Coshott Family Pty Ltd v Lyons

Case •

[2022] NSWCA 216

•

27 October 2022

No judgment structure available for this case.

Court of Appeal


Supreme Court


New South Wales

Medium Neutral Citation: Coshott Family Pty Ltd v Lyons [2022] NSWCA 216
Hearing dates: 12 October 2022
Date of orders: 27 October 2022
Decision date: 27 October 2022
Before: Meagher JA at [1]
Kirk JA at [2]
Griffiths AJA at [61]
Decision:

The appeal is dismissed with costs.

Catchwords:

RESTITUTION — Nature of restitutionary liability — Common counts — Money had and received to the use of the plaintiff — Onus of proof — Money paid by plaintiff to defendant to hold subject to further directions — Where plaintiff requested repayment — Where defendant said funds were paid out pursuant to plaintiff’s directions — Whether plaintiff required to prove payments were made without authority

Legislation Cited:

Legal Profession Uniform General Rules 2015 (NSW), r 63

Legal Profession Uniform Law (NSW), ss 128, 129, 139

Uniform Civil Procedure Rules 2005, r 14.12

Cases Cited:

Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662; [1988] HCA 17

Australian Financial Services and Leasing Pty Limited v Hills Industries Limited (2014) 253 CLR 560; [2014] HCA 14

Bofinger v Kingsway Group Limited (2009) 239 CLR 269; [2009] HCA 44

Chan v Eastern Blue Pty Ltd [2021] VSCA 121

Currie v Dempsey (1967) 69 SR (NSW) 116

David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; [1992] HCA 48

Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498; [2012] HCA 7

Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2003) 230 CLR 89; [2007] HCA 22

Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560; [2019] HCA 32

Martin v Andrews (1856) 7 El & Bl 1; 119 ER 1148

Martin v Pont [1993] 3 NZLR 25

Moses v Macferlan (1760) 2 Burr 1005; 97 ER 676

Napier v Torbay Holdings Ltd [2016] NZCA 608; [2017] NZAR 108

Parry v Roberts (1835) 3 A & E 118; 111 ER 358

Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516; [2001] HCA 68

Sims v Commonwealth of Australia [2022] NSWCA 194

Taylor v Lendey (1807) 9 East 49; 103 ER 492

Texts Cited:

CR Williams, “Burdens and Standards in Civil Litigation” (2003) 25 Sydney Law Review 165

E Bullen and S M Leake, Precedents of Pleadings in Personal Actions in the Superior Courts of Common Law (3rd ed, 1868, Stevens & Sons)

FMB Reynolds, Bowstead on Agency (15th ed, 1985, Sweet & Maxwell)

GE Dal Pont, Law of Agency (3rd ed, 2014 LexisNexis Butterworths)

Category:Principal judgment
Parties:

Coshott Family Pty Ltd (Appellant)

James William Lyons (Respondent)
Representation:

Advocates:

T Hall (sol) (Appellant)

G E S Ng (Respondent)

Solicitors:

Hall Partners (Appellant)

YPOL Lawyers (Respondent)
File Number(s): 2022/00163191
 Decision under appeal 
Court or tribunal:
District Court
Jurisdiction:
Civil
Date of Decision:
20 May 2022
Before:
Acting Judge Kearns
File Number(s):
2021/00074000

HEADNOTE

[This headnote is not to be read as part of the judgment]

The appellant company brought an action in the District Court against the respondent, a solicitor, for money had and received. The appellant’s case at trial was that its director, Mr Coshott, had paid $197,200.50 to the respondent to be held in a controlled money account, that it requested the money be repaid, and that the respondent only repaid $8,419.32. The respondent’s case at trial was that there had been transfers out of the account but that these occurred pursuant to “written and/or oral authority” from Mr Coshott.

The only evidence in the case was 11 pages of material tendered by the appellant. Neither party called any witnesses. The respondent tendered nothing. The appellant contended that it was entitled to judgment in consequence of the pleadings and the evidence that it did put on. The parties accepted at trial that the case turned on the question of onus. The primary judge found for the respondent, on the basis that it was for the appellant, as plaintiff, to prove that the transfers had not been authorised. The principal issue on appeal was, therefore, whether the appellant had discharged the onus which falls on a plaintiff who brings a claim for money had and received.

The Court (per Kirk JA, Meagher JA and Griffiths AJA agreeing) dismissed the appeal and held:

1. The necessity for a claimant to establish some “qualifying or vitiating factor” in order to make out a claim for money had and received has been reiterated by the High Court a number of times. The presence of such a factor goes to establish that money the defendant received is held to the use of the plaintiff so as to found a claim to restitution: at [22].

David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 379; [1992] HCA 48; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2003) 230 CLR 89; [2007] HCA 22 at [150]; Bofinger v Kingsway Group Limited (2009) 239 CLR 269; [2009] HCA 44 at [89]; Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498; [2012] HCA 7 at [29]-[30] and [101]; Australian Financial Services and Leasing Pty Limited v Hills Industries Limited (2014) 253 CLR 560; [2014] HCA 14 at [73].

2. Recognised categories of such factors include mistake, duress, illegality or failure of consideration, but the categories are not closed: at [22].

Moses v Macferlan (1760) 2 Burr 1005 at 1012; 97 ER 676 at 681; Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516; [2001] HCA 68 at [93]-[95]; Equuscorp at [30]; Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560; [2019] HCA 32 at [213].

3. The appellant did not point to any case in which a claim for money had and received was made out on similar facts. There is, however, an established category of case where money paid by a principal to an agent subject to an authority to dispose of the money in a particular manner may be recovered in a claim for money had and received: at [27]. Such cases suggest that proof that the agent had not paid on the money at the time the countermand is issued, or proof of the agent having paid money out inconsistently with the purpose, goes to the essence of what the principal must establish: at [31]. Some of the cases rely on proof of failure of consideration: at [35].

Taylor v Lendey (1807) 9 East 49; 103 ER 492; Parry v Roberts (1835) 3 A & E 118; 111 ER 358; Martin v Andrews (1856) 7 El & Bl 1; 119 ER 1148; Martin v Pont [1993] 3 NZLR 25.

4. It was not sufficient for the appellant simply to prove that the payment was made into the account, held for its benefit, and then not returned in full when requested. The appellant had failed to establish any qualifying or vitiating factor: at [53].

5. If the point is expressed in terms of a total failure of consideration, the evidence did not establish that the state of affairs contemplated as the reason for the payment had failed to sustain itself, except to the extent of the small remainder in the account: at [54]. If the point is expressed in terms of the cases relating to agents, the appellant has not sought to show that he countermanded the purpose prior to the respondent giving it some effect. Nor did it show that the respondent paid out money inconsistently with his directions, including because of an absence of any further directions: at [55].

JUDGMENT

  1. MEAGHER JA: I have had the benefit of reading Kirk JA’s judgment in draft. I agree with those reasons and the order his Honour proposes.

  2. KIRK JA: This appeal turns on a narrow question concerning onus of proof in a claim for money had and received. The question arises because of the way in which the case was run below. The only evidence in the case was 11 pages of material tendered by the appellant, as plaintiff. Neither party called any witnesses. The respondent, as defendant, tendered nothing. The appellant contended that it was entitled to judgment in consequence of the pleadings and the evidence that it did put on. The respondent said that the appellant had not discharged its onus. The primary judge in the District Court found for the respondent.

  3. His Honour reached the correct conclusion. The appeal should be dismissed with costs. This judgment first address the pleadings and the evidence; then considers what is involved in proving a claim for money had and received; then examines what “vitiating factors” might have been relevant here; before addressing what the appellant needed to prove to make out its claim in the circumstances of this case.

Background

Pleadings

  1. The appellant is Coshott Family Pty Ltd, a director of which is Mr Robert Coshott. The respondent is Mr James Lyons, a solicitor.

  2. The appellant’s statement of claim relevantly pleaded:

“2. The defendant received $200,000 [later put as $197,200.50] on behalf of the plaintiff on or about 1 September 2020 (“the monies”).

3. The plaintiff has instructed/requested the defendant to pay to its bank account the monies which the defendant received on its behalf.

4. The defendant has in breach of his duty under the Legal Profession Uniform Law (NSW) failed to deal with the said monies as instructed by the plaintiff company.

5. The plaintiff does not claim the monies paid to Bruce Hocking ($50,300.00), nor the monies received by the plaintiff ($8,419.32). The plaintiff does claim the balance of the monies received by the defendant, $141,280.68, together with interest thereon … ”

  1. The respondent’s amended defence pleaded that he had been retained by Mr Coshott to provide legal advice and services from about October 2019 until 21 September 2020. He said that this included the establishment of a controlled money account “from which disbursements (including counsel fees) would be paid” with respect to specific matters involving Mr Coshott or the company or other associated persons or entities, and he identified some examples of these matters. He accepted that he received $197,200.50 in a controlled money account named “James W Lyons on behalf of Robert Gilbert Coshott”. He accepted that there had been transfers out of the account but said that these occurred pursuant to “written and/or oral authority” from Mr Coshott. Particulars were provided of authorising emails, but these emails were not tendered at the hearing. The respondent pleaded that when on 22 September 2020 he had been asked by Mr Coshott to pay the monies held in the account to a nominated account he had done so by transferring the balance of $8,419.32.

Evidence

  1. On 17 August 2020 the respondent wrote to the manager of the Commonwealth Bank branch at Bondi Junction explaining that his firm acted for Mr Coshott and noting that Mr Coshott was a customer of the bank. The respondent requested the bank to open a solicitor’s controlled money account for “James William Lyons on behalf of Robert Gilbert Coshott”.

  2. An “account confirmation” document of the Commonwealth Bank indicates that an account was opened with the bank on that day. It lists the account holder as “James W Lyons on behalf of Robert Gilbert Coshott” (no issue was taken by the respondent with the fact that the account was held on behalf of Mr Coshott as opposed to on behalf of the appellant company). The bank also sent a pro forma welcoming email to Mr Lyons.

  3. Later on 17 August 2020 the respondent sent an email to Mr Coshott confirming that a controlled money account had been opened. The content of this email is set out at [44] below.

  4. A list of transactions from the bank shows the respondent’s firm deposited $197,200.50 into the account on 3 September 2020, and that various electronic transfers out of the account were made over the course of the following weeks. The entries relating to these withdrawals are discussed further below.

  5. On 22 September 2020 Mr Coshott sent an email to the respondent, in which he said “[p]lease close the controlled money account into which you deposited the proceeds of the mortgage settlement and EFT the monies into the account details of which were provided to you”. Later that day the respondent replied to Mr Coshott’s email, explaining that he had closed the account and paid the balance into the account nominated by Mr Coshott. He said that he enclosed a copy of the statement of the account.

  6. That was the extent of the evidence admitted at trial.

The hearing and judgment below

  1. The case was heard by Acting Judge Kearns on 18 May 2022. Counsel for the appellant explained that the claim was put as an action for money had and received or as an action in tort for conversion, although the conversion claim was effectively abandoned in the course of argument. The appellant’s then counsel accepted during the course of the hearing that the fate of the claim turned on which side bore the onus of proof.

  2. His Honour delivered judgment promptly two days later, dismissing the claim. After considering the elements of a claim for money had and received, his Honour concluded:

“the plaintiff should establish an unjust use of the money by the defendant. Without any evidence as to what the money was used for, the plaintiff has failed to establish that its use was unjust. Accordingly, the plaintiff must fail for not satisfying this element of the cause of action.”

  1. On appeal, the appellant says this was in error. Its notice of appeal contains four grounds. In the end, however, the argument on appeal on both sides was directed to who bore the onus of proof, which argument was agreed to depend upon what were the elements of the appellant’s claim for money had and received.

The onus on the appellant in making out its claim

  1. The money in the present case was paid into a “controlled money account”, which was clearly meant to invoke the type of account of that name regulated by Part 4.2 of the Legal Profession Uniform Law (NSW) (LPUL). The money was therefore presumptively held by the respondent on trust for the appellant: note s 129(1) of the LPUL, defining “trust money” as including “controlled money”. Yet the case was not run as a trust claim. There were various other legal doctrines which might also have been invoked by the appellant, but Mr Hall, appearing in this Court for the appellant, made clear that the appellant did not seek an account, nor did it allege a breach of contract or of statutory duty. The only claim it makes is for money had and received.

  2. The appellant argued that UCPR r 14.12(1) was significant in relation to what it needed to prove to make out that claim. The rule provides that for certain identified money claims – including an action for “(f) money had and received by the defendant for the plaintiff’s use” – it is “sufficient to plead the facts concerned in short form (that is, by using the form of words set out in the relevant paragraph above)”. The appellant’s argument is misplaced. The rule itself goes on to provide, in subrule (2), that a defendant may file a notice requiring the plaintiff to plead the facts on which they rely in full, in which case the plaintiff is required to file an amended statement of claim pleading the facts on which they rely in full. That further provision illustrates the broader point that the rule is a matter of practice and procedure. It does not alter the legal requirements as to what a claimant needs to prove in order to make good their claim.

  3. An oft-cited statement as to where the legal burden of proof will lie is that of Walsh JA in Currie v Dempsey (1967) 69 SR (NSW) 116 at 125, who said that it will lie on the claimant “if the fact alleged (whether affirmative or negative in form) is an essential element in his cause of action, eg if its existence is a condition precedent to his right to maintain the action”. His Honour explained that if a point was a matter of “avoidance” of the claim then in general the legal burden will be on the defendant; note further the discussion in CR Williams, “Burdens and Standards in Civil Litigation” (2003) 25 Sydney Law Review 165, 170-173.

  4. There is no dispute here that money belonging to the appellant was paid into the controlled money account controlled by the respondent. Nor is there any dispute that a request for repayment was made by the appellant, and that what was left in the account was then promptly repaid to the appellant. The issue is what more, if anything, the appellant needed to prove in order to make good its claim for money had and received.

  5. That issue was addressed thirty years ago in David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; [1992] HCA 48. The respondent in that case argued that “a plaintiff should be required to prove that retention of the moneys by the recipient would be unjust in all the circumstances before recovery should be granted” (at 378). That argument was rejected. The plurality stated as follows at 379 (citations omitted):

“it is not legitimate to determine whether an enrichment is unjust by reference to some subjective evaluation of what is fair or unconscionable. Instead, recovery depends upon the existence of a qualifying or vitiating factor such as mistake, duress or illegality. As this Court stated in Westpac Banking Corporation:

‘In other words, receipt of a payment which has been made under a fundamental mistake is one of the categories of case in which the facts give rise to a prima facie obligation to make restitution, in the sense of compensation for the benefit of unjust enrichment, to the person who has sustained the countervailing detriment.’ …

The respondent's submission that the appellants must independently prove ‘unjustness’ over and above the mistake cannot therefore be sustained. The fact that the payment has been caused by a mistake is sufficient to give rise to a prima facie obligation on the part of the respondent to make restitution. Before that prima facie liability is displaced, the respondent must point to circumstances which the law recognizes would make an order for restitution unjust.”

  1. Thus it is not necessary for a claimant to establish that in all the circumstances retention of the money is unjust. Rather, the claimant must establish the existence of some qualifying or vitiating factor which gives rise to a prima facie obligation to make restitution. The defendant may then seek to establish some responsive defence which displaces that prima facie obligation, on which the defendant will bear the onus.

  2. The necessity for a claimant to establish some “qualifying or vitiating factor” in order to make out a claim for money had and received has been reiterated a number of times since David Securities by members of the High Court: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2003) 230 CLR 89; [2007] HCA 22 at [150]; Bofinger v Kingsway Group Limited (2009) 239 CLR 269; [2009] HCA 44 at [89]; Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498; [2012] HCA 7 at [29]-[30] and [101]; Australian Financial Services and Leasing Pty Limited v Hills Industries Limited (2014) 253 CLR 560; [2014] HCA 14 at [73]; see also Sims v Commonwealth of Australia [2022] NSWCA 194 at [140]-[146]. The presence of such a factor goes to establish that money the defendant received is held to the use of the plaintiff so as to found a claim to restitution. Recognised categories of such factors include mistake, duress, illegality or failure of consideration, but the categories are not closed: note Moses v Macferlan (1760) 2 Burr 1005 at 1012; 97 ER 676 at 681; Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516; [2001] HCA 68 at [93]-[95]; Equuscorp at [30]; Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560; [2019] HCA 32 at [213].

  3. The primary judge in this case referred to the need to identify an “unjust factor”, relying on language employed in a recent decision of the Victorian Court of Appeal: Chan and Assets China Pty Ltd v Eastern Bluer Pty Ltd [2021] VSCA 121 at [70]. In its written submissions the appellant embraced in chief, and then appeared to reject in reply, the necessity to establish some “unjust factor”. The primary judge’s usage can be understood as referring to the need to identify a vitiating factor. The appellant also sought to resist the characterisation of its claim as being one in “restitution”. Yet the appellant seeks the return of money paid into the controlled money account on its behalf by way of an action for money had and received. That is a restitutionary claim.

  1. The appellant’s core argument was that all it needed to prove in order to make good its claim was that monies were received by the respondent from the appellant for the benefit of the appellant, that the appellant demanded repayment of those monies, and there has been a failure to repay in full (and leaving aside the money paid to Mr Hocking and the final repayment of $8,419.32). When asked what constituted the vitiating factor, Mr Hall submitted that it was established:

“by consequence of the fact that the plaintiff paid the money to the defendant, who placed it in a controlled moneys account, which means straight away you’re in a position where the defendant was holding the money for the benefit of the plaintiff”.

  1. Mr Ng, counsel appearing for the respondent, submitted that the relevant vitiating factor was an allegation of payments being made by the respondent without the appellant’s authorisation. He put that the appellant “itself proved what Mr Lyons did with the funds in the Account, and the question then was whether what he so did was authorised”.

  2. Strictly it is not necessary for the respondent to persuade the Court how the vitiating factor could or should have been put by the appellant. The issue is whether or not the appellant could sufficiently establish its claim simply by proving the payment into a controlled account for its benefit, followed by a failure then to repay the full sum when demanded. Nevertheless, it is relevant to consider what vitiating factor might apply here.

The possible vitiating factor here

  1. The appellant has not pointed to any case in which a claim for money had and received was made out on facts similar to those in the present case. There is, however, an established category of case where money paid by a principal to an agent subject to an authority to dispose of the money in a particular manner may be recovered in a claim for money had and received. This case was not one where the respondent received the money as agent for a designated principal: cf Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 at 673-4; [1988] HCA 17. But it can be seen as a case where the respondent was given money to be used according to the appellant’s directions and thus, in a loose sense, as the appellant’s agent.

  2. The appellant gave some emphasis to how an action for money had and received was described in Bullen and Leake. In the third edition of that work the principle relating to agents is explained as follows (E Bullen and S M Leake, Precedents of Pleadings in Personal Actions in the Superior Courts of Common Law, 3rd ed, 1868, Stevens & Sons, at 46):

“Where an agent receives money from his principal under a revocable authority to dispose of it in a particular manner, the principal, if he revokes the authority before it has been acted upon, may recover back the money as money received to his use. (Taylor v Lendey, 9 East, 49; Parry v Roberts, 3 A & E 118; Fletcher v. Marshall, 15 M & W 755.)”

  1. Similarly, in the 15th edition of Bowstead on Agency it is said that “if the principal has entrusted money to his agent for a particular purpose which the agent has not carried out, the principal can recover that money as had and received to his use”: FMB Reynolds, Bowstead on Agency (15th ed, 1985, Sweet & Maxwell) at 197; see also the 22nd ed, 2021, at [6-100]. The cases cited in support included Parry v Roberts (1835) 3 A & E 118; 111 ER 358 and (in the 22nd edition) Martin v Pont [1993] 3 NZLR 25 and Napier v Torbay Holdings Ltd [2016] NZCA 608; [2017] NZAR 108. In a footnote it is observed that

“Probably an action for money had and received will not lie against an agent entrusted with money for a particular purpose until the agent violates his duty by applying it for some other purpose, or otherwise shows an intention not to be bound by his obligation: Hardman v Bellhouse (1842) 9 M & W 596; Ehrensperger v Anderson (1848) 3 Exch 148; Whitehead v Howard (1820) 2 B & B 372.”

  1. In another text it has been said that “if the principal has entrusted money to the agent for a particular purpose, which the agent has yet to apply for that purpose, or which the agent purports to apply for a different purpose, the principal may recover it as money had and received”: GE Dal Pont, Law of Agency (3rd ed, 2014 LexisNexis Butterworths) at [13.10], citations omitted.

  2. All of these statements indicate that the principal is entitled to reclaim the money if, when the demand is made, the agent has not carried out the purpose for which the money was given to the agent. Although these statements do not address the issue of onus, they suggest that proof that the agent had has not paid on the money in accordance with the purpose at the time the countermand is issued, or proof of the agent having paid money out inconsistently with the purpose, goes to the essence of what the principal must establish. So much gains support by reference to the cases cited by the texts.

