Riverwood Legion & Community Club Ltd v Repaja & Co Pty Ltd

The plaintiff, Riverwood Legion & Community Club Ltd (“the Club”), trades as “Club Rivers” and is an unlisted not for profit public company limited by guarantee. Its objects are to provide facilities and benefits to Club members and the surrounding community.

The fourth defendant, Mr Simon de Munck, was, at all relevant times, the Chief Executive Officer of the Club.

In the circumstances I describe below, Mr de Munck was suspended as Chief Executive Officer of the Club and, ultimately, dismissed.

The second defendant, Ms Divna Repaja, was the sole director and shareholder of the first defendant, Repaja & Co Pty Ltd, now in liquidation. Repaja & Co was a company purportedly engaged in selling furniture over the internet and from a warehouse in Wetherill Park, and able to arrange high interest investments on behalf of clients.

In addition to being a director of Repaja & Co, Ms Repaja also held herself out to various people, including Mr de Munck and the fifth defendant, Ms Tina Fistar, as a “financial advisor” who could invest money on their behalf in overseas “pools” at extremely high rates of interest.

Ms Fistar was an acquaintance of Ms Repaja.

The Club’s claims in the proceedings arise out of a payment of $800,000 that Mr de Munck caused the Club to make on 24 February 2014 into Repaja & Co’s account with St George Bank.

The Club claims that Mr de Munck had no authority from the Club to make the payment, and that in doing so he acted in breach of his contractual duty of fidelity to the Club, his fiduciary duties of loyalty to the Club and his obligations as an officer of the Club pursuant to ss 180, 181 and 182 of the Corporations Act 2001 (Cth).

In effect, the Club contends that Mr de Munck stole the $800,000 from the Club.

It is common ground that where money is stolen, it is trust money in the hands of the thief: Black v S Freedman & Co (1910) 12 CLR 105 per O’Connor J at 110.

The relevant principles were summarised by White J in Wambo Coal Pty Ltd v Ariff [2007] NSWSC 589 at [40]:

The Club’s case is that Mr de Munck was induced to make the $800,000 payment by reason of Ms Repaja’s false representation to him that she would arrange for the $800,000 to be invested, at interest, on Mr de Munck’s behalf for a short time, and that the funds would be repaid in time for Mr de Munck to restore it to the Club prior to a gaming tax obligation arising in late March 2014.

In fact, Ms Repaja caused Repaja & Co to use part of the $800,000 (I have determined that part to be $481,189.75: see [112] below) to make a payment of $599,999.99 at Ms Fistar’s direction. That payment enabled Ms Fistar to complete the purchase of a property at Dolls Point. Ms Repaja represented to Ms Fistar, and Ms Fistar believed, that the $599,999.99 was repayment by Repaja & Co of funds that Ms Fistar had earlier placed with Repaja & Co for investment. Ms Repaja then used most of the balance of the $800,000 to purchase a Porsche Cayenne.

The Club contends that each of Ms Repaja, Repaja & Co and Mr de Munck are liable to pay to the Club the $800,000.

The Club also contends that it is entitled to a personal remedy against Ms Fistar for that part of the $800,000 that Ms Repaja caused Repaja & Co to pass on indirectly to Ms Fistar and which Ms Fistar used to complete her purchase of the Dolls Point property. As I have said, I have determined that the relevant amount is $481,189.75 (see [112] below). The Club does not suggest that Ms Fistar was on notice of the circumstances in which Mr de Munck misappropriated the funds from the Club, and accepts that Ms Fistar believed the funds she received represented a repayment by Ms Repaja of funds Ms Fistar had earlier entrusted to her for investment. The Club contends, however, that the funds were, in truth, trust monies to which it was entitled in equity, and that as Ms Fistar was a volunteer, she must now pay the Club an amount equal to that part of the Club’s funds as she used to complete the Dolls Point purchase.

In its Amended Statement of Claim, the Club also sought proprietary remedies in respect of the Dolls Point property arising out of these circumstances.

In opening submissions, Mr Newton, who appeared for the Club, very properly drew my attention to the decision of the Court of Appeal in Sze Tu v Lowe [2014] NSWCA 463 per Gleeson JA (with whom Meagher and Barrett JJA agreed) at [243] endorsing the decision of Black J in Break Fast Investments Pty Ltd v Giannopoulos (No 5) [2011] NSWSC 1508. Black J decided that a proprietary Black v Freedman claim, that did not amount to an allegation of fraud in the sense of dishonesty, and thus that did not constitute “fraud” for the purposes of s 42 of the Real Property Act 1900 (NSW), could not be maintained if the recipient of the funds acquired indefeasible title prior to being placed on notice of the claim (at [102] and [103]).

In light of that authority, Mr Newton informed me that the Club did not press for any proprietary remedy concerning the Dolls Point property and confined its case to personal claims against Ms Repaja, Repaja & Co, Mr de Munck and Ms Fistar.

As I have mentioned, Mr Newton of counsel appeared for the Club. Ms Obrart of counsel appeared for Ms Fistar.

None of Ms Repaja, Repaja & Co or Mr de Munck appeared when the matter was called on for hearing.

So far as Mr de Munck is concerned, Mr Jordan, who is still on the record as the solicitor for Mr de Munck (and who also instructed Ms Obrart) made this statement to me at the outset of the hearing:

Mr Jordan formally sought an adjournment of the proceedings on behalf of Mr de Munck.

For the reasons in my ex tempore judgment delivered on 11 February 2015, I refused that application.

I was informed, during the course of proceedings, that Mr de Munck’s wife was present in court throughout the hearing.

I am satisfied on the evidence that Mr de Munck misappropriated, that is to say, stole the $800,000 that he caused to be transferred from the Club’s account to Repaja & Co’s account on 24 February 2014. In equity, those funds belong to the Club; the funds were trust monies in Mr de Munck’s hands, and he was incapable of divesting them of that character: Black v Freedman at 110 per O’Connor J; see generally Tu v Lowe at [141] ff per Gleeson JA.

