HME Services Pty Ltd v Ortado

[2019] NSWSC 1325

Supreme Court

New South Wales

Medium Neutral Citation:	HME Services Pty Ltd v Ortado [2019] NSWSC 1325
Hearing dates:	28 August 2019
Date of orders:	28 August 2019
Decision date:	01 October 2019
Jurisdiction:	Equity
Before:	Ward CJ in Eq
Decision:	(1)   Judgment for the plaintiff against the defendant in the sum of $235,890.05 inclusive of interest. (2)   Order the defendant to pay the plaintiff’s costs of the proceedings. (3)   Reserve the questions of whether the costs of the proceedings should be on an indemnity basis and stand the matter over to the applications list on 10 September 2019 at 9am for further directions. (4)   Order that these orders be entered forthwith.
Catchwords:	CIVIL PROCEDURE — Summary disposal — Judgment for plaintiff — No defence save the claim for costs on an indemnity basis – where the defendant while in the employment of the plaintiff misappropriated moneys
Legislation Cited:	Corporations Act 2001 (Cth), ss 182, 1317H Uniform Civil Procedure Rules 2005 (NSW), r 13.1
Cases Cited:	Dey v Victorian Railways Commissioners (1949) 78 CLR 62; [1949] HCA 1 General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125; [1964] HCA 69
Category:	Procedural and other rulings
Parties:	HME Services Pty Ltd (Plaintiff) Laura Ortado (Defendant)
Representation:	Counsel: D Stewart with K Hooper (Plaintiff)   Solicitors: Coleman Greig Lawyers (Plaintiff) N Hardy-Clements (Defendant)
File Number(s):	2019/00177252
Publication restriction:	Nil

Judgment

1. HER HONOUR: This is an application by the plaintiff (HME Services Pty Ltd) by Notice of Motion filed on 9 August 2019 seeking summary judgment against the defendant (Laura Ortado, also known as Laura Stephanie Hatadi) pursuant to r 13.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) and the amount of the judgment that is sought, quantification of which I will explain shortly, is the sum of $213,522.63 plus interest and costs. The interest component has been calculated at a figure in the order of $22,367.42. The total amount claimed inclusive of interest is an amount of $235,890.05.

2. There has been no appearance this afternoon for the defendant. The matter was listed yesterday when the matter came before me in the applications list. On that occasion, the defendant was represented by a solicitor, Ms Bosloper. On that occasion, I was informed that the defendant was not proposing to file a defence in relation to the claim, and was not opposing the entry of judgment for the plaintiff, but was opposing the claim for costs on an indemnity basis.

3. Yesterday, I made directions in relation to the hearing of the summary judgment application this afternoon, but I also listed the matter in the applications list for further directions in relation to the costs aspect only on 10 September 2019, and directed the defendant to file and serve any evidence on which the defendant relied in resisting the application for costs on an indemnity basis by 9 September 2019.

4. Counsel appearing for the plaintiff on the present application has had communications with counsel for the defendant in advance of this afternoon’s application. I am satisfied that the defendant is on notice of the application for summary judgment this afternoon, and in the circumstances, I have proceeded to hear the application. The plaintiff relies on two affidavits sworn by Christina Harris, the “HR and Administration Manager of the plaintiff”; those being affidavits sworn 6 June 2019 and 15 August 2019 respectively.

5. By way of background to the application, as deposed to in the 6 June affidavit of Ms Harris, the plaintiff is a company which manufactures and installs theatrical equipment. It has a regular staff of 23 employees (though that number can reach 40 employees during busy periods) and it has a turnover of $6 million per annum. The staff are divided into administrative staff, workshop and site staff. The defendant was initially employed by Harris Movement Engineering (HME) Pty Ltd from 8 October 2012. In or about June 2016, the defendant’s employment was transferred to the plaintiff. The defendant, as part of her duties as an Accounts Clerk with the plaintiff, was given full access to the plaintiff’s accounting software which is a MYOB software system.