  3. For example, in Taylor v Lendey (1807) 9 East 49; 103 ER 492, the plaintiff paid a sum to the master of a workhouse for the use of the poor. Before it was so applied the plaintiff countermanded this authority. He succeeded in recovering the sum in an action for money had and received against the master, because the master was seen as the plaintiff’s agent, and the countermand had occurred before the money was applied by him. But “[i]f the master of the workhouse had applied it before any countermand, it would been too late for the countermand to have operated” (at 54; 494).

  4. In Parry v Roberts (1835) 3 A & E 118; 111 ER 358, the defendant sought to raise his own misapplication of the funds in his favour. The facts may or may not incite sympathy (at 118-119; 358):

“It appeared that the plaintiff had requested the defendant to take 45l. for him to a person at Liverpool; that the defendant received it for that purpose, gratuitously, but did not pay it; and that, being questioned afterwards on the subject, he said he had ‘lost the money among the whores.’”

  1. There was some dispute as to whether the claim should have been for money had and received or for negligence. Either way, the Court held that it was no answer to the claim for the defendant to protest that he no longer held the money because he had misapplied it. Patteson J, for example, said (at 121-122; 359):

“If the sum remained in the defendant’s hands, and the plaintiff upon enquiry found that it had not been applied, he was entitled to say, ‘Give me back the money; I countermand the direction to pay it’ and, if the defendant refused, his remedy was by action for money had and received.”

  1. These types of case are related to that well-established category of claim for money had and received, namely where there has been a total failure of consideration. The notion of consideration is not here limited simply to the contractual sense: see eg Roxborough at [101]-[107] per Gummow J. There will be a relevant failure when “the state of affairs contemplated as the basis or reason for the payment has failed to materialise or, if it did exist, has failed to sustain itself”: see Equuscorp at [31], and authority there cited.

  2. Martin v Pont [1993] 3 NZLR 25, for example, was a case in which the plaintiffs had given their accountant money to invest on their behalf, but much of this money was misappropriated by the accountant’s daughter, who was an employee of the firm. The New Zealand Court of Appeal upheld the plaintiffs’ claim, finding that the money had been entrusted by the plaintiffs to their accountant as an agent for the purpose of investment, and the accountant had failed to carry out that purpose (at 27-29). The Court also held that the consideration upon which the Ponts paid their money to Mr Martin's firm had wholly failed (at 29-30).

  3. One of the cases cited by Gummow J in Roxborough (at [102]) was Martin v Andrews (1856) 7 El & Bl 1; 119 ER 1148. In that case the Court of Queen's Bench upheld a declaration for money had and received to recover conduct money tendered with a subpoena to appear and give evidence where the case was settled before trial. Lord Campbell CJ said (at 4; 1149):

“The consideration has failed. The money is paid for the purpose of defraying the expences of the witness's journey: if there is no journey there is no expence, and the consideration fails; and then an action lies for money had and received.”

  1. That case bears similarities to the present case. There can be no doubt that when a claim is put in terms of total failure of consideration then it is necessary for the claimant to prove that vitiating factor. In Martin v Andrews, thus, it was no doubt necessary for the claimant to prove that the purpose of giving the money had fallen away prior to the money being used.

It was insufficient for the plaintiff merely to prove payment and demand

  1. Having referred to potentially analogous cases, it is necessary to return to the facts of this case. Despite the paucity of evidence, some points of significance do emerge from the limited material before the Court.

  2. The respondent is a solicitor. In his capacity as a solicitor he was instructed by Mr Coshott, implicitly as a client, to set up a controlled account. A controlled money account is one maintained by a law practice with a relevant financial institution “for the holding of controlled money received by the law practice”, where controlled money is “money received or held by a law practice in respect of which the law practice has a written direction to deposit the money in an account (other than a general trust account) over which the law practice has or will have exclusive control”: LPUL, s 128(1).

  3. Section 139 of the LPUL relevantly provides:

(1) As soon as practicable after receiving controlled money, a law practice must deposit the money in the account specified in the written direction relating to the money.

Civil penalty: 50 penalty units.

(2) The law practice must hold controlled money deposited in a controlled money account in accordance with subsection (1) exclusively for the person on whose behalf it was received.

Civil penalty: 50 penalty units.

(3) Subject to a court order or as authorised by law, the law practice that holds money deposited in a controlled money account must not disburse the money except in accordance with—

(a) the written direction relating to the money; or

(b) a later written direction given by or on behalf of the person on whose behalf the money was received.

Civil penalty: 50 penalty units.

