicial treatment of El-Ahmad v Westpac Banking Corporation [2025] NSWCA 239. It therefore does not provide a basis to say that later courts have followed, distinguished, applied or questioned it.
The judgment itself relied on earlier authorities. It applied Fox v Percy and Lee v Lee when describing appellate review and referred to Vagg v McPhee on credibility findings ([39]). It cited J and E Vella Pty Ltd v Hobson for the trial judge's advantage from seeing witnesses and experiencing the trial ([8]). It also recounted the deceit elements from Magill v Magill as stated in the primary judge's reasons ([32]). Those are relationships within this judgment, not evidence of how later courts have treated the 2025 decision.
The decision does not determine how the same factual issues would be resolved where the employee's role, the required certification, the surrounding records, or the credibility evidence differed. It upholds the inference on the evidence in this case; it does not set a checklist that automatically establishes knowledge.
The Court did not separately decide whether El-Ahmad was involved in creating false documents, because the Bank's case did not require proof of that proposition. Nor did it need to decide whether she had an interest in, or gained a benefit from, the fraud ([70]). Those issues remain outside the necessary basis for the disposition.
The Court's s 64 analysis is also bounded by the appeal arguments. The appellant's senior counsel accepted that the primary judge could probably rely on his knowledge of the whole case when evaluating the relevant matters ([26]). The judgment does not explore every possible dispute about notice under s 67 or every evidentiary circumstance in which a trial judge may assess undue expense, delay or practicability.
The judgment is general legal information, not legal advice. Zoe can make mistakes. Before acting on this, relying on it, or using any draft, have it checked by a qualified Australian lawyer.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: El-Ahmad v Westpac Banking Corporation [2025] NSWCA 239
Hearing dates: 2 July 2025
Date of orders: 30 October 2025
Decision date: 30 October 2025
Before: Payne JA at [1]
Mitchelmore JA at [2]
McHugh JA at [72]
Decision: (1) The appeal is dismissed.
(2) The appellant is to pay the respondent’s costs of the appeal.
Catchwords: APPEAL — appeal against liability in the tort of deceit — whether primary judge erred in concluding that the appellant had knowledge of, or was reckless as to, falsity — where primary judge’s conclusion was based on inferences — inferences not to be disaggregated — appellate review of witness evidence — whether primary judge’s findings were glaringly improbable or contrary to compelling inferences — advantage of primary judge in seeing and hearing the witnesses give evidence
Legislation Cited: Evidence Act 1995 (NSW) ss 64, 67
Cases Cited: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22
J and E Vella Pty Ltd v Hobson [2023] NSWCA 234
Lee v Lee (2019) 266 CLR 129; [2019] HCA 28
Magill v Magill (2006) 226 CLR 551; [2006] HCA 51
Vagg v McPhee (2013) 85 NSWLR 154; [2013] NSWCA 29
Texts Cited: Nil
Category: Principal judgment
Parties: Sahar El-Ahmad (Appellant)
Westpac Banking Corporation (Respondent)
Representation: Counsel:
F Corsaro SC and Dr S B Levi (Appellant)
T Mehigan SC and J Foley (Respondent)
Solicitors:
Avondale Lawyers (Appellant)
Dentons Australia Limited (Respondent)
File Number(s): 2024/00474142
Publication restriction: None
[This headnote is not to be read as part of the judgment]
The respondent, Westpac Banking Corporation (the Bank), advanced funds to Sentox Pty Ltd (in liq) (Sentox), the first defendant in the court below, pursuant to an Invoice Discounting Facility (the IDF). Sentox carried on business as a fruit and vegetable wholesaler. Under the IDF, the Bank purchased Sentox’s current and future debts at 80% of their face value. Sentox uploaded invoices to the Bank’s web-based portal, Cashflow Connect, on the basis of which the Bank made funds available under the IDF. At all relevant times, the appellant was employed by Sentox. Her role involved uploading invoices to Cashflow Connect.
The Bank commenced proceedings against parties including Sentox, its sole director and shareholder, Mrs Musumeci, her husband, Mr Musumeci, and the appellant, including in the tort of deceit.
The primary judge found that Sentox perpetrated a fraud on the Bank in relation to the IDF which had four main elements:
(1) Sentox maintained two sets of financial information: one in MYOB that was entirely fictitious, and one in Wizard that represented its true financial position.
(2) Sentox generated false records relating to its supply of goods, including false invoices, and uploading these to MYOB.
(3) From the information it kept in MYOB, Sentox generated false financial statements and tax returns, which it provided to the Bank.
(4) Sentox uploaded the false information from MYOB to Cashflow Connect, on the basis of which the Bank made funds available under the IDF, which Sentox drew down on. Sentox used most of the funds to make payments into the nominated account under the IDF, giving the appearance that the invoices were being paid by genuine debtors. Some of the funds were used for other business ventures, necessitating increases in the IDF over time.
During the hearing below, each of the defendants other than the appellant accepted that Mr Musumeci had engaged in the fraud and that the Bank had suffered loss as a consequence.
In concluding that the appellant was liable to the Bank in the tort of deceit, the primary judge found that the appellant knew that the invoices that she uploaded to Cashflow Connect were false. That conclusion rested upon a number of factual findings as to her role in the business and his negative assessment of her credibility.
On appeal, the appellant contended:
(1) The primary judge erred in admitting a report that contained firsthand hearsay under s 64 of the Evidence Act 1995 (NSW), which his Honour relied upon in finding that the fraud as alleged by the Bank occurred (Grounds 5 and 6).
(2) The primary judge’s ultimate inference as to the appellant's knowledge of the falsity of the invoices was based on subsidiary findings as to her role in the business which were not available on the evidence. In the alternative, his Honour was not entitled to be satisfied to the requisite standard on the basis of inferences rather than direct evidence (Ground 1 to 4).
The Court (Mitchelmore JA, Payne and McHugh JJA agreeing), dismissing the appeal, held:
As to the evidentiary challenge (Grounds 5 and 6):
(1) Contrary to the complaint advanced by the appellant, there is no separate requirement for an application for evidence to be admitted under s 64 of the Evidence Act, having regard to the notice requirement in s 67: [25]-[26].
(2) As to the complaint that his Honour did not have evidence before him that went to undue expense, undue delay and reasonable practicability (being the matters in Evidence Act s 64(2)), it was open to his Honour to rely on what he knew of the whole of the case, as it was appearing and evolving in front of him. As much was conceded in the course of the appeal: [26].
As to the knowledge challenge (Grounds 1 to 4):
(3) There was no material shift in the Bank’s case during the trial. The Bank’s case, as pleaded and opened, included an allegation that the appellant submitted false information through Cashflow Connect: [31].