Further, the evidence satisfies me that Ms Repaja, and thus Repaja & Co, knew that Mr de Munck had misappropriated the $800,000. Contrary to her representations to Mr de Munck, Ms Repaja did not invest the stolen funds on Mr de Munck’s behalf but, rather, as I have said, used them to pay $599,999.99 at Ms Fistar’s direction (purportedly in “repayment” of funds Ms Fistar had earlier advanced to Ms Repaja for investment) and to purchase a Porsche.

In those circumstances, the Club is entitled to the relief it seeks against the fraudsters Ms Repaja, Repaja & Co and Mr de Munck on the various bases I set out below.

It is also entitled to the relief it seeks against Ms Fistar. Ms Fistar has received funds which, to the extent of $481,189.75, represent monies that Mr de Munck misappropriated from the Club. Ms Fistar used those funds to complete her purchase of the Dolls Point property. Ms Fistar received those funds as a volunteer. Ms Fistar thought Ms Repaja was “repaying” money Ms Fistar had earlier provided Ms Repaja to be invested on her behalf. But Ms Repaja was using money that she knew that Mr de Munck had stolen from the Club. She was not, in fact, “repaying” Ms Fistar at all.

Both the Club and Ms Fistar are victims of Ms Repaja’s fraudulent activities. The Club is also a victim of Mr de Munck’s fraudulent activities.

In substance, the matter for determination in these proceedings is which of those two innocent parties must bear the loss caused by this fraudulent conduct.

My conclusion is that it is Ms Fistar who must bear that burden, subject to such right of recovery as she is able to obtain from Ms Repaja and Repaja & Co.

On 3 July 2006, Mr de Munck was engaged by the Club as its General Manager.

On or about 10 August 2006, Mr de Munck signed a “Service Agreement” with the Club in which his duties were described to include:

In due course, Mr de Munck’s title was changed from “General Manager” to “Chief Executive Officer”. He also became the approved licensee of the Club and Secretary to the Board.

Mr de Munck had general authority from the Board of the Club to authorise payments from the Club’s main account up to a total daily withdrawal limit of $150,000.

In the circumstances I describe below, on 31 March 2014 the Club suspended Mr de Munck from employment and on 10 April 2014 terminated his employment.

In light of the serious findings that I have made concerning Mr de Munck and Ms Repaja, it is necessary to set out, in some detail, the factual background.

Ms Fistar met Ms Repaja in or about July 2013. She was introduced to Ms Repaja by a mutual friend who told Ms Fistar that Ms Repaja was an investment broker who had access to “higher paying interest investments and was also a financial advisor”.

Later, as I set out below, Ms Repaja represented to both Ms Fistar and Mr de Munck that she and Repaja & Co were “registered” financial advisers able to invest money on behalf of clients in overseas “pools” at extremely high rates of interest. It is the Club’s case that these representations were false.

Certainly, as I set out in detail below, so far as concerns the funds entrusted to Ms Repaja for investment by Ms Fistar (being part of the proceeds of a property Ms Fistar owned in Abbotsford; clearly her own funds) and by Mr de Munck (the money he stole from the Club), Ms Repaja did not cause them to be invested on behalf of her “clients” (whether in overseas “pools” or at all). Rather, Ms Repaja misappropriated those funds; in the case of the bulk of Ms Fistar’s funds, by using them for personal expenditure, and in the case of the funds stolen by Mr de Munck from the Club, by paying them at Ms Fistar’s direction to the vendors of the Dolls Point property.

I should add at this stage that Ms Fistar knew Mr de Munck. Ms Fistar knew that Mr and Mrs de Munck were contemplating “investing” with Ms Repaja, and said that this was “probably not long after my investment because that’s when everybody was talking about it”.

Mr de Munck was a friend of Ms Fistar’s daughter (who apparently was also persuaded to “invest” funds with Ms Repaja). Ms Fistar said her daughter was a long standing friend of Mr de Munck’s wife. Ms Fistar described Mr de Munck as being “like a surrogate child of mine”.

However, although Mr Newton explored these matters in cross-examination, he did not seek to make anything of them in final submissions. In particular, Mr Newton did not suggest, and it is no part of the Club’s case, that Ms Fistar knew of Mr de Munck’s misappropriation of funds from the Club.

In October 2013 the sale of Ms Fistar’s Abbotsford property settled. After that settlement, Ms Fistar received $761,000 which she deposited with the Commonwealth Bank of Australia (CBA).

Thereafter Ms Fistar contacted Ms Repaja and said:

On 26 October 2013 Ms Repaja sent an email to Ms Fistar as follows:

The following day, 27 October 2013, Ms Fistar sent an email to Ms Repaja saying she was interested in “moving forward with this with a starting price of $10,000”. The next day, 28 October 2013, Ms Fistar transferred from her CBA account $10,000 to an account associated with either Ms Repaja or Repaja & Co. On 19 November 2013 and on 20 December 2013, Ms Repaja paid Ms Fistar “interest” on Ms Fistar’s $10,000 investment in the sums of $1,981.08 and $1,907 respectively. The evidence does not reveal whether those interest payments reflected an investment that Ms Repaja had, in truth, made with the $10,000 Ms Fistar transferred on 28 October 2013.

In the meantime, on 9 November 2013 Ms Fistar exchanged contracts with the executrix of the late Leslie Phillip Gleeson (“the Vendor”) to purchase the Dolls Point property for $711,500. Ms Fistar paid the Vendor a deposit of $71,150. The contract called for completion on the later of 42 days from the date of the contract, or 7 days after notification by the Vendor of the registration of a Transmission Application.

Shortly prior to 18 December 2013, Ms Repaja spoke to Ms Fistar and said:

On 18 December 2013, Ms Fistar gave Ms Repaja a bank cheque for $598,853.53 which was drawn by the CBA using funds in Ms Fistar’s CBA account.

In her affidavit evidence, Ms Fistar gave no evidence of the circumstances that led her to pay Ms Repaja the $598,853.53, other than to refer to the conversation at [49] above and to state that, based on the interest payments referred to in [47] above, she thought Ms Repaja to be “trustworthy” (although she received one of those interest payments on 20 December 2013; after she paid the $598,853.53).

In cross-examination, Ms Fistar said that her arrangement with Ms Repaja was that the 18 December 2013 “investment” was to be returned in time for Ms Fistar to complete her purchase of the Dolls Point property, which Ms Fistar anticipated would take place eight weeks from that date.

Ms Repaja deposited that cheque to Repaja & Co’s account with St George Bank on 18 December 2013.

On that date there was a credit balance of $30,049.10 in that account.

Examination of the bank statements published by St George Bank in respect of that account make clear that Ms Fistar’s funds were not invested on her behalf in any “pool”, or at all. Rather, the funds were used for living and other personal expenses. There are numerous, daily, withdrawals from the account to “VISA”, “Coles Express”, “Rental Car Toll”, “Bing Lee Liverpool”, “Allianz Insurance”, “Telstra Mobile”, “Kennards Hire”, “Shangri-La Hotel Sydney”, “Qantas Airways”, “Mercedes Benz Finance”, “Sportsgirl”, “Woolworths” and other like payees.

Ms Fistar entrusted the $598,853.53 with Ms Repaja and Repaja & Co for investment. Accordingly, both Ms Repaja and Repaja & Co held the funds on trust for Ms Fistar either by reason of the principles in Black v Freedman or because Ms Fistar paid the funds to Ms Repaja and Repaja & Co for a specific purpose (investment) and that purpose was not fulfilled (because Ms Repaja used the money for her own purposes): Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567; Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq) [1978] HCA 45; (1978) 141 CLR 335 at 353; P W Young, C Croft and M L Smith, On Equity, (2009, Lawbook Co.) at [6.1020]; J D Heydon and M J Leeming, Jacobs’ Law of Trusts in Australia, (7th ed 2006, LexisNexis Butterworths) at [214] ff).

In those circumstances, it is to be assumed that the withdrawals thereafter made by Repaja & Co from the account were first taken from its own funds, and only when those funds were exhausted were the withdrawals taken from the funds it held on trust for Ms Fistar: for example, Heperu Pty Ltd v Belle [2009] NSWCA 252; (2009) 76 NSWLR 230 at [114] to [116] per Allsop P citing Re Hallett’s Estate; Knatchbull v Hallett (1879) 13 Ch D 696 and Re French Caledonia Travel Service Pty Ltd (in liq) [2003] NSWSC 1008; (2003) 59 NSWLR 361 at [43] to [65] per Campbell J.

I am prepared to assume, in Repaja & Co’s favour, that the $30,049.10 in Repaja & Co’s account on 18 December 2013 belonged to Repaja & Co. On 18, 19 and 20 December 2013, there were a number of transactions on the account which led to that sum being exhausted. Thereafter Repaja & Co began withdrawing money which it held on trust for Ms Fistar. The transactions which exhausted Repaja & Co’s funds are set out in the following table, provided by Mr Newton in supplementary submissions:

By 20 December 2013, following the debit of $30,000 on that day, Repaja & Co had thus spent $9,779.27 of funds it held on trust for Ms Fistar, which had been reduced to $589,074.26, the then balance in the account.

Thereafter, and assuming, in Repaja & Co’s favour, that the further credits to the account between 18 December 2013 and 23 January 2014 (which amounted to $43,826.94) were from funds which belonged to Repaja & Co, and that Repaja & Co withdrew those funds before withdrawing funds held on trust for Ms Fistar, the minimum account balance on 23 January 2014 of $94,971.24 represents all that remained of the funds held on trust for Ms Fistar. That is because the debits to the account during that period exceeded, by a very considerable margin, the deposits made to it.

From 23 January 2014 to 24 February 2014 (the date on which the Club’s $800,000 was deposited into the account), the credits to the account were greater than the debits. It is common ground that the result is that Ms Fistar’s funds were not further depleted.

In the meantime, from at least 8 January 2014, Ms Repaja and Mr de Munck corresponded concerning a possible “investment” by Mr de Munck with Ms Repaja or Repaja & Co.

The nature of Mr de Munck’s communications with Ms Repaja during January and February 2014 is revealed by emails which the Club arranged to have recovered from the computers that Mr de Munck used when he was employed at the Club. The emails, which Mr de Munck had purported to delete from his computers, were recovered by a forensic computer expert engaged by the Club.

Those emails reveal that Mr de Munck and his family spent New Year’s Day with Ms Fistar’s daughter, Ms Kaylene Macmorran. As I have mentioned, Ms Macmorran had also been persuaded to make an “investment” with Ms Repaja.

On 8 January 2014 Ms Repaja sent an email to Mr de Munck:

On the same day Mr de Munck replied:

Mr de Munck’s reference to an ability to invest “up to $1m but that’s through a business” bespeaks an intention that Mr de Munck had then formed to use the Club’s funds to “invest” with Ms Repaja. There is no suggestion in the evidence of any “business” with which Mr de Munck was associated other than the Club, nor any suggestion of any other potential source to Mr de Munck of “$1m”.

Later on 8 January 2014 Ms Repaja responded outlining a range of possible “investments” including:

On 16 January 2014, Mr de Munck’s wife, Ms Mary-Anne de Munck, sent an email to Ms Repaja asking some questions which, in hindsight, appear to have been most prescient. Mrs de Munck asked, among other questions:

Only part of Ms Repaja’s response to that email is in evidence. Ms Repaja said that her activities were “very similar in many ways” to a “pyramid scheme” and that:

I should add that there is no suggestion in the evidence that Mrs de Munck knew of her husband’s intentions and later actions. Indeed, as emerges from what follows, the evidence suggests Mr de Munck deliberately concealed his activities from his wife.

On or about 22 January 2014, Mr de Munck made an “investment” with Ms Repaja of $25,000. He obtained that sum by “cashing-in” his annual leave entitlements with the Club.

