Toksoz v Westpac Banking Corporation

A G Bell SC, P Kulevski (Respondent) Allied Lawyers (Appellant) Henry Davis York (Respondent) File Number(s): 2008/277888 Decision under appeal Citation: [2010] NSWCA 1509 Date of Decision: 2010-12-23 00:00:00 Before: Palmer J File Number(s): 2008/277888

Judgment 1ALLSOP ACJ: This appeal concerns the sufficiency of proof to attribute civil liability to the wife of a thief, who stole over $1m from a bank by identity theft, in respect of over $600,000 of funds controlled by the wife for which money there is no explanation. 2The appellant, Mrs Gulay Toksoz, was at all relevant times married to Ersever Toksoz. The unchallenged findings of the primary judge were that Mr Toksoz was directly and actively involved in frauds on 27 victims who were customers of Westpac. The frauds were carried out by a method that, with some variations, involved the following. Mr Toksoz, or an accomplice, would telephone Westpac armed with knowledge of a customer's details and apply to have the owner's access code and password changed. The security questions would be answered. It is thought that Mr Toksoz had assistance from someone inside the bank. Once details had been changed, new cards with new personal identification numbers would be issued. The customer's account could then be the subject of depredation. For present purposes, it is unnecessary to recount in detail what happened to each account. In respect of some accounts, addresses and mobile phone details were changed to locations and numbers that had an apparent personal or family connection to Mr or Mrs Toksoz. Some accounts had cash removed, some had cash transferred to other accounts, including to one in the name of Gino Versace, being a name used by Mr Toksoz. Some accounts had purchases fraudulently made to them. 3It was impossible to trace with exactitude the movement of money from the defrauded account directly or through a chain of transactions to Mrs Toksoz's accounts. Rather, all the surrounding circumstances were said to point inexorably to the conclusion that Mrs Toksoz received and possessed at the time the claim was made upon her sums and value totalling $666,830.56. 4The claim was put on two bases: (a)That she was a volunteer and these funds were held by her when put on notice of the bank's claim. As a volunteer, the money having been proved to be the product of the thefts should be disgorged: Black v S Freedman & Co [1910] HCA 58; 12 CLR 105; and Heperu Pty Ltd v Belle [2009] NSWCA 252; 76 NSWLR 230. (b)That she received the moneys with the requisite knowledge for her to be accountable as a trustee under the first limb of Barnes v Addy (1874) LR 9 Ch App 244. 5The claim was put principally upon (a), which does not depend upon proof of any state of knowledge at the time of receipt. For the reasons that follow, the primary judge was correct to conclude that the elements of (b) were also satisfied. 6The following facts which are not challenged should be borne in mind in assessing Mrs Toksoz's position: (a)She did not give evidence. (b)She was not present at the trial when the identity of a female participant was in issue. (c)No explanation was proffered of (a) or (b). (d)Only an accountant was called in her case. (e)She does not dispute that during the relevant period unexplained deposits were received by her totalling over $1m, comprising sums in the order of: (i)$886,000 into bank accounts in her name; (ii)$53,575 into a joint account held with her husband; (iii)$93,000 in bank cheques purchased by her husband and given to her. (f)No evidence was led by her as to any legitimate or honest source of those moneys. After a Mareva injunction in 2008, there was no evidence that Mrs Toksoz sought to explain the presence of the money. (g)During the period of the frauds she received 105 unexplained deposits. From the time of the Mareva order she received no sizeable deposit. (h)Mrs Toksoz claimed in an affidavit filed in connection with the Mareva injunction that her only source of income was social services benefits of $1,300 per fortnight for a single parent pension. 7Before turning to what the evidence disclosed and the arguments put on behalf of Mrs Toksoz, it is helpful to refer to the legal principles involved. Tracing has been said not to be a right or remedy, but a process of demonstration or proof of what has happened to property: Foskett v McKeown [2001] 1 AC 102 at 128; Robb Evans v European Bank Ltd [2004] NSWCA 82; 61 NSWLR 75 at [133]. This expression of the matter can be accepted. The legal consequences of this approach and any qualification to it, especially by reference to restitutionary principle, need not be explored. 8Money can be traced notwithstanding an inability of the follower to connect each link in the chain of accounts. Commonsense and reasonable inference play their part, especially if there is fraud involved and if there is a lack of explanation, when the circumstances cry out for honesty to be explained, if it can be. 9A number of cases reveal a sensible robust approach to the tracing of moneys from theft: R v Powell (1837) 7 Car & P 640; 173 ER 280; Harford v Lloyd (1855) 20 Beav 310; 52 ER 622; Black v S Freedman & Co [1910] HCA 58; 12 CLR 105; Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548; El Ajou v Dollar Land Holdings Plc [1993] 3 All ER 717; and see the discussion in L D Smith, The Law of Tracing (Clarendon Press, 1997) at 263 and the other cases there cited. The expression "tracing by exhaustion" is sometimes used. Where the facts as proved are sufficient to permit the inference that moneys have been received or property bought without there being an honest source available to explain the wealth and the sums or value can be seen as referable to the following party's property wrongfully obtained, such that the inference is open that the wrongfully obtained funds were the source of the wealth, the funds can be so treated. One does not need to be able to show every link in the chain of accounts from and through which the money passed. Inferences will be more easily drawn, as here, in circumstances where the funds were stolen, the person who is said to have provided the funds was one of the thieves who stole money from the follower, when the recipient has an apparent close relationship with the thief, which recipient gave no value for it, has no personal source of income and gives no explanation as to the source or circumstances of the receipt of the money or any honest source of it. 10None of this is the expression of a principle of law. It is the expression of the available approach to fact finding in the presence of fraud and lack of explanation when plainly called for. 11The critical paragraphs of the primary judge's reasons challenged by the appellant were [139]-[141] and [149]-[150] as follows: "[139]In determining whether any of the proceeds of Mr Toksoz's frauds on the Bank were received into Mrs Toksoz's accounts I must draw inferences. I have regard to the following facts: