The Cleaning Doctor NSW Pty Ltd v Fonseca

BRERETON JA: I have had the great benefit of reading in draft the judgment to be delivered by Mitchelmore JA, with which I agree. In the following supplementary remarks, which adopt the same defined terms as her Honour’s judgment, I summarise my essential reasons for reaching that conclusion.

Ali’s claim for an express trust in respect of the Bardwell Property depends on a conversation, the only evidence of which was given by Ali. In circumstances where Ali’s evidence was disbelieved, for reasons which included the primary judge’s assessment of credit informed at least in part by her position of advantage in seeing and hearing him, it cannot succeed.

The claim for an implied or resulting trust depends on the proposition that no consideration was paid for Ali’s equity in the Bardwell Property, and/or that the stated consideration of $808,000 was a “false consideration”.

The suggestion of a “false consideration” invokes the statement of Dixon CJ in Wirth v Wirth: [1]

As the primary judge observed in a passage which is endorsed below by Mitchelmore JA, [2] the reference in this passage to a “false consideration” is “a reference to consideration that is expressed in a contract or transfer notwithstanding that the parties intend that no consideration will move from the transferee”. As the primary judge concluded, this was not such a case, because the consideration of $808,000 was not false consideration in that sense. [3] Manifestly, consideration was given for the transfer: Orlando procured the discharge of Ali’s mortgage indebtedness, and himself obtained a mortgage loan to do so.

In my view there are multiple potential explanations of the established facts concerning this transaction consistent with the view that Ali would not retain a beneficial interest, though he would be permitted to continue to occupy the property. One is that the $808,000 was inserted in the contract on the basis of a valuation for stamp duty purposes, although the parties intended that only some lesser sum, including the amount required to discharge Ali’s mortgage, would actually be paid. If so, the consideration was “false”, but not in the sense that the concept is used by Dixon CJ: there was still a real consideration, being the discharge of Ali’s mortgage. As the primary judge said, there is no notion of consideration for the vendor’s equity, as distinct from the property – at least unless the transfer is subject to mortgage. This contract was not, and even if the “true” consideration was only the discharge of the mortgage, it was consideration nonetheless. The purchaser was not buying Ali’s equity, but the entire property unencumbered, which he then re-mortgaged. That it might have been at an undervalue does not give rise to a resulting trust to the extent of the undervalue. Sales may occur at an undervalue (or overvalue) for any number of reasons. A sale at an undervalue is nonetheless a sale, not a gift. It is a transaction supported by consideration. The law eschews examining the adequacy of the consideration; it is of course trite that the inadequacy of a propounded consideration by comparison with the value of the promise which it is said to support is no ground of objection to its sufficiency and validity. [4] A sale at an undervalue is not divisible into a sale of part of the subject matter for full value and a gift of the balance.

Another potential explanation is that the $808,000 was the true consideration, and adjustments were allowed between the parties which resulted in an outstanding balance of $58,078.51 remaining payable by Orlando to Ali.

It is unnecessary to decide which of these or any other potential explanation is to be preferred, beyond concluding that Ali’s case (that it was intended that he retain the beneficial interest) is not more probable than the others combined. Indeed, it is inherently implausible that Orlando would discharge Ali’s mortgage upon taking the transfer, and assume personal liability to a new mortgagee to do so, and then himself pay the mortgage instalments, if he was to have no beneficial interest in the property. And many of the matters relied upon as suggestive or indicative of an intention that Ali have or retain a beneficial interest, even if accepted, are equivocal. In particular, even if Ali undertook renovations to the Bardwell Property while Orlando was the registered proprietor, that is not inconsistent with what a person permitted to occupy the property indefinitely might do. And if in response to the loss of the Bardwell Property in March 2015, Orlando promised to provide an alternative house for Ali and Laura, that is not inconsistent with a promise of premises they could occupy, as distinct from beneficial ownership, consistent with the promise that he could occupy the Bardwell Property. On the other hand, that Orlando borrowed money on the security of the Bardwell Property while he was the registered proprietor is consistent only with Orlando being beneficially entitled to it. So too is Ali’s evidence that after the transfer he no longer paid the mortgage instalments but Orlando did so:

Ali’s claim in respect of the Bardwell Property, on either basis, therefore rightly failed.

Cleaning Doctor propounded three claims in respect of the money subtracted from its account via the cheques completed and presented by Orlando and Jeffrey. The first was for Jeffrey and Orlando to account for the money they received from the CD Account, [5] reliant on Black v S Freedman & Co. [6] The second was a restitutionary claim, to recover the money as money had and received by the defendants to the use of Cleaning Doctor. [7] The third was for damages for conversion of the cheques used to make withdrawals from the CD Account, and the notes and coins paid to the recipient on the occasion of each withdrawal. [8]

Prefatory to each of those three claims, Cleaning Doctor pleaded: [9]

To this, the defendants:

As the primary judge observed: [13]

Thus the essential dispute was not whether there was any authority, but the scope of the authority. In circumstances where her Honour was not persuaded to accept either Ali’s version or that proffered by Orlando, the critical question on appeal was who bore the onus on the question of authority. Cleaning Doctor appeared to accept, that, at least in relation to the first basis of its claim, it initially bore the legal onus of negating authority, [14] but argued that it was relieved of that onus in respect of any general authority by a supposed admission that there was no general authority, but only a limited authority, which was not accepted by the primary judge. However, it appeared to contend that, in respect of the claims in restitution and conversion, the defendant bore the onus, submitting that “a plaintiff must prove that the defendant took money from the plaintiff’s account … The burden then shifts to the defendant to prove they were authorised to take the money, or that it is not inequitable that they retain it.” [15] Reference was made to authorities which held that it was for the defendant to a restitutionary claim to prove repayment, [16] or that retention was not inequitable. [17]

In my opinion the appellants misstate the position. No doubt in the case of money received by way of a loan, the defendant bears the onus of proving that it has been repaid. But the plaintiff does not cast that onus on the defendant only by proving payment; the plaintiff must also prove that the payment was by way of loan (and not a gift, or a price). No doubt in restitutionary claims, defendants bear the onus of showing that it is not inequitable that they retain the benefit – whether on account of change of position or otherwise. But again, the plaintiff does not cast that onus on the defendant merely by proving payment; the plaintiff must also prove the qualifying or vitiating factor which raises the prima facie claim for restitution: whether it be mistake, failure of consideration, lack of authority, or otherwise. [18] Merely by providing that it has made a payment, or that money has been taken from its account, does not without some additional vitiating factor found a claim for restitution. [19]

Likewise, in a claim for conversion, it does not suffice to show that the plaintiff has delivered property to the defendant; it must be proved that the circumstances were such that the plaintiff retained an immediate right to possession. Delivery of a blank cheque to a recipient does not of itself import retention of an immediate right to possession of it; to the contrary. In other words, the plaintiff has to prove the terms, express or implied, upon which the delivery was made.

In this case, the asserted vitiating factor for the purposes of the restitutionary claim was the alleged lack of authority. The asserted term of delivery of the cheque book constraining the use that could be made of it was that the cheques would be used for the limited purpose of paying the mortgage. Thus her Honour was right to say: [20]

It is plain from the pleadings extracted above that the allegation that the withdrawals were made without authority was simply denied. That of itself amounts to a positive assertion that they were authorised. [21] It does not appear that any particulars of the “pregnant negative” implicit in that denial were sought, as they could have been, if it was desired to clarify and confine the scope of the defence. [22] Absent such a limitation, the onus remained on Cleaning Doctor to negate authority, and that was not confined to negating the limited authority of which the defendants gave express evidence. That cannot have been a surprise to the appellants, given the provision to Orlando of books of signed blank cheques and the debit card.

Insofar as there are suggestions in some cases that where a party must prove a lack of authority, and the other party is better placed to contradict it, the other may bear an evidential burden to support the existence of authority, [23] that does not assist the appellants here, where it was plain and not in issue that there was some authority, as was implicit in the provision of the signed blank cheques and debit card, such as amply to discharge any evidential burden. In those circumstances, Cleaning Doctor had to prove that the cheques were used outside the scope of that authority, and it did not do so merely by negating the limitation for which the defendants contended; it had to show what was the relevant limitation. As counsel for the respondents rightly submitted to the primary judge: [24]

For the reasons given by the primary judge, [25] such authority was not negated. In this respect, her Honour did not affirmatively find a case which was not advanced of express general authority; her Honour’s statement “whilst there is no evidence of a conversation between Ali and Orlando in which Ali (on behalf of Cleaning Doctor) expressly conferred general or unlimited authority on Orlando to make withdrawals from the CD Account, the objective evidence of Ali’s conduct during the period after the incorporation of Cleaning Doctor and the opening of the CD Account points strongly to the conclusion that Cleaning Doctor did confer such authority on Orlando” [26] is to be understood, in the context of the surrounding paragraphs, as a statement to the effect that in the context there described, it was no easy task to negate the possibility that there was general authority.

Cleaning Doctor’s claim therefore also rightly failed.

I agree with the orders proposed by Mitchelmore JA.

MITCHELMORE JA: The appellants brought proceedings in the Equity Division seeking relief in respect of two claims, both of which were dismissed. The first claim concerned the first appellant, The Cleaning Doctor NSW Pty Ltd (“Cleaning Doctor”), of which the second appellant, Ali Itawi, was the sole director and shareholder. The appellants alleged that between October 2009 and October 2012, $2,695,078.51 was stolen from Cleaning Doctor’s bank account (“the CD Account”) by the second respondent, Orlando Fonseca, the first respondent, Jeffrey Fonseca, and others on the instructions of Orlando and/or Jeffrey.

The second claim related to Mr Itawi and a property that he purchased in 2001 which was located in Bardwell Valley, NSW (“the Bardwell Property”). Mr Itawi alleged that in January 2003, he transferred the Bardwell Property to Orlando Fonseca, pursuant to an agreement by which Orlando would hold the Property on trust for him. He further alleged that, in breach of that trust, Orlando transferred the Bardwell Property in 2015 to a third party to discharge debts which were secured against a number of properties belonging to members of his family. Mr Itawi advanced an alternative claim to a resulting trust on the basis that the sale of the Bardwell Property was a sham, sold for what he contended was “false consideration”. The relief sought included that the traceable proceeds of the benefits received by members of Orlando’s family were held on constructive trust.

