Judgment - EX TEMPORE
Revised from transcript and annotated; issued 29 March 2022
This matter came before the Court on 17 March as the result of an application by way of notice of motion on the part of the plaintiff, Goldfield Funds Pty Limited ("GF"), to amend its statement of claim and join additional parties. In the course of the hearing, I indicated that there were some deficiencies in the proposed statement of claim. I also required, for reasons which will become clear, that specific instructions be obtained about the further prosecution of the proceedings. The matter has returned to Court today for the making of orders on the motion.
The motion proceedings arise out of transfers of funds made on 24 February last year on GF's behalf by Hui Chen, who is its sole director. There were two transfers, totalling $41,532. They were paid out of GF's account with the Commonwealth Bank of Australia ("CBA") to an account in the name of the defendant, A1 Plans Online Pty Limited ("A1") with the Australian and New Zealand Banking Group Limited ("ANZ").
According to Mr Chen (and it does not appear to be in dispute) the transfers in question were made by mistake. Mr Chen intended to pay a different person entirely.
A1 is controlled by Mr Brett Woodward, who is its sole director. According to Mr Chen, he notified Mr Woodward of the mistake by email sent at about 6:40 am on 26 February, two days afterwards. On 1 March Mr Chen notified CBA, who in due course notified ANZ.
Meanwhile, on 25 February, the sum of $41,500 was transferred from A1's account to an account in the joint names of Mr Woodward and Ms Samantha Johnston. The sum was paid back (in three separate transfers) to A1 on 5 March. But it was not returned to GF. Instead, by a series of payments between 6 and 24 March, the sum of $40,780 was transferred to another company apparently controlled by Mr Woodward, Brett Woodward Holdings Pty Limited ("BWH").
It is then alleged that, in a further series of payments, the sum of $40,780 was paid back to the joint account of Mr Woodward and Ms Johnston. This included, allegedly, a payment of $35,000 on 19 April.
The proceedings were commenced by a statement of claim against A1 as the sole defendant in June last year. No solicitor is acting for A1, and no formal appearance was entered for it. Mr Woodward apparently tried to file a defence for A1 but could not do so because, as an unqualified person, he was not entitled to act for it. Mr Woodward attended the call-over which resulted in the motion being fixed for hearing. He also attended the hearing of the motion before me on 17 March this year. But he has never obtained leave from the Court to represent A1.
The motion sought to amend the statement of claim, so as to join BWH, Mr Woodward and Ms Johnston as the second, third and fourth defendants. The proposed amendments set out to plead recipient‑based liability claims against each of them for the moneys which passed through their hands after the money was first paid mistakenly to A1.
To this end the proposed statement of claim propounded claims for equitable relief. These included a claim for a declaration that the sum of $41,532 paid to A1 "is being held on trust for the plaintiff". It was also proposed to claim an order in the form of a grant of leave to GF "to approach the Court for any further application for tracing [sic], provided that the application is accompanied by sufficient evidence showing an arguable case that any parts of the Trust Funds are traceable into any asset(s) owned by any of the Defendants". While not in proper form, this seems to have been intended to invoke the Court's powers to take accounts and conduct inquiries in pursuit of a tracing claim. In the alternative, a claim was made against A1 for restitution of the sum of $41,532 at common law as money had and received.
When the application came before me, I was concerned that these claims, which apparently were the reason why GF's legal advisors wished to pursue the claim in this Court, were unnecessarily elaborate. This was a particular problem given the relatively small amount of money involved, which would be well within the jurisdiction of the Local Court.
It appeared from the submissions in support of the motion that counsel for GF wished to argue that a payment by mistake gave rise to an equitable proprietary interest in the sum paid (see Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] Ch 105). This would arguably be enforceable against the second, third and fourth defendants, to whom I will refer as the recipient defendants. But, as I pointed out to counsel, this was not the only possible basis for a claim against them. It might for instance be possible to make claims against the recipient defendants as volunteers, on the principle in Black v S Freedman & Co (1910) 12 CLR 105.