(4) None of the matters relied upon by the appellant to disturb his Honour’s subsidiary findings were such as to render those findings glaringly improbable or contrary to compelling inferences: [8], [38]-[68]. The appellant’s argument sought to disaggregate the primary judge’s findings and downplay the significance of his Honour’s adverse assessment of her credibility, which was an artificial way to assess his Honour’s conclusion: [8], [38], [59].
(5) Viewed as a whole, there was ample evidence to ground the ultimate inference his Honour drew as to the appellant’s knowledge, which was supported by his Honour’s adverse view of her credibility: [38], [69]-[70].
Fox v Percy (2003) 214 CLR 118; [2003] HCA 22; Lee v Lee (2019) 266 CLR 129; [2019] HCA 28; Vagg v McPhee (2013) 85 NSWLR 154; [2013] NSWCA 29, applied.
(6) As the Bank’s case did not require it to demonstrate that the appellant was involved in creating the false invoices or profited from the fraud, the balance of the issues on the appeal fell away: [70].
PAYNE JA: I agree with Mitchelmore JA.
MITCHELMORE JA: This is an appeal from a decision of Ball J finding the appellant, Sahar El-Ahmad, liable to the respondent, Westpac Banking Corporation (the Bank), in the tort of deceit: Westpac Banking Corporation v Sentox Pty Ltd (No 2) [2024] NSWSC 783 (the liability judgment). On 11 December 2024, his Honour ordered judgment for the Bank against the appellant in the amount of $10,782,116.44: Westpac Banking Corporation v Sentox Pty Ltd (No 3) [2024] NSWSC 1578.
The Bank commenced the proceedings in the court below against a number of defendants, including Sentox Pty Ltd (in liq) (Sentox), Kathie Musumeci, the sole director and shareholder of Sentox, Kathie’s husband, Andrew Musumeci, a number of other companies related to Mr and Mrs Musumeci, and the appellant, who was an employee of Sentox. The Bank advanced funds to Sentox pursuant to an Invoice Discounting Facility (IDF). In the liability judgment, his Honour found that Sentox perpetrated a fraud on the Bank in relation to the IDF, which had four main elements (at [56]):
Sentox kept two sets of financial information, one set using MYOB accounting software (MYOB) and one set using Wizard accounting software (Wizard). The information that Sentox provided to the Bank was generated from MYOB and was entirely fictitious, while the information that Sentox maintained on Wizard represented its true financial position.
Sentox generated false records relating to its supply of goods, including false invoices, and uploading those records to MYOB.
From the information it kept on MYOB, Sentox generated false financial statements and tax returns, which it provided to the Bank. From the accurate information it kept in Wizard Sentox generated equivalent documents, which it provided to the tax office.
Sentox uploaded false information from MYOB to the Bank’s web-based portal, Cashflow Connect, on the basis of which the Bank made funds available under the IDF which Sentox drew down. Sentox paid a large proportion of those funds to accounts it controlled and then used the funds to make payments into the nominated account under the IDF, giving the appearance that the invoices were being paid by debtors whose debts had been sold to the Bank. However, some of the funds that Sentox drew down from the IDF were syphoned off for other purposes, which required increases in the IDF over time.
On the penultimate day of the hearing, each of the defendants other than the appellant accepted that Mr Musumeci engaged in the fraud, and Mr and Mrs Musumeci accepted his Honour’s description of it. These defendants (to whom his Honour referred collectively as the Musumeci defendants) also accepted that the Bank relied on the fraud and suffered loss as a consequence, and that it was entitled to judgment in its favour against Mr Musumeci in the tort of deceit for the amount claimed ($16,166,628.63): at [8].
Where I refer to paragraphs of the primary judge’s reasons below, those references are to the liability judgment unless otherwise stated.
From 2011, Sentox carried on business as a fruit and vegetable wholesaler under the name “Fresh Xpress”, operating out of a trading space at Flemington Markets in Sydney (the Stand): at [1]. The Fresh Xpress business was originally owned by Fresh Express (Australia) Pty Ltd (Fresh Express), which was controlled by Mr Musumeci.
The appellant started working for Fresh Express in approximately 2003, in a quality assurance role. Over time, her responsibilities expanded “to include administrative tasks such as recording the receipt of stock, entry of sales information and bills into Fresh Express’s computer system and counting the till”: at [13].
When the business was transferred to Sentox in 2011, Mrs Musumeci’s nephew, Carl-Anthony Ortato, was the sole director and shareholder of Sentox. Mr Ortato was also the sole director and shareholder of CAO Holdings Pty Ltd (CAO), which, jointly with Sentox, held the shares that conferred the right to occupy the Stand.
In order to acquire the Fresh Xpress business, Sentox obtained finance from St George Bank (as this was a division of the Bank, I will continue to refer to the Bank alone): at [15]. On or about 28 March 2011, the Bank made available to Sentox an invoice discounting facility with a limit of $4,000,000 (the Initial IDF). Under the terms of the Initial IDF, the Bank agreed to purchase “debts” from Sentox at 80% of their face value (as adjusted in accordance with the General Standard Terms): at [17]. Sentox provided a first registered fixed and floating charge over its assets and Mr Ortato gave a guarantee to secure Sentox’s obligations under the facility: at [17]. In obtaining that financing, Mr and Mrs Musumeci and the appellant provided financial information as to profits of the business, the number of debtors, and the details of debts: at [15], [18].
On or around 1 April 2011, on the basis of representations that the business was owed debts in the amount of $3,955,729.85, Sentox became entitled to draw down 80% of that amount under the Initial IDF: at [18]. Following the sale of the business to Sentox, the appellant was employed by Sentox.
On 22 January 2014, Mrs Musumeci became the sole director and shareholder of Sentox and of COA, replacing Mr Ortato: at [1]. In March 2014, the shares in both businesses were transferred to her: at [23]. However, it was common ground that Mr Musumeci controlled the business at all relevant times: at [1].
In or around August 2014 and partly by reason of the transfer to Mrs Musumeci, the Initial IDF was replaced by the IDF, with a limit of $5,000,000: at [25]. The IDF, which was guaranteed by Mrs Musumeci, was contained in a facility offer letter dated 5 August 2014, an invoice discounting agreement (IDA) and general standard terms: at [25]. The primary judge noted at [27] that under the IDA, the Bank purchased the debts of the business (and committed to purchasing future debts) for 80% of their value. The terms of the IDA included the following:
“You declare, in relation to each debt, that:
(a) the details given to us of the debt, the debtor, the related documents and the goods or services are complete and correct;
…
(d) it is valid and binding and enforceable in accordance with the terms of the contract and for the full face value less only any allowance, discount, credit or rebate shown on the invoice;
(e) the debtor is liable to pay the invoice by the earlier of the payment date specified on the invoice or the recourse date;
…
(h) it has arisen as a result of a bona fide and arm’s length transaction in the ordinary course of your business
…
(k) you are not aware of any reason why it will not be paid in accordance with the terms of the contract;
…
(r) the debtor has an established place of business; …”
Sentox was required to tell the Bank “whenever anything happens which would mean you could not truthfully repeat all the declarations in this agreement”: cl 14.3.
