Break Fast Investments Pty Ltd v Giannopoulos

[2011] NSWSC 1508

Supreme Court

New South Wales

Medium Neutral Citation:	Break Fast Investments Pty Ltd v Perikles Giannopoulos (also known as Perry Giannopoulos) & Anor (No 5) [2011] NSWSC 1508
Hearing dates:	17 - 19 October 2011, 27 October 2011, 1-3 November 2011
Decision date:	09 December 2011
Jurisdiction:	Equity Division
Before:	Black J
Decision:	Claim in unjust enrichment established; opportunity for further submissions as to quantum of relief
Catchwords:	EQUITY - trusts - constructive trust - liability for knowing receipt and knowing assistance REAL PROPERTY - indefeasibility - in personam exceptions to indefeasibility - whether available in respect of claim for monies received by volunteer and applied to reduction of mortgage RESTITUTION - monies had and received - liability of volunteer recipient of funds
Legislation Cited:	- Corporations Act 2001 (Cth) ss 128, 129 - Civil Procedure Act 2005 (NSW) - Real Property Act 1900 (NSW) s 42
Cases Cited:	- Austotel Pty Ltd v Franklins Self-Serve Pty Ltd (1989) 16 NSWLR 582 - Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662 - Australian Capital Television Pty Ltd v Minister for Transport and Communications (1989) 86 ALR 119 - Bahr v Nicolay [No 2] [1988] HCA 16; (1988) 164 CLR 604 - Banque Belge Pour L'Etranger v Hambrouck [1921] 1 KB 321 - Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221 - Barclays Finance Holdings Ltd v Sturgess & Ors (1985) 3 ACLC 662 - Barnes v Addy (1874) LR 9 Ch App 244 - Bell Resources Holdings Pty Ltd v Commissioner of The ACT Revenue Collections (1990) 22 FCR 178; 2 ACSR 211 - Black v S Freedman & Co [1910] HCA 58; (1910) 12 CLR 105 - Belmont Finance Corp Ltd v Williams Furniture Ltd (No 2) [1980] 1 All ER 393 - Bofinger v Kingsway Group Ltd [2009] HCA 44; (2009) 239 CLR 269 - Boscawen v Bajwa [1996] 1 WLR 328 - Briginshaw v Briginshaw (1938) 60 CLR 336 - Burston Finance Ltd v Speirway Ltd [1974] 1 WLR 1648 - Challenger Managed Investments Ltd v Direct Money Corporation Pty Ltd [2003] NSWSC 1072; (2003) 59 NSWLR 452; 12 BPR 22,257 - Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] Ch 105 - Ciaglia v Ciaglia [2010] NSWSC 341; (210) 269 ALR 175 - Cochrane v Cochrane (1985) 3 NSWLR 403 - Commonwealth Bank of Australia v Mohamed Saleh [2007] NSWSC 903 - Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394 - Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 - Cook v Italiano Family Fruit Co Pty Ltd (in liq) [2010] FCA 1355; (2010) 190 FCR 474 - David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 - Fabre v Arenales (1992) 27 NSWLR 437 - Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 - Ford by his Tutor Watkinson v Perpetual Trustees Victoria Ltd [2009] NSWCA 186; (2009) 75 NSWLR 42 - Foskett v McKeown [2000] UKHL 29; [2001] 1 AC 102 - Gerard Cassegrain & Co Pty Ltd v Cassegrain [2011] NSWSC 1156 - Gertch v Atsas [1999] NSWSC 898; (1999) 10 BPR 18,431 - Gillies v Downer EDI Ltd [2011] NSWSC 1055 - Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101 - Ghana Commercial Bank v Chandiram [1960] AC 732 - Heperu Pty Ltd v Belle [2009] NSWCA 252; (2009) 76 NSWLR 230 - Heperu Pty Ltd v Belle [2011] NSWSC 1151 - Jones v Dunkel (1959) 101 CLR 298 - Kalls Enterprises Pty Ltd (in liq) v Baloglow [2007] NSWCA 191 - LHK Nominees Pty Ltd v Kenworthy [2002] WASCA 291; (2002) 26 WAR 517 - Linter Group Ltd v Goldberg (1992) 7 ACSR 580; 10 ACLC 739 - Lithgow City Council v Jackson [2011] HCA 36; (2011) 281 ALR 223 - Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 - Lurgi (Australia) Pty Ltd v Gratz [2000] VSC 278 - Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 - National Australia Bank Ltd v Rusu [2001] NSWSC 32 - Perpetual Trustees Australia Limited v Heperu Pty Ltd [2009] NSWCA 84; (2009) 76 NSWLR 195 - Phetteplace v Bucklin (1893) 18 R 1297 - Raulfs v Fishy Bite Pty Ltd [2011] NSWSC 105 - Re Diplock; Diplock v Wintle [1948] Ch 465 - Re Hill (1974) 23 FLR 329 - Robb Evans of Robb Evans & Associates v European Bank Ltd [2004] NSWCA 82; (2004) 61 NSWLR 75 - Robins v Incentive Dynamics Pty Ltd (in liq) (2003) 45 ACSR 244; 175 FLR 286; 21 ACLC 1030; [2003] NSWCA 71 - Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 - Port of Brisbane Corporation v ANZ Securities Ltd (No 2) [2002] QCA 158; [2003] 2 Qd R 661 - Saraceni v Mentha [2011] WASC 94 - Selanger United Rubber Estates Ltd v Cradock (No 3) [1968] 2 All ER 1073; [1968] 1 WLR 155 - Smith v Samuels (1976) 12 SASR 573 - Southern Cross Commodities Pty Ltd (in liq) v Ewing (1988) 14 ACLR 39 - State Bank of New South Wales Ltd v Swiss Bank Corporation (1995) 39 NSWLR 350 - Stuart v Kingston [1923] HCA 17; (1923) 32 CLR 309 - Super 1000 v Pacific General Securities [2008] NSWSC 1222; (2008) 221 FLR 427 - The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1; 225 FLR 1; 70 ACSR 1; [2008] WASC 239 - Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 - Wambo Coal Pty Ltd v Ariff & Anor [2007] NSWSC 589; (2007) 63 ACSR 429 - Westpac Banking Corporation v Ollis [2007] NSWSC 956 - Westpac Banking Corporation v Toksoz & Anor [2010] NSWSC 1509
Texts Cited:	- J D Heydon, Cross on Evidence, 8th Australian ed, 2010 - P Butt, Land Law, 6th ed, 2010 - K Mason, J W Carter & G J Tolhurst, Mason & Carter's Restitution Law in Australia, 2 ed, 2008 - R P Meagher, J D Heydon & M J Leming, Meagher, Gummow & Lehane's Equity: Doctrines and Remedies, 4th ed, 2002
Category:	Principal judgment
Parties:	Break Fast Investments Pty Ltd (Plaintiff) Perikles Giannopoulos (also known as Perry Giannopoulos) (First Defendant) Sandra Faraone (Second Defendant)
Representation:	Counsel: R.E. Dubler SC/C. Salpigtidis (Plaintiff) M.K. Condon (First and Second Defendants) Solicitors: Proctor Phair Lawyers (Plaintiff) Sage Solicitors (First and Second Defendants)
File Number(s):	10/147040

Judgment

1. These proceedings arise out of payments totalling $317,000 ("Monies") made by the Plaintiff ("Break Fast") to the First Defendant ("Mr Giannopoulos") that were, Break Fast contends, made by a former director of Break Fast, Mr Christos Voukidis ("Mr Voukidis") without authority and in breach of duty. This matter arises from two connected transactions that involve common individuals but different corporate entities. The first is the purchase and sale of Unit 1201 ("Unit 1201") in a property situated at Clarence Street in Sydney ("Clarence Street property") by Clarence Street Pty Limited ("CSPL") and the second is the payments made by Break Fast to Mr Giannopoulos. Both parties rely on aspects of these transactions to support their respective positions.

