Silversea Cruises Australia Pty Ltd v Mary Ann Abellanoza and Anor

By way of Summons filed on 24 April 2018 Silversea Cruises Australia Pty Ltd (Plaintiff) sought and obtained freezing orders against Ms Mary Ann Abellanoza (First Defendant). On 4 May 2018 those orders were extended to include Mr Perven Salas Abellanoza (Second Defendant) and the amount frozen was increased to $2,299,401.99.

On 17 July 2018 the Plaintiff filed a Statement of Claim setting out the relief it sought against each of the Defendants:

The Plaintiff is a company in the group known as Silversea Cruises Group. The group is a privately owned group of companies that specialises in luxury cruises across a range of international destinations.

The Plaintiff alleges that during her employment the First Defendant defrauded it of amounts totalling $3,565,862.95, which was done by the First Defendant arranging electronic funds transfers from the Plaintiff’s bank account to 7 bank accounts controlled by her in circumstances where she had no lawful entitlements.

The First Defendant did not file a Defence.

The Second Defendant filed a Defence on 7 August 2018.

On 17 September 2018 I gave the Plaintiff leave to file an Amended Statement of Claim (after one previous iteration).

The First Defendant was employed by the Plaintiff as Branch Accounting Supervisor during the period 5 April 2010 to 14 March 2018.

The First Defendant is married to her husband the Second Defendant.

The First Defendant’s duties as recorded in her position description dated August 2017 included:

The First Defendant was the only employee working in the Accounting Department in the Sydney office of the Plaintiff during the following periods:

On 22 February 2018 the First Defendant emailed Mr Elvire Gallicchio Corporate Treasury Manager stating that she had been subject to an online scam that ended in payments being made in USD and GBP. The total value of the purported scam was for USD $56,100 and GBP £63,390.

After the First Defendant reported this alleged fraud an investigation by a forensic accountant revealed that the First Defendant had set up fake vendor accounts and fake invoices generated by a downloadable invoice generator and thereby transferred in excess of $3,500,000 to various bank accounts in her name and in the joint name of both Defendants (Fraudulent Payments). As the First Defendant has filed no evidence it may be taken that there is no contest as to these findings and in particular to the findings of the expert evidence and report of the Plaintiff compiled by Ms Myriam Elizabeth Perez.

Two of the 7 bank accounts into which the Fraudulent Payments were deposited are in the joint names of the First and Second Defendants namely:

Below is a summary of the Fraudulent Payments made to bank accounts belonging to the First Defendant and in some cases her relatives as provided by the Plaintiff’s expert evidence (CB4 11) (noting the first account number appears to be 48281721 not 482817021):

In July 2013 the Defendants and the family went to the Philippines (T15/9-12).

In August 2013 the Second Defendant returned from the Philippines and was made redundant (T14/5-12). He did not obtain work until 2014 apart from working as a contractor (T14/40-50).

The following broad periods of travel were referred to by the Plaintiff with reference to the evidence, noting that on the evidence it was unclear to determine precisely which party or family member was travelling on the following dates (T135/29-31) (and see the discussion at T137/1-T138/7):

On 14 March 2018 the First Defendant resigned from her employment with the Plaintiff.

On 24 April 2018 the First Defendant was served with a Summons (T48/26-28).

On 25 April 2018 the Second Defendant accepted he was carrying boxes from his house stating they were clothes because he wanted to move out, where he dropped the boxes at his niece’s house (T50/1-7; T63/28-32).

On 26 April 2018 the Second Defendant withdrew $20,000 from his Commonwealth Bank Account (T50/43-50).

As at 14 June 2018 the St George Account had a balance of $87,811.77 and the ANZ had a balance of $699.41 (Second Defendant’s submissions [5]).

On 17 September 2018 I gave the Plaintiff leave to file an Amended Statement of Claim. This pleading went through previous iterations, but updated the account details of the Defendants and alleged the Second Defendant knew or ought to have known of the dishonest payments of the First Defendant.

In Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ said (at [111]) (citations omitted):

Their Honours also stated (at [163]) (citations omitted):

Applying the dicta of Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; [1975] HCA 8 their Honours said a recipient is only liable if he or she has knowledge on any of the first four points of the “Baden scale” (as from Baden Delvaux & Lecuit v Societe Generale pour Favoriser le Development du Commerce [1992] 4 All ER 161) (at [174]-[178]) (citations omitted):

In Ford v Perpetual Trustees Victoria Ltd (2009) 75 NSWLR 42; [2009] NSWCA 186 Allsop P and Young JA said (at [121]-[125]):

See National Commercial Banking Corporation of Australia Ltd v Batty (1986) 160 CLR 251 at 268-9 (Gibbs CJ); [1986] HCA 21 (“Batty”) and David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; [1992] HCA 48.