The Bank was entitled to terminate the IDF immediately and without notice if Sentox was in default of the IDA, with the total amount owing becoming payable at that point: cl 17.2.
The Bank’s Cashflow Connect system, which permitted borrowers under invoice discounting facilities to submit information and request drawdowns, was the principal means by which Sentox made drawdowns under the IDF. The primary judge summarised the operation of the system at [28]:
“In order to make a drawdown, Sentox was required to upload debtor invoice information (in batches). The system requires the person uploading the information to tick a box certifying that the goods the subject of the invoices have been delivered, that the debts arising under the invoices are transferred and that the original invoices containing the same details have been provided to the customer before the information can be uploaded. After the certification is given and the information in relation to each invoice is entered, the Bank was notified that an invoice batch had been submitted. The bank then either approved or disapproved the invoice batch (it could disapprove individual invoices). Most often, it disapproved individual invoices because payment was outstanding for more than 90 days. Once the Bank had given its approval, Sentox was notified through Cashflow Connect of the total amount available under the facility for drawdown and could make a drawdown using the Funding Screen. The amount of the drawdown was transferred to Sentox’s trading account.”
As I noted above, the primary judge found that Sentox uploaded documents and information to Cashflow Connect that attested to non-existent debts and significantly overstated the size and profitability of its business, in order to obtain advances under the IDF. In some cases, the funds obtained were used to repay the Bank. However, the funds were also used for other, unrelated, ventures (including a mango farming business in the Northern Territory (at [46]) and to make payments on personal assets of Mrs Musumeci (at [89])).
The Bank conducted periodic audits which were held at Sentox’s office at the Stand, initially twice a year before moving to three times a year. The Bank would obtain a number of documents from Sentox in this context, including a debtor ageing summary (for comparison with the information retained on Cashflow Connect), sample debtor confirmations (for debts that the Bank selected in advance) which were either emails or were obtained orally in the presence of the auditor, sample invoices and delivery dockets (again, for debts that the Bank selected in advance) and sample remittance advices and bank statements. Both Mrs Musumeci and the appellant were present at the audits, and the auditor would go through the Bank’s audit template with them: at [32].
The limit of the IDF was increased on six occasions between August 2016 and August 2019, to a total of $15,000,000: at [43], [52]. As the primary judge stated, the need for these increases over time “arose from the fact that some of the funds drawn down on the IDF were syphoned off for other purposes”: at [56].
Following a number of debtor inquiries that the Bank made in August 2020, and an audit in October 2020, on 11 December 2020 the Bank issued a default notice under the IDF: at [53]. On 15 December 2020, the Bank appointed Barry Kogan, of McGrathNicol, as an investigative accountant. On the morning of 16 December 2020, Sentox provided a copy of its aged receivables. Mr Kogan’s staff were unable to verify any of the debtors in that document. Later that day, in a telephone conversation between Mr Kogan and Mr and Mrs Musumeci and their then solicitors, Mr and Mrs Musumeci told Mr Kogan that Sentox’s annual turnover was between $4,000,000 and $5,000,000 and that its debtor balance was “about $50,000 - $100,000”: at [53]. Mr Kogan reported this information to the Bank on the same day as that telephone conversation; and on 21 December 2020 the Bank appointed him as Receiver and Manager of Sentox: at [54].
As the primary judge recorded at [57], the appellant submitted below that “the Bank had not established that all the debtor information contained in the MYOB system was false (or that all the information contained in the Wizard system was accurate)”: at [57]. His Honour considered it doubtful that much turned on the correctness or otherwise of that submission: at [57]. That assessment was self-evidently correct in circumstances where the Musumeci defendants, including Mr Musumeci, accepted on the second-last day of the hearing that Sentox, which was controlled by Mr Musumeci, perpetrated the fraud that the Bank alleged.
His Honour was nonetheless “satisfied that at least the records contained in the MYOB system relating to invoices were all false”, stating at [57]:
“The evidence of Mr Kogan is that the debtor verification exercise carried out by his staff on 16 December 2020, which occurred by reference to a debtor list generated from the MYOB system, revealed that of those debtors that Mr Kogan’s staff were able to contact, none acknowledged any substantial debt owing to Sentox, whereas the list of debtors provided to Mr Kogan by Mrs Musumeci showed that the total amount owing was $20,940,138.20. The evidence given by Mr Kogan is consistent with the admission made by Mr and Mrs Musumeci (I say ‘Mr and Mrs Musumeci’ because Mr Kogan’s evidence is that the admission was made by one in the presence of the other without objection) during the telephone call on 18 December 2020 that the debtor balance was about $50,000 - $100,000.”
During the hearing, his Honour admitted Mr Kogan’s evidence about the debtor verification exercise, and the accompanying records of McGrathNicol, over the appellant’s objection that “it was hearsay evidence of representations made by the individual debtors”. His Honour recorded at [58] that he considered the evidence was admissible under s 64 of the Evidence Act, which permits the Court to admit first-hand hearsay “if it would cause undue expense or undue delay, or would not be reasonably practicable, to call the person who made the representation to give evidence”. There was, his Honour said, no reason to think the evidence was unreliable and “it would have caused undue expense and delay to require each person contacted by McGrathNicol to attend court simply for the purpose of denying that they owed Sentox money”: at [58]. Those reasons reflected what his Honour said when ruling on the objection during the hearing.
Ground 5 of the notice of appeal raised four complaints regarding this ruling. The first two complaints related to the Bank’s non-compliance with the notice requirement in s 67 of the Evidence Act and the absence of any application to dispense with that requirement. However, when the primary judge raised that the evidence regarding the individual debtors would be admissible under s 64, counsel for the appellant submitted that the Bank had not applied to admit it under that section but did not rely on the absence of notice under s 67. In those circumstances, the appellant’s senior counsel on the appeal did not press the sub-grounds that raised those complaints (grounds 5(a) and (b)).
