Artcraft Pty Ltd v Dickson - [2014] SASC 108

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
ARTCRAFT PTY LTD & ANOR v DICKSON & ANOR
[2014] SASC 108
Judgment of The Honourable Justice Kelly
15 August 2014
EQUITY - GENERAL PRINCIPLES - FIDUCIARY OBLIGATIONS - FIDUCIARY DUTY - ACCOUNT FOR BENEFITS GAINED
EQUITY - TRUSTS AND TRUSTEES - POWERS, DUTIES, RIGHTS AND LIABILITIES OF TRUSTEES - LIABILITY FOR BREACH OF TRUST - WHO MAY BE LIABLE - ACCESSORY LIABILITY
EVIDENCE - BURDEN OF PROOF, PRESUMPTIONS, AND WEIGHT AND SUFFICIENCY OF EVIDENCE - GENERALLY - CREDIBILITY AND WEIGHT - PARTY'S FAILURE TO GIVE OR CALL EVIDENCE
EQUITY - TRUSTS AND TRUSTEES - IMPLIED TRUSTS - CONSTRUCTIVE TRUSTS - KNOWING RECEIPT
DAMAGES - GENERAL PRINCIPLES - EXEMPLARY, PUNITIVE AND AGGRAVATED DAMAGES
The plaintiffs, Artcraft Pty Ltd and Artcraft (SA) Pty Ltd claim damages from the first defendant Benjamin Dickson for breach of employee’s contractual and fiduciary duties and wrongful conversion.
It was alleged that between 17 September 2007 and 18 October 2011, Mr Dickson, while in the plaintiffs’ employ, took a large quantity of the plaintiffs’ metal and delivered or had it delivered to scrap metal recyclers Ferris Metal Recyclers Pty Ltd and Trading Metals Pty Ltd, and appropriated to himself almost $500,000 from the sale of the property.
The plaintiffs seek against Mr Dickson damages for the value of the metal, estimated to be around $1,000,000 as well as an award of exemplary damages.
From second defendant Stacie Dickson, who is the wife of the first defendant, the plaintiffs claim damages on the basis of accessorial liability, namely as a knowing recipient of trust property, retaining trust property without having provided consideration and unjust enrichment.
At trial, the first defendant gave evidence. The second defendant did not.
Held:
1. Each cause of action against the first defendant is proved.
2. It is proved beyond reasonable doubt that between 2007 and 2011 Mr Dickson delivered the alleged quantity of new and scrap metal to Ferris and Trading Metals and cashed the proceeds as alleged by the plaintiffs.
3. The first defendant is liable to pay general damages assessed at the value of the new metal sold to Ferris and amounts paid to the first defendant for the scrap metal sold by him in breach of his contractual and fiduciary duties.
4. The plaintiffs are entitled to an award of exemplary damages assessed at $50,000. The conduct of the first defendant can be described as conscious wrongdoing in contumelious disregard of the plaintiffs’ rights.
5. It is proved on the balance of probabilities that the second defendant received some of the proceeds obtained by the first defendant as a result of his breach of contractual and fiduciary duties. The second defendant had the requisite state of knowledge required under the first limb in Barnes v Addy.
6. The alternative claims against the second defendant on the bases of unjust enrichment and volunteer liability fail.
7. The second defendant is liable to pay equitable compensation assessed at $59,800.
Barnes v Addy (1874) LR 9 Ch App 244; Briginshaw v Briginshaw (1938) 60 CLR 336; Gray v Motor Accident Commission (1998) 196 CLR 1; Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298; Whitfeld v De Lauret & Co Ltd (1920) 29 CLR 71; Baden v Sociéte Générale pour Favoriser le Développement du Commerce et de I’Industrie en France SA [1993] 1 WLR 509; Jones v Dunkel (1959) 101 CLR 298; Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; Bell Group v Westpac Banking Corporation (2008) 225 FLR 1; Toksoz v Westpac Banking Corporation (2012) 289 ALR 577; Heperu Pty Ltd v Belle (2009) 76 NSWLR 230; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, applied.
State of New South Wales v Ibbett [2005] NSWCA 445; State of South Australia v Treglown [2012] SASC 47; Black v S Freedman & Co (1910) 12 CLR 105; Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; Kalls Enterprises Pty Ltd (in liq) v Baloglow (2007) 63 ACSR 557; Hancock Family Memorial Foundation Ltd v Porteous (1999) 151 FLR 191, discussed.

WORDS AND PHRASES CONSIDERED/DEFINED
"conscious wrongdoing in contumelious disregard of another’s rights"

ARTCRAFT PTY LTD & ANOR v DICKSON & ANOR
[2014] SASC 108
Civil
KELLY J.
Introduction

The plaintiffs Artcraft Pty Ltd and Artcraft (SA) Pty Ltd (“Artcraft group”) claim damages against a former employee Benjamin Dickson (the first defendant) and his wife Stacie Dickson (the second defendant).
In the second statement of claim the plaintiffs allege that between 17 September 2007 and 18 October 2011 the first defendant, Benjamin Dickson (“Mr Dickson”), whilst continuing in the plaintiffs’ employ, took a quantity of metal and delivered it, or had it delivered, to Ferris Metal Recyclers Pty Ltd (“Ferris”) and Trading Metals Pty Ltd (“Trading Metals”) and appropriated to himself payments totalling almost $500,000 from the sale of that metal. The plaintiffs seek against Mr Dickson the value of the metal estimated to be around $1,000,000 and rely upon causes of action in conversion, contract and breach of fiduciary duty. In the alternative, the plaintiffs seek against Mr Dickson the value of the cash that he obtained and misappropriated, relying on causes of action of monies had and received and breach of fiduciary duty.
The claims against the second defendant, Stacie Dickson (“Mrs Dickson”) are brought on the basis of accessorial liability, namely knowing receipt of trust property under the first limb in Barnes v Addy,[1] retaining trust property without having provided consideration and as a recipient of monies on the basis of unjust enrichment.
[1] (1874) LR 9 Ch App 244.
Background
The Artcraft group are manufacturers of street furniture and road signs. Artcraft (SA) Pty Ltd is a wholly owned subsidiary of the first plaintiff, Artcraft Pty Ltd. The Artcraft group has branches throughout Australia. Artcraft (SA) is based in Adelaide. Artcraft (SA) was, until August 2006, formerly known as Heatpac Safety Signs and Equipment Pty Ltd (“Heatpac”). When I refer to the Artcraft group I mean both plaintiffs. When I refer to “Artcraft” I mean the second plaintiff.
For some of the relevant time, Artcraft operated from premises at Dry Creek, Cavan. In late 2010/early 2011, the premises moved to Port Road, Beverley upon the purchase of Allpack Signs, which operated out of the Beverley premises. Artcraft has, at all relevant times, manufactured and produced signs on site. In the course of business, the Artcraft group purchased and used raw materials including aluminium sheets and aluminium extrusions to manufacture road signs and street furniture.
Mr Dickson was an employee of Artcraft. For most of the relevant time, Mr Dickson was the production/manufacturing manager of the Adelaide branch. He was responsible for the production of signs produced by Artcraft.
Mr and Mrs Dickson married in January 2006. As at January 2007, their household included four children who were either fully or partially dependant: CC, JC (who lived with Mr and Mrs Dickson off and on), HG and DG. In August 2007 Mrs Dickson gave birth to BD, making theirs a household of seven.
Ferris and Trading Metals were each metal recyclers whose business included the purchase of scrap metals for cash. At all relevant times, Ferris’ premises were located in Burton, South Australia while those of Trading Metals were located at Dry Creek, South Australia. Michael and William Tolmachoff are and at all relevant times were directors of Ferris.
On 5 October 2011, Artcraft branch manager Donald Wild attended the yard of Ferris on the basis of hearsay information to the effect that Mr Dickson had been selling Artcraft’s metal, primarily aluminium, to that business. Mr Wild requested a list of transactions between Artcraft and Ferris and was provided with a list dating back to 1 June 2011 totalling $46,000. He was then shown a large volume of aluminium sheet metal stored at the Ferris yard, which he believed belonged to Artcraft. Mr Wild was informed that the metal had been delivered to Ferris in recent weeks. After verifying that Artcraft did not have an account with Ferris, Mr Wild reported the matter to the police.
On 17 October 2011, Mr Wild attended the Ferris yard with police and approximately 16.25 tonnes of aluminium were seized. The police informed Mr Wild of a significantly longer history of transactions between Artcraft and Ferris. The next day, on 18 October 2011, a meeting between Mr Wild and Mr Dickson took place in Mr Wild’s office at the Artcraft premises. Mr Dickson’s employment ceased. It was disputed at trial whether his employment was suspended or terminated at that time. The terms of that conversation, in particular the question whether any admission was made by Mr Dickson, was disputed at trial.
Further investigations were launched by Mr Wild in concert with the police. Mr Wild obtained, amongst other things, documents enumerating a series of transactions between Artcraft and another scrap metal business, Trading Metals. Again, Mr Wild located no records of any legitimate account between Artcraft and Trading Metals.
Although it is clear from the evidence of Detective Mark Rowe that a police investigation was conducted, I was informed by counsel for the plaintiffs that criminal proceedings were ultimately discontinued.
The plaintiffs’ pleadings
The plaintiffs sued Mr Dickson, Mrs Dickson and Ferris. The second statement of claim alleges that between 17 September 2007 and 18 October 2011 Mr Dickson, without authority, instructed employees of Artcraft to cut up new sheets of aluminium and aluminium extrusion (“new metal”) and collect metal offcuts and scrap metal (“scrap metal”) for delivery to Ferris. It alleges that during the relevant period Mr Dickson himself delivered the new metal and some of the scrap metal to Ferris and also instructed employees of Artcraft to deliver some scrap metal to Ferris. It alleges that Mr Dickson himself delivered scrap metal to Trading Metals and also instructed Artcraft employees to do so.
The second statement of claim alleges that between 17 September 2007 and 18 October 2011 Mr Dickson sold and received payment for the new and scrap metal deliveries. All payments were either received in cash by him personally, or were provided to him by the respective Artcraft employees. With the exception of one payment of $1,729.20 which was deposited into Artcraft’s account, Mr Dickson is alleged to have appropriated to himself all cash received directly or indirectly from Ferris and Trading Metals. Those payments are enumerated in annexures A and B of the second statement of claim. It is alleged that Mr Dickson received and appropriated to himself payments to Artcraft from Ferris in the sum of $473,830.16 and from Trading Metals in the sum of $32,606.67. The total receipts alleged to have been misappropriated by Mr Dickson is $506,436.83.
As against Mrs Dickson, the second statement of claim alleges that between September 2007 and October 2011 some or all of the cash paid directly or indirectly by Ferris and Trading Metals to Mr Dickson was then paid to Mrs Dickson or to her benefit.
On 19 December 2013 the plaintiffs discontinued proceedings against Ferris. A deed of settlement was executed on 3 December 2013 pursuant to which Ferris agreed, inter alia, to pay a settlement sum of $253,000.
The issues
Three key issues arise for determination in this matter. The first is whether Mr Dickson is responsible for the theft of Artcraft property. The second is, if it is proved that Mr Dickson was responsible for the theft of Artcraft property during the relevant period, then what is the measure of loss which Artcraft has suffered as a result of Mr Dickson’s theft. The third, if the first two issues are proved as against Mr Dickson, is whether Mrs Dickson is liable to repay any cash and benefits proved to have been received by her as a result of Mr Dickson’s theft.
Liability of Mr Dickson
I deal first with the issue whether the plaintiffs have proved that Mr Dickson himself delivered new and scrap metal to Ferris and Trading Metals and/or instructed Artcraft employees to deliver them between September 2007 and 18 October 2011, as alleged in paragraphs 17 and 18 of the second statement of claim, and further, whether Mr Dickson received proceeds totalling approximately $473,830.16 from Ferris and $32,606.67 from Trading Metals in the relevant period.
To prove these allegations the plaintiffs called the director of the Artcraft group, Rodney Wellington, a number of Artcraft employees, directors of Ferris, Michael and William Tolmachoff, office manager of Trading Metals, Maria Regidor and a forensic accountant, Peter Holmes. I shall deal first with the evidence of the Artcraft employees.
Donald Wild
Mr Wild was the branch manager of Artcraft for approximately two and a half years between 2010 and 2013. Acting on information received from an employee at the Beverley premises named Richard Fleming, Mr Wild went to Ferris on 5 October 2011. In a shed at the rear of the premises he was shown a quantity of material, later estimated to weigh approximately 16 tonnes, which he identified to be the property of Artcraft. He took photographs of that material and asked one of the directors of Ferris, William Tolmachoff, to hold on to the material as he believed at that stage it had been stolen. Mr Wild, who at that time was not aware of any dealings between Ferris and Artcraft, was advised that there were no payments from Ferris recorded on the Artcraft system. He then, on 17 October 2011, contacted the police and the metal in the possession of Ferris was subsequently impounded.
On 18 October 2011 Mr Wild had a conversation with Mr Dickson, the terms of which are very much in dispute.
Although Mr Wild conceded that he was stressed during the conversation he maintained that he could distinctly recall Mr Dickson saying in response to his questioning that he, Mr Dickson, had “made a mistake”.
Mr Wild, who said that he had previously enjoyed a good relationship with Mr Dickson, was flabbergasted by that comment, which he took to be an admission. He described Mr Dickson’s demeanour during that conversation as deflated and withdrawn.
It is significant that key elements of the conversation recounted by Mr Wild were later confirmed by Mr Dickson in evidence, although Mr Dickson denied ever acknowledging the theft of the property or saying that he had made a mistake. However, important elements were not disputed by Mr Dickson. For example, he did not dispute that Mr Wild opened the conversation by saying that $46,000 had been paid to a particular person, implying that person was Mr Dickson, and he agreed that Mr Wild raised the issue of why Artcraft’s aluminium purchases had been so much higher than other branches of Artcraft. Mr Dickson agreed that in this context he did say that if these things said by Mr Wild had occurred, it would be theft. However, Mr Dickson denied ever admitting the theft or saying words which had the effect of admitting that he was responsible.
The conversation on 18 October 2011 was not recorded. Mr Wild in cross-examination recounted the conversation with Mr Dickson as follows:[2]
[2] T191–192.
Q.Things that occur at that meeting you may not properly recall, that's correct.
A.Again, certainly. The general conduct of the meeting and the results of it, I am very aware of and certain parts of that meeting are burned into my memory.
Q.Especially the bit which is a bit like the old police verbal: you got me fair to right – govern [sic]. That's what happened according to you, he just rolled over, blurted it all out and you got what you wanted which was an admission, is that it. He just rolled over.
A.It certainly wasn't what I wanted. As I said, I still held some hope that it could all be resolved. However Ben offered that he had made a mistake during the conversation and as he was saying that he, you could almost see the wind going out of the guy, he became deflated and, I guess, very withdrawn into himself at that point.
Q.The point is you can't properly remember all of the events that occurred on the day.
A.I distinctly remember me saying –
Q.Yes or no, 'I can or cannot remember the conversation'.
HER HONOUR: Don't verbal the witness. He can answer it how he wants to. Don't interrupt him in his answer.
A.I distinctly remember me presenting the transaction or discussing the transaction history with Ben and saying 'Can you offer any form of explanation', again hoping that he could and he offered that he had made a mistake. At that point I was, I guess, somewhat flabbergasted.
An extract from an affidavit of Mr Wild dated 26 October 2011 deposing to the conversation was later tendered at the trial. Given that Mr Wild’s account of the conversation was made just over a week after the conversation, it is the best evidence of the conversation which Mr Wild had with Mr Dickson on the morning of 18 October 2011. Moreover, the terms of the conversation, with the exception of the vital admission said to have been made by Mr Dickson, and the way in which the conversation unfolded, is generally consistent with the account given by Mr Dickson in his oral evidence.
It is convenient to set out the relevant section of that affidavit:[3]
[3] Exhibit D29.
At approximately 9am on 18 October 2011, I called Mr Ben Dickson into my office for a meeting. Mr Dickson and I had a conversation to the following effect:
Me:
“Do you know why Artcraft’s aluminium purchases are so high, compared with the number of signs Artcraft has sold or manufactured?”
Mr Dickson:
“I have no idea.”
Me:
“Do you have any knowledge of scrap metal being sold to Ferris Metal Recyclers for the total amount of $46,000?”
Mr Dickson:
“I have no idea.”
Me:
“Ferris Metal Recyclers’ staff have informed me that since June 2011 they have purchased approximately $46,000 of Artcraft aluminium materials. The Ferris staff have also indicated to me that you were the person responsible for those sales.
“Can you show me anything which evidences the Ferris payments being receipted into the Artcraft accounts system?”
Mr Dickson:
“No, I don’t have any receipts which show that.”
Me:
“From what the Ferris staff have told me, and having looked at the Artcraft accounts records, I think that you have been taking both scrap and new metal from Artcraft and selling it to Ferris Metal Recyclers and keeping the money for yourself.”
Mr Dickson:
“Yes, I have done that. I have made a mistake.”
Me:
“In my view these actions amount to theft.”
Mr Dickson:
“Yes, that is theft.”
Me:
“Is there anything you would like to say or add to the information I have that might explain your actions?
Mr Dickson:
“No.”
Me:
“Was there anyone else involved in this with you?”
Mr Dickson:
“No, I acted alone.”
Me:
“Please hand over your work mobile phone, work car keys, building keys and all other property belonging to Artcraft immediately. You are now suspended without pay, pending the completion of the Artcraft and South Australian Police investigations.
Although there were some inaccuracies in Mr Wild’s evidence about some other matters, I am satisfied that his account of the conversation with Mr Dickson on the morning of 18 October 2011 is in essential respects accurate. It follows that I am satisfied that Mr Dickson did make an admission in response to Mr Wild’s suggestion that it was him who had been taking metal to Ferris and said that he had made a mistake.

