Focus Metals Pty Ltd v Babicci

[2014] VSC 380

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 5117 of 2011

FOCUS METALS PTY LTD
(ACN 007 788 150)

Plaintiff

v

KRIS BABICCI
(ALSO KNOWN AS CHRIS BABICCI)

and

BRUCE TRAVERS McNAB

First Defendant

Second Defendant

---

JUDGE:

SLOSS J

WHERE HELD:

Melbourne

DATES OF HEARING:

17, 18 and 20 February 2014

(Further written submissions filed by defendants on 2 April, responding submission filed by plaintiff on 7 May and reply submission filed by defendants on 13 May 2014)

DATE OF JUDGMENT:

15 August 2014

CASE MAY BE CITED AS:

Focus Metals Pty Ltd v Babicci & anor

MEDIUM NEUTRAL CITATION:

[2014] VSC 380

---

Restitution – Money paid under mistake – Mistake of fact – Right to recover – Unjust enrichment – Money had and received – Constructive trust – Requisite knowledge required of a payee who is paid by mistake – Defences of “No Mistake” and “Change of position”.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr N J O’Bryan AM SC with Mr C H Truong	Alan Sheppet & Associates
For the First Defendant	Mr T G Moloney	Business Support Services (Legal)
For the Second Defendant	Mr T G Moloney	Bruce McNab Solicitor

HER HONOUR:

Introduction

1. The plaintiff, Focus Metals Pty Ltd (“Focus Metals”), a company located in Richmond, Victoria, operates a business of buying, smelting, assaying and refining gold and other precious metals.  Focus Metals seeks to recover from the first defendant, Mr Kris Babicci (“Mr Babicci”), the sum of $166,688.33 which it says it paid to him by mistake by four electronic funds transfers to his account with the National Australia Bank (“NAB”) (BSB 082-401 Account No. 752036778) (“Mr Babicci’s NAB account”) on 9 September 2011.  In the alternative, Focus Metals seeks to recover the sum of $133,859.93 from Mr Babicci and the balance of $32,828.40 from the second defendant, Mr Bruce McNab (“Mr McNab”), the latter sum having been transferred by Mr Babicci to an account with the NAB in the name of Mr McNab by two internet transfers, made on 14 and 15 September 2011.  

1. The alleged mistaken payment to Mr Babicci, and his subsequent payment of the sum of $32,828.40 to Mr McNab, arose in the context of a gold refining and purchasing transaction undertaken by Focus Metals in September 2011. 

1. Between 2007 and 2011, Focus Metals refined and assayed several consignments of ore containing gold and other precious metals that were exported from Papua New Guinea by Exara Limited, under instructions from its managing director Mr Aristotelis (Telly) Nicolaou (“Mr Nicolaou”). 

1. From time to time, Mr Nicolaou involved different investors in funding the gold transactions.  Generally, the ore was exported from Papua New Guinea using Exara Limited’s export licence, and consigned to Focus Metals for refining and assaying.  Upon completion, the gold and other precious metals were usually purchased by Focus Metals whereupon the proceeds would be remitted according to instructions given by Mr Nicolaou.

1. In February 2010, Mr Babicci and Mr McNab, together with Mr Jon Brunner (“Mr Brunner”), entered into an agreement with Mr Nicolaou and Exara Limited, whereby they agreed to export geological samples obtained from Papua New Guinea, using Exara Limited’s export licence, and refine them with a view to earning and sharing financial returns.  Early in the piece, Mr McNab apparently paid some preliminary expenses of $10,000, by way of establishing their venture and Mr Babicci contributed an initial sum of $200,000 by way of loan funds.

1. In August 2010, a consignment of alluvial gold was exported from Papua New Guinea by Exara Limited on behalf of the participants in the February 2010 agreement to Focus Metals for refining and assaying.  Upon completion, in accordance with instructions given by Mr Nicolaou, 155.5 grams of fine gold was retained in a metals account with Focus Metals and the balance was purchased by Focus Metals.  From the proceeds of sale, $88,592.86 was remitted to Mr Babicci’s NAB account, and $15,000 was paid into Empire Distributors’ account with Westpac Banking Corporation Limited (BSB: 033 072 Account No.: 229171) (“the Westpac account”) by way of reimbursement of Mr Nicolaou’s expenses.

1. In September 2011, another consignment of gold bearing ore was exported from Papua New Guinea by Exara Limited to Focus Metals for refining and assaying.  The purchase of the refined gold the subject of this transaction was undertaken by Focus Metals upon instructions given by Mr Nicolaou on behalf of Empire Distributors, or Empire Distributors trading as Exara Gold.  Some months earlier, Mr Nicolaou had apparently provided Focus Metals with change of account details, requiring payments for future “in and out business transactions” to be made to the Westpac account and he had requested that Mr Babicci’s NAB account be cancelled and deleted from their system as it was no longer valid.  Mr Nicolaou’s instructions were not, however, implemented by Focus Metals.  The  result was that, upon settlement of the purchase of the refined gold the subject of the September 2011 transaction, the sales manager Mr Howard Cooklin (“Mr Cooklin”), paid the settlement moneys, totalling $166,688.33, into Mr Babicci’s NAB account, rather than to the Westpac account that Mr Nicolaou had designated.

1. A few days later, when Focus Metals became aware that the moneys had been paid to the wrong account, it took action through its bank, the NAB, seeking to recover the moneys but without success.  When the matter of the mistaken payment was raised by Ms Yvonne Balogh of Focus Metals (“Ms Balogh”) with Mr McNab in a telephone conversation, he informed her that he and Mr Babicci “d[id] not consider that the payment had been made to the wrong account” and said that the funds were the repayment of a debt and that both Exara Limited and Mr Nicolaou personally “owed the debt to Mr Babicci for a considerable time and it was long overdue for repayment.”[1]

   [1]Email from Mr McNab to Yvonne Balogh dated 26 September 2011.

1. On 6 October 2011, Empire Distributors commenced a proceeding against Focus Metals in the County Court of Victoria, seeking payment of the debt of $166,688.33.  Focus Metals took legal advice and subsequently settled the proceeding on 7 November 2011.  The Deed of Release entered into recorded that “[w]ithout admission of liability and to commercially resolve the Proceeding”[2] Focus Metals agreed to pay Empire Distributors the sum of $166,688.33, and the proceeding was to be struck out without adjudication and no order as to costs.  It was a term of the Deed of Release that both Empire Distributors and Mr Nicolaou would “render all reasonable and timely assistance” to Focus Metals in relation to its Supreme Court proceeding against Mr Babicci.[3]

   [2]Deed of Release, Recital E.

   [3]Deed of Release, cl 2(e).

1. Focus Metals commenced this proceeding in late September 2011, when it sought a freezing order over Mr Babicci’s NAB account and other associated relief.  At the outset, Mr McNab, a solicitor by profession, appeared as the solicitor on the record for Mr Babicci.  However, in about September 2012, Focus Metals became aware from subpoenaed banking documents that Mr McNab had personally received the sum of $32,828.40 from Mr Babicci, paid from his “line of credit account”.  This was the same account into which Mr Babicci had transferred the whole of the sum of $166,688.33 he received from Focus Metals.  Focus Metals then made an application for Mr McNab to be added as a second defendant and relief was also sought against him, following which Mr Babicci engaged new solicitors to represent him.  

1. Focus Metals contends that when it paid the sum of $166,688.33 into Mr Babicci’s NAB account on 9 September 2011, it did so as a result of a mistake of fact arising from a clerical error in paying the wrong account, contrary to instructions.  At the time when Mr Cooklin made the payments on behalf of Focus Metals to Mr Babicci’s NAB account, he believed he was discharging the indebtedness of Focus Metals to Empire Distributors for its purchase of the precious metals the subject of the September 2011 assaying and refining transaction. 

1. Focus Metals says it had no indebtedness to Mr Babicci.  Accordingly, when Mr Babicci, and through him Mr McNab, claimed ownership of the funds which had been paid to them by mistake, and refused to repay them, Focus Metals contends that two legal consequences arose:

(a)upon becoming aware of the mistake, or wilfully shutting their eyes to the obvious, each of Mr Babicci and Mr McNab was liable to Focus Metals to account as a constructive trustee;  and

(b)      irrespective of knowledge, Mr Babicci and Mr McNab were each liable pursuant to restitutionary principles on the basis of unjust enrichment and money had and received.

Focus Metals also pleaded a Quistclose trust[4] claim as against the second defendant, contending that emails sent by Mr Babicci to Mr McNab in September 2011 demonstrated that he had intended to ”refund” the sum of $32,828.40 to Focus Metals.  This additional claim was not, however, pursued by Focus Metals and in closing submissions Senior Counsel confirmed that it was not relied upon.[5]

[4]Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567.

[5]Transcript of Proceedings, 20 February 2014, 361. 

1. In their defences, Mr Babicci and Mr McNab initially pleaded a number of defences including allegations of no mistake, change of position and estoppel.  However, at the trial, the defences of change of position and estoppel were not pursued and effectively no evidence was led in relation to either of them.  Indeed much of the factual framework alleged in the defence was not the subject of any evidence in chief given by or on behalf of the defendants at trial.  Rather, the gist of the “defences” advanced by the defendants during the course of the trial was to the effect that:

(a)       there was no relevant error or mistake because Focus Metals had contracted with Exara Limited, the September 2011 transaction was an “Exara transaction” and Mr Babicci’s NAB account was the correct and only authorised account for payments for ore sourced or derived from Exara Limited; and

(b)      if there was a mistake, it was not unjust for the defendants to retain the monies because Focus Metals was aware of an issue with Exara Limited and it nevertheless chose to settle the County Court proceeding brought by Empire Distributors.  The defendants contend that it was this settlement and release, “hastily entered into” by Focus Metals, which was the real cause of the loss alleged.[6]

[6]Outline of Submissions dated 14 February 2014 filed by each of the defendants, [14]-[15].

1. Against that background, the arguments advanced by Counsel for the respective parties in closing submissions focussed on three main issues:

1.        Did Focus Metal pay the sum of $166,688.33 to Mr Babicci’s NAB account under a mistake of fact?

2.        If so, did Mr Babicci and Mr McNab have knowledge of the mistake?

3.        (Irrespective of their knowledge) is it unjust for Mr Babicci and Mr McNab to retain the moneys so paid by Focus Metals?

1. In order to understand the claimed entitlement of Mr Babicci and Mr McNab to retain the total sum of $166,688.33, or part thereof, it is necessary to set out below, in a little more detail, the background to the gold transactions undertaken, the alleged mistaken payment and the events that ensued as Focus Metals attempted to recover the moneys paid to Mr Babicci. 

Factual narrative

1. The factual narrative set out below is taken from the business records and other documents tendered by the respective parties and the viva voce evidence adduced from the witnesses at the trial.  In that regard, Mr Cooklin gave evidence for the plaintiff and was cross-examined.  Mr Babicci, Mr McNab and Mr Brunner each gave evidence on behalf of the defendants but only Mr Babicci and Mr McNab were cross-examined.

The witnesses who gave evidence at the trial

1. Mr Cooklin gave cogent evidence on behalf of Focus Metals in a clear, frank and forthright manner both in examination in chief and under cross-examination.  He listened to the questions asked and answered them in a direct way.  He was an impressive witness.

1. The evidence given on behalf of the defendants, on the other hand, was vague, fragmentary and lacked coherence.  In part, this was because it was led in a manner and form that provoked frequent objections, many of which were upheld, and in the final outcome, the evidence adduced fell well short of establishing the basic framework for some of the defences that had been advanced in their pleadings.  Furthermore, the evidence that was given orally by each of Mr Babicci and Mr McNab often conflicted with what was recorded in their contemporaneous email exchanges. 

1. Mr Babicci was the first of the defendants to give evidence.  For the most part, he had a poor recollection of the events that took place.  Even during his examination in chief he was often unable to recall matters of significance that had been mentioned in the course of his email exchanges with Mr McNab and others.  During cross-examination he exhibited the same difficulty with recalling events and he often sought to give evidence about what “he would have done” rather than what actually took place.  Furthermore, on one occasion during his cross-examination, when answering a question about the transfer of the moneys across to his line of credit account and whether he had spoken with Mr McNab beforehand, Mr Babicci admitted that he was “having a guess”.[7]  Accordingly, where the oral evidence given by Mr Babicci is at odds with the contemporaneous record of events set out in the email exchanges, I have generally preferred the written version.

   [7]Transcript of Proceedings, 18 February 2014, 196.