It became clear in the course of argument that all GF can realistically hope to achieve is a money judgment against whichever of the defendants it can make liable. Presumably, as a result of obtaining documents on subpoena, GF's legal advisors are aware of, and have been able to plead, the relevant movements of funds. This is not a case where tracing will result in the identification of an asset to which the plaintiff wishes to make a proprietary claim.
On the face of it, GF had a clear claim against A1 in a restitutionary action at law for money had and received. In fact, it was a claim for a liquidated sum. As no defence had been filed, on proof of service (which was on the file), GF was entitled to apply for default judgment against A1 without any further ado.
It is not necessary in the present case to go into the academic debate about the extent to which it might be possible to trace the proceeds of funds paid under mistake at common law, so as to bring an action for money had and received against the recipient defendants. [1] Even if only equitable principles of tracing apply, the District Court has jurisdiction to deal with GF's claims for money judgments against the recipient defendants as well as A1. That is because the District Court's equitable jurisdiction which allows it to give judgment in a claim for equitable compensation or "equitable debt". [2] The judgments sought fall well within the relevant monetary limit. Although an account is not required in this case, it seems to me that the District Court might well have jurisdiction anyway to take an account for the purposes of determining the amount of an equitable debt which is due.
Accordingly, I indicated to counsel that if the amendments were permitted, I would transfer the proceedings to the District Court for them to continue there. Counsel accepted this.
It seemed to me, however, that there was real doubt about the utility of further proceedings. Mr Woodward was bankrupt between 2017 and 2020. He recently made an application to deregister BWH which has been put on hold as a result of action taken by the solicitors for GF. The sums involved are relatively small. It seemed to me questionable whether further pursuit of the recipient defendants (assuming that nothing can be recovered from A1) is likely to be worthwhile.
In these circumstances, I indicated that I would not be prepared to grant the necessary leave and allow the proceedings to continue unless I could be assured that Mr Chen, who is giving the instructions on behalf of GF, understood these risks. But at today's hearing an affidavit has been read from Mr Chen which records that he has been advised by GF's solicitors of those risks and nevertheless wishes to proceed.
Counsel for GF has also produced a revised version of the proposed amended statement of claim which makes it clear that all GF seeks against the defendants are judgments for liquidated sums. I will, therefore, make orders permitting the amendments and then transferring the proceedings to the District Court. Although, as I have said, GF is probably entitled to default judgment against A1 already, counsel for GF invited me, for convenience, to leave the making of that application to the District Court once the transfer has taken effect.
The orders of the Court are:
1. Grant leave to the plaintiff to amend its statement of claim in the form initialled by me and placed with the papers joining as second, third and fourth defendants:
1. Second Defendant: Brett Woodward Holdings Pty Limited
2. Third Defendant: Brett Woodward
3. Fourth Defendant: Samantha Johnston
1. Direct that the Amended Statement of Claim be filed by close of business on 25 March 2022.
2. Order that upon filing of the Amended Statement of Claim the proceedings be transferred to the District Court.
[2]
Endnotes
Heperu Pty Ltd v Belle (2009) 76 NSWLR 230 at [89], [137]-[153]; cf Russell Gould Pty Ltd v Ramangkura (2014) 87 NSWLR 552 at [32], [37]-[38]; Silversea Cruises Australia Pty Ltd v Abellanoza [2019] NSWCA 306 at [50]-[51].
District Court Act 1973, s 134(1)(h); Commonwealth Bank of Australia v Hadfield (2001) 53 NSWLR 614 at [65], [68]-[69]. This provision does not apply if the claim is one of a type to which any other sub-paragraph applies. Sub-paragraph (d) applies to proceedings "for relief in respect of … mistake". But although the question was not argued it seems to me that sub-paragraph (d) is concerned with relief in the nature of rescission rather than a judgment for monies received: Kelly v Mina [2014] NSWCA 9 at [60]-[61]; In the matter of Australian Managed Print Services (VIC) Pty Ltd [2020] NSWSC 1694 at [27]-[30]. It is also conceivable that the payment was made in a commercial context, which might bring the District Court's jurisdiction under s 44(1)(c1) into play.
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Decision last updated: 29 March 2022