Voitin v GP Building Holdings Pty Ltd & Anor

[2023] HCATrans 82

[2023] HCATrans 082

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M75 of 2022

B e t w e e n -

CLARE MAREE VOITIN

Applicant

and

GP BUILDING HOLDINGS PTY LTD (ACN 145 944 163)

First Respondent

ROUBAL BEIRUTI

Second Respondent

Application for special leave to appeal

EDELMAN J
GLEESON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA AND BY VIDEO CONNECTION

ON FRIDAY, 9 JUNE 2023, AT 1.59 PM

Copyright in the High Court of Australia

EDELMAN J:   In accordance with the protocol for remote hearings, I will announce the appearances of the parties.

MR P.G. CAWTHORN, KC appears with MR D.H. CONNORS and MR T.B. GORTON for the applicant.  (instructed by Rothwell Lawyers)

MR D.J. FARRANDS, KC appears with MS L.E. MILLS for the respondents.  (instructed by SLF Lawyers)

EDELMAN J:   Yes, Mr Cawthorn.

MR CAWTHORN:   This Court in Farah v Say-Dee and the Full Federal Court in Grimaldi settled a number of issues concerning the two limbs of Barnes v Addy liability, particularly the requisite quality of knowledge to found liability.  What those decisions did not settle was whether a finding of knowing receipt as opposed to knowing assistance required the standard of comfortable satisfaction propounded by Briginshaw.

GLEESON J:   Mr Cawthorn, why does that matter in circumstances where the Court of Appeal said that the appropriate approach was to apply the standard in section 140 of the Evidence Act?

MR CAWTHORN:  Well, section 140 has the third limb, which is about the gravity of the allegations.  These were grave allegations.  They concerned a knowing receipt of trust money.  If trust money is received, self‑evidently, we would say something that involves dishonesty, is money that does not belong to the person.  It is known not to belong to the person.  And they know they have to return it.  So, we submit that the third limb of section 140 was engaged and Briginshaw was also engaged.

GLEESON J:   But, Mr Cawthorn, at paragraph 91 of the Court of Appeal’s reasons, the Court of Appeal said:

the judge was required to have the principles explained in Briginshaw ‘in mind’.

So, what is the issue?

MR CAWTHORN:   Paragraph 91, line 5 said:

the judge’s invocation of Briginshaw and the presumption of innocence on the ultimate question of knowledge was in error.

GLEESON J:   That was an error, because the reference to presumption of innocence by Sir Owen Dixon only related to a finding of criminality.

MR CAWTHORN:   Yes, but the invocation – what the Court of Appeal said was the judge’s invocation of Briginshaw was an error, that is what we say – we say the Court of Appeal ought to have applied Briginshaw and not have found the judgment was in error.  We submit, in ‑ ‑ ‑

EDELMAN J:   Mr Cawthorn, it is rather difficult to read that sentence saying that the judge’s invocation of Briginshaw was in error as a suggestion that the Court of Appeal is saying that Briginshaw did not apply, especially in light of what is said at paragraphs 89 and 90 that:

It may be accepted that people do not likely obtain and retain money that they know has been paid to them in breach of trust.

Which is the core idea in Briginshaw, and then paragraph 90 where the error that is identified is the error:

in treating the allegations as akin to fraud and in applying the Briginshaw test in the way that he did.

It is the manner of application, is it not, rather than the existence of the test?

MR CAWTHORN:   It is, in our respectful submission, the existence of the test.  It says – the Court of Appeal also says in paragraph 106:

in arriving at that conclusion –

about the three matters, there were three matters that followed about the state of mind, namely, the positive evidence:

the judge applied Briginshaw in a way that we have found to be in error.

The error that they found was to apply Briginshaw to what was here circumstantial evidence.  There was no actual evidence of knowledge of the actual receipt of the money.  So, there were three pieces of circumstantial evidence, namely, the defrauding of creditors’ claim, the Victorian Civil and Administrative Appeal Tribunal determination about the trust money, and the taxable income point.

Those three things were circumstantial evidence which did not bear on the actual receipt of money in this case.  So, that was purely circumstantial evidence and the Court, we say, had it applied Briginshaw – as it should have, in our respectful submission – would have concluded as the trial judge did that the fourth limb of the Baden test – which is what the Court of Appeal found at paragraph 110:

wilfully and recklessly failed to make such inquiries about the source . . . that an honest and reasonable person would have made –

that that test would not have been made out.  We submit it is tolerably clear that what the Court of Appeal was ‑ ‑ ‑

EDELMAN J:   Mr Cawthorn, was this necessarily even a knowing receipt case?  Some of the moneys of the $150,000 – for example, the $70,000 – it is unclear that that money that was paid to The Providore account had been spent at all.

MR CAWTHORN:   That is right.  So, the judge ‑ ‑ ‑

EDELMAN J:   It still is trust money.