In Batty, Wilson J provided further explanation of the content of what “ought to have known” means (at 269-71) (citations omitted):

In Heperu Pty Ltd v Belle (2009) 76 NSWLR 230; [2009] NSWCA 252 Allsop P (with Campbell JA and Handley AJA agreeing) said (at [74]-[75] and [153]-[154]):

In the context of a discussion on what constitutes a “bona fide purchaser for value without notice” J D Heydon, M J Leeming and P G Turner (eds) Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies (LexisNexis Butterworths, 5th ed, 2015) provides (at [8-270]) (citations omitted):

In Russell Gould Pty Ltd v Ramangkura (2014) 87 NSWLR 552; [2014] NSWCA 310 Barrett JA (with Bathurst CJ and Ward JA agreeing) said (at [28]-[32]):

In Lipkin Gorman v Karpnale [1991] 2 AC 548 Lord Goff of Chieveley likewise observed (at 572) “at common law, property in money, like other fungibles, is lost as such when it is mixed with other money”.

Given the seriousness of the allegations against the Defendants the Court must come to a comfortable satisfaction about material aspects of the case. Section 140 of the Evidence Act 1995 (NSW) provides:

In Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 Dixon J said (at 361-2):

The Plaintiff submits its case against the First Defendant is relatively straightforward in that the evidence demonstrates that the First Defendant made payments in excess of $3,500,000 to bank accounts of which she and/or her husband were beneficiaries. This conduct was not authorised by the Plaintiff and the First Defendant engaged in the conduct deliberately and in breach of her contractual, fiduciary and statutory obligations to the Plaintiff (submissions [1.1]-[1.9], [1.11], closing submissions [1.1]-[1.9]). The Plaintiff states it is clear the First Defendant has dishonestly misappropriated a total of $3,565,862.95 from the Plaintiff. It contends she had no entitlement to the money, nor has provided any defence or explanation and the appropriate inference should be drawn (closing submissions [3.1]-[3.3]).

The Plaintiff submits that the Second Defendant is liable (for the amount of $811,565.53) as money had and received by him on the basis that at all relevant times he had the requisite knowledge of this amount being deposited into the St George Account (for the amount of $299,588.90 from 3 November 2014 to 11 December 2017) and ANZ Account (for the amount of $511,976.63 from 28 January 2014 to 3 October 2017) jointly held in his and his wife’s name (opening submissions [3.2]). The Plaintiff also submits the Second Defendant received the benefit of monies transferred into NAB account number 130766469 of which he had either actual knowledge or constructive knowledge (opening submissions [1.10], [3.2]).

The Plaintiff also submits that it became clear during the course of cross-examination of the Second Defendant that the First Defendant had provided misappropriated funds to the Second Defendant via poker machines winnings, which were transferred into his personal Commonwealth Bank accounts 10620475 and 10316831 (closing submissions [1.11], [4.5]).

The Plaintiff asserts an action for money had received is not confined to stolen or misappropriated property. It is available against an entirely innocent recipient who did not receive the money as a bona fide purchaser without notice (submissions [2.1], closing submissions [2.6]).

Further the Plaintiff submits where notice that the money or property was the proceeds of an unauthorised receipt is acquired by a third party, he or she will not be relieved of personal liability by later disposing of the money or property into which its benefit is traceable. The content of the required degree of knowledge is determined by reference to that which the person ought to have known if informed of all matters (a) which he or she would have received notice if they had made the investigations usually made in similar transactions; and (b) of which he or she would have received notice had he or she investigated a relevant fact which came to their notice and into which a reasonable person ought to have enquired (submissions [2.2]-[2.4], closing submissions [2.6]-[2.8]).

The Plaintiff contends payments made in respect of a mortgage are usually only of direct benefit if they reduce the principal loan, however in a rising market it could be said preservation of a loan may be linked to a proprietary benefit, or if it can be said without misappropriated monies a mortgage debt could not have been met (closing submissions [2.9]).

The Plaintiff submits the Second Defendant was not a credible witness, pointing to purported inconsistences, evasions and illogical propositions given by the Second Defendant during cross-examination (closing submissions [4.1]-[4.2]). It contends it is clear that the Second Defendant knew or ought to have known that the monies that the First Defendant gave to him to deposit in his two Commonwealth Bank accounts were obtained by dishonest means (closing submissions [4.3]).

It submits the Second Defendant either wilfully shut his eyes to the obvious, wilfully and recklessly failed to make such inquiries as an honest and reasonable person would make, had knowledge of circumstances which would indicate the facts to an honest and reasonable person, or had knowledge of circumstances which would put an honest and reasonable person on inquiry (closing submissions [4.4]).

The Plaintiff submits the Second Defendant had knowing receipt (actual or constructive) of the misappropriated funds (submissions [3.1]-[3.3]).

Accordingly, by receiving and withdrawing monies from each of the Commonwealth Bank accounts after 24 July 2017 the Second Defendant dealt with monies obtained by dishonest means and is personally liable to the Plaintiff for those monies (closing submissions [4.5]).