1. It is necessary to say something further as to the identity of the persons involved in these transactions. Mr Giannopoulos is Mr Voukidis' first cousin and has worked with him for several periods in his working life. The Second Defendant ("Ms Faraone") is Mr Giannopoulos' wife. Mr Voukidis was a director of CSPL until 27 February 2008 and a director of Break Fast until 12 April 2010. Other persons who play important roles in the proceedings are Mr Theodore Baker, a director of Break Fast throughout the relevant period, and Mr Nicholas Anastasopoulos, a director of CSPL and a director of Break Fast since 25 November 2009. Messrs Giannopoulos, Baker and Anastasopoulos and Ms Faraone gave evidence in the proceedings. Mr Voukidis did not give evidence in the proceedings.

1. It appears that Mr Baker held 2 of the 4 shares in Break Fast; Mr Voukidis held the third share; and another company associated with Messrs Voukidis, Baker and Anastasopoulos, Oxley Group Finance Pty Ltd ("Oxley") held the fourth share in Break Fast. There was also in evidence before me a draft Joint Venture Agreement in respect of Break Fast that raised the possibility (which has been the subject of other proceedings in the Supreme Court of Victoria) that other parties had interests in a joint venture involving Break Fast.

1. The Third Defendant in the proceedings is Citigroup Pty Limited (to which I will refer as "Citibank") which was a lender to Mr Giannopoulos in respect of Unit 1201 and a property subsequently purchased by the Defendants ("Homebush property") and currently holds a mortgage over the Homebush property. Orders were made by consent between Break Fast and Citibank, which were not opposed by the Defendants, which deal with the effect of any orders for subrogation made in the proceedings and had the result that Citibank was relieved from the obligation to file and serve a Defence in the proceedings and was excused from attending the hearing.

1. The Amended Statement of Claim filed by Break Fast is complex and somewhat convoluted but the Defendants took no objection to its form. I have also had reference to a "Schedule of Claims and Relief" provided by Break Fast as indicating the relief which is sought in respect of its various causes of action.

1. In broad terms, Break Fast claims relief in unjust enrichment, under the principles in Black v S Freedman & Co [1910] HCA 58; (1910) 12 CLR 105, in subrogation and for knowing receipt and knowing assistance under the principles in Barnes v Addy (1874) LR 9 Ch App 244 . The major issues which need to be determined in the proceedings are:

• whether the payments by Break Fast to Mr Giannopoulos were unauthorised and whether a claim for unjust enrichment is available in that situation;
• estoppel, change of position and other defences raised by the Defendants in response to the unjust enrichment claim;
• the quantum of any relief available under the unjust enrichment claim;
• whether a claim under the principles in Black v S Freedman & Co is established;
• whether a claim to subrogation is established;
• whether claims under the knowing receipt and knowing assistance limbs of Barnes v Addy are established; and
• whether proprietary and/or other remedies are not available to Break Fast by reason of s 42 of the Real Property Act 1900 (NSW).

The witnesses

1. There were several difficulties with Mr Giannopoulos' evidence. Notwithstanding his apparently clear recollection of conversations in some detail in his affidavit, he claimed to have little recollection of numerous matters under cross-examination. The events in issue in the proceedings involved conduct on the part of Mr Giannopoulos that was, at best, commercially inappropriate and on occasion misleading and his evidence as to aspects of these matters in cross-examination was unconvincing. In particular, Mr Giannopoulos failed to include any profit made by the option arrangements in respect of the Clarence Street property in his taxable income and I do not accept his evidence that he did not recall whether he had done so (see paragraph 16 below); the evidence establishes that he purchased Unit 1201 at an undervalue, in a transaction implemented by CSPL and its principals in order to seek to protect against a claim by the builder in respect of the Clarence Street property (see paragraph 25 below); and he provided misleading information to Citibank in respect of his loan application and I do not accept his evidence in cross-examination seeking to treat the accuracy of information in that application as the responsibility of the mortgage broker rather than himself (see paragraph 22 below). Mr Giannopoulos' response to questions as to these matters must impact on my assessment of his credit generally and I consider his evidence should be approached with caution. No matters emerged in the cross-examination of Ms Faraone which were improbable or which led me to form an adverse view as to her credit.

1. Break Fast also draws attention to the Defendants' failure to lead evidence from Mr Voukidis and submits that a Jones v Dunkel ((1959) 101 CLR 298) inference should be drawn that Mr Voukidis' evidence would not assist the Defendants as to any relevant matter. In Fabre v Arenales (1992) 27 NSWLR 437 at 449-450, Mahoney JA (with whom Priestley and Sheller JJA concurred) observed that the significance to be attributed to the fact that a witness did not give evidence depended upon whether it was to be inferred that the reason the witness was not called was because the party expected to call him feared to do so, and that such an inference would not be available or would be of little significance if the reason why the witness was not called had no relevant relationship with the fact in issue and was, for example, because the witness had a reason for refusing to assist and the party who might call him was aware of this. Their Honours also observed that a party was not required to call a witness "blind", under pain of a detrimental inference. Cross on Evidence , 8 th Australian ed, 2010 observes that the rule has no application if the failure is explained by a reasonable explanation for not compelling the witness's attendance by subpoena, and notes that an explanation may arise from the fact that calling the witness would cause jeopardy or grave prejudice to the witness: Smith v Samuels (1976) 12 SASR 573 at 581.

1. It is plain that Mr Voukidis and Mr Giannopoulos had a close relationship and there is evidence that Mr Voukidis has provided assistance to Mr Giannopoulos in respect of the conduct of the proceedings, including making documents available to Mr Giannopoulos. It appears that Mr Giannopoulos took steps to seek evidence from Mr Voukidis, but Mr Voukidis declined to provide voluntary evidence on the advice of his legal advisers, in circumstances that he is a defendant in other proceedings brought by Break Fast in the Supreme Court of Victoria. In my view, it can properly be said that Mr Voukidis was a witness in Mr Giannopoulos' camp, given the evidence of cooperation between them in preparation of the proceedings. However, I do not think that a Jones v Dunkel inference that Mr Giannopoulos did not call Mr Voukidis because his evidence would not assist should be drawn as a matter of common sense. Given the evidence that Mr Voukidis had been advised by his legal representatives not to provide an affidavit in these proceedings, and the existence of the Victorian proceedings brought against Mr Voukidis, the more likely inference is that Mr Giannopoulos did not wish to take the risk of calling Mr Voukidis on subpoena, in circumstances that he was opposed to giving such evidence and would potentially suffer adverse consequences from doing so.