Ms Meagan Ringwood, the administrative and payroll officer of the Club, gave evidence that:

Mr Free had not, in fact, authorised the cashing out of Mr de Munck’s leave. However, Mr Newton accepted that Mr de Munck was entitled to the funds he so received from the Club.

Mr de Munck then used $25,000 of the $32,268 to invest with Ms Repaja.

As I have mentioned, Mr de Munck was at this time contemplating a much larger investment with Ms Repaja, and was planning to use Club funds for that purpose. He planned to disguise the use of those funds as an acquisition of furniture by the Club from Repaja & Co.

Thus, Mr de Munck and Ms Repaja exchanged the following emails on 18 January 2014:

The “attached set” to which Mr de Munck referred was not in evidence. Later communications between Mr de Munck and Ms Repaja suggest that it was a document describing a set of furniture. The fact that Mr de Munck stated that he could not “stretch that far without the wife knowing” suggests that Mr de Munck was concealing his activities from Mrs de Munck.

On 29 January 2014, Mr de Munck and Ms Repaja had the following email exchange:

Mr de Munck’s email makes clear that he was contemplating using “Club money” to “invest” with Ms Repaja (as in fact happened; see below) and that he apprehended the need to demonstrate, if necessary, that the funds were being held somewhere as a “current balance” .

By at least 18 February 2014, Mr de Munck was contemplating using $800,000 of the Club’s funds to “invest” with Ms Repaja.

After hours on that day, Mr de Munck sent an email to Ms Repaja asking her to “hold off on the second investment for now”.

Later on the same evening he sent a further email to Ms Repaja:

Ms Repaja replied:

The emails are, again, somewhat cryptic. However, as I read them, Mr de Munck was suggesting that he was able to access $800,000 of Club funds but would have to return those funds to the Club by 21 March 2014 to meet a gaming tax obligation of the Club. In turn, Ms Repaja was giving Mr de Munck an assurance that the funds that Mr de Munck was proposing to take from the Club could be invested in a variety of “pools” and returned prior to 21 March 2014. Thus it seems that Mr de Munck was contemplating a short term investment, using the Club’s funds. There is no suggestion in the evidence that Mr de Munck had in mind accounting to the Club for any interest earned on that investment.

On 21 February 2014 Mr de Munck sent an email to Ms Ringwood saying:

The only “loan” that the Club had at that time (apart from its trading account and trust account) was from the National Australia Bank Limited (“NAB”).

Mr de Munck then handed Ms Ringwood a handwritten note which was in the following form:

The account details on the note were those of Repaja & Co’s St George Bank account. The amount of the note is, plainly, “$800k”; that is $800,000, and not $8,000 (the amount Mr de Munck later claimed he had intended the Club to remit to Repaja & Co).

A short time later Mr de Munck told Ms Ringwood:

Mr de Munck’s reference to the “car park” was evidently a reference to a car park owned and maintained by the Club in Riverwood.

Mr de Munck thus gave Ms Ringwood two different explanations for the proposed $800,000 transfer. First, to pay a “chunk” off the amount owing to the NAB, and second to pay a “deposit” in relation to the car park. Neither explanation was the truth. Mr de Munck was intending to “invest” the funds with Repaja & Co on his own account.

On 24 February 2014, Ms Ringwood assisted Mr de Munck to effect the instructions in his note and to cause the $800,000 to be transferred from the Club’s account to that of Repaja & Co at the St George Bank.

The communications between Ms Repaja and Mr de Munck show that, at least by 24 February 2014, they had concocted a scheme whereby they conspired to disguise the true nature of Mr de Munck’s proposed withdrawal of the Club’s funds as a purchase by the Club of furniture to the value of $8,000 from Repaja & Co, and to then (evidently to allow Ms Repaja to have access to the funds until the 21 March 2014 gaming tax deadline) engage in the deceit that Mr de Munck had accidently paid Ms Repaja $800,000, rather than $8,000, for that furniture.

Thus, on or about 24 February 2014 Mr de Munck sent an email to Ms Repaja:

Mr de Munck’s reference to having “another option for an out should I need to use this” shows that he wished Ms Repaja to join with him in a ruse that he could use falsely to justify the $800,000 payment, should he be called on to explain the payment.

Accordingly, on 24 February 2014, Ms Repaja caused Repaja & Co to send the Club an invoice in this form:

Ms Repaja knew that Repaja & Co had not supplied any furniture to the Club. The invoice was bogus. Ms Repaja’s preparedness to concoct and send this invoice shows that she knew Mr de Munck was seeking to disguise from the Club the true nature of the $800,000 payment. She must have known from this that Mr de Munck was not authorised by the Club to use its funds for investment with Ms Repaja or Repaja & Co and was misappropriating the Club’s funds for his own purposes.

Thus, when the $800,000 credit appeared in Repaja & Co’s bank account on 24 February 2014, Ms Repaja, and thus Repaja & Co, must have known, and I find did know, that Mr de Munck was not entitled to the funds. In those circumstances, Repaja & Co held the funds on trust for the party that it, through Ms Repaja, knew to be their true owner: the Club.

By now Ms Fistar was due to settle the purchase of the Dolls Point property.

In her affidavit Ms Fistar said:

It is not necessary to set out the detail of the correspondence between Ms Fistar’s solicitor and Ms Repaja concerning “repayment of the money”. Ms Fistar, in cross-examination, accepted that she had some concerns about Ms Repaja’s failure to respond to her request for repayment but denied that she was concerned that Ms Repaja might not repay her at all. That evidence was not challenged in cross-examination and Mr Newton did not suggest, in final submissions, that anything that occurred in January or February 2014 could or should have put Ms Fistar on notice that Ms Repaja had dealt improperly with her money.