In the alternative, the Plaintiff submits since 24 April 2018 the Second Defendant has had knowledge that the amounts deposited into each of the Commonwealth Bank accounts were obtained by dishonest meanings. This was because his date informed him of the contents of the Summons filed on 24 April 2018 (closing submissions [4.6]-[4.8]). He is liable to the Plaintiff for these amounts totalling $20,000 (closing submissions [4.8]).

Further still, the Plaintiff asserts the Second Defendant had knowledge of payments made to maintain mortgages held by the family for the following loan account numbers, paid from the St George Account (closing submissions [4.9]-[4.10]):

The Plaintiff asserts the Second Defendant is personally liable to account to the Plaintiff as constructive trustee for any benefit he has retained in the property at 9 Winsome Avenue Plumpton, which includes the mortgages held with the St George Bank above and the increase in value of the Plumpton property (closing submissions [4.11]-[4.12]).

In addition, the Plaintiff contends that there is a sufficient connection between the First Defendant’s breach of fiduciary duty and the Second Defendant’s knowing assistance giving rise to a Barnes v Addy (1874) 9 Ch 244 constructive trust (closing submissions [2.1]-[2.5]).

As indicated the First Defendant did not file a defence and Mr Hardy solicitor for the First Defendant indicated that he did not wish to make any separate submissions on behalf of his client, but adopted as far as relevant as I understood it, the submissions made by the Second Defendant (T119/35-41).

After briefly outlining the background to the proceedings (submissions [1]-[5]) the Second Defendant makes a number of submissions with respect to the Plaintiff’s claim and pleadings (closing submissions [1]).

The Second Defendant submits the only cause of action pleaded against him by the Plaintiff is a claim for money had and received, and that the Plaintiff has not pleaded with sufficient particularity any “knowing receipt” or “knowing assistance” claims against the Second Defendant (submissions [6]-[11], closing submissions [2]).

The Second Defendant further submits the Plaintiff has not sought, and has not provided evidence proving, any tracing in respect of any assets owned by the Second Defendant (submissions [12]-[13]). To this extent the Second Defendant accepts he is liable only to $1,829.08 as money had and received for the use of the Plaintiff for both the ANZ Account and St George Account as the remaining amounts in those two accounts of the Fraudulent Payments have been withdrawn (submissions [15]-[18], closing submissions [10]-[15]).

In any event the Second Defendant submits the claims against him by the Plaintiff should be dismissed (closing submissions [3]).

The Second Defendant denies that he had any knowledge (actual or constructive) of any of the Fraudulent Payments over which he had possession or control made into the St George Account or ANZ Account, and only became aware of the Plaintiff’s claims when proceedings were commenced (that is on or about 24 April 2018) (submissions [14], closing submissions [16]-[26]). He denies he had actual knowledge or control over the St George Account or ANZ Account (closing submissions [27]-[37]) and denies there is any evidence relating to the supposed extravagant lifestyle of the Defendants or their gambling habits that provides evidence for the Court to make the inference that he ought to have known of the deposit of the Fraudulent Payments into the two jointly owned accounts (closing submissions [38]-[56]).

He denies he is required to give restitution to the Plaintiff for any greater amount than $1,829.08, and denies he is liable to the Plaintiff for damages or any other relief (submissions [19]). He submits the Plaintiff’s claim with respect of the property at 9 Winsome Avenue Plumpton is misconceived. The property is jointly owned by the Defendants and mortgaged to the St George Bank, and given the effect of s 42 of the Real Property Act 1900 (NSW) the Plaintiff cannot seek any proprietary remedies against the Second Defendant in respect of mortgage repayments. As the Second Defendant did not know and had no reason to have known about the deposit of the Fraudulent Payments the claim with respect against the property should likewise be dismissed (closing submissions [57]-[63]).

With respect to the monies deposited into the Second Defendant’s Commonwealth Bank accounts, he contends that as the Plaintiff has conceded all of the cheques deposited into these two accounts were drawn from the poker clubs’ bank accounts not from any other source, none of the monies were Fraudulent Payments. As soon as the Fraudulent Payments were deposited or paid into the poker machines, those monies became mingled with the clubs’ monies and cannot be traced into any of the amounts paid out by the clubs to either of the Defendants: Russell Gould Pty Ltd v Ramangkura (2014) 87 NSWLR 552; [2014] NSWCA 310 (closing submissions [4]-[9]).

Mr Santos swore one affidavit in the proceedings on 23 April 2018.

In this affidavit Mr Santos outlined how since 2017 he has been employed by the parent company of the Australian company of the Plaintiff in the position of Vice President – Corporate Accounting and Tax. This parent company is part of a group of companies known as the Silversea Cruises Group which is a privately owned group of companies that specialises in gold standard luxury cruises.

In Australia, the Silversea Cruises Group operates through the Plaintiff in its office at 8 Spring Street Sydney NSW, and employs approximately 35 employees with a turnover in Australia of approximately $15,000,000 per annum. Prior to February 2018, Mr Santos said Ms Amber Wilson (Managing Director), the First Defendant (Branch Accounting Supervisor) and Ms Megan Booker (Marketing Executive, Digital and Trade) worked in the office of the Plaintiff in Sydney.

