Gudmundsen v Carrington

[2012] NSWSC 147

Supreme Court of NSW|2012-02-02|Before: Stevenson J, White J, Bergin CJ

View original source

At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2012-02-02

Before

Stevenson J, White J, Bergin CJ

Source

Original judgment source is linked above.

Judgment (26 paragraphs)

[1]

Judgment 1The plaintiff, Dr Ken Gudmundsen, is a dermatologist and operates a specialist medical practice under the name "Lismore Skin Clinic" ("the Clinic") at 186 Molesworth Street, Lismore. 2In early 2006, Dr Gudmundsen engaged the defendant, Ms Nina Carrington, as his bookkeeper at the Clinic. 3In January 2008, Dr Gudmundsen appointed Ms Carrington as his practice manager on a full time 5 day a week basis. 4In the proceedings, Dr Gudmundsen claims that Ms Carrington has misappropriated from him some $490,000.00 and seeks equitable compensation in that amount.

[2]

The proceedings 5The proceedings were commenced on 30 November 2011. On that day White J made an asset freezing order against Ms Carrington and adjourned the proceedings until 2 December 2011. 6On 2 December 2011, White J extended the freezing order until 7 December 2011 and adjourned the proceedings to that date. White J ordered that the summons, and Mr Gudmundsen's affidavit of 30 November 2011 be taken to have been served on Ms Carrington on 1 December 2011. 7On 7 December 2011, Bergin CJ in Eq fixed the matter for hearing on 2 February 2012 and extended the freezing order until 5pm that day. 8Ms Carrington has, at no time, appeared in the proceedings. She did not appear when called at the commencement of the hearing before me on 2 February 2012. 9Furthermore, Ms Carrington has not been personally served with any documents in the proceedings. However, the Summons and Dr Gudmundsen's affidavit (and its exhibits) were left at a property she owns at Highland Park in Queensland, and she has received by email, and acknowledged, the Amended Summons and Dr Gudmundsen's affidavit of 11 January 2012 (and its exhibits). She has also received from Dr Gudmundsen's solicitors SMS notifications to her mobile telephone of the progress of the litigation, the making and extension of the freezing order, and the fixing of 2 February 2012 as the date for the hearing of the matter. I am satisfied that she is aware of the proceedings, and of the nature of the allegations and claims made against her by Dr Gudmundsen. 10It appears that Ms Carrington now resides in New Zealand. 11On 31 January 2012 Ms Carrington forwarded to Dr Gudmundsen's solicitors a document called "Statement for the Court in Regards to Allegations made by Ken Gudmundsen against Nina Carrington" dated 31 January 2012 and she informed those solicitors that "this statement is to be put to the Court". 12Mr O'Sullivan, who appears for Dr Gudmundsen, did not tender that statement but, very properly, drew it the Court's attention. 13On 2 February 2012, during the first day of the hearing, Ms Carrington sent Dr Gudmundsen's solicitors a further document addressed to the Court and making a further statement "in regards to the allegations that Ken Gudmundsen has made against me". 14On 6 February 2012, after Judgment had been reserved, my Associate received a number of emails from Ms Carrington, to some of which were attached documents that Ms Carrington wished to draw to my attention. 15For that reason, on 6 February 2012, I indicated to the parties (including Ms Carrington) that I would not deliver judgment in the matter until 28 February 2012 in order to give Ms Carrington an opportunity to make such application as she wished in the proceedings. 16Since then Ms Carrington has contacted my Associate on a number of occasions by email and has forwarded to my Associate by mail an document purporting to be an affidavit setting out various matters said to be relevant to these proceedings. 17Ms Carrington also contacted the Assistant Manager Client Services of the Court and on 27 February 2012 sent by email a copy of her affidavit to that person. 18However, on 24 February 2012, at my direction, my Associate wrote to Ms Carrington as follows: "I refer to your email received at 4.49pm this afternoon. This [was] matter was heard on 2 and 3 February 2012. On 3 February 2012 His Honour directed that Dr Gudmundsen file any further affidavit evidence by 5pm that day. His Honour has taken into account the affidavit served pursuant to that order because the affidavit was filed pursuant to a direction made by His Honour arising out of Dr Gudmundsen's participation in the hearing of the proceedings on 2 and 3 February 2012. You are in a different position. You have not entered an appearance. You have not participated in the proceedings. You did not appear when the matter was called on for hearing. You did not participate in the trial. As you have not entered an appearance in the proceedings and have not participated in the proceedings, His Honour cannot take into account material that you send me or the Court informally by mail or by email. Judgment will be delivered at 9.30am next Tuesday 28 February 2012 unless you make an application of the kind I have described in previous correspondence. That Judgment will be based upon, and only upon, the evidence properly before the Court - that is the evidence adduced by Dr Gudmundsen. If you wish to seek leave to place evidence before the Court in accordance with the Court's procedures you will need to appear, either in person, or by a solicitor or barrister, or by some other person, before His Honour next Tuesday 28 February 2012 at 9.30am." 19Ms Carrington has not done any of these things. 20As Ms Carrington has not appeared, and gives no direct evidence of any of the matters that she has asserted in the documents she has sent to the Court, I am unable to take them into account. 21In the result, the only evidence before the Court is that of Dr Gudmundsen, which I must treat as uncontradicted. 22That evidence was to the following effect.