1. The Defendants made several criticisms of evidence of Mr Baker, who gave evidence in Break Fast's case, including that he had no recollection of some events; declined to alter his position when confronted with evidence that the Defendants contended had contradicted that position; and avoided answering questions which asserted propositions which were contrary to his case, and these criticisms had some justification. There were some difficulties with Mr Baker's recollection of events, including that he initially did not recall, and then on cross-examination denied, receiving an email from Mr Giannopoulos dated 22 September 2005 (Baker 13.10.11 [53] and T53.40 where Mr Baker observed that "I think I said numerous times I did not receive that email"). That email was ultimately located when Mr Baker's computer was forensically examined, together with a response by Mr Baker and a further email from Mr Giannopoulos. Mr Baker then asserted in cross-examination that he "probably" sent an email response to Mr Giannopoulos' email but that assertion was inconsistent with his previous evidence that he did not recall receiving Mr Giannopoulos' email and with the fact that no such response was located on his computer. It was plain that Mr Baker was alert to the issues in the case and he was, in my view, anxious to advance Break Fast's case in giving his evidence and reluctant to make any concession which might be inconsistent with that case. On occasions, his evidence was non-responsive. I consider his evidence should also be approached with caution.

1. The Defendants also criticised Mr Baker's approach to discovery, on the basis that Mr Baker did not undertake comprehensive searches for discoverable documents and, in particular, failed to produce notebooks that recorded relevant events in 2005. I do not consider that those criticisms were ultimately shown to be well-founded, given Mr Baker's evidence as to the extent of the searches that had been undertaken, and the fact that the Defendants have not established that the documents which were not made available on discovery are in Mr Baker's care, custody and control. I also do not accept the Defendants' criticism of the extent of email searches undertaken by Mr Baker, and I note that the additional emails which were located when Mr Baker's computer was examined by a forensic specialist were not shown to have been capable of being identified by the searches which Mr Baker had said he had made. The Defendants also made various criticisms of the extent to which Mr Baker had reviewed his personal bank records prior to giving evidence but I do not think that the Defendants established that Mr Baker was under any obligation to undertake such a review as to warrant adverse comment in that regard.

1. An attack was also made by the Defendants upon the credit of Mr Anastasopoulos, who also gave evidence in Break Fast's case, having regard to issues as to the adequacy of his production of documents in response to subpoena. Although there were plainly inadequacies in that production, I do not consider that the Defendants have established that those inadequacies were deliberate or such as to impugn Mr Anastasopoulos' credit.

Chronology of events

1. Because the transactions relating to the Clarence Street property, Unit 1201 and the payments by Break Fast to Mr Giannopoulos are interconnected, it is useful to set the evidence surrounding them in a single chronology. I will refer below to those facts which are established by documentary evidence and also to the key witnesses' evidence in respect of several of these events. I have had regard to the issues which I have noted above as to the witnesses' credit in assessing that evidence.

1. The Clarence Street property was developed by CSPL, which was appointed as venture manager to develop that property under a Joint Venture Agreement dated 6 September 2001. On 4 June 2002, CSPL entered a Put and Call Option with Mr Giannopoulos in respect of level 4 of the property (Giannopoulos 3.10.11, Ex PG-1). Mr Giannopoulos paid $300,000 for the option plus GST. There is difficulty in accepting Mr Giannopoulos' evidence that he understood the Put and Call Option over level 4 of the Clarence Street property to be effective in accordance with its terms, where that would have required him to purchase level 4 of the Clarence Street property for a purchase price of $2.45 million when his annual income was at that time $120,000 per annum (T166). I am not satisfied that Mr Giannopoulos' evidence that he then had shares in another entity and could have sought assistance from his parents (T167) provided an adequate answer to that difficulty.

1. A letter dated 3 February 2003 between CSPL and Mr Giannopoulos varied the Put and Call Option by substituting level 4 for level 5 as the property the subject of the option. The letter of variation also provided that Mr Giannopoulos would not exercise the call option in respect of level 5 and that he consented to the sale of level 5 by CSPL, in consideration of which he was to receive any net proceeds of sale of level 5 exceeding $2,450,000 (exclusive of GST) following completion of the sale. CSPL then entered into a contract of sale of land to a third party in respect of level 5 for the sum of $2,650,000 on 4 February 2003 and that sale settled in December 2003. The variation of the Put and Call Option from level 4 to level 5, at a time that a buyer had been found for level 5 but not for level 4, was plainly to Mr Giannopoulos' advantage and CSPL's disadvantage.

1. Although Mr Giannopoulos gave evidence of his understanding that he had obtained a profit on the sale of level 5, he claimed not to recall whether he had declared that profit in his tax returns. I do not accept Mr Giannopoulos' evidence in that regard. The profit made on this transaction would have been material to Mr Giannopoulos having regard to his income, and the corresponding tax liability would also be material where he had not received that profit in cash, and I regard it as highly unlikely that Mr Giannopoulos would not now recall how he had dealt with that tax liability. The evidence establishes that Mr Giannopoulos did not in fact include any profit in respect of the option arrangements in respect of the Clarence Street property in his taxable income for the relevant year.

1. In January 2004, Mr Voukidis put a proposal to Mr Giannopoulos that Mr Giannopoulos should invest in Unit 1201 in the Clarence Street property. Mr Giannopoulos' evidence is that the purchase price for the apartment was to be $905,000 and Mr Voukidis told him that:

"All you need to do is roll over the $550,000 that you are due to receive from the sale of the option into the Apartment and we will put in the rest and then upon resale of the property you will receive a further $200,000 and we will receive the balance. Our intention is to fitout and resell the apartment within 6 to 12 months and we have independent valuations that suggest the apartment would sell for a return of approximately $2 Million." (Giannopoulos 3.10.11, [15]-[17])

Mr Giannopoulos' evidence is that he was also told by Mr Voukidis of litigation between CSPL and a builder which had worked on the Clarence Street property and the need to "show the sale of the unit is at arm's length", notwithstanding that he was also told that the transaction would be effected by him providing personal cheques to CSPL and Mr Voukidis and others arranging for money to be deposited into his account to pay for the cheques (Giannopoulos [19]).

1. Communications between Mr Giannopoulos and his solicitor in relation to the purchase of Unit 1201 in the first half of 2004 indicates an expectation that a Mr Crotti, and subsequently Mr Baker, would be loaning funds in respect of the purchase of the unit. In particular, it appears that it was contemplated in conversations between Mr Giannopoulos and his solicitor in March 2004 that Mr Baker would provide the funds for the purchase of Unit 1201 (Ex PG19, PG24). It is probable, on the evidence, that Mr Voukidis rather than Mr Baker was the source of that information. Mr Baker's evidence is that he was not informed of, nor party to, any proposal involving the sale of Unit 1201 to Mr Giannopoulos at the time it occurred (Baker 13.10.2011 [31]). It was put to Mr Baker that in 2004 he was contemplating advancing funds in relation to Mr Giannopoulos' purchase of Unit 1201 but he denied that proposition (T47). On balance, I accept Mr Baker's evidence in this regard.

1. Contracts for the sale of Unit 1201 were exchanged on 6 May 2004 and Mr Giannopoulos' company, Connor FC Pty Ltd ("Connor FC"), provided a cheque in the sum of $90,500 on account of the deposit, on Mr Voukidis' undertaking that it would not be banked (Giannopoulos 3.10.11 [27]).