6. Ms Harris has deposed that the defendant’s duties, in her position as an Accounts Clerk, included accessing MYOB and creating and updating what are referred to as ‘cards’ for new clients and suppliers. The cards for the plaintiff’s suppliers included the suppliers’ bank account details, so that the plaintiff could make electronic payments for invoices rendered by the supplier via the plaintiff’s electronic banking platform with St George Bank.

7. Ms Harris has deposed that as part of the defendant’s duties, the defendant entered supplier invoices and scheduled payments as well as conducting bank reconciliations, and that the process for the payment of supplier invoices involved the preparation of directions to pay for a supplier against an invoice.

8. The bank account details for a particular supplier are completed by the MYOB system from the respective suppliers’ card, and the directions to pay are compiled into an electronic file known as an ABA file that is downloaded from MYOB. The ABA file is then uploaded by the defendant or another person with authorisation in the plaintiff’s administrative staff to the plaintiff’s St George Bank portal. To action the actual payment, authorisation is required to be given by one of the people identified at [27] of Ms Harris’ 6 June affidavit, namely, the director, Mr Harris, Ms Harris herself or the Operations Manager.

9. Authorisation for payment is given through the entering of a secured dongle number and password on the St George banking platform and approvals are made daily or weekly depending on the needs of the plaintiff’s business and the project at the time.

10. Ms Harris has deposed that for ad hoc or irregular payments, the payments are manually entered within the St George Bank portal by entering the EFT details contained in the invoice, but that this still requires payment authorisation by one of Mr Harris, herself or the Operations Manager.

11. Ms Harris has deposed to the discovery of what she refers to as “irregular transactions” in early February 2019 following the contact from a representative from a supplier to the plaintiff about an unpaid account. Ms Harris has deposed to her review of the plaintiff’s records which recorded that the plaintiff had paid the account, and to her discovery from the ABA file, that the payment had been made to a bank account that was different to the bank account details on the supplier’s card. Ms Harris has also deposed to her attempts to find out how the incorrect payment had occurred and to her discussions with the St George Bank and with the MYOB help line, as well as to her discussions with the defendant. I will not set out in these reasons the detail of those discussions.

12. Ms Harris considered at the time that this was just an error. In February 2019, two further so-called irregular payments were found by the plaintiff involving the same supplier, bringing the total to three irregular payments. By that, the plaintiff refers to a payment for a legitimate invoice that was paid electronically to a bank account that was not the supplier’s bank account. The plaintiff was informed by St George Bank on or about 18 March 2019 that recall of the irregular payments had been unsuccessful. Ms Harris then attempted to reconcile the payments to the defendant, and Ms Harris has deposed to further enquiries that took place in relation to that.

13. Ms Harris has deposed that on 20 May 2019, a meeting was held with the plaintiff’s administrative staff about the three irregular payments at which meeting the defendant was present, and that subsequently, the defendant contacted Ms Harris. Ms Harris has deposed to a meeting with the defendant and her husband on 20 May 2019 in which Ms Harris admitted that certain of the payments had been made to bank accounts set up by her, but that there were no other transactions of a similar nature to the three irregular transactions.

14. The defendant’s employment ceased on 20 May 2019. The defendant repaid the sum of $5,439.10 on 22 May 2019. Ms Harris has deposed then that she and Ms Stubbs, one of the administrative staff of the plaintiff, then carried out a review of past payments to suppliers so as to identify whether there were any other irregularities. Ms Harris has deposed to the enquiries that were made in that regard and to the result of that investigation.

15. The plaintiff commenced these proceedings and sought a freezing order on an ex parte basis on 6 June 2019 to preserve the sum of $183,007.53 being the total amount of the irregular payments that had been discovered at that time. Those orders were made by Rein J on 6 June 2019. In compliance with the orders made by Rein J, the defendant swore a disclosure affidavit on 17 June 2019. At subsequent directions hearings, orders were made for the filing and service of a statement of claim which was done by the plaintiff on 9 July 2019 and for filing and service of a defence on or before 6 August 2019. There was no compliance with that direction.

16. There was a subsequent direction made by the registrar on 13 August 2019 for the filing of a defence by 16 August 2019. No defence has been filed, and as I say, when the matter was before me yesterday in the applications list, I was advised by the solicitor then appearing for the defendant that the defendant did not propose to file a defence.