One inaccuracy in Mr Wild’s evidence related to a statement he made to the police on 5 October 2011. When that statement was put to him in cross-examination he acknowledged that, contrary to his evidence in court, he had not told police that Mr Tolmachoff described the appearance of the man named “Ben” to him. His explanation for that inconsistency was understandable in light of the time which has elapsed since these events in October 2011 and the date when Mr Wild gave evidence in these proceedings.
Mr Wild was also challenged about his purported identification of the product found in the shed at the Ferris premises as being property belonging to Artcraft. He said that he instantly recognised the product as Artcraft’s just by looking at it. Though he acknowledged that the pallets and the wrapping were of a generic type, nevertheless he did not resile from his identification of the material as product consistent with material cut at the Artcraft premises.
Mr Wild’s evidence about the practices and procedures at Artcraft’s premises at Cavan and later at Beverley was important in understanding how it was that a person might have the opportunity to remove such a quantity of metal from his employer’s premises over such a prolonged period of time. Mr Wild explained that the purchasing procedures at Artcraft were such that a range of people were able to make purchases within the system. The demand for material was driven by the production manager who, at the relevant time, was Mr Dickson.
Mr Wild did acknowledge that, while the point of the Artcraft compliance requirements implemented in accordance with international compliance standards was to ensure that everything was tracked through the factory, the lack of a perpetual inventory system meant that it was never going to be possible to reconcile product which had disappeared, by reference to sales orders and purchase orders.
Mr Wild was criticised for not conducting a more thorough investigation of Artcraft’s records at the time when the alleged theft was uncovered. It was said that if he had done so it would have been possible to reconcile purchases of aluminium with sales orders, thereby enabling him to accurately identify what happened to material which had been purchased – especially in the months between July and October 2011. Much attention was given to this period of time and there was detailed cross-examination of both Mr Wild and later Mr Wellington with the view to establishing that the records of Artcraft did not reveal that Artcraft had lost any material during the relevant period.
I deal with this topic in more detail elsewhere in these reasons. Suffice to say at this stage that Mr Wild and Mr Wellington gave generally consistent evidence that Artcraft did not have a perpetual inventory system and that it was therefore not possible to identify with precision the actual quantity of stock misappropriated by reference to the records. In any event, as Mr Wild pointed out more than once, there was no real need to do so as Mr Dickson’s actions were revealed by the invoices in the records retained by Ferris and Trading Metals and the Tolmachoff brothers’ identification of Mr Dickson as the person who in the main supplied the material to them and to whom the cash was paid.
The evidence of Mr Wild, Mr Wellington and others was that Mr Dickson was a trusted employee of Artcraft. Mr Wild regarded him highly and believed he was doing “a pretty good job”. I do not find it surprising that Mr Wild did not notice anything was amiss. When he first arrived in Adelaide in November 2010, he had not been exposed to the same processes in the previous position he held in Townsville. However, he said that once he began to understand the business in detail he became concerned about the cost pressures on the Adelaide business and Artcraft’s apparent inability to compete effectively in the market place because of those pressures. This process took some time.
A number of other matters pertaining to the day to day operations of the business at the time were put to Mr Wild with a view to showing that Mr Dickson could not have stolen such a large volume of material in the manner alleged. For example, it was put to Mr Wild that the “ute register” was kept up to date during his tenure, with the clear implication being that all of Mr Dickson’s alleged trips to Ferris would have been revealed on that register. Mr Wild did not agree with that suggestion and commented that he did not personally monitor the ute register on a regular basis. He believed that the policy was not complied with in its entirety.
Mr Wild explained the production process that was in place at Artcraft at the relevant time. Although it was company policy that a work order would accompany each customer order through the production process and that no work was to be done without a written work order, Mr Wild nevertheless acknowledged that he had occasion to warn people both formally and informally about conducting work without a written order.
He was questioned extensively about the company policies and practices, particularly with regard to the policy empowering every employee to refuse to do a job if they did not have the proper paperwork and order number. He agreed in cross-examination that every employee had the power to so refuse. In the end, however, I formed the view that rather than describing the actual process, Mr Wild described the process as it should have been, particularly with regard to the issue of employees performing work without a production order. Mr Wild’s evidence on this topic was not supported by either Mr Stone or Mr Dewhirst who both testified that they did work without a production order at Mr Dickson’s request on numerous occasions. Moreover, Mr Stone did not recall being told that employees in the production process were entitled to stop work until an order number had been provided.
In assessing Mr Wild’s evidence on this topic, I have taken into account that by his own admission he was embarrassed that such a volume of material could have been taken to the Ferris shed “under his watch”, as he put it. I also bear in mind that when Mr Wild arrived to take up the position at Artcraft in November 2010, Mr Dickson had been at Artcraft for many years. Mr Wild recognised that Mr Dickson was a key employee who was highly regarded by the director of Artcraft, Mr Wellington. He was also by his own admission on a steep learning curve when he took up the position of branch manager in November 2010. That challenge was heightened by the fact that Artcraft was at that time moving from Cavan to Beverley, Artcraft having recently purchased another business, Allpack Signs.
In all of the circumstances, having seen and heard from both Mr Dickson and Mr Wild, I have no difficulty in understanding how it was that Mr Dickson was able to remove such a large volume of metal under Mr Wild’s watch.
Perhaps Mr Wild came closest to explaining this himself when he said:[4]
Q.I am having trouble reconciling your evidence today with your evidence yesterday that the equivalent of a truck load or a semi-trailer load of pallets went out the door without you realising it.
A.I personally find it difficult to believe myself that that volume of material cut up in such an unconventional manner and handled in such an unconventional manner was able to be moved out of the factory. I – at the very least there is – there’s – I guess some failings on my behalf for not being on the factory floor enough to see that sort of thing happening, but also it seems that my employees didn’t feel empowered enough to put their hand up and say “hey something strange is going on here”.
Q.If your evidence today is correct, there would be paperwork to track every despatch from that factory whether it was to Ferris Metals or anywhere else.
A.There should be unless somebody was contravening the system.
[4] T141.
I find that Mr Wild was an honest witness who gave evidence to the best of his recollection. Some aspects of his evidence, as I have already noted, were inaccurate, however on the important aspects of his evidence, in particular, the conversation he had with Mr Dickson on 18 October 2011, I accept his evidence and where it conflicts with Mr Dickson’s account, I prefer Mr Wild’s.
Barry Stone
Mr Stone was a long-term employee of Artcraft, having worked at Heatpac when it operated from Mile End, later at Cavan and finally at Beverley. He worked as the guillotine operator throughout and later, when the operations moved to Beverley, there was a second guillotine operator as well. Mr Dickson was his supervisor. Like the other witnesses, he said he got on well with Mr Dickson.
Mr Stone’s evidence was that there were occasions going back to 2007 when he was directed by Mr Dickson to perform work pursuant to verbal orders. He then cut the aluminium and put it on a pallet. On occasions when he spoke to Mr Dickson about it, he was told that Mr Dickson had received an email from the Melbourne office. Mr Stone’s understanding was that these orders were in the main at the request of the Melbourne office. Although he knew it was against the rules to do work without a production order, he nonetheless did the work because Mr Dickson was his supervisor. He said that when the oral requests from Mr Dickson first started it happened about once a fortnight, but later it became more frequent – about once a week. This happened at both Cavan and Beverley. Tellingly, Mr Stone said that verbal orders of this nature ceased as soon as Mr Dickson left the business in October 2011.
Mr Stone said he never knew what happened to the aluminium he cut for Mr Dickson. Usually Mr Dickson took it away in the truck. Sometimes Mr Stone cut up to four, five or six different types at any given time. Mr Stone said that quite often another employee, Tom Nicholas, took scrap metal away but it was Mr Dickson who took the pallet load. Mr Stone estimated that he cut up approximately two to three tonnes of sheet metal a month at the oral request of Mr Dickson.
Paul Dewhirst
Mr Dewhirst worked a few metres away from Mr Stone and was next in the chain of the process. His task was to cut aluminium extrusion (“street blades”). He said that while he was employed by Artcraft he received verbal instructions from Mr Dickson to cut street blades to one metre long. He said that it was usual for a production order to accompany each task performed. However, when asked to cut street blades by Mr Dickson, he was told that an email had come from Melbourne requesting a number of street blades to be cut at a metre long, placed on a pallet and strapped on. He never received a written production order for those jobs. He said that Mr Dickson never explained why there was no production order. Mr Dickson just said that a fax had come through from Melbourne requiring the pieces. Occasionally the pallet would remain stored at Artcraft for a few days, but generally it would be placed on a ute and taken the same day. He could not recall who forklifted the blades onto the ute, but said sometimes it was Mr Dickson and two or three others whose names he could not recall.
The frequency of the verbal orders he received from Mr Dickson at Cavan ranged from approximately once a week to sometimes two and occasionally three times a week. He said the process took him approximately three to four hours. While Artcraft was at Cavan, Mr Dewhirst was unaware of any direction as a matter of policy that he was not to perform any work without a written production order. He also said he saw Mr Stone doing work without a written production order more than once. He did not believe it was as regular as the street blades that he was cutting but was “regular enough”.
While Artcraft was at Beverley, Mr Dewhirst was aware of a requirement that work not be done without a production order. He said he cut one pallet of street blades pursuant to a verbal order from Mr Dickson but it was a “once off”.
Thomas Nicholas
Mr Nicholas is a long-term employee of Artcraft having been employed there for seven years. The majority of the work performed by Mr Nicholas at Cavan involved installation jobs outside of the premises. Mr Dickson was his supervisor and the person to whom he reported until Mr Dickson left Artcraft. Mr Nicholas said he took scrap metal from the premises at Cavan and later a little bit from the premises at Beverley, always on the instructions of Mr Dickson. His first delivery of scrap metal was to Sims Metal which was near the Artcraft premises. He said that at some point after this, Mr Dickson came up with the idea of going to Ferris because they had a better rate.
Mr Nicholas acknowledged that it was his signature on the recipient created tax invoice[5] agreement which constituted the initial contract between Ferris and Artcraft. Mr Nicholas had no memory of and was not able to explain the context in which he had signed that document. All he could say was that, if it was handed to him when he went to receive cash for the scrap metal, then he would have signed it upon request – believing that it was the appropriate procedure.
[5] Exhibit P1, page 274.
Mr Nicholas said that sometimes they would take scrap metal and other aluminium back from whatever “bush jobs” they had been performing. Usually two of them went to Ferris. They would forklift the whole load onto a truck or a ute and drive it to Ferris. Mr Nicholas estimated the time that it would take to drive from Ferris to Artcraft’s Cavan premises at about 45 minutes. I shall say more about the evidence as to the timing of these trips in another context in these reasons.
Mr Nicholas said that the product was weighed and then they received the paperwork, walked into the locked office at Ferris and waited for the paymaster to hand over the cash and a receipt. He said that happened on every occasion. As soon as he returned to the Artcraft premises he gave the cash to Mr Dickson and insisted that Mr Dickson count the cash in front of him. The procedure which Mr Nicholas described for unloading the product at Ferris was generally confirmed by the evidence of the two Tolmachoff brothers.
Mr Nicholas said he would only go to Ferris when directed to do so by Mr Dickson. It usually happened on a Friday and he liked doing that trip because basically that was the only job he would have to do as they only worked for half a day on Friday. He estimated that he received anywhere between $700 to $800 and up to $2,000 or $2,500 for deliveries.
In cross-examination he was asked to estimate how many times he had delivered product to Ferris. Mr Nicholas was unable to say, but estimated that it might have been about 30 times. I shall say further about this evidence in the context of the recipient created tax invoices from Ferris[6] and the telephone records of Mr Dickson.[7]
[6] Exhibit P1, page 274.
[7] Exhibit P1 USB 31 “Telephone records for Ben Dickson”.
Nhu Dinh
Mr Dinh started working for Allpack Signs in 2003. That business was later sold to the plaintiffs, and Mr Dinh was transferred to Artcraft. His main work was as a sign installer. He received orders from Mr Dickson in relation to his daily duties. Mr Dinh described occasions when Mr Dickson asked him to get a pallet from the guillotine operator (Mr Stone), load it onto a ute and tie it up. He recalled that such a pallet was stacked with ally pieces about “1200 square and 600 high”. The material had been cut in half. He put it on the ute but he did not drive that ute anywhere. He did not see where it went. He recalls being asked to do this three or four times. On about two or three occasions he also saw Mr Dickson with a ute or a truck stacked with pallets. When Mr Dinh offered to take it, Mr Dickson said no and that it was going to be powder coated.
Conclusion as to the Artcraft employees
The evidence of the factory employees of Artcraft, namely Mr Stone, Mr Dewhirst, Mr Nicholas and Mr Dinh is important. Each of those employees were responsible to Mr Dickson. When asked whether he had any suspicions about what was occurring, Mr Dewhirst said “You don’t question your boss if you want to keep your job. You just do as you’re told”. Neither Mr Nicholas, Mr Stone, Mr Dewhirst nor Mr Dinh thought much about the requests they received from Mr Dickson. They simply accepted them as orders from their boss. As Mr Nicholas said in answer to a similar question in cross-examination:[8]
Q.When you were taking scrap material from either the Beverley site or the Cavan site, did it ever occur to you that there was anything suspicious about taking the material.
A.Slightly, but like I said, the only solace I got was that I received receipts and I felt comfortable with that, because I felt comfortable, it was recorded and if anyone had a problem with it, it could be traced. So I did not have a problem with it.
[8] T335.
There was a somewhat half-hearted challenge to Mr Nicholas’ evidence that he handed over cash on a regular basis to Mr Dickson; however there is no basis to reject Mr Nicholas’ evidence and in my view he was plainly telling the truth.
The only criticism which was made of the evidence of Mr Stone was that his evidence was said to be inconclusive. His evidence about the frequency of Mr Dickson’s verbal instructions and the quantity of material which he was asked to cut was said to be vague and the fact that he did not notice anything amiss was said to detract from the probative force of his evidence.
Similar criticisms were made of Mr Dewhirst’s evidence. Mr Dewhirst said he was not suspicious; he considered the verbal orders he received from Mr Dickson were an ordinary straightforward job. In addition, Mr Dewhirst’s evidence was said not to be supported by the extrusion ledger. Mr Dinh’s evidence was said to be neutral.
I have considered the criticisms made of each of these employees’ evidence. It is correct that none of them really seemed to notice that anything was amiss; however it needs to be borne in mind that each of these employees were in a subordinate position to Mr Dickson and took orders from him. Their evidence, to my mind, underscores the status and power which Mr Dickson enjoyed in the Adelaide operation of Artcraft. Precisely because these orders came from their boss as far as they were concerned, no further questions needed to be asked by the employees. There is nothing unusual, startling or implausible about that.
Nothing in the evidence of Mr Stone, Mr Dewhirst, Mr Nicholas or Mr Dinh is inconsistent with the allegations made on the plaintiffs’ case and indeed much of their evidence supports the evidence of the Tolmachoffs as to Ferris’ dealings with Artcraft between 2007 and 2011. As to the Artcraft employee witnesses, I have no hesitation in accepting that each of them were witnesses of truth giving evidence to the best of their recollection about events which occurred over a long period of time between 2007 and 2011.
The evidence of two other witnesses is highly supportive of the evidence of the plaintiffs’ employees that they were instructed to cut up metal and on occasion take metal to Ferris.
The Tolmachoffs
Michael and William Tolmachoff are directors of Ferris, a business which has been operating for about 15 years out of premises at the corner of Heaslip and Waterloo Corner Roads at Burton. The business pays cash for scrap metal.
The plaintiffs tendered evidence of all recipient created tax invoices[9] issued by Ferris to Artcraft between 17 September 2007 and 12 October 2011, together with a payment summary of all the accounts relating to Artcraft during the relevant period.
[9] Exhibit P1, pages 261-273.
During the relevant period between 2007 and 2011, it was both Michael and William Tolmachoff in the main who conducted the business from their main office. Both Michael and William Tolmachoff gave evidence in these proceedings.