1. Mr McNab was present in Court whilst Mr Babicci gave evidence.  Mr McNab also sought to give evidence in terms of “what would have happened” and what “he would have done” rather than informing the Court about what had actually happened.  When giving his evidence, I did not find him frank and forthcoming in his answers.  For example, his evidence concerning the payment by Mr Babicci to him of the sum of $32,828.40 was implausible and unconvincing – not only did his account contradict the contemporaneous documents in which Mr Babicci had identified that sum as an overpayment which was to be refunded – he also effectively contradicted Mr Babicci’s oral evidence that the payment of the $32,828.40 to him was “to make him good on his investment as well”.[8]  Mr McNab said the payment was “an amount of money which Kris [Babicci] elected to pay to me from his funds”[9] and he did not consider that Mr Babicci “had done anything other than pay me funds from his personal account”.[10]  He agreed, under cross-examination, that the payment from Mr Babicci could be a characterised as “a gift” but said that was “an unusual way to put it.”[11]  Later, Mr McNab appeared to suggest that the payment he received from Mr Babicci was “to pay some money back to [him] because [Mr Babicci] knew [he] was out of pocket” in relation to the joint venture.[12]

   [8]Ibid 203-204.

   [9]Ibid 237.

   [10]Ibid 241.

   [11]Ibid 242.

   [12]Ibid 242.

1. Furthermore, I regarded the explanation that Mr McNab proffered about his failure to disclose his receipt of the $32,828.40 in previous proceedings before the Court and in affidavit materials filed with the Court as somewhat unsatisfactory and inadequate.[13]  Accordingly, as with Mr Babicci, where the oral evidence given by Mr McNab is at odds with the contemporaneous record of events set out in the email exchanges, I have generally preferred the written version.

   [13]Under cross-examination, Mr McNab said that he did not consider the funds Mr Babicci paid to him to be part of any application before the Court.  He added:

   It may be that I take a very structured approach to things, but the payment - from my perspective Focus paid Exara the proceeds of an Exara transactions, did so by paying the money to the account which we had nominated for Exara purposes.  Having arrived at that account Kris was entitled to take from that account the money owing to him which exhausted that payment.  That's the end of the matter from my perspective.

   (Transcript of Proceedings, 18 February 2014, 237.)

1. The evidence given by Mr Brunner was peripheral to the real issues in the case.  He gave evidence in very general terms about the activities of the joint venture conducted by Mr Babicci, Mr McNab, Mr Nicolaou and himself.  He mentioned that at a meeting held in Thailand in May 2010 requests were made of Mr Nicolaou for more rigour and discipline in the conduct of the business and preparation of its accounting records.  He said that he participated in teleconferences between Mr Nicolaou in Melbourne and others based in Papua New Guinea concerning their attempts to secure gold.  Mr Brunner also said that he had discussions with Ms Balogh at Focus Metals, usually to seek information about matters such as security and shipping arrangements.

1. Mr Brunner was not cross-examined.  I did not find his evidence of any real assistance in resolving the issues in the case.

Mr Nicolaou and Ms Balogh were not called to give evidence

1. Neither Mr Nicolaou nor Ms Balogh were called to give evidence.  The defendants were critical of Focus Metals for not calling them.  In the case of Ms Balogh, in closing submissions, Counsel for the defendants contended that an adverse inference should be drawn under the rule in Jones v Dunkel[14] because Focus Metals failed to call her, in particular to give evidence about the February 2011 email from Mr Nicolaou containing the payment instructions.

   [14](1959) 101 CLR 298.

1. Mr Cooklin gave a cogent explanation for not calling Ms Balogh.  He gave evidence about why she is no longer employed at Focus Metals.  Mr Cooklin said that she was not candid with him when he questioned her about what had happened, and she seemed to be having some personal health issues at the time.  Mr Cooklin said that the circumstances of her leaving Focus Metals in late October 2011 were “partly” connected with this problem arising from the payment.[15]  In the circumstances, I am not satisfied that any adverse inference should be drawn.  Further, it was open to the defendants to call Ms Balogh themselves if they were of the view that her evidence would assist their case.  The same can be said for Mr Nicolaou.  Whilst the Deed of Release entered into by way of settlement of the County Court proceedings required Mr Nicolaou to assist Focus Metals, its case was one of mistaken payment and his evidence was not necessary for that case to be made out.  If the defendants had wished to adduce evidence from Mr Nicolaou in furtherance of their “defences” to prima facie recovery of the mistaken payment, it was open to them to call him.

Empire Distributors Pty Ltd and Exara Limited

[15]Transcript of Proceedings, 17 February 2014, 51.

1. At all relevant times Empire Distributors was controlled by, and had as its sole shareholder and director, Mr  Nicolaou.  Empire Distributors operated a jewellery and gold purchasing business from premises at Evelina Road, Toorak, Victoria. 

1. Exara Limited was a company incorporated and registered in Papua New Guinea in April 2007.  At all relevant times it held a licence to buy and export gold and other precious metals from Papua New Guinea.[16]  Exara Limited was controlled by Mr Nicolaou, who was both the managing director and a shareholder of Exara Limited.  In addition to Mr Nicolaou, Exara Limited also had a locally appointed director and shareholder, Mr Kaman Denge, so as to comply with Papua New Guinean laws.

   [16]Consent to Export Geological Samples and Specimens dated 8 February 2010.

1. Empire Distributors and Exara Limited conducted a gold purchasing business involving the export of ore sourced from Papua New Guinea.  The ore was exported from Papua New Guinea using Exara Limited’s export licence.  From time to time, different investors were apparently involved in funding the gold purchasing business conducted by Empire Distributors and Exara Limited. 

1. On 25 August 2010, Empire Distributors registered the business name “Exara Gold” in Victoria.  The nature of the business to be conducted by Exara Gold was stated as being the importation of alluvial gold.

Background to Focus Metals’ dealings with Exara Limited between 2007 and 2011

1. In the period commencing from 2007 through to 2011, Focus Metals entered into several gold refining, assaying and purchase transactions with Empire Distributors and its principal, Mr Nicolaou, where Exara Limited was the licensed entity exporting the precious metals from Papua New Guinea.  Mr Cooklin had met Mr Nicolaou but he was not directly involved in the customer side of the business – that was handled by Ms Balogh.  Ms Balogh was variously described in evidence as the accounts manager, the client manager and Mr Cooklin’s personal assistant.  Mr Cooklin said that Focus Metals’ normal business practice was to deal only with big companies or partnerships that have an Australian Business Number.  They rarely dealt with individuals but there were occasions when they dealt with Mr Nicolaou personally.  At all relevant times, the transactions undertaken were monitored by an Australian entity known as ”AUSTRAC”[17] for regulatory compliance purposes.

   [17]”AUSTRAC” is the Australian Transaction Reports and Analysis Centre.

1. Mr Cooklin said that Ms Balogh had discussed with him something about the background of the transactions conducted between Empire Distributors, Exara Limited and Focus Metals.  The substance of their conversations was that Mr Nicolaou was the director of Empire Distributors and managing director of Exara Gold and was the prime mover in all of the transactions.  Mr Cooklin was aware that Mr Nicolaou had a number of silent or passive investors involved and believed that he may have met one or two of them, but said he didn’t take much notice of them because they weren’t relevant to Focus Metals.  Rather, Mr Cooklin  said that “[w]hat was relevant to Focus Metals was the instructions by Mr Nicolaou.”[18]

   [18]Transcript of Proceedings, 17 February 2014, 58.

1. Mr Cooklin said that the first refining transaction undertaken by Focus Metals involving Mr Nicolaou was in early February 2008, where the gold was brought into Australia from Papua New Guinea by Mr Nicolaou and his (then) business partner, Mr Chris Karamountzos.  He could not recall whether it was undertaken for Empire Distributors or Exara Limited, but the consignment was processed under the name ”Exara Ltd”[19] and involved melted bars containing gold and silver.  

   [19]Focus Metals tax invoice dated 5 February 2008.

1. Mr Cooklin’s evidence was that Focus Metals prepared the customs clearance papers for the consignment and the product arrived at the refinery in late January 2008.  Upon completion, Focus Metals purchased the gold and silver from Exara Limited and paid the settlement sum into Exara Limited’s account with the ANZ Banking Group (PNG) Limited at its Port Moresby branch.  A number of similar transactions took place during February, March and April 2008.  In some cases, upon instruction from Mr Nicolaou, Focus Metal split the proceeds of sale and paid a portion into the bank accounts of each of Exara Limited and Empire Distributors.

1. Mr Cooklin recalled that Mr Nicolaou’s partner, Mr Karamountzos, had emailed him in February 2008 and raised some concerns about Mr Nicolaou and his accounting for the disbursement of “investor” money from the 2008 transactions.  He said that during a later telephone conversation, Mr Karamountzos had told him that once the present dealing was finished he would not be doing any more business with Mr Nicolaou.  Mr Cooklin said that the issues Mr Karamountzos had raised in these discussions did not cause him to become concerned about dealing with Mr Nicolaou because when Mr Nicolaou started to trade out of Papua New Guinea in 2008, he was “green”[20] and did not have a great depth of knowledge about the precious metal industry.  He said the mistakes that Mr Nicolaou made with Mr Karamountzos in importing the first consignment were the sort of mistakes inexperienced people make, but he imagined that Mr Nicolaou would have learned from them and would not make them again.

   [20]Transcript of Proceedings, 17 February 2014, 83.

1. There is no evidence of any gold consignments taking place between Mr Nicolaou, Empire Distributors, Exara Limited and Focus Metals from March 2008 or during 2009.  Later events confirmed that Exara Limited had not been conducting business during that time.  In particular, no export activity had been undertaken by Exara Limited and it had effectively been dormant.

Background to the February 2010 agreement

1. In January 2010, Mr Nicolaou met with Mr McNab and Mr Brunner to discuss a potential investment by them in his gold exportation activities from Papua New Guinea and Bougainville.  According to an email Mr Nicolaou sent to them after their meeting, the “necessary funding amount of $10k [was] needed to start and secure as per our discussions” and Mr Nicolaou said that, at that stage, he would use his company, Empire Distributors, to disburse the necessary payments as required.  He also provided them with the relevant banking details for making the initial investment of $10,000, nominating the Westpac account of Empire Distributors.[21] 

   [21]Email from Mr Nicolaou to Mr McNab and Mr Brunner dated 15 January 2010.

1. Mr McNab followed up their conversation and informed Mr Nicolaou by email of another potential investor, Mr Babicci, a “personal and trusted friend” who was currently the CEO of Bank Dhofar in Oman, whom he said could “comfortably fund our proposed business from his own resources”.[22]  Mr Nicolaou responded by email and instructed Mr McNab to “lift the cone” of silence and include Mr Babicci. 

   [22]Email from Mr McNab to Mr Nicolaou dated 18 January 2010.

1. In the meantime, Mr Nicolaou was making the necessary preparations for the re-activation of Exara Limited’s export licence.  He also made arrangements with Focus Metals for the refining and assaying of gold that was proposed to be exported from Papua New Guinea by Exara Limited.  At Focus Metals, Mr Nicolaou dealt primarily with Ms Balogh. 

1. Mr Cooklin was cross-examined about the various company names and business names used by Mr Nicolaou in dealings with Focus Metals.  He said that:

at all times whether it was Exara or Exara Gold - Gold or Exara Limited they were companies and entities controlled by Mr Nicolaou.  Mr Nicolaou at all times was our client.  Nobody else.  No one else gave us instructions at any time to do anything else with the product that Mr Nicolaou organised to bring in from - from Papua New Guinea.[23]

He was also asked about Focus Metals’ in-house differentiation between corporate customers.  He said that Focus Metals gave each company a code that was used internally but not shown on invoices.[24]  Mr Cooklin said that he did not differentiate between Exara Gold and Exara Limited – “we dealt with Exara”.[25]

[23]Transcript of Proceedings, 17 February 2014, 98-99.

[24]Ibid 60.

[25]Ibid 86-87.

1. Mr Cooklin said that Focus Metals always understood that Mr Nicolaou was its  client and he was using the export licence of Exara Limited only to export the gold.  He said that he was not aware of how shipments from Papua New Guinea to Australia via Exara Limited were funded, or who paid for the shipment and the like.

1. He said that Focus Metals had a number of clients who were using other people’s export licences to take the gold legally out of Papua New Guinea and that this was standard practice in Papua New Guinea.  Mr Cooklin said that, from the Australian perspective, what mattered was the company that imported the material.  Relevantly, the ore exported from Papua New Guinea by Exara Limited was imported under the name of Focus Metals and cleared by the customs agent in Focus Metals’ name.