The appellant did maintain that his Honour erred in admitting the evidence under s 64 because the Bank had not applied to admit it on that basis (ground 5(c)). However, the section does not refer to an application being required, which is not surprising given the provision that is made for notice in s 67. That left the challenge to his Honour’s ruling on the basis that no evidence was adduced or considered on the question of whether the requirements of s 64(2) were satisfied (ground 5(d)). Counsel for the appellant submitted below that there was a limited list of debtors, and given the number of witnesses in the matter the “crux” of the Bank’s case should be proved by direct admissible evidence, noting there was no evidence before the Court as to any difficulty putting forward affidavit evidence. That submission did not squarely answer the inquiry posed by s 64(2), which is concerned with questions of undue expense, undue delay and what is reasonably practicable. When McHugh JA asked the appellant’s senior counsel during the hearing why the primary judge needed more than what he knew of the whole of the case, as it was appearing and evolving in front of him, to make an informed assessment of those matters, senior counsel replied, “He probably doesn’t, to be frank”.
There was thus no substance in what remained of ground 5. It should be dismissed. Ground 6 was premised upon error being found on ground 5, contending that his Honour erred “in failing to find, accordingly, that there was insufficient evidence of fraud (by any party)”. It should also be dismissed.
As his Honour observed at [91], it was not necessary for the Bank to establish that the appellant was aware of precisely how the fraud worked. The central issue for the Bank on its case against the appellant was whether it could prove that she “made representations to the Bank which she knew to be false (or was reckless as to whether they were false or not)”. The representations on which the Bank ultimately relied were those that the appellant made by uploading the details of fictitious invoices to the Bank’s Cashflow Connect system. The Bank alleged that the appellant knew or was reckless as to the fact that the invoices that she uploaded were false: at [91]. It sought to prove that allegation as a matter of inference from what she knew: at [95].
The appellant advanced a preliminary submission to the effect that the way the Bank put its case against her in closing was the product of a material shift during the course of the hearing. The introductory section of the appellant’s written submissions on the appeal focused on this issue. The appellant submitted that the Bank’s case as pleaded and opened concentrated on her involvement in creating and providing to the Bank debtor ledgers, management accounts, month-end reconciliations and aged debtor lists; and when this case “collapsed”, the Bank reframed its case to one that focused on her providing false invoice information to the Bank.
Senior counsel confirmed at the hearing that the appellant’s grounds of appeal did not include a pleading point or a procedural fairness point arising from the alleged shift. He ultimately submitted that the shift exposed the weakness of the evidentiary basis for the key findings that the primary judge made.
I do not accept the premise that the Bank’s case materially shifted from the way it pleaded and opened its case. As the primary judge stated at [92], in rejecting the appellant’s submission in this regard (from which no appeal is brought), the Bank’s Amended Commercial List Statement included an allegation that the appellant “provided or caused to be provided Financial Information and Documents to the [Bank]”, and the particulars to that allegation referred to the appellant’s provision of information through Cashflow Connect (at [C78]). Although there was no express pleading that the appellant uploaded the details of invoices to Cashflow Connect, his Honour considered that this allegation nonetheless fell within the pleading and was consistent with the way the Bank opened its case: at [93]. As his Honour observed at [94]:
“…Paragraph 111 of the Bank’s opening submissions alleges that Mrs El-Ahmad made false representations in a number of ways including (in para (b)) by ‘uploading invoice information to Cashflow Connect, the first step in obtaining funding for invoices under the IDF. This invoice information was not, and could not have been, true’. It was not suggested that this allegation went beyond the pleaded case.”
“The modern tort of deceit will be established where a plaintiff can show five elements: first, that the defendant made a false representation; secondly, that the defendant made the representation with the knowledge that it was false, or that the defendant was reckless or careless as to whether the representation was false or not; thirdly, that the defendant made the representation with the intention that it be relied upon by the plaintiff; fourthly, that the plaintiff acted in reliance on the false representation; and fifthly, that the plaintiff suffered damage which was caused by reliance on the false representation. Generally, the elements of the tort have been found to exist in cases which concern pecuniary loss flowing from a false inducement and the need to satisfy each element has always been strictly enforced, because fraud is such a serious allegation.”
The appellant’s first line of defence to the claim was that she did not make any representations to the Bank. Rather, and seeking to borrow from the consumer law context, she submitted that she was acting as a mere conduit. His Honour did not consider the mere conduit principle, which was developed in the context of strict liability provisions, to have any application to the tort of deceit: at [97]. His Honour considered there was “no doubt” that the appellant made representations to the Bank when she uploaded details of invoices to Cashflow Connect: at [98]. Consistently with the terms of the IDF, that process required her to “tick a box certifying that the goods the subject of the invoices had been delivered, that the debts arising under the invoices were transferred and that the original invoices containing the same details had been provided to the customer”. The appellant accepted that she had done this hundreds of times. The fact that she did not, on her evidence, read what she was certifying did not affect that she made a representation in terms of the certification: at [98].
His Honour also found that the appellant “must have understood, at least in a general sense, that the process of uploading details of invoices to Cashflow Connect was the first step by which the Bank lent money against those invoices”: at [99]. In making that finding, his Honour referred to the appellant’s evidence that “every morning two piles of invoices were left on her desk, one to be entered into the MYOB system, which she understood were the invoices to be funded by the Bank, and the other to be entered into the Wizard system, which she understood to be unfunded invoices”: at [99]. In circumstances where the Bank had trained the appellant to operate the Cashflow Connect system, including how to upload invoice details from MYOB, the appellant understood that in uploading invoices “she was representing that the invoices accurately recorded the debts owing to Sentox”: at [99].
As I noted above, the Bank relied on inferences from what the appellant knew to make out that the appellant knew that the details of the invoices that she uploaded were false: at [95]. In concluding that the Bank had discharged its burden, his Honour relied on the following seven matters, each of which I will address in more detail below:
From the time Sentox entered into the Initial IDF, the appellant “knew that Sentox kept two sets of accounts”: at [101]. His Honour did not accept the appellant’s evidence that on her understanding, the unfunded invoices were recorded in Wizard and invoices funded under the IDF were recorded in MYOB.
The appellant was involved in collecting debts owed by customers recorded in the Wizard system, with emails she sent indicating that “she must have gained some knowledge of the business and its customers from her interactions with them”. Her evidence that she was not involved in chasing payments was “at best misleading and reflect[ed] poorly on her credibility”: at [106].
“Taking these matters together, I am satisfied to the requisite standard that Mrs El-Ahmad knew from at least 2014 (to choose a date that corresponds to the pleaded case) that the invoice details she uploaded to Cashflow Connect were false. The invoice details did not record details of actual sales made by Sentox which the Bank had agreed to fund, and Mrs El-Ahmad must have known that. Mrs El-Ahmad’s evasive and implausible answers together with the objective facts demonstrate that Mrs El-Ahmad must have known the true position.”
The appellant challenged each of the matters on which the primary judge relied in reaching the conclusion in [116] of the liability judgment. The essence of the appellant’s challenge was captured in ground 4, which took issue with the factual findings that his Honour made and his rejection of parts of her evidence.
