Westpac Banking Corporation v Hilliard & Information Age Travel Pty Ltd [2001] VSC 187

Westpac Banking Corporation v Hilliard & Information Age Travel Pty Ltd [2001] VSC 187 - VSC 2001 case summary — Zoe

[4]

On 20 December 2000 the plaintiff commenced its proceedings against the defendants by issue of a writ on that day. By the plaintiff's endorsement on the writ the plaintiff claimed against the defendants damages pursuant to the Fair Trading Act (Vic) and/or the Trade Practices Act 1974 (C'th) and for fraudulent misrepresentation. By the endorsement on the writ the plaintiff alleged that it operated bank accounts in the name of Stephen Vizard, Sarah Vizard and entities in which Stephen Vizard is a director and/or shareholder, including Performing Arts Investments Pty Ltd and Performing Arts Services Pty Ltd referred to collectively as the "PAS Group". It is alleged that during the period from or about July 1991 until or about 7 October 2000 Hilliard was employed as a book-keeper by Performing Arts Services Pty Ltd and during that period and in his employment he was authorised to sign cheques up to a limit of $10,000 per cheque drawn on accounts maintained by the plaintiff on behalf of the companies in the PAS Group. It is alleged that in or about 2 February 1996 Hilliard, without the consent of the PAS Group, forwarded to the plaintiff a letter purporting to increase, from $10,000 to $50,000 per cheque, the authority of Hilliard to sign cheques and to arrange payment on behalf of the PAS Group utilising funds in the PAS Group bank accounts maintained by the plaintiff. It is alleged that the plaintiff was induced by the purported authority, as Hilliard intended it to be, to honour cheques signed by Hilliard and drawn on accounts of the companies within the PAS Group in excess of the limit of $10,000 per cheque. It is alleged that some of such unauthorised drawings were paid to and accepted by the second defendant of which company Hilliard was a director and shareholder. It is alleged that the second defendant at all times knew that it had no right to receive any of the unauthorised drawings from the plaintiff. It is alleged, that as it was reasonably entitled, the plaintiff admitted liability to the PAS Group for honouring cheques which constituted unauthorised drawings. In the alternative it is alleged that by sending the letter, Hilliard falsely represented to the plaintiff that he had the authority of the PAS Group to sign cheques in excess of $10,000 per cheque and that in respect of cheques payable to the secondnamed defendant, that it was entitled to such cheques and that acting on such false representations the plaintiff honoured such cheques.

[9]

At the time of the making of the aforesaid orders the court had before it four affidavits sworn respectively by Stephen William Vizard, David Warner, Leon Zwier and Trevor John Stanley McMahon. In his affidavit sworn 19 December 2000, Vizard deposed, inter alia, to the following matters:- Hilliard commenced his employment with the PAS Group in or about July 1991 and remained in that employment until 17 October 2000. During that time and in his employment, save for a cheque book that Vizard's wife, Sarah, operated from time to time, Hilliard alone wrote up cheques for the PAS Group and for Vizard and his wife. Hilliard was authorised by the PAS Group, Vizard and his wife to sign cheques on behalf of the PAS Group, Vizard and his wife up to $10,000 in value. He was authorised to transfer funds between accounts maintained by the PAS Group or in relation to investments with the plaintiff, however, Hilliard was never authorised to draw any cheques on any accounts of the PAS Group in excess of $10,000. Shortly after Hilliard commenced employment, Vizard wrote a letter to the plaintiff enclosing signing authorities which authorised Hilliard, inter alia, to sign cheques on specified accounts. In that letter Vizard informed the plaintiff that cash or travellers cheques had to be signed by either himself or his wife and that save for cheques being transferred between accounts or investments with the plaintiff any cheque drawn on the PAS Group accounts in excess of $10,000 had to be signed by Vizard. In July 2000 Hilliard told Vizard that he wished to resign nominating a date which was agreed upon, being that he would leave in mid-October 2001. After being so advised Vizard made enquiries and took steps which resulted in one Stephens, a certified practising accountant and former bank manager, being employed with the PAS Group. After commencing employment Stephens commenced a full reconciliation of the PAS Group assets register and in November Stephens informed Vizard that he could not reconcile some of the assets on the asset register. On examining the asset register Vizard found that there were six assets referred to in the register as being purchased in 1996 and that neither he, his wife or the PAS Group had ever purchased such assets. Those assets were entered in the asset register at a cost totalling $657,900. Following this, further enquiries were conducted by Stephens and Vizard during which Vizard found that files and documents relating to the PAS Group were missing which led him to believe that the missing bank records and other primary documents had been destroyed by Hilliard.