Michael Tolmachoff explained the practice which was followed during the relevant period when persons delivered scrap metal to their business. First the metal was weighed and the customer was given a document on which information about the scrap was recorded, including a description of the metal and its weight. The customer then delivered that docket in person to either Michael or William Tolmachoff after obtaining access to the office by way of a security system. The information contained on that docket was then entered into the computer by one of the two Tolmachoffs and a recipient created tax invoice was generated and then given to the customer together with cash. If the customer is entitled to be paid GST then a standard form known as a recipient created tax invoice agreement was required. Also, a customer card was established in relation to each customer on which the customer’s details were recorded and kept on a computer. The relevant customer card, somewhat misleadingly described as “buying quotation”, was tendered.[10] It contained a contact mobile telephone number which was Mr Dickson’s mobile telephone number during the relevant period.
[10] Exhibit P3.
Michael Tolmachoff identified Mr Dickson as the person named Ben who attended at Ferris regularly with deliveries from Artcraft. He often engaged in small talk with Ben in the office area while the docket was being created. He said that 90 to 95 per cent of the time it was Mr Dickson who delivered materials to Ferris.
Michael Tolmachoff’s evidence is in direct conflict with the evidence of Mr Dickson who claims never to have met Michael Tolmachoff.
Evidence was led from Detective Rowe, who was the investigating police officer at the time when the criminal investigation commenced. He said that Michael Tolmachoff had identified Mr Dickson in a photographic array he conducted on 28 May 2012. There was no dispute that the photograph identified by Michael Tolmachoff was of Mr Dickson.
The first Michael Tolmachoff realised of any problem with the Artcraft deliveries was when Mr Wild arrived at the premises of Ferris on 5 October 2011. On that day he gave Mr Wild a purchase summary which showed cash paid to Artcraft between the months of June 2011 and 5 October 2011.
He said it was convenient to accumulate approximately 18 to 20 tonnes of aluminium cuttings for shipment on shipping containers which accounts for the large volume (approximately 16 tonnes) of material observed by Mr Wild on 5 October 2011.
Counsel for Mr Dickson criticised the evidence of both Tolmachoffs on the basis that the two witnesses had conferred over the evidence they would give. Further criticism was made of the evidence of identification by Michael Tolmachoff of Mr Dickson as the person Ben. It was said that that identification was unsafe as it was not based on Michael Tolmachoff’s own recollection but on his brother’s.
The question of collusion was put to this witness directly. He responded:[11]
Q.You are identifying him when you weren’t even there. Is that correct.
A.No, I was there for quite a few of those transactions. My brother was there for the other ones, and since we do work in the same office and we do talk, the conclusion that we have come to is that it was Ben Dickson because Ben Dickson was the one he had the dealings with, Ben Dickson was the one that I had dealings with, but no I was not present for each and every single transaction.
Q.But what you’re being asked is to identify the transactions about which you have person knowledge.
A.Mm-hmm.
Q.Have you and your brother come to an agreement as to the evidence you are going to give today.
A.No.
[11] T612-613.
Michael Tolmachoff confirmed that an email sent to Ben requesting him to manufacture a sign was sent by him and that he had the dealings with Ben about that sign.
Mr Tolmachoff was quite candid and admitted that he was concerned after Mr Wild’s visit to Ferris and that is presumably why they consulted a lawyer. He agreed that during settlement negotiations with the plaintiffs he was asked and agreed to give evidence in these proceedings.
Michael Tolmachoff claimed never to have met Tom Nicholas; however he was adamant that he knew Ben. He said he always came in with an Artcraft logo on his shirt and the name Ben was inscribed on that shirt.
I turn now to the evidence of William Tolmachoff. He also gave evidence about the creation of the recipient created tax invoice agreement.[12] While William Tolmachoff’s evidence that he gave that particular document to Mr Dickson to sign may not necessarily be accurate, there is no reason to disbelieve his evidence that Ben had enquired about prices when he first met him. That accords with the evidence of Mr Nicholas who said that at some stage on Mr Dickson’s instructions he started taking scrap metal to Ferris because Mr Dickson said Ferris’ prices were better.
[12] Exhibit P1, page 274.
Both William and Michael Tolmachoff said that Ferris’ scrap metal bins were kept on site at Artcraft. I do have some doubt about whether Ferris ever did have any scrap metal bins in situ at Artcraft; however the records show that the person who William and Michael Tolmachoff identified as their subcontractor (“Joe”) delivered scrap metal from Artcraft to Ferris on at least three occasions. The evidence is unsatisfactory as to the issue of the bins. It seems plain enough that William Tolmachoff at least has assumed on the basis of the buying quotation document,[13] which records two bins on site, that in fact those two bins went on site. On any view of the matter, the deliveries by the subcontractor Joe were at best sporadic, there being only three recorded deliveries over that five year period. If the Tolmachoff brothers have given inaccurate evidence about the bins on site, that does not detract generally from the essential aspects of their evidence in relation to their dealings with Mr Dickson.
[13] Exhibit P3.
I accept William Tolmachoff’s evidence that he never physically went to the Artcraft premises. This evidence is in direct conflict with the evidence of Mr Dickson who says that it was William Tolmachoff who came to Artcraft soliciting business. There is in fact no evidence which I am prepared to accept that either William or Michael Tolmachoff went to Artcraft at any stage.
The evidence of William Tolmachoff, similar to his brother, was that 99.9 per cent of the time it was Ben who delivered the material to Ferris. When pressed, he said he could only recall two occasions when it was not Ben.
This witness was also questioned about collusion and responded as follows:[14]
Q.Did you come to an agreed position as to who delivered the material.
A.We didn’t discuss that, we knew who brought the material. We never strategized about it, no.
[14] T701.
William Tolmachoff was clear that he knew who the person Ben Dickson was from the first time he gave his business card.
The only aspect of the evidence of Mr Dickson not in conflict with the evidence of the Tolmachoffs is that he did meet one of them in relation to the delivery of the sign. There is a possibility that Mr Dickson may have been mistaken in his identification of William Tolmachoff as the man he met on two occasions. I accept the evidence of the Tolmachoffs that both of them had dealings with Mr Dickson. In these circumstances I consider it likely that Mr Dickson is confused as to which brother he dealt with in relation to the sign.
I accept the evidence of both Michael and William Tolmachoff. Even though, as I have commented, some aspects of their evidence may not be accurate, particularly in relation to the placement of their bins at Artcraft and about which I can make no finding, nevertheless on the essential aspect of their evidence which concerns their respective dealings with Mr Dickson, I find the Tolmachoff brothers to be truthful and reliable witnesses. Their evidence that it was Mr Dickson who attended on most of the 300 occasions identified in the Ferris records between 2007 and 2011 is in direct conflict with the evidence of Mr Dickson who said he never went to Ferris to deliver any metal and never instructed Mr Nicholas or any other employee to do so either.
When assessing the evidence of the Tolmachoff brothers, I have taken into account the fact that Ferris was originally joined as third defendant in the action. The plaintiffs discontinued their claim against Ferris after Ferris agreed to pay the plaintiffs the sum of $253,000 and signed a deed of settlement to that effect. Michael Tolmachoff acknowledged that during settlement negotiations they had been asked if they were prepared to give evidence and agreed to do so. None of this gives me any concern about any possible motive to lie. Neither of the Tolmachoffs had anything to gain from giving evidence in this matter.
There is evidence which tends to confirm the truth and accuracy of both Tolmachoff brothers’ identification of Mr Dickson as the person who made most of the deliveries of metal to Ferris. That evidence comes from the telephone records of Mr Dickson himself during the relevant period. I will turn to that evidence shortly in the context of Mr Dickson’s evidence.
Rodney Wellington
Mr Wellington is a director of the Artcraft group with over 40 years experience in managing small to medium sized companies predominantly in metal manufacturing. He has worked with the Artcraft group since 1996 and in February 2002 he purchased a 50 per cent share in the company. Consequently, Mr Wellington has extensive experience with manufacturing processes and the purchasing of raw materials such as aluminium and other materials for sign making and sales.
In his position as executive director of Artcraft Pty Ltd he held direct responsibility for other branches of the plaintiff company in Melbourne and Sydney and between 2004 and 2010 in relation to the Adelaide branch of the plaintiff company.
Mr Wellington gave evidence about the general way in which Artcraft operated its business. He also explained the process whereby Artcraft was able to identify all relevant purchases of aluminium sheet metal and extrusions between 2007 and 2011.
Importantly, Mr Wellington described the inventory system operating at Artcraft at the relevant time. His evidence on this topic was consistent with Mr Wild. He said that the Artcraft group does not have a perpetual inventory system anywhere in its branches in relation to the purchasing of raw material. For this reason it was not possible for the plaintiffs to identify with precision the amount of raw stock used in production for any given period.
Mr Wellington also confirmed that for many years “the Adelaide branch was run by Mr Dickson … it was very settled, it was very predictable”.[15] He was a trusted employee, especially in relation to the day to day operations of the branch in respect of which Mr Wellington never became involved.
[15] T531.
The plaintiffs tendered through this witness the bulk of the invoices, schedules and other raw data from which the forensic accountant Mr Holmes later calculated by four different methods the likely loss to the company from the theft of the new and scrap material sold by Mr Dickson to Ferris. I do not propose to descend into any detailed analysis of the evidence of Mr Wellington. His experience and expertise was never really challenged. It is true that during his cross-examination, Mr Dickson’s counsel identified some information in the plaintiffs’ records which was deficient as far as the calculations for quantifying the loss to the company were concerned. That necessitated an adjournment during which Mr Wellington went back to Melbourne, checked his records and later returned to Adelaide for further cross-examination. The deficiencies were rectified and the calculations as to the value of lost metal were altered accordingly.
Mr Wellington was subjected to protracted cross-examination about Artcraft’s business and about the inventory system and the stocktakes conducted at Artcraft with a view to establishing that, because the lost metal could not be accounted for by the plaintiffs’ inventory records, it could therefore be inferred that the plaintiffs suffered no loss. I pause here to mention that the main thrust of the expert opinion from Mr Wiese is to that effect.
It is evident on the face of Mr Wiese’s report and later from his oral evidence that he and Mr Holmes were in fact like two ships passing in the night. Each was asked to undertake a different enquiry. Mr Wiese was essentially asked to conduct a forensic examination with a view to establishing whether the records established any loss. The Artcraft group did not undertake any such forensic accounting enquiry.
The apparent purpose of cross-examination of Mr Wellington was to establish that bad management and bad financial control in the operation of Artcraft led to the plaintiffs being unable to prove that they had in fact lost any raw material during the relevant period. A typical response during cross-examination is demonstrated in the following question and answer:[16]
Q.Wouldn’t it be of concern to at least ensure, at least broadly speaking, that the amount of raw material you were ordering in was translated into product that was going out.
A.Well, that would be very nice if it could do that but the nature of our business is that it’s very, very difficult, very time consuming, very costly. We estimated to have that sort of system throughout our business we would need to put at least one person, extra person in all the branches. So that then had a cost of $300,000-350,000 a year, so then we had to make a judgment as to whether that was worth it or not, and the judgment was at the time that it wasn’t a – it was a – we thought that our management of the business, with the people inside various businesses, their management, which was it was adequate control for what we required; in other words, we trusted the people.
Q.Do you agree that the way that the business is run leaves it open to abuse.
A.Absolutely.
[16] T380.
Importantly, Mr Wellington did confirm that the plaintiffs had concerns about the deterioration in the gross margins for the Adelaide branch for the year 2010. He said that they realised there was a problem with the Adelaide branch but at the time it was attributed to market conditions.
In the end, notwithstanding the protracted cross-examination of Mr Wellington directed to the alleged deficiencies in the plaintiffs’ accounting system, nothing of substance came from that cross-examination. During the course of Mr Wellington’s cross-examination, the first defendant made a sustained attack upon his credit. It was said that his evidence about the preparation of financial reports for the 2011 year was evasive and contrived.
To the contrary I find that Mr Wellington’s explanation about that made plain common sense. As far as the large scale fraud which was revealed in October 2011 is concerned, Mr Wellington said it was not necessary to include the value of the stolen metal in the financial records for that year as the loss had already been accounted for in previous years and there was no need to re-characterise the accounts.
In my view, the approach adopted by Mr Wellington after he became aware in October 2011 of the alleged theft was understandable and reasonable. It became apparent to him very early on that there was overwhelming evidence pointing to a theft occurring over a protracted period and that the person responsible was Mr Dickson. It did not make any commercial sense to spend a vast amount of time and resources in undertaking a forensic accounting investigation into the alleged theft when Mr Wellington already knew there had been a theft.
I turn now to consider the evidence of Mr Dickson.
Analysis of Mr Dickson’s evidence
Mr Dickson is an intelligent, capable man who worked his way into a position of influence and power within the Artcraft operation in Adelaide. On a day to day basis he was the key employee upon whom Mr Wellington relied, even during those periods of time when a State manager was appointed.
It is plain that he was a likeable person who got on very well both with senior management of Artcraft and with his subordinates. Not one person testified to the contrary. This evidence accords with my own impression of Mr Dickson in the witness box. He is a likeable, articulate man with a ready answer for everything. In the end however, I have come to the conclusion that his evidence in many important respects was untruthful.
Mr Dickson denied that he ever attended at the Ferris premises to sell aluminium cuttings and extrusions or that he ever instructed Mr Nicholas or any other Artcraft employee to do so on any of the occasions identified in the Ferris purchase summary.[17]
[17] Exhibit P1, pages 261-273.
In his evidence, Mr Dickson said that during a normal week he spent most of the time at the Artcraft premises and only left to attend site meetings in respect of particular projects. He said his absence from the factory would be noticed. Later however, he conceded that it was not necessary for him to be present throughout the whole production process and when he was out of the office he was accessible to others by way of mobile telephone.
Telephone records covering the entire period from September 2007 to 18 October 2011 were tendered at the trial.[18] An analysis of those records indicates first that Mr Dickson was able to, and did, leave his employer’s premises often and at any time of the day. The records also indicate that on 37 different dates, Mr Dickson either made or received a phone call via a telephone cell in the suburb of Burton, which is where Ferris’ premises are located. Importantly, those records indicate that Mr Dickson either made or received a telephone call in Burton within minutes of transactions occurring at Ferris in the name of Artcraft. The timing of those transactions was evident from Ferris’ recipient created tax invoices[19] which recorded the time at which metal was weighed at the Ferris weighbridge. On some occasions the synchronicity between the weighbridge and telephone records is startling in that it is evident that on many occasions Mr Dickson either made or received a phone call in the Burton area within as little as two minutes of a relevant transaction occurring at Ferris.
[18] Exhibits P1 USB 31 “Telephone records for Ben Dickson”; P5, P35 and D27.
[19] Exhibit D15.
On several of the 37 occasions identified, within minutes of the transactions occurring at Ferris, phone calls were made to or from the phone number used by Mrs Dickson.
It is significant that there are very few entries in the phone records that are not consistent with Mr Dickson attending the Ferris yard personally and receiving cash payment for Artcraft metals. Moreover, the few telephone entries that are not consistent with Mr Dickson attending Ferris at times when a transaction occurred were occasions when Ferris’ records indicate that Mr Nicholas attended to deliver scrap materials. I find that Mr Nicholas attended Ferris on these occasions because the relevant recipient created tax invoices indicate that scrap as opposed to sheet metal was delivered, which is consistent with Mr Nicholas’ evidence that he delivered scrap metal to Ferris. There were approximately 300 recipient created tax invoices and, excluding deliveries referable to Mr Nicholas, I could find only one or two telephone records inconsistent with Mr Dickson being at Burton on the occasion of the relevant delivery. This is consistent with the evidence of the Tolmachoff brothers who testified that Mr Dickson was the person from Artcraft who attended on the majority of occasions.
In cross-examination Mr Dickson was unable to give any plausible explanation for his presence in the Burton area on the 37 occasions where it was proved via the telephone records that he was there. I do not accept Mr Dickson’s explanation that he cannot recall why he might have been in the area because he was unable to access his diaries which he left at his employer’s premises on the day his employment terminated. It is significant in that respect that the first time Mr Dickson ever requested access to those diaries was in May of this year. During an extensive cross-examination, Mr Wild was not asked a single question about the allegedly missing diaries.