1. Mr Cooklin said that in transactions in which Mr Nicolaou was involved it was often the case that the material may have come in under one name and he wanted it settled in another entity and so the entity shown on the settlement documents would be changed.  Mr Cooklin said that where the director of a corporate entity asked for the transaction to be directed to another entity, Focus Metals would action the request because it was normal business practice, especially in circumstances where the particular person and companies had been identified and undergone due diligence.  Further,  Focus Metals had no reason to be wary of Mr Nicolaou.

1. On or about 13 February 2010, Ms Balogh forwarded Mr Nicolaou a Focus Metals’ document entitled “Contract for Dore ex Exara Limited”.  The contract recorded that Exara Limited was responsible for security shipment to Australia and compliance with AUSTRAC requirements.  It also set out Focus Metals’ terms and conditions pertaining to the recovery operations and the settlement prices payable.  These terms included that following the recovery operations “Focus Metals Pty Ltd will pay 99% of the recovered gold to the client”.[26]  Mr Nicolaou executed the contract in his capacity as managing director of Exara Limited and Mr Cooklin then signed the contract in his capacity as Focus Metals’ sales manager. 

   [26]Contract for Dore ex Exara Limited, cl 7 (emphasis added).

1. Mr Cooklin said that the Contract for Dore ex Exara Limited was a document that was entered into by way of compliance with the relevant regulations for the export of gold from Papua New Guinea.  He said that the contract is a standard document that “is required by the exporting authorities in Papua New Guinea for the exportation of gold or precious metals”.[27]  He said that without such a contract, the Central Bank of Papua New Guinea would not allow the export of gold.

Entry into the February 2010 agreement

[27]Transcript of Proceedings, 17 February 2014, 49.

1. Mr Nicolaou, Mr Brunner, Mr Babicci, Mr McNab and Exara Limited entered into an agreement, in writing, with effect from 18 February 2010, “to record the basic agreement between the parties” (“the February 2010 agreement”).[28]  The February 2010 agreement, which was drafted by Mr McNab, recited:

A.Telly [Nicolaou], Jon [Brunner], Bruce [McNab] and Kris [Babicci] have agreed to reactivate the business of Exara Limited with a view to earning and sharing financial returns in accordance with their individual proportions, building their respective wealth and enjoying themselves at the same time.

B.Exara is a Papua New Guinea registered company and it is intended that its business remain in Papua New Guinea and that it be controlled outside of Australia and earn active income.

C.Telly has considerable experience and contacts in Papua New Guinea and in the precious metals industry generally, Jon has broad entrepreneurial skills and abilities, Kris is a banker with specific skills in managing risk and funding and Bruce is a lawyer with experience in establishing and managing issues involved with businesses in different jurisdictions.

D.All parties are committed to making the business work successfully and to protecting each other’s financial and other risks in connection with Exara and its business.[29]

[28]February 2010 agreement, cl 8.1 ”Going forward”.

[29]Ibid “Recitals”.

1. When giving evidence, Mr Brunner, Mr McNab and Mr Babicci referred to the arrangement between them variously as a “joint venture agreement”, a ”partnership” and a “consortium”.  For the purposes of this judgment, I will refer to it as a “joint venture” and to the parties as “joint venturers”,  but whatever be the correct characterisation, in their written agreement the parties expressly provided that:

[n]o party is the partner, agent, employee or representative or [sic] any other party and no party has the power to incur any obligations on behalf of, or pledge the credit or [sic], any other party.

1. Under the February 2010 agreement, each party committed “to making the business of Exara [Limited] work and to at all times be honest and faithful to each other and always mindful of each other’s interests.”  The relevant ”Business” to be conducted by Exara Limited was defined to mean “the export and refinement of geological samples from Papua New Guinea and any further business which may be agreed by the parties as appropriate for Exara [Limited] to profitably conduct.”[30]  The agreement provided that the “business of Exara [Limited] will be managed by Telly” and required that the parties “keep each other informed about operational issues”.[31] The agreement recorded that Mr Nicolaou was to be the managing director,[32] and that Mr Kaman Denge, a Papua New Guinea national, is and would remain a director of Exara Limited.[33]

   [30]Ibid cl 1.1 “Definitions”.

   [31]Ibid cl 3 “Running the business”.

   [32]Ibid cl 5.1 “Appointment of Managing Director”.

   [33]Ibid cl 5.4(a) “Directors generally”.

1. Under the February 2010 agreement, Exara Limited was required to “do all things necessary to maintain its license of export geological samples and to renew it each year” and the business was to “be conducted on an ad hoc basis as opportunities arise.”[34]  There was, however, nothing explicit in the agreement that confined Exara Limited to undertaking export activities only on behalf of the joint venture.

   [34]Ibid cl 4.1(a) “Business Plan”.

1. Exara Limited was permitted to raise funds for working capital, investment and expansion as may be agreed from time to time by the parties.  At the outset, Mr Babicci apparently provided $200,000 and Mr McNab, the sum of $10,000.  The February 2010 agreement provided that where any of the individual participants provided funds, “each of Telly, Jon, Kris and Bruce severally indemnify the party providing the funds to the extent of their individual proportion.”[35]  In that regard, each of Mr Brunner, Mr McNab and Mr Babicci held a two ninths interest and Mr Nicolaou held a one third interest in the arrangement.[36]  Any funding provided by any of them was required to “be repaid as a priority to any payment or distribution of profit.”[37]  Any profits arising were to be “allocated in cash or in kind to Telly, Jon, Kris and Bruce in accordance with their individual proportions as soon as practical after each transaction conducted by Exara [Limited].”[38]

Activities conducted under the February 2010 agreement

[35]Ibid cl 4.2(a) “Funding”.

[36]Ibid cl 1.1 “Definitions”; “Individual proportion”.

[37]Ibid cl 4.2(d) “Funding”.

[38]Ibid cl 4.1(c) “Business Plan”.

1. Early in 2010, an excursion to Bougainville was undertaken by some of the participants in the February 2010 agreement, but no business arose from it.  On a later occasion, however, Mr McNab apparently went back to Papua New Guinea with Mr Nicolaou and secured some gold.

1. In May 2010, Mr Nicolaou, Mr Brunner, Mr McNab and Mr Babicci met in Pattaya in Thailand for a series of meetings to discuss their activities under the February 2010 agreement.  Each of Mr Babicci, Mr McNab and Mr Brunner gave evidence to the effect that one of the matters they discussed in Thailand was that they were unhappy with Mr Nicolaou’s reporting on financial matters and it was an ongoing issue.

1. A few weeks after the meeting in Thailand, Mr Babicci sent an email to Mr McNab in which he offered both the use of his personal bank account for the joint venture’s activities and to take over the financial reporting, provide a financial report and transfer surplus money to the partners.[39]  He said that being a non-resident for tax purposes, he was not taxed on share and commodity trading gains, which “should be good news for everyone”.  It seems that while Mr Babicci’s NAB account was later used, the financial reporting and other matters nevertheless remained with Mr Nicolaou.

Shipment from Papua New Guinea to Focus Metals in August 2010

[39]          See email from Mr Babicci to Mr McNab dated 23 June 2010.

1. In early August 2010, Mr Nicolaou informed Focus Metals that it would shortly receive a shipment of alluvial gold from Papua New Guinea.  Focus Metals received the consignment on 5 August 2010 and undertook its refining and assaying operations, following which Mr Nicolaou gave instructions to Focus Metals about how the processed gold was to be dealt with. 

Written instructions given by Mr Nicolaou to Focus Metals

1. By letter dated 16 August 2010, apparently sent to Focus Metals following a request made by Ms Balogh, Mr Nicolaou gave written instructions to Focus Metals on the letterhead of Empire Distributors trading as Exara Limited, as follows:

I Telly Nicolaou of the above address, being the director of Exara Limited hereby authorized and request Funds to be deposited into Empire Distributors P/L account, bsb no: 033072/acc no: 229171 Until further notice

Also regarding the opening and operations of the metal account with Focus metals, only two signatures to operate at this time, being myself and Ms Tina Nicolaou.

The bank account of Empire Distributors that Mr Nicolaou specified was the Westpac account.

1. Mr Nicolaou also provided a further written authorisation to Focus Metals, dated 25 August 2010, on the letterhead of Exara Limited, in his stated capacity as a director and as “the duly authorized person to make this request”.  The authorization referred to alluvial gold having been imported and received by Focus Metals on 5 August 2010 for refining.  Two jobs were listed:

Job 1.   Gross weight: 261.1 gms

Net weight:     247.9 gms

Job 2.   Gross weight: 2146.4 gms

Net weight:       361.5 gms

1. Mr Nicolaou authorised Focus Metals “to transfer the total of our metal account from importation of Alluvial Gold received by Focus Metals Pty Ltd on the 5^th August 2010 for refining, to Empire Distributors Pty Ltd trading as Exara Gold.”  The authorisation apparently reflected the terms of a pro forma letter provided by Focus Metals,  and once executed by Mr Nicolaou, it was witnessed by Ms Balogh.

Exara Gold

1. On 25 August 2010, Empire Distributors was successful in having the business name ”Exara Gold” registered in Victoria pursuant to the Business Names Act 1962 (Vic.).  On the same day, Mr Nicolaou provided to Ms Balogh, under cover of an email concerning “Exara Transfer”, a copy of the registration of “Exara Gold, trading as Empire Distributors”.  In the email, Mr Nicolaou requested that Ms Balogh:

disburse funds as follows, as perversely [sic] discussed:

1.       Hold 155.5 grams in Exara Gold Metal Account. being (5oz)

2.Transfer the remaining after Focus metals to: NAB bsb:082 401 acc: 7520 3677 Kris Babicci/ref: Exara Gold.

He signed off the email as “Telly Nicolaou ABN: 69 111 552 875”, which was the ABN for Empire Distributors. 

1. Focus Metals prepared a “Metal Account Transaction”[40] invoice dated 26 August 2010, in the name of “Empire Distributors Pty Ltd T/as Exara Gold” (bearing the ABN 69 111 552 875), recording the purchase by Focus Metals of 2122.5 gms of gold for a total price, inclusive of GST, of $103,592.86.  The invoice included payment instructions as per Mr Nicolaou’s earlier email, and bore a handwritten note: “Howard please note different bank a/c”, presumably a reference to the fact that Mr Babicci’s NAB account was typed on the invoice, with “ref: Exara Gold”.  Further handwritten annotations showed a payment of $15,000 made on 16 August 2010 and the balance of $88,592.86 was noted as “balance to be paid”.  Mr Cooklin made payment on 27 August 2010 and the sum of $88,592.86 was received into Mr Babicci’s NAB account the same day.[41]

   [40]Mr Cooklin explained (Transcript of Proceedings, 17 February 2014, 78-79) that a metal account is a little like a savings account.  When a client puts their gold into an ”unallocated” metal account, the gold is pooled and it goes into Focus Metals’ general stock until the client requests either gold (or other precious metals) or the money.  When called for, the deal is undertaken at the spot price of the day and the funds are transferred the next day to the client.

   [41]The bank statement for Mr Babicci’s NAB account records the payment by Focus Metals of two sums that day, being the sum of $88,592.86 and an additional sum of $1,464.21, in total $90,057.07.

1. Following the processing of the August 2010 shipment, Mr Nicolaou followed up with an email to Mr McNab on 2 September 2010, addressed to both him and Mr Babicci.  Mr Nicolaou reported that he believed “there is a business in PNG, and not a small one at that”.  He noted that, apart from the unavoidable expenses that would be incurred from this transaction, “there’s a kitty at this point” and that they hold 155.5 grams of fine gold in their metal account, “as agreed 1 oz. between us.”  On 4 September 2010, he also provided them with a list of the “expenses for the 15k withdrawal.”  This withdrawal appears to relate to the payment of $15,000 noted above as having been made by Focus Metals on 16 August 2010. 

1. It seems clear from Mr Nicolaou’s reporting that this transaction was one that was undertaken for and on behalf of the participants in the February 2010 agreement.  The payment of the balance of $88,592.86 to Mr Babicci’s NAB account was apparently by way of partial reimbursement of his initial contribution of $200,000.

1. There is no evidence of any further transactions having been conducted through Focus Metals during 2010. 

Transactions with Focus Metals in 2011

1. On 8 February 2011, Mr Nicolaou provided fresh banking details concerning Focus Metals’ document metaltransaction-txn6301.pdf[42] and instructions to Focus Metals by email as follows:

   [42]That attachment was not in evidence nor was any evidence given about the particular transaction.