1. On 21 June 2004, CSPL and Mr Giannopoulos executed a "Deed of Set-Off and Release" by which CSPL acknowledged the variation of the Put and Call Option Agreement and, by clause 2(a), acknowledged that the sum of $550,000 was due to Mr Giannopoulos (Ex PG 37, D3), which was applied to the purchase of Unit 1201. Mr Baker gave evidence in cross-examination of his understanding that an amount of $500,000 was payable to Mr Giannopoulos in respect of the transaction (T80). Settlement of the sale of Unit 1201 occurred on 22 June 2004 and Mr Giannopoulos provided a personal cheque in the amount of $265,748.15 from Connor FC. Mr Giannopoulos gives evidence of a conversation with Mr Voukidis that the cheque would not be deposited until funds were provided to him (Giannopoulos 3.10.11 [31]). Mr Giannopoulos was advised by his solicitors that the settlement process proposed was "highly unusual" and had the potential to lead to claims from CSPL in the event of insolvency or a change in its shareholders or directors.

1. Mr Giannopoulos gave evidence of a conversation with Mr Voukidis just before or just after settlement of Unit 1201 in words to the following effect, which was admitted as evidence of the conversation not as proof of the facts asserted:

[Voukidis]: "Theo [Baker] hasn't contributed his share of the funds to finish off the apartments. Will you take out a loan to assist us?"

[Giannopoulos]: "I don't mind, but who will pay the loan off?"

[Voukidis]: "Theo [Baker] will pay the loan repayments. You will not be responsible for the loan."

At some point in this conversation Chris [Voukidis] told me [Giannopoulos] the proposed loan was to be in the order of $1 million.

[Giannopoulos:] "That's fine as long as I don't have to pay the loan off". (Giannopoulos [34]).

1. Mr Giannopoulos' evidence was that he was subsequently contacted by a finance broker who told him "[t]he guys have asked me to arrange a loan for the unit at Clarence Street". Mr Giannopoulos applied to Citibank for a loan of $1.2 million by an application dated 19 May 2004 (Ex P7). The information provided to Mr Giannopoulos in respect of his loan application to Citibank was incomplete and misleading, although he attributed this to the conduct of the mortgage broker who completed the relevant form, notwithstanding that Mr Giannopoulos signed that form. In particular, the information provided to Citibank did not disclose the fact that there were other parties interested in the loan (assuming the correctness of Mr Giannopoulos' account that Messrs Baker, Anastasopoulos and Voukidis were taking responsibility for the loan payments); information provided as to rental income from the unit was incorrect where Mr Giannopoulos understood that he was entitled to occupy the property and in fact did so; and information as to monies on deposit contained in the loan application was also incorrect.

1. A valuation report prepared for the purposes of the Citibank loan referred to a value of Unit 1201 at 28 June 2004 of $1.9 million, while noting the need for minor works to be finished including carpets, rear terrace areas, bathroom fit-outs, staircase balustrade and electrical work.

1. A loan approval was received from Citibank in the amount of $1,045,000 on 7 July 2004 and that loan settled on 29 July 2004 with the payment of $1,040,554 (being the net proceeds from the loan after payment of loan fees) into Mr Giannopoulos' Citibank Offset Savings Account ("Offset Account"). The proceeds of the Citibank loan were subsequently disbursed in accordance with Mr Voukidis' directions (Giannopoulos 3.10.11 [39]-[40]), by payment of $544,000 to Jeddah Projects Pty Limited, a company controlled by Mr Voukidis; $396,603.60 to Connor FC; and $50,000 to Community Life Limited, a company associated with Mr Baker, with an amount of $49,950.40 remaining in the Offset Savings Account to pay future interest on the Citibank loan. Mr Giannopoulos' evidence was that the amount paid to Connor FC was used to permit the cheques which he provided at settlement of the property to be presented by CSPL and to reimburse him the costs of stamp duty and legal fees for the purchase. Mr Giannopoulos' evidence was also that he asked Mr Voukidis why a payment was being made to Mr Baker (or his company) in the amount of $50,000 and was informed that "[b]ecause Theo [Baker] was paying the loan, he wanted some of the money" (Giannopoulos [46]). Mr Baker's evidence was that the amount of $50,000 repaid to Community Life was in part repayment of funds previously advanced by Mr Baker (T29.24). It is not necessary to resolve the dispute as to this matter for the purpose of these proceedings.

1. Mr Giannopoulos resided in Unit 1201 from about December 2004 until about July 2010 (Giannopoulos 3.10.11 [52]-[53]). Mr Giannopoulos' evidence on cross-examination was that he understood that he was the registered proprietor of Unit 1201 but that he was holding it on behalf of the shareholders in CSPL and that should not be revealed on the face of any documents, both so that the builder would not find out and also because there was an issue with home warranty insurance (T177). Mr Baker's evidence was that he first became aware that Mr Giannopoulos had moved into Unit 1201 in early 2005 and that Mr Voukidis informed him that "[CSPL] will get the benefit" and that "[o]nce the units are sold the profits will flow through to [CSPL]" (Baker 13.10.11 [44]). Mr Baker gave evidence of having been told by Mr Voukidis in the first half of 2005 that:

"We had to raise finance to do the fitout so the units were sold to friendly parties ... the units are being held for [CSPL]. They will be sold soon. When they are sold the profits will be realised by [CSPL]."

Mr Baker also gave evidence that he was told by Mr Voukidis of the need to keep the units out of CSPL "in case the litigation with the builder goes bad" (Baker 13.10.11 [45]).

1. Mr Giannopoulos' evidence was that he requested Mr Voukidis to have Mr Baker start making the repayments on the Citibank loan in March 2005, and that a payment of $15,000 was deposited into the Offset Account with the description "Direct Credit Netbank Peri-Clarence" on 18 May 2005 which he assumed was made by Mr Baker, who (to Mr Giannopoulos' knowledge) banked with the Commonwealth Bank. Mr Baker's evidence was that he did not recall making a payment to Mr Giannopoulos' Citibank account on 18 May 2005 and had not searched his bank accounts to determine whether such a payment had been made (T40). Mr Baker subsequently said that he did not believe that he made the payment (T41.24).

1. A series of emails were exchanged between Messrs Giannopoulos, Voukidis, Anastasopoulos and Baker in September 2005 concerning the Citibank loan to which I will refer below. Oxley made a payment to the Citibank Offset Account on 27 March 2006 (T157, Ex PG60). There was further correspondence between Messrs Giannopoulos, Voukidis and Baker on 16-17 May 2006 to which I will also refer below. Mr Giannopoulos' evidence was that he was again told by Mr Voukidis that Mr Baker would make the payments on the Citibank loan when he followed up with Mr Voukidis before he departed for his honeymoon in June 2006.

1. Payments were made by Break Fast to Mr Giannopoulos' Citibank Offset Savings Account from May 2006 until October 2009 (Baker 23.9.11 [31]; Giannopoulos 3.10.11 [85]). They were variously described in narrations to the payments as "Direct Credit Bfi - loan - Careerpath" (Giannopoulos [89]-[90]) and "Direct Credit Transfer Interest/Dir Fee" (Giannopoulos [95]-[96]). Mr Giannopoulos' evidence is that he noticed that an amount was deposited into the Offset Account on 26 May 2006, and that he believed the payment came from Mr Baker and did not know what the reference to "Bfi" related to and did not associate those letters with Break Fast. Mr Giannopoulos also gave evidence that he believed that subsequent deposits made with a notation referring to "Careerpath" were made by Mr Baker as Career Path was, to his knowledge, also Mr Baker's company. He gave evidence that he did not recall if he noticed the change in the narration which occurred in May 2008, but it did not cause him to change his belief as to the source of the payments. Mr Baker's evidence was that he did not authorise and was not aware of the payments made by Break Fast to Mr Giannopoulos which Mr Voukidis had arranged from Break Fast funds without his authority. I will reach findings as to whether those payments were authorised by Break Fast below.