The principal protagonists in the events the subject of the two claims were Ali and Orlando. They gave highly divergent accounts of the circumstances surrounding the transfer of the Bardwell Property and the creation of, and the purpose of the payments into and withdrawals from, the CD Account. The documentary record concerning both events could at best be described as incomplete. The primary judge rejected the evidence of Ali and Orlando on disputed matters, save for where it was supported by documents or corroborated by credible witnesses, describing them as highly unsatisfactory witnesses who lied if it served their interests and whose evidence was riddled with inconsistencies.

The appellants contend that the primary judge’s rejection of Ali and Orlando as credible and reliable witnesses, being the “central plank” of her Honour’s reasons, necessitated a conclusion in their favour on both claims. Instead, her Honour dismissed the claims, concluding that the appellants had not discharged the burden of proof as to either.

In appealing Mr Itawi’s claim, the appellants contend that the primary judge erred in failing to find that the Bardwell Property was held on trust for Mr Itawi (Ground 1). They also contend that her Honour erred in otherwise failing to find that Orlando’s transfer of the Property to a third party, to release mortgages over properties belonging to the respondents, impressed those properties with trusts in Mr Itawi’s favour (Ground 2).

In their appeal on the Cleaning Doctor claim, the appellants contend that the primary judge reversed or otherwise inappropriately applied the burden of proof (Ground 3), and that by reason of that error, her Honour failed to find that Jeffrey and Orlando Fonseca were not authorised by Ali Itawi to withdraw money from the CD Account (Ground 4). The appellants also contend in that context that the primary judge mischaracterised the respondents’ case as involving a claim that Jeffrey and Orlando had general authority to withdraw money from the CD Account when that was not pleaded; and her Honour erred in determining the claim on that basis (Ground 8). The appellants further allege that the primary judge failed to decide their money had and received claim and their claim of conversion of cheques (Grounds 6 and 7). In so far as the primary judge found that the money on deposit in the CD Account did not legally or beneficially belong to Cleaning Doctor, the appellants contend that neither party raised this as an issue and her Honour should not have so found (Ground 5).

The respondents have filed a cross-appeal and a notice of contention. By their cross-appeal, the respondents contend that the primary judge erred in refusing them leave to amend their defence to rely on provisions of the Cheques Act 1986 (Cth) in answer to Cleaning Doctor’s claim. The notice of contention advances two arguments in respect of Mr Itawi’s claim which the primary judge found it unnecessary to decide, the first relying on s 44 of the Conveyancing Act 1919 (NSW) and the second relying on a deed of release and loan documentation in the context of the transfer of the Bardwell Property to a third party, Goodman Court Pty Ltd (“Goodman Court”).

For the reasons below, I consider that the appeal should be dismissed. In light of that conclusion, it is unnecessary to consider the cross-appeal or the notice of contention.

As the individual respondents share the same surname, in what follows I will refer to them by their first names, without intending any disrespect. For the avoidance of confusion, I have adopted the same approach in respect of the second appellant and other individuals involved in the proceedings.

The primary judge observed that “the affidavit and documentary evidence adduced by both parties was extensive”: J [18]. Her Honour’s reasons, which run to 563 paragraphs, incorporate a detailed summary of the evidence of the parties, adopting a chronological sequence, before addressing the credibility of the witnesses, making factual findings, and considering and determining the appellants’ claims.

The witness evidence included multiple affidavits of the principal protagonists, Ali (eleven affidavits), Orlando (nine affidavits), Jeffrey (eleven affidavits) and Orlando’s wife, Vilma (seven affidavits). Her Honour described the evidence of these witnesses, which included “conversations that occurred as long ago as 1997 and 2001”, as evolving over the course of their affidavits: J [20]. Her Honour referred in this context to authorities such as Watson v Foxman (1995) 49 NSWLR 315: see J [415]-[419].

In addition to internal inconsistencies in the respective affidavits of the key protagonists, her Honour noted that there were inconsistencies between their affidavit evidence and their oral evidence, as well as inconsistencies within their oral evidence: J [20]. In summarising the evidence, her Honour noted such inconsistencies without seeking to reconcile them. Ultimately, however, the nature and extent of the inconsistencies were fatal to her Honour’s acceptance of the evidence of any of the key witnesses.

The primary judge described Ali and Orlando as “most unsatisfactory witnesses”: J [419]. Ali’s evidence was “riddled with irreconcilable inconsistencies”, while Orlando’s evidence was “plagued by inconsistencies”: J [420], [424]. Each of them “lied about significant matters relevant to these proceedings where he considered that it was in his interests to do so”: J [427]. Her Honour did not accept the evidence of Ali or Orlando about any disputed matter, except where that evidence was “inherently probable, corroborated by a contemporaneous document or the evidence of a reliable witness, or where the evidence was contrary to his own interests”: J [430].

The primary judge also did not regard Orlando’s son, Jeffrey, as a reliable witness who could corroborate Orlando’s evidence, describing his recollection of events as poor and finding that he was also willing to lie where he perceived that it was in his or his family’s interests to do so: J [431]-[434]. Her Honour reached the same conclusion regarding the evidence of Ali’s wife, Laura: J [436].

Rather than duplicate the primary judge’s comprehensive and detailed summary of the evidence, I will first provide some background to the claims as to which there was no dispute at first instance or there is now no challenge to the primary judge’s findings. I will then identify the claims which remain in issue in the appeal and address her Honour’s findings relevant to those claims and her Honour’s resolution of them.

Orlando and Ali were introduced in 1997. Orlando operated cleaning and maintenance subcontracting businesses under various business names and through various corporate entities, which her Honour referred to collectively as the “Fonseca businesses”: J [11]-[13]. At the time of their introduction, Ali was an Area Manager for Prestige Property Services (“Prestige”) and had the authority to decide which subcontractors to engage on behalf of Prestige to work within his area: J [22]-[23]. One of Orlando’s businesses was engaged as a subcontractor by Prestige to provide cleaning services: J [22].

Orlando’s cleaning business was one of the main subcontractors to whom Ali allocated work while he was at Prestige: J [26]. Ali continued to allocate work to the Fonseca businesses when another cleaning contracting company, Tempo, took over the business of Prestige in 2002; and when Ali moved into a similar role at Total Building Management (“TBM”), in 2005: J [87], [133]-[136].

During Ali’s time at Prestige, Tempo and TBM, Orlando periodically caused cash deposits to be made into Ali’s accounts: J [91], [138]. When Ali was at Prestige, he and Orlando came to an arrangement for the payment of cleaning workers whereby Orlando would pay the labour cost in cash or into Ali’s account, and Ali would then pay, and/or withdraw and pay, cash to the site manager for payment to the workers: J [32]. Her Honour noted that neither Orlando nor Ali explained why workers undertaking cleaning work subcontracted to Fonseca businesses on behalf of Prestige were paid by Ali, rather than being engaged and paid directly by the relevant business: J [36]. Nonetheless, the arrangement for the transfer of money for the payment of workers continued when Ali was at Tempo and TBM: J [87] (Tempo) and J [135]-[136] (TBM).

Additionally, Orlando claimed that between 1997 and 2000, in accordance with a condition that Ali stipulated for referring more work to Fonseca businesses, he paid Ali money from time to time that was equivalent to 15-20 per cent of the profits that the Fonseca businesses made on Prestige jobs that Ali allocated: J [30]. Orlando further claimed that this arrangement continued when Ali was at Tempo and TBM: J [131], [134]. Ali denied that he had imposed this condition, and gave varying evidence as to whether he received a percentage of profits from Orlando: J [35]. Her Honour noted that Ali gave inconsistent evidence as to whether there was such an arrangement at Tempo and TBM: J [137].

It was not in dispute that Orlando periodically caused cash deposits to be made into Ali’s accounts, including after 2002, when he moved to Tempo, and from 2004 or 2005, when he moved to TBM: J [136]. Her Honour referred to cash deposits made into Ali’s accounts in 2005 ($339,088), 2006 ($46,030), 2007 ($319,515), 2008 ($207,040), and in the first few months of 2009 ($14,000). Other deposits were made into his account by way of electronic funds transfer: J [138].

The primary judge noted that the respondents adduced evidence of receipts for some deposits made during the period from 2002 until 2010, “although they did not put these receipts forward as a complete record of all such cash payments”: J [91]; [132]. Ali’s evidence was that these payments were for the cleaning workers he arranged to work the jobs that he allocated to Orlando’s businesses: J [91].

In about March 2009, Ali ceased employment with TBM and incorporated a company, Swell Trades Pty Ltd (“Swell Trades”). Between March 2009 and April 2010, Swell Trades was an independent contractor to TBM performing jobs at the University of New South Wales (“UNSW”): J [140]. There was evidence of funds being deposited into the account of Swell Trades by one or more Fonseca businesses: J [266].

In September 2009, Cleaning Doctor was incorporated: J [189]. In about October 2009, Ali opened the CD Account at the Menai branch of Westpac Banking Corporation (“Westpac”). Ali was the only signatory on the CD Account. The Bardwell Property was recorded as the registered address for the CD Account, but the mailing address was a post office box in Mortdale which was operated by Mr Luis Duran, a friend of the Fonseca family who had no relationship with Ali: J [199].

A 50-page cheque book and a debit MasterCard were issued for the CD Account: J [199]. It was common ground that Orlando asked Ali to sign the debit card and all of the cheques in this book, and to leave the cheque book and debit card with him; and that Ali did so: J [210].

Between the opening of the CD Account and October 2012, a total of $2,695,078 was deposited into the CD Account by Fonseca businesses. Between October 2009 and October 2010, $899,900 was deposited by Crew Hire Pty Ltd (“Crew Hire”); between October 2010 and October 2012, $1,145,567 was deposited by Clean & Clear Group Pty Ltd (“Clean & Clear”); and Link Cleaning Group Pty Ltd (“Link”) deposited $607,367 in that same period: J [273]. An additional amount of $42,245 was deposited from other sources that were not identified in the evidence: J [274]. Her Honour noted that the “typical pattern of transactions on the CD Account was that a deposit would be followed by a withdrawal of the same or a similar amount on the same day or within a few days of the deposit”: J [257],[277]. Almost all of the withdrawals were made by cheque: J [257], [278].