MR CAWTHORN:   It is trust money, but the judge ‑ ‑ ‑

EDELMAN J:   Your client has to give it back.

MR CAWTHORN:   No, it was ‑ ‑ ‑

EDELMAN J:   It is not the knowing receipt case if trust money is still held.

MR CAWTHORN:   No, the $149,000‑odd that was found was money that was received by her, and therefore it came within the first limb of Barnes v Addy.

EDELMAN J:   But if the money or part of it is still retained, Barnes v Addy does not even need to apply.  If the money is still held, it is still trust money.  You do not get to keep it.

MR CAWTHORN:   Well, the finding was $150,000 was received by her.  There was a substantial amount of other money that was allegedly received, but the trial judge found that they were benefits that could not come within the first limb of Barnes v Addy.

EDELMAN J:   I appreciate that, but what I am putting to you is that a substantial amount of that $150,000, at least the $70,000, it appears, may still be retained.  Barnes v Addy has nothing to do with it.  If trust money is still held, it cannot be kept.

MR CAWTHORN:   It is unknown where that money is, so it is not still held, or there is not a finding it is still held.  In our respectful submission, the Court has found that the judge was in error to have come to the conclusions he did about the application of Briginshaw.  The conclusions about that start at paragraph 81 and following, and the Court of Appeal rightly refers to the first precept at paragraph 86 that a court:

should not . . . find that a person is guilty of serious wrongdoing because generally people do not behave in that way.

And then refers to the application of section 140, then refers, as the Court has pointed out to me, at paragraphs 89 and 90, to Briginshaw and concluded that Briginshaw was not to be applied in the circumstances and that the judge was in error to do so.  We submit that this Court, having found in Farah v Say‑Dee that Briginshaw applies to the second limb, it ought to apply to the first limb as well.

The Full Court said in Grimaldi that both of the limbs attract the same quality of knowledge and, therefore, we say as a matter of consistency there ought to be the same standard of proof applied to the first limb as the second limb.  We submit that in a number of places the court has concluded on the basis of what is purely circumstantial evidence that the knowledge supposedly required had been made out.

The Court will appreciate that the evidence, such as it was, of supposed actual knowledge of the receipt which concerned the meeting at the café was rejected, so the court was then thrust back to the three separate points about the financial scam, the involvement of the trust money which led to disciplinary procedures and the taxable income point.  None of those bore directly on the actual receipt, and the Court of Appeal concluded that itself at paragraph 99, so it was thrown back onto an issue of purely circumstantial evidence, and we submit it was in error to do so without applying the Briginshaw test.  We might point out that at paragraph 108 the court said that:

It is significant that, as a solicitor who operated a trust account Mr Voitin was likely to be in a position to hold client funds that might provide a possible source of unexplained money.

Suggesting that any solicitor who holds a trust account might – if somebody deals with him, and in this case, a wife, might have known that that might be a source of unexplained income.  That, in our respectful submission, was clearly a step too far.  We submit that when regard is had to the court’s reasons it is clear that the court was not applying the Briginshaw test, and had it done so, it would have done, as the trial judge had done, and have dismissed the appeal.

We submit an allegation of knowing receipt and retention of someone else’s money being a grave and serious allegation is one that does require proof by the Briginshaw standards, not satisfied by inexact proofs or indefinite testimony or indirect inferences.  The court adverted to what was said by Justice Gordon in Re Day at paragraph 85 of those things and then referred to section 140, as Justice Gleeson has pointed out to me.  So, we submit that had the court properly applied the Briginshaw standard then the appeal would have been dismissed.

We have three points to make on the special leave application.  One is that there is a lack of authority on this point.  We identified in the written case there are several trial decisions where Briginshaw has been applied to a claim of knowing receipt, directly applied, and we pointed to three of them – Silversea v Abellanoza where Justice Sackar found Briginshaw applied to knowing receipt, and that was passed over by at least one member of the Court of Appeal.

Might we say that in our learned friend’s written case before the Court of Appeal, the Silversea Court of Appeal decision was referred to, but the Court of Appeal said at paragraph 21 that there be no authority on the question of the applicable standard and said that:

neither party was able to identify any authority directly on point.

So, it says there that:

Given the requirement to prove knowledge of a breach of trust, it is certainly arguable that . . . Briginshaw –

might be required, and we identified three first‑instance decisions where judges clearly and unequivocally applied Briginshaw.  That is the Silversea decision, the Break Fast Investments where Justice Black found that recipient liability, cogent proof to the Briginshaw standard was needed, and in Australian Financial Services v Hills Industries where Justice Einstein applied Briginshaw to a knowing receipt case.

So, then, there are those decisions which, we think have run contrary to the conclusions that the Court of Appeal came to.  Instead, what we are met with from our opponents is that there are innumerable first instance decisions where there is no application of Briginshaw to first limb cases, and they have said that in their response.  We submit those decisions do not assist the Court because the lack of express consideration of Briginshaw should not be equated with well-settled legal principle.  Our first point in relation to special leave for appeal is that there are not authorities; there are authorities contrary to what the Court of Appeal has done, and there is a necessity to resolve that conflict.