[3]

Background 23When Ms Carrington was engaged as practice manager in June 2009, she agreed to work on a full time 5 day a week basis and be paid $45.00 per hour. 24Dr Gudmundsen agreed with Ms Carrington that she could work overtime on certain conditions. First, Ms Carrington had to seek to work such overtime in advance. Second, Dr Gudmundsen had to give his approval to Ms Carrington working additional hours in advance. 25Thereafter Ms Carrington, on two separate occasions, requested a pay increase. On both occasions Dr Gudmundsen refused to agree to such increase. 26As practice manager, Ms Carrington had unrestricted access to Dr Gudmundsen's banking accounts, including his business account at Westpac Banking Corporation ("Business Account"). Ms Carrington also had the ability to transfer funds, using B-Pay or Westpac's "pay anyone" function to make payments from the Business Account. 27On 8 August 2011, Dr Gudmundsen decided to conduct an audit of the practice. He informed Ms Carrington of his intention on 9 August 2011. On 15 August 2011, Ms Carrington removed all her personal items from the Clinic. By an email sent to Dr Gudmundsen on 16 August 2011, Ms Carrington resigned from "Lismore Skin Clinic as of today and will not be back due to that manner in which I am being treated". 28Dr Gudmundsen was told by another member of staff that, shortly after Dr Gudmundsen announced that the audit was to take place, Ms Carrington stated "If Ken has an audit I'm gone. I'm out of here". 29Following Ms Carrington's departure, Dr Gudmundsen conducted an investigation as to the state of financial affairs of the practice. 30Dr Gudmundsen has referred the matter to the Police, whose investigations are continuing. 31The commencement of these proceedings, and the application to White J for ex parte relief, was prompted by information received by Dr Gudmundsen in late November 2011 that Ms Carrington was planning to leave Australia for New Zealand to pursue an employment opportunity in Nelson.

[6]