Cleaning Doctor was deregistered in October 2012: J [268]. After that time, payments into and withdrawals from the CD Account ceased: J [265]. The CD Account was closed in January 2013. Each of Ali, Orlando and Jeffrey denied closing the account: J [267].

Ali continued to provide maintenance services at UNSW through Swell Trades: J [266]. From about November 2013 to April 2015, he was employed by one of the Fonseca businesses, CCG Projects Pty Ltd (“CCG”): J [11], [297]. [303]. By the time Ali resigned from CCG, relations between him and the Fonseca family had irretrievably broken down.

The events regarding the Bardwell Property took place at an earlier stage in Ali and Orlando’s relationship. In November 2001, Ali became the registered proprietor of the Bardwell Property, for a purchase price of $580,000: J [37]-[38]. Her Honour found that in order to fund the purchase price and associated costs, including stamp duty, Ali obtained a mortgage loan of $464,000 (J [40], [448]), a loan of $50,000 from Orlando and Vilma (J [450]), and paid the balance from his own savings: J [453]. Ali resided in the Bardwell Property from completion of the purchase.

On 11 December 2002, Ali signed a contract for the sale of the Bardwell Property to Orlando. On 21 January 2003, the contract was completed, and on 11 February 2003, Orlando became the registered proprietor of the Bardwell Property: J [92]. Orlando obtained a loan of $500,000, secured by a mortgage over the Bardwell Property, and paid out the amount owing under Ali’s mortgage (which was discharged on 11 February 2003). He did not pay any money directly to Ali for the Bardwell Property: J [110]-[111].

After Ali transferred the Bardwell Property to Orlando, he continued to live in the Property without paying any rent: J [121].

In 2004, Orlando refinanced the Property, taking out a new loan of $670,000 and using the proceeds to discharge the existing mortgage: J [126]. In January or February 2015, Goodman Court became the registered proprietor of the Bardwell Property: J [325]. Goodman Court was associated with the family of Mr Sam Cassaniti, who was the accountant for the Fonseca family and their related entities between about July 2008 and about late 2012 or mid-2013: J [313]. Mr Cassaniti was also a consultant for Reliance Financial Services Pty Ltd (“Reliance”), which facilitated short-term loans: J [313].

On 2 July 2010, Fonseca family members and various entities (collectively “the Clients”) entered into a Deed of Retainer and Loan with Reliance and Armstrong Scalisi Holdings Pty Ltd (“ASH”) as trustee for the ASH Discretionary Trust trading as CAP Accounting, pursuant to which they granted a charge over any real property owned by them to secure substantial sums of money then owing to Reliance and CAP Accounting. In June 2014, the Clients entered into a Deed of Release with ASH as trustee for the ASH Discretionary Trust and Reliance, by which they agreed to transfer the Bardwell Property to Reliance, and Reliance and ASH would receive the difference between the value of the Property and the amount secured by the mortgage over the Property at the time: J [321]. By the time of entry into the Deed of Release, Orlando and Vilma were discharged bankrupts, and Jeffrey was still in bankruptcy (Joselyn was also declared bankrupt, but the bankruptcy was annulled): J [316]-[319].

In early March 2015, Goodman Court wrote to “The Occupier” of the Property, being Ali and his wife, Laura. Goodman Court signalled its intention to commence proceedings for possession unless an agreement could be reached for the occupants to vacate within a reasonable period of time: J [326].

On 28 May 2015, Ali commenced the proceedings in the Equity Division: J [358]. The Court was informed that as at the hearing of the appeal, Ali continued to live in the Bardwell Property.

In light of the arguments that the appellants advance on the appeal, it is necessary to identify with some precision the appellants’ claims in so far as they remain relevant to the appeal.

The appellants alleged that in or about November 2002, Orlando made an oral offer to Ali, which he accepted and which the primary judge referred to as the “alleged November 2002 agreement”: J [95]. As pleaded, Orlando’s offer was that if Ali transferred title of the Bardwell Property to Orlando, Ali could continue living in the Property without charge and Orlando would eventually transfer title back to him. In the meantime, Orlando would organise to borrow money secured against the Bardwell Property, pay out Ali’s mortgage, and hold the property on trust for Ali until title was transferred back to him. Ali accepted this offer either orally or by conduct (the conduct comprising the transfer of the Bardwell Property to Orlando).

The appellants pleaded that the alleged November 2002 agreement created an express trust in relation to the Bardwell Property. They further alleged that in September 2009, Orlando acknowledged that he held the Bardwell Property on trust for Ali. In the alternative to an express trust, the appellants contended that the Bardwell Property was subject to a resulting trust. They claimed that Ali’s transfer of the Bardwell Property occurred without consideration or without good consideration, meaning that Orlando received the property as a volunteer. The appellants alleged that this gave rise to a presumption that Orlando held the Bardwell Property on a resulting or implied trust for Ali. The appellants further claimed that Ali had the intention of retaining the beneficial ownership in the Bardwell Property.

The appellants pleaded that in breach of trust, Orlando transferred the Bardwell Property to Goodman Court, to discharge debts secured against certain properties owned by the Fonseca family. The appellants claimed a constructive trust over the benefits that Orlando and other members of the Fonseca family obtained as a result of the removal of the mortgages from properties that they owned directly or indirectly.

The primary judge noted that the appellants’ resulting trust claim evolved over the course of the hearing: J [362]. In light of the evidence that, on settlement, Orlando had paid out the amount owing under the loan that Ali had taken out when purchasing the Bardwell Property in 2001, the appellants accepted that they could not maintain that the Property was transferred “without consideration”: J [365]. What they then contended was that there was no consideration for the transfer of “Ali’s equity”: J [365].

The primary judge noted that, in oral closing submissions in reply, “the plaintiffs referred to what was described as a ‘false consideration principle’, relying on Wirth v Wirth (1956) 98 CLR 228”. The consideration was “false” because Ali received no part of the purchase price identified in the contract of sale, other than the amount that Orlando paid directly to the mortgagee to discharge Ali’s mortgage: J [366]. Her Honour permitted the appellants to advance this claim over the respondents’ objection: J [367]. Her Honour also permitted the respondents to rely on s 44 of the Conveyancing Act in answer to this claim, over the appellants’ objection: J [368].

The respondents denied the alleged November 2002 agreement and the existence of an express trust. They also denied that a resulting trust had come into existence. The respondents contended that Ali acquired the Bardwell Property in 2001 pursuant to an agreement that Orlando and Ali made in September 2001, which her Honour referred to as the “alleged September 2001 agreement”: J [58]. Ali’s transfer of the Bardwell Property to Orlando in February 2003 allegedly accorded with the purported terms of that agreement. The respondents also relied on the purchase price stated in the contract as evidence of consideration, and contended that the evidence pointed to the parties having made various adjustments to that price before settlement: J [381].

As noted above, it was common ground on the pleadings that Ali opened the CD Account with Westpac in or about September 2009, and that he was the sole signatory to that account. The appellants alleged, and the respondents admitted, that during the period between September 2009 and November 2012:

The appellants alleged, and the respondents admitted, that no entity of which any member of Orlando’s family was a director, secretary, shareholder or trustee, was authorised to withdraw money from the CD Account.

The appellants also alleged that Jeffrey, Orlando and Mr Duran, and such other persons as withdrew money from the CD Account, were not authorised by Ali to withdraw money. The respondents denied those allegations. Specifically in relation to the allegation that Mr Duran was not authorised to withdraw money from the CD Account, the respondents pleaded as follows:

The primary judge footnoted this paragraph of the Further Amended Defence when characterising the respondents’ case as involving a positive contention “that Jeffrey and Orlando were authorised by Ali, to make withdrawals from the CD Account”: J [403]. Her Honour also understood the respondents to deny that the withdrawals were made for an unauthorised purpose, citing a paragraph of the Further Amended Defence which addressed an element of the appellants’ unconscionability claim: J [403]. Her Honour’s characterisation of this pleading is in issue on the appeal.

The appellants alleged that the money withdrawn from the CD Account was stolen by one or more of Jeffrey, Orlando, Mr Duran and other persons (on the instructions of Orlando or Jeffrey) and, on being stolen, became trust money. They claimed that the respondents were liable to Cleaning Doctor by way of a trust, by damages and by way of an account in common form. As the primary judge noted at J [393]:

The appellants further alleged that where the stolen money “was received for the use or benefit of the [respondents], that money is payable by the recipient thereof to the Cleaning Doctor as money had and received by the [respondent/s] to the use of the Cleaning Doctor”. Her Honour described this claim as “a restitutionary claim on the basis that the [respondents] have been unjustly enriched by receiving the allegedly stolen moneys”: J [394].

Finally for the purposes of the appeal, the appellants alleged that in so far as the stolen money was obtained by the cashing of cheques, Jeffrey and Orlando converted those cheques to their use and/or the use of other respondents. The primary judge summarised this aspect of Cleaning Doctor’s claim as follows at J [396]:

The respondents denied all of these allegations. In their closing written submissions, the respondents relied upon s 18(1) of the Cheques Act as giving rise to a presumption that Orlando had authority to complete the blank cheques in any way he saw fit unless Cleaning Doctor proved otherwise. When Cleaning Doctor objected to this submission on the basis that it was not pleaded, the respondents sought leave to amend their Further Amended Defence: J [408]-[409]. Her Honour’s refusal of leave to amend is the subject of the respondents’ cross-appeal.

In their closing submissions in support of the Bardwell Property claim, the appellants relied on a series of matters that they characterised as “objective facts”, describing some as “critical” and others as “non-critical”: J [439]. Her Honour summarised those facts at J [440]:

The respondents, on the other hand, submitted that the Court should make the following findings on the evidence, which her Honour set out at J [441]:

The appellants submitted that either Ali’s version or Orlando’s version of the Bardwell Property transactions must be accepted, as there was no other rational explanation for the unclaimed shortfall in the price that Orlando paid for the Property in 2003. The respondents contended that the Court was not so bound.

As noted above, the appellants’ claim relied on the fact of Ali’s purchase of the Bardwell Property. Orlando, on the other hand, relied on the circumstances that he claimed surrounded that purchase so as to explain Ali’s subsequent transfer of the Bardwell Property to him.