Please deposit to

Empire Distributors P/L

Westpac

BSB: 033 072

ACCOUNT No. 22 9171

Please note for future deposit’s on all .. in and out business transaction between Focus Metals and Empire Distributors and Exara Gold to be deposit to the above nominated account only.

Please also cancel and delete account of Chris Babici [sic.] NAB account from your system.  No longer valid!

Many thanks

Kind regards

Telly Nicolaou

Empire Distributors also t/a Exara Gold.

1. There is no direct evidence about what ”metaltransaction-txn6301” concerned.  The email exchange with Ms Balogh suggests that it was one conducted with Focus Metals by Mr Nicolaou on behalf of “Empire Distributors also t/a Exara Gold”.  No evidence was given by Mr Babicci, Mr McNab or Mr Brunner about any gold transaction activity having been undertaken by the participants in the February 2010 agreement at around this time.  Indeed, the transaction undertaken on their behalf in August 2010 was referred to by Mr McNab in later email communications with Mr Babicci as their “one and only transaction”.[43]

   [43]Email from Mr McNab to Mr Babicci dated 11 September 2011 (10.37 pm).

1. In late August 2011, Mr Nicolaou was again in contact with Ms Balogh to advise her of an incoming gold transaction and request that she arrange customs clearance.  He provided Focus Metals with an invoice, numbered FMEXL001, prepared on the letterhead of Exara Limited and addressed to Focus Metals for the delivery of approximately 5.747 kilograms of “gold rock samples/assaying-analysis” at an approximate amount of (USD) $169,544.00.  Mr Cooklin gave evidence that this invoice was generated to satisfy two regulatory requirements: first, to permit the export of the gold rock samples to Australia under Exara Limited’s export licence, and secondly, to declare the approximate value of the gold to enable customs clearance to take place.

1. The gold rock was delivered to Focus Metals on 26 August 2011 for refining and assaying and dealt with in four lots, as follows:

Lot 1 (Ref. 19486)	This lot contained gold, silver and mercury.  After treatment, the ore produced a net payout of $38,803.37.
Lot 2 (Ref. 19427)	This lot contained gold and silver.  After treatment that ore produced 712.2 grams resulting in a net payout of $29,263.27.
Lot 3 (Ref. 19458)	This lot contained gold, silver and mercury and after treatment constituted a weight of 2,170.7 grams and produced a net payout of $91,588.05.
Lot 4 (Ref. 19428)	This lot contained gold and silver and after treatment constituted a weight of 134 grams and produced a net payout of $7,033.64.
Total payable:	$166,688.33

Focus Metals makes payment of $166,688.33 on 9 September 2011

1. Focus Metals assayed and refined the gold rock and then purchased the precious metals the subject of the four refining lots.  On 9 September 2011, Mr Cooklin transferred funds totalling the sum of $166,688.33 to “Exara Gold”.  However, because Mr Cooklin was unaware that Mr Nicolaou had given updated instructions to Ms Balogh in February 2011 changing the bank account details, he transferred the funds into Mr Babicci’s NAB account on 9 September 2011.

1. Mr Nicolaou soon noticed that the proceeds of the September 2011 transactions had not reached the nominated Westpac account of Exara Gold and he followed the matter up with Ms Balogh and Mr Cooklin. 

1. Mr Cooklin gave evidence about what took place when Mr Nicolaou came looking for the money.  He said that two or three days after he had made the payments, Mr Nicolaou rang Ms Balogh and complained that he had not received the money.  Mr Cooklin looked at Focus Metals’ bank account and confirmed that the money had been paid out.  He could not understand why there was a problem and so they let the next day pass.  Then, Mr Nicolaou came to Focus Metals’ office demanding the funds for the last consignment.  Mr Cooklin said to him that Focus Metals did not owe him any money and said that they had paid the money and discharged their debt.  Mr Cooklin also produced receipts for the electronic funds transfers.  When he showed the receipts to Mr Nicolaou, Mr Nicolaou said words to the effect of “Oh my God, you’ve sent it to the wrong account.”[44]  It was then that Mr Nicolaou produced a copy of the email that he had sent to Ms Balogh in February 2011. 

   [44]Transcript of Proceedings, 17 February 2014, 50, 53.

1. Mr Cooklin said that he was not aware of this email having been sent to Focus Metals and it came “as a complete shock” to him when he saw it.[45]  Mr Cooklin said that “it was only then we realised that we had by mistake sent it to the wrong account”.[46]  Once he was aware that he had sent the payments to the wrong account, Mr Cooklin immediately rang Focus Metals’ lawyer, Mr Alan Sheppet, and asked him what to do.  Mr Cooklin also provided a copy of Mr Nicolaou’s email to his solicitor.  

Focus Metals seeks to recover the $166,688.33 it paid to Mr Babicci’s NAB account

[45]Ibid 51.

[46]Ibid 53.

1. Once Focus Metals became aware that it had paid the proceeds of the September 2011 transactions to the wrong account, Focus Metals contacted its bank, the NAB, to seek reimbursement from the account that the money had been paid into.  The NAB commenced an investigation and tried to contact the third party and their banker. 

1. In the meantime, at some point over the weekend of 10-11 September 2011, Mr Babicci noticed that Focus Metals had sent some money to his account.  He contacted Mr McNab by email and asked him if he had any idea why Focus Metals had sent some money to his account.  He stated:

Hi Bruce,

Any idea why Focus Metals has sent some money to my account?  Do you think it is Telly making good?

Very interesting, let’s have a discussion before asking anyone else.  Do you think it could be Telly trading again and Focus operating on old instructions?

Please give me a call in the morning.

1. Mr McNab responded, by email in the first instance.  He commented:

Very interesting!  How much?  It might be as a result of a meeting Jon [Brunner] and I had with Focus two weeks ago in relation to the possibility of Focus processing some PNG gold for a different client.  We commented about Exara but the discussion didn’t go anywhere.

How much was deposited?  I think that there was about 100 grams held over from our one and only transaction, so if the deposit was $5k or thereabouts that’s probably what it is.  If it’s more, then perhaps Telly is trading again.  How much was deposited?

Mr Babicci replied, again by email:

$166,000 plus a bit of change.  About what I am owed plus some interest and fees.  Very good of Telly to sort it out.

1. This contemporaneous email exchange between Mr Babicci and Mr McNab conveys the clear impression that each of them was unaware of any gold transaction activity being undertaken by Mr Nicolaou on behalf of the participants in the February 2010 agreement, or involving them. 

1. On Monday, 12 September 2011, Mr Babicci promptly transferred the whole of the funds that Focus Metals had deposited in his NAB account across to his “line of credit” account with the NAB (BSB: 082-401 Account no.: 53-949-7890) (“the line of credit account”).  

1. On the next day, Tuesday, 13 September 2011, Mr Babicci made contact by email with Mr Jesse McPherson, a Private Client Manager, at NAB Private Wealth.  He referred to some payments that had been made to his trading account by Focus Metals and said they related to “a company that I am a shareholder and director of”.  Mr Babicci suggested that, as “[o]ne of the ex-directors of that company might try and contest the payments, please let me know if you hear anything.”  Mr McPherson responded that if he was approached he would be bound by privacy details and not be able to give them any information. 

1. Mr Babicci then followed up with a further email that same day to Mr McPherson, providing more background information.  He stated that:

This is our small gold business that we have in PNG.  We had a director that did some silly stuff last year and we had to exit him.  He is still owing us some money and it looks like he might have started trading under his own account but using our company name.

Likewise, Focus Metals has quoted confidentiality clauses and privacy requirements to us, so we will just see if anything comes out of the woodwork.  Let me know if you hear anything.

The terms in which this response is framed do not convey the impression that Mr Babicci believed that the recent gold refining and purchasing activities that Mr Nicolaou had been conducting were being undertaken on behalf of the participants in the February 2010 agreement or involved Mr Brunner, Mr McNab and Mr Babicci in any way.  Rather, the use of the language “we had to exit him” suggests that Mr Babicci held the view that Mr Nicolaou was no longer a current participant in their “small gold business”.  Further, it conveys the impression that Mr Babicci thought it was likely that Mr Nicolaou was trading on his own account but using “our company name”, presumably a reference to Exara Limited, even though Mr Nicolaou was actually at all times, and remained, the managing director and substantial shareholder of Exara Limited.

1. Later that day, Mr McPherson emailed Mr Babicci and asked him to call.  Mr Babicci forwarded that email, without any covering message, to Mr McNab.  By this time, Focus Metals had also become aware that the proceeds of the September 2011 transaction had been paid into the wrong bank account and it was separately following the matter up with the NAB and seeking a reversal of the transfers. 

1. Mr McNab said that he telephoned Ms Balogh immediately after he had been told by Mr Babicci that he had received the payment from Focus Metals “because it occurred to [him] that it may have been that that payment was in relation to a totally unrelated transaction” and that they might have  “pressed a wrong button on a computer.”[47]  He said:

I rang Yvonne [Balogh] and I said, "Yvonne, I'm presently at the NAB.  I'm just ringing about the recent transaction.  I want to confirm that it's an Exara transaction."  And she said, "Yes, well, yes, Mr McNab, it is.  But look, I'm very sorry.  It's gone to the wrong account," or words to that effect.  And I said, "No, no, it's gone to the correct account.  It's the account that is to be used for Exara transactions."  And she said something along the lines of, "Well, Telly forgot to change the instructions."  And I said, "No, no, it's gone to the right account.  I'll take the matter up with Telly."[48]

[47]Transcript of Proceedings, 18 February 2014, 230-231.

[48]Ibid 231.

1. Following a telephone conversation between Mr McNab and Ms Balogh on the morning of Wednesday, 14 September 2011, Ms Balogh also forwarded him a copy of her email exchange with Mr Rose at the NAB.  Mr McNab then contacted Mr Babicci and forwarded that email exchange to him by way of an update on developments.  In his covering email, Mr McNab informed Mr Babicci as follows:

I spoke with Yvonne today and she kindly sent me this email.

Telly has told her that the money should have been paid to “Empire t/as Exara Gold” and she said that she has asked her bank to seek reimbursement from the account that the money has been paid to.

I told her that it didn’t seem to me that the money had gone to the wrong account and that I would be taking the matter up with Telly.

It seems to me that it would be sensible for us to get off on the front foot against Telly.  I’ll do some searches and see if I can find out what new structures he has in place.

I’ll also suggest to him that the way forward is to trade out of the problem and to stop doing stuff behind our back.

Contemporaneously, Mr McNab also sent an email to Ms Balogh, thanking her for forwarding the email chain and saying that he would take the matter up with Mr Nicolaou.

1. Later that morning, Mr McNab contacted Mr Nicolaou by email.  He said:

I’ve heard from Kris that his Exara loan account has been repaid.  This is good, but it would be useful if you would keep us informed about what you are doing.

We have an opportunity to bring in a further 36kg – it’s in Mount Hagen and I’m told that it can be done on a consignment basis.  Are you able to meet at your place at say 2.00pm tomorrow with Gayle Daisley and myself (and Jon) to discuss?

1. Mr Nicolaou responded by email a few minutes later.  He pointed out to Mr McNab that the amount of money transferred to Mr Babicci’s account was “a mistake wrong transfer via Focus Metals” and that the funds “have to be returned asap”. 

1. At the same time as Mr McNab was emailing Mr Nicolaou, he was also communicating by email with Mr Babicci.  He laid out his “on the front foot” strategy to Mr Babicci as follows:

Telly will obviously come chasing the money when Focus’s bank gets back to them, so I’m getting off on the front foot.  He seems to have incorporated a new company Exara Gold Pty Ltd (and [sic.] Australian company) and there is an Exara Gold business name as well, I’ll have the searches this arvo.

Anyway, I’ve confirmed with Gayle Daisley that the 36kg deal is still available.  The obvious solution to everyone’s issues is for that deal to go ahead using Exara’s export licence.  I want to use that deal as leverage to wrap up what might otherwise be a messy drawn out argument – payment under mistake, interpleader, blah blah.  Assuming that the overpayment is about $20K if we tip in another $20K that would just about be enough to fund the $36kg [sic.]  deal.  In simply [sic.] terms (subject to your instructions) we cut a deal with Telly that he stops claiming that the payment went to the wrong account on the basis that we cut him in (and kick back some funds) on the 36kg.  That leaves us $126K better off than last week without any arguments and a prospect of some further profits if the 36kg actually works (and I suspect that might – at least in part).

We need to quickly do the maths about how much Exara has overpaid.