1. Mr Giannopoulos and Ms Faraone married in June 2006, resided together at Unit 1201 from July 2006, exchanged contracts to purchase the Homebush property for the sum of $896,000 on 8 December 2007 and completed the purchase of the Homebush property in January 2008 (Giannopoulos 3.10.11 [107]-[109], [111]).

1. In March 2008, Mr Voukidis requested Mr Giannopoulos to change the Citibank loan in respect of Unit 1201 to make it interest only.

1. Mr Baker advised Mr Giannopoulos on 30 October 2009 that the payments which had been made to him by Break Fast were not authorised and sought to require that those amounts be repaid to Break Fast (Baker 13.10.11, Ex TB-10). Mr Baker reiterated the claim that Mr Giannopoulos was not entitled to those payments on 30 November 2009 (Baker 23.9.11 [34]).

1. Contracts for the sale of Unit 1201 were exchanged on 21 May 2010 and the sale of the unit proceeded, after a caveat had been lodged by Break Fast and with Break Fast's consent, on condition that the surplus proceeds from the sale be paid in reduction of the Defendants' mortgage over the Homebush property (Giannopoulos 3.10.11 [121]). On settlement of the sale of Unit 1201 on 30 July 2010, Mr Giannopoulos paid the balance of the proceeds in the amount of $240,423.38 into the Homebush Offset Mortgage Account and $42,247.07 into the Homebush Offset Savings Account (Giannopoulos 3.10.11 [123]).

Claim in unjust enrichment

1. Break Fast brings a personal claim in unjust enrichment against Mr Giannopoulos (Amended Statement of Claim [6M]) and Ms Faraone (Amended Statement of Claim [6CC], [9], [11]-[12]). Break Fast contends that a remedy in unjust enrichment is available where the Defendants have obtained a benefit at the expense of a plaintiff and a vitiating factor such as misappropriation is present: David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 378-379. A claim for monies had and received may be established in respect of monies paid over without authority, which remain the property of the payer, unless a third party has received the money in good faith and for valuable consideration: Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 at 572. In Heperu Pty Ltd v Belle , [2009] NSWCA 252; (2009) 76 NSWLR 230, the Court of Appeal held that an action at law in money had and received is available to restore the value of the benefit retained by a volunteer where that benefit is traceable in equity from misappropriated funds (at [144], [153]). I will refer further to that decision below.

1. The Defendants contend that Break Fast cannot maintain its unjust enrichment claim by reason of the High Court's decision in Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89. The Defendants contend that the High Court considered there was no role for a claim founded on unjust enrichment in the case of breaches of fiduciary duty. I am, of course, bound by the High Court's decision that a claim in unjust enrichment should not be permitted in substitution for a claim for knowing receipt under the first limb of Barnes v Addy . However, I do not consider that the decision in Farah Constructions excludes an unjust enrichment claim arising from payments made without authority, as distinct from payments made with authority but in breach of directors' or officers' duties. The High Court referred (at [141]) without disapproval to the decision in Lipkin Gorman v Karpnale Ltd , which allowed a claim for unjust enrichment in respect of an unauthorised payment, and also referred to the common law cause of action in money had and received arising in the case of a payment made with a vitiating factor such as mistake, duress or illegality and noted that no such factor had not been identified in Farah Constructions beyond the director's alleged breach of fiduciary duty (at [150]); see also Heperu Pty Ltd v Belle at [152]. In this case, Break Fast's claim for unjust enrichment does not depend upon an allegation of breach of fiduciary duty but rather upon an allegation that the relevant payments were made without its authority.

1. I will deal below with a defence raised by the Defendants under s 42 of the Real Property Act , so far as the Plaintiffs seek proprietary relief in respect of Unit 1201 or the Homebush property. I am conscious of Rein J's observation in Raulfs v Fishy Bite Pty Ltd [2011] NSWSC 105 at [88].

"... There seems to be considerable force in the proposition that in the absence of a claim that meets the requirements of Barnes v Addy , as laid down in Consul Development and confirmed in Farah , and in the absence of conduct falling within the fraud exception, there is no scope for an in personam claim independent of a claim against a fund or property in [a volunteer's] hands to be maintained: see Farah ."

However, I do not understand that observation to exclude the possibility of a personal claim for monies had and received which is not based upon an allegation of breach of fiduciary duty and does not seek to assert an interest in real property.

Whether the relevant payments were unauthorised

1. In order to make good its claim in unjust enrichment, Break Fast seeks to establish that the payments made by Mr Voukidis had not been authorised by it and did not reflect any obligation owed by Break Fast. Specifically, in paragraph 3D of the Further Amended Statement of Claim, Break Fast pleads that Mr Voukidis "wrongfully without any obligation or requirement to do so" transferred or caused to be transferred the amount of $317,000 in "unauthorised payments" from Break Fast to Mr Giannopoulos' Citibank account between 26 May 2006 and 26 October 2009. Break Fast also contends that Mr Voukidis' conduct in making or causing the monies to be paid involved a breach of his general law and statutory duties, although, as I have noted above, that proposition is not necessary to a claim arising on the basis that the relevant payments were made without Break Fast's authority.

1. The Defendants admit the receipt of the Monies but denies that the payments were unauthorised or, alternatively, say that Mr Giannopoulos was entitled to receive them. In particular, the Defendants contend that Mr Giannopoulos was entitled to receive the Monies by reason of an agreement between Messrs Baker, Voukidis and Anastasopoulos to pay amounts he was required to pay to in respect of the Citibank loan (Further Amended Defence to Amended Statement of Claim, [3D]). I will deal with the evidence relating to authority and "entitlement" together since the same matters were relied on for both submissions.

1. There is no evidence that the payments made by Break Fast to Mr Giannopoulos were authorised by a formal resolution of Break Fast's then directors, Messrs Voukidis and Baker. There is also no direct evidence that the payments were authorised by any informal decision of the then directors of Break Fast, acting in that capacity. There is evidence that Mr Voukidis did not have authority to make such payments in the ordinary course since Mr Baker gave evidence, without objection, that:

"The directors of Break Fast never agreed that Voukidis could make payments other than that which is associated with the Wellington Parade Property". (Baker 23.9.11 [23])

The reference to the "Wellington Parade Property" is to a property owned by Break Fast in Melbourne. Mr Voukidis did not give evidence and no inference that the payments were authorised by him in an exercise of his powers as a director of Break Fast can be drawn from the mere fact of the payments, which is equally consistent with their being made without such authority.

1. Mr Baker's evidence is that he did not authorise or consent to or know of the transfers from Break Fast to Mr Giannopoulos (Baker 23.9.11 [32], T26.24-41, T112.42-45). That evidence was vigorously challenged by the Defendants but, on balance, I accept it, on the basis that it is corroborated by Mr Baker's later attempt to prevent payments by Mr Voukidis from Break Fast's funds to which I refer below.

