Heperu Pty Ltd v Belle

Heperu Pty Ltd (the appellants) appealed a decision concerning their liability for funds deposited into and withdrawn from a bank account operated by an agent. The dispute arose from the agent's fraudulent activities, which involved misappropriating funds from third parties and depositing them into the appellants' account, and subsequently withdrawing those funds. The case was heard by the Court of Appeal of New South Wales.

The central legal issues before the court were whether the appellants were liable for the deposit of fraudulently obtained funds into their account, and whether they were liable for the withdrawal of funds derived from misappropriated cheques. The court also considered whether the appellants had received and benefited from the misappropriated funds in a manner that would ground a claim for money had and received, and whether they could be held liable as constructive trustees under the principles established in *Barnes v Addy*. Finally, the court examined the availability of personal remedies for the traceable proceeds of misappropriated funds, particularly where those proceeds had been used to reduce a mortgage on real property.

The Court of Appeal reasoned that the appellants were not liable for the deposit of misappropriated funds as these acts fell outside the scope of the authority granted to their agent. Similarly, the withdrawal of funds, even if derived from misappropriated cheques, did not render the appellants liable unless they had authorised the use of the account to receive or deploy such funds, which they had not. Regarding restitution, the court held that liability for money had and received required the owner of the account to have known, or to have been in a position where they ought to have known, that they possessed or controlled the misappropriated funds, a fault element not present on the facts. The court also found no liability under *Barnes v Addy* as the appellants lacked the requisite notice or knowledge to be considered constructive trustees. However, the court recognised a personal remedy available at law for the traceable proceeds of the misappropriated funds remaining in the appellants' hands, even if those proceeds had been used to reduce a mortgage, distinguishing this from the law of receivers of goods.

The court made no final orders regarding the ultimate relief, instead directing the parties to file and serve submissions on relief in light of the court's reasons, with provision for reply submissions.