He said the First Defendant was employed by the Plaintiff from 5 April 2010 to 14 March 2018, with terms of employment set out in her employment contract executed on 15 March 2010. Immediately prior to the cessation of her employment, the First Defendant had a base salary of $88,167 and worked as the only employee in the Accounting Department of the Plaintiff from 5 April 2010 to June 2016, and August 2017 to 14 March 2018.

From September 2013 to 26 April 2016, the First Defendant reported to Ms Christensen and himself. During her employment, the First Defendant had access to “NAV” software to process invoices received from suppliers at the Sydney Office, of which she had a unique user profile and login.

Mr Santos said that on various occasions during the First Defendant’s employment, Silversea Cruises Group reprimanded her for her failure to act in accordance with the required policies and procedures for purchase orders and payment processing.

On 22 February 2018, the First Defendant emailed Elvire Gallicchio the Corporate Treasurer Manager stating that she had been subject to an online scam ending in scam payments of USD $56,100 and GBP £63,390.

On 26 February 2018 Mr Santos received a call from Ms Wilson who conveyed to him that the First Defendant had offered to pay $195,000 to the Plaintiff to repay the purported scam payments. He thought this was unusual as the First Defendant on her account was not at fault because she had been the innocent victim of an “email scam”. This led to further investigations, where in March 2018 Ms Cernoglazova Senior Accountant of Silversea Cruises Group informed Mr Santos of a number of discrepancies in the First Defendant’s invoice practices in the Sydney office, including numerous payments to illegitimate accounts

On 14 March 2018 the First Defendant resigned from her employment.

Mr Santos engaged forensic experts on April 2018 to conduct a forensic review of the First Defendant’s activity. On 16 April 2018 he was informed by Ms Cernoglazova that in the days prior to the First Defendant’s resignation, she had observed her placing large quantities of hard copy documents in the shredding bin in the Sydney office. Mr Santos unlocked the secure destruction bin and observed that the bin contained numerous documents of unopened vendor correspondence and documents indicating the First Defendant had utilised an accounting software known as “FreshBooks” an unofficial software used to create invoices and available for download online.

Mr Santos was not required for cross-examination.

Ms Gilbert swore one affidavit in the proceedings on 4 May 2018.

Ms Gilbert outlined how she is the responsible partner on this matter for solicitors for the Plaintiff.

She asserted the forensic evidence obtained in this matter to date indicates the First Defendant used her position with the Plaintiff to misappropriate company funds, including by making what appears to be fraudulent supplier payments and payments to a purported “ATO Direct Credit Account” which is fact an account with NAB number 130766469.

As at 24 April 2018 she said the forensic evidence indicated the First Defendant had misappropriated $1,590,348.82 of company funds. She further described the freezing orders made by Kunc J on 24 April 2018 and subpoenas issued to the various banks relating to the First Defendant’s account activity.

Ms Gilbert was not required for cross-examination.

Ms Perez swore on affidavit on 15 August 2018 annexing in various forms her expert report. She is an Equity Partner at Moore Stephens NSW which specialises in audit, accounting, tax and business advisory services.

In her Second Supplementary Report dated 14 August 2018 Ms Perez set out the summary and process behind her findings and concluded:

Ms Perez was not required for cross-examination.

Unsurprisingly the First Defendant did not give evidence.

The Second Defendant filed two affidavits on 14 June 2018 and 31 August 2018.

In his first affidavit the Second Defendant provided a list of his assets. The most significant asset was his half share (owned jointly with the First Defendant) in his house at 9 Winsome Ave Plumpton NSW 2761 with value estimated at $600,000. His most significant liabilities were two home loan accounts with St George Bank secured over his house estimated at $169,709.03 and $254,264.59 (half share with his wife the First Defendant).

In his second affidavit the Second Defendant described how he was born on 11 April 1963 in Cebu in the Philippines. In about 1985 he was in his last year of a bachelor of electrical engineering at Cebu Technical School in the Philippines but decided to quit, and entered the workforce as an electrical technician.

He met the First Defendant in 1986 in the Philippines when she was on a scholarship studying industrial engineering at Cebu Institute of Technology. They married in 1990 with their son Nathan born on 13 March 1992 and Nadine on 23 December 1993.

He asserted that from the beginning of their marriage, the couple decided the First Defendant would be responsible or the household finances and paying household bills. In 1996 the family emigrated to New Zealand and in 2002 emigrated to Australia.

The Second Defendant said when he came to Australia he worked assembling air conditioning for trains, and then for Quirks Refrigeration where he designed refrigerators. In 2004 he started studying refrigeration and air conditioning at TAFE which he finished in 2007, allowing him to work as a contractor. He stopped working in May 2018 due to some health reasons.

The Second Defendant asserted when they moved to Australia he and his wife opened the ANZ Account. However since opening the account he said he has not known the banking details or card PIN, as he does not have access to internet banking or a debit card for the ANZ Account.