Focus Metals contends that in this email, sent to Mr Babicci mid-morning on 14 September 2011, Mr McNab demonstrates clear knowledge of the payment by Focus Metals having been made by mistake.

1. Later on 14 September 2011, Mr Rose of the NAB communicated by email with Mr McPherson and others at NAB.  He attached the NAB online payment advices along with an email from Focus Metals requesting that the payments be recalled.  Mr McPherson responded, saying that he had been in contact with Mr Babicci and advised that Mr Babicci was not prepared to authorise the return of the funds and that there were potential legal matters pending.  Mr Rose acknowledged that response and informed Mr McPherson that he would advise Focus Metals accordingly. 

1. On 14 September 2011, Mr Babicci also responded to Mr McPherson‘s earlier request by email that he contact him.  Mr Babicci informed him that regarding the payment from Focus Metals “we have found that this was our ex-director trading without authority.”  He said that Mr McNab, is “reaching an agreement for a refund” and that he wants to “send money back using internet banking today.”  Mr Babicci then made arrangements with the NAB to facilitate the transfer to Mr McNab of the money to be refunded. 

1. In subsequent emails exchanged on 14 September 2011, Mr Babicci said that he would send Mr McNab his workings and bank statements, and his calculation of the “refund” due - $32,828.40 – as follows:

11/2/2010	Original amount invested	$200,000.00
Telegraphic Transfer fee	$35.00
27/8/2010	Payment	$90,057.07
9/9/2011	Final payment	$109,977.93

I have calculated interest on principal outstanding at the prevailing rates of my Line of Credit account with NAB plus 1.0%pa – on a simple interest basis – total is $18,257.27

Expenses for the visit to Pattaya, includes airfare, accommodation and entertainment, $5,624.73.

Total owing to me is $133,859.93

The amount credited to my account by Focus Metals was $166,688.33

Refund due is $32,828.40, let me know who to make it out to and I’ll send a cheque.

1. In response to the question raised in the last sentence of Mr Babicci’s email, Mr McNab provided details of his own NAB account (BSB: 083 054 Account no.: 18-725-4499) (“Mr McNab’s NAB account”) that same day.  Mr Babicci responded and said that, because of the daily limit on transactions, he would send Mr McNab $12,828.40 that day and $20,000 the next day.  Mr Babicci then made the transfers from his line of credit account, describing each of the internet transfers as “refund”.  Mr McNab gave no consideration for either payment.  The following day, being 15 September 2011, Mr McNab confirmed with Mr Babicci that he had received all of the money and would keep him posted.  He added that Mr Nicolaou had cancelled the meeting that was scheduled to take place that afternoon to discuss the Mt Hagen opportunity. 

1. A week or so passed without any developments.  In an email sent to Mr McNab on 23 September 2011, Mr Babicci observed that they had heard nothing more from Mr Nicolaou and commented that it was “hard to believe if it has gone away so easy.” 

Empire Distributors demands that Focus Metals makes payment of the $166,688.33 due

1. By letter dated 23 September 2011, the solicitors for Empire Distributors, HWL Ebsworth, sent a formal Letter of Demand to the solicitors for Focus Metals seeking payment of the sum of $166,688.33 by Monday, 3 October 2011. 

1. On 23 September 2011, Mr McPherson contacted Mr Babicci by email to let him know that “[t]he wolves are howling again”.  He said that he had been contacted by Focus Metals and he enquired whether Mr Babicci was on top of recent events.  Mr Babicci responded, and let Mr McPherson know, that the matter is “with Bruce and under control”.  A day or so later, Mr Babicci followed up with Mr McNab by email, forwarding a copy of Mr McPherson’s email to him, and suggested that they should “talk tomorrow to see where we are going to take this”.

1. On 26 September 2011, Mr Cooklin made contact with Mr McPherson at the NAB to “officially inform the NAB” that he had lodged a police report and to request that he “freeze the funds that [Focus Metals]  sent in error.”  Mr McPherson responded by email, thanking him for the information and informing him that he was not able to freeze the funds on the advice of a third party. 

1. Later that day, Mr McPherson made contact with Mr McNab and requested that he “get confirmation from Kris [Babicci] that you’re acting for him in this matter” so that he could put Mr McNab in touch with the NAB’s legal department.  A short while later, Mr McNab emailed Mr McPherson and confirmed that he was acting for Mr Babicci. 

1. Earlier that day, Mr McNab and Mr Babicci had been discussing what approach they should make to Focus Metals following an attempt made by Mr Cooklin the preceding weekend to contact Mr Babicci via his elderly mother.  Those discussions led to Mr McNab sending an email to Ms Balogh at Focus Metals addressed to “Mr Coghlan” (intended for Mr Cooklin), in the following terms:

Re Exara deposit.

I understand that in telephone discussions with Mr Babicci’s elderly mother, you have threatened police action in the event that the money deposited to Mr Babicci’s account is not returned to Focus Metals.

I have already confirmed with Yvonne Balogh that the funds in question were the proceeds of the smelting of some material imported from PNG by Exara.  She has also told me that the issue which has arisen is that Mr Nicolaou did not advise Focus that the proceeds of his latest transaction ought be paid to a different account.

We do not consider that the payment has been made to the wrong account.  Exara (and Mr Nicolaou personally) has owed the debt to Mr Babicci for a considerable time and it was long overdue for repayment.  We have emailed Mr Nicolaou about the matter and offered to meet with him, but after initially accepting the suggestion he is now refusing to meet.

Under the circumstances I (a) request that you refrain from troubling Mr Babicci’s elderly mother about the matter and (b) suggest that you leave the issue to Mr Nicolaou and Exara to sort out.

Focus Metals commences Supreme Court proceeding seeking freezing orders

1. On 26 September 2011 or thereabouts, Focus Metals sought and obtained ex parte before Justice Kaye a freezing order preventing Mr Babicci and the NAB from removing, disposing, dealing with or otherwise encumbering all or any part of the moneys standing to the credit of Mr Babicci’s NAB account up to the unencumbered value of $166,688.33.  Thereafter, Focus Metals commenced this proceeding by a generally Indorsed Writ naming Mr Babicci and the NAB as defendants, and seeking freezing orders, payment of the sum of $166,688.33, and further or alternatively, a declaration that Mr Babicci holds the sum of $166,688.33 that Focus Metals paid to him on trust for Focus Metals. 

1. Once the freezing order was in place, Mr Cooklin informed Mr McPherson and others at the NAB that it had been made and requested that they confirm that “the funds will not be transferred from this account.”  Mr McPherson notified Mr Babicci, and he in turn Mr McNab, who then discussed this development with Mr McPherson by email.

1. At the time when the freezing order was made, neither Focus Metals nor the Court was aware that the whole of the amount paid by Focus Metals had already been transferred from Mr Babicci’s NAB account and deposited into his line of credit account.  This remained the position on the first return of the freezing order on 28 September 2011, and on the extension of the freezing order on 24 October 2011, even though Mr McNab appeared on each occasion in his capacity as Mr Babicci’s solicitor and had by then received (in his personal capacity) the payments made by Mr Babicci from his line of credit account totalling $32,828.40. 

1. On 20 December 2011, when the freezing order came on for hearing before Justice Kyrou, his Honour expressed his “concern that the money was taken out of the NAB account fairly quickly and details of what occurred was not disclosed to the Court on a timely basis.”[49]  The fact that the entirety of the moneys had been transferred out of the account was only revealed to Focus Metals when it later obtained documents it had subpoenaed from the NAB.  His Honour said:

Now in this case the thing that’s caused me the greatest concern is that the moneys that were deposited in the account with the National Australia Bank, were almost immediately to the cent, taken out and beyond the reach of the freezing order that was subsequently made. 

On the continuation of the freezing orders and subsequent appearances before the court, the court was allowed to proceed on the false assumption that the amount remained in that account without timely information being brought to the court’s attention that the court’s processes were rendered nugatory by virtue of that amount having been taken out.[50]

[49]Transcript of Proceedings, 20 December 2011 (Kyrou J), 1103.

[50]Ibid 36.

1. Mr McNab responded and sought to explain to his Honour what had occurred:

MR McNAB: …perhaps if I could say I’m instructed that the money that was in the account was simply applied against the line of credit Your Honour.  It wasn’t - - -

HIS HONOUR:  But it’s beyond the reach of the plaintiff.  Isn’t that the point?  It doesn’t matter whether it’s shipped overseas or not.

MR McNAB: Yes, the transaction occurred simply as part of ordinary prudent financial arrangements before the freezing orders applied…[51]

However, Mr McNab did not inform the Court that Mr Babicci had also paid him the sum of $32,828.40 from his line of credit account by way of “refund”.  Indeed, Focus Metals did not become aware of that fact until September 2012 when it obtained the subpoenaed bank documents from the NAB.

[51]Ibid 39.

1. On 20 December 2011, Kyrou J made orders varying the freezing orders so as to restrain Mr Babicci from dealing with two Australian properties that he owned and with any bank accounts held with the NAB.

Empire Distributors commences a proceeding against Focus Metals in the County Court

1. On 6 October 2011, no payment having been made by Focus Metals in response to the solicitors’ letter of demand, Empire Distributors commenced a proceeding by Writ issued in the County Court of Victoria seeking payment of the debt of $166,688.33.  The Writ and Statement of Claim were served on Focus Metals’ solicitor on 7 October 2011.

1. Mr Cooklin gave evidence that following service of the proceeding brought by Empire Distributors, he consulted with Focus Metals’ solicitor and obtained advice from two barristers.  He did not detail the substance of the advice but said that he was advised by several barristers and solicitors that Focus Metals should repay the money to Mr Nicolaou.  He discussed the matter with the directors and they determined to follow that advice.  To that end, Focus Metals entered into the Deed of Release with Empire Distributors, Exara Limited and Mr Nicolaou, without any admission of liability, and repaid the sum of $166,688.33 to the solicitors for Empire Distributors on 7 November 2011. 

1. On 14 November 2011, Orders were made in the County Court by Judge Lewitan, striking out the proceeding without adjudication and with no order as to costs.

Mr McNab seeks to obtain evidence in support of Mr Babicci’s claim for repayment of his loan

1. Behind the scenes, on 5 October 2011 or thereabouts, Mr McNab made contact with Mr Kaman Denge, whom he apparently understood to still be a director of Exara Limited, seeking to have him provide some support for Mr Babicci’s claim for repayment of his loan.  Mr McNab followed up with emails on 5 October 2011, 7 October 2011 and 21 November 2011, but Mr Denge did not reply to any of them.

1. On 6 October 2011, Mr McNab forwarded the 5 October 2011 email exchange with Mr Denge to Mr Babicci and  commenting as follows:

Just FYI.  This is the email I’ve sent to Kaman – I expect a reply from him shortly.

I enclose Focus’s new Statement of Claim.  It’s quite odd that they seem to think that they can avoid all of the Exara emails and instructions and pretend that their instructions came from Empire Distributors.  No mention (for instance) of the written Exara contract (attached) etc etc etc.  Also no mention of the Exara Ltd invoice which was raised (and which they paid by directing the payment to your account).

Jon is digging out all his emails with Focus also.

Seems to me that on any basis Exara must be the principal in the transaction and even if Empire was giving instructions it was doing so as agent on Exara’s behalf.

1. Contrary to Mr McNab’s expectation, no response was forthcoming from Mr Denge.

1. Against that background, Focus Metals’ claim proceeded to trial.

Relevant legal principles

1. Before turning to consider the three main issues raised for decision, l shall summarise the relevant legal principles.

Recovery of money paid by mistake

1. Where money is paid under a mistake of fact, the person paying the money (the payer) may recover it from the recipient in an action for money had and received.  In Australia & New Zealand Banking Group Limited v Westpac Banking Corporation[52] the High Court clarified that the basis of the common law action for money had and received for recovery of money paid under fundamental mistake of fact should now be recognized as lying in restitution or unjust enrichment rather than in implied contract.  The Court, in a joint judgment,[53] stated:

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 the unjust enrichment, to the person who has sustained the countervailing detriment.[54]

[52](1988) 164 CLR 662 (”ANZ v Westpac”).

[53]Mason CJ, Wilson, Deane, Toohey and Gaudron JJ.

[54](1988) 164 CLR 662, 673.

1. The Court continued, to point out that the action for recovery itself is not one for the enforcement of a trust or for tracing or the recovery of specific money or property.  Rather, the Court explained:

It is a common law action for recovery of the value of the unjust enrichment and the fact that specific money or property received can no longer be identified in the hands of the recipient or traced into other specific property which he holds does not of itself constitute an answer in a category of case in which the law imposes a prima facie liability to make restitution.  Before that prima facie liability will be displaced, there must be circumstances (e.g., that the payment was made for good consideration such as the discharge of an existing debt or, arguably, that there has been some adverse change of position by the recipient in good faith and in reliance on the payment) which the law recognizes would make an order for restitution unjust.