In the end I regard the evidence of the telephone calls when compared with the Ferris receipts as fatal to Mr Dickson’s defence that it was not him who was conducting the relevant transactions at Ferris on the relevant dates.
Exhibit D25
The manner in which exhibit D25 came into existence and the cross-examination of Mr Dickson on that document alone was very telling as to his credit. I shall say something about D25. By the time Mr Holmes had finished giving evidence about the financial affairs of Mr and Mrs Dickson, the defendants could not have failed to be aware that there were a number of transactions identified in their financial records in respect of which there was no apparent explanation as to the source of those deposits.
Faced with a request for documents referred to by Mr Holmes, the defendants sought and received an adjournment of the trial to enable them to produce further documentation. When Mr Dickson gave evidence it became apparent that he used that time to prepare D25, which purports to be an explanation as to the source of the majority of the unidentified deposits identified in Mr Holmes’ report.
Even making allowance for the fact that Mr Holmes’ report has been revised several times following the provision of further financial documents by both Mr and Mrs Dickson, nevertheless there were a substantial number of transactions identified by Mr Holmes which called for an explanation from the defendants as to the source of particular deposits. Those “unexplained” deposits were enumerated in exhibit P20 appendix 4.4 and appendix 5.4.
Mr Dickson said that he and Mrs Dickson did spend the period of the adjournment attempting to identify the source of some of the unknown deposits by turning the house upside down looking for any further documentation that was in their possession. In the end, as they were not able to find further documentation, Mr Dickson said he prepared D25 to explain the deposits identified by Mr Holmes for which there was no apparent source. Although Mr Dickson said he sought assistance from Mrs Dickson with regard to the provision of documentation and they discussed certain aspects, the authorship of D25 was his own.
In summary, Mr Dickson’s evidence about those amounts was that, insofar as they may represent cash deposits, that cash came from various legitimate sources set out in the document tendered as D25. His evidence was that with the sale of various items of furniture, motor vehicles (including motorbikes and caravan), an inheritance from his father, cash received from maintenance work for his mother, rent from his brother and board from Mrs Dickson’s children, that cash was placed in a common fund in a drawer in their bedroom to be used from time to time for payment of accounts and other emergencies that cropped up.
Counsel for the plaintiffs submitted that I ought to find that the document exhibit D25 is a fiction created by Mr Dickson in an attempt to mislead the Court. That submission necessitates a close analysis of Mr Dickson’s evidence about that document.
In his evidence Mr Dickson stated that he received $150 per week from his brother for a period from approximately August 2005 until November 2006 when he eventually rented the property on a commercial basis to a tenant named RE Marten. He referred also to the settlement of his father’s estate in February 2007 which he said accounted for one of the post office deposits appearing in his Macquarie account as a deposit for 23 February 2007. He later sold his father’s motor vehicle for $2,200 in either 2008 or 2009 and from time to time they sold items of furniture privately through the Trading Post or on an internet site known as Gumtree. Mr Dickson was unable to give dates or precise amounts for those sales, but said that over a period of time he believed the amount of the sales of furniture would have totalled about $8,500. He produced no receipts or any other documents relevant to these sales. Later Mrs Dickson sold her Toyota Tarago for $8,000. That was also placed with the cash kept in the drawer for emergencies. They sold motorbikes belonging to each of them and their children for approximately $8,500 in total. Mrs Dickson sold her caravan for $3,500. Mr Dickson explained that the amount of cash could be anywhere between $10,000 and $13,000 and sometimes down to nil.
The upshot of the evidence about these sales was that Mr Dickson claimed that over the period of time up to 2011, the total cash sales of property belonging to them would have been in the order of $40,000. That figure was quite elastic as later in his evidence Mr Dickson revised it to around $44,000. There is a discrepancy between Mr Dickson’s evidence and D25 in that D25 records the total cash amount for all of the sold items identified by Mr Dickson as $48,500 to $49,000.
I have serious concerns about Mr Dickson’s evidence in relation to the unexplained deposits. This exercise was undertaken by Mr Dickson, apparently with Mrs Dickson’s assistance, only midway through the trial and after the evidence of Mr Holmes, by which time presumably it was beyond argument that the records of Mr and Mrs Dickson appeared to show that there are a number of transactions, possibly in excess of $100,000, for which an explanation as to the source of those deposits was required.
In explaining D25 Mr Dickson accepted that to some extent the document was a reconstruction – doing the best he said he could without any of the records in a very short period of time. Nevertheless the document tendered as D25 does purport to explain each of the deposits highlighted by Mr Holmes by specific reference to a time period and an amount.
Of all of the cash identified in D25, there were only three documents relating to nearly 200 occasions set out in that exhibit to support any of Mr Dickson’s assertions about the deposits in the relevant period. Some of the deposits recorded in exhibit D25 do not align with the time period when the cash was deposited into the relevant accounts. For example, Mr Dickson said his brother paid rent for a period of approximately 15 months from August 2005 until November or December 2006. The amounts that Mr Dickson attributed to cash received from his brother for rent in D25 are recorded between November 2007 and 31 March 2009. In other words, the start date for use of his brother’s rental payments appears to be over 12 months after its receipt.
The effect of Mr Dickson’s evidence is that he kept the cash from rent received in the drawer mixed with cash from other sources for over 12 months before depositing that cash on 20 separate occasions. The same applies with regard to the cash received from the sale of Mrs Dickson’s Toyota. Exhibit D25 shows that the amounts Mr Dickson attributes to cash received from the sale of that vehicle were deposited between 28 July 2008 and 9 October 2009. His evidence was that the Toyota was sold in 2007. The effect of his evidence on that topic is that the $8,000 cash was kept in the drawer for at least seven months before depositing that cash on 25 separate occasions into Mrs Dickson’s accounts over the course of the next 15 months. There are similar discrepancies between the time periods when the caravan and the motorbikes were sold and the date when the cash was used to make separate deposits over a three month period.
Some of the deposits referred to by Mr Dickson in D25 are deposits into either Mr Dickson or Mrs Dickson’s bank accounts for which Mr Dickson attributes the source as being from cash withdrawn from their accounts on prior occasions. There are 12 separate months during the period in which the amount of cash withdrawn from either Mr Dickson and or Mrs Dickson’s accounts is less than the amount, that according to D25, they deposited into their accounts attributable to the cash withdrawn from those accounts.
When these discrepancies were pointed out to Mr Dickson in cross-examination, he conceded that there were mistakes in D25. He explained that the mistakes were caused by him incorrectly attributing some amounts as the source of deposits. He said he was simply doing the best he could in the limited time available.
One further matter which touches on Mrs Dickson concerns the 25 occasions between July 2009 and October 2011 in which D25 attributes money given to Mr Dickson by Mrs Dickson. When questioned about those items, Mr Dickson said that he was able to determine that these amounts were given to him by Mrs Dickson and subsequently deposited into their accounts because he is confident that he recollects asking her for money during the period in which those 25 deposits occurred. Curiously, no explanation was given about the source of the cash; Mr Dickson expressed the opinion that for all he knew she may have got it out of the cash stash in the drawer.
The totality of Mr Dickson’s evidence about the preparation of D25 is very telling as to his credit. I have reached the conclusion that D25 is a reconstruction prepared by Mr Dickson, apparently with Mrs Dickson’s help, in an attempt to explain how the unexplained deposits identified in Mr Holmes’ report could have come from legitimate income. I have no confidence in Mr Dickson’s explanation.
Nearly all of the explanations proffered by Mr Dickson are not based on any verifiable record such as a receipt, docket or entry in a bank record. It was plain from the cross-examination of Mr Dickson that he was unable to say what the source of cash was for any particular unexplained deposit. While there may be an element of truth in some of the explanations proffered – for example it is possible that they did have some extra cash from the sale of various vehicles and items of furniture and that the family did receive cash gifts from time to time for birthdays – nonetheless large parts of Mr Dickson’s explanation in D25 are either a reconstruction or are untruthful. There is some force in the plaintiffs’ submission that Mr Holmes’ report[20] was received in 2012 and the updated appendix 4.5 in March 2014, giving the defendants ample time to check their records before the trial was underway. A more likely explanation for the creation of D25 is that Mr Dickson belatedly realised that an explanation for the large amounts of unexplained deposits was required.
[20] Exhibit P20.
The failure of Mr Dickson to provide a satisfactory explanation for the unexplained deposits and the failure of Mrs Dickson to provide any explanation at all leads me to the conclusion that the majority of the unexplained deposits identified by Mr Holmes in his analysis are in fact from cash obtained by Mr Dickson from the sales of metal to Ferris and Trading Metals.
I cannot be certain that all of the deposits identified by Mr Holmes were from those sources; for example a deposit on 16 May 2009 to the Community CPS Australia Ltd (“CPS”) at Gawler (about which I shall say more in the context of the claim made against Mrs Dickson), may well have been out of legitimate income. However, I am satisfied that most of the unexplained deposits were made with stolen monies obtained by Mr Dickson from his dealings with Ferris.
As far as the case against Mr Dickson is concerned, these deposits constitute evidence which further supports the evidence of the Artcraft employees and the Tolmachoffs leading to the conclusion that Mr Dickson was stealing Artcraft’s metal and selling it to Ferris and Trading Metals. Standing alone, it is not capable of proving the case against Mr Dickson, particularly when I have regard to the burden of proof against Mr Dickson; however it is one more item of circumstantial evidence supporting the evidence of other witnesses. As such, I have taken that evidence into account when determining whether on the whole of the evidence presented the plaintiffs have proved their case against Mr Dickson to the requisite standard.
The volume and frequency of the unexplained deposits particularly in the latter period of 2010 and 2011 also assumes significance in the case against Mrs Dickson as I will explain shortly.
In summary, Mr Dickson’s evidence is in conflict with each of the following witnesses.
As to Mr Stone and Mr Dewhirst, Mr Dickson’s evidence conflicts with their assertion that each of them did work at the request of Mr Dickson without a written production order.
As to Mr Wild, Mr Dickson’s evidence conflicts with Mr Wild’s evidence that during their conversation on 18 October 2011 Mr Dickson made an admission of wrongdoing by acknowledging that he had made a mistake.
As to the evidence of Michael Tolmachoff and William Tolmachoff, there is a direct conflict in that both Tolmachoffs identify Mr Dickson as the person Ben with whom they dealt on the majority of occasions when scrap metal was delivered to Ferris in the name of Artcraft.
As to Mr Nicholas, there is conflict in relation to Mr Dickson’s instructions to deliver scrap metal to Ferris and Mr Nicholas’ evidence that he delivered the cash and receipt to Mr Dickson and counted the cash in his presence.
While it was Mr Nicholas who signed the recipient created tax invoice agreement about which he had no memory, I accept William Tolmachoff’s clear and unequivocal evidence that he gave that recipient created tax invoice agreement to Mr Dickson and asked him to get the relevant person to sign it. Mr Nicholas in particular had no reason to lie about any of these matters and I have no hesitation in accepting that he did his best to give truthful and accurate evidence given the lapse of time between these events and the date he was giving evidence.
As to the evidence which Mr Dickson gave that no work could be performed at the premises without a written production order, I prefer the evidence of Mr Dewhirst and Mr Stone who said that often they were required to perform work at the oral instruction of Mr Dickson without a written production order.
I find that Mr Dickson was in a position to manipulate the inefficiencies and inadequacies in the plaintiffs’ inventory system to conceal the theft of material on an ongoing basis between 2007 and 2011.
I accept the evidence of Mr Wellington and Mr Wild that due to the lack of a perpetual inventory system within Artcraft there was no adequate record tracking metal purchased and used in the production process. In the main, the demand for new material was driven by the production manager who at that time was Mr Dickson. Contrary to Mr Dickson’s evidence, the policies and procedures at Artcraft requiring written production orders were not always followed. That was abundantly clear from the evidence of each of the plaintiffs’ employees who gave evidence.
I find that Mr Dickson had been employed by Artcraft since 2004[21] and was the person who had day to day responsibility for the production process and was well familiar with the strengths and weaknesses of the Artcraft inventory system. Mr Dickson knew that the plaintiffs did not have adequate systems to keep track of any metal that went to an external source. It was the evidence of Mr Wellington that he discussed this very issue with Mr Dickson. I find that Mr Dickson had ample authority and discretion to disguise and conceal his frequent trips to Ferris. The telephone records alone indicate that Mr Dickson had ample scope to leave the Artcraft premises at any time of the day and for any amount of time.
[21] Mr Dickson was employed by Heatpac since 2000. Heatpac was purchased by Artcraft in 2004.
Between 2007 and 2011, there were three different State managers employed by Artcraft. When Mr Wild arrived after there having not been any manager for a period, he was inexperienced by his own admission. These were some of the deficiencies and weaknesses in the company which enabled Mr Dickson to continue stealing property from Artcraft for as long as he did. In the end it was only the hearsay allegation of an apparent whistleblower that alerted Mr Wild to the fact that something might be wrong.
For these reasons, I am satisfied that Mr Dickson did convert metal in the quantity and in the amount alleged by the plaintiffs in paragraph 30 of the second statement of claim.[22]
[22] I note that the figure of $506,436.83 was ultimately revised to $484,077.18.
I acknowledge, lest there be any misunderstanding, that because of the very serious nature of the allegations against Mr Dickson I must be satisfied on the basis of the standard of proof enunciated in Briginshaw v Briginshaw.[23]
[23] (1938) 60 CLR 336.
I am conscious of the gravity of the allegations made against Mr Dickson in this matter. The issue is plainly whether Mr Dickson has committed a fraud over an extended period upon his employer. Nevertheless, I do not consider it necessary to dwell any further on the precise degree of satisfaction required in accordance with the principle enunciated in Briginshaw. That is because I consider in light of the whole of the evidence both direct and circumstantial in this case that the evidence pointing to Mr Dickson as the perpetrator of the fraud is overwhelming. I have reached the state of satisfaction that I am in fact satisfied beyond reasonable doubt that between 2007 and 2011 as alleged in the second statement of claim Mr Dickson stole the quantity of new and scrap metal and cashed the proceeds as alleged by the plaintiffs.
The claim in respect of monies received from Trading Metals
As to the claim in respect of the scrap metal taken to Trading Metals, there was evidence from three witnesses, namely Mr Wild, Mr Nicholas and the office manager of Trading Metals Ms Regidor.
Mr Nicholas said that he was directed by Mr Dickson to take scrap metal to Trading Metals whilst at Cavan and possibly (although he was not as clear about that later) when they operated out of Beverley.
The receipts tendered by Ms Regidor as part of the business records of Trading Metals reveal that Ms Regidor’s employer paid a total of $34,335.87 to Artcraft of which the sum of $32,606.67 was never accounted for in Artcraft’s records. One payment of $1,729.10 paid by Trading Metals to Artcraft from 29 June 2010 was credited in the records of Artcraft.
As the office manager at Trading Metals, Ms Regidor was responsible for creating some of the records tendered. She was responsible for the payment for metal received either by cash or by cheque. Although she was unable to identify the person or persons who actually attended at the premises of Trading Metals on Artcraft’s behalf, I have no hesitation in accepting the business records as evidence that the amount or amounts referred to in those records was paid to a person purporting to act on behalf of Artcraft.
As I accept the evidence of Mr Nicholas that he, acting on the instructions of Mr Dickson, took scrap metal on a regular basis to Trading Metals, I do not consider it to be important that Ms Regidor was unable to identify him or any other person for that matter as the Artcraft representative.
Mr Nicholas was clear in his evidence that he never took scrap metal to Trading Metals without an instruction from Mr Dickson and he always accounted to Mr Dickson for the monies received by him whether received from Trading Metals or Ferris.
For these reasons, I find it proved that the sum of $32,606.67 paid by Trading Metals to an employee of Artcraft, probably Mr Nicholas on most occasions, was received by Mr Dickson.
The measure of the plaintiffs’ loss
The evidence of Mr Holmes and Mr Wellington
Mr Holmes adopted four different approaches in calculating what he considered to be a fair and reasonable estimate of the loss to Artcraft from the sale of the new and scrap metal by Mr Dickson. Both Mr Wellington and Mr Holmes explained in considerable detail the basis for each of the four methods adopted.
The loss calculations in respect of the new metal sold were based on four scenarios:
(i)Loss Calculation 1 – average cost price paid for New Metal purchases in the month that New Metals were sold to Ferris (ie “Rolling Average Price Paid”).
(ii)Loss Calculation 2 – lowest cost price paid for New Metals purchases, in the month that New Metals were sold to Ferris (ie “Rolling Lowest Price Paid”).
(iii)Loss Calculation 3 – lowest cost price paid for New Metal purchases for the relevant period.
(iv)Loss Calculation 4 – highest cost price paid for New Metal purchases for the relevant period.