[92]

That which was not disclosed to the court by the plaintiff at the time that ex parte applications were made were the facts within the knowledge of the plaintiff by its employees that the transfer of Hilliard's interest in Unit 801 to Ms McCready had been made in circumstances in which Hilliard joined the plaintiff's Portfolio Service which required him to deposit with the plaintiff $500,000, which he provided in part and to the extent of $200,000 from the joint account that he held with Ms McCready and that as to the remaining part by way of a loan facility provided by the plaintiff in the sum of $300,000 to be secured over Unit 801; that Hilliard was advised by the bank officer Laughlan that to facilitate a tax deduction he should be the sole borrower; that Laughlan was advised during discussions that Hilliard and Ms McCready were interested in maintaining some equality in the distribution of their joint assets; that there had been discussion with a bank officer with respect to Ms McCready drawing $100,000 from the joint bank account to be paid into a superannuation fund with the plaintiff; that Ms McCready in a meeting with bank officers including New informed them that she wanted to have Unit 801 transferred into her name solely and that she wanted that which she referred to as a "lien" over Hilliard's investment portfolio to protect her interests and her equity; that the bank officer, New, said that Hilliard's interest in Unit 801 could be transferred to Ms McCready on the basis of "love and affection"; that between 4 September 1997 and the transfer of Unit 801 into Ms McCready's name solely, $100,000 was withdrawn from the joint bank account of Hilliard and Ms McCready and paid into the superannuation fund of Ms McCready and that the sum of $200,000 was transferred from the joint account into Hilliard's Portfolio Service; that the borrowings of $300,000 by Hilliard was secured by a mortgage given by Ms McCready to the plaintiff over Unit 801; that Unit 801 was transferred into Ms McCready's name solely; that Ms McCready took a charge over Hilliard's Portfolio Services and that an employee of the plaintiff had been informed by Ms McCready that it was her intention in the short term to pay the net proceeds of the sale of Unit 801, into her Westpac superannuation fund.

[104]

In my view from the material furnished on behalf of the plaintiff to the judge entertaining the ex parte applications brought against Ms McCready that which had been disclosed to the court relating to the property in respect of which the plaintiff sought a Mareva order against Ms McCready, Unit 801, was that until January 1998 Hilliard and Ms McCready had been joint proprietors of that property, that Hilliard had transferred his interest in the property at that time for the stated consideration of "love and affection", that Hilliard had a mortgage over the property to the plaintiff, that the property had been sold and settlement was due in February 2001. Such matters were material to the court exercising its jurisdiction as to whether a Mareva order relating to that property should be made against Ms McCready. However, that disclosed to the court failed to make a full and fair disclosure of the facts known to the plaintiff material to the applications. Had a full and fair disclosure of the facts known to the plaintiff and material to the application been made such facts would have informed the court that the transfer of Unit 801 to Ms McCready was to keep in balance the interests which she had in the property with that of her partner Hilliard; that Hilliard borrowed $300,000 from the plaintiff which was to be secured by a mortgage to be granted by Ms McCready over Unit 801, that the consideration stated in the transfer for "love and affection" had been suggested by an officer of the plaintiff; that in addition to that consideration Ms McCready had consented to the loan of $300,000 being secured by a mortgage to the plaintiff over the unit; that both Hilliard and Ms McCready had sought the advice of the plaintiff relating to their financial affairs; that they had acted on the advices given; that the plaintiff was aware that the property was being sold and that Ms McCready had informed the plaintiff of her intentions as to the disposition of the net proceeds of sale after the mortgage to the plaintiff had been discharged from the proceeds of that sale. In my view when one has regard to the facts as known to the plaintiff, but not disclosed to the judge hearing the ex parte applications, rather than it being seen that Ms McCready had become "mixed up" in the property of Hilliard it would have been seen that she was seeking to keep separate and equal her interest in property with that of Hilliard. In my view the matters known to the plaintiff and not disclosed by the plaintiff to the judge hearing the ex parte applications were material to the exercise of his discretion on the applications before him. Such failure of the plaintiff to make a full and fair disclosure of material facts known to it provides good reason for an order being made discharging the Mareva order made against Ms McCready on 19 February 2001. However, the question now to be addressed is whether when one has regard to all facts and circumstances now before the court, the Mareva order made against Ms McCready on 19 February 2001 should be allowed to continue or an order in similar terms should be made against her.