The prima facie liability to make restitution is imposed by the law on the person who has been unjustly enriched.[55]

[55]Ibid.

1. A few years later,  in David Securities Pty Ltd v Commonwealth Bank of Australia,[56] the High Court made clear that, where a qualifying or vitiating factor such as mistake of fact or law is established by the payer, there is a prima facie liability on the recipient to make restitution, and the recipient is entitled to raise by way of defence any matter or circumstance that will demonstrate that the receipt or retention of the payment is not unjust.  In their joint judgment, Mason CJ, Deane, Toohey, Gaudron and McHugh JJ summarised the applicable principles as follows:

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 recognises would make an order for restitution unjust.[57]  There can be no restitution in such circumstances because the law will not provide for recovery except when the enrichment is unjust.  It follows that the recipient of a payment, which is sought to be recovered on the ground of unjust enrichment, is entitled to raise by way of answer any matter or circumstance which shows that his or her receipt (or retention) of the payment is not unjust.[58]

[56](1992) 175 CLR 353 (”David Securities”).

[57]ANZ v Westpac (1988) 164 CLR 662, 673.

[58]David Securities (1992) 175 CLR 353, 380.

1. In David Securities, the Court also clarified that it is no longer necessary for the payer to prove that the mistake was ”fundamental”; rather what the payer must prove is that the mistake caused the payment to be made and also the extent of the mistaken payment.[59]

Constructive trust arising from the retention of a mistaken payment

[59]Ibid 376-377 per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ; 395-396 per Brennan J; 402 per Dawson J.

1. In the present case, Focus Metals argued for the imposition of a constructive trust as a result of the making of the alleged mistaken payment.  Focus Metals contended that:

1.        where money is paid by mistake, the payee’s conscience is bound upon becoming aware of the mistake; and

2.        the law recognises that where a payee retains moneys known to have been paid by mistake, and for which there was no consideration, a constructive trust arises from the retention of those moneys from the time the payee acquired such knowledge. 

1. Focus Metals relied on the decision of White J in Wambo Coal Pty Ltd v Ariff[60] as authority for the proposition that once the payee has knowledge of the mistake, it would be against conscience for the payee to use that money as his or her own.  Wambo Coal is also authority for the proposition that a proprietary remedy is appropriate “once the recipient is aware that, by a mistake, he has got something for nothing.”[61]

   [60](2007) 63 ACSR 429 (“Wambo Coal”).

   [61]Ibid 438 [43].

1. In Wambo Coal, White J held that the requisite knowledge required of a payee who is paid by mistake is the same knowledge as is required to render a third party liable under the second limb of Barnes v Addy.[62]  That is, a payee will be treated as having knowledge of a payment if he or she has:

   [62](1874) LR 9 Ch App 244.

(a) actual knowledge; or

(b)      wilfully shuts his or her eyes to the obvious; or

(c)       wilfully and recklessly fails to make such inquiries as an honest and reasonable person would make; or

(d)      has knowledge of circumstances which would indicate the facts to an honest or reasonable person.[63] 

[63](2007) 63 ACSR 429, 438 [44], citing Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 (“Farah Constructions”), 163-164 [174]-[178].

1. Focus Metals also relied on the later decision of White J in Credit Union Australia Ltd v Lyons[64] and the decision of the New South Wales Court of Appeal in Shields v Westpac Banking Corporation[65] as examples of cases where the court has found it appropriate to grant relief by way of a constructive or resulting trust. 

   [64][2009] NSWSC 1188.

   [65][2008] NSWCA 268.

1. In Credit Union Australia Ltd v Lyons, funds had been withdrawn from a line of credit account that was not closed, due to an administrative oversight.  The plaintiff had allowed the drawings to take place on the line of credit account because it was acting under a mistake that the account was still secured.  When it became aware of its mistake, the plaintiff commenced proceedings seeking to recover the moneys that were withdrawn by the defendants, contending that it should be inferred that they knew of the mistake, and that the moneys so paid out were held on trust for the plaintiff.  Relevantly, His Honour found that the:

moneys received by the defendants from the accounts, with knowledge that they were permitted to be drawn as a result of the mistake, when the monies were paid without any consideration passing from the defendants to the plaintiff other than the original promise made by the first defendant in her loan agreement, were at that time impressed with either a constructive or resulting trust in favour of the plaintiff.[66] 

[66][2009] NSWSC 1188, [29]. In Shields v Westpac Banking Corporation [2008] NSWCA 268, [20] per Hodgson JA (with whom Spigelman CJ and Macfarlan JA agreed) said it “does not matter whether the trust is characterised as a resulting trust or a constructive trust” but if it is to be characterised as a constructive trust “it is clearly in my opinion one which arose immediately.”

1. Furthermore, as certain amounts of the payments made in that case could be traced as having been used to reduce the mortgage debts secured over properties acquired by the first defendant, his Honour said that the court “may treat those lands as charged with the payment to the plaintiff of the amounts so applied.”[67] 

   [67][2009] NSWSC 1188, [30] per White J, citing Kang v Kwan [2002] NSWSC 1187, [204]–[207] and cases there cited; Boscawen v Bajwa [1996] 1 WLR 328, 334-335.

1. In the present case, Focus Metals seeks to recover the whole of the moneys the subject of the mistaken payments from either Mr Babicci or from both Mr Babicci and Mr McNab.  Focus Metals contended that both Mr Babicci and Mr McNab knew of the mistake at or shortly after the time of receipt and, instead of repaying the funds, have sought to justify their retention of the proceeds.

1. In the case of the two payments made by Mr Babicci to Mr McNab, Focus Metals contends that Mr Babicci held the sum of $166,688.33 subject to a constructive trust, and that when he transferred the sum of $32,828.40 to Mr McNab, he did so in breach of trust.  In those circumstances, it was said that the disposition of trust property to a third party recipient in breach of trust may give rise to two remedies:

(a)        a proprietary remedy in respect of the trust property and its traceable proceeds subject to the defence of bona fide purchaser for value without notice;[68] and

[68]Westpac Banking Corporation v Ollis [2007] NSWSC 956, [41]-[46] per Einstein J; Wambo Coal (2007) 63 ACSR 429, 441-442 [57]-[65].

(b)        personal liability for equitable compensation, where the recipient has notice that it is received in breach of trust.[69]  Focus Metals contends that Mr McNab had the requisite knowledge.

The proprietary remedy contended for is distinct from the personal liability.[70]

Unjust enrichment and money had and received

[69]Farah Constructions (2007) 230 CLR 89, 140-141 [111]-[113] where the High Court observed that “[i]n recent times it has been assumed, but rarely if at all decided, that the first limb [of Barnes v Addy] applies not only to persons dealing with trustees, but also to persons dealing with at least  some other types of fiduciary”.

[70]Re Montagu’s Settlement Trusts [1987] Ch 264; K & S Corp Ltd v Sportingbet Australia Pty Ltd (2003) 86 SASR 312, [8].

1. As noted above, where a party pays money to another as a result of a mistake, the payer is prima facie entitled to its restitution.  To displace that prima facie liability, the recipient must identify matters or circumstances which the law recognises would make an order for restitution unjust[71] and the enriched party has the onus of demonstrating that his or her receipt (or retention) of the payment is not unjust.  In Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd,[72] Einstein J observed that it “is not a defence to claims for recovery of mistaken payments (based on mistake of fact) that the defendant(s) honestly believed in his or her entitlement to receive or retain money mistakenly paid”.[73] 

   [71]Perpetual Trustees Australia Ltd v Heperu Pty Ltd (2009) 76 NSWLR 195, [127]-[129].

   [72][2011] NSWSC 267.

   [73][2011] NSWSC 267, [23].

1. Similarly, where a payment is made for a consideration that has wholly failed, and the money so paid is sought to be recovered by the payer on the basis of money had and received, nowadays it would also be prima facie recoverable in restitution.[74]  Even in the absence of knowledge, a party who receives money as a result of mistake is liable in an action for restitution or in an action for money had and received.[75]  In Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd Einstein J set out the three essential elements of an unjust enrichment claim as being  that:

   [74]David Securities (1992) 175 CLR 353, 379.

   [75]Ilich v R (1987) 162 CLR 110, 129, 143; Credit Union Australia Ltd v Lyons [2009] NSWSC 1188, [26] per White J.

1. The tenor of Mr Babicci’s oral evidence was that in making the payment of the $32,828.40 to Mr McNab, Mr Babicci was, in effect, acknowledging that Mr McNab had not been repaid his initial $10,000 investment in the joint venture and he was repaying him what he was due.  In Mr McNab’s oral evidence, however, he did not assert that he was owed any money; rather he said the $32,828.40 was a sum that Mr Babicci elected to pay him from his own funds, and it was effectively a “gift” to him. 

1. Insofar as each of Mr Babicci and Mr McNab gave evidence about the payment of the sum of $32,828.40 to Mr McNab, I found their respective accounts untenable in the face of the contemporaneous documents designating that amount as a “refund”.

1. Approaching the matter on the basis that the knowledge required of a payee who is paid by mistake is the same knowledge as is required to render a third party liable under the second limb of Barnes v Addy,  I am satisfied that each of the defendants relevantly had knowledge of the mistake at or shortly after the time the payment was made to Mr Babicci’s NAB account and that the conscience of each defendant was bound upon becoming aware of the mistake of fact.  I am also satisfied on the evidence that each of the defendants ”wilfully shut their eyes to the obvious” and ”failed to make such inquiries as an honest and reasonable person would make” concerning the payments made by Focus Metals.  As a result, they each had “knowledge of circumstances which would indicate the facts to an honest or reasonable person”. 

1. It follows that I am satisfied that each of the defendants relevantly had knowledge that the payment to Mr Babicci was made by Focus Metals under a mistake and that each of the defendants is liable to account to Focus Metals as a constructive trustee from the date of such knowledge.  In the case of Mr Babicci, the relevant date is 12 September 2011.

Was Mr McNab a knowing recipient of the $32,828.40?

1. In the case of the sum of $32,828.40 paid to Mr McNab, Focus Metals also contended that Mr McNab was a knowing recipient of funds paid under a mistake.  Focus Metals submitted that, in the first place, Mr Babicci had no entitlement whatsoever to retain the $166,688.33 and it said that remained the position even when he transferred those funds across to his line of credit account.  Secondly, when Mr Babicci withdrew the sum of $32,828.40 from his line of credit account in two tranches on 14 and 15 September 2011, he did so from the funds that had been mistakenly paid to him by Focus Metals.  When he transferred the sum of $32,828.40 to Mr McNab, he did so for no consideration and Mr McNab knew that the moneys he received were part of the moneys that Focus Metals had mistakenly paid to Mr Babicci.  Thus, so Focus Metals submitted, Mr McNab’s conscience was bound upon him becoming aware of the mistake of fact, such that Mr McNab holds the sum of $32,828.40 on a constructive trust in favour of Focus Metals and is liable to account to it for that sum. 

1. When he gave evidence, Mr McNab contended that the moneys Mr Babicci paid to him were sourced from Mr Babicci’s own funds.  He denied that the moneys were wrongly paid to him and he continued to maintain his entitlement to retain them. 

1. In their written outline of closing submissions, the defendants advanced for the first time an argument, based on based on the decision of the Privy Council in Re Goldcorp Exchange Ltd.[111]  The defendants’ submission was to the effect that the moneys so paid to Mr McNab were not funds the subject of this proceeding because the moneys paid by Focus Metals were transferred by Mr Babicci into his line of credit account, which was overdrawn, and as a consequence the funds paid by Focus Metals ceased to exist.  Alternatively, it was argued that even if part of the line of credit account were referable to the $166,688.33 credited to it, and that fund survives as moneys held on trust, the line of credit account would nevertheless be regarded as a ”mixed fund”.  As a result, it was said that application of the presumption arising from In re Hallett’s Estate[112] would mean that the funds transferred to Mr McNab were paid from Mr Babicci’s own funds.

   [111][1995] 1 AC 74.

   [112](1880) 13 Ch D 696.