39The summary schedules prepared in respect of both periods also record the descriptor given, evidently by Ms Carrington (Dr Gudmundsen did not create them and did not authorise anyone but Ms Carrington to do so), in the Clinic's records of the transactions and the dates and amounts of the transactions. 40This approach to the calculation of Dr Gudmundsen's loss is said to be necessary because of the "chaotic" state of the entries made by Ms Carrington in the Clinic's MYOB bookkeeping records and because of what Dr Gudmundsen describes as being a failure by Ms Carrington to keep adequate records and the alleged deliberate creation by Ms Carrington of false records of the books and accounts of the Clinic. 41Dr Gudmundsen gave evidence that he had engaged a forensic accountant, a Ms Bateman, to produce an analysis of the Clinic's accounts such as would reveal the extent of any misappropriation of funds by Ms Carrington. 42Ms Bateman is reported to have stated that the MYOB records of the practice were "unusable" for this purpose. 43Dr Gudmundsen has not adduced evidence from Ms Bateman, or from any other forensic accountant dealing with this, or any other question concerning Ms Carrington's activities. 44In the result, what has been placed before the Court is a list of over seven hundred transactions. Each of these transactions undoubtedly represents a transfer of funds from the Business Account to one or other of Ms Carrington's accounts. Dr Gudmundsen has asserted in his initial affidavit that all these transactions were unauthorised by him. 45Various descriptors appear in the Clinic records in relation to these transactions. Some of these descriptors include "petty cash", "wages", "uniform", "practice expense", "general expense", "stationery", "general expense", and "management expenses". There are also a large number of transactions, occurring on an approximately weekly basis from September 2009, described as "Ken's drawings" or "Ken drawings". 46There are a large number of transactions described as "Molesworth House". Molesworth House is the name of the premises owned by Dr Gudmundsen, from which he conducts his dermatology practice. 47From the beginning of 2011 there are a number of transactions described as "wage repay" in respect of various employees at the Lismore practice - thus "Petria wage repay", "Gerrie repay", "Margo wage repay", "Kathy wage repay" and "Karen wage repay". 48In that regard Dr Gudmundsen said, in one of his affidavits, that he had become aware, in early 2011, that Ms Carrington had paid, from her own account, the wages of one of Dr Gudmundsen staff, Ms Petria Brown. He said that Ms Brown had told him that she had received her pay from Ms Carrington's account and enquired as to why that was so. Dr Gudmundsen said he had a conversation with Ms Carrington as follows: - "Dr Gudmundsen: Nina, what is this about payments to Petria Brown from your account? Ms Carrington: We didn't have enough in the cheque account to pay this. I was helping you out by paying it myself. You can pay me back when your current situation is better. I am helping you out. Dr Gudmundsen: Yeah, ok, but keep a close eye on this". 49In his affidavit, Dr Gudmundsen did not suggest that he was surprised to hear that Ms Carrington had been paying staff wages from her own funds, or that he asked her not to do so in the future. 50Dr Gudmundsen gave oral evidence before me. After the conclusion of that evidence, Dr Gudmundsen swore a further affidavit of 3 February 2012 giving more giving more detailed evidence in respect of the various categories of transfers from the Business Account to Ms Carrington's account.

[7]

Some important matters 51Before considering the detail of that evidence, I mention some matters that I must bear in mind. 52The first is that Dr Gudmundsen makes very serious allegations against Ms Carrington. Dr Gudmundsen claims that Ms Carrington made the transfers from the Business Account to her accounts without his authority. Thus, in effect, Dr Gudmundsen alleges that Ms Carrington has misappropriated the funds. The allegation is one of dishonesty. 53When considering whether I am satisfied, on the balance of probabilities, that Dr Gudmundsen's allegations are correct I must bear in mind the gravity of the allegations: Evidence Act 1995 s 140(1). 54As the High Court said in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd and Others (1992) 67 ALJR 170 at 170 per Mason CJ and Brennan, Deane and Gaudron JJ: "The ordinary standard of proof required of a party who bears the onus in civil litigation in this party is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary, 'where so serious a matter as fraud is to be found'. Statements to effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a Court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct". 55Another matter concerns Ms Carrington's likely knowledge of the true position. 56There is no doubt, on the evidence before me, that Ms Carrington caused the transfers to be made from the Business Account to her accounts. It is Ms Carrington, alone, who has full knowledge of what use she made of these funds. In particular, it is Ms Carrington, alone, who knows the extent to which she used the funds for the purpose of the Clinic, and the extent to which she used the funds for her own purposes. 57Ms Carrington is well aware of the existence and pendency of these proceedings. She has not come to the Court to give evidence setting out her side of the story and to explain what use she has made of the funds that she has transferred into her accounts. 58In Sutherland Shire Council v Dietz [2004] NSWCA 53, the Court of Appeal cited with approval the observations of Jordan CJ in De Gioia v Darling Island Stevedoring & Lighterage Co Ltd [1941] 42 SR (NSW) 1 at 4:- "...where the facts were peculiarly within the knowledge of the defendant and it was difficult for the plaintiff to produce them, then 'very slight evidence pointing to [the] existence [of facts essential to the plaintiff's case] may be treated as sufficient to justify a jury in holding that they do exist' ". 59Finally, if and to the extent that I am satisfied that Ms Carrington was not entitled to transfer funds to her accounts, the inevitable conclusion is that she has misappropriated those funds. 60In those circumstances it appears to me the position is clear and is summarised in Young, Croft, Smith On Equity (Lawbook Co 2009) at [6.1010] as follows: - " An employee or agent who steals moneys from, or diverts moneys intended to be paid to, the employer or principal, and either holds the moneys or invests them, will hold the funds or investment on trust for the employer of principal: Black v S Freedman & Co (1910) (12 CLR 105 at 110). In Robb Evans of Robb Evans & Associates v European Bank Ltd (2004) 61 NSWLR 75 (CA), Spigelman CJ (with whom Handley and Santow JJA agreed) concluded that stolen funds were held on a presumed or resulting trust, rather than a constructive trust, for defrauded credit card holders. His Honour stated: 'A case of simple theft involves a transfer of property about which the transferor was entirely unaware. The transferee holds any property into which the stolen property has been converted on trust in a manner which should be seen as automatic'." 61Further, to the extent that Ms Carrington has misappropriated her employer's funds, she has acted in breach of her fiduciary duty. As Mr O'Sullivan submits, a fiduciary relationship may exist between an employer and an employee. This is particularly so where the relationship is one of trust and confidence. In this case, Ms Carrington was charged with handling her employer's money and managing his practice and had a fiduciary duty to her employer not to obtain an unauthorised benefit from the relationship ( Breen v Williams (1995) 186 CLR 71 at 113 per Gaudron and McHugh JJ).