[114]

It is not necessary when reliance is sought to be had to the second category of circumstances identified in the joint judgment in Cardile, as the foundation of making a Mareva order against a person not a party to the proceedings, to establish that circumstances relevant to s. 120(1) of the Bankruptcy Act will certainly occur in the future. It is sufficient at this time in the proceedings to establish that a process such as that available under s. 120 of the Bankruptcy Act "may be available to the judgment creditor as a consequence of a judgment against ...[a] potential judgment debtor[9]]". Even if such proceedings were available in the future on the appointment of a trustee in bankruptcy of the estate of Hilliard such contribution that Ms McCready may be obliged to contribute to the funds of Hilliard would not be the whole of the net proceeds of the sale of Unit 801, as that transferred by Hilliard to her in January 1998 was his half share in Unit 801. Accordingly on the facts as known in this case, that may in the future lead to Ms McCready being obliged to contribute to the funds available to help satisfy the judgment of the plaintiff against Hilliard, when viewed from the standpoint best to the plaintiff they could not support a Mareva order being now made against Ms McCready with respect to the whole of the net proceeds of the sale of Unit 801. The present Mareva order against Ms McCready applies to the whole of the net proceeds of the sale of Unit 801 less an amount of $75,000 released to her from the proceeds of the sale. Further on the submissions made on behalf of the plaintiff they do not take into account that by agreeing to have the loan of $300,000 to be made to Hilliard by the plaintiff secured by a mortgage to the plaintiff over Unit 801 she gave valuable consideration for the transfer by Hilliard of his interest in Unit 801 to her. The submissions made on behalf of the plaintiff cannot support the continuance of the Mareva order against Ms McCready in its present form.

[118]

In evidence Ms McCready said that if the present Mareva order was discharged she would put the funds into her superannuation fund and purchasing a property in the country in which to live. I found that Ms McCready was a straightforward witness. I generally accept the evidence given by her in these proceedings. I am satisfied that when arrangements were being made for Hilliard to take advantage of the plaintiff's portfolio services and to provide to Hilliard the sum of $500,000 so as to be able to take advantage of such services that Ms McCready was concerned to protect for her benefit an equality of assets as between herself and Hilliard. Notwithstanding that she and Hilliard have been partners together for some 16 years they have not married. Ms McCready has sought to maintain her independence financially and to that extent has sought to maintain an equal financial balance between herself and Hilliard. The transfer by Hilliard of his share in Unit 801 to Ms McCready while the property was to be mortgaged to the plaintiff to secure the loan of $300,000 provided by the plaintiff to Hilliard, provided to Ms McCready some continuing equality in the property which they had jointly owned and which had not at a time relevant to these proceedings been the subject to any charge or mortgage. The security provided to the plaintiff by the mortgage over Unit 801 owned solely by Ms McCready enabled the plaintiff to discharge the debt owed by Hilliard to it on his account. Any risk, that at present may exist, that if Ms McCready recovers the net proceeds of the sale of Unit 801, she may dissipate such funds in such a way as to frustrate the process of the court, is in my view very small indeed. From the evidence given by Ms McCready she appeared to me to be more concerned about securing her own future particularly by purchasing a house in which to live. If a Mareva order was to continue against Ms McCready with respect to half the net proceeds of the sale of Unit 801 it is likely that she would be prevented from doing that which she planned, that is to acquire a house in which to live and to reasonably support herself. From the time that the plaintiff provided a financial facility to Hilliard for $300,000, which was secured by a mortgage granted to the plaintiff over Unit 801, in circumstances that Hilliard transferred his interest in the unit to Ms McCready the plaintiff has known that Ms McCready sought to provide some independent security for herself in the future. From investigations to date it can not be shown that any money which may have been misappropriated by Hilliard found its way into the acquisition of Unit 801.

At a glance

Court

Decision date

Before

Source

Judgment (129 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (2)