1. The decision of the Privy Council in In re Goldcorp Exchange Ltd[113] is a leading authority on proprietary remedies, in particular the remedy of tracing and constructive trusts.  In their written submission, the defendants made reference to a passage in the judgment of their Lordships, delivered by Lord Mustill, discussing the fact that where moneys said to be impressed with a trust were paid into an overdrawn account, they ceased to exist.[114]  In the present case, however, where Focus Metals is pursuing what is essentially a monetary claim or equitable compensation claim for a breach of trust, rather than a proprietary remedy, at least at this stage, Senior Counsel for Focus Metals contended that there is no need for the Court to embark on this area of legal discourse.[115]  In oral closing submissions, Counsel for the defendants accepted that the argument based on Re Goldcorp Exchange Ltd was “susceptible to the analysis that my learned friend posits” and he did not press the point.[116]  However, he then sought to advance a fresh argument, based on the presumption in In re Hallett’s Estate.[117]  

   [113][1995] 1 AC 74.

   [114]Ibid 105.

   [115]Transcript of Proceedings, 20 February 2014, 357-359.

   [116]Ibid 388.

   [117](1880) 13 Ch D 696.

1. In re Hallett’s Estate[118] is authority for the proposition that where a trustee deposits moneys into a mixed fund he will be presumed to withdraw his own money, prior to trust moneys. 

   [118]Ibid.

1. In the present case, Counsel for the defendants argued that Mr Babicci had established the line of credit facility with his bank, and there was no evidence of any inability on his part to service it.  In those circumstances, he submitted, the presumption in In re Hallett’s Estate applies such that any money distributed by Mr Babicci from that line of credit account is necessarily his own money, and not trust money in the relevant sense, such that the full quantum of any trust fund arising from the alleged mistaken payment remains available to be withdrawn from the mixed fund.  In reply, Senior Counsel for Focus Metals contended said that the presumption in In re Hallett’s Estate was irrelevant to the payments made by Mr Babicci in the present case.  Even if it were capable of application, however, Senior Counsel said that there was much evidence to refute the presumption because the evidence showed that it was always Mr Babicci’s intention to pay or refund part of the moneys that were mistakenly paid, which were trust moneys in the relevant sense, via Mr McNab.  Further, he observed, this explanation had never been pleaded or mentioned before the Court until an outline of the defendants’ closing written submissions was filed on the last day of the trial.

Mr McNab was a knowing recipient

1. In respect of the payment of the sum of $32,828.40 to Mr McNab, I have preferred the evidence set out in the contemporaneous emails that were exchanged between Mr Babicci and Mr McNab, rather than the version of events given by them in oral evidence.  In my view, the moneys paid to Mr McNab were subject to a constructive trust from the moment Mr Babicci appropriated them as his own and transferred them across to his line of credit account.  Accordingly, in circumstances where Mr McNab’s “conscience was bound”, having knowledge in the relevant sense that Focus Metals had paid the sum of $166,688.33 to Mr Babicci’s NAB account under the mistaken belief that it was discharging its indebtedness to Empire Distributors pursuant to the September 2011 transaction, the moneys paid to Mr McNab remained the subject of a constructive trust.  In the case of the $32,828.40 paid to Mr McNab, he is liable to account to Focus Metals as a constructive trustee and the relevant date contended for by Focus Metals is 15 September 2011, when the second payment was made.

Alternatively, is it unjust for the defendants to retain the mistaken payment?

1. This issue is only relevant in the context of the restitutionary claims made by Focus Metals.

1. In David Securities, the High Court confirmed that a recipient of a mistaken payment could defeat the payer’s prima facie entitlement to recover it as money paid under a mistake of fact if certain “defences” were made out.[119]

   [119]See David Securities (1992) 175 CLR 353, 380.

1. As noted earlier, the defendants formally pleaded a number of defences which were not pursued.  The thrust of the case advanced by the defendants at trial was that if there was relevantly a payment made by Focus Metals by mistake, it would be “unjust in all the circumstances that this money be returned” because:

(a)        it was Focus Metals' intention to discharge its obligation to Exara by making the payment of the $166,688.33.  Focus Metals has correctly made payment to Mr Babicci’s NAB account for the September 2011 transaction and it made a further payment to Empire Distributors on 7 November 2011 “further to a misunderstanding of the law or of the circumstances when they entered into the terms of settlement”;[120] and 

(b)        Focus Metals was aware of “an issue with Exara Limited” - apparently a reference to the comments made by Mr Karamountzos to Mr Cooklin in 2008 about the conduct of Mr Nicolaou - and the defendants said that Focus Metals nevertheless chose to settle the County Court proceeding brought by Empire Distributors.  The defendants contended that it was this settlement and release, “hastily entered into” by Focus Metals, which was the real cause of the loss alleged.

[120]Transcript of Proceedings, 18 February 2014, 146.

1. Mr Cooklin gave evidence that in making the four payments totalling $166,688.33 he intended to discharge the indebtedness of Focus Metals that arose on the purchase of the refined gold and other precious metals the subject of the September 2011 transaction.  There was no debt owed by Focus Metals to either Mr Babicci or Mr McNab.  Nor was there any evidence to suggest that Mr Cooklin was in some way instructed or authorised to make, or acquiesced in making, payment to Mr Babicci’s NAB account in order to discharge any debt owed to him or to Mr McNab.  Moreover, no such case was put to Mr Cooklin during cross-examination.

1. There was no evidence that the payments made by Mr Cooklin to Mr Babicci’s NAB account were effective to discharge Focus Metals’ indebtedness arising from the September 2011 transaction.  That indebtedness was only discharged when Focus Metals made the further payment of the sum of $166,688.33 to Empire Distributors pursuant to the Deed of Release entered into by way of settlement of the County Court proceeding.

1. Reference has already been made to Mr Cooklin’s account of the substance of his conversations with Mr Karamountzos back in 2008.  That account does not suggest that there was any ongoing “issue” with Exara Limited or indeed Mr Nicolaou.

1. The defendants also asserted that Focus Metals was aware of their involvement via the February 2010 agreement and the contractual arrangements with Exara Limited.  As noted earlier, that assertion formed part of the foundation for their contention that there was ”no mistake”, but it was also relied upon in support of their claim that it would be unjust in all the circumstances to require the defendants to repay the $166,688.33 that was mistakenly paid.  In effect, the defendants said that because Focus Metals was on notice that the defendants contended they were entitled to retain the monies, Focus Metals had acted hastily in settling the County Court proceeding without ever testing the strength of the matters that had been raised by the defendants.

1. During cross-examination, Mr Cooklin was asked about the settlement of the County Court proceedings and whether he believed that there was no defence to the claim made by Empire Distributors against Focus Metals.  He said:

I had legal advice to say that if we went to court with Mr Nicolaou we would have little chance of winning and it would cost a lot of money.  And my advice at that time by my legal representers was that's the best course of action you should take.  And as a director of the company, I spoke to the other director of the company and also the financial controller who has input into it, and we agreed that the best course of action was to settle with Mr Nicolaou because we truly believed that Mr Nicolaou was the owner of the gold.  He was entitled to the funds and we truly believed that the only reason Mr Babicci received the funds is he received it by mistake, our mistake.[121]

[121]Transcript of Proceedings, 17 February 2014, 114.

1. Counsel for the defendants then asked Mr Cooklin whether, at the time when he made the decision to settle the County Court proceeding, he considered that Mr Nicolaou’s instruction concerning payment (as contained in his email of 8 February 2011) did not apply to the transactions between Focus Metals and Exara Limited.  Mr Cooklin responded:

I took the advice of counsel.  I didn't – it's not for me to make those decisions, for me to make the decisions of the best interests of the company that I'm employed by.  And I count more than one lawyer, more than one lawyer looked at this case and advised me on behalf of the company to settle.  I was told by various counsel that action, if Mr Nicolaou took action against the company, we had very little chance of success.[122]

[122]Ibid.

1. In the circumstances, the evidence given by Mr Cooklin under cross-examination serves to confirm that in settling the County Court proceeding as it did, Focus Metals acted appropriately and in conformity with the proper discharge of its overarching obligations under the Civil Procedure Act 2010 (Vic). Furthermore, if Focus Metals had not paid the sum of $166,688.33 to Empire Distributors, the debt arising from the September 2011 transaction would not have been discharged.

1. In my view, none of the matters raised by the defendants operates to displace the prima facie entitlement of Focus Metals to recover the sum of $166,688.33 that it mistakenly paid to Mr Babicci’s NAB account.  The documentary record establishes that from shortly after the funds were received into Mr Babicci’s NAB account, the defendants knew that the payments made by Focus Metals had been paid in error and that the retention of them by the defendants would be contested.  Nevertheless, Mr Babicci appropriated the whole of the moneys and transferred them into his line of credit account.  The defendants then together embarked on a strategy designed to establish a basis for holding on to the moneys.  They discussed working out a deal with Mr Nicolaou to avoid the matter being litigated.  When that strategy failed, they sought to substantiate the retention of the moneys as a repayment of the balance of Mr Babicci’s initial investment or loan capital contributed to the venture established under the 2010 agreement.  To the extent that the sum paid by Focus Metals represented an ”overpayment” of what Mr Babicci calculated was due to him, Mr Babicci sought to refund it, but the question was to whom?  Mr McNab solved that by appropriating the overpayment to himself, by directing Mr Babicci to pay the sum of $32,828.40 to his personal account.  That appropriation only came to the attention of Focus Metals more than 12 months after the mistaken payment was made. 

1. Accordingly, on the basis of the evidence that was adduced at trial, there is little, if anything, about the conduct of the defendants that suggests either of them has acted in good faith in holding onto the sum of $166,688.33 (or the retained payment of $133,859.93) in the case of Mr Babicci or the sum of $32,828.40 in the case of Mr McNab.  It would be inequitable for either defendant to be permitted to retain any of Focus Metal’s money.

Further submissions filed by the parties after the conclusion of the trial

1. At the conclusion of the oral submissions at the trial on 20 February 2014, I gave Mr Babicci and Mr McNab leave to file, by 12 noon on Monday, 24 February 2014, a short written submission (of no more than 3 pages) addressing any matter that had not been addressed orally by their counsel.  In so doing, I emphasised that the grant of leave was not an opportunity to re-visit any submission already advanced.  I also gave Focus Metals leave to reply to any such submission by 12 noon on Wednesday, 26 February 2014. 

1. On 24 February 2014 no further submissions were filed.  My Associate was, however, informed by email from Mr Anthony Chimonis, the solicitor for the first defendant that the defendants were in discussions with a Senior Counsel, with a view to re-opening the case.  Further emails from the solicitor for the first defendant, conveying information to similar effect, followed on 6 and 7 March 2014.  On 7 March 2014, the solicitor for Focus Metals wrote to the first defendant’s solicitor, objecting to him communicating with the Court in this way and setting out the reasons why he regarded it as inappropriate to do so.  A copy of that response was copied to my Associate by email.

1. On 31 March 2014, Junior Counsel for Focus Metals sent an email to my Associate, notifying the Court of the recent decision of the Court of Appeal in Pentridge Village v Potenza,[123] noting that it “is the most recent application of the principles of restitution and payments by mistake as set out in David Securities” and attaching a link to the decision.  The defendants then used the delivery of this recent decision as an opportunity for them to file a further written submission (of 3 pages) prepared by Mr Richard Cook of Counsel and sent to my Associate by email on 2 April 2014. 

   [123][2014] VSCA 50 (“Pentridge Village”).

1. Following service of the proposed submissions, Senior Counsel for Focus Metals notified my Associate by email sent later that day that Focus Metals objected to the defendants making additional submissions without leave of the Court having first been sought and obtained.  He also pointed out that in referring the Court to the recent decision in Pentridge Village, Focus Metals had not sought to make any additional submission.  On 3 April 2014, the first defendant’s solicitor emailed my Associate explaining that their submissions were filed with leave but were out of time.  The letter offered to provide affidavit evidence regarding the delay in filing the submissions.  On 4 April 2014, the solicitor for Focus Metals sent an email to my Associate, copied to the solicitors for the respective defendants, setting out the grounds upon which they objected to the defendants filing or making any further submissions.

1. Against that background, on 4 April 2014, my Associate sent an email to the solicitors for the parties in the following terms:

I have informed Her Honour that a body of correspondence has been received by email over the past few days.  Whilst Her Honour has not read the email correspondence, she has asked me to inform the parties that if either of them has an application they wish to make, they should do so by filing an application forthwith together with any material in support.  If an application is filed, the solicitors for the parties should consult as to dates when they would be available for any such application to be heard in a timely way and the likely duration of the hearing.