On 24 February 2014, Ms Repaja sent an email to Ms Fistar’s solicitor stating:

Later that day, Ms Fistar’s solicitors sent an email to Ms Repaja:

Thus Ms Fistar, through her solicitor, directed Ms Repaja, and thus Repaja & Co, to make the payment to the Vendor, rather than directly to Ms Fistar. As I have said, Ms Fistar understood that, by this process, Ms Repaja or Repaja & Co would “repay” to her the money she invested with Repaja & Co on 18 December 2013. In truth, unbeknownst to Ms Fistar, by this date Repaja & Co had dissipated all but $94,971.24 of her funds.

On 25 February 2014 (the day after the Club’s transfer of $800,000 was received into Repaja & Co’s St George Bank account) Ms Repaja caused $599,999.99 to be withdrawn from that account to purchase a bank cheque in favour of the “Estate of the Late Leslie Phillip Gleeson”, the Vendor.

In circumstances not revealed in the evidence, that bank cheque was either handed to Ms Fistar or to her solicitors. Ms Fistar’s evidence was that:

That bank cheque was handed to the Vendor’s solicitors on settlement on 27 February 2014.

On 24 February 2014, immediately prior to the deposit of $800,000 of the Club’s money, the credit balance in Repaja & Co’s St George Bank account was $133,279.31. It is common ground that, of that sum, Repaja & Co held the amount standing to the credit of the account on 23 January 2014, $94,971.24, on trust for Ms Fistar. The difference ($38,308.07) represented the net increase in the account resulting from numerous deposits and withdrawals to the account between 23 January and 24 February 2014.

Assuming that transactions took place on the Repaja & Co account in the order that they appear on its bank statements, following the deposit to the Repaja & Co account of the Club’s $800,000 on 24 February 2014, and prior to the withdrawal from that account on 25 February 2014 of the $599,999.99 used to fund the bank cheque in favour of the Vendor, there were further withdrawals and one deposit to the account the net effect of which was to reduce the balance of the account to $918,810.24.

The $918,810.24 comprised:

Mr Newton accepted that the $599,999.99 withdrawal used to fund the bank cheque in favour of the Vendor should be taken to have been funded in part by the $94,971.24 held on trust by Repaja & Co for Ms Fistar, and in part by the $23,839 of Repaja & Co’s own money. In my opinion, this concession was well made. Repaja & Co was purporting to repay to Ms Fistar the funds she advanced on 18 December 2013 and must be taken to have intended, so far as it was able to do so, to use any funds to which it was entitled for that purpose. The balance of the $599,999.99 ($481,189.75) must be taken to have come from the funds Repaja & Co held on trust for the Club.

The next day, 26 February 2014, Ms Repaja caused Repaja & Co to pay a further $177,880 from the account towards the purchase of the Porsche (all but $80 of which was funded from what remained of the funds held by Repaja & Co on trust for the Club; there was a credit to the account of $80 on 26 February 2014 which I will assume was of funds to which Repaja & Co was entitled and must be taken to have contributed to the cost of the Porsche). The Porsche was purchased in Ms Repaja’s name. There is no evidence as to its current location or indeed as to whether Ms Repaja still owns it. Although in its Amended Statement of Claim the Club alleged that Ms Repaja holds the Porsche on trust for it, the Club sought no relief against Ms Repaja in relation to it.

In the meantime, on 25 February 2014, the Club’s Head Accountant, Ms Ha Thi Bich Pham, noticed the $800,000 payment. She found it to be “out of the ordinary” and spoke to Mr de Munck as follows:

The next day, 26 February 2014, Mr de Munck set about implementing the conceit to which I have referred by writing a letter to Ms Repaja asserting an accidental overpayment by the Club in respect of Repaja & Co’s 24 February 2014 “invoice”.

Thus, on that date, Mr de Munck, on Club letterhead, wrote to Ms Repaja in the following terms:

The letter was a smokescreen; Mr de Munck well knew there had been no “error” of the kind asserted.

On 1 March 2014 (a Saturday) Mr de Munck telephoned Ms Pham and said:

Ms Pham then telephoned Ms Ringwood and had a conversation to the following effect:

Evidently, the email to which Ms Ringwood referred is that set out at [86] above.

On 4 March 2014, Ms Repaja continued with the charade that she and Mr de Munck had devised by writing to Mr de Munck at the Club in the following terms:

In the same vein, on 6 March 2014 Mr de Munck replied, on Club letterhead, as follows:

On 10 March 2014 Ms Repaja replied:

On 11 March 2014 Mr de Munck sent a further letter to Ms Repaja in the following terms:

In the meantime, on 4 March 2014 Ms Pham had a conversation with Mr Stuart Jamieson. Mr Jamieson was at the time the Club’s Operations Manager and reported to Mr de Munck. The conversation was to the following effect:

The next day, 5 March 2014, Ms Pham said to Mr Jamieson:

On 19 March 2014 Mr Jamieson checked the Club’s online bank account and saw that the $800,000 had not been repaid.

Mr Jamieson spoke to Mr de Munck:

Mr de Munck then left and returned to Mr Jamieson’s office with a folder containing papers. Mr de Munck said:

Mr de Munck showed Mr Jamieson the handwritten note that he had given Ms Ringwood (see [88] above) and the 24 February 2014 Repaja & Co “invoice”.

The following conversation ensued:

Mr de Munck then showed Mr Jamieson a cheque dated 13 March 2014 drawn on a bank account styled “Divna Repaja and Milorad Repaja t/a Divine Smiles Dental” in favour of “Club Rivers” in the sum of $800,000.

The cheque bore what appears to be Ms Repaja’s signature.