He said he opened his own account with the Commonwealth Bank of Australia in 2004 with the assistance of his wife. He said he does not know how to use an ATM and his wife has access to this account to pay for household expenses and she has the debit card for this account. He asserted he does not know the PIN for the debit card nor the details of his credit card account because he is hopeless with technology.

The Second Defendant said he knew his wife had several accounting supervisor jobs but did not know how much she was being paid as she was responsible for household finances.

He asserted he and his wife started gambling in 2013 because of a string of personal tragedies including the deaths of relatives. They started going to the RSL and gambling on poker machines in Rooty Hill, Lakemba or Canterbury. When they went to the RSL or club they would go their separate ways. His wife would give him an amount of cash to use, or he would have some cash still in his wallet.

The Second Defendant described the various trips he and his family took in 2014 to the present, estimating since 2014 he had been to the Philippines approximately 10 times. He asserted he was not suspicious of how these trips were paid for because he said he thought his wife paid for these from her salary and some large gambling wins.

He said his sister solely owns and operates a business in the Philippines called DongPerven which sells medical refrigerators which was started in about May 2015. He said he would sometimes buy equipment and parts for refrigerators to take to the Philippines to assist his sister, paying for these parts with his credit card, cash or some gambling winnings.

The Second Defendant asserted he was not aware until these proceedings started of any allegation or suspicion that his wife had misappropriated money from the Plaintiff.

In cross-examination, the Second Defendant denied that on 4 September a payment into the joint ANZ Account labelled “pay salary from Rural Co Limited” was his salary, asserting it was the First Defendant’s pay. He denied his salary ever went into this account. He denied that the First Defendant ever told him this account had gone into debit (T8/10-44). He denied knowing that on 3 June proceeds of a loan draw down were paid into the account (T9/6-8).

In cross-examination the Second Defendant further said he could not remember when he and his wife started gambling, but accepted it “maybe” could have been late 2011. He said she first started gambling, and he assumed he got the money to gamble from her wages although he did not ask her (T9/38-T10/1). He said they started gambling “all of a sudden” (T10/18-24). He said when she started gambling all of a sudden, he did not ask her where she was getting the money to gamble (T10/28-31).

However the Second Defendant admitted that before 2013 his wife had gambled on occasion and that they started with gambling on the weekend then going up to seven nights per week three years ago (T93/20-35). He said she started gambling earlier than him (T105/20-24).

The Second Defendant said he did not know how to explain why there was a visa purchase in Rooty Hill RSL and ATM withdrawal in the Philippines on the same day in May 2012 because he did not have a debit card (T12/4-6). He said the withdrawal from the Philippines had to be his wife, so he could not explain who withdrew from Rooty Hill RSL (T12/17-24). He said he used a credit card and his wife would leave him money when she went away (T12/46-50).

The Second Defendant accepted there was an increased amount of travel that he and his wife were doing in around 2012, and said he did not ask where the money was coming from for the extra travel (T13/20-26) He said he recalled travelling to the Philippines in July 2013 around when his father died (T13/33-34). When he returned he was made redundant and did not work until 2014 other than working as a contractor (T14/5-50). When describing his trips to Surfers Paradise and Darwin in December 2013, he said as an employee of Silversea his wife got one free cruise each year (T15/1-24). Upon further cross-examination he said he also went to Cairns in December 2013 (T16/24-25). He denied he remembered about a withdrawal of $99.50 in December 2013 but said he thought it was his wife (T17/17-23).

Although first denying he had a player’s account, the Second Defendant accepted both he and his wife had membership cards with Rooty Hill RSL, but only his wife used the card when she played on poker machines because he was always losing it (T18/1-11). He denied on 19 December 2013 he used an ATM for the ANZ Account because he said he does not have an ANZ card (T18/29-38).

The Second Defendant denied remembering going to the Philippines in late 2015 (T19/29-31). He accepted he went to Singapore in January 2016 with his wife and daughter and booked accommodation for the Philippines, but said he could not remember if he went to the Philippines or not during that trip (T20/9-32). Although first denying he stayed at the City Park Hotel he accepted he and the whole family stayed there (T20/40-45). He accepted going to Surfers Paradise in April 2017 and the Philippines and Taiwan in May 2017 (T21/20-38).

When outlined the various holidays he and his family went on, he said he thought they were paid from “gambling money” because they had big wins and he did not ask (T22/32-38). He said he could not remember when he went to the restaurant Buffet 101 but denied spending $264 at this restaurant in the Philippines was a large amount of money, because it depended if he brought his family there (T26/4-20). In November 2017 the Defendants again travelled to the Philippines (T23/26-45).

He said his wife sometimes gave him cash to pay for things put not much larger than $500, although “a few times” she gave him thousands of dollars of winnings to put in the bank mostly last year (T27/6-43). He accepted his wife would only gamble on poker machines (T27/48-50). He said he did not think this was unusual as he thought it was “a proper winning” from poker machines (T28/15-17).