1. Mr Giannopoulos' evidence at times asserted an obligation on the part of Messrs Voukidis, Baker and Anastasopoulos collectively to make payments on the Citibank loan, consistent with his pleaded case, and at times asserted a particular liability of Mr Baker for that loan. The position that Messrs Voukidis, Baker and Anastasopoulos were collectively liable to meet the Citibank loan was reflected in Mr Giannopoulos' evidence (which was admitted as proof of his understanding) that he understood the agreement between Messrs Baker, Anastasopoulos, Voukidis and himself was:

• That I [Mr Giannopoulos] would enter into a Contract for the Sale of Land for the purchase of the Property [Unit 1201] for an amount of $905,000;
• That the $550,000 I [Mr Giannopoulos] was to receive from the sale of Option would be rolled over into the purchase of the Property;
• That Chris [Voukidis], Nick [Anastasopoulos] and Theo [Baker] would then arrange for the Property to be transferred into my [Mr Giannopoulos'] name;
• That Chris [Voukidis], Nick [Anastasopoulos] and Theo [Baker] would pay all of the expenses in relation to the transfer of the Property into my [Mr Giannopoulos'] name, including the stamp duty and my [Mr Giannopoulos'] solicitor's costs;
• That Chris [Voukidis], Nick [Anastasopoulos] and Theo [Baker] would complete the fitout of the Property and proceed to sell it;
• That I [Mr Giannopoulos] would receive the $550,000 that was rolled over into the purchase of the Property and an additional amount of $200,000. (Giannopoulos [18]).

1. Mr Giannopoulos' explanation of the commercial logic of the arrangement given in re-examination was also consistent with an arrangement with Messrs Voukidis, Baker and Anastasopoulos, rather than arrangement with Mr Baker personally. That evidence was that:

"Because they were meant to put the capital up front, they didn't do that and therefore I took out this loan on their behalf and they were to pay the interest. It was - like I put my capital up front and that was part of the deal and the part of the deal was I was to live there. They were supposed to put up their share of the funds, they didn't do that and in lieu of that I took out the loan and they were to pay the interest." (T254).

1. Mr Baker acknowledged that Messrs Voukidis, Anastasopoulos and he had at least an indirect interest in Unit 1201, denied that they were responsible for the payments on the Citibank loan although he conceded (as the evidence made clear) there were discussions as to assisting Mr Giannopoulos with such payments, and denied that he had any personal responsibility for the loan. In particular, Mr Baker's evidence was that his understanding was that the friendly parties to whom the three apartments had been sold (including Mr Giannopoulos in respect of Unit 1201) held them in the interests of CSPL and that, notwithstanding the title to those apartments was in the name of those people, CSPL could control the disposition and use of the apartments (T73.19, T27) and Mr Baker understood in substance that CSPL controlled the relevant apartments (T74.22), Mr Baker's evidence was also that the individual owners took the responsibility for the loans and were allowed a significant upside (T81.9) and he denied that he was responsible for meeting the mortgage payments for Unit 1201 (T81.14) and denied that he had agreed to repay the Citibank loan (T104-105, T109).

1. In my view, the proposition that Mr Baker had accepted personal responsibility for the Citibank loan is inconsistent with email correspondence in May 2005 by which Mr Baker sought clarification of the ownership of the units at the Clarence Street property and Mr Voukidis responded by referring to a residual profit to the "parties who provided the necessary funds for the purchase" rather than by referring to any responsibility of Mr Baker for the loan in respect of Unit 1201.

1. Mr Giannopoulos relies on the fact that a meeting took place between Messrs Voukidis, Anastasopoulos and Baker concerning Unit 1201 on 13 May 2005 and, on 18 May 2005, Mr Baker transferred $15,000 from a Commonwealth Bank account maintained in Brisbane to Mr Giannopoulos' Citibank account. I do not consider that I can draw the inference that that payment relates to Unit 1201 or acknowledges any liability of Mr Baker to make payments in respect of the loan on Unit 1201, still less a liability of Break Fast to make such payments, since the evidence discloses a range of other financial transactions between Mr Giannopoulos and Mr Baker to which that payment may be referable. The Defendants also rely on what they characterise as Mr Baker's "deliberate failure to search for any records of the payment" to support this inference. I do not consider the allegation of a deliberate failure to search for records has been made good, having regard to Mr Baker's evidence of the extent of searches which were undertaken to comply with discovery requirements in these proceedings.

1. By email dated 22 September 2005, Mr Giannopoulos wrote to Messrs Voukidis, Anastasopoulos and Baker stating, inter alia, that:

"I personally took out the above loan on proviso that you would support me in relation to the repayment."

The terms of that email are not consistent with an obligation of Mr Baker alone to provide such support. An email dated 22 September 2005 from Mr Anastasopoulos to Mr Voukidis in turn stated that "[t]he ball (loan) is in Theo's [Baker's] court!!!!". Mr Giannopoulos also relies on an email dated the same day purporting to set out Mr Baker's response "Voukidis strikes again", which was the subject of some controversy before me. Mr Baker's evidence was that he did not recall the email exchange and had searched the emails held on his computer and had not been able to locate that email exchange (Baker 13.10.2011 [53]). Mr Baker also gave evidence "the words 'Voukidis strikes again!' do not appear to be words that I would use" although that evidence was questioned by evidence of an earlier email from Mr Baker expressing a somewhat similar sentiment in stronger terms.

1. By email dated 23 September 2005, Mr Giannopoulos sent an email to Mr Baker indicating that:

"I spoke with Nick [Anastasopoulos] and he tells me that you had all come to the agreement that you would take care of apartment no 1."

There is no evidence that Mr Baker subsequently responded denying any such agreement. At its highest, this exchange of emails amounts to a representation by Mr Anastasopoulos, left uncorrected by Mr Baker, that the loan was Mr Baker's responsibility.

1. There was further correspondence between Messrs Giannopoulos, Voukidis and Baker on 16-17 May 2006. On 17 May 2006, Mr Giannopoulos sent an email to Mr Baker which again asserted "[t]he original deal never included me taking out a loan. I did that to help you guys." I do not accept Mr Baker's evidence that he regarded Mr Giannopoulos' emails of May 2006 as a request for a loan (T99.40), since there is nothing in the terms of those emails to indicate either a request by Mr Giannopoulos or an offer by Mr Baker of such a loan, and Mr Giannopoulos' emails instead assert an obligation on the part of others to make the relevant payments.

1. Mr Baker's first response to Mr Giannopoulos' email was to suggest that the amount be paid from Mr Baker's claim against another company by which Mr Giannopoulos was then employed. In a further email, Mr Baker denied any "direct relationship" with the Citibank loan and suggested that payments be made by OnetoFour, which was another entity associated with Messrs Voukidis, Baker and Anastasopoulos, and repeated the suggestion of payment of monies which he claimed against a third party toward that loan. Mr Voukidis in turn responded to Mr Baker's position by asking Mr Baker the rhetorical question "if you are taking no responsibility for the Citibank loan, then are you are expecting no benefit?" That response is consistent with an attempt to persuade Mr Baker to accept responsibility for the Citibank loan, on the basis that he might then obtain any consequential benefits in respect of Unit 1201, rather than any existing acceptance of responsibility for that loan by Mr Baker. In cross-examination, Mr Baker rejected the proposition that his denial of a "direct relationship" with the Citibank loan in his email dated 17 May 2006 conceded the existence of an indirect relationship with that loan, other than through his investment in CSPL (T104.39). Mr Baker also denied that, after the exchange of emails which took place on 16-17 May 2006, he agreed to cause the funds of Break Fast to be paid to the Citibank mortgage (T112.45).

1. In my view, to the extent the email exchange on 16-17 May 2006 conveys a representation by Mr Baker, it is equivocal, since he plainly does not accept direct responsibility for the Citibank loan; and, to the extent that it suggests that monies otherwise due to Mr Baker might be used to make loan payments, that would be consistent with Mr Baker's position as one of the principals of CSPL and the possibilities raised by Mr Baker do not extend to payments made by Break Fast.