The following conversation ensued:

Mr de Munck then left the office and returned with Ms Pham. The following conversation took place:

Later, on or about 19 March 2014, Ms Pham met with Mr Jamieson and Mr de Munck and the following conversation took place:

At around this time, Mr de Munck showed Ms Pham the Repaja & Co “invoice” of 24 February 2014 referred to at [97] above and added:

The following day, 20 March 2014, Mr Jamieson again checked the Club’s online bank account and saw that the $800,000 had not been returned. He told Mr de Munck, who said:

After office hours on 20 March 2014, Mr de Munck sent an SMS text message to Mr Jamieson’s mobile phone:

The following day, 21 March 2014, Mr de Munck telephoned Ms Young at the Club’s solicitors, Thomson Geer. Mr de Munck and Ms Young had a conversation to the following effect:

Later that day, Mr de Munck had the following conversation with Mr Jamieson:

On 26 March 2014, Mr de Munck again called Ms Young at Thomson Geer. Mr de Munck and Ms Young had the following conversation:

On 27 March 2014 Mr de Munck telephoned Mr Jamieson and had the following conversation:

The same day, Mr de Munck telephoned Mr Free (the Club’s President) and they had this conversation:

Later on 27 March 2014 the Club commenced these proceedings.

Brereton J, as Duty Judge, made a freezing order against Ms Repaja and Repaja & Co up to and including 1 April 2014 and ordered that Ms Repaja and Repaja & Co produce to Court on 1 April 2014 a statement in writing setting out their dealings with the $800,000 paid into the Repaja & Co account on 24 February 2014.

On 28 March 2014, Mr Free confronted Mr de Munck and asked him “could you tell us what happened again?”.

Mr de Munck showed Mr Free the handwritten note referred to at [88] above and the following conversation ensued:

On the morning of Monday 31 March 2014 Mr de Munck telephoned Ms Ringwood and had the following conversation:

About half an hour later Mr de Munck called Ms Ringwood again and they had the following conversation:

Later that morning Mr de Munck again telephoned Ms Ringwood and had the following conversation:

On 31 March 2014, the Executive Committee of the Club resolved to suspend Mr de Munck from his duties. Mr de Munck was present at the meeting, as was the normal practice.

Mr Free said to Mr de Munck:

Mr de Munck replied:

Thus, to the end, Mr de Munck maintained the pretence that there had been an error, and that the $800,000 had been paid mistakenly (and, desperately, tried at the last moment unsuccessfully to persuade Ms Ringwood to corroborate his story).

On 1 April 2014 the matter came before me as Duty Judge. Ms Repaja and Repaja & Co had not complied with Brereton J’s order to produce to the Court a statement setting out their dealings with the $800,000. Accordingly, I extended the freezing order made Brereton J and made a further order requiring Ms Repaja and Repaja & Co to provide such a statement by 3 April 2014.

The matter was before me again on 3 April 2014. On that occasion I extended the freezing order until further order, and extended the order requiring Ms Repaja and Repaja & Co to make a statement concerning the $800,000. I adjourned the proceedings until 4 April 2014 before Lindsay J as Duty Judge.

Later on 3 April 2014 Ms Repaja swore an affidavit.

Ms Repaja’s affidavit was brief and in the following terms:

Ms Repaja’s affidavit was, to say the least, incomplete. The alleged conversation with Mr de Munck to which she deposed in her par [4] must be a fabrication.

On 4 April 2014, Ms Repaja appeared before Lindsay J represented by Mr Phillip Santucci, solicitor from Marque Lawyers.

Mr Santucci called Ms Repaja to give evidence before Lindsay J.

During the course of those questions, Mr Santucci referred to “the s 128 issue that I flagged earlier”. Mr Santucci was, obviously, referring to s 128 of the Evidence Act 1995 (Cth). The transcript from 4 April 2014 before me does not reveal what had earlier been said about that issue. The transcript does record that Lindsay J cautioned Mr Santucci about the possibility of Ms Repaja incriminating herself.

Mr Newton then cross-examined Ms Repaja.

In the course of that cross-examination, Mr Newton showed Ms Repaja the bank statements of Repaja & Co indicating the 24 February 2014 credit of $800,000.

Ms Repaja gave the following evidence:

Notwithstanding his earlier reference to s 128 of the Evidence Act, Mr Santucci did not object to Mr Newton asking these questions.

Only on the following page of the transcript did Mr Santucci take an objection under s 128 of the Evidence Act and request that Lindsay J issue a certificate under that Act.

I am satisfied, on this evidence, that on 24 February 2014 Mr de Munck misappropriated the $800,000 from the Club and, relying on Ms Repaja’s representations that she could invest those funds for Mr de Munck’s benefit at high interest rates, transferred the funds into the St George Bank account of Repaja & Co.

It does seem that Mr de Munck was intending to return the funds to the Club by late March 2014, in time for the Club to meet a gaming tax obligation. However, as I have said, there is no evidence to suggest that Mr de Munck was proposing to account to the Club for any profit he made from the use of the Club’s funds in the meantime.

Mr de Munck must have known that, as happened, the $800,000 transfer would come to light. In order to disguise the true nature of what he had done, and to buy time during which the funds could be restored to the Club, he engaged in the charade that I have set out above. He sent letters to Repaja & Co asserting, falsely, a mistaken overpayment of the 24 February 2014 furniture “invoice”. Time and time again, he asserted to various fellow employees at the Club, and to the Club’s solicitors, that the funds had been paid by mistake and would be restored.

It may be that, during March 2014, he was receiving assurances from Ms Repaja that the funds would be restored and was living in hope that this would occur, and, in the meantime, maintaining the pretence of a mistaken payment. However that may be, until his suspension and then dismissal, Mr de Munck maintained the pretence of mistaken payment, albeit with a growing appreciation of the likelihood of the true position being revealed (he told Ms Ringwood “I’m in a lot of trouble, I could go to jail”: see [149] above).

Ms Ringwood knew there had been no mistake. She had received unambiguous instructions from Mr de Munck to transfer the $800,000 to Repaja & Co. Mr de Munck gave her two different, and inconsistent, explanations for the transfer (see [92] above). And as early as 1 March 2014, Ms Ringwood told Ms Pham that, contrary to Mr de Munck’s account of it, Mr de Munck had instructed her to transfer $800,000, not $8,000 (see [119] above). Quite why Ms Pham, or someone else at the Club, did not immediately confront Mr de Munck about this was not revealed in the evidence. However, as Ms Obrart did not seek to make anything of this curious aspect of the matter, I will make no further comment about it.