The term “rolling average” represents an average of the cost price paid in a month immediately prior to the date of a sale recorded by Ferris. As new purchases are made on a daily basis, so the calculated average cost price changes.
I am satisfied that the first method of calculation is the most appropriate and reliable to quantify the actual loss to the plaintiffs from Mr Dickson’s theft. For convenience, the respective loss calculations are annexed to this judgment.[24]
[24] Appendix 1, Table A.
In addition to his evidence about the plaintiffs’ financial records, Mr Holmes gave expert evidence on the topic of loss calculations. Specifically on the topic of quantifying the loss to the plaintiffs by virtue of the sale of the new metal to Ferris, Mr Holmes was asked to identify from information provided to him whether any or all of a number of methodologies employed by the plaintiffs to calculate their loss were reasonable and appropriate in all of the circumstances. In the end, Mr Holmes expressed a preference for the methodology adopted in loss calculation 1.
He prepared a number of reports and was cross-examined extensively on those reports. In final submissions counsel for Mr Dickson submitted that the appropriate loss calculation that should be accepted by the Court is loss calculation 3.[25] That loss calculation is based on the lowest cost price paid for new metal over the entire period of the theft from 2007 to 2011. Loss calculation 4[26] is calculated on the highest cost price paid over the same period, that is, 2007 to 2011. As Mr Holmes pointed out in his evidence calculation of the loss at a single rate per kilogram over the entire period is illogical. It also ignores the fact, that except for a short period in 2008, the price of new metal was generally declining over the relevant period.
[25] Appendix 1, Table A.
[26] See Appendix 1, Table A.
Mr Holmes also explained why he rejected loss calculation 2[27] which was based on the lowest cost price in the month as opposed to over the whole period as he thought it unnecessarily conservative.
[27] See Appendix 1, Table A.
The final figures referred to in Appendix 1, Table B are based on schedules which were amended specifically in light of the new information supplied by Mr Wellington and later by Mr Holmes’ acceptance of Mr Wiese’s view that it was fairer to adopt a weighted rolling average approach to calculating losses in respect of aluminium cuttings and extrusions. The weighted rolling average approach took into account the total number of kilograms purchased; so for any particular time period, for example the previous month, it captured the kilograms purchased and the total cost. When one is divided by the other, the result is the weighted average which picks up and accounts for any aberrations. Thus whether the price is high or low or whether the volumes are high or low it takes a weighted average of the lot.
In the end I find that loss calculation 1 is the most appropriate and reliable method by which to measure the estimated value of the new metal sold by Mr Dickson to Ferris.
It follows from these reasons that the plaintiffs’ claim against Mr Dickson must succeed. Mr Dickson’s actions amount to theft.
The plaintiffs have proved their entitlement to damages in respect of Mr Dickson’s breach of his employment contract with Artcraft, breach of fiduciary duties owed to his employer and in respect of the conversion of the metal belonging to Artcraft and the failure to account to the plaintiffs for the proceeds from the sale of that metal.
The measure of damages payable to the plaintiffs in respect of each cause of action pleaded is, on the facts of this case, for all practical purposes identical. The plaintiffs are entitled to recover by way of damages the full value of the goods wrongfully converted by Mr Dickson. In my view a fair and reasonable estimate of the value to be ascribed to that property is the value arrived at by loss calculation 1 in Mr Holmes’ analysis, that is $1,018,888.
As I have stated, no different result would be reached by calculating damages under any other heading of breach in the circumstances of this case.
I turn now to the question whether, as the plaintiffs’ claim, exemplary damages should be awarded.
Exemplary damages
In addition to seeking compensation the plaintiffs seek exemplary damages. Counsel for Mr Dickson submitted that exemplary damages should not be awarded in the circumstances of this case and cited a number of authorities in support of his submission that exemplary damages are only available in respect of a tort or statutory entitlement and not available for a breach of contract or in equity.
The most authoritative statement in Australia as to the scope and purpose of an award of exemplary damages is to be found in Gray v Motor Accident Commission.[28]
[28] (1998) 196 CLR 1.
The question which arose in Gray was whether exemplary damages should be awarded against the driver of a motor vehicle which seriously injured a person in circumstances where the driver was convicted of intentionally causing grievous bodily harm and was sentenced to seven years imprisonment.
When the driver was later sued for damages for personal injury, an application for exemplary damages was also included in the claim.
The High Court determined that exemplary damages could not be awarded in circumstances where the wrongdoer had already received substantial punishment as a result of the criminal proceedings.
In the course of the joint judgment the Court stated:[29]
Because the kinds of case in which exemplary damages might be awarded are so varied, it may be doubted whether a single formula adequately describes the boundaries of the field in which they may properly be awarded. Nevertheless, the phrase adopted by Knox CJ in Whitfeld v De Lauret & Co Ltd of “conscious wrongdoing in contumelious disregard of another's rights” describes at least the greater part of the relevant field.
[footnotes omitted]
[29] Gray v Motor Accident Commission (1998) 196 CLR 1 at [14].
In Harris v Digital Pulse Pty Ltd,[30] a case involving a employee who conducted business in competition with his employer in breach of his contractual, fiduciary and other duties, Heydon JA (Spigelman CJ agreeing) held that the law of New South Wales does not recognise a power to award exemplary damages for equitable wrongs of the type involved in the circumstances of that case, namely breach of fiduciary duty where that duty arises in the context of a contractual relationship.
[30] (2003) 56 NSWLR 298.
Mason P was in dissent in Harris. However, on the issue whether exemplary damages may be awarded with respect to an equitable claim, the preponderance of authority in decisions of intermediate appellate courts in Australia is that exemplary damages are not available in respect of claims based on breach of contract or claims made in equity.
In this case I have found that the plaintiffs succeed as against Mr Dickson in respect of each of the three causes of action pleaded namely breach of contract, breach of fiduciary duty and wrongful conversion of property belonging to the plaintiffs. The plaintiffs are entitled to damages for the loss suffered as a result of those wrongful acts of Mr Dickson.
As the claim in tort has succeeded it follows that the discretion to award exemplary damages does arise. The question is whether that discretion should be exercised in the plaintiffs’ favour.
Exemplary damages should only be awarded where there has been “conscious wrongdoing in contumelious disregard of another’s rights”.[31]
[31] Whitfeld v De Lauret & Co Ltd (1920) 29 CLR 71 at 77 per Knox CJ.
As Kourakis J (as his Honour then was) observed in State of South Australia v Treglown,[32] referring to a New South Wales case State of New South Wales v Ibbett,[33] the Court should start with the proposition that exemplary damages are rarely awarded and should be slow to award such damages. Moreover the Court should resist the temptation to be extravagant and must consider the purpose to be served by awarding exemplary damages particularly where the defendant has or might be subject to sanction by the criminal law.
[32] [2012] SASC 47.
[33] [2005] NSWCA 445 per Spigelman CJ.
Gray is authority for the proposition that exemplary damages should not be awarded where the wrongdoer has already been subject to the sanction of the criminal law.
Taking all of these matters into account, I consider that the facts in this matter do bring this case within that category of quite rare and exceptional cases where an award of exemplary damages is not only justified but called for. On the findings I have made, Mr Dickson over an extended period of time, namely four years, has perpetrated a fraud on his employer of a most egregious kind. Not only did he effectively steal hundreds of thousands of dollars from his employer over that period of time but he co-opted other subordinates to unwittingly provide assistance in his fraudulent design. Mr Dickson occupied a key position within the South Australian operation of the plaintiffs’ business as a trusted senior manager in the production area. For reasons which were never explained, the prosecuting authorities in this State were either unable or unwilling to prosecute Mr Dickson.
The conduct of Mr Dickson is properly characterised as conscious wrongdoing in contumelious disregard of the plaintiffs’ rights. In my view it is appropriate that this Court express its disapproval of that conduct in an emphatic way.
The first defendant submits that there is no basis to award exemplary damages in this matter. Even if the plaintiffs succeed in establishing liability on the part of Mr Dickson, the first defendant submits that the damages for the purchase price of new metal provide complete compensation to the plaintiffs for any loss sustained.
Exemplary damages are not awarded by way of compensation, they are not about the plaintiffs’ rights, they involve the Court expressing its disapproval of the defendant’s conduct. Here Mr Dickson’s fraudulent conduct has not and apparently will not be punished in any criminal proceedings. In all of the circumstances, I consider that exemplary damages should be awarded.
As exemplary damages are only available in respect of the claim in tort for wrongful conversion, the plaintiffs will need to elect on which basis they seek to recover damages.
For these reasons I assess exemplary damages in the sum of $50,000.
The case against Mrs Dickson
I turn now to the case against Mrs Dickson. The case against Mrs Dickson was articulated by counsel for the plaintiffs in the following way.
It was contended that from Mr Holmes’ analysis of Mr and Mrs Dickson’s known finances an inference can be drawn that for some of the period between 2007 and 2011 Mr and Mrs Dickson and their family were living on unexplained sources of income.
First it was contended that Mrs Dickson received funds as a volunteer within the meaning of that term as enunciated in a line of authority commencing with Black v S Freedman & Co.[34]
[34] (1910) 12 CLR 105.
Next it was contended that Mrs Dickson received the money and she must therefore pay back the monies had and received for which she gave no consideration.
The next basis on which the plaintiffs claim money from Mrs Dickson is on the basis that she knowingly received the funds within the meaning of the first limb of Barnes v Addy.[35] The plaintiffs specifically eschew any claim based on the second limb of that case.
[35] (1874) LR 9 Ch App 244 at 251-252.
The requisite knowledge for establishing knowing receipt in the first limb has been the subject of much academic debate. The claim against Mrs Dickson was put in the alternative that she either had actual knowledge or, if she did not have actual knowledge, she wilfully shut her eyes to the obvious or had knowledge of circumstances which would have indicated the facts to an honest and reasonable person. Proof of those facts and circumstances was said to lie in Mr Holmes’ analysis of Mr and Mrs Dickson’s financial records.
The plaintiffs plead their case against Mrs Dickson in paragraphs 37A to 37K of the second statement of claim. Paragraph 37A alleges that some or all of the cash paid to Mr Dickson by Ferris and Trading Metals was paid to Mrs Dickson or to her benefit by payment to her credit card, debts and by payment of family expenses. The plaintiffs pleaded that they were unable to particularise the amount paid, but stated in paragraph 37A that they would do so after receipt of expert reports.
In paragraph 37B the plaintiffs allege that neither Mr Dickson nor Mrs Dickson gave any consideration for the benefit.
Paragraph 37C alleges that Mrs Dickson is liable to account to the plaintiffs for the cash and benefit attained by Mr Dickson and therefore by Mrs Dickson in breach of his contractual and fiduciary obligations to the plaintiffs on the following grounds:
(a)as a volunteer for which she gave no consideration;
(b)which were not received for any legitimate commercial purpose;
(c)which were not pursuant to any earnings of Mr Dickson or by which he had any entitlement because they were of such a frequency and magnitude as to be beyond Mr Dickson’s earnings from the plaintiff;
(d)for which she made no reasonable enquiry as to their source; and
(e)about which she was aware as to the apparent addition to the overall wealth of their family.
Paragraph 37E alleges that in all of those circumstances it was unconscionable for Mrs Dickson to retain the cash and the benefit and she was liable to account to the plaintiffs as a trustee.
Paragraph 37F alleges that Mrs Dickson is liable to pay to the plaintiffs such cash and benefit as money had and received by her to the use of the plaintiffs.
In paragraph 37G the plaintiffs claim that Mrs Dickson was unjustly enriched.
The plaintiffs claim in the alternative by paragraph 37H that Mrs Dickson knowingly received trust property from Mr Dickson in breach of trust or his fiduciary duty in that she knew:
(a)that the trust property belonged to the plaintiffs;
(b)that Mr Dickson had no authority to deal with that trust property or to be paid cash in relation to that property;
(c)that the trust property (the cash) was traceable to a breach of trust or fiduciary duty by Mr Dickson.
It is then alleged that Mrs Dickson had at all material times actual knowledge or wilfully shut her eyes to the obvious or wilfully and recklessly failed to make such enquiries as an honest and reasonable person would make or had knowledge of facts and circumstances which would indicate to an honest and reasonable person that the plaintiffs did not consent to the receipt of its property or the cash and benefit by Mr Dickson and Mrs Dickson or that she had knowledge of facts and circumstances which would have put an honest and reasonable person on enquiry of those matters.
By that pleading, the plaintiffs effectively plead the five limbs of knowledge often referred to as an emanation of the decision in Baden v Sociéte Générale pour Favoriser le Développement du Commerce et de I’Industrie en France SA.[36] It is alleged that in all of these circumstances Mrs Dickson’s knowledge was such as to make it unconscionable for her to retain the benefit of the cash or to pay it away for her own purposes.
[36] [1993] 1 WLR 509.
The particulars on which the plaintiffs relied to prove knowledge of the circumstances on the part of Mrs Dickson were said to be the following:
(a)The fact that Mr Dickson received the trust property between 17 September 2007 and 18 October 2011 at such regular and frequent intervals as set out in a table annexed to the second statement of claim marked “A”. That table, consisting of 11 pages, contains all of the dates, amounts and entries in relation to the cash said to have been paid by Ferris to Mr Dickson. That figure was pleaded at $473,830.16.
(b)Trading Metals paid out $32,606.67 to Mr Dickson (less an amount of $1,729.20 which was deposited with the plaintiffs on 29 June 2010) at regular intervals set out in a table also annexed to the second statement of claim and marked “B”. That annexure B contains a summary of all of the payments made by Trading Metals to Mr Dickson during the relevant period.
(c)The trust property and the cash and benefit received by Mrs Dickson was not received as part of the usual family activity and earnings because the payments in cash were of such magnitude and at such regular and frequent intervals as to be beyond the earnings of Mr Dickson from the plaintiffs.
By virtue of those facts pleaded, the plaintiffs further allege in paragraph 37I that Mrs Dickson received the cash and benefit as a trustee.
Finally, by paragraph 37J the plaintiffs allege that Mrs Dickson has either held the cash and benefit on trust for the plaintiffs or has disposed of the cash and benefit in breach of trust.
By paragraph 37K the plaintiffs articulate the remedy sought as against Mrs Dickson for the loss and damage suffered. The plaintiffs seek the trust property and its traceable proceeds, a proprietary interest in any property acquired, an equitable charge over such money and/or property, and finally, a proportionate beneficial interest in any asset derived from the money and/or property.
In opening the case for the plaintiffs, their counsel articulated the case against Mrs Dickson. It was the plaintiffs’ contention that Mrs Dickson knew or should have known that cash was being paid for various household expenses and living expenses which would not have come from the combined legitimate income of both of them. She therefore must have known that the cash paid comprised funds received from a source which she either did not make enquiry about or turned a blind eye to. The issue, he submitted, was what knowledge she in fact had and if she had such knowledge was it the requisite knowledge for the ingredients of a claim in knowing receipt.
Counsel for the plaintiffs submitted that the plaintiffs’ case against Mrs Dickson is that she either had actual knowledge or if she did not have actual knowledge she wilfully shut her eyes to the obvious and in all of the circumstances she comes within at least the first four categories of essential requirements to be met in a case based on knowing receipt of trust funds.
In final submissions after the close of evidence, the plaintiffs provided a number of schedules[37] based on the financial records[38] of both defendants. The plaintiffs submitted that in respect of all or at least some of the stolen cash, Mrs Dickson benefited via deposits placed at intervals into various accounts including those accounts jointly held with Mr Dickson or accounts in his or her sole name.
[37] Outline of Submissions of the Plaintiffs dated 7 July 2014.
[38] Tendered in evidence as part of Exhibit P1 USB.
It was never suggested that Mrs Dickson was actually involved in the fraud on Artcraft, however it was suggested that she knew that there was cash, “rivers of cash” to use counsel’s words, coming into the family over that four year period proved to be in excess of $400,000. On the plaintiffs’ case it must have been abundantly clear to Mrs Dickson that the family expenses far exceeded the family’s legitimate income and at the very least she ought to have been on notice in the sense that she ought to have enquired as to the source of those funds. Absent an explanation from Mrs Dickson, I have been invited the draw an inference that the unexplained deposits into the various accounts are part of the stolen proceeds and further that she and Mr Dickson received the benefit of those stolen proceeds.
The plaintiffs called in aid the rule in Jones v Dunkel.[39] The rule is that unexplained failure by a party to call a witness may in appropriate circumstances support an inference that uncalled evidence would not have assisted the party’s case. As Heydon, Crennan and Bell JJ pointed out in Kuhl v Zurich Financial Services Australia Ltd,[40] the rule permits an inference not that the evidence not called by a party would have been adverse to the party, but that it would not have assisted the party.
[39] (1959) 101 CLR 298.
[40] (2011) 243 CLR 361 at [64].