As the Bank submitted at the outset of its written submissions on these grounds, disaggregating the matters his Honour relied upon in combination with the appellant’s “evasive and implausible answers”, was an artificial approach to assessing his Honour’s conclusion. Viewed as a whole, there was ample evidence to ground the inference that the appellant had the requisite knowledge of the falsity of the invoice information she uploaded to Cashflow Connect, which was supported by his Honour’s adverse view of the appellant’s credibility.
In evaluating this aspect of the appeal, consistently with Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [29], and Lee v Lee (2019) 266 CLR 129; [2019] HCA 28 at [55] it is necessary to be mindful of the advantages that his Honour enjoyed. The appellant submitted that his Honour’s description of her evidence as “evasive and implausible” was not a finding or observation in relation to demeanour, but, rather, to the substance of her answers, which this Court is able to assess. Even if his Honour’s description at [116] could be read in that limited way – which I do not accept when one reads it with the preceding paragraphs – where findings of credit are in issue “it is unlikely that … presentation in the witness box was not keenly observed and taken into account”: Vagg v McPhee (2013) 85 NSWLR 154; [2013] NSWCA 29 at [84]-[85] (Tobias AJA).
In order to contextualise the issues that the appellant raises with his Honour’s finding about her knowledge of Sentox’s two sets of accounts, it is necessary to consider how his Honour reasoned to that finding. As I noted above, his Honour rejected the distinction that the appellant drew in her evidence between unfunded invoices, which were recorded in Wizard, and invoices funded under the Initial IDF and IDF, which were recorded in MYOB, for the following reasons:
The appellant gave evidence that the Bank indicated, in advance, which invoices it would fund and which invoices it would not fund. She confirmed her understanding that the Bank gave that advance indication by reference to each debtor. It followed, then, on her evidence, that a debtor was either funded or unfunded. The appellant also gave evidence that the Bank did not approve the unfunded debtors because they did not pass the Bank’s due diligence: at [103].
When the appellant was taken to a number of examples generated from Wizard and MYOB in the same periods which (contrary to her evidence) listed amounts owing from the same debtors and with comparatively much higher invoice amounts in MYOB, she was, in his Honour’s words, “unwilling to concede that, even though the names of the debtors were the same, they were the same debtors”: at [105]. Pointing out that the reference numbers for the debtors were different for the two systems, the appellant said that they must be different customers. After being taken to further examples, her final position was that it “appeared to be that she just focussed on the customer numbers and that it did not occur to her [that] customers with the same name were the same customers”: at [105].
His Honour considered that the appellant’s evidence on this topic was “completely implausible”: at [105]. The appellant submitted that far from being implausible, her evidence showed that she was mistaken as to her understanding of the IDF. His Honour had earlier noted that the IDF permitted the Bank to approve or disapprove batches of invoices, or individual invoices: at [28]. The appellant relied on this as demonstrating that she did not have a clear or accurate understanding of how the IDF operated. Given that lack of understanding, his Honour was wrong to conclude that she must have appreciated that the presence of the same debtor across both systems necessarily indicated that the invoices she was uploading to Cashflow Connect were false.
The appellant placed some emphasis in this respect on an email exchange between the appellant and Mr Odlum of the Bank in July 2013. In response to a query from Mr Odlum as to whether there was “anything that you have issue with or anything that causes you hassles in using the invoice discount finance product”, the appellant replied, on 17 July 2013:
“Only two issues come to mind:
1. We are unhappy with the customer balance limit for example anything over 300k per debtor is not funded and this is restricting some of our sales.
2. At the moment our submission day for invoices is Thursday and Andrew wants to be able to submit any day of the week and have funds available the next day.
Other than that we are all happy.”
The appellant relied on this document as demonstrating that a customer could be partly funded (up to the balance limit) and partly unfunded. However, as was pointed out in the course of the hearing, the email exchange, which was not put to any witness, dated to a time when the Initial IDF was in place, and the limit of the facility was $5 million, and no equivalent limit was pointed to in relation to the IDF. The content of the email also suggested a level of understanding of how the facility worked, contrary to the impression that the appellant sought to convey on the appeal.
More fundamentally, however, the appellant’s submissions missed the key point of his Honour’s reasoning. The appellant accepted that she entered invoices, for the same business, across two accounting software platforms. Her evidence was that she did so because of the status of particular debtors, on the basis of a determination that the Bank had made after doing its due diligence. When confronted in cross-examination with a number of examples, from Sentox’s own records, of the same (or very similar) debtor names being entered in both MYOB and Wizard, in relation to vastly differing amounts, the appellant’s evidence was not that she must have misunderstood the basis of entering invoices across the two systems. Rather, it was that when uploading the invoices she did not focus on names, but only the customer numbers, and because they had different customer numbers they were, to her, different entities.
The primary judge, who viewed the appellant as she gave this evidence, found her responses to be implausible. The appellant’s response in the written submissions on the appeal was to refer to what was described as “ordinary commercial practice”, whereby account management systems record and distinguish between different customers (or accounts) by reference to allocated customer numbers, rather than by customer names alone. Such a practice, assuming for present purposes that it exists, did not render his Honour’s conclusion regarding this aspect of the appellant’s evidence glaringly improbable or contrary to compelling inferences.
The appellant also devoted attention both in writing and orally to establishing that the debtor numbers and accompanying names were not the same as between the two systems (for example: “Tony Lahood” and “Tony Lahoods” had different customer numbers, as did “Top Fruit” and “Top Fruit & Veg P/L”, and “Losurdo’s Fresh” and “Losurdo Investments Pty Ltd”). Some debtors also had multiple customer numbers for different locations or sub accounts. That there were differences is unsurprising, given the invoices uploaded to MYOB were fictitious. The more fundamental point was that when confronted with this evidence, the appellant’s evidence was that the examples she was shown looked like they were the same names, but to her they were different people, on the basis of the “funded” and “unfunded” distinction. The force of this point was strengthened by the other findings that his Honour made about the appellant’s involvement in the business over many years.
In her affidavit, the appellant stated that she did not directly communicate with customers and never communicated with them about outstanding payments. Instead, she would pass information about overdue invoices to the sales representatives. Early in the cross-examination, she confirmed this evidence. His Honour found this evidence “misleading”, on the basis of emails the appellant sent to customers recorded in the Wizard system, including following up outstanding invoices. His Honour considered that the tone and content of those emails suggested that she had some knowledge of the business and the customers: at [106].