To her credit, Ms Ringwood resisted Mr de Munck’s desperate attempt to persuade her to “say that it was a mistake” (see [149] to [151] above).

Mr de Munck’s actions were fraudulent, and in clear breach of his contractual, fiduciary and statutory duties to the Club.

In those circumstances, I accept Mr Newton’s submissions that Mr de Munck should be ordered to pay the Club $800,000 either as damages for deceit, damages for breach of contract, equitable compensation for his breach of fiduciary duty, or compensation pursuant to s 1317H of the Corporations Act.

Accordingly, I propose to enter judgment for the Club against Mr de Munck in the sum of $800,000.

Ms Repaja has admitted that neither she nor Repaja & Co were entitled to receive the $800,000 (see [166] above).

In any event, the above evidence shows that Ms Repaja dishonestly misappropriated from Mr de Munck (by the payment to Ms Fistar and by the purchase of the Porsche) funds that she knew Mr de Munck had himself misappropriated from the Club.

Not only that, but she also participated in the charade of mistaken payment, when she well knew there had been no mistake at all.

I accept Mr Newton’s submission that Ms Repaja, and Repaja & Co, should be ordered to pay the Club $800,000.

There are a number of bases to make such an order. First, in the circumstances I have described, Ms Repaja and Repaja & Co are liable to the Club for money had and received or for damages in deceit. Further, Ms Repaja and Repaja & Co obtained the Club’s funds by fraudulent misrepresentation and held the money on trust for the Club (see the authorities set out at [10] and [11] above). Ms Repaja’s unauthorised use of those funds renders her and Repaja & Co liable to make equitable compensation to the Club. Further, Ms Repaja is liable as someone involved in Mr de Munck’s statutory breaches and as an accessory to his breaches of his fiduciary duties to the Club under both limbs of Barnes v Addy (1874) LR 9 Ch App 244.

I propose to enter judgment for the Club against Ms Repaja and Repaja & Co in the sum of $800,000.

My conclusion is that the 25 February 2014 bank cheque for $599,999.99 drawn in favour of the Vendor of the Dolls Point property, and used by Ms Fistar to complete her purchase of that property, was funded as to $481,189.75 from monies that Ms Repaja, and thus Repaja & Co, knew Mr de Munck had misappropriated from the Club and were thus, in equity, owned by the Club. Otherwise, the bank cheque was funded from monies to which Ms Fistar was, in equity, entitled (the balance of $118,810.24).

In those circumstances, if the Club has a claim against Ms Fistar, it is for $481,189.75 (not $599,999.99 as claimed in the Amended Statement of Claim). In supplementary submissions, Mr Newton accepted that this was so.

The Club’s claim against Ms Fistar is a personal claim for unjust enrichment. As Mr Newton has submitted, in Heperu v Belle, Allsop P (with whom Campbell JA and Handley AJA agreed) held that an action at law for money had and received is available to restore the value of the benefit retained by a volunteer where that benefit is traceable in equity from misappropriated funds (at [144] and [153]).

The relevant principles are summarised in K Mason, J W Carter and G J Tolhurst, Restitution Law in Australia, (2nd ed 2008, LexisNexis Butterworths) at [305], in a passage cited with approval by Allsop P in Heperu v Belle at [127]:

Ms Obrart raised four matters in answer to the Club’s claim.

First, Ms Obrart submitted that Ms Fistar was not a volunteer and, having given value, was not liable to make restitution to the Club.

Second, Ms Obrart submitted that the $599,999.99 withdrawn from the Repaja & Co account on 25 February 2014 was not traceable to Ms Fistar and was traceable only “to the hands of the Vendor”.

Third, Ms Obrart contended that Ms Fistar had a change of position defence.

Fourth, Ms Obrart submitted that, because Ms Fistar obtained indefeasible title to the Dolls Point property prior to being put on notice of the Club’s claim, any personal claim by the Club against her cannot be maintained.

I am not able to accept any of these submissions and shall deal with them in turn.

In her defence, Ms Fistar denied that she received the proceeds of the 25 February 2014 bank cheque as a volunteer because she, or her solicitors, received that bank cheque “in repayment of the funds advanced” by her to Ms Repaja or Repaja & Co on 18 December 2013 “in accordance with the commercial terms of their agreement”.

The unstated premise of this defence is that Ms Fistar gave value to Ms Repaja or Repaja & Co for receipt of the proceeds of the bank cheque by discharging Ms Repaja or Repaja & Co from all or part of her or its obligation to repay the $598,853.53 that Ms Fistar had entrusted to Ms Repaja or Repaja & Co on 18 December 2013.

But that depends on whether or not by provision of the $599,999.99 bank cheque on 25 February 2014 Ms Repaja or Repaja & Co was in fact repaying all or any part of those monies. In my opinion, that is only so in respect of that part of the proceeds of the bank cheque as did not represent funds that Repaja & Co was holding on behalf of the Club but instead represented funds that Repaja & Co was entitled (if not obliged) to account to Ms Fistar; namely, the $118,810.24.

Beyond that $118,810.24, Repaja & Co was purporting to “repay” Ms Fistar from money which it held on trust for the Club. To that extent, provision by Repaja & Co to Ms Fistar’s solicitors of the 25 February 2014 bank cheque did not discharge Repaja & Co’s obligation to Ms Fistar which obligation survived (and indeed, so far as the evidence reveals, still survives). It follows, to that extent, that Ms Fistar is, vis-à-vis the Club, a volunteer.

In indistinguishable circumstances, Myers J came to the same conclusion in Austin v Khaliffe [1966] 2 NSWR 632 at 633.

In that case, a solicitor used funds misappropriated from a client, Ms Austin, to “repay” to a second client, the Khaliffes, monies that he had earlier misappropriated from the Khaliffes. The solicitor purported to make those funds available to the Khaliffes by using them to fund a bank cheque in favour of the solicitor for the Vendor of the property that that the Khaliffes were purchasing.