Orlando’s evidence regarding the alleged September 2001 agreement was that it arose in a conversation between him and Ali to the following effect:

Orlando gave evidence that, in accordance with the alleged September 2001 agreement, he negotiated the purchase price for the Bardwell Property. He also arranged for his solicitors, Hancock Alldis, to act for Ali on the purchase. Ali accepted that Orlando paid the solicitors’ bill, and gave evidence that he did not have anything to do with Hancock Alldis. However, he denied the existence of the alleged September 2001 agreement. Ali’s evidence was that Orlando encouraged him to buy the Bardwell Property and offered to arrange the solicitors. Ali also ultimately accepted that Orlando had also contributed some funds towards the purchase price: J [450].

The primary judge rejected the alleged September 2001 agreement (J [459]). In doing so, her Honour relied on a number of matters including the following:

Her Honour concluded that Orlando’s evidence about the alleged September 2001 agreement was “a lie invented after Jeffrey’s first affidavit was served in these proceedings to manufacture an explanation for the subsequent transfer of the Bardwell Property to Orlando in January 2003”: J [467].

The primary judge also rejected Orlando’s contention that he made the mortgage repayments on the Bardwell Property from the time of completion of Ali’s purchase in September 2001 until February 2003, consistently with the alleged September 2001 agreement. The evidence did not provide a sufficient basis for her Honour “to make any finding on the balance of probabilities about who made the mortgage repayments” in this period: J [463], [466]. It followed that the primary judge also did not accept Ali’s evidence that he had made those mortgage repayments.

Central to Ali’s claim of an express trust with respect to the Bardwell Property was the “alleged November 2002 agreement”. His evidence was that from as early as 1998, Orlando had been suggesting that they go into partnership. Shortly after Ali bought the Bardwell Property, Orlando increased the frequency with which he made this suggestion, also suggesting that if Ali transferred the Bardwell Property to him they could borrow against it and expand the business.

Ali gave evidence of the conversation giving rise to the alleged November 2002 agreement in his affidavit of 27 May 2015. The primary judge summarised Ali’s evidence of Orlando’s proposal, to which Ali said he agreed, as involving the following elements (at J [94]):

Orlando denied that he asked Ali to become his partner, and he denied that he made the above proposal to Ali: J [100]-[101]. He maintained that the genesis of his dealings with Ali regarding the transfer of the Bardwell Property in 2003 was the alleged September 2001 agreement (see [75] above): J [101]. As noted above, her Honour found that Orlando lied about the existence of this agreement; but the lie he told was unnecessary because Ali had “failed to prove that Orlando held the Bardwell Property on trust for him after the legal title was transferred to Orlando in January 2003”: J [468].

The primary judge described the following matters as “plain from the documentary evidence” (at J [471]):

Initially, Ali accepted that he signed the transfer but said that it was a document that Orlando arranged, and that the figure of $808,000 was not something he and Orlando worked out as between them. In a later affidavit, he said that the price was based on a market valuation obtained for stamp duty purposes. Then, in cross-examination, Ali said that he had not seen the price on the contract that he signed, and he denied that Hancock Alldis acted for him on this transaction, saying that he was not involved in getting Hancock Alldis to do anything and he did not pay their fees.

Her Honour rejected Ali’s denial of Hancock Alldis acting for him as vendor. Her Honour noted that Hancock Alldis was named on the contract as the solicitor for both the vendor and purchaser, and found it inherently unlikely that this would have happened if the solicitors were not satisfied that they had instructions from both parties. Further, in conducting the 2001 transaction, Hancock Alldis had taken care to record Ali’s instructions: J [472]. Her Honour described Ali’s evidence to the contrary as “uncorroborated, inconsistent with contemporaneous documents and inherently improbable”.

In light of her Honour’s findings regarding Ali and Orlando as witnesses, correspondence from Hancock Alldis took on particular significance. In a letter to Orlando the day after settlement, Hancock Alldis informed Orlando that at settlement “a total of $528,354.26 was calculated…as being due to the Vendors”. The letter referred to having enclosed the settlement sheet, which would have shown how that amount was calculated, but neither party tendered the settlement sheet in the proceedings: J [106]. The letter also enclosed a statement of account, which was in evidence. It identified $528,354.26 as the “Balance of purchase monies” due to the vendor. The statement of account also identified amounts payable on account of the solicitors’ fees, stamp duty, and transfer and bank cheque fees.

The statement of account also recorded a “Shortfall” of $58,078.51 between the sums payable on settlement and the available funds. Underneath this amount was written the following: “As per Mr Itawi’s written instructions we note that you will and Mr Itawi will deal with the shortfall of $58,078.51 between yourselves”. Ali denied giving any written instructions to this effect; I have referred to her Honour’s rejection of Ali’s evidence about Hancock Alldis at [86] above. Specifically in relation to the statement of account, her Honour observed that there was no evidence that Ali had disputed its accuracy at the time of settlement, his evidence being that he had received the document from Orlando at the time of the transaction: J [119], [475].

Her Honour considered that the existence of a shortfall was consistent with aspects of Ali’s evidence about various conversations he said he had with Orlando in the ensuing months and years in which he sought the rest of the purchase price: J [120]. Her Honour recorded one example of which Ali gave evidence, of a conversation in September 2009. The conversation is of more significance for the Cleaning Doctor claim, and was described by her Honour as “the September 2009 conversation”: J [148]. Relevantly for present purposes, however, Ali said that in the course of this conversation he told Orlando that he (Orlando) still owed him (Ali) “the rest of the purchase price on my house”. Orlando replied: “Yes. The business can’t afford to pay this at the moment. I agree it’s owed, though”: J [147].

Later in her Honour’s reasons, the primary judge described the existence of a shortfall, and Ali chasing Orlando for payment of it in the years following settlement, as “fundamentally inconsistent with all bases of Ali’s claim in these proceedings that Orlando held the Bardwell Property on trust for him”: J [505]. Her Honour characterised the appellants’ attempt to explain away these subsequent demands as “construing [the demands] in a manner that is entirely inconsistent with the plain language used in Ali’s evidence”, and “submitting that the Court should treat Ali’s evidence about the demands (one of the few matters about which he gave consistent evidence) as unreliable”: J [490]. Her Honour rejected the submission that the shortfall “was never paid (or asked for)” (emphasis in original): J [490].

On the basis of the letter from Hancock Alldis and the statement of account, “together with Ali’s evidence that he received that statement of account at the time [namely 22 January 2003]”, the primary judge found that Hancock Alldis:

Her Honour concluded that the evidence did not support the further “critical fact” on which the appellants relied, namely, that the purchase price was a “notional value” or “fictional”. Her Honour identified the evidence on which the appellants relied in this respect as follows (at J [486]):

Her Honour concluded that there was no basis for finding that the contract price of $808,000 “was not the starting point for the calculation undertaken by the solicitors acting for both parties”: J [478]. Ali’s evidence on this subject was inconsistent: J [487]. Orlando’s evidence was not of assistance because her Honour found it to be untrue, resting as it did on the alleged September 2001 agreement, the existence of which her Honour rejected: J [488]. As to the appellants’ failure to produce a valuation, her Honour did not consider that a meaningful inference could be drawn. Separately, her Honour considered that it was odd that the Court was being asked to draw that inference when it was inconsistent with Ali’s evidence: J [489].

Coming then to the further “critical fact” that Orlando “paid nothing for Ali’s equity”, her Honour found that the evidence did not support that finding. Her Honour stated at J [490] (footnotes omitted):

The appellants’ submissions in support of the notion that either Ali’s version or Orlando’s version of the Bardwell Property transactions had to be accepted were extracted as follows in J [491]:

Her Honour described this submission as misconceived (at J [492]), for three reasons:

Relevantly to the appellants’ arguments on the appeal, the primary judge did not accept that her rejection of the appellants’ contention that the Bardwell Property transfer was a “sham” involved drawing any inference in favour of the respondents: J [496]. Rather, her Honour described it as involving:

Her Honour then turned to the conflicting evidence about the transaction: J [498]. Her Honour rejected Orlando’s evidence that the Bardwell Property was transferred to him in accordance with the alleged September 2001 agreement: J [499]. Her Honour was also not satisfied on the balance of probabilities that Ali and Orlando entered into the alleged November 2002 agreement: J [504]. Her Honour noted that Ali’s evidence about the conversation in which that agreement was said to have been entered into was the only evidence on the subject (J [501]), which gave rise to the difficulties in accepting his evidence to which I have earlier referred. As to the terms of the alleged agreement, her Honour considered it “inherently unlikely” that Orlando would have agreed both to pay Ali the shortfall on the transfer of the Property and to transfer it back to him with the mortgage repaid: J [502]. Although Ali sought to explain the reference to this deferred shortfall, her Honour rejected the two bases on which he attempted to do so (which I will address below).

In so far as the appellants contended that Orlando’s subsequent conduct in obtaining loans secured against the Bardwell Property was consistent with the alleged November 2002 agreement, her Honour noted that the loans were taken out in August 2004 and July 2010. The timing of those loans pointed “overwhelmingly” to the conclusion that they had nothing to do with any plan by Orlando in November 2002. If further support for that conclusion were needed, the documents relating to the July 2010 loan established that it related to moneys owed by the Fonseca family and businesses to their accountant (see [53] above): J [510]. Her Honour also rejected the submission that Ali’s extensive renovations to the Property supported the conclusion that Orlando held the Property on trust for him, noting that his was the only evidence on the subject and there was no independent evidence before the Court as to the cost of the works: J [509].

Her Honour also addressed in this context a recorded conversation between Ali, Orlando and Laura from March 2015: J [506]. By way of background, Ali and Laura met with Orlando at his office in Peakhurst on 18 March 2015. It transpired that Laura recorded this conversation, and that Ali and Laura had a copy of the recording at all times after it was made: J [347]. Neither Ali nor Laura disclosed the existence of the recording until after they had both affirmed affidavits giving evidence of the meeting, and Orlando had affirmed a responsive affidavit disputing their respective accounts: J [330]-[333]. The recording was played in Court, and a transcript of the conversation, including those parts during which Orlando and Laura spoke in Spanish, was tendered. Her Honour set out large parts of the transcript of the conversation, on which the appellants relied, in her reasons at J [335]-[345].