  1. Under r ule 63 of the Legal Profession Uniform General Rules 2015 (NSW), the law practice must keep a written record of the “required particulars” for each withdrawal. Those particulars include the reason for which the payment was made, and the person or persons “effecting, directing or authorising the withdrawal”.

  2. Thus a controlled money account is an account under the exclusive control of the law practice; money in the account is to be held exclusively for the person on whose behalf it was received; such accounts may be used to disburse payments to third parties; such disbursements are to be undertaken in accordance with a written direction, being either the direction relating to the establishment of the account, or a later direction; particulars of each withdrawal must be kept. This is the nature of the account which the appellant requested the respondent to establish.

  3. It might readily be inferred from the nature of a controlled money account that the purpose here was for the respondent to pay disbursements to third parties or to the respondent’s law firm according to the appellant’s directions. Mr Hall accepted that there is no suggestion that the account was set up for investment purposes: cf LPUL, s 129(21)(d). The inference as to payment of disbursements gains significant support from the respondent’s email to Mr Coshott on 17 August 2020 confirming that a controlled money account had been opened:

“● As discussed I have opened a controlled monies account in your name. If you wish this account can be for your personal matters such as Spencer.

● I am happy to open a further account in your sons name for the litigation funding, representing Aversa and Mangano. I want $60,000 deposited into account immediately to pay the barristers – I agree that your son needs to budget at least $200,000 for Aversa.

● Let me know the name that your son wishes to appear for this further controlled Monies Account?”

  1. There is no evidence of any response to this email, nor any further communications on the issues raised. There is no evidence whether or not another controlled money account was set up in the name of Mr Coshott’s son.

  2. Following this email, on 3 September 2020 the payment of $197,200.50 – ie nearly $200,000, as referred to in the email – was paid into the account in question. That was the only payment made into the account. The appellant argued in effect that that number was just a coincidence; that it could not be inferred that the suggestion of setting up an account in the son’s name fell away; nor that this account was used to serve that purpose. That argument is unpersuasive, especially when account is taken of the entries made with respect to the electronic withdrawals (see below). But in the end whether or not this account was used with respect to the son’s litigation is not of great significance. Incidentally, it is not material for current purposes that payments may have been intended to be made from this account for the benefit of persons other than Mr Coshott or the appellant. It is not unusual for one family member to pay another’s legal fees.

  3. The email contemplated that the account could be used for Mr Coshott’s “personal matters such as Spencer”, and stated “I want $60,000 deposited into account immediately to pay the barristers”. It is clear that it was contemplated by the respondent that the money would be used to pay out third parties at the direction of Mr Coshott with respect to matters in which the respondent was acting in some way. There is nothing to suggest that this did not also accurately capture the purpose of Mr Coshott. Indeed, counsel appearing for the appellant below informed the primary judge that the account was opened because the respondent “does not operate a trust account, and the money was to be placed in to pay legal disbursements, including barristers and professional fees”. A court is entitled to rely on an admission made from the bar table, such as this.

  4. The bank’s account statement records the “transaction details” against each entry. There is text recorded for each of the transfers out of the account. For most of the transfers the text suggests they were to various persons identified as barristers, and some payments were made to the respondent’s law firm for “fees”. There are two entries stating “Aversa fee” and identifying a barrister’s name (“Aversa” being one of the litigation matters involving Mr Coshott’s son, according to the 17 August email). On its face, the text against these payments is consistent with the purpose for which the account was established, which included payment of barristers and professional fees.

  5. The primary judge stated that there was “no evidence” of the use to which the money had been put, nor that payments had been made to barristers. Yet the bank statement constitutes some evidence to that effect. True, it could not be described as best evidence, being hearsay representations by (it may be inferred) the respondent. But it is still evidence that was admitted below. The appellant suggested that this challenge to the primary judge’s finding should have been raised in a notice of contention. Whether or not that is so, it was raised in the respondent’s written submissions, responded to in the appellant’s written reply, and the appellant accepted it suffered no prejudice from the absence of such a notice.

  6. The appellant sought to emphasise that the respondent was not entitled to disburse the money except pursuant to a written direction, and the respondent had not put any such directions into evidence. However, the appellant made clear it was not making some claim for breach of s 139 of LPUL. And if the appellant meant to suggest illegality had vitiated the respondent’s right not to reimburse the full amount, then the onus would have been on the appellant to make out that illegality.