His Honour said, at 633:

In my opinion, that is the case here.

Accordingly, to the extent that the 25 February 2014 bank cheque was funded with money that Ms Repaja and Repaja & Co held on trust for the Club (that is, $481,189.75) I accept Mr Newton’s submission that:

Ms Obrart drew attention to the obiter observations of Owen J in Conlan (as liquidator of Oakleigh Acquisitions Pty Ltd) v Registrar of Titles [2001] WASC 201 at [201] to [213] and submitted that, by analogy with those observations, Ms Fistar was not a volunteer because she “gave money in return for a promise of repayment with interest or further or alternatively exercised a forbearance to sue when the bank cheque was drawn on the company account and paid to the Vendor”.

I do not think this submission takes the matter any further. The fact remains that Ms Repaja and Repaja & Co were purporting to repay Ms Fistar with funds that in equity belonged to the Club. Ms Fistar is not bound by any “forbearance to sue” because neither Ms Repaja nor Repaja & Co gave any consideration for any such forbearance.

For those reasons, my opinion is that to the extent that Ms Fistar received the $481,189.75, she was a volunteer.

Ms Obrart submitted that:

I do not accept that submission. In my opinion, it is immaterial that the 25 February 2014 bank cheque was drawn in favour of the Vendor, rather than in favour of Ms Fistar herself. The 25 February 2014 bank cheque was drawn in favour of the Vendor at Ms Fistar’s direction (by her solicitor) (see [104] and [105] above).

As Allsop P (at [89]) pointed out in Heperu v Belle:

Ms Fistar used the proceeds of the 25 February 2014 bank cheque to complete the purchase of the Dolls Point property. My finding is that, to the extent of $481,189.75, the bank cheque was funded with monies belonging in equity to the Club. This is exactly what happened in Austin v Khaliffe (see [199] and [200] above).

The fact that those monies did not, physically, come into Ms Fistar’s hands but were, rather, paid at her direction directly to the Vendor of the Dolls Point property, can make no difference to the outcome of these proceedings.

Although no change of position defence was pleaded by Ms Fistar, Ms Obrart submitted that:

I do not accept this submission for a number of reasons.

First, I cannot see how Ms Fistar has changed her position “on the faith of the receipt” of the proceeds of the 25 February 2014 bank cheque (see generally Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14). Ms Fistar was contractually bound to complete the purchase of the Dolls Point property in any event.

Second, there is no evidence that the property is worth less now than it was in February 2014. The only evidence Ms Fistar gave about the property was that she had expended some $70,000 on its renovation which suggests, if anything, that it may be worth more now than it was in February 2014.

Although, in her defence, Ms Fistar denied that the Club had “any equitable interest in the Dolls Point property”, she did not plead that the unavailability to the Club of a proprietary Black v Freedman remedy carried with it the consequence that the Club, for that reason alone, had no personal remedy available. Nor did Ms Obrart made any such submission in her pre-trial written outline, or during the hearing itself.

However, in response to an enquiry from me, Ms Obrart raised the argument in supplementary submissions, submitting that the Club’s entitlement to a personal remedy was excluded by reason of Ms Fistar obtaining indefeasible title to the Dolls Point property in circumstances where “all of the moneys the subject of the action indisputably went into the creation of the registered title”.

In support of that submission, Ms Obrart referred to Gleeson JA’s observations in Tu v Lowe at [238] to [244]. However, in those paragraphs, his Honour was dealing with the unavailability of a proprietary, not a personal, remedy and, as I have stated at [17] above, agreed with Black J’s conclusions in Break Fast to the effect that, absent “fraud” for the purposes of s 42 of the Real Property Act, indefeasible title was an answer to a Black v Freedman proprietary claim.

Gleeson JA left open the question of whether it followed from the unavailability of a proprietary remedy, that a personal remedy was also unavailable. Gleeson JA referred to White J’s decision in Super 1000 Pty Limited v Pacific General Securities Limited [2008] NSWSC 1222 at [234] to [237] and said:

Although Gleeson JA in Tu v Lowe and White J in Super 1000 were dealing with claims arising from the first limb in Barnes v Addy, I see no relevant distinction between such claims and a Black v Freedman claim, such as is involved in this case. Nor did Black J in Break Fast: see [102].

Ms Obrart, without elaboration, also drew attention to Allsop P’s observation in Heperu v Belle at [154] that “to call the volunteer recipient a constructive trustee does not mean the volunteer comes under a personal liability independently of the obligation to restore the fund or asset” (Ms Obrart’s words). So much may be accepted. But the Club seeks no more than to have restored to it that part of its fund as came into Ms Fistar’s hands.

Ms Obrart did not cite any further authority on the point.

In the absence of authority compelling a contrary conclusion, I am not prepared to find that the Club’s entitlement to a personal remedy against Ms Fistar, otherwise available, should be extinguished only by reason of the unavailability of a proprietary remedy due to Ms Fistar’s acquisition of indefeasible title. The fact remains that, to the extent of $481,189.75, Ms Fistar has funded the acquisition of the Dolls Point property with money which, in equity, belongs to the Club and in respect of which, for the reasons I have outlined above, she was a volunteer. I see no reason why Ms Fistar’s indefeasible title would have the effect of depriving the Club of a personal remedy that it would otherwise be entitled to.

This conclusion is consistent with that of Black J in Break Fast. In that case, his Honour held that Break Fast’s personal claim of unjust enrichment against Mr Giannopoulos arising from payments made without authority by a third party was established, notwithstanding the fact that its proprietary claim failed by reason of Mr Giannopoulos’ indefeasible title (see [33] to [35] and [137]).

The Club is entitled to judgment against each of Mr de Munck, Ms Repaja and Repaja & Co for $800,000 together with interest.

The Club is also entitled to judgment against Ms Fistar for $481,189.75 together with interest.

I will hear the parties as to the precise orders to be made, and as to costs.