The second point we make is that we submit that the standard of proof should be the same for both limbs.  This Court found in Farah v Say‑Dee that the required quality to attract liability for knowing assistance should be the Briginshaw standard, and we submit, consistently with what the Full Court said in Grimaldi, that the requisite quality of knowledge be the same to attract liability under both limbs, that, for consistency, there should be the same application of Briginshaw to the first limb, knowing receipt, as there should be for knowing assistance.

Might we point out that in this case, there was a four‑limb – the first three limbs sought to be engaged in the third limb of the Baden scale, the one engaged, ultimately, by the Court of Appeal.  The Full Court in Grimaldi were silent about the standard to which the knowledge needed to be determined, and we submit that the Full Court, having found that the two limbs are not distinct but are two ways by which a third party might by their conscience be fixed with liability, suggests strongly that Briginshaw ought to apply to the first limb as well as the second limb, and the effect of the Court of Appeal’s decision is to drive a wedge between the two limbs of Barnes v Addy.  We submit, given the development of the two limbs requiring the same quality of knowledge, we submit conceptual immunity ought to be maintained regarding the standard of proof.

Now, a third point concerns the serious wrongdoing requiring the first limb of Barnes v Addy.  The importance of dishonesty makes appropriate, in our submission, the application of Briginshaw to the knowing receipt claims independently of its relationship to knowing assistance.  And, in the decision of Williams v Central Bank of Nigeria, we have cited Lord Sumption, who said:

the defendant has accepted trust assets knowing that they were transferred to him in breach of trust and that he had no right to receive them.  His possession is therefore at all times wrongful and adverse to the rights of both the true trustees and the beneficiaries.

We submit that dishonesty is an inherent part of the claim for knowing receipt because the recipient is necessarily found to have known or ought to have known the property in their hands was misappropriated trust property and they have no right to its possession or use.  So, we submit that that serious allegation of dishonesty warranted the application of the Briginshaw test, and the circumstantial evidence that was marshalled in this case fell well short of that.  A person’s receipt without more of trust property may be, of course, wholly innocent; that is a “knowing receipt”.  But, in our submission, receipt with knowledge is impliedly dishonest.

It is implicitly dishonest, the Court of Appeal found that the liability is fault‑based – it said that at paragraph 10 – and the knowledge is what makes the continued retention of the property unconscionable.  Even in this case, we submit that even were the Court not satisfied that Briginshaw ought to apply to all knowing receipt claims, it was appropriate to apply it to this case in circumstances where the trust property was money, in effect stolen by the applicant’s husband from his client.

So, that is substantially similar to the factual elements of the effect of the offence of dealing with the proceeds of crime, and the fact that the applicant and the person from whom she received the trust money were married – that is a relationship which may colour the assessment of when a person ought to know, we submit, the assessment ought to be approached more cautiously than at an arm’s length or otherwise commercial relationship uncovered by that relationship context.

Might we move quickly to ground 2.  The Court of Appeal determined the applicant ought to have known she was receiving misappropriated trust property not by reason of any factual circumstance of receipt but by the surrounding context of her marriage to her defaulting husband.

The Court of Appeal said the judge ought to have regard to the broader picture and said that at 103.  We submit that the broader picture fell well short of the exact proof required by Briginshaw.  Had it approached the task correctly applying Briginshaw, the finding the applicant ought to have known the breach would not have been made.  The substance of the Court of Appeal’s reasoning was that the applicant was aware or had suspicions her husband had been involved in an unrelated financial scheme or scam several years prior, and that she had been aware he had been disciplined by the legal regulator for intermixing personal money into his trust account – her knowledge of his general financial position could extend the obligations.

We submit the Court of Appeal wrongly found the way the applicant as the wife had constructed knowledge of specific receipts was by reason of her relationship and his activity.  But none of those things were related to the specific breaches of trust in question.  Had the Court of Appeal approached the task by reference to the standard of proof required in Briginshaw, it would have satisfied – it would have recognised the existence of those matters could not found the comfortable satisfaction required.

Those are our submissions, if the Court pleases.

EDELMAN J:   Thank you, Mr Cawthorn.  The Court will adjourn briefly to consider what course it will take.

AT 2.18 PM SHORT ADJOURNMENT

UPON RESUMING AT 2.22 PM:

EDELMAN J:   We do not need to hear from you, Mr Farrands.  We are not satisfied that there are sufficient prospects of successfully establishing that the Court of Appeal did not apply the principles in Briginshaw v Briginshaw.  The circumstances of the case do not otherwise engage the interests of the administration of justice to warrant a grant of special leave to appeal.  Accordingly, special leave will be refused with costs.

Please adjourn the Court to 10.00 am on Wednesday 14 June.

AT 2.22 PM THE MATTER WAS CONCLUDED