1. The Defendants rely on the fact that, some nine days after the exchange of emails on 16-17 May 2006, Break Fast made the first of the impugned payments. The Defendants contend it should be inferred that those payments were authorised by Messrs Voukidis and Baker, as directors of Break Fast, following that exchange of emails. However, I do not consider that I should draw that inference, in the fact of Mr Baker's unequivocal denial of it, in the absence of evidence from Mr Voukidis and in the face of subsequent communications where Mr Baker has consistently sought to prevent other payments being made by Mr Voukidis from Break Fast's accounts. The more probable explanation, in my view, is that Mr Voukidis authorised the relevant payments without Mr Baker's authority since the communications on 16-17 May 2006 had not resolved the question of who would make payments on the Citibank loan.

1. The Defendants contend that Mr Baker would have been expected to have responded in writing denying the content of Mr Giannopoulos' emails of September 2005 and May 2006 if he considered they were false, and they rely on the absence of a clear denial of that proposition. I do not consider that the absence of a response establishes that Mr Baker accepted responsibility for the loan, or was likely to have authorised payments towards the loan from Break Fast, in circumstances that Mr Giannopoulos had referred to a collective responsibility of Messrs Voukidis, Anastasopoulos and Baker for the loan, and Mr Baker had no need to respond to that contention so far as it concerned Mr Voukidis and Mr Anastasopoulos. Mr Giannopoulos himself gave an account to his solicitor of the circumstances giving rise to these proceedings, which was apparently discovered without a claim to legal professional privilege (Ex P9), which referred to representations made to him by Mr Voukidis and to an expectation that Messrs Voukidis, Baker and Anastasopoulos collectively would take responsibility for the loan, rather than to any acceptance of personal responsibility for that loan by Mr Baker. By email dated 1 February 2007, Mr Voukidis provided Mr Baker with a further explanation of the ownership of the units in the Clarence Street property which referred to finance on the units in a manner which did not indicate that Mr Baker had accepted responsibility for the loan in respect of Unit 1201.

1. The inference that the relevant transactions were unauthorised also finds support from correspondence between Mr Baker and Mr Voukidis in the period from December 2008, when Mr Baker objected to payments which he had discovered were being made by Mr Voukidis from Break Fast's account and directed Mr Voukidis and Break Fast's bank to cease those payments, although he was not successful in securing that result. Those directions did not contain any exclusion for the payments to Mr Giannopoulos, which one would have expected had the payments to Mr Giannopoulos been authorised. By email dated 18 August 2009, Mr Baker asked Mr Voukidis to "confirm that there were no direct debits occurring". Mr Voukidis responded, somewhat evasively, that no such debits were occurring "without your knowledge or consent" and Mr Baker in turn responded that "I'll interpret that as meaning that NO direct debits are occurring". These exchanges are also inconsistent with Mr Baker then having knowledge that the direct debit facility on Break Fast's account was being used to transfer funds to Mr Giannopoulos in payment of the Citibank loan. Mr Baker again objected to the payments when he discovered, in the second half of 2009, that they had continued and then advised Mr Giannopoulos that the payments made to him were unauthorised when he became aware of those payments. In my view, this correspondence provides strong support for Break Fast's contention that the relevant payments were unauthorised.

1. The Defendants rely on evidence given by Mr Esquivel, who works with Mr Voukidis and previously provided accounting and bookkeeping services to Break Fast to support the proposition that Mr Baker permitted Break Fast's payments toward the loan to continue from the time he began to receive bank reconciliations in early 2009 until 26 October 2009. The Defendants contend that the only explanation for that course is that Mr Baker, as a director of Break Fast, approved the payments. I do not consider that I can properly draw that inference. There is no evidence as to the content of the bank reconciliations said to have been provided to Mr Baker which would allow me to conclude that they squarely drew Mr Baker's attention to the payments being made to Mr Giannopoulos.

1. The Defendants alternatively contend that the Monies paid by Break Fast to Mr Giannopoulos were funded from directors' fees of Mr Baker or of Mr Voukidis. I do not accept the submission that the Monies were directors' fees of Mr Baker. While there had been an earlier discussion between Mr Voukidis and Mr Baker as to the possible payment of directors' fees to Mr Baker, that appears to have been conditional on Break Fast's capacity to pay those fees; the discussion related to the payment of directors' fees for the years ending 30 June 2005, 30 June 2006 and 30 June 2007 (Ex P5) and contemplated a further agreement in respect of directors' fees in subsequent years; and Mr Baker gave evidence, which I accept, that there was no further discussion as to payment of directors' fees to him (T120-121). Given the evidence that Mr Voukidis had control of Break Fast's bank account, and the absence of evidence from Mr Voukidis, I cannot attribute any weight to the description of payments made by Break Fast after 26 May 2008 in bank statements as "directors' fees". The Defendants' contention that Mr Baker had consented to the application of his director's fees to payments to the Citibank loan is also inconsistent with Mr Baker's email dated 25 August 2009 to Mr Voukidis seeking an explanation, by reference to affidavits which had been sworn by Mr Voukidis in Victorian proceedings, "why you claim to having paid me [Baker] a director's fee when I have never received these amounts or any other amounts from Break Fast" and seeking "an explanation of where these funds actually went".

1. I also do not accept the Defendants' alternate submission that the Monies were directors' fees of Mr Voukidis. In a reconciliation of directors' fees prepared by Mr Voukidis (Baker 13.10.11, Ex TB-6, p 618), substantially all of the relevant payments are purportedly allocated to Mr Baker's director's fees rather than Mr Voukidis' director's fees. The emails between Mr Voukidis and Mr Baker do not contain any assertion by Mr Voukidis that the Monies were due to him as directors' fees, and, as I have noted above, Mr Voukidis did not give evidence in the proceedings.

1. Although Mr Voukidis represented to Mr Giannopoulos that Messrs Voukidis, Baker and Anastasopoulos would attend to repayment of the Citibank loan and Mr Giannopoulos' emails are consistent with his having held that understanding, the evidence does not establish that Mr Baker had in fact accepted such an obligation or that he authorised payments by Break Fast as a means of discharging such an obligation. Nor does that evidence establish any "entitlement" on Mr Giannopoulos' part to receive such payments from Break Fast as distinct from Messrs Voukidis, Baker and Anastasopoulos personally.

Estoppel defence

1. The Defendants raise an estoppel defence, contending that Break Fast is estopped from alleging that the payments were unauthorised or that Mr Giannopoulos was not entitled to the payments. The Defendants contend that Break Fast (by its directors) represented that the directors and/or Break Fast would cause the payments due to Citibank pursuant to the mortgage over the Clarence Street property to be repaid from their and/or its own resources (Further Amended Defence [15](b) - (i)]).

1. In Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 at 428, Brennan J observed that to establish an estoppel the first thing it was necessary for the plaintiff to prove was that (at 428):

"... the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship."

In Austotel Pty Ltd v Franklins Self-Serve Pty Ltd (1989) 16 NSWLR 582 at 610, the elements of an estoppel were formulated as requiring:

"the creation or encouragement by the Defendant in the Plaintiff of an assumption that a contract will come into existence or a promise be performed or an interest granted to the Plaintiff by the Defendant, and reliance on that by the Plaintiff, in circumstances where departure from the assumption by the Defendant would be unconscionable."

In Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394, Deane J observed at 444 that the law does not permit an unconscientious departure by one party:

"from the subject matter of an assumption which has been adopted by the other party as the basis of some relationship, course of conduct, act or omission which would operate to that other party's detriment if the assumption be not adhered to for the purposes of the litigation."

1. Three key elements of an estoppel claim were summarised by Pembroke J in Summerhill Business Estate v Equititrust [2010] NSWSC 776 at [42]ff as that the defendant's words or conduct must be clear and unambiguous; the defendant's conduct in relying to its detriment on those words or conduct must be reasonable; and the defendant must know or intend that the plaintiff will act or abstain from acting in reliance on those words or that conduct or, in effect, have some reasonable expectation that its words or conduct will induce some detrimental reliance by the plaintiff. In Evans v Evans [2010] NSWSC 170 at [36], Brereton J observed that the defendant's knowledge or intention that the party who adopts an assumption will act or abstain from acting in reliance on it

"is easily inferred where the adoption, assumption or expectation is induced by the making of a promise or representation, but may also be found where a defendant encourages a plaintiff to adhere to an assumption or expectation already formed, or acquiesces in an assumption or expectation when, in conscience, objection ought to be stated. The unconscionability which attracts the intervention of equity is the defendant's failure, having induced or acquiesced in the adoption of the assumption or expectation, to fulfil it, or otherwise to avoid the detriment which that failure would occasion."

1. In my view, the Defendants have not established that Break Fast paid any part in the creation of an assumption on their part. This is sufficient to mean the estoppel claim must fail against Break Fast. I have set out my findings in respect of the various dealings, particularly the emails of September 2005 and May 2006, on which the Defendants rely in support of this defence in paragraphs 45-49 above. There is, in my view, no basis for a finding that Mr Baker was acting on behalf of Break Fast at the meeting on 13 May 2005, where he was involved in dealings with the Clarence Street property in his personal capacity and as a party interested in CSPL. There is, in my view, no basis for a finding that the representations made by Messrs Voukidis and Anastasopoulos, including the email from Mr Anastasopoulos to Mr Voukidis on 22 September 2005 asserting Mr Baker's responsibility for the loan, were made on behalf of Break Fast, where those persons were also involved in the matter for CSPL and in their personal capacities. There is no evidence that that email was sent to or relied on by Mr Giannopoulos and it does not represent that any payment would be made by Break Fast. There is also no basis for finding that the agreement of which Mr Anastasopoulos informed Mr Giannopoulos, to which reference was made in Mr Giannopoulos' email dated 23 September 2005, was made on Break Fast's behalf. There is also no indication that Mr Baker's emails of May 2006 were sent on Break Fast's behalf. In any event, Mr Giannopoulos did not rely on these communications to purchase Unit 1201 or accept the liability under the Citibank loan, which he had taken out in July 2004 and was already contractually obliged to repay.

1. The Defendants rely on s 129 of the Corporations Act 2001 (Cth) to contend that they were entitled to assume that Break Fast was acting at the instance of its officers and agents who in turn were properly performing their duties (Further Amended Defence [15(e)]). Section 128 of the Corporations Act provides that a person is entitled to make the assumptions specified in s 129 in relation to dealings with a company and the company is not entitled to assert in proceedings in relation to those dealings that any of the assumptions are incorrect. The specified assumptions include assumptions as to the authority of a person appointed as a director and that the officers and agents of the company properly perform their duties to the company. A person is not entitled to make such an assumption if at the time of the relevant dealing they knew or suspected the assumption was incorrect: s 128(4).

1. In Barclays Finance Holdings Ltd v Sturgess & Ors (1985) 3 ACLC 662 at 667, Wood J observed that the reference to "dealings" in a predecessor of this section was to a transaction with a company, not a step taken unilaterally in the course of a transaction. In Bell Resources Holdings Pty Ltd v Commissioner of ACT Revenue Collections (1990) 22 FCR 178; 2 ACSR 211 at 228, von Doussa J indicated that he understood his Honour to have meant by "transaction" the making of the relevant contract, although his Honour noted that a broader meaning to the notion of "dealing" had been given in Australian Capital Television Pty Ltd v Minister for Transport and Communications (1989) 86 ALR 119 at 156. Even on a broader view, I can see no basis for reading the reference to "dealing" with a company in ss 128 and 129 of the Corporations Act as applying to the mere receipt of an unauthorised payment from a company in the absence of any other transaction or contract with it. Otherwise, the section would have the very surprising result that any party who received an unauthorised or mistaken payment made by a company would be entitled to assume that it was a proper one, unless the disqualifying factors were present. For this reason, I consider that the defence under this section must fail.

1. As I have noted above, a person is not entitled to make the assumptions specified in s 129 if at the time of the dealings he or she knew or suspected that the assumption was incorrect: s 128(4). Break Fast contends that Mr Giannopoulos must have had suspicions as to the probity of Mr Voukidis' conduct as a director so as to fall within that exception and, in particular, contends that Mr Giannopoulos knew that the relevant assumption was incorrect by reason of the circumstances surrounding the sale of Unit 1201 to Mr Giannopoulos. I accept that the circumstances of the sale of that unit were such as to indicate to Mr Giannopoulos that Mr Voukidis was prepared to take steps to seek to put the assets of CSPL out of reach of potential claims by third parties, by transferring those assets to persons such as Mr Giannopoulos under informal arrangements, and I also accept that those transactions might in some circumstances constitute a breach of duty owed by Mr Voukidis to CSPL, at least if the company was in a situation of potential insolvency, or be voidable on application of a liquidator of CSPL. However, it does not follow that Mr Giannopoulos had any basis to know or suspect that Mr Baker and Mr Voukidis had not authorised, formally or informally, the payments made by Break Fast to him, for the reasons I have set out above in dealing with the Barnes v Addy claims.

1. In any event, the assumptions specified in s 129 would not assist the Defendants in respect of the claims for unjust enrichment (which has succeeded against Mr Giannopoulos) where their subjective knowledge that the payments were unauthorised is not necessary to the cause of action against them.

Laches and acquiescence

1. The Defendants contend that Break Fast's claim (to the extent it is founded in equity) is defeated by laches and acquiescence (Further Amended Defence [15(j)]). I do not consider that these defences are established. The evidence to which I have referred above indicates that Break Fast (through Mr Baker) had sought to prevent unauthorised payments being made by Mr Voukidis and had advanced its claim against Mr Giannopoulos as soon as the circumstances giving rise to that claim were established.

Orders

1. On the basis of these findings, Break Fast's claim to a personal remedy against Mr Giannopoulos in unjust enrichment should succeed to the extent of any enrichment which Break Fast can establish on the evidence, but I will allow the parties an opportunity to make further written submissions as to the extent of such enrichment and the appropriate orders. Break Fast's claim in unjust enrichment against Ms Faraone fails.

1. Break Fast's claims under the principles in Black v S Freedman & Co and for knowing assistance and knowing receipt have not been established. Break Fast has not established its claim for subrogation to Citibank's mortgage over the Homebush property since the relief in unjust enrichment is sufficient to avoid an unconscionable result. Break Fast also does not succeed in its other claims for proprietary relief in respect of the Homebush property by reason of s 42 of the Real Property Act .

1. I will hear the parties, including Citigroup Pty Limited, in respect of costs.

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Decision last updated: 09 December 2011