1. Subsequently, an affidavit sworn by Mr Chimonis on 16 April 2014 on behalf of both defendants, was emailed to my Associate on 29 April 2014.[124]  It was accompanied by a draft summons seeking an order that the submissions filed on behalf of the defendants on 2 April 2014 “be accepted by and read by Her Honour and consideration be given to the matters raised in those submissions before Her Honour delivers judgment in this proceeding.”   In his affidavit in support, Mr Chimonis deposed as follows:

The submissions of Mr Cook dated 1 April 2014, in my belief, are prepared largely in response to the Pentridge Village case.  Insofar as they go further than that case and are submissions in respect of which it is necessary to obtain leave to file after the conclusion of the trial I would seek to have the time extended for the delivery of those submissions extended, from the time fixed by Her Honour’s earlier order at the conclusion of the trial until 2 April 2014.[125]

[124]The bundle of documents emailed, including the affidavit of Mr Chimonis and draft summons, was later re-sent to my Associate by the solicitor for Focus Metals because the bundle emailed on 29 April 2014 was missing pages.

[125]Affidavit of Mr Chimonis sworn 16 April 2014, [12].

1. Email correspondence was exchanged between the solicitors for the parties and my Associate on 29 April 2014 about whether or not the matter could be resolved “on the papers.”  The parties agreed that the matter could be dealt with in that way if the sole purpose of the defendants’ application was to file further submissions.  The draft summons filed by Mr Chimonis confirmed that this was the case.  In those circumstances, on 1 May 2014, my Associate emailed the solicitors for the parties to confirm that the application would be dealt with “on the papers”.

1. On 7 May 2014, Focus Metals filed an affidavit sworn by their solicitor dated 5 May 2014 and written submissions dated 6 May 2014 in opposition to the defendants’ application to file further submissions.  On 13 May 2014, the defendants filed a written submission in reply.  In essence, it is clear that the defendants submitted that the matters raised in their further submissions filed on 2 April 2014 were directed to ensuring that their case has been adequately advanced by those representing them.  Further, they said, if the arguments raised therein were not advanced at trial, then they are to be regarded as “additional points not raised in oral closing submissions” and fall within the grant of leave given at the conclusion of the trial, subject to time being extended to permit them to be filed.  They contended that Focus Metals had not pointed to any prejudice it would suffer if the Court had regard to the further submissions, whereas the defendants would suffer prejudice if the matters raised in them were not before the Court.

1. By email dated 13 May 2014, Senior Counsel for Focus Metals objected to the final paragraph of the defendant’s submissions in reply (set out and discussed below at [204]ff).

Relevant legal principles concerning receipt of further submissions after conclusion of trial

1. The submission filed on behalf of Focus Metals helpfully summarised the relevant legal principles.  It is clear that, once a trial has concluded, the parties have no right to make additional submissions.  Once argument has been presented at a hearing, leave of the Court must be obtained before further submissions may be made, and leave will only be granted in “exceptional circumstances”.[126]  Further, where leave is granted for a limited purpose (as was the case here), it is not permissible to use the opportunity to add further material or address matters outside the scope of the leave granted.[127]

   [126]R v Zhan Yu Zhong [2003] VSCA 56, [4].

   [127]NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90, [192]. See also the observations made by McHugh J in Eastman v Director of Public Prosecutions (2003) 214 CLR 318, [29]-[31] and those of the Court of Appeal to similar effect in the context of applications to re-open a case in Spotlight Pty Ltd v NCON Australia Ltd [2012] VSCA 232, [17] per Beach AJA.

1. Focus Metals also relied on the Civil Procedure Act 2010 (Vic). It contended that as more than two months had elapsed since the conclusion of the trial, the application should be refused because the grant of leave in these circumstances would be contrary to the overriding objectives of economy and efficiency sought to be advanced by that Act.

Ruling on the defendants’ application for leave to file additional submissions

1. In my view the defendants’ application should be refused.  The leave that was given at the conclusion of the trial was directed to the delivery of any further submissions, of limited scope, in a short time frame.  The defendants failed to provide any such submissions in a timely way.  Rather, they appear to have embarked on a course of seeking a second opinion about the way the case was run at trial.  Then, when counsel for Focus Metals informed the Court of the recent decision in Pentridge Village, they seized upon that as an opportunity for making further additional submissions, with the benefit of assistance from their new counsel.  The matters set out in the affidavit of Mr Chimonis do not provide a proper explanation for the long delay or any basis for the grant of the wider leave now sought to file the proposed supplementary submissions.  In my view, there are no exceptional circumstances or other matters justifying the grant of leave.  The application should be refused.

Additional submissions that the defendants sought to advance

1. Having ruled against the defendants’ application, I nevertheless turn to deal with the additional matters raised, for completeness. 

1. The defendants contended that the recent decision in Pentridge Village does not assist Focus Metals.  Focus Metals did not advance any submissions about the case.  Rather, Junior Counsel for Focus Metals did no more than draw the recent decision to the Court’s attention, in accordance with well-established practice rules.[128] 

   [128]See Rule 26, Victorian Bar Inc. Practice Rules; see also Good Conduct Guide 2006.

1. The decision in Pentridge Village turned on its particular facts.  Relevantly, at the trial Pentridge Village failed to prove that it had made a mistake of fact or law in paying the $150,000 to the plaintiff.  On the appeal, the critical issue was whether Pentridge Village had made the payment of $150,000 because it believed it was under a legal obligation to do so.  The Court of Appeal observed that “[i]f Pentridge Village believed that it was contractually bound to make the payment when in fact it was not, it will prima facie be entitled to recover the sum.”[129]  However, the Court of Appeal found that the evidence did not establish that it is more likely than not that the $150,000 was paid because of any mistake on the part of Pentridge Village.  That is, Pentridge Village had failed to discharge its onus and thus the Court found there was no error in the reasoning of the trial judge. 

   [129]Pentridge Village [2014] VSCA 50, [23] citing David Securities.

1. The gist of the additional matters the defendants sought to raise were summarised in their reply submissions as follows:

The defendants submit that the transaction the subject of this proceeding can be simply explained:

·Babicci’s NAB account was an Exara account: Focus intended to pay Exara and it did: the doctrine of mistake does not apply.

·The defendants have changed their position as a result of the payment being made.[130]

[130]Defendants’ written submission in reply dated 12 May 2014, 5.

1. The defendants’ further submission contended that “Mr Babicci’s NAB account was specifically set up to be used as an Exara account.”[131]  The characterisation of Mr Babicci’s NAB account as one specificially set up for use as “an Exara account” is not supported by the evidence.  Following the meeting in Thailand in May 2010, Mr Babicci offered the use of his NAB account for transactions conducted by the joint venture.  In an email to Mr McNab, Mr Babicci said that, as a non-resident for tax purposes, he was not taxed on share and commodity trading gains and therefore he offered the use of a trading account he had with NAB private banking in North Sydney.  He said his “trading account in Australia is there for transactions going in and out”.[132]  Furthermore, Mr Babicci’s NAB account was only one of several accounts that, between 2007 and 2011, Mr Nicolaou directed Focus Metals to use for depositing the settlement proceeds of transactions where gold was imported by Exara Limited.

   [131]Defendants’ further submission dated 1 April 2014, [3].

   [132]Transcript of Proceedings, 18 February 2014, 183.

1. The latter assertion (in the second bullet point above) that the defendants had “changed their position” was not addressed in their oral submissions and, in that sense, it was an additional matter, first raised in their further written submissions dated1 April 2014.  In the final sentence of those submissions, the defendants contended that “[i]n the circumstances the defendants are entitled to succeed in this proceeding.”  In a footnote appended to that sentence, the defendants stated as follows:

In any event, the defendants confirm that they changed their position as a result of the payment being made to the first Babicci account:

(a)The first defendant said that he considered himself to be “out of the project”: in those circumstances he would no longer be entitled to partake in future deals if they did occur.

(b)He transferred funds to other accounts and conducted his affairs on the basis of those subsequent transactions having occurred.

(c)The second defendant did likewise.[133]

[133]Further submissions of the defendants dated 1 April 2014, 10, .

1. These additional matters raised can be readily addressed.  

1. While under cross-examination, Mr Babicci said that, when he told Mr McNab that money had come into his account, he had requested that Mr McNab get in touch with the other partners and tell them “thank you very much … I’m out of the agreement, out of the partnership.”[134]  However, the assertion that upon his investment being re-paid, Mr Babicci had “changed his position” and exited the joint venture (and thus would no longer be entitled to partake in future deals if they did occur), does not accord with the version of events that is recorded in Mr Babicci’s contemporaneous email exchanges with Mr McNab and Mr McPherson.  Nor was it included in the particulars of the change of position pleaded in Mr Babicci’s defence[135] or in Mr McNab’s defence.[136]

   [134]Transcript of Proceedings, 18 February 2014, 195.

   [135]Amended Defence to Further Amended Statement of Claim, [28].

   [136]Defence of the Second Defendant to the Second Further Amended Statement of Claim, [35].

1. It will be recalled that when Mr Babicci first contacted Mr McPherson shortly after he had discovered the $166,688.33 in his NAB account, he informed Mr McPherson that the payment related to their small gold business in Papua New Guinea and that they had “had to exit” Mr Nicolaou from their business.  There was no mention of Mr Babicci having recently exited the business following the repayment of his initial investment.

1. Further, there was no evidence of that position having been communicated to the other participants in the joint venture, save perhaps for Mr McNab.  For example, in his  email exchanges with Mr Nicolaou regarding the Mt Hagen opportunity, no mention was made of Mr Babicci having exited the business following the repayment of his initial investment.

1. Accordingly, in the face of the contemporaneous documents, I do not accept Mr Babicci’s evidence that he “changed his position”. 

1. To the extent that Mr Babicci also relied upon the transfer of the funds to other accounts and his having conducted his affairs on the basis of those subsequent transactions having occurred, I am not satisfied that those matters are capable of supporting a change of position defence.  No relevant change of position defence can be maintained in circumstances where the money is simply transferred to another account in his name to reduce his loan liability.  There was no evidence that he suffered any detriment in so transferring or expending the funds in that way.

1. To the extent that Mr McNab seeks to rely on a change of position defence, the same analysis applies.  He gave evidence that the $32,828.40 was paid into his personal account and he had used it for “various expenses”.  Accordingly, no change of position defence is made out.

Conclusion

Summary of findings – Mr Babicci

1. I find that the four payments made by Focus Metals to Mr Babicci on 9 September 2011 (totalling $166,688.33) were paid under a mistake of fact and that Mr Babicci had knowledge of the mistake at or shortly after the time the payment was made (and from 12 September 2011 at the latest).

1. As a result, I find that:

(a)       Focus Metals is entitled to recover from Mr Babicci as money had and received to the use of Focus Metals, the amount of $166,688.33 (or alternatively $133,859.93; and

(b)      Mr Babicci was unjustly enriched by the receipt of the money from Focus Metals and, as a result, it is inequitable for Mr Babicci to retain any of the money.

1. Further, I find that Mr Babicci holds the amount of $166,688.33 (or alternatively

   
   

   $133,859.93) on constructive trust in favour of Focus Metals and that Mr Babicci is liable to account to Focus Metals for the amount of $166,688.33 (or alternatively

   
   

   $133,859.93).

Summary of findings – Mr McNab

1. I find that, at the time of receiving the $32,828.40 from Mr Babicci, Mr McNab knew that the money had been paid to Mr Babicci as a result of a mistake of fact.

1. As a result, I find that Mr McNab holds the amount of $32,828.40 on constructive trust in favour of Focus Metals and that Mr McNab is liable to account to Focus Metals for the amount of $32,828.40, of which $12,828.40 was received on 14 September 2011 and $20,000 was received on 15 September 2011.

Relief Sought

1. Senior Counsel for Focus Metals submitted that the appropriate orders, at least on the monetary side, are that:

(a)       Mr Babicci shall repay to Focus Metals the sum of $166,688.33 together with interest at the usual Supreme Court penalty interest rate from 12 September 2011, being the date he applied the money to himself; and

(b)      Mr McNab shall pay the sum of $32,828.40 to Focus Metals together with interest at the usual Supreme Court penalty interest rate from 15 September 2011, being the date of receipt of the final instalment from Mr Babicci,

subject to the proviso that Focus Metals shall not recover in total more than the sum of $166,688.33 together with interest at the usual Supreme Court penalty interest rate from 12 September 2011. 

1. I am satisfied that it is appropriate to make orders substantially in the form sought.

1. Focus Metals also indicated that, at an appropriate time, it may also seek orders for a proprietary remedy in respect of the trust property and its traceable proceeds.

1. I will hear the parties on the precise form of the appropriate orders, including on the question of costs.