The Second Defendant accepted he was worried his wife was gambling at this level, as he was scared she might “hook up with gambling too much” however he accepted he thought she was reasonably successful at gambling (T28/21-28). He said he and his wife had been gambling probably before 2013 but could not remember, and only knew a few people who were successful at gambling as his wife (T28/32-38). He thought it was just luck and that she was lucky for four years with gambling winnings (T28/40-49). He denied he ever thought to ask her where the money was coming from although accepted he was worried about his wife, and denied this account was a lie and denied he turned a blind eye to the money (T29/4-33). He said he thought the money was coming solely from poker machines (T29/37-39).

He said he and his wife always flew economy except on the occasions where they were upgraded for no charge because he was a member of the Marco Polo rewards club (T30/1-13) He again denied he asked her where the money was coming from (T31/15-22). He repeated his wife controlled the money (T32/10-11).

The Second Defendant said it would have been unusual if his wife gave him winnings to bank more than once a month (T32/19-29). However he accepted between 21 May 2017 and 14 April 2018 he cashed out a total of $100,220.99 (T33/48-50). He denied he thought this was unusual and repeated he thought these were poker machine winnings (T34/1-16; T35/3-27). He said he did not think it was unusual to receive $100,000 in cheques in one year (T35/44-46). He said his wife never allowed him to play beside her at the poker machines, but that she would call him over on the phone if she got a large win. He did not think this was unusual because she said he was “bad luck” (T46/46-50).

The Second Defendant accepted he had been living with his wife in the same house for 12 years, and they slept in the same bedroom (T37/23-27). He said his wife had been gambling on average seven nights a week over the last few years, staying until 10:00pm on weekdays and 2:00am on weekends (T37/38-T38/2; T39/11-21). He said he had no idea how much you would expect to get from a poker machine after putting through $10,000 (T39/3-9). He asserted he did not think it was unusual that between August 2016 and February 2018 Dooleys Lidcombe Catholic Club paid out $115,191 to his wife (T44/8-14).

Upon accepting on 24 April 2018 he and his wife were served with a Summons, and being told he was observed on 25 April 2018 carrying two large cardboard boxes he said “I think that was my clothes” because he wanted to move out (T50/1-7). He said he was so upset he tried to kill himself a few times (T50/9-10). He accepted he withdrew $20,000 out from an ATM for his wife on 26 April 2018 and said this was to pay for her lawyer (T50/40-T51/2).

He repeated the deposits he made were not unusual because he thought they were from winnings (T53/35-37).

He accepted he would have withdrawn $42,000 from his account in December 2017 upon instructions from his wife, but said he could not remember doing this (T54/1-23). He asserted the $140,000 that went through his account in less than one year was what he thought was just winnings and “a pure luck” (T57/5-15). He said he opened an account purely for his winnings with the Commonwealth Bank (T56/3-6). He repeated although he saw the balance of the account every time he withdrew money, he did not turn a blind eye to the $140,000 going through his account in less than a year (T57/5-15).

The Second Defendant said he could not recall driving to a storage facility on 25 April 2018 and said he had no storage facility (T58/47-T59/8). He denied he and his wife drove to Storage King (T58/53-50). He agreed however he dropped the cardboard boxes to a house in Lloyd Street Blacktown where his niece and nephew lived (T60/4-19). He said the boxes were full of clothes because he was upset, however said this was the first time he had suspicions against his wife (T59-3-37). He said he was so upset he tried to kill himself “a few times” because he lost trust in the First Defendant (T59/36-38).

He accepted he went to a conference in Taiwan in 2017 and dressed in a uniform at a trade conference, asserting he would not have been let in unless he was dressed in a uniform (T61/1-19)

He denied knowing about transfers his wife made to accounts of his relatives in the Philippines (T62/1-32). He said his wife has not ever explained to him why she transferred money into the DongPerven account owned by his sister (T62/-1-32).

He reiterated his wife handled everything to do with banking (T73/49-50) however accepted he had an account opened in 2018 which had gambling monies placed into it (T74/32-43). He said his limit when gambling was $500, and if when gambling with his wife he hit that limit he would stop playing and wait in the car for his wife (T77/18-20).

The Second Defendant accepted he understood his wife was an in-house accountant at Silversea Cruises, but asserted the amounts he was depositing into accounts were what he thought were winnings because his wife never informed him of any salary increases she received (T90/1-50). He denied that he knew from his own experience that if his wife was spending many hours at the poker machines she must either have been winning a lot or putting a lot of money through the poker machines (T92/16-19). He accepted his wife did not appear to have a limit at gambling (T91/21-39). He repeated his concern was not where the money was coming from, only that he was worried his wife was gambling too much (T91/21-24). He asserted he did not know whether his wife had the “golden touch” with poker machines, however repeated that his wife was winning most of the time (T93/13-43). He said he thought his wife was winning every single night (T93/7-8).