The failure to call a witness may also entitle the Court to draw with greater confidence any inference unfavourable to the party who failed to call the witness if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn.
In relation to Mrs Dickson, I am invited to draw an inference from the unexplained deposits into various accounts in her name and/or jointly in her name and Mr Dickson’s name, absent any explanation from her, that the source of those deposits was the proceeds from the sale of the plaintiffs’ stolen metal to Ferris and Trading Metals.
That is the first inference I am invited to draw. The next inference I am invited to draw is that because of the magnitude of those deposits and the evidence as to the defendants’ financial transactions between 2007 and 2011, Mrs Dickson knew, or ought to have known, in the relevant sense that those funds were stolen.
Although the plaintiffs brought their claim against Mrs Dickson on a number of different bases, it is convenient to first deal with the cause of action pleaded against Mrs Dickson which relies upon establishing liability under the first limb of Barnes v Addy.
The plaintiffs’ pleadings allege that Mrs Dickson received some or all of the cash paid to Mr Dickson in breach of his duties to the plaintiffs for which she made no reasonable enquiry as to their source, and about which she was aware given the apparent addition to the overall wealth of the family of Mr and Mrs Dickson.
As there appears to have been much controversy as to the state of knowledge required to establish liability under this limb in Barnes v Addy, it is necessary to discuss some of the authorities. As I understood the claim as finally articulated by the plaintiffs against Mrs Dickson, there is no suggestion that any of the real estate or motor vehicles acquired by Mrs Dickson either solely in her own name or jointly with Mr Dickson was acquired with any stolen proceeds.
The analysis carried out by Mr Holmes of the defendants’ financial records during the relevant period demonstrates that the properties acquired by the defendants between 2007 and 2011 and the Range Rover acquired by Mrs Dickson in May 2011 were legitimately funded and the loans in respect of those properties serviced by the use of legitimate income of both defendants.
The claim against Mrs Dickson is based on her accessorial liability as a knowing recipient of trust monies obtained by Mr Dickson in breach of his contractual and fiduciary duties to his employer. The plaintiffs allege that she received these monies and they were used by way of payment of expenses including travel expenses and the like, to fund their joint lifestyle.
At an early stage of the trial the plaintiffs notified the Court of their intention to abandon any claim to be able to trace the proceeds of the theft into the acquisition of any assets of either defendant.
The plaintiffs submit that the sheer volume of benefits proved to have been received by Mr Dickson as evidenced by many unexplained deposits into the various accounts controlled by one or both of the Dicksons, and by the evident decrease in ATM withdrawals and EFTPOS purchases to pay household bills and other living expenses during the relevant period, is sufficient, absent any explanation by Mrs Dickson, to enable the inference to be drawn that she must have known in the relevant sense that stolen monies were being used to fund their lifestyle.
The issues – Mrs Dickson
Two key issues arise for determination with respect to the claim against Mrs Dickson. The first is whether she did in fact receive any cash or benefit from Mr Dickson’s conversion of the plaintiffs’ property, and the second is, if it is proved that she did receive cash or benefit, whether she had the requisite state of knowledge for liability as a recipient of those funds under the first limb of Barnes v Addy.
There has been a dispute for many years about the state of knowledge required to establish liability on the basis of the two limbs in Barnes v Addy. However I proceed on the basis that the High Court has authoritatively settled the issue at least in respect of the knowledge requirements with regard to the second limb. In Farah Constructions Pty Ltd v Say-Dee Pty Ltd,[41] the Court stated:[42]
The “rule in Barnes v Addy” stated. In Barnes v Addy Lord Selborne LC said:
“Those who create a trust clothe the trustee with a legal power and control over the trust property, imposing on him a corresponding responsibility. That responsibility may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees de son tort, or actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust. But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees.”
The form of liability referred to in the first part of the last sentence is often called the “first limb” of Barnes v Addy, and the form of liability referred to in the second part of the last sentence is often called the “second limb”. In Barnes v Addy itself, the Court of Appeal in Chancery (Lord Selborne LC, James and Mellish LJJ) upheld the decision of Wickens VC that two solicitors, Mr Preston and Mr Duffield, had not received any trust property and had no knowledge of any dishonest and fraudulent design to make them parties to the breach of trust by the sole trustee. It was insufficient that Mr Preston had been alive to the danger of the course of appointing a sole trustee and that Mr Duffield had prepared the appointment of that trustee.
It has become common to describe the first limb as involving “knowing receipt” and the second limb as involving “knowing assistance”. Lord Selborne LC did not use the expression “knowing receipt”. It seems to have been employed first in 1966 by the editors of Snell's Principles of Equity. Even then, it was only introduced by inserting under the pre-existing heading “Receipt of Trust Property by Stranger to Trust” a new sub-heading “Knowing Receipt or Dealing”. However, in 1972 Brightman J adopted the expression in Karak Rubber Co Ltd v Burden [No 2]. He said that the labels “knowing receipt or dealing” and “knowing assistance” employed by Snell were “an admirable shorthand description of their different natures”. Those labels have been commonly used since then. In contrast, Lord Selborne LC's expression was “receive and become chargeable”. Persons who receive trust property become chargeable if it is established that they received it with notice of the trust.
In recent times it has been assumed, but rarely if at all decided, that the first limb applies not only to persons dealing with trustees, but also to persons dealing with at least some other types of fiduciary. Since the appellants did not contend that the first limb was incapable of applying on the ground that neither Farah nor Mr Elias was a trustee, the correctness of this assumption need not be examined.
[footnotes omitted]
[41] (2007) 230 CLR 89.
[42] Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [111]-[113].
The High Court authoritatively stated that circumstances falling within any of the first four categories of knowledge identified in Baden are sufficient to satisfy the knowledge requirement in the second limb of Barnes v Addy. However, the High Court did not analyse the requirement of knowledge necessary to establish liability under the first limb of Barnes v Addy. It left unclear whether the knowledge requirements for the first limb are the same as the knowledge requirements for the second limb.
A number of Courts, both at appellate level and at first instance, have grappled with this issue. In Kalls Enterprises Pty Ltd (in liq) v Baloglow,[43] Giles JA (Ipp and Basten JJA agreeing) referred with apparent approval to a passage written by Anderson J in Hancock Family Memorial Foundation Ltd v Porteous[44]:[45]
The judge took as an accurate statement of the knowledge relevant in a first limb case a passage from the judgment of Anderson J in Hancock Family Memorial Foundation Ltd v Porteous (1999) 151 FLR 191 -
“79 As to recipient liability, there is less certainty about what must be proved to sheet home liability to the non-trustee but I adopt, with respect, the reasoning and conclusions of Hansen J in Koorootang Nominees Pty Ltd v Australia & New Zealand Banking Group Ltd [1998] 3 VR 16 on the question. In the first place, it is not necessary to establish that a recipient of trust property acted dishonestly or with want of probity. Recipient liability may be established if the defendant had actual or constructive knowledge at the time he received the relevant property that (a) it was trust property and (b) it was being misapplied. The defendant will be taken to have constructive knowledge if it is proved that he wilfully shut his eyes to the obvious; that he wilfully and recklessly failed to make such inquiries as an honest and reasonable man would make in the circumstances; and that he knew of circumstances which would indicate the true facts to an honest and reasonable man. If all that is proved is that the defendant had knowledge of circumstances which would put an honest and reasonable man on inquiry, that is not enough: see Koorootang at 85 and 105.”
[43] (2007) 63 ACSR 557.
[44] (1999) 151 FLR 191.
[45] Kalls Enterprises Pty Ltd (in liq) v Baloglow (2007) 63 ACSR 557 at [125].
In Grimaldi v Chameleon Mining NL (No 2)[46] there is a helpful discussion by the Full Court of the Federal Court as to the knowledge requirement in respect of the first limb. In my view the Federal Court in Grimaldi provides perhaps the clearest statement of the current state of the law in Australia with regard to the knowledge requirement for recipient liability under the first limb of Barnes v Addy.
[46] (2012) 200 FCR 296.
After reproducing the five categories of knowledge described in Baden, the Court said:[47]
[47] Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296 at [260]-[269].
The comment that should be made at the outset about this five-fold classification is that it tends to invite the use of formulae to solve problems. Unsurprisingly judges have cautioned against treating each category as an exclusive and rigid one. That caution is justified and is illustrated in his Honour's reasons as will be seen.
The first two categories of “knowledge” require no comment. The third involves such a calculated abstention from inquiry as would disentitle the third party to rely upon lack of actual knowledge of the trustee's or fiduciary's wrongdoing. The fourth reflects what seems to have been accepted provisionally by three judges of the High Court in Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 398 and 412-413. It is, in essence, an understandable, objective, default rule designed to prevent a third party setting up his or her own “moral obtuseness” as the reason for not recognising an impropriety that would have been apparent to an ordinary person: Consul at 398. It is the surrogate of actual knowledge. The form of constructive notice used in category (v) derives from the bona fide purchaser for value without notice doctrine.
For the purposes of the “knowing assistance” liability, Farah Constructions has indicated beyond question in this Court that “knowledge/notice” falling within the first four categories, but not the fifth, represents Australian law. The matter we would emphasise is that that limb of Barnes v Addy is based manifestly on the third party's own wrongdoing in the circumstances.
When one turns to “knowing receipt” a more complex picture emerges. It is necessary to refer initially to English law. Prior to the abandonment of the Baden categories in England, first in relation to “knowing assistance” in Royal Brunei Airlines, and then in relation to “knowing receipt” in BCCI (Operations), there were two distinct lines of cases on recipient liability. One expressed the view that cases typically falling within categories (iv) and (v) would not suffice for liability: see eg Re Montagu's Settlement Trusts at 285; Eagle Trust plc v SBC Securities Ltd [1993] 1 WLR 484 at 509; Cowan de Groot Properties Ltd v Eagle Trust plc [1992] 4 All ER 700 at 758-761. What has been called the third party's “want of probity” needed to be shown. The other line, which Millett J's observations in Agip (Africa) Ltd v Jackson at 292-293 typify, founded the knowing receipt liability on protection of “rights of priority in relation to property”. Hence would accommodate constructive notice, ie categories (iv) and (v), as a basis for liability: see also Westpac Banking Corporation v Savin [1985] 2 NZLR 41.
We do not seek to express a view on which line carried the weight of authority, though Underhill and Hayton (at 98.29) suggest the latter did. All that needs emphasis is that English case law revealed two rationales for recipient liability - fault and property protection - and depending on which was accentuated would contrive the extent to which, if at all, constructive notice sufficed for liability to ensue: see generally the discussion in Dietrich and Ridge at 57-62. We should add that Winterfall, as will be seen, relies upon cases in the “want of probity” line to challenge his Honour's reliance upon category (iv) notice in a recipient liability case.
The orthodox view in this country has been that there was a difference for knowledge/notice purposes between knowing receipt and knowing assistance, with constructive notice (encompassing both categories (iv) and (v)) sufficing for the former: see eg Ninety Five Pty Ltd (in liq) v Banque Nationale de Paris [1988] WAR 132 at 175-176.
In Consul Stephen J was prepared to countenance category (iv), but not category (v), notice in a knowing assistance claim: at 412. However, his Honour had earlier observed that the distinction between the two liabilities had been said to be based on the acceptance of constructive notice (a reference, seemingly, to traditional or category (v) constructive notice)) for receipt but not for assistance. Of this he commented that:
“It is not clear to me why there should exist this distinction between the case where trust property is received and dealt with by the defendant and where it is not; perhaps its origin lies in equitable doctrines of tracing, perhaps in equity's concern for the protection of equitable estates and interests in property which comes into the hands of purchasers for value.”
We share the doubt expressed here. We do not consider that a property protection rationale for recipient liability (beyond a proprietary claim to a subsisting equitable interest in property, or its proceeds, in the third party's hands) of itself provides a sufficient justification for imposing a personal liability to account. That liability arises as a matter of conscience not of property. As with assistance liability, recipient liability should be seen as fault based and as making the same knowledge/notice demands as in assistance cases. We need not pursue this particular matter further because the weight of authority in this country appears now to draw no distinction between the two types of liability in this respect: but see generally, Dietrich and Ridge, above.
The High Court in Farah Constructions did not settle the knowledge/notice requirement in relation to recipient liability. Nonetheless, from at least the 1990s and in the wake of the Baden classification, judges had begun in recipient liability cases to generalise from what had been said both by Gibbs J (at 398) and by Stephen J (at 412) with whom Barwick CJ agreed, about the insufficiency of traditional, or category (v), constructive notice - though not of category (iv) notice - as a basis for personal liability. To allow that, as Stephen J commented, would be “to disregard equity's concern for the state of conscience of the defendant”: at 412; see eg Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 at 103G; Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd at 105; Hancock Family Memorial Foundation at 209; Tara Shire Council v Garner [2003] 1 Qd R 556 at [66]-[72]; Spangaro v Corporate Investment Australia Funds Management Ltd (2003) 54 ATR 241 at [54]-[60]; see also United States Surgical Corporation v Hospital Products International Pty Ltd [1983] 2 NSWLR 157 at 252-254. In Kalls Enterprise Pty Ltd (in liq) v Baloglow (2007) 63 ACSR 557 - a decision which post-dates Farah Constructions - the New South Wales Court of Appeal applied Baden's categories (i)-(iv), but not category (v) to a knowing receipt claim. Kalls Enterprise in turn has been applied subsequently: see eg Horsman v MG Kailis Pty Ltd [2009] WASC 166; Fodare Pty Ltd v Shearn (2011) 29 ACLC 11-036.
There is, in other words, an established line of judicial decision and opinion both at first instance and in intermediate courts of appeal spanning at least 20 years adhering to the view taken in the above cited cases. We do not consider that that view is plainly wrong and should be rejected.
In Grimaldi, the Court held that the Judge had not erred in law in finding that knowledge within the meaning of the fourth category described in Baden, namely knowledge of circumstances which would indicate the facts to an honest and reasonable man, was sufficient to establish liability for knowing receipt.
Earlier in Bell Group v Westpac Banking Corporation,[48] Owen J summarised the current state of Australian law of knowing receipt as follows:[49]
[48] (2008) 225 FLR 1.
[49] Bell Group v Westpac Banking Corporation (2008) 225 FLR 1 at [4748].
The resulting law, as I apprehend it, is that for a third party to be held liable for knowing receipt:
(a)     there must be a ‘trust’;
(b)     the trustee must have misapplied ‘trust property’;
(c)     the third party must have received trust property;
(d)     at the time of receiving the trust property, the third party must have known of the trust and of the misapplication of the trust property; and
(e)     the third party will be taken to have ‘known’ in the relevant sense if the third party:
(i)has actual knowledge of the trust and the misapplication of trust property; or
(ii)has deliberately shut his or her eyes to those things; or
(iii)has abstained in a calculated way from making such enquiries as an honest and reasonable person would make, about the trust and the application of the trust property; or
(iv)knows of facts which to an honest and reasonable person would indicate the existence of the trusts and the fact of misapplication
I take the statements of the Court in Grimaldi and Bell as the law which applies in respect of the first limb of Barnes v Addy.
Under the first limb of Barnes & Addy, liability does not depend on the recipient having retained any of the property received.
I turn now to consider the evidence in respect of the claim against Mrs Dickson, of which careful and close analysis is required.
In determining the case against Mrs Dickson, I start from the premise that I am satisfied beyond reasonable doubt that between 2007 and 2011 Mr Dickson received in cash from unauthorised sales of Artcraft property to Ferris and Trading Metals the sum of $484,077.18.[50] I bear in mind that it is not enough to prove receipt by Mr Dickson of that amount of cash. To succeed the plaintiffs must prove that Mrs Dickson knowingly received all or some of the funds obtained by converting Artcraft’s property in the sense that she either knew or ought to have known or at least was put on enquiry as to the source of the funds which the plaintiffs have proved Mr Dickson received.
[50] In the statement of claim the total sum alleged to have been misappropriated was $506,436.83. This figure was revised to $484,077.18.

