Key Takeaways

A victim of theft may sue for money had and received by a third party recipient who has received the stolen money from the thief without giving valuable consideration.

Brief Facts

A firm of chartered accountants retained the first plaintiff, a firm of solicitors, to perform some legal work for the second plaintiff, a trustee of a bankrupt estate.

The solicitors performed the work and issued the chartered accountants with an invoice for $145,282.20. The chartered accountants obtained that amount from the trustee however before making the payment to the solicitors, the chartered accountants received a fraudulent email apparently from the solicitors requesting payment to a different bank account.

Acting on the fraudulent email, the chartered accountants paid the amount to the account identified in that email.

Upon the arrival of the deposit into the wrong account, approximately $101,000 was then immediately transferred to a further account held by the third defendant.

Upon realising the fraud had occurred, the firm of solicitors obtained orders freezing the two accounts into which the money had been paid and transferred. There was about $124,250.51 frozen in those accounts.

The firm of solicitors then brought an application seeking orders compelling the bank where the accounts were frozen and the account holders to transfer the funds in the two accounts to the firm of solicitors.

Judgment

Elkaim AJ found that the cause of action relied upon by the plaintiffs was of monies had and received citing with approval the following remarks made by Foster J in Shaw Building Group Pty Ltd v Narayan (No 2) [2015] FCA 585 (at [37] to [39]):

“[37]. Money that has been stolen may be recovered from the thief in an action or money had and received. The claim against the thief is an independent restitutionary claim based upon unjust enrichment by subtraction because the defendant’s receipt of an obviously unjust enrichment has resulted from the defendant’s deception of the plaintiff or commission of a wrong against the plaintiff…”

“[38]. A victim of theft may also sue for money had and received a third party who has received the stolen money from the thief without giving valuable and adequate consideration therefor…”

“[39]. Being a restitutionary claim, a successful action for money had and received sounds in an order requiring the defendant to repay the amount received by him or her…”

Applying those principles, Elkaim AJ held that the firm of solicitors had a clear entitlement to have the monies paid into the two accounts returned, with one reservation. The reservation arose from the fact that the first fraudulent account had an existing balance of $124.76 before the fraudulent transaction and a negative balance of $117.64 in the second account could not be set off against this.

Accordingly, judgment was entered for the chartered accountants and the firm of solicitors against the fraudulent actors and receivers of the stolen funds for the full amount of $145,282.20. The bank was ordered to transfer the funds held in the two accounts (less $124.76) to the firm of solicitors.

Implications

With the rapid advancement of technology, the above decision serves as a timely reminder for all legal practitioners to be vigilant and suspicious when transferring monies internally within the organisation or externally from the organisation in the current environment of increasing cyber fraud.

Two-factor authentication of bank account details is the bare minimum acceptable security process undertaken by those looking after their own best interests against this type of fraud.