Her Honour considered that the appellants relied “on highly selective extracts from the recording” in support of the claimed express trust. Read as a whole, her Honour considered that the passages that the appellants relied on did not support Ali’s contentions and were ambiguous when considered in context: J [506]. On balance, her Honour found that the transcript was “more consistent with Orlando’s evidence that he told Ali in the period after 2003” (J [508]):

Ali had also alleged that in September 2009, he and Orlando had a conversation which her Honour described as the “alleged September 2009 conversation”: J [148]. The alleged conversation is of more significance for the Cleaning Doctor claim, but it was also relevant to the Bardwell Property claim. I have set out above (at [89]) part of the alleged conversation, where Ali referred to Orlando owing him the rest of the purchase price for the Bardwell Property and Orlando acknowledged this, but said the business could not afford to pay.

In a later affidavit, Ali claimed that he had written up a document summarising the September 2009 conversation and caused Orlando, Vilma, Jeffrey and Joselyn to sign it. Ali subsequently deposed to having found the document, which her Honour called the “September 2009 Document”. Following the provision of a report from a handwriting expert called by the respondents, the appellants accepted that the signatures on the September 2009 Document were photocopied, and alleged that Jeffrey had done this, which Jeffrey strenuously denied. Her Honour ultimately rejected the “September 2009 Document”, on the basis that Ali had told a series of lies about it: J [512].

In circumstances where Ali had failed to prove the alleged November 2002 agreement on the balance of probabilities, her Honour concluded that there was no oral express trust over the Bardwell Property: J [516]. It also followed that Ali could not succeed on his alternative claims that Orlando held the Bardwell Property on trust for him pursuant to an implied or resulting trust: J [517].

As to the claim of a resulting trust based on Ali receiving no consideration for his “equity”, her Honour rejected this claim. Noting that “Ali’s equity” was not something that was transferred separately from the title to the Bardwell Property, her Honour concluded that Ali had, in any event, not established that the discharge of the 2001 mortgage was the only consideration moving from Orlando: J [523]. As to the further claim of a resulting trust based on “false consideration”, her Honour concluded that the appellants’ reliance on the judgment of Dixon CJ in Wirth v Wirth (1956) 98 CLR 228; [1956] HCA 71 was misplaced. Her Honour considered that the consideration of $808,000 was not “false consideration” in the sense referred to by Dixon CJ in that case, stating at J [526]:

In light of these conclusions, her Honour did not consider it necessary to address the respondents’ argument regarding s 44 of the Conveyancing Act: J [527]. It was also unnecessary to address the appellants’ submissions concerning constructive trusts and tracing remedies: J [530].

There was no dispute that Ali signed all of the cheques in the first cheque book and left it, and the signed debit card, with Orlando. Ali also signed all of the cheques in two further cheque books.

As her Honour noted, the documents in each cheque book were not unconditional orders to pay “unless and until the sum certain to be paid was completed”: J [537]. Although by delivery of the signed blank documents Ali “plainly authorised Orlando to complete the documents so as to create ‘cheques’ within the meaning of the Cheques Act”, it was the scope of Orlando’s authority that was in dispute: J [537]. Her Honour stated in this context at J [538]-[539]:

As to Cleaning Doctor’s claim in conversion in respect of the cheques, her Honour stated that it required Cleaning Doctor to establish that it had an immediate right to possession of the cheques, and that Orlando and/or Jeffrey acted in a manner repugnant to that right by presenting each completed cheque to the bank. The immediacy of Cleaning Doctor’s right to possession also turned on the scope of the respondents’ authority to complete the cheques and whether they acted outside that authority in completing each cheque: J [540].

Her Honour noted that the case was “most unusual”, in the sense that “the parties’ competing claims about the scope of the authority conferred on Orlando and Jeffrey were based on the uncorroborated evidence of Ali on the one hand and Orlando and Jeffrey on the other”, in circumstances where the evidence of those witnesses suffered from the difficulties to which I have already referred at [35] above: J [552].

According to Ali, Orlando suggested in the alleged September 2009 conversation that there should be an agreement between a company of which Ali was a director (which Orlando suggested be called “the Cleaning Doctor”) and Orlando’s cleaning business. Both would have an equal share in the business, provided Ali came to work for Orlando; and Ali’s mortgage would still be paid (referring to the mortgage over the Bardwell Property). When Ali asked “How will the 50:50 work”, Orlando is said to have replied:

Orlando denied the alleged September 2009 conversation. He denied that Ali was entitled to half of Cleaning Doctor’s profits, or that the purpose of the bank account was to save money to pay down the mortgage on the Bardwell Property. His evidence was that in a conversation with Ali in September 2009, they had the following exchange:

Orlando claimed that after Cleaning Doctor was established, he had a further conversation with Ali to the following effect:

Ali denied that the further conversation with Orlando about the CD Account occurred, and instead gave evidence that he and Jeffrey went to the Menai branch of Westpac, where Jeffrey introduced him to a teller at the bank and waited for him to open the CD Account. Ali also gave evidence that Jeffrey told him to get a cheque book and to sign all of the cheques, “so that way when we need to pay your mortgage, my father or I can just fill out the cheque and we’ll get the money out of the Cleaning Doctor’s account to pay your mortgage”.

Jeffrey denied Ali’s evidence about the visit to the bank, and denied that he suggested to Ali that he sign all of the cheques, or that this would facilitate him or Orlando paying the mortgage on the Bardwell Property. Jeffrey accepted that he had accounts at the Menai branch of Westpac and was known to the staff (whereas Ali had a company account open at UNSW), but denied that the branch was chosen because it would be easy for him to draw large sums on the CD Account using cash cheques.

Orlando’s evidence was that between September 2009 and October 2012, he continued receiving workers’ time sheets from Ali, and he would calculate the pay for Ali’s workers and Ali, but instead of paying the money to Ali’s bank account, he would transfer it into the CD Account. Jeffrey said that he received permission to withdraw money from the CD Account from his father. Ali denied authorising cash withdrawals from the CD Account to pay workers, and denied authorising any withdrawals from the CD Account for any purpose other than to pay the mortgage on the Bardwell Property: J [231], J [250].

Before addressing the merits of the appellants’ claims regarding the CD Account, her Honour noted a number of matters relevant to those claims that were revealed by the evidence “considered as a whole”: J [270]. Those matters included:

As a preliminary matter, the primary judge rejected the premise of Cleaning Doctor’s claim in respect of the $2,695,078.51 allegedly “stolen” from its bank account, that it was the legal and beneficial owner of that money. Her Honour noted that the money deposited in the account became the property of the bank, meaning that Cleaning Doctor’s proprietary interest was “a chose in action, being the right to recover from the bank on demand a sum equivalent to the amount standing to the credit of the account at any given time”: J [532]. It was on this basis that her Honour rejected the claim in conversion relating to the “notes or coins withdrawn” from the CD Account, which is not the subject of appeal: J [541].

The primary judge rejected the appellants’ submissions that the authority conferred on Orlando and Jeffrey was limited to the purpose of making repayments under the Bardwell Property mortgage: J [544]. First, the only evidence of the respondents making payments into the CD Account which represented Cleaning Doctor’s share of profits from a partnership was “the uncorroborated evidence of Ali”, which her Honour did not accept: J [545]. Her Honour noted in this context that there were no accounts or tax returns prepared for Cleaning Doctor or the alleged partnership: J [545]. Ali gave some evidence of workbooks in which he said he had recorded the amounts of invoices that the Fonseca businesses had issued during the period of the alleged partnership with Cleaning Doctor, but this “did not rise above the level of bare assertion” and was admitted subject to a limiting order: J [546]. The expert accounting evidence on which the appellants relied involved a calculation for a period extending beyond that during which deposits were made into the CD Account, and assumed a profit margin that the appellants failed to prove: J [546].

Second, her Honour found it “inherently improbable that Ali would have signed blank cheques for the CD Account in order to facilitate cash withdrawals from that account by Orlando in order to pay the Bardwell Property mortgage”: J [547]. The level of trust that required was inconsistent with Ali’s evidence that by September 2009 he did not trust Orlando. If Ali had understood that money in the CD Account would be used to pay the Bardwell Property mortgage, it was “inherently probable” that he would have made those payments electronically into Orlando’s account or required Orlando to use the online access to make those payments electronically: J [547].

Third, her Honour found it inherently implausible that Ali believed that an initial cash withdrawal of $36,320 that he made and handed to Jeffrey, in denominations as small as $5 and $10, was being withdrawn to pay the Bardwell Property mortgage: J [548]. Fourth, her Honour considered the timing of the opening of the CD Account, which did not coincide with any relevant change in Ali’s role or involvement in the work at UNSW: J [549]. The fifth matter on which her Honour relied was as follows (at J [550]):

In support of this conclusion, her Honour referred to the matters she drew from the evidence, and to which I have referred at [117]. Additionally, her Honour relied on:

At the same time, her Honour concluded that the evidence did not support a finding that Orlando and Jeffrey made withdrawals from the CD Account to pay workers’ wages, referring to the absence of tax invoices in so far as deposits by Clean & Clear were concerned, and noting that there was no explanation for the deposits made by Crew Hire and Link. However, it did not follow from the respondents’ failure to prove the authority on which they relied for most of the withdrawals, and which they claimed in their evidence was expressly conferred on them in conversations between Orlando and Ali, that the Cleaning Doctor claim succeeded. Her Honour stated at J [552]:

Her Honour had earlier stated in this regard, at J [543]:

Her Honour noted that she had not relied on certain provisions of the Cheques Act on which the respondents had sought leave to rely: J [554]. Those provisions concerned the presumption of authority of a holder of a cheque to complete cheques signed by the drawer and delivered to the holder (s 18(1)), the presumption that the drawer of a cheque has received valuable consideration for the cheque (s 36), and the liability of the drawer of a cheque to a holder (s 71(1)(a)). Her Honour described those matters as irrelevant to the central issue in dispute (namely, the scope of the respondents’ authority to complete the cheques and present them to the bank). Accordingly, her Honour declined to grant leave to the respondents to amend their Further Amended Defence to rely on those provisions of the Cheques Act: J [554]-[559].

There is no challenge to the primary judge’s rejection of the evidence of Ali or Orlando, with her Honour having concluded that they were thoroughly unimpressive witnesses who lied to serve their respective interests. Instead, the appellants take that rejection as the starting point for their submissions on appeal, contending that her Honour’s conclusion should have led to a different result on both the Cleaning Doctor claim and the Bardwell Property claim:

Although the appellants maintained their claim for an express trust on the Bardwell Property appeal, it was not the focus of their submissions. The success of that claim would require this Court to overturn the primary judge’s disbelief of Ali’s evidence regarding the alleged November 2002 agreement. Senior Counsel for the appellants acknowledged as much during the hearing.