There being no evidence from Mrs Dickson about any of these matters, I find on the basis of Mr Dickson’s evidence that they both did attend to the payment of expenses and bills. That conclusion is also consistent with my own observations of Mrs Dickson during the trial. Although she gave no evidence, I had the opportunity to observe her in proceedings in Court over an extended period. On the days when Mrs Dickson was present, she appeared to be following the proceedings intently, from time to time gave instructions to her solicitors and on other occasions expressed visible reaction either positive or negative to some of the evidence which was then being given.
There was evidence that prior to her employment with the Light Regional Council, she was employed with the Department of Health. There is no reason for me to disbelieve the evidence of Mr Dickson that Mr and Mrs Dickson shared the responsibilities for payment of the family’s living expenses.
There is other documentary evidence which tends to suggest a decrease in payment of ordinary household utilities over the relevant period. An examination of the records in relation to the Hewett property where Mr and Mrs Dickson have been living since 29 May 2009 bolsters this conclusion.
There was evidence from Mr Dickson that during the relevant period the defendants made payments of Council rates, water rates, electricity, gas and other services in connection with the Hewett property. However, there are only three occasions in the records where there is any evidence of payment of Council rates having been made: on 30 September 2009 by way of a CPS cheque for $451.95 to Light Regional Council; on 11 March 2010 through the CPS joint account a payment of $450 to the Light Regional Council; and on 24 June 2010 by way of the CPS joint account an amount of $273.32 to the Light Regional Council.
A rate notice for the Hewett property was tendered in evidence[57] which reveals the rates to be $2,010.79 per annum. Although the payslip from the Light Regional Council tendered in evidence shows that as of March 2014 the rates for the Hewett property were deducted from Mrs Dickson’s pay, I am not satisfied that that arrangement necessarily predated October 2011 when the theft was uncovered. If that were the case, it is unlikely that the three payments to which I have just referred would appear in the records. This is another matter about which Mrs Dickson could have given evidence and could have explained when it was that the Council commenced to deduct funds from her pay for payment of rates.
[57] Exhibit P28B.
The plaintiffs provided a schedule[58] based on Mr Holmes’ analysis of Mr and Mrs Dickson’s general living expenses between January 2007 and October 2011,[59] as per the financial records available to Mr Holmes.
[58] Outline of Submissions of the Plaintiffs dated 7 July 2014 Appendix 4.
[59] Exhibit P20 Appendix 4.4.
The plaintiffs submit that an appropriate basis on which to estimate the general living expenses that would have been incurred but for the use of stolen proceeds is to compare the difference in the expenses as evidenced by cash withdrawals, EFTPOS, Visa and other items in the records prior to September 2007 and the same records after 2007.
It must be accepted that there are some inherent limitations and imprecision in the plaintiffs’ methodology for comparing the apparent expenses evidenced in the records prior to September 2007 with the expenses which occurred after that time. However, the exercise nevertheless clearly demonstrates that there was a significant drop in the total amount of cash withdrawals and EFTPOS, Visa, and other expenses in the years between September 2007 and October 2011. A chart prepared by the plaintiffs’ instructors illustrated that fact in graphic form.[60]
[60] Outline of Submissions of the Plaintiffs dated 7 July 2014 Appendices 3 and 4.
The total figure of $107,529.99 is thus not necessarily an accurate estimate of the total of unlawfully obtained proceeds used to fund living expenses during the relevant period; nevertheless I have concluded the exercise carried out by the plaintiffs is a valid one and provides a proper basis to make a reasonable estimate of the total amount of unlawfully obtained proceeds applied to payment of the family’s living expenses. It could well have been higher.
I bear in mind that it is not possible to be definitive about any particular time when Mrs Dickson acquired the relevant knowledge that funds significantly in excess of their joint legitimate income were being used to fund the family’s lifestyle. The Ferris’ records reveal that Mr Dickson was obtaining cash of between approximately $800 and $1,500 on average once or twice a week. In the early stages in 2007 and 2008, unexplained deposits into their various accounts appears to be sporadic and in relatively small amounts only. For this reason I do not draw any inference that Mrs Dickson was or should have been aware of the excess funds at that early stage.
However, it is evident that as time went on the spending of Mr and Mrs Dickson increased to the point that by the year 2010 financial year there were frequent and large cash deposits into both the HSBC and the joint CPS account and more frequent holidays. In all of the circumstances, I have concluded that by January 2010 the family’s living expenses for the previous year so obviously exceeded their legitimate income that she did have the requisite knowledge.
In reaching this conclusion, I make it clear that I did not include any of the sums arrived at on the basis of any unexplained payments of Trinity College school fees. That is because I am not satisfied on the balance of probabilities that those unexplained payments for school fees were not paid by a third party, for example one of the defendants’ former spouses who were also responsible for some of the school fees.
My own analysis of the banking records satisfies me that Mrs Dickson did receive the benefit of the stolen proceeds paid into the joint CPS account and the HSBC credit card of Mr Dickson from which numerous family expenses were paid.
An analysis of the HSBC credit card account in particular reveals that in the months from January 2010 to October 2011 that credit card was used to pay for travel expenses obviously associated with trips to Sydney, New Zealand and Bali, as well as other living expenses which I infer were part of the family’s living expenses.
In these circumstances, I am satisfied that Mrs Dickson had the benefit of deposits made into that account between January 2010 and October 2011 and that, in all the circumstances, she had the requisite knowledge.
When reaching my conclusion in relation to Mrs Dickson I have taken into account the whole of the evidence tendered in relation to Mr and Mrs Dickson’s financial records. That evidence shows that between September 2007 and October 2011, they spent on average an amount of $1,854.28 per month on general living expenses. The average spent by Mr and Mrs Dickson prior to that date as evidenced by the records available for the period between January to September 2007 show that the defendants were spending on average $4,000 per month up to September 2007. No satisfactory explanation for this decrease in expenditure was provided by Mr Dickson and no explanation was provided by Mrs Dickson. This is despite the fact that on 31 August 2007 Mrs Dickson gave birth to their son BD and was not in receipt of any employment income from April 2008 to October 2008. Between them, Mr and Mrs Dickson had five children, three of whom were dependants at and during the relevant period.
Between September 2007 and October 2011 Mr and Mrs Dickson purchased the following assets, the repayments for which were regularly made.
(a)A property at 4 Carrama Court, Munno Para purchased on 3 August 2007;
(b)A property at 22 Campbell Court, Elizabeth Downs purchased on 28 March 2008;
(c)A property at 15 Brolga Way, Hewett purchased on 29 May 2009;
(d)A property at Marion Bay Caravan Park purchased in May 2011; and
(e)A Range Rover which was purchased on 24 May 2011 in Mrs Dickson’s name for $117,084.
These repayments were made regularly and in addition to payment of school fees for the three children at Trinity College and costs associated with six overseas and interstate holidays between September 2007 and October 2011.
I consider that Mrs Dickson would have been able to provide the Court with an explanation both about the source of the unknown deposits, the decrease in living expenses in their accounts over the four year period, the decrease in cash withdrawals in their accounts, the payment of all their holiday expenses, and the payment of rates and utilities particularly in respect of the Hewett property.
There has been no satisfactory explanation provided for why Mrs Dickson did not give evidence. Her counsel suggested that the only aspect of the plaintiffs’ claim which might have called for an explanation from his client related to two accounts: the joint CPS account and the CPS account of which Mrs Dickson was the sole account holder. However, for the reasons which I have given, I consider that Mrs Dickson did have the benefit of monies received into the HSBC account of Mr Dickson and the benefit of considerable cash expenses not appearing anywhere in the records available to Mr Holmes. Moreover, as she shared equal responsibility with Mr Dickson for the household bills, she was aware of the manner and method by which the defendants paid all their accounts. For this reason she could not fail to have been aware that significant amounts of cash in excess of their income were being used to pay those bills.
Mrs Dickson could have contradicted the evidence of the plaintiffs. She could also have contradicted or clarified the evidence given by Mr Dickson. She has not chosen to do so and she must now accept the consequences.
Conclusion
I conclude that Mrs Dickson was aware that Mr Dickson was bringing cash into the household which could not be explained by his legitimate source of income. She was aware that it was used to fund their lifestyle in each of the ways I have set out earlier in these reasons.
I am not satisfied that she was necessarily aware that there was unexplained cash being injected into the family home from the outset. To my mind the common sense inference to be drawn from the evidence of the bank records is that Mrs Dickson either was aware or should have been aware no later than January 2010 when they embarked on their family holiday to New Zealand. I consider this inference is unavoidable. First because I accept that she with Mr Dickson was equally responsible for payment of the joint family expenses. Second, because I accept that Mrs Dickson had access to the banking records forwarded to their residential home at Hewett. Those records included the joint CPS accounts and the HSBC credit card of Mr Dickson. Third, because no later than January 2010 the family’s joint expenses were of such a magnitude that no honest and reasonable person could fail to have been put on enquiry.
It follows from my findings on the facts that at least by the beginning of 2010 Mrs Dickson had acquired the knowledge necessary to satisfy the requirements of the first limb in Barnes v Addy. Accordingly, I find the plaintiffs have proved that by the beginning of 2010 Mrs Dickson had the requisite knowledge in that she either had actual knowledge that the cash and benefits were trust property belonging to Artcraft, or she wilfully shut her eyes to the obvious, or wilfully and recklessly failed to make such enquiries as an honest and reasonable person would make as to the source of the cash and benefits, or had knowledge of the facts and circumstances which would indicate to an honest and reasonable person that Mr Dickson had stolen these funds from Artcraft.
Accordingly, having regard to the state of the current law in relation to the knowledge requirement for establishing liability under the first limb of Barnes v Addy, as set out earlier in these reasons, then in my view the plaintiffs must succeed in respect of this claim.
I am satisfied on the balance of probabilities that Mrs Dickson was in fact the beneficiary of the unexplained deposits identified by Mr Holmes made into the joint CPS account and into the HSBC credit card account of Mr Dickson. I am satisfied that she was the beneficiary of significant amounts of cash used to fund the family’s joint lifestyle which at that time included numerous holidays.
I am satisfied that Mrs Dickson had the requisite knowledge either because she had actual knowledge of the theft by her husband, or if she did not have actual knowledge she deliberately shut her eyes to the obvious in the sense that, realising that their living expenses so far exceeded their joint legitimate income she nevertheless refrained from asking any questions or making any enquiries as to the source of the funds which any honest or reasonable person in her position would have made.
I strongly suspect that Mrs Dickson was aware of the magnitude of cash coming into the family by way of cash and payment of various bank cards and joint accounts earlier than January 2010. There is necessarily something arbitrary about my conclusion that no later than January 2010 she was aware that she was in receipt of cash not from any legitimate source simply by virtue of its magnitude and consistency at that stage; however the evidence points to her becoming aware much earlier than that date. Nevertheless, as I have explained elsewhere in my reasons, there may have been no reason for Mrs Dickson to have been on notice of the excess amount of money coming into the family at the outset of these thefts because the bank records show relatively small cash deposits made on a sporadic basis into various accounts in the early part of the four year period from September 2007 to October 2011. By 2010 it appears that much larger amounts were being paid off on bank cards and into the joint account and Mr and Mrs Dickson were taking more frequent holidays. By this stage I find that, at the very least, Mrs Dickson wilfully shut her eyes to the obvious.
To express my conclusion in another way; I have some doubt about Mrs Dickson’s state of knowledge before January 2010, however, I am satisfied that no later than January 2010 Mrs Dickson did have the requisite knowledge.
It follows that the plaintiffs’ claim based on the first limb in Barnes v Addy must succeed.
Equitable compensation
I understand the plaintiffs to be claiming equitable compensation in such amount as has been proved to have been actually received by Mrs Dickson. Even though Mrs Dickson’s liability is “accessorial” to Mr Dickson’s breach of fiduciary duty, it does not follow that the compensation she must pay is necessarily the same as Mr Dickson.
Mrs Dickson must pay compensation for the loss to the plaintiffs arising out of her receipt of monies stolen by her husband because she received some of those stolen monies knowingly in the sense required by the first limb in Barnes v Addy. However, she is required to compensate the plaintiffs only to the extent of any monies proved to have actually been received by her. That has been the purpose of the foregoing detailed analysis of the evidence in relation to Mr and Mrs Dickson’s financial records.
In summary, I am satisfied that the monies paid off Mr Dickson’s HSBC account between January 2010 and October 2011 were made with cash obtained from Ferris and Trading Metals. It is particularly significant that the payments made on that credit card during the relevant period were in a large measure payments made for travel expenses incurred in respect of the trip to New Zealand in January 2010, the trip to Bali in October 2010, the trip to Sydney in February 2011 and the trip to Bali in August 2011. To that extent Mrs Dickson was an equal beneficiary with Mr Dickson of those funds.
I accept that the payments made into the CPS account in Mrs Dickson’s sole name are of such amounts as to be consistent at least with the claim made in her affidavit sworn in May 2012 to be from legitimate sources. While I have some doubt as to the source of the two latter deposits of $300 and $600 made in 2011, I am not persuaded to the necessary degree of satisfaction that those deposits were in fact made from the unlawfully obtained proceeds and have not included any of the unidentified deposits on the CPS account in Mrs Dickson’s name solely as part of the calculation of money she is liable to repay.
I have not included as a separate calculation any benefits received by Mrs Dickson in the form of payment of Trinity College school fees for the reasons I earlier explained. In addition, I have not included in the calculation under the heading of costs for living expenses any additional sum for travel expenses. This is to avoid any possible duplication as it is evident that a large part of the Dicksons’ travel expenses were paid using the HSBC credit card and are accounted for in the form of unexplained deposits.
I am satisfied that the unidentified deposits paid off the HSBC credit card between January 2010 and October 2011 were made with proceeds unlawfully obtained from Ferris and Trading Metals.
I am satisfied that the unidentified deposits paid into the joint CPS account were made with unlawfully obtained proceeds.
I am satisfied that Mrs Dickson was also the beneficiary in the form of payment for joint living expenses of a significant portion of the unlawfully obtained proceeds.
In calculating the figure representing the cash and benefits received by way of injection into payment of the family’s living expenses, I have adopted a conservative approach. Accepting as a starting point the figure of $107,529.99 which was the figure arrived at by Mr Holmes’ analysis of the four year period, Mrs Dickson is liable to repay at least a portion of those monies which I find both defendants did receive. It is necessary to allow for any possible errors, omissions or inaccuracies in Mr Holmes’ analysis. Nevertheless I accept that Mr Holmes’ report can be used as it identifies clear patterns of expenses incurred by the defendants during the relevant period. Those patterns were not challenged by either defendant. Thus using the figure of $107,529.99 as a benchmark, Mrs Dickson is liable to repay at least $30,000. That figure equates to $1,500 per month of cash and benefit received by Mrs Dickson between January 2010 and October 2011.
I have found that Mrs Dickson acquired the requisite knowledge no later than January 2010. She must therefore account for those benefits and monies received by her after that date. I find she is liable to pay equitable compensation to the extent of $29,800. That figure is the total of the unexplained deposits made into the CPS joint account and the HSBC credit account of Mr Dickson between the months of January 2010 and October 2011.
I find that she is also liable to pay equitable compensation of $30,000. That figure represents the proportion of cash (in addition to the money received by way of unexplained deposits direct into the back accounts) which I find Mrs Dickson received out of unlawfully obtained proceeds between the months of January 2010 and October 2011.
Alternative claims
As I noted at the outset, the plaintiffs pleaded other causes of action including a claim for restitution on the basis of unjust enrichment and a claim based on liability as a volunteer.
Each of the other pleaded causes of action have their own difficulties and the parties do not seem to have turned their mind to any defences available to the claims made on these alternative bases.[61]
[61] See for example Australian Financial Services and Leasing Pty Limited & Anor v Hills Industries Limited & Ors [2014] HCA 14.
The claim based on receipt of the stolen monies as a volunteer cannot in any event succeed. The plaintiffs have conceded that the cash cannot be traced into acquisition of any property and that it has effectively been dissipated.