[14]

Other transfers 90In relation to many categories of transfer, the only evidence that Dr Gudmundsen was able to give about the transactions was that either he did not know what the transactions were supposed to relate to and/or that neither he, nor Ms Carrington's successor as practice manager (Ms Kathy Klem) had been able to locate any invoices, receipts or other primary accounting records or other paperwork that appeared to relate to those transactions. 91The categories of transactions (as described in the Clinic records) which fall into this category are as follows: -

Admin
Business meeting
Cash dockets reimb
Citibank repaid
Computer
Cosmetics
Drawings
General expense
Jessie vacation care (Jesse is Dr Gudmundsen's son)
Management
Marketing and Promotion
Medical supplies
Mgement expenses
Mobile
Accessories
Expenses
Optus
Phone/internet
Powermax repay
Practice expense
Practice amenities
Procedure room acc
Printer repay
Professional meetings
Reimbursement
Repayment comp
Robina set up (Dr Gudmundsen's practice had rooms at Robina)
Secretarial
Sensis
SSS repayment
Stationery repay
Storage
Surgery exp
Telstra
Theatre accessories
Training
Travel comp exp
Variety 92In relation to these categories of transactions, it is conceivable that some of the transfers made by Ms Carrington were used for Clinic purposes. On the evidence before me, I am unable to say either way. 93The fact that Dr Gudmundsen and Ms Klem cannot locate any invoices or other documents tends to suggest no Clinic obligations were discharged. It may be that forensic accounting analysis of the kind to which I have referred earlier in this judgment could have cast further light on the matter. 94As Mr O'Sullivan accepts, the evidence in this regard is not wholly satisfactory. 95However, this is an area where, to paraphrase the words of Sir Frederick Jordan cited above, the facts are peculiarly within the knowledge of Ms Carrington and, because of the state in which Ms Carrington has left the Clinic's books and records, it has proved difficult for Dr Gudmundsen to produce precise proof. 96I also take into account the circumstances of Ms Carrington's resignation. Ms Carrington resigned suddenly in August 2011, in the face of Dr Gudmundsen's announcement that he proposed to conduct an audit. This strongly suggests that Ms Carrington was not prepared to confront Dr Gudmundsen in relation to the transfers she had made or to provide to him, directly, an explanation. 97In those circumstances, and in the absence of any evidence from Ms Carrington explaining the position, I am prepared to accept Dr Gudmundsen's admittedly generalised evidence as sufficient to establish that Ms Carrington has not used the monies transferred under these headings for the purposes of the Clinic. 98Dr Gudmundsen was able to give more specific evidence of the following categories of matters.