The contract for the sale of the Bardwell Property between Ali as vendor and Orlando as purchaser stated a purchase price of $808,000. The appellants submitted that if the outgoing mortgage balance that was discharged in Ali’s favour was subtracted from that amount, it left an “unclaimed shortfall” of $293,000. That shortfall could not be explained by any rational consideration of the evidence adduced at the hearing, with the only reasonably available conclusion being “that the 2003 sale was a sham”.

The appellants made the same argument to the primary judge. In addressing the contract, which was prepared by Hancock Alldis and was stamped on the basis that the contract price was $808,000, Senior Counsel submitted the following to her Honour in closing submissions:

In support of their submission as to the evidence of both Ali and Orlando, the appellants relied on Orlando’s affidavit of 8 September 2017, in which he gave evidence of a conversation with Ali in 2002 about transferring the Bardwell Property back to him (see [76] above) and stated that he did not pay the amount of the purchase price to buy the house. They also relied on the responses Orlando gave in cross-examination about the shortfall amount, based on the contract price. Orlando did not accept that this amount was owing to Ali, stating “…because the valuation come in for $800,000, we have to pay this sum, $800,000. Why I have to give you the difference to [Ali] when the properties was belong to me before?” There was then the following exchange:

The appellants submitted that the respondents’ closing submissions were not consistent with this evidence, instead taking the contract price as the starting point and submitting that various adjustments were made to that price before settlement (see J [381]). They submitted that Orlando’s evidence was consistent with Ali’s evidence, that no money flowed to him from Orlando in 2003 and that the contract was a sham.

This characterisation of the contract was supported, the appellants submitted, by her Honour’s rejection of Orlando’s evidence regarding the alleged September 2001 agreement, with her Honour finding that Orlando had lied to explain the 2003 transfer (J [467]). The appellants contended that her Honour should have concluded that the lie constituted recognition on Orlando’s part that his case was unfounded. In their written submissions, the appellants submitted that rejection of this evidence supported the contrary inference of the existence of the trust for which Ali contended (whether resulting or express). In oral submissions, however, Senior Counsel refined this argument, describing Orlando’s lie as supporting the transaction being a sham (as otherwise Orlando would not have needed to lie about it), referring to the reasons of Meagher JA in Tobin v Ezekiel (2012) 83 NSWLR 757; [2012] NSWCA 285 at [100]-[102].

The appellants submitted that in circumstances where both Orlando and Ali gave evidence that the unclaimed shortfall was not paid, the primary judge could not find that there was a legitimate sale of land contract. The finding that there was a legitimate sale contract necessarily involved a missing shortfall which the evidence could not answer. Senior Counsel put the point orally as follows:

The appellants further submitted that contrary to her Honour’s conclusion that there was no basis for finding that the contract price was not the starting point for the calculation that the solicitors undertook (at J [478]), there was nothing to support that figure being anything other than notional apart from the sale of land contract itself. In so far as the primary judge relied on the contract and the statement of account prepared by Hancock Alldis, they also challenged her Honour’s rejection of Ali’s evidence that the solicitors acted only on Orlando’s instructions.

Although the appellants now submit that it was open to her Honour to reject the evidence of both Ali and Orlando, they submitted below that it was necessary for her Honour to choose one or other of their accounts in order to provide a rational explanation for what the evidence disclosed. The starting point for that contention was, as Senior Counsel put it in closing oral submissions, “that the purported transaction of November 2003 cannot be a legitimate transaction on the evidence”.

The evidence of both Ali and Orlando about the circumstances surrounding the transfer of the Bardwell Property was, to use Counsel for the respondents’ description, “all over the place”. There is no challenge to the primary judge’s conclusion that neither Ali nor Orlando were witnesses of truth, and that she could not accept their evidence unless it was inherently probable, corroborated by a contemporaneous document or the evidence of a reliable witness, or contrary to their respective interests: J [430].

Critically, however, Ali bore the burden of proof. As her Honour observed in an exchange with Counsel for the respondent in closing submissions, her Honour had to have “a sense of actual persuasion of the matters that the [appellant] contends about which he bears the onus and if I don’t have that sense of actual persuasion, after taking into account all of the relevant evidence, then that onus by [scil. may] not be discharged”. Her Honour extracted in her reasons the passage to this effect from the reasons of Hammerschlag J in John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 at [95]-[96], describing it as “relevant to assessing the evidence given by Ali and Orlando about the basis or terms on which Ali transferred the Bardwell Property to Orlando in January 2003”: J [417].

As to the express trust, the appellants’ case rested on the terms of the alleged November 2002 agreement: J [360]. Not only was Ali’s evidence about that alleged agreement uncorroborated, it was also internally inconsistent, including as to whether Orlando was responsible for making the mortgage repayments, and what he understood Orlando meant when he said, in the course of the conversation of which Ali gave evidence: “I’ll also pay you [Ali] the shortfall on the transfer of the property, but I’ll need five years for that”: J [420]. As to the latter, her Honour had earlier set out a lengthy passage from Ali’s cross-examination on this topic (at J [96]), and made the following observations at J [97]-[98]:

Returning to those divergent explanations at J [503], her Honour rejected both of them, the first because it was “so implausible as to be fanciful”, and the second because it was inconsistent with other aspects of Ali’s evidence and with objective evidence about the amount of the loans secured against the Bardwell Property. Her Honour observed in this context that “[t]he stark inconsistency between the two alternative explanations advanced by Ali in this part of his cross-examination revealed a willingness to make things up as his evidence unfolded in the witness box if he thought it would assist his case”.

Ali’s account of the alleged November 2002 agreement was not assisted by the recorded March 2015 conversation. As was the case below, the appellants relied on parts of that conversation on the appeal, the import of which did not unequivocally support Ali’s evidence on the terms of the alleged November 2002 agreement. Her Honour made no error in concluding that, considered as a whole, what she described as an “ambiguous, rambling discussion at the meeting” did not support Ali’s account: J [506]-[508].

Her Honour’s rejection of the alleged November 2002 agreement was the product of assessing Ali’s evidence on the subject, together with her more general observations of his performance as a witness: J [504]. Although the appellants maintained the express trust argument on appeal, they did not advance arguments in relation to the alleged November 2002 agreement that would fall within the limited circumstances in which findings based on credibility assessments may be found to be erroneous: see Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [28]-[29] per Gleeson CJ, Gummow and Kirby JJ; Lee v Lee (2019) 266 CLR 129; [2019] HCA 28 at [55].

Her Honour’s finding that Hancock Alldis acted for Ali and Orlando, which the appellants challenge on appeal, cannot be disaggregated from her Honour’s findings regarding Ali’s credibility, noting that her Honour expressly referred to those findings in rejecting Ali’s evidence to the contrary at J [472]. I have referred above to her Honour’s description of Ali’s evidence as “uncorroborated, inconsistent with contemporaneous documents and inherently improbable” (at [86]). The four reasons that the appellants advanced in their written submissions do not call for the contrary conclusion.

The first reason that the appellants advanced was that it was “inherently improbable” that Hancock Alldis would have acted for Ali when about a year earlier they had sent him threatening letters, on behalf of Vilma, claiming a mortgage over the Bardwell Property. That improbability does not follow as a matter of logic, noting that the issue of acting for both parties would raise questions of professional responsibility which a court would not lightly find were ignored. The appellants did not directly allege dereliction in that regard, although their second reason approached it. By their second reason, the appellants submitted that her Honour’s finding involved a presumption that the solicitors were “thorough and careful”, which was not supported by the errors in the cover sheet of the contract. Again, it does not follow from errors in a cover sheet that solicitors would have committed the serious professional error that is implicit in this reason. I note in this regard that although the cover sheet recorded the firm as acting for both vendor and purchaser, it provided two different solicitor references, suggesting that the solicitors were careful (a conclusion that her Honour also reached in terms of their recording Ali’s instructions regarding his 2001 purchase of the Property: J [472]).

The third reason, that Orlando paid the legal fees, is neutral, particularly in light of Orlando having paid Hancock Alldis’ fees on Ali’s purchase of the Property in 2001 and Ali did not dispute that the firm acted for him on that transaction (a matter to which her Honour also referred at J [472]). The final reason was that her Honour’s rejection of Ali’s evidence that Hancock Alldis were not his lawyers effectively required him to prove a negative, which was “a burden that should not ordinarily be placed on a party”. That reason is misconceived, in circumstances where Ali advanced the evidence about the solicitors not acting for him in the context of explaining a contemporaneous document prepared by the solicitors, being the statement of account, which referred to him having provided them with written instructions. As her Honour noted, it was only in cross-examination that Ali said for the first time that he had not given any instructions to Hancock Alldis about the “shortfall” referred to in that document: J [119].

The appellants’ contention as to a resulting trust rested on the proposition that the transfer of the Bardwell Property in January 2003 was not a legitimate sale and that Orlando had taken a transfer of the Property for false consideration (at least in respect of part of the Property), relying on Dixon CJ in Wirth v Wirth. His Honour there stated at 236-7:

As the primary judge observed at J [525], it is clear from this passage that the reference to “false consideration” is “a reference to a consideration that is expressed in a contract or transfer notwithstanding that the parties intend that no consideration will move from the transferee” (emphasis in original). Her Honour concluded that this was not such a case because the consideration of $808,000 was not false consideration in the sense referred to by Dixon CJ: J [526]. The appellants took issue with her Honour’s conclusion on the basis that it was no party’s evidence that the amount of $808,000 would actually be paid.

Her Honour accepted “on the basis of the evidence of Ali and Orlando”, about which there was “no dispute”, that the proceeds of the 2003 mortgage funded the discharge of the 2001 mortgage “and that Orlando did not pay any additional money directly to Ali at the time of settlement”: J [473]. However, it did not follow, as was central to the appellants’ case, that having regard to the contract price of $808,000 there was a significant “apparent shortfall” of which Orlando had taken the benefit of as a volunteer: see Bosanac v Commissioner of Taxation (2022) 96 ALJR 976; [2022] HCA 34 at [104]-[106], [110] ("Bosanac”); Calverley v Green (1984) 155 CLR 242; [1984] HCA 81.

