NIML Ltd v Man Financial Australia Ltd - [2004] VSC 449

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL & EQUITY DIVISION

No. 7113 of 2000

NIML LIMITED (ACN 007 016 186)	Plaintiff
v
MAN FINANCIAL AUSTRALIA LIMITED (formerly known as ORD MINNETT JARDINE FLEMING FUTURES LIMITED) (ACN 001 662 077)	Defendant

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JUDGE:	HARPER J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	19-22, 25-27 AUGUST 2003
DATE OF JUDGMENT:	8 NOVEMBER 2004
CASE MAY BE CITED AS:	NIML LTD v MAN FINANCIAL AUSTRALIA LTD
MEDIUM NEUTRAL CITATION:	[2020] VSC 449	1^st Revision: 12/11/04

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TRUSTS – Constructive trust – Misappropriation of monies – Fraud on the plaintiff by its employee – Cheques drawn in favour of the defendant – Deposit of cheques into defendant’s clients’ segregated account - Subsequent disbursement of monies - Knowledge (if any) of the defendant – Barnes v Addy (1874) LR 9 Ch App 244 – Koorootang Nominees Pty Ltd v Australian and New Zealand Banking Group Ltd [1998] 3 VR 16 considered.

MONEY – Money had and received – Mistake by paying bank – Whether the defendant unjustly enriched payee - ANZ Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 and David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, followed –- Port of Brisbane Corp v ANZ Securities Ltd [2003] 2 QdR 661 considered - Continental Caotchouc (1904) 9 Comm Cas 248 applied - State Bank of NSW Ltd v Swiss Bank Corporation (1995) 39 NSWLR 350 distinguished - The Corporations Law, s.1209.

CONVERSION – Cheques signed by authorised signatories and collected for the payee in accordance with mandate – Whether conversion by collecting bank – Whether, if so, collecting bank acted as agent for payee – Whether converted by defendant.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A.G. Uren QC with Mr P.J. Riordan	Ebsworth & Ebsworth
For the Defendant	Mr N.J. Young QC with Mr C.M. Caleo	Freehills

HIS HONOUR:

Introduction

“If I may say so”, said Tadgell J in Hunter BNZ Finance v Australia and New Zealand Banking Group Ltd.[1] “it is incontestable that the question whether a particular person was ever intended by the drawer of a cheque to benefit from the cheque, or can assert against the drawer a right to benefit from it, will be determined ultimately by reference to what the cheque says.” His Honour continued:

“No such issue, however, arises in this case…The question here is whether, having drawn the cheque, the plaintiff relinquished its right to immediate possession of it in favour of the payee. I put it in that way having regard to what McNair J said in the Marquess of Bute’s Case,[2] namely: ’…in order to claim in conversion, it is not necessary for the plaintiff to establish that he is the true owner of the property alleged to have been converted. It is sufficient if he can prove that at the time of the alleged conversion he was entitled to immediate possession.’ “

[1][1989] VR 41 at 46.

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2004] VSC 449
Decision Date: 8 November 2004

CaseChat Overview and Summary

NIML Ltd brought a case against Man Financial Australia Ltd, alleging that the latter had misappropriated funds through cheques drawn in NIML’s favour and deposited into accounts belonging to Man Financial’s clients. The dispute came before the court, which had to determine the liability of Man Financial for the misappropriation and whether they had acted with knowledge of the fraud perpetrated by their employee. Additionally, the court needed to decide if Man Financial had been unjustly enriched by the deposit of the cheques into their client’s segregated accounts.

The legal issues before the court were whether Man Financial had knowledge of the fraud, whether they were liable for the misappropriation of funds, and if they had been unjustly enriched by the cheques deposited into their client’s accounts. The court considered the principles in Barnes v Addy and Koorootang Nominees Pty Ltd v ANZ Banking Group Ltd, particularly focusing on the constructive trust and the defendant’s knowledge. The court also examined if Man Financial had converted the cheques by collecting them, and whether they acted as an agent for the payee or if the defendant had committed the conversion.

The court found that Man Financial had no knowledge of the fraud committed by their employee and thus could not be held liable for the misappropriation. The cheques were collected in accordance with the mandate, and there was no evidence to suggest that Man Financial had acted as an agent for NIML or had committed conversion. The court held that the cheques were paid into the clients’ segregated accounts by mistake and, therefore, Man Financial had not been unjustly enriched. The principles in ANZ Banking Group Ltd v Westpac Banking Corporation and David Securities Pty Ltd v Commonwealth Bank of Australia were followed, and the court distinguished the case from State Bank of NSW Ltd v Swiss Bank Corporation.

The final orders of the court dismissed NIML Ltd’s claims against Man Financial Australia Ltd, finding that Man Financial had not acted with knowledge of the fraud, had not been unjustly enriched, and had not committed conversion.

Orders