In Heperu, Allsop P (with whom Campbell JA and Handley AJA agreed) explained the principle in Black v S Freedman & Co in the following way:[62]
In Black v S Freedman, a husband handed stolen money to his wife who received it as a volunteer. From the terms of the description of the claim against the wife in the judgment of Griffith CJ (at 106) and his description of the evidence and the issues (at 106–109), it is clear that the claim against the wife was based on tracing and the identification of what was in her bank account to have come from the stolen money. It is in this context that the following statements of Griffith CJ were made (at 109):
“But it has been laid down in cases decided long ago that if the alienee is a volunteer the estate may be followed into his hands whether he had notice of the trust or not. … I think that where a man pays a large sum of money to his wife, and no more appears, the inference is that it is a present. Therefore the doctrine of equity is applicable. The money is identified; it came into her hands as a volunteer, and she is liable to repay it. It was pointed out by Sir George Jessel, in a well known case, that a man may at a certain stage be innocent, but that, if he knows that he has got the advantage of a fraud to which he was no party and says he will keep it, then he becomes himself a party to the fraud and is liable to the jurisdiction of the Court of Equity. In the present case the wife says she holds this money for her separate use and claims it for herself, knowing now, at any rate, the circumstances under which it came to be given to her.”
The reference there to liability to repay was in relation to an extant bank account. It was the restoration of an identified fund that was the subject of attention. These statements of Griffith CJ do not support a personal remedy against an innocent recipient (beyond a personal obligation to restore an identified fund or asset) in addition to any proprietary remedy against the identified asset, unless, with knowledge of the character of the advantage from the stolen asset, the recipient seeks to retain the advantage. It was in this sense that Griffith CJ spoke of becoming a party to the fraud (in effect an accessory after the fact). That may give rise to accessory liability in equity, but it is not the same as saying that a volunteer who receives the traceable property of the wronged party comes under a personal obligation to account in money terms for property received as well as a claim to restore the property itself. Barton J agreed with Griffith CJ (at 110).
O'Connor J (at 110–111) agreed with Griffith CJ and then expressed himself somewhat differently, though to the same substantive effect. He said that where money is stolen it is trust money in the hands of the thief and can be followed into the hands of another person. The proprietary character of the remedy can be seen in the last sentence of his reasons (at 111): In all the circumstances, I am of opinion that there was a prima facie case, that she was a volunteer, and that this money retains its character as trust money and she cannot be allowed to keep it.
[62] Heperu Pty Ltd v Belle (2009) 76 NSWLR 230 at [130]-[132].
A claim based on unjust enrichment would not require proof that Mrs Dickson received the stolen monies with the relevant knowledge be it actual or constructive. However, to paraphrase an observation made by the Court in Farah Constructions, the plaintiff did not explain how there could be any justice in permitting restitution against Mrs Dickson if she received the property without the requisite notice.
In the course of the joint judgment in Farah Constructions, the Court stated:[63]
Unjust enrichment is not a “definitive legal principle according to its own terms”. If it were not so, as Gummow J pointed out in Roxborough v Rothmans of Pall Mall Australia Ltd:
“[S]ubstance and dynamism may be restricted by dogma. In turn, the dogma will tend to generate new fictions in order to retain support for its thesis. It also may distort well settled principles in other fields, including those respecting equitable doctrines and remedies, so that they answer the newly mandated order of things. Then various theories will compete, each to deny the others. There is support in Australasian legal scholarship for considerable scepticism respecting any all-embracing theory in this field, with the treatment of the disparate as no more than species of the one newly discovered genus.”
This prediction about the consequences of unjust enrichment for the distortion of equitable doctrines is illustrated by the Court of Appeal's approach in this case. The areas in which the concept of unjust enrichment applies are specific and usually long-established. Recipient liability for breach of trust or fiduciary duty has not been one of them.
[footnotes omitted]
[63] Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [151].
Another observation made by the authors of ‘Remedies for Knowing Receipt’ is pertinent in this context:[64]
Returning to the requirement that a defendant must have received trust property before he can be liable in knowing receipt, we would stress that the reason why this matters is not because the defendant must have been unjustly enriched, but because liability for knowing receipt depends on the defendant owing custodial duties as a trustee of the property. The strict insistence on receipt of property does not make sense, except on this assumption; and it helps to explain why knowing receipt should not be collapsed into either the wrong of dishonest participation in a breach of trust, or into a liability in unjust enrichment.
[footnotes omitted]
[64] Charles Mitchell and Stephen Watterson, ‘Remedies for Knowing Receipt’ in Charles Mitchell (ed.) Constructive and Resulting Trusts (Hart Publishing, 2010) at 157.
In my view the claim against Mrs Dickson based on the equitable principle of unjust enrichment is misconceived.
In the end the plaintiffs’ case against Mrs Dickson was presented principally on the basis of her liability as a knowing recipient within the first limb of Barnes v Addy and in the light of my findings that she is liable under that limb I do not propose to grapple any further with the difficulties in respect of the alternative causes of action.
Conclusion
As against the first defendant the plaintiffs are entitled to an award of general damages at least to the value of the new metal as estimated by Mr Holmes pursuant to the method of calculation identified as loss calculation 1. That figure is $1,018,888. The plaintiffs are also entitled to general damages in an amount equal to the total of the cash received by Mr Dickson from Ferris and Trading Metals for the scrap metal. The figures will need to be adjusted to reflect the amount already received by the plaintiffs by way of compensation already paid by Ferris ($253,000) and the value of the aluminium seized by the police and returned to the plaintiffs. In addition the plaintiffs claim an amount representing GST. I will hear the parties as to whether the final calculation of the damages should include GST.
The plaintiffs are also entitled to an award of exemplary damages which I fix at $50,000.
As against the second defendant the plaintiffs are entitled to equitable compensation of $59,800.
I shall hear the parties as to interest and costs.
Appendix 1
Table A[65]
[65] See Exhibit P19, page 18.

Loss Calculations ($)

(excl GST)

Type

Kg

1

2

3

4

Cuttings

232,693

917,046

847,853

632,925

1,196,042

Extrusions

26,460

93,824

93,194

83,614

158,760

Total (Excl Scrap Metals)

259,153

1,010,870

941,047

716,539

1,354,802

Total (Incl Scrap)

299,076

Loss Calculation 1 – average cost price paid for New Metal purchases in the month that New Metals were sold to Ferris (ie “Rolling Average Price Paid”).
Loss Calculation 2 – lowest cost price paid for New Metals purchases, in the month that New Metals were sold to Ferris (ie “Rolling Lowest Price Paid”).
Loss Calculation 3 – lowest cost price paid for New Metal purchases for the relevant period.
Loss Calculation 4 – highest cost price paid for New Metal purchases for the relevant period.
Table B[66]
[66] See Exhibit P23, page 3.

Loss Calculation ($)

(excl GST)

Type

Volume (Kgs)

1

Extrusions

26,460

93,221

Cuttings

232,693

925,667

Subtotal (excl scrap)

1,018,888

Scrap

39,923

0

TOTAL

299,076

1,018,888

Loss Calculations ($) (excl GST)
Type	Kg	1	2	3	4
Cuttings	232,693	917,046	847,853	632,925	1,196,042
Extrusions	26,460	93,824	93,194	83,614	158,760
Total (Excl Scrap Metals)	*259,153*	1,010,870	941,047	716,539	1,354,802
Total (Incl Scrap)	299,076

Loss Calculation ($) (excl GST)
Type	Volume (Kgs)	1
Extrusions	26,460	93,221
Cuttings	232,693	925,667
Subtotal (excl scrap)	1,018,888
Scrap	39,923	0
TOTAL	*299,076*	1,018,888