In Bosanac, Gordon and Edelman JJ, citing Lord Diplock in Pettitt v Pettitt [1970] AC 777 at 823, noted that the first step in determining the existence of a resulting trust is the objective factual inquiry of ascertaining the parties’ words or conduct at the time of the transaction or so immediately thereafter as to constitute part of the transaction: at [106]; [111]; [113]. Without the evidence of either Ali or Orlando being accepted, the “critical facts” on which the appellants relied were the “notional value” of the Bardwell Property and the lack of consideration for “Ali’s equity”. In the court below, Ali’s account had been the basis on which those matters could be explained. Senior Counsel had submitted that Ali’s evidence was “the only explanation that reconciles the shortfall and the transcript evidence”.

Her Honour found that the appellants had not established either of those objective facts, leaving no basis for any presumption of resulting trust to operate. As to the notional value, her Honour considered, correctly, that making a finding that the $808,000 was not the starting point for the calculations that Hancock Alldis undertook invited speculation: J [478]; J [496(1)]. The appellants sought “to narrow the speculation” that was inherent in the underlying argument by reference to three possibilities, the most likely of which was that the sale of land contract was a sham and the calculation of the balance of purchase monies was wrong because Orlando had not told the solicitors the truth: J [478]-[483]. However, that explanation remained speculative, and her Honour properly rejected it, including on the basis that the appellants were unable to identify any rational reason as to:

The latter point was of key significance to her Honour. An amount payable by Orlando to Ali pursuant to the 2003 transfer, and a shortfall payable after settlement was:

As the primary judge observed, in an exchange with Ali’s Counsel below:

Although the appellants submitted that “the solicitors were [never] told that there was a sum owing that was greater than the settlement sum”, the primary judge had before her the contemporaneous statement of account that they had prepared indicating that at settlement there was a “Balance of monies payable” of $528,354.26. True it is that there was no indication of how that amount had been calculated. However, as her Honour noted, neither Orlando nor Ali raised any issue with its accuracy, or with the notion that moneys were payable by Orlando to Ali in excess of the amount required to pay out the 2001 mortgage J [475], [490]. Nor, as her Honour had earlier noted, did Ali dispute the accuracy of the annotation that he had provided written instructions on the “shortfall” of $58,078.51: J [477]. The appellants also submitted that her Honour had misstated some of the evidence given by Vilma. However, her Honour correctly referred to Vilma’s evidence that the record of deposits made into Ali’s account was incomplete. Counsel for the respondent had advanced that submission in closing in more general terms.

As to the objective fact of there being no consideration for “Ali’s equity”, this was explained in the following exchange which took place in closing submissions before the primary judge:

As her Honour observed, it was necessary for Ali to prove that the discharge of the 2001 mortgage “was the only consideration moving from Orlando for the transfer of the Bardwell Property”. Her Honour found that he failed to do so: J [523]. One difficulty with the appellants’ case on consideration, which was put to Senior Counsel in the course of the appeal hearing, was that it entailed Orlando borrowing $500,000 to discharge a mortgage over a property in which he was to have no beneficial interest. In circumstances where her Honour did not accept the uncorroborated accounts of either Ali or Orlando (J [496(4)]), aspects of the evidence, such as this, were simply left unexplained.

Her Honour did not err in concluding that Ali did not discharge the burden of proof necessary to establish that Orlando held the Bardwell Property on trust for Ali. It follows that her Honour also did not err in failing to find that Orlando’s transfer of the Property to Goodman Court to secure releases of mortgages over properties belonging to the Fonseca family impressed those properties with trusts in Ali’s favour. Grounds 1 and 2 of the Amended Notice of Appeal should be dismissed.

Having reached this conclusion, it is not necessary to consider the points that the respondents sought to raise on the notice of contention concerning s 44 of the Conveyancing Act and the proper construction of the agreements that the Fonseca “Clients” (defined at [54] above) entered into with Goodman Court.

The appellants took issue with the primary judge’s understanding of the respondents’ defence of Cleaning Doctor’s claims in J [543], which I have set out at [124] above. Her Honour there rejected Cleaning Doctor’s submission “that its claims must succeed if the [respondents] fail to establish on the balance of probabilities that they were entitled to withdraw from the CD Account for the purpose of paying workers’ wages, and that the withdrawals were in fact made and the money withdrawn was in fact used for that purpose”. The primary judge so concluded on the basis that the respondents also claimed that general authority was conferred by Ali, in signing and delivering blank cheques and the signed debit card. The appellants submitted that apart from the belated attempt to rely on the Cheques Act, the respondents advanced a single claim of limited authority by way of confession and avoidance. In so doing, the appellants submitted, the respondents implicitly conceded that they did not have general authority.

The appellants submitted that, the respondents having limited their defence in this way, and the primary judge having rejected it, their claim should have succeeded. Focusing on Cleaning Doctor’s claim for money had and received, the appellants submitted that it was only necessary for Cleaning Doctor to prove that Orlando and Jeffrey withdrew money from the CD Account. The respondents then had the “persuasive burden of proof” of establishing that they were authorised to take it, or that it was not inequitable for them to retain it. It was not for Cleaning Doctor to prove the negative proposition that Orlando and Jeffrey were not authorised to withdraw money from the account. The appellants relied in this context on statements of principle in Sino Iron Pty Ltd v Worldwide Wagering Pty Ltd (2017) 52 VR 664; [2017] VSC 101 at [276]; Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560; [2014] HCA 14 at [66], and Finlay v Silcon Industries Pty Ltd [2003] SASC 236 at [96]-[97].

Instead, her Honour concluded, wrongly in the appellants’ submission, that Cleaning Doctor had failed to discharge its onus of proving that the withdrawals from the CD Account were made without authority: J [553]. In so doing, her Honour referred back to J [403], where she relied on [4] of the Further Amended Defence in support of the respondents’ advancing a positive contention “that Jeffrey and Orlando were authorised by Ali, to make withdrawals from the Cleaning Doctor Account”. The appellants submitted that her Honour erred in this respect, because the allegation in the Further Amended Statement of Claim to which [4] of the Further Amended Defence was responsive said nothing about Orlando and Jeffrey withdrawing the funds. Where the Further Amended Statement of Claim made those specific allegations, the respondents did not positively allege authorisation; and they otherwise ran their case on the basis of limited authority. If Orlando and Jeffrey had sought to plead and run a general authority case, they would have been extensively cross-examined on the issue.

In support of their argument, the appellants relied on the ex tempore reasons the primary judge gave in allowing them to reopen and tender further evidence from Orlando’s affidavit of 8 September 2017. The evidence in question was two sentences in [70] of that affidavit. In the first of those sentences, Orlando stated that he was authorised to withdraw money from the CD Account “because the money that was put into that bank account came from Clean & Clear and was put there for the purpose of paying wages to the subcontractors”. In the second of those sentences, Orlando referred to Ali’s awareness of the arrangement because of their conversation about setting up the account, to which he referred at [51]-[53] of the same affidavit and as to which he gave the further evidence in his affidavit of 18 September 2018 (see [113] above).

In granting leave to the appellants to rely on this evidence, the primary judge observed that it “carries some additional probative value because it is arguably an admission that the sole basis of his claimed authority to withdraw money from Cleaning Doctor’s bank account was to pay wages to subcontractors”. Her Honour considered that to be “directly relevant to the question about whether withdrawals from the [CD Account] that [Jeffrey] has admitted making in order to pay business expenses of the [respondents’] entities and to pay his own personal expenses were authorised”. Her Honour also recognised that the issue of the scope of the respondents’ authority had “assumed new importance” by reason of the respondents’ reliance, in closing, on presumed authority said to be conferred by the Cheques Act. Her Honour considered that the occasion for the appellants to tender this evidence could not reasonably have been foreseen before the respondents raised this argument.

The appellants submitted that her Honour’s reasons in this regard were consistent with the position for which they contended, that the respondents did not make a claim of implied actual authority or any claim of general authority on the basis of the handing over of the cheques themselves, or by Ali allowing Orlando and Jeffrey to deal with the bank account, until they advanced the Cheques Act argument. The appellants submitted that a claim of implied actual authority would have needed to be pleaded, referring to the applicable principles in Equiticorp Finance Ltd v Bank of NZ (1993) 32 NSWLR 50 at 132-133 (Clarke and Cripps JJA).

The appellants spent some time in oral submissions addressing the respondents’ written opening and closing submissions, which, the appellants argued, demonstrated that they did not run a case of general or implied actual authority. They also relied on concessions that Counsel for the respondents was said to have made in the course of submissions on the application to amend the pleadings to rely on the Cheques Act, submitting that they accurately described what occurred in the hearing.

In the face of the respondents’ submissions, the appellants contended that the primary judge had committed the error that Gleeson CJ and Heydon J identified in Suvaal v Cessnock City Council (2003) 77 ALJR 1449; [2003] HCA 41 (“Suvaal”) at [36]:

In Suvaal, the primary judge made a finding about a loss of concentration on the plaintiff’s part while cycling, when he allowed the steering of the bicycle to put him into potholes and the rough edge of the road: [20], [22]-[23]. This was not a case that the plaintiff had made, and the defendant Council had denied it was an issue: at [32]. Their Honours found that the primary judge had “rationalised the circumstances so as to generate a possible explanation for the accident which was not directly supported by any matter that emerged in the course of the trial”: at [37].

The appellants also relied on this Court’s decision in Films and Casting Temple v Malla [2013] NSWCA 377 at [47]-[49]. McDougall J there stated that while a court may proceed on the basis that ordinarily, through the conduct of a trial, the parties will have become aware of the real issues and agreed (expressly or by inference) to those issues being fought out and defended, “before the court proceeds thus, it should ensure that the party affected by the proposed judgment has been given an adequate opportunity … to deal with the case that has in fact been made good”: at [49] (Ward JA and Gleeson JA agreeing).

As to Cleaning Doctor’s conversion of cheques claim, the appellants contended that as the cheques were in the custody of the respondents, they were the bailees and had an obligation to prove that the conversion of the cheques was authorised.