In taking issue with this finding, the appellant submitted that her evidence was not misleading because the emails that were put to her were not inconsistent with what she said in cross-examination, namely, that the emails she sent were at the direction of Mr Musumeci. His Honour’s focus, however, was on the appellant’s change in position in cross-examination after being confronted with emails that squarely contradicted her affidavit and initial oral evidence. As the respondent submitted, the appellant initially under cross-examination said that while she chased debtors for payment, she did so on behalf of Mr Musumeci. Ultimately, however, she accepted that the evidence demonstrated that she had a relationship with customers and chased payment of invoices. The appellant’s submission that there was no relevant inconsistency in her evidence on which his Honour could draw to make an adverse finding as to her credibility cannot be sustained.
His Honour observed that his finding in relation to Woolworths was “related to the second point”: at [107]. The relatedness arose from the cross-examination of the appellant about her evidence that she did not chase customers for payment of outstanding invoices. The Bank’s senior counsel cross-examined the appellant in that context about an email that she sent to Woolworths, dated 7 March 2014, setting out a series of outstanding invoices and asking Woolworths to review them. Senior counsel for the Bank also questioned the appellant about an email, dated 2 June 2014, that she received from “Reddy”, in the Accounts Department of Sentox, asking her to confirm sales for the week ending 31 May 2014. This email included a reference to Woolworths for an amount of $11,448 (the primary judge extracted this email at [109]).
The appellant complained that the primary judge’s finding in relation to Woolworths was without evidentiary foundation because she did not give evidence that she considered Woolworths to be unfunded. Further, and in any event, it was not inherently implausible that Woolworths might be unfunded to a certain extent, given how the IDF operated and having regard to evidence that referred to limits on aggregate funding.
As to the first of those complaints, senior counsel for the Bank accepted on the appeal that he did not question the appellant further in relation to Woolworths. However, the inference that the primary judge drew from this correspondence was, as his Honour observed at the beginning of [107], an extrapolation of the previous matter, as well as the first matter (the appellant’s evidence that debtors entered into Wizard were unfunded because they had failed to meet the Bank’s due diligence). Putting the appellant’s evidence on these matters together, she was following up Woolworths, being one of the customers entered into Wizard; and the customers entered into Wizard were “unfunded” in the sense that they did not pass the Bank’s due diligence. His Honour considered that the scale of Woolworths’ business rendered it implausible that it could be “unfunded” in the manner the appellant explained, from which it followed that the appellant could not have believed it.
As to the second of the appellant’s complaints, the appellant’s reliance on how the IDF in fact worked on appeal is misconceived for the reasons I have set out in relation to the first matter.
The appellant’s challenge to how the primary judge dealt with her evidence in relation to her parents focused on what she contended was a failure on his Honour’s part to identify specifically what he considered to be completely implausible. The appellant submitted that his Honour’s finding lacked any evidentiary foundation and, in any event, had no bearing on any material issue.
The appellant’s evidence in relation to her parents’ appearance in the MYOB records highlighted the implausibility of the appellant having no knowledge of the falsity of invoices that she entered into that system and uploaded to Cashflow Connect. It is worth setting out his Honour’s finding at [108] in full:
“Fourth, one of the customers included in the MYOB system was M & N Abbas, who are Mrs El-Ahmad’s parents. Mrs El-Ahmad accepts that she saw the customer name ‘multiple times’. The information provided to the Bank suggests that they were large customers of Sentox. The MYOB records indicated that as at December 2020, they owed Sentox $698,859. Mrs El‑Ahmad gave evidence that her parents were growers who also had a shed at Flemington Markets. When she was questioned about the apparently large purchases that they were making from Sentox, Mrs El-Ahmad said that she had not spoken to her parents since 1997 and she sought to give the impression that she knew nothing about their business. When confronted with telephone records which indicated that she had rung her mother on 48 occasions during a one-month period, she said that she rang her mother’s number to speak to her sister who did not have her own telephone (although her evidence concerning the fact that her sister did not own a telephone is not recorded in the transcript). In addition, she gave evidence that she had made up with her parents in the past two or three years, although she said that she had never discussed with them the amount that they are said to owe Sentox. Again, this evidence is completely implausible, and I do not accept it.”
The paragraph captured, with his Honour’s customary succinctness, the implausibility of the appellant’s evidence on this subject. As the Bank submitted, she was taken to MYOB records that gave the impression that her parents were purchasing vast amounts of produce from Sentox, such that as at December 2020 they owed Sentox $698,859. The appellant acknowledged that she saw her parents’ names “multiple times” on records which indicated that they were purchasing produce from Sentox, when to her knowledge her parents were growers, meaning they sold produce. When the appellant reiterated that she had not spoken to her parents since she was 17, she was taken to the phone records to which the primary judge referred. More critically, however, the appellant accepted that she saw their names on invoices “all the time”, and on her evidence these transactions were genuine, yet even after reconciling with them two or three years ago she had never had any discussion with her parents about the (very large) amount owing to Sentox.
I see no error in his Honour’s conclusion, having seen the appellant give this evidence, that it was “completely implausible”. Contrary to the appellant’s submission, it was not necessary for his Honour to have direct evidence that contradicted it.
The appellant complained that the three examples of emails involving the appellant reconciling invoices, over a period of four years, did not ground the inference the primary judge drew from them. It is important not to overstate that inference. At the outset of his Honour’s discussion of this matter, he referred to there being evidence that “at least on some occasions”, the appellant was involved in reconciling the payment of accounts: at [109]. His Honour then summarised the three emails, being:
an email from Reddy in Accounts to the appellant dated 20 May 2014, which attached a debtor list showing total debtors of $192,401.80 and requested the appellant to “go through it with debtors movement and workout with Kathie [Musumeci]”;
the email from Reddy to the appellant dated 2 June 2014 to which I have referred at [49] above, which included the reference to Woolworths and sought confirmation of “the Sale for the week ending 31/5/2014” in the total amount of $64,459; and
an email dated 20 June 2018 that the appellant sent to a customer, Lou’s Produce, chasing payment of several invoices on which the appellant made handwritten notes as to amounts that had been paid.
As the Bank submitted, there were further examples of emails of this nature that the appellant sent to other customers, including an email she sent on 4 September 2019 to a customer recorded in the accounts as “A Fresh”, and an email exchange with Lo Surdos in April and May 2018. The inference that his Honour drew from these examples was that they “supported” the conclusion that the appellant knew more about Sentox’s business and had a greater involvement than she suggested. What was of particular significance to his Honour, which the appellant does not grapple with, was that the first two emails respectively gave debtor amounts (from Wizard) and sales figures (for one week) which were much lower than the information supplied to the Bank. In circumstances where the appellant “could give no explanation for why she was sent the first two emails”, his Honour relied on her receipt of them, and what she was asked to do in respect of them, as suggesting that she “had a clear understanding of the size of the business, which was quite different from the impression that would be gained from the information supplied to the Bank”: at [111]. The appellant’s complaint about his Honour’s reliance on this evidence in support of the (limited) inference that his Honour drew is without substance.