  7. Further, s 139(3) contemplates that the written direction might be either the original written direction for the establishment of the account, or a subsequent direction. The appellant could readily have put the former into evidence (or have given evidence that there was no such direction). As for subsequent directions, the appellant argued that it could not have put on evidence of lack of authorisation because such evidence “would be capable of objection as to form or in that it's conclusionary”. The argument is incorrect. For a witness to refer to an account statement and say “I did not authorise these payments” is commonplace evidence of fact. Lack of authorisation to make the payments was a matter readily capable of proof by the appellant.

  8. In summary, the material before the Court indicates that the payment in question was made into a controlled money account, implicitly for the purpose of being paid out to third parties (including barristers) or for professional fees in relation to matters in which the respondent was acting, and there is evidence indicating that the payments out of the account were made in fulfilment of that purpose. There is no material indicating whether or not these payments were authorised by the appellant. There is evidence that when Mr Coshott asked for the account to be closed and the money transferred to another nominated account, the remaining funds were promptly transferred by the respondent as requested.

  9. In this context it was not sufficient for the appellant simply to prove that the payment was made into the account, held for its benefit, and then not returned in full when requested. The appellant’s submissions to the contrary fail to take account of why the money was held for its benefit, namely, for a purpose of enabling the respondent to pay disbursements to third parties or for professional fees on behalf of, and as directed by, the appellant. In that context, merely proving payment, holding and demand did not establish any factor vitiating the respondent’s right to retain monies originally paid to him. Or to put it more precisely, the appellant had not proved that it was entitled to be repaid the funds originally paid into the account even though the respondent had paid them out. The appellant made no attempt to establish that the respondent had acted inconsistently with the purpose for which he was holding the funds to the appellant’s benefit. The appellant failed to make out any qualifying or vitiating factor.

  10. If the point is expressed in terms of a total failure of consideration, the evidence did not establish that the state of affairs contemplated as the reason for the payment had failed to sustain itself, except to the extent of the small remainder in the account. On the contrary, the evidence suggested that the purpose of the appellant’s payment had been substantially implemented by way of payments being made to various third parties, including barristers, and to the respondent’s law firm for professional fees.

  11. If the point is expressed in terms of the cases relating to agents, the appellant has not sought to show that he countermanded the purpose prior to the respondent giving it some effect. Nor did it show that the respondent paid out money inconsistently with his directions, including because of an absence of any further directions.

  12. No doubt the appellant might seek to distinguish the agency cases discussed above because here, in contrast to those cases, the money was entrusted to the respondent for the purpose in question only contingently, that is, upon further directions being given by the appellant to pay money out of the controlled money account. Yet the evidence does not establish that the respondent was not authorised to pay monies out to third parties without further specific instructions from the appellant. Section 139 of the LPUL requires a written direction for payments, but this can be given in advance, including as at the time of the establishment of the account. As noted, the appellant did not tender any initial written direction. Nor did Mr Coshott give any evidence relating to any such direction (or the absence of such a direction), nor as to what the limits of his instructions to the respondent were in relation to the use of the money. In these circumstances, it was not established that the respondent acted inconsistently with his instructions.

  1. Put simply, the evidence did not establish any basis for asserting that the full amount initially paid to the respondent should still be treated as being held to the appellant’s benefit. In the absence of the appellant having established a vitiating factor, there is no basis to conclude that the respondent’s supposed retention of the funds is unjust.

  2. This legal conclusion is reinforced by the way that the case was actually put to the court below. In the appellant’s statement of claim at [4] it was alleged that the respondent had “in breach of his duty under the [LPUL] failed to deal with the said monies as instructed by the plaintiff company”. Reflecting that pleading, in the court below counsel for the appellant said:

“The plaintiff’s case, your honour, is very simple. It is that whilst he placed the money into the controlled account, he at no stage ever authorised for that money to be disbursed, and that the defendant did so without his authorisation.”

  1. The pleading and this statement recognised, correctly, that the central issue in the case was whether or not the payments out of the account were made by the respondent with or without authority. It is not surprising, then, that the appellant’s case should fail in the absence of it providing any evidence going to the central issue.

  2. The appellant has not made out its claim for money had and received. The appeal should be dismissed with costs.

  3. GRIFFITHS AJA: I agree with Kirk JA and with the order he proposes.

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Decision last updated: 27 October 2022

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