17. The statement of claim brings claims for moneys had and received, damages and equitable compensation or in the alternative, compensation pursuant to s 1317H of the Corporations Act 2001 (Cth) (Corporations Act) plus interest and costs. The particular causes of action that are pleaded in the statement of claim relate to claims of breach of the defendant’s employment contract, breach of a term implied by law into the contract pursuant to which the defendant is alleged to have owed the defendant a duty of good faith and fidelity, and breach of fiduciary duties allegedly owed to the plaintiff by the defendant given her position as Accounts Clerk, and the duties and responsibilities of her position.

18. The claim as made includes claims of breaches of the express and implied terms of the contract, breach of fiduciary duties, breach of s 182 of the Corporations Act, and the commission of fraud against the plaintiff by making the card alterations falsely representing and warranting to the person authorised by the plaintiff to execute the payments to the supplier that the bank account details for the supplier contained in the direction to pay in the ABA file were, in fact, the correct bank account details for the supplier and inducing the person authorised by the plaintiff to execute the payments, ultimately causing the payments to be made to bank accounts set up by the defendant which were not paid to the legitimate supplier, and the claim as to loss relates to the making of those payments.

19. Exhibit B contains a reconciliation of the payments that have been made to the bank accounts that have been identified as the defendant’s bank account and/or bank accounts established by the defendant. The defendant’s disclosure affidavit details those bank accounts. It appears that there was one personal bank account and up to 12 other bank accounts established by the defendant.

20. The plaintiff’s investigation into the irregular transactions was completed on or about 15 August 2019.

21. Ms Harris, in a further affidavit sworn that day, has deposed to the total of the irregular transactions being $218,961.73. It is recognised that the defendant has repaid the sum that I referred to earlier, leaving a total amount owing to the plaintiff of $213,522.63 plus interest and there is, as adverted to above, a claim for costs.

22. Pursuant to r 13.1 of the UCPR, summary judgment may be entered if, on an application by the plaintiff in relation to the plaintiff’s claim for relief or any part of the claim for relief there is: evidence of the fact on which the plaintiff’s claim or part of the claim is based; and there is evidence, given by the plaintiff or some responsible person, that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part of the claim or no defence, except as to the amount of any damages claimed. In those circumstances the court may give such judgment for the plaintiff, or make such order on the claim or that part of the claim, as the case requires.

23. The general principles governing summary disposal of proceedings are well-known. A party will not be denied a contested merits hearing, unless the absence of a cause of action or a defence is clearly established. Authority for that proposition is General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 at 129; [1964] HCA 69; and see also Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91; [1949] HCA 1. There is a requirement for satisfaction at a high level, albeit that this is a claim that is to be established on the balance of probabilities with the civil onus of proof, that the test for satisfaction in those circumstances has been variously described as where the court is satisfied that there is no real defence or the defence is so obviously untenable that it cannot possibly succeed or is manifestly groundless or the like.

24. Ms Harris, in her 15 August affidavit, has deposed to her belief that the defendant has no explanation and that she is not aware of any possible defence that the defendant could raise to explain the irregular transactions.

25. As I have already said, the defendant’s solicitor indicated that the defendant did not propose to file a defence in relation to the claim.

26. In those circumstances, I am satisfied that it is in order to enter summary judgment against the defendant in the amount that has been established through Ms Harris’s investigations as the total of the irregular account transactions, together with interest calculated thereon as set out in the schedule, which is annexed to the submissions that have been handed up today.

27. I will make the following orders, noting that that the quantum of costs and, in particular, whether or not costs should be ordered on an indemnity basis, has been deferred to be dealt with on a later occasion following whatever evidence the defendant is seeking to rely upon in resisting that application.

28. For the above reasons, I make the following orders:

1. Judgment for the plaintiff against the defendant in the sum of $235,890.05 inclusive of interest.

2. Order the defendant to pay the plaintiff’s costs of the proceedings.

3. Reserve the questions of whether the costs of the proceedings should be on an indemnity basis and stand the matter over to the applications list on 10 September 2019 at 9am for further directions.

4. Order that these orders be entered forthwith.

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Decision last updated: 01 October 2019