According to the Second Defendant, his wife played on $6-10 per press poker machines (T94/20-43). He said he understood that on poker machines more often than not you lose, and that in his experience he had seen some people that were better than his wife in terms of luck in gambling jackpots on poker machines (T95/33-T96/12).

He repeated his denial that he did not know the money was coming from somewhere other than poker machine winnings, because if he had known he would have been the first one to stop it or divorce his wife immediately (T97/1-25). He denied he knew the money was coming from somewhere other than poker machines (T97/8-20). He repeated his wife handled the finances and did not doubt anything from her (T97/27-30).

He denied it did not make any sense that, on his evidence, when his wife received the Summons he did not know she had done anything wrong, but still was so upset that he wanted to leave his wife (T100/1-27). He said he never asked his wife why she directed him to put her winnings and deposit money into his account (T101/34-45). He said most of the time his wife received winnings it was under his name, because she was scared to carry the money and said he never asked his wife why she deposited money into his account not her own (T101/26-40).

The Second Defendant said “she’s not successful per year. It’s just luck” (T105/26-28). He accepted he noticed an increase in the amount of cheques and gambling winnings, but denied he ever asked her where the money was coming from because he thought they were just winnings (T105/44-50).

In a brief re-opened cross-examination following the filing of an Amended Statement of Claim (of which leave was given on 17 September 2018) the Second Defendant said that from 2013 onwards he and his wife did not really have a sudden increase in gambling, but they played a bit more (T116/38-40). He accepted there was an increased amount of gambling (T117/1-2). He said the increase was at its worse around 2016 and 2017 (T117/8-9). He said he could not remember noticing an increase in the amount of money that was being deposited into the Commonwealth Bank accounts (T117/38-40). He denied he must have known in order to gamble and travel his wife was getting money via dishonest means (T117/29-34).

I accept as truthful and accurate the evidence of those witnesses put forward by the Plaintiff, although I am not bound to do so. However their evidence is unchallenged and credible. In my view the outcome of this case is to be determined by whether the Plaintiff has discharged its onus of proof in light of serious allegations made in the context of the Second Defendant’s denial of relevant events.

In my view, the Second Defendant’s evidence was unsatisfactory for a number of reasons. It was my impression of him that in the witness box he had a convenient answer for everything and was too readily prepared to provide a quick response to each question posed to him.

It was my impression that to an extent he tried far too hard to project the image of a hapless male entirely unaware of his surroundings and what was happening on a daily basis, and whose wife at any or all relevant times controlled and held the purse strings.

However he clearly appreciated his family’s ability from about 2012 to go on increasing holidays beyond free cruises and said he did not ask his wife about where she was getting the money for this travel (T13/20-26). He also clearly appreciated that his wife started gambling “all of a sudden” and that she was gambling excessively (T10/18-24).

For him a gambler himself to suggest all of a sudden his wife had an apparent arguably unconstrained capacity to gamble without a suspicion is to some extent disingenuous.

The Defendants share the same bedroom, lived obviously with a high level of daily interaction and on a nightly basis would go to gamble together although in the gambling rooms they would sit in separate areas. His reason in his affidavit for the couple commencing gambling was the preponderance of family tragedies, yet in cross-examination he said it never occurred for him to ask why they started gambling (T9/44-45) and indeed he said he could not remember when they started gambling (T9/20-21). These accounts are again to some extent inconsistent.

The Second Defendant did not state he believed his wife had a dramatic increase in her salary nor is there any suggestion of an inheritance providing a sudden influx of money.

There were therefore a number coincidences that must have been apparent to the Second Defendant: all of a sudden his wife started gambling, and all of a sudden she was receiving large wins from the poker machines which was and could only be a product of the first. In addition they enjoyed extensive and frequent travel.

The increase in travel, the increase in gambling and my assessment of the demeanour of the Second Defendant inclines me therefore to be somewhat suspicious of his evidence. His allegations that he attempted suicide on several occasions finds no support on the evidence before me other than his solicitor informing me from the bar table that there was some suggestion on one occasion he took some substances, and no evidence was called in re-examination to substantiate these claims. I am satisfied these were gross exaggerations.

By way of further example, the Second Defendant was confronted with a Facebook photo of his wife in a business class flight and was somewhat quick to suggest it was an upgrade from the Marco Polo rewards club, thereby attempting to allay any suggestion of his family’s sudden profligacy (T30/31-33). However, the inference I draw is that rewards from loyalty clubs such as Marco Polo come only from frequent travel.

Further, the Second Defendant was confronted with his activities on 25 April 2018 where he accepted he was carrying boxes from his home to the house of his relatives, however said they were boxes full of clothes because he wanted to move out (T50/1-16, T63/28-31). Although the Plaintiff did not seek to tender any surveillance report, the Second Defendant was cross-examined that his version of events regarding this incident did not make any sense, because on his case he did not know anything was wrong when his wife received the Summons and did not suspect anything, however still was so upset that he wanted to move out (T100/6-35).