In oral submissions, the respondents submitted that Cleaning Doctor had the onus of showing that the withdrawals were unauthorised and they had failed to discharge that onus, as the primary judge found; and there was nothing in the way that the proceedings were conducted that reversed the onus such that the respondents had to prove the withdrawals were authorised. The respondents also submitted that, even if the way the proceedings were conducted did place the burden on the respondents to show that the withdrawals were authorised, that onus was discharged, the primary judge having found general authority. Finally, the respondents submitted that if the primary judge did not make that finding, this Court should do so on the basis of the same evidence that her Honour set out in support of the proposition that the evidence pointed strongly to the conclusion that the withdrawals were authorised.

As to Ground 5 of the Amended Notice of Appeal, the appellants did not address the ground in their written submissions; and in oral submissions they did not address the reasoning of the primary judge in concluding, correctly, that the bank was the legal owner of the money in the CD Account: J [532]. The appellants submitted that neither party had advanced this argument; the implications of that submission for the broader Cleaning Doctor appeal, even if correct, were opaque. In any event, the respondents did not admit the allegation of Cleaning Doctor’s ownership of the funds in the CD Account, meaning that the primary judge did need to consider whether the appellants had made that good, specifically in the context of the claim for conversion of the notes and coins in the Account: J [541].

As the appellants submitted, there were a number of facts that were admitted on the pleadings on the Cleaning Doctor claim:

It was also not in dispute that Ali signed “an entire cheque book of blank cheques within one week of the CD Account being opened, a second book in about December 2011 and a third book in about October 2012”, and a debit card which he left with Orlando: J [536]. As her Honour observed, by delivering the signed blank documents to Orlando, “Ali plainly authorised Orlando to complete the documents so as to create ‘cheques’ within the meaning of the Cheques Act that would operate as an order to pay when presented to the bank”: J [537].

As the primary judge recognised, resolution of the claim in restitution rested upon whether the respondents acted outside the scope of their authority to deal with money in the CD Account: J [539]. The issue on the conversion claim, of whether Cleaning Doctor had an immediate right to possession of each cheque at the time it came into existence, also turned on the scope of the respondents’ authority, to complete the cheques and present them to the bank, and whether they acted outside the scope of that authority in completing each cheque: at J [540]. As her Honour recognised implicitly in so framing the issue, and as Brereton JA observes expressly in his Honour’s reasons at [16] above, Cleaning Doctor needed to do more than prove delivery of the cheques to Orlando in order to establish an immediate right to possession.

The appellants’ allegations that none of the persons who withdrew money from the CD Account were authorised to do so, Orlando and Jeffrey in particular, were denied. In response to the allegations that Orlando and Jeffrey were not authorised to withdraw funds from the CD Account without authority, the respondents generally denied those allegations. Those allegations were central to Cleaning Doctor’s trust claim and their claim for money had and received, both of which rested on establishing that the funds withdrawn from the CD Account were, to use the defined term in the Amended Statement of Claim, “stolen”. As her Honour noted at J [538]:

The appellants pleaded in this respect that Ali pre-signed “a number of blank cheques” which he provided to Orlando and/or Jeffrey (which was admitted), but that he “only authorised those cheques to be used to pay down the mortgage of the Bardwell Property”: ASOC [135]. The respondents admitted the allegation that the pre-signed cheques were not used for this purpose (ASOC [136], AD [1]). However, they denied that the cheques were pre-signed for the specific purpose that Ali alleged: AD [3].

As her Honour noted, the central evidence of the limited scope of authority on which the appellants relied was the uncorroborated evidence of Ali, which her Honour rejected: J [545]. Apart from the general credibility issues that beset his evidence, his account of the purpose for which he had authorised money to be withdrawn from the CD Account was, as her Honour described it, “inherently improbable”: J [547]. It was undermined by the very first withdrawal from the CD Account of $36,320, in cash, that Ali made from the CD Account, on the day the account was opened. The withdrawal was in denominations the size of which was inconsistent with his evidence that the purpose of the withdrawal was to pay the mortgage and bills for the Bardwell Property: J [548]. Her Honour had earlier addressed Ali’s evidence in this regard in some detail, including the cross-examination, at J [204]-[214]. Her Honour then observed, at J [550], that apart from resting on evidence which was uncorroborated and/or implausible, the limited scope of authority on which the appellants relied was contrary to objective evidence which was put before her Honour. I have addressed above the evidence upon which her Honour relied in that regard (see [122]).

The appellants accepted that the findings at [545]-[549] were reasons on the basis of which the primary judge could have rejected the trust claim but not the money had and received claim, on the basis of what was described as an “implied concession” that there was no general authority. However, the respondents made no such concession:

The appellants also relied on concessions that the respondents’ Counsel was said to have made in the course of his submissions on the Cheques Act amendment application. The context is important, the specific issue being whether the appellants were prejudiced by not having had an opportunity to cross-examine Orlando about general authority. Counsel for the respondent’s response was that there was nothing that Orlando could say by way of evidence about general authority, but that reliance on the Cheques Act raised questions of onus, not evidence (TS 936.10-20). That submission was consistent with Orlando’s evidence, with Counsel accepting that Orlando and Ali did not claim to have had conversations in which Ali conferred general authority (TS 933.46-50; 934.9-24; 934.35-40). Her Honour referred to this in J [550], noting that there was “no evidence of a conversation between Ali and Orlando in which Ali (on behalf of Cleaning Doctor) expressly conferred general or unlimited authority on Orlando to make withdrawals from the CD Account” (emphasis added). That is not inconsistent with a general authority implicit in the delivery of the signed cheque books and debit card and the other matters referred to by her Honour at J [550]

The appellants took particular issue with J [550] as involving a conclusion that was not consistent with the case of either party. That allegation of error misunderstands the purpose of the paragraph. It is apparent from the chapeau to J [550] that her Honour was identifying material that was contrary to the case of limited authority that the appellants had advanced. So much is apparent from terms of J [544], where her Honour commenced the relevant analysis, and from the terms of her Honour’s conclusion at J [552], which I have set out above at [123].

Her Honour’s conclusion that the appellants had not discharged their onus was consistent with authority. In the recent decision of this Court in Coshott Family Pty Ltd v Lyons [2022] NSWCA 216 ("Coshott”), the respondent, a solicitor, had made withdrawals from a controlled money account that he opened on behalf of Mr Robert Coshott, a director of the appellant: [7]. The appellant alleged that approximately $200,000 was deposited into the account, and that in breach of his duty under the Legal Profession Uniform Law (NSW), the respondent had failed to deal with those monies as instructed: [5]. The respondent accepted that the funds had been received into a controlled money account and that transfers had been made out of the account, but said that these occurred pursuant to “written and/or oral authority” from Mr Coshott: [6]. Although the respondent provided particulars of authorising emails, they were not tendered: [6]. The extent of the evidence in the trial was a letter from the respondent to the Commonwealth Bank requesting that an account be opened; an account confirmation document and welcome email to the respondent; an email from the respondent to Mr Coshott confirming the opening of the account; a list of transactions from the bank; and an email exchange between Mr Coshott and the respondent in relation to closing the account: [7]-[11].

Kirk JA, with whom Meagher JA and Griffiths AJA agreed, referred at [18] to the “oft-cited statement as to where the legal burden of proof will lie” of Walsh JA in Currie v Dempsey (1967) 69 SR (NSW) 116 at 125, where his Honour stated:

In circumstances where there was no dispute that money belonging to the appellant was paid into the controlled money account that the respondent controlled, and that the appellant made a request for repayment and what was left in the account was promptly repaid, the issue was what more, if anything, the appellant needed to prove in order to make good its money had and received claim: [19]. Kirk JA noted that this issue had been addressed in David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; [1992] HCA 48, in which the plurality stated that recovery depended on the existence of a qualifying or vitiating factor, such as mistake, duress or illegality (at 379): at [20]. The appellant in Coshott, however, had submitted that it only needed to prove that monies were received by the respondent from the appellant for the latter’s benefit, that the latter demanded repayment of those monies, and that there had been a failure to repay in full: [24].

Kirk JA observed that the material before the Court indicated that the payment in question was made into a controlled money account, “implicitly for the purpose of being paid out to third parties (including barristers) or for professional fees in relation to matters in which the respondent was acting, and there is evidence indicating that the payments out of the account were made in fulfilment of that purpose”: [52]. Although there was no evidence indicating whether or not the appellant had authorised those payments, there was evidence indicating that upon requesting that the account be closed and the money transferred, that occurred as requested: [53]. In that context, his Honour considered that it was “not sufficient for the appellant simply to prove that the payment was made into the account, held for its benefit, and then not returned in full when requested”: [53]. In concluding that the appellant had failed to establish a basis for asserting that the full amount initially paid to the respondent should still be treated as being held for his benefit (at [57]), his Honour later stated at [58]-[59]:

Senior Counsel for the appellants submitted that Coshott was distinguishable from the present case because in Coshott, there was no express or implied concession about the lack of any express authority to use the account in the manner in which it was used. He relied in this respect on the implied concession in Orlando’s evidence, and the express concessions that Counsel for the respondents was said to have made in the course of argument on the amendment application regarding the Cheques Act. For the reasons I have outlined above, I do not accept either basis. In any event, her Honour’s conclusion as to the appellants’ failure to discharge their onus remains. The primary judge’s reasons on the interlocutory question of admitting parts of [70] of Orlando’s affidavit of 8 September 2017 does not call her Honour’s reasons into question in this regard, noting that it was interlocutory and was made before her Honour had heard from the respondents’ Counsel on the Cleaning Doctor claim.

Both the money had and received claim and the claim in conversion rested on whether the respondents had acted outside of the scope of their authority: J [539]-J [540]. Her Honour’s conclusion, at J [553], that Cleaning Doctor failed to discharge its onus of proving that the withdrawals were made without authority of Cleaning Doctor was determinative of those claims. Her Honour’s conclusion in that regard did not involve a reversal of the burden of proof, or a mischaracterisation of the respondents’ case.

Grounds 4 to 8 of the Amended Notice of Appeal should be dismissed. As was the case with the notice of contention on the Bardwell Property appeal, given my conclusions with respect to the Cleaning Doctor appeal it is not necessary to determine the cross-appeal, in relation to her Honour’s decision to refuse the respondents leave to amend to rely on the Cheques Act.

I propose the following orders:

SIMPSON AJA: I agree with Mitchelmore JA.