As with the appellant’s general approach to the seven matters from which his Honour drew the ultimate inference of the appellant’s knowledge of the falsity of the invoice information she uploaded to Cashflow Connect, the appellant’s submission on this, the sixth matter, disaggregated the component evidence that his Honour relied upon and submitted that none of it supported his conclusion that she occupied “a trusted and senior role in Sentox”: at [112]. The appellant placed particular reliance in the written submissions and at the hearing on what his Honour made of a loan application document that indicated her salary was $171,000, her evidence as to which was that it was filled in by a mortgage broker and that the figure represented a promised salary.
I do not accept the appellant’s submissions in this regard. It is apparent from [112] and [113] of his Honour’s reasons that in reaching a conclusion as to the appellant’s role in Sentox, his Honour had regard to a number of matters of which the salary indicated on the loan application (which she signed) was but one. As I have already noted, his Honour relied on the appellant having worked in the business for an extended period of time, her close working relationship with Mr Musumeci (with whom she continued to work at the time she gave her evidence), her involvement in sending monthly reconciliation reports to the Bank, her presence when the Bank conducted audits, and the small size of the Sentox business (being only about six or seven employees).
Further, it was not the amount of the salary alone but rather the amount together with what his Honour described as the “evasive and implausible” evidence that the appellant gave in respect of it, which his Honour summarised at [112]:
“…According to a home loan application Mrs El-Ahmad completed in May 2016, her salary from Sentox was $171,000. When questioned about that evidence, she gave a series of evasive answers. She said that she did not know what her salary was in 2016 (or, indeed, what it is now). She also said that the $171,000 was her ‘promised salary’, without conceding that she ever received it. She denied that the amount of $171,000 suggested that she held a position of seniority. She gave this evidence:
A. I, I just explained it. In that industry my husband doesn’t hold a position of senior and he is - on that I, I could pull up one of his payslips in 30 seconds and, and show you that and he’s not in any way - he does not have a senior role. So I know you didn’t ask me that but he’s my husband and I can compare myself to him directly because he did not have a senior role at all. In fact, he’s, just works on the floor like as nothing special in any way, shape or form, no education required, nothing, just works there as a labourer.
This evidence is evasive and implausible. Her salary coupled with her evasive evidence suggests that she occupied a trusted and senior role in Sentox.”
“It is also noteworthy that Sentox was a small business with no more than about six or seven employees. When questioned about the number of employees in the business, Mrs El-Ahmad gave evasive answers saying that ‘I don’t have access to payroll at all’. Mrs El-Ahmad had worked in the business for an extended period of time. She occupied a position of some seniority and trust. The information supplied to the Bank by Mrs El-Ahmad suggested that the scale of the business was far greater than it was. It is not plausible given the size of the business and Mrs El-Ahmad’s role in it that she was unaware of the true scale of the business.”
The final matter that the primary judge relied on was:
the appellant’s receipt, on one occasion (3 May 2014), of a large amount of money from Sentox, and how she disbursed those funds; and
her status as an authorised signatory of Gem Fruitz, into which Sentox paid money on one occasion in 2011 which was then paid into the nominated account.
In relation to the first of those matters, the appellant submitted that there was no evidence to support the inference that she knew the transaction was part of a fraud. I do not accept that submission. As the primary judge noted in [114], and as the Bank submitted on the appeal, the manner in which the appellant transferred the funds out of her account was critical:
“Mrs El-Ahmad made one payment from a branch at Flemington markets to Sentox’s account with the Bank. On the same day she transferred the balance of the amount to Sentox’s ANZ account from which four payments were then made to the nominated account purportedly from different debtors. Mrs El-Ahmad could give no explanation for her conduct other than that she was following the directions of Mr Musumeci.”
In the face of this detail, the appellant’s evidence that the money was paid into her account by mistake seemed implausible, as his Honour observed at [114]. When asked to explain the detail of the transaction, the appellant could only say that she was following the directions of Mr Musumeci. True it is, as the appellant submitted, that in inferring her knowledge of the true purpose of this payment his Honour expressly referred only to her close relationship with Mr Musumeci and her role in reconciling payments into the nominated accounts with invoices (which she accepted). However, those matters, particularly when read with his Honour’s earlier findings about her role and her knowledge of Sentox’s systems, as well as his rejection of her evidence as implausible, amply supported the inference of knowledge that his Honour drew.
The same must be said of the primary judge’s finding about the Gem Fruitz transactions, with money being paid from Sentox, into Gem Fruitz’s account, and from there into the nominated account under the IDF. The significance of this from his Honour’s perspective was that while the appellant was a signatory on the Gem Fruitz account, Mr and Mrs Musumeci were not. In the face of the appellant disclaiming any knowledge of Gem Fruitz, there was evidence that on at least one occasion she had authorised a transfer of $30,000 from that account: at [115]. His Honour was careful to note that the transfer she had authorised was not into the nominated account.
The appellant was unable to explain her status as a signatory of the account or the individual payment she had authorised. If the primary judge had otherwise accepted the appellant as a credible witness, his Honour might have addressed the absence of an explanation differently. At this point of the reasons, however, his Honour had roundly rejected the appellant’s evidence on a range of significant matters. In that context, his Honour formed the view that the only reasonable inference that could be drawn from Sentox paying money to Gem Fruitz, which then made payments to the nominated account, was that Gem Fruitz was established as a fictitious customer and that the appellant’s knowledge of this could be inferred from the matters on which the Bank relied.
The appellant has not demonstrated any error in his Honour’s conclusion at [116] that the appellant knew, from at least 2014, of the falsity of the invoice details she uploaded to Cashflow Connect.
By ground 3 of the notice of appeal, the appellant contended that the primary judge should have made a number of different findings in relation to the appellant and her role within Sentox, including that she did not have knowledge of the falsity of information she supplied to the Bank (grounds 3(a), (c) and (d)). In view of my conclusions upholding the findings his Honour did make, it is unnecessary separately to address those grounds. In so far as the appellant further contended that the primary judge should have found that she was not involved in the creation of false documents provided to the Bank (ground 3(b)), the Bank’s case against the appellant did not require that finding. Nor was the Bank’s case contingent upon the appellant having any interest in, or obtaining any profit or gain from, the fraud, such that a finding that she had no such interest would be material to the outcome (ground 3(e)).
I propose the following orders:
The appeal is dismissed.
The appellant is to pay the respondent’s costs of the appeal.
McHUGH JA: I agree with Mitchelmore JA.
*********
Court book reference removed at [24].