He further did not satisfactorily explain the $42,000 he deposited under the directions of his wife in December 2017 which was comparatively only a short time ago (T53/45-T54/47).

There are several possible explanations for these examples of inconsistency and unreliability displayed by the Second Defendant. He could have been telling lies, or he could also have been upset, nervous and ashamed of what had occurred when he discovered it.

On balance however the evidence before the Court suggests to me that he did trust his wife the First Defendant. In addition the Plaintiff was unable to point to any substantial evidence to contradict the Second Defendant’s assertions that his wife had all the control over the finances.

Notwithstanding my serious misgivings about the credibility of the Second Defendant and not without some hesitation I am inclined to accept a number of the important things he did say.

As I have said, notwithstanding my serious concerns with the Second Defendant’s evidence, the key question is whether he knew or ought to have known of the monies being deposited into those accounts held solely or jointly by him.

Although in the pleadings the Plaintiff referred vaguely to “constructive trust” there was no clear assertion in the pleadings of “knowing assistance” or “knowing receipt” to satisfy me that any type of Barnes v Addy constructive trust has been pleaded.

The key problem in this case from the perspective of the Plaintiff is the Second Defendant’s unswerving assertion that he did not have access to his wife’s bank account and in particular had no access to the ANZ Account and St George Account held jointly by the two Defendants. The Plaintiff has been unable to show that he had access to the ANZ Account and/or St George Account.

There was no evidence to suggest the Second Defendant did or could have had knowledge of his wife’s other accounts.

The Second Defendant denies he ever received in the mail or otherwise printouts of his wife’s gambling activity at the various clubs they frequented. The only money he was aware of was therefore the winnings that his wife made, and not knowledge of the Fraudulent Payments at the point they were directly deposited into the joint bank accounts or those accounts held in his wife’s and/or her mother’s name.

All of the cheques he received came from the various clubs. None came from his wife directly into his personal Commonwealth Bank accounts.

Further the Plaintiff has not been able to provide any tangible evidence that the Second Defendant had access to the two joint accounts or access to bank statements or PIN details for those two accounts. Significantly, the Second Defendant knew what was coming out of the poker machines to some extent, but not what was going into them in the first place to produce those winnings.

All the Second Defendant had knowledge of was his wife’s apparent increased ability to gamble and travel. That could however be theoretically explained by reason of her success in gambling alone.

Therefore in my view despite my misgivings and suspicions the Second Defendant’s story does have a reasonable amount of corroboration. There is strictly no evidence before me from which I am satisfied I can reasonably draw the inference that his wife’s sudden and increased gambling ability acts as constructive knowledge of the Fraudulent Payments themselves. To this extent the Plaintiff has not established a clear link between the money coming out of the poker machines (of which the Second Defendant had knowledge) and the source of the money going into the poker machines (of which in my view the Second Defendant did not have knowledge or constructive knowledge). This further defeats the case that the Second Defendant should be liable for monies going into his two Commonwealth Bank Accounts as these were monies obtained from monies going out of the poker machines, not monies going in.

There is no evidence the Defendants lived an extravagant lifestyle, and no evidence for example of who bought the airfares. There is no evidence to seriously contradict the Defendants’ case that they flew economy apart from the one Facebook post of an upgrade to business class.

Due to the seriousness of the allegations made against the Second Defendant, on balance I am not satisfied the Plaintiff has discharged its onus that the Second Defendant had knowledge of the Fraudulent Payments to constitute money had and received. Accepting he had knowledge of an increased ability on the part of his wife to gamble and to travel, it does not follow he had knowledge of the Fraudulent Payments.

In any event the Second Defendant was not given anything other than winnings, and there is no evidence before me to indicate that his wife could not have won those amounts without spending vast amounts of money. I have been provided with no information as to the odds expected of certain poker machines in the various clubs.

The Second Defendant only had knowledge of the seemingly legitimate wins of his wife, and there is no suggestion the winnings produced by the poker machines were somehow illegitimate, other than the source of the money to be put into the machines.

Importantly I am satisfied the Second Defendant trusted his wife, and his wife was demonstrating to him that she was indeed lucky, confirming his belief. Given his educational background, there is no suggestion he would be able to make some calculation as to the probabilities of these winnings or any calculation other than an assessment of luck or randomness.

Given the lack of filed Defence on behalf of the First Defendant, and on the basis of an expert report filed by the Plaintiff which comprehensively sets out the basis for the conclusion that she misappropriated a total of $3,565,862.95, I am of the view the Plaintiff should be entitled to whatever remedy is appropriate to facilitate recovery if possible of that amount. I will hear the Plaintiff on the precise form of orders in due course.

I am not satisfied that the Second Defendant had knowledge or constructive knowledge of receipt of the Fraudulent Payments.

However the Second Defendant did concede knowledge of the receipt of some $1,829.08 and I am satisfied he should be liable to pay this amount to the Plaintiff.

I would invite the parties to prepare short minutes to give effect to these reasons.

I will also hear the parties on costs if necessary.