El-Ahmad
Westpac Banking Corporation [2025] NSWCA 239
(2003) 214 CLR 118
(2019) 266 CLR 129
(2006) 226 CLR 551
(2013) 85 NSWLR 154
Appeal dismissed. The appellant was ordered to pay the respondent's costs of the appeal.
Notwithstanding the capitulation of the Musumeci defendants on this issue, the appellant maintained in the court below that the Bank had not made out the fraud: at [56]. Grounds 5 and 6 of the appellant’s notice of appeal maintained that challenge on the limited basis that the primary judge erred in admitting into evidence a report prepared by the receiver whom the Bank appointed to Sentox, on which the Bank relied to establish the falsity of information recorded in MYOB. The utility of these grounds was at best limited in the face of Mr Musumeci’s concession that he perpetrated the fraud. In the course of the hearing of the appeal, the scope of these grounds reduced to a complaint that no evidence was adduced or considered as to whether the requirements of s 64(2) of the Evidence Act 1995 (NSW) were satisfied. For reasons I outline below, that complaint is without substance.
Senior counsel who appeared for the appellant at the hearing of the appeal submitted that apart from the admissibility of the receiver’s report, he would not be heard against his Honour’s findings of fraud. However, the appellant submitted in writing, and at certain points in the hearing, that the primary judge had misconceived the fraud in so far as his Honour found it to involve preparing a higher set of financial statements and tax returns from MYOB and a lower set of financial statements and tax returns from Wizard, when both sets derived from MYOB alone. As was raised in the course of the hearing, the appellant did not identify where this submission was put below. In any event, the alleged misconception was not material to the basis on which the primary judge found the appellant liable in deceit.
The central issue on the appeal, and the focus of the remaining grounds (grounds 1 to 4), was the primary judge’s satisfaction to the requisite standard that the appellant knew, from at least 2014, that details of invoices that she uploaded from MYOB to the Bank’s Cashflow Connect system were false and did not record details of actual sales that Sentox had made and that the Bank had agreed to fund: at [116]. The appellant submitted that this conclusion rested on inferences that were not open on the evidence. Instead, the evidence demonstrated that the appellant played a limited, administrative role in the business, and she was not shown to have understood or interrogated the information that she provided to the Bank. The appellant further submitted that even if the findings the primary judge made were available on the evidence, his Honour’s ultimate finding regarding the appellant’s knowledge of the falsity was not available.
The appellant’s arguments involved disaggregating the bases of the primary judge’s conclusion rather than understanding his Honour’s reasons in context. Her arguments also sought to downplay the significance of his Honour’s findings being based, in no small part, on not accepting the appellant as a credible witness, with his Honour describing her evidence on issues of significance as evasive and implausible. The high bar set for a challenge of this nature reflects the advantages of a trial judge “by reason of having seen the witnesses and having been immersed in the milieu of the trial”: J and E Vella Pty Ltd v Hobson [2023] NSWCA 234 at [214] (Stern JA). Ultimately, none of the appellant’s contentions met, still less overcame, that high bar. It follows that the appeal should be dismissed.
Sentox assigned all of its debts (current and future) to the Bank, title to which automatically vested in the Bank either at the commencement of the IDF or when the debt arose: cl 2.1.
The Bank agreed to pay the “purchase price” of each approved debt at 80% of its value: cl 4.1.
Each debt was an “approved debt” unless it was a debt classified as a “disapproved debt”: cl 4.1, cl 3.
Sentox could request payment under the IDF using, relevantly, the Bank’s Cashflow Connect system: cl 11.
Sentox agreed to administer the accounts of debtors and collect the debts as agent for the Bank: cl 12.1. All payments were to be deposited into a nominated account, and details for each payment deposited and the debt to which it related were to be provided: cl 12.4. The Bank was exclusively entitled to all amounts in the nominated account: cl 12.4.
Sentox was also required to provide various other information to the Bank, including a “month end reconciliation” containing a statement setting out the balance brought forward from the previous month, the value of invoices issued, the amount of any debit and credit notes issued, and the amount of payments received and any dishonoured cheques or refunds paid: cl 15.1(a). The primary judge noted at [31] that if the Bank could reconcile the information with the amount funded for that month, the facility was closed out for the month and Sentox could arrange for the next month of invoices to be funded.
Clause 14.1 of the IDA was headed “Declarations relating to debts” and provided:
One of the customers the appellant chased for payment was Woolworths. On the appellant’s evidence as to the distinction between customers entered into MYOB and Wizard, Woolworths was an “unfunded” customer, but his Honour considered that she “could not possibly have believed that Woolworths had failed to meet the Bank’s ‘due diligence’”: at [107].
One of the customers included in MYOB was “M & N Abbas”, being the appellant’s parents, who according to the information provided to the Bank were large customers of Sentox (as at December 2020 they owed Sentox $698,859). The appellant accepted that she saw the name multiple times but said that she had not spoken to her parents since 1997 and sought to give the impression that she knew nothing about their business. Her evidence changed upon being confronted with phone records showing that she had rung her mother 48 times during a one-month period. His Honour found her ultimate position, that she had made up with her parents in the past two or three years and yet had never discussed with them the amount they were said to owe Sentox, to be “completely implausible”: at [108].
There was some evidence that the appellant was involved in reconciling account payments “at least on some occasions”, which supported that she “knew more about Sentox’s business and had a greater involvement in it than she suggests”: at [109]. Two particular emails that she sent suggested that the appellant had a clear understanding of the size of the business “which was quite different from the impression that would be gained from the information supplied to the Bank”: at [111].
There was other evidence to suggest that the appellant’s role in the business “was much greater than she suggests it was”. The matters to which his Honour referred in that context included: the close working relationship between the appellant and Mr Musumeci, which was continuing; the appellant’s involvement in sending monthly reconciliation reports to the Bank; her presence when the Bank conducted audits; and a home loan application from May 2016 which recorded her salary as $171,000, about which she gave what his Honour described as “a series of evasive answers”: at [112]. His Honour also noted the small size of the Sentox business in terms of employees (no more than six or seven) was at odds with the scale of the business on the information the appellant supplied to the Bank: at [113].
On one occasion, Sentox paid a large sum of money to the appellant, which she disbursed in accordance with Mr Musumeci’s instructions. The primary judge rejected as “implausible” the appellant’s evidence that the payment had been made to her by mistake and she had returned it as soon as the mistake was discovered: at [114]. His Honour also relied on another 2011 payment that Sentox made into an account in the name of Gem Fruitz Pty Ltd (Gem Fruitz) (of which the appellant was one of two authorised signatories), which was then paid into the nominated account. His Honour found that Gem Fruitz was established as a fictitious customer of Sentox and payments were made out of its account into the nominated account to create the false impression that the payments were for produce: at [115].
His Honour concluded at [116]: