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High Court of New Zealand Decisions |
Last Updated: 10 September 2019
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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
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CIV-2017-404-646
[2019] NZHC 2218 |
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BETWEEN
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WORLDWIDE HOLIDAYS LIMITED
Plaintiff
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AND
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XIAONING WANG
First Defendant
HAIMENG LIN
Second Defendant
LI HEMING
Third Defendant (discontinued)
BU JUN
Fourth Defendant
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Hearing:
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6, 7, 8, 10 and 13 May 2019
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Appearances:
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T Allan, G Steyne and T P Kelly for the Plaintiff No appearance by or for
the First Defendant
The Second Defendant in person
No appearance by or for the Fourth Defendant
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Judgment:
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5 September 2019
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JUDGMENT OF GAULT J
This judgment was delivered by me on 5 September 2019 at 3:30 p.m. pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
..........................................
Parties / Solicitors / Counsel:
Mr T Allan and Mr T P Kelly, Grove Darlow & Partners, Auckland The first defendant, Ms Xiaonng Wang
The second defendant, Ms Haimeng Lin
Mr Yang (Eddie) Yang (for the fourth defendant), Great Wall Lawyers, Auckland
WORLDWIDE HOLIDAYS LTD v WANG [2019] NZHC 2218 [5 September 2019]
[1] The plaintiff, Worldwide Holidays Ltd, is a New Zealand travel agency selling inbound and outbound travel and tourism services. Approximately 95 per cent of Worldwide’s services are provided to customers travelling between New Zealand and China – 60,000 or more customers per year.
[2] The first defendant, Ms Wang, was an employee or independent contractor working as a travel consultant for Worldwide between 2007 and 2017. Counsel for Ms Wang advised the Court by memoranda in March 2019 that the first defendant did not intend to appear at the trial or file evidence and would abide by the ruling of the Court in her absence, and subsequently that he had received instructions to cease acting. Leave was granted by van Bohemen J excusing counsel’s attendance at the trial.
[3] The second defendant, Ms Lin, is a friend of the first defendant.
[4] The third defendant, Li Heming, was thought to be the husband of the first defendant but has never been served or pursued. The plaintiff filed a discontinuance in November 2017, but not all defendants consented. I granted leave to discontinue at the hearing.
[5] The fourth defendant, Ms Jun, is the mother of the first defendant. Prior to trial Ms Jun’s counsel advised that she would not be appearing at the trial or filing evidence, and van Bohemen J excused counsel’s attendance.
[6] Worldwide claims that Ms Wang misappropriated money from Worldwide in breach of her fiduciary and contractual duties as its agent. Worldwide claims for misappropriation of $1,435,708.95 in the period from 1 January 2010, even though it suspects further misappropriation may have pre-dated this period.
[7] Worldwide also claims that sum in contract pursuant to an acknowledgement of debt signed by Ms Wang in March 2017 after the alleged misappropriation came to light. Worldwide also claims the same sum against Ms Jun as guarantor.
[8] Worldwide claims that Ms Lin received $558,468.50 of its money from Ms Wang or directly from Worldwide’s customers. Worldwide claims recovery of this sum as money had and received.
Factual background
[9] In 2007 Worldwide employed Ms Wang as a travel consultant in its Newmarket branch. She was promoted to branch manager in August 2010.
[10] On 5 May 2012 Worldwide and Ms Wang entered into an Approved Salesperson Contract. Ms Wang became an approved salesperson for Worldwide at its Albany branch (which was soon to open) as an independent contractor, rather than employee. In July 2012 Ms Wang also became the branch manager of the Albany branch.
[11] In November or December 2014, Ms Wang and Ms Lin became friends in the VIP Black room at SkyCity Casino in Auckland. They were both from Beijing and of similar age. They met regularly, normally at SkyCity.
[12] On 9 February 2017 Ms Ma, a Worldwide employee responsible for accounts payable, accessed a payment received list for the Albany branch in Worldwide’s internal accounting software programme (EKOK). She came across a large number of payments listed as payments by cheque with future payment dates. She found this strange, as usually Worldwide clients pay by cash, EFTPOS or bank transfer at the time of booking and it is rare that clients pay by cheque. She thought there was a problem with the system. She accessed the payment received list for all branches and for the Albany branch for a different date range and found 296 future payments listed under cheque for sales by Ms Wang. She called Worldwide’s chief financial officer, Ms Liu. An investigation began. Ms Wang was on holiday in China at the time.
[13] Early investigation indicated to Worldwide that Ms Wang had sent 47 emails to travel clients providing her personal bank account number requesting them to pay for travel services. It also indicated multiple payments from Ms Wang to Ms Lin and multiple withdrawals at SkyCity Casino.
[14] On 2 March 2017 Worldwide’s managing director, Mr Yu, met with Ms Wang and Ms Jun in Beijing. Mr Yu showed them the outcome of Worldwide’s investigation. Mr Yu gave evidence that Ms Wang admitted theft of Worldwide’s money, that Ms Jun said that the family would try their best to pay all the money back, and that Ms Wang said she had spent the money in SkyCity Casino. They went to the office of Mr Mu, who had been suggested as someone to assist in preparing a document setting out when and how the money would be paid back, and signed an acknowledgement of debt.
[15] Back in New Zealand later in March 2017, Mr Yu told Ms Wang she would need to undergo SkyCity’s self-identified exclusion procedure before she could come back to work at Worldwide. She did not come back to work.
[16] In April 2017 Worldwide commenced this proceeding and obtained freezing orders.
Issues
[17] The key issues to be determined are:
(a) whether Ms Wang owed a fiduciary duty to Worldwide not to receive money due to Worldwide into her personal account or to account to Worldwide for any money she might receive from Worldwide’s clients;
(b) whether Ms Wang misappropriated Worldwide’s money or whether the customers belonged to her personally;
(c) whether the rolling forward of payment dates was known and approved by Worldwide;
(d) whether Ms Wang’s actions constituted a breach of the Approved Salesperson Contract;
(e) the quantum of Worldwide’s fiduciary claims against Ms Wang;
(f) whether Ms Wang’s and Ms Jun’s failure to repay is a breach of the acknowledgement of debt;
(g) whether Ms Lin received $558,468.50;
(h) whether the money transferred to Ms Lin belonged to Worldwide or Ms Wang; and
(i) whether Ms Lin has a defence.
Claims against Ms Wang
[18] As indicated, Ms Wang did not appear at the trial. Worldwide must still prove its causes of action so far as the burden of proof lies on it.1
[19] I deal with Worldwide’s first two causes of action against Ms Wang together. The first cause of action claims that Ms Wang owed fiduciary duties given her role as agent, whether as an employee or independent contractor. The second cause of action is pleaded as breach of contract relying on the approved salesperson contract expressly appointing Ms Wang as an agent.
[20] Ms Wang’s statement of defence admits she was employed until July 2011 but pleads she was then an independent contractor of Worldwide and self-employed. She pleads she did not owe any duty as agent to Worldwide and that the customers belonged to her, although she admits the relevant terms of the approved salesperson contract.
[21] The fiduciary obligation not to profit from a position of trust, or, as it is sometimes relevant to put it, not to allow a conflict to arise between duty and interest,
1 High Court Rules 2016, r 10.7.
applies in principle to the relationship of principal and agent but its scope is to be defined by the terms of the contract of agency.2
[22] I have no doubt that Ms Wang was an agent of Worldwide and owed it a duty of loyalty attracting fiduciary obligations including a duty not to profit from her position of trust (beyond her contractual remuneration) throughout the relevant period notwithstanding the change in the basis of her remuneration in 2012.
(a) The evidence indicates she was an employee until May 2012. As such, she dealt with Worldwide’s customers as an agent of Worldwide.
(b) In May 2012 she became an independent contractor pursuant to the Approved Salesperson Contract, which expressly provided that she was an agent of Worldwide. It also prohibited Ms Wang from operating as a travel agent in any other capacity, issuing travel documentation other than by Worldwide, and receiving purchase monies or collecting purchase monies unless payment was made to Worldwide by a crossed non-transferrable cheque or by credit card directly to the credit of Worldwide’s bank account.
(c) From July 2012 Ms Wang was also the branch manager of the Albany branch and was paid a salary in addition to her sales commission. Mr Yu’s evidence reinforced that in the Albany branch Ms Wang was not supervised by anyone (she reported directly to him as Worldwide’s managing director), she had a wide ambit of authority and Worldwide instilled trust and confidence in her to carry out her duties honestly and in good faith.
Misappropriation?
[23] In essence, Worldwide’s case is that:
(b) Ms Wang concealed her theft by entering the transactions in Worldwide’s accounting system as payments by cheque and continuously rolling forward the payment date by up to 30 days into the future, such that the payments did not show as accounts receivable; and
(c) Ms Wang withdrew the money to gamble at SkyCity or transferred it to Ms Lin, who also gambled at SkyCity.
[24] As indicated, Ms Wang pleads the customers belonged to her. She admits that she rolled forward certain sales records by a further 30 days into the future but says this was known and approved by Worldwide. She admits that she transferred
$558,468.50 to Ms Lin but pleads those funds belonged to her.
[25] As the claim effectively amounts to theft by Ms Wang, I note the approach when applying the civil balance of probability standard of proof in the case of serious allegations.3 As the majority of the Supreme Court stated in Z v Dental Complaints Assessment Committee, “the quality of the evidence required to meet that fixed standard may differ in cogency, depending on what is at stake”.4
[26] There is ample evidence that Ms Wang received money into her personal bank account for travel arranged for clients. There are the many emails she sent to travel clients providing her personal bank account number and requesting they pay for travel services. There are also many receipts into Ms Wang’s bank account where the payment description can be matched with Worldwide’s travel services.
[27] On the face of these emails and the payment descriptions in her bank statements, and given Ms Wang’s role as an employee or approved salesperson, these
4 Z v Dental Complaints Assessment Committee [2008] NZSC 55, [2009] 1 NZLR 1 at [101].
were clearly Worldwide’s clients, not personal to Ms Wang as her pleaded defence asserted. Ms Wang entered these sales transactions in Worldwide’s system. Including the sales transactions in Worldwide’s system no doubt meant that Worldwide paid the travel suppliers. I conclude that Ms Wang made these sales in her capacity as an agent of Worldwide, owing a fiduciary duty as I have found. I reach this conclusion that these were Worldwide, not personal, transactions even leaving to one side Ms Wang’s admission in the acknowledgement of debt dated 2 March 2017 that she embezzled company funds totalling $1,445,648.27.
[28] Mr Yu also gave evidence that none of the money due from the sales records which Ms Wang modified into the ‘future payments’ category was ever received into Worldwide’s bank accounts – including the money referred to in the emails Worldwide obtained from Ms Wang’s hard drive.
[29] In relation to cash deposits, Mr Yu gave evidence that:
(a) cash deposits recorded as ‘paid’ in the hard copy records filled out and signed by Ms Wang had in fact never be paid into Worldwide’s bank account or received in any other manner;
(b) Ms Wang had used her personal login details in order to access Worldwide’s systems to modify her records to reflect that cash had been received by Worldwide for its services, when this was not in fact the case; and
(c) the cash receipts did not always accurately match the amounts she entered into the EKOK system as received in cash.
[30] Receipting cash payments in Worldwide’s system was also quite inconsistent with any suggestion that the customers were personal to Ms Wang.
[31] The evidence is sufficiently cogent for me to conclude that diverting, or failing to account to Worldwide for, these customer payments by bank transfer to her personal account and in cash was misappropriation in breach of Ms Wang’s fiduciary duty.
[32] It is also evident that Ms Wang withdrew money from her bank account to gamble at SkyCity and transferred money to Ms Lin, who also gambled at SkyCity. Ms Wang and Ms Lin were both SkyCity VIP Black members, the highest tier of SkyCity’s loyalty programme. SkyCity’s detailed records show that over the period from 1 January 2010 to 31 March 2017, Ms Wang lost $2,566,790 and Ms Lin lost
$947,383 gambling at SkyCity.
Was rolling forward of payment dates known and approved by Worldwide?
[33] The evidence also indicated how Ms Wang’s misappropriation was concealed in Worldwide’s EKOK system. The future payment lists generated for payments due in January to March 2017 showed that many sales in EKOK where Ms Wang was the travel consultant had future payment dates in that period even though the sales were old. Some sales dated back to 2011. In early 2017 Worldwide identified 472 sales transactions by Ms Wang with future payment dates.
[34] The system allowed travel consultants to alter payment dates after they had been entered. The consultant could therefore delete a future payment date before that due date and enter a new future payment date up to 30 days ahead, and repeat the process every month. Furthermore, the system treated transactions with future payment dates as paid. Thus, if transactions were repeatedly altered to have a future payment date before the reconciliation that occurred after month end, they would never show up as an account receivable in the reconciliation process.
[35] Although Worldwide was unable to produce a record from its system that looked back and showed Ms Wang changing the payment date every month, I am satisfied that is the explanation for these transactions with future payment dates well after the sales transactions occurred.
[36] Worldwide witnesses explained how they became aware in February 2017 of Ms Wang’s sales with future payment dates rolled over repeatedly, which concealed those transactions and Ms Wang’s misappropriation.
[37] There appeared to be an inconsistency in the evidence as to whether Ms Wang was nevertheless paid commission on these transactions. Mr Lu, a Worldwide manager, said that she was, because the consequence of the manipulation of the EKOK system was that it showed a balance owing of zero, in which case Ms Wang could present a sales report with zero owing on particular sales and be paid commission. Ms Liu, however, said that Ms Wang was not paid commission on the future payment transactions. In one sense this inconsistency is immaterial as Worldwide does not seek repayment of commission paid to Ms Wang. However, if commission was paid, it might seem more likely the practice would have come to Worldwide’s knowledge sooner. I consider Mr Lu is likely correct that commission was paid to Ms Wang on the sales he identified. But I accept the presentation of reports with sales showing zero balances would not likely have raised questions in the absence of some link to a future payment date, especially given the scale of Worldwide’s business. I accept that Worldwide did not know or approve of Ms Wang’s practice of repeatedly rolling forward payment dates.
Breach of the Approved Salesperson Contract
[38] As already indicated, the Approved Salesperson Contract expressly prohibited Ms Wang from receiving purchase monies or collecting purchase monies unless payment was made to Worldwide by a crossed non-transferrable cheque or by credit card directly to the credit of Worldwide’s bank account. My findings of misappropriation also mean Ms Wang breached her Approved Salesperson Contract.
[39] I accept Mr Allan’s submission that this breach was also of a fiduciary nature given the express agency and prohibition on personal receipt of customer payments. This has relevance to the nature of the remedy and also to the claim against Ms Lin.
Quantum of misappropriation
[40] Worldwide seeks damages as a result of Ms Wang’s breach of fiduciary duty. Equitable compensation on a restitutionary basis is not available for every breach of
duty by a fiduciary.5 But it is available for the fiduciary breach here.6 Damages for breach of the Approved Salesperson Contract are also available.
[41] Mr Lu explained his two analyses of the quantum of Ms Wang’s misappropriation. First, prior to commencement of proceedings in April 2017, Mr Lu cross-checked Ms Wang’s sales reports with the EKOK system, the January, February and March 2017 payment received lists, and Ms Wang’s bank statements for the periods 1 April 2014 to 31 March 2015 and 22 June 2015 to 22 August 2015. Mr Lu listed transactions with future payment dates totalling $1,365,378.02 of which he said
$1,342,644.02 were attributed to Ms Wang. It appears that some cash transactions were attributed to Ms Wang in error.7 The total of transactions with future payment dates attributed to Ms Wang is $1,310,729. Mr Lu’s analysis then effectively traced
$415,843.61 of Worldwide’s money to Ms Wang. That was made up of:
(a) payments into Ms Wang’s bank account that Mr Lu could match with Worldwide’s travel services by identifying a passenger name or other reference to the travel product;
(b) payments into Ms Wang’s bank account that Mr Lu could match with Ms Wang’s emails seeking payment into her personal bank account; and
(c) cash receipts issued and signed by Ms Wang where a cash bank deposit was never credited against a particular trip, indicating that Worldwide never received the payment.
[42] Payments in categories (a) and/or (b) totalled $196,366.01 and cash receipts in category (c) totalled $219,477.60. Mr Lu’s evidence worked through a number of example transactions.
5 BNZ v NZ Guardian Trust Co Ltd [1999] 1 NZLR 664 (CA) at 680 and 687-688.
[43] Secondly, Mr Lu did further analysis once he received disclosure of Ms Wang’s other bank statements for the full period from January 2010 to April 2017. In a receipt schedule, he analysed receipts into Ms Wang’s personal account in four sub-categories:
[44] Mr Lu also identified $70,330.93 of sales by Ms Wang as outstanding accounts receivable as at 1 March 2017; that is unpaid travel services without future payment dates. Adding this amount to the $1,365,378.02 of transactions with future payment dates accounts for Worldwide’s total claim of $1,435,708.95.
[45] Mr Lu also identified that Ms Wang caused two further tickets totalling
$8,566.28 to be issued on 24 March 2017 through other Worldwide employees after her login was suspended. Worldwide has not received payment for these tickets. This is not included in the claim.
[46] Mr Graham provided an independent expert review of Mr Lu’s analysis. Mr Graham reviewed Worldwide’s workpapers (particularly the payment received list and receipt schedule), compiled a running analysis of Ms Wang’s ASB bank account and filtered the deposits, and considered whether there was any innocent explanation for the unexplained credits into her account. He conducted a three-stage analysis:
(a) filtering out unchallenged transactions (salary, commission and transactions where Worldwide is prepared to give Ms Wang the benefit of the doubt);
(b) isolating transactions attributable to Ms Lin and SkyCity; and
(c) breaking the remaining transactions down into groups based on the likelihood they were related to Worldwide’s business.
[47] In this third stage, Mr Graham cross-referred passenger names on the unmatched EKOK identifier list with names referenced on Ms Wang’s bank statements, which identified receipts by Ms Wang totalling $522,716. He also searched the reference text in her bank statements for ordinary travel related terms, which identified further receipts of $186,742.75. Together, these receipts total
$709,458.75.
[48] Mr Graham considers that an aggregate of receipts by Ms Wang of $709,458.75 relates observably to unmatched EKOK transactions and to ordinary travel related terms in Worldwide’s business. That is over $700,000 less than the amount claimed by Worldwide. But Mr Graham considers the balance is also recoverable.
$219,477.60 is attributed to unmatched cash receipted from clients by Ms Wang as analysed by Mr Lu.8 That would take Ms Wang’s total receipts and Worldwide’s loss to $928,936.35. Mr Graham considers it is a reasonable conclusion, in the absence of any alternative explanation from Ms Wang, that she has had the benefit of receipts in this sum which should more properly have been received by Worldwide.
[49] Mr Graham acknowledged that the remainder of $506,722 is less certain. But he noted Ms Wang’s pleaded defence is that she was an independent contractor and was self-employed. Mr Graham’s review of her bank statements and the ASB bank files did not reveal any transactions which he would ordinarily expect to be evident for a person who is self-employed and conducting a business, such as payment of GST, employees or service providers and general business disbursements and expenses. Mr Graham concluded that, in the absence of any innocent explanation from Ms Wang, the inference is open to be made that these receipts to her account include the remaining sum of $506,722 of further EKOK identifiers unmatched by cash receipts. Mr Graham noted the difficulty of tracing as in most instances the amount of the individual unmatched EKOK identifiers did not exactly match the sum received in Ms Wang’s account – the difference is usually up to one or two hundred dollars.
8 Above at [42].
He also considered it would be punitive for Worldwide to be obliged to trace each transaction to Ms Wang to a full legal standard, particularly given the evidence that cash has been diverted away from Worldwide following the issue of a Worldwide receipt to the customer by Ms Wang.
[50] Following Mr Graham’s work, Mr Lu conducted a further analysis of the
$711,759.03 balance between Mr Graham’s observable sum and the total amount claimed, comparing reference text as per the ASB file with the client references in EKOK. That identified a further $576,505.77 as Worldwide’s. On that basis, the unexplained receipts reduce to $135,253.26. If this were subtracted from the amount claimed, the total would be $1,300,265.69.
[51] Mr Graham’s inferential approach is appropriate when a trustee or fiduciary has not explained dealings with another’s money. When a fiduciary does not satisfactorily explain what has happened to money or property over which he or she had control, the Court may draw adverse inferences against him or her which may lead to substantive liabilities. This principle is most often applied where a trustee or a director has received money from a trust fund or company account without a good explanation. For example, in the English case of Burke (Liquidator of Idessa (UK) Ltd) v Morrison, a liquidator alleged misfeasance in respect of payments made out of company funds. The Court stated, in a passage that has been repeatedly cited: 9
I am satisfied that whether it is to be viewed strictly as a shifting of the evidential burden or simply an example of the well-settled principle that a fiduciary is obliged to account for his dealings with the trust estate ... [counsel for the liquidator] is correct to say that once the liquidator proves the relevant payment has been made the evidential burden is on the Respondents to explain the transactions in question. Depending on the other evidence, it may be that the absence of a satisfactory explanation drives the Court to conclude that there was no proper justification for the payment. However, it seems to me to be a step too far for [counsel for the liquidator] to say that, absent such an explanation, in all cases the default position is liability for the Respondent directors. In some cases, despite the absence of any adequate explanation, it may be clear from the other evidence that the payment was one which was made in good faith and for proper company purposes.
[52] Likewise, in GHLM Trading Ltd v Maroo, Newey J said:10
The close analogy between directors and trustees suggests, to my mind, that, much as a trustee “must show what he has done with [trust] property”, it is incumbent on a director to explain what has become of company property in his hands.
In the circumstances, I agree with [counsel] that, once it is shown that a company director has received company money, it is for him to show that the payment was proper. In a similar way, it seems to me that, where debit entries have correctly been made to a director’s loan account, it must be incumbent on the director to justify credit entries on the account. That conclusion makes the more sense when it is remembered that the director (a) will have been (one of those) responsible for the management of the company’s business and (b) will have had a responsibility for ensuring that proper accounting records were kept ...
[53] This approach, so far as it concerns company directors, has been accepted in New Zealand.11
[54] The question is how far this approach is applicable here. While Ms Wang is not a director, she owed fiduciary duties as an agent, so I do not consider that is a material difference. But the approach applies only to dealings with another’s money (be it trust, company or some other principal’s money). That has to be established before the approach applies.12 It therefore does not apply to the question of whether money received into Ms Wang’s account belonged to Worldwide.
[55] Based on Mr Graham’s work and Mr Lu’s further work, I consider that Worldwide has traced the following sums into Ms Wang’s account:
$709,458.75 13
$576,505.77 14
Total $1,285,964.52
[56] The difference between this figure and the amount claimed ($1,435,708.95) is
$149,744.43. That may be reduced in two respects:
10 GHLM Trading Ltd v Maroo [2012] EWHC 61 (Ch) at [148]- [149].
11 Mizeen Painters Ltd (in liq) v Tapusoa [2015] NZHC 826, [2016] NZAR 423 at [25].
12 See, for example, Ingram v Singh [2018] EWHC 1325 (Ch) at [138] and [141].
13 Above at [47].
14 Above at [50].
(a) $54,649.02 not attributed to Ms Wang;15
(b) $70,330.93 of sales by Ms Wang that were identified as outstanding accounts receivable as at 1 March 2017.16 Those transactions did not have future payment dates and, while I accept that Worldwide was not paid, I am not willing to infer (absent other evidence) that Ms Wang received payment for them. Worldwide could not trace them into Ms Wang’s account. The other evidence on which Worldwide might rely is the acknowledgement of debt. However, as the sum acknowledged is higher than that now claimed and the acknowledgement was signed on the same day that Mr Yu met with Ms Wang in Beijing, I do not consider it demonstrates that Ms Wang received the $70,330.93.
[57] Deducting these two figures, the difference between the total traced ($1,285,964.52) and the total if I could infer that all unaccounted for receipts into Ms Wang’s account belonged to Worldwide ($1,310,729) reduces to $24,764.48. Given that, to avoid double counting, I leave to one side whether Ms Wang actually received cash in addition to the money received into her account.
[58] Without shifting the evidential burden or drawing an inference based on an agent’s failure to explain receipts into her account when she is best placed to do so, there may still be room to draw an appropriate inference that the remaining unexplained receipts into Ms Wang’s account relate to Worldwide transactions in respect of which she rolled over the future payment date. Worldwide has established that Ms Wang conducted transactions to the value of $1,310,729 that she mis-recorded in Worldwide’s system. Worldwide has established that Ms Wang was dealing with Worldwide’s money to the extent of $1,285,964.52. This arouses suspicion as to the remainder. Ms Wang undertook sales transactions as Worldwide’s agent. She was responsible for and had control of those transactions. She could and did take payments in cash or direct clients to pay into a bank account. Importantly, Worldwide’s evidence was that its clients usually pay at the time of booking. Worldwide has shown that it did not receive payment. The work of Mr Lu and Mr Graham has excluded Ms Wang’s
15 Above at [41] ($1,365,378.02 – $1,310,729).
16 Above at [44].
receipts that appear unrelated to Worldwide. Ms Wang’s only specific denial in her pleading was that the customers belonged to her. I have not accepted that, concluding that Ms Wang was an agent of Worldwide and owed a fiduciary duty not to profit from her position of trust (beyond her contractual remuneration).
[59] In those circumstances, I am willing to infer that the unaccounted for
$24,764.48 received into Ms Wang’s bank account also belonged to Worldwide. Accordingly, I conclude that the quantum of compensation to which Worldwide is entitled from Ms Wang under the first and second causes of action is $1,310,729.
Acknowledgement of debt
[60] Ms Wang admits she signed the acknowledgement of debt dated 2 March 2017 and admits its terms but says she signed under duress. This was not technically pleaded as an affirmative defence, but I would have allowed an amendment given it was raised in her defence and was pleaded as an affirmative defence by Ms Jun. However, as duress is an affirmative defence, the defendant bears the onus. Ms Wang did not appear at the trial to advance any evidence in support of her pleaded allegation. Nor did Ms Jun. Therefore, the affirmative defence of duress was not made out. Indeed, the evidence of Mr Yu refuted it.
[61] The terms of the acknowledgement of debt record that Ms Wang admitted she embezzled company funds totalling $1,445,648.27. She undertook to repay that sum in instalments plus interest of 5 per cent per annum. Ms Wang has failed to make any payment.
[62] As there was no consideration shown in the document moving from Worldwide, it could only be enforceable if it were a deed. Mr Allan submitted that the acknowledgement of debt meets the requirements for a deed set out in s 9 of the Property Law Act 2007 as it is in writing, signed, witnessed and delivered. I note the acknowledgement of debt is entitled Letter of Undertaking and on its face does not purport to be a deed, but that is not fatal.17 I accept Mr Allan’s submission.
[63] Notwithstanding the sum stated in the acknowledgement of debt, Worldwide seeks the lesser sum of $1,435,708.95 under this cause of action, plus interest. This claim succeeds.
Claim against Ms Jun
[64] Worldwide claims $1,435,708.95 from Ms Jun in contract as guarantor of Ms Wang’s acknowledgement of debt dated 2 March 2017.
[65] Ms Jun admits signing the acknowledgement of debt as guarantor but pleads an affirmative defence that it was vitiated by duress. As I have said in relation to Ms Wang, duress is an affirmative defence and the defendant bears the onus. Ms Jun did not appear at the trial to advance any evidence in support of her affirmative defence. As indicated, the affirmative defence of duress was not made out. The evidence of Mr Yu refuted it.
[66] Worldwide is also entitled to judgment against Ms Jun for $1,435,708.95, plus interest.
Claim against Ms Lin
[67] Ms Lin represented herself at the trial. She understood she was entitled to an interpreter but due to her financial hardship she could not arrange one. I made clear that if she did not understand, we could pause and she could ask a question and that she could change her mind about an interpreter during the course of the hearing. In the event, Ms Lin was able to make submissions, cross-examine and give her own evidence sufficiently articulately in English.
[68] Worldwide’s claim against Ms Lin is that she received $558,468.50 of Worldwide’s money into her personal bank account from Ms Wang – by way of 371 bank transfers.18 Worldwide’s claim is for money had and received.19
19 Notwithstanding the prayer for relief which also seeks a declaration that money is held on trust.
[69] Worldwide accepted that for this claim to succeed against Ms Lin it must succeed against Ms Wang on the basis of fiduciary breach (as it has done). But Worldwide submitted that, in a money had and received claim, receipt by Ms Lin is sufficient and the Court need not examine Ms Lin’s conscience. In the alternative, Worldwide submitted that Ms Lin assisted Ms Wang to deceive ASB in relation to her gambling and in some cases used the money herself for gambling and personal expenses.
[70] Ms Lin’s response was that:
(a) She was never aware that Ms Wang was stealing money from Worldwide. Ms Wang had told her that the money was from her parents and Ms Lin had no reason to believe otherwise.
(b) She was only an intermediary and only held the money in her bank account for a short time before giving it back to Ms Wang. She did not retain the money or use the money herself.
(c) When she received money in her bank account, she was only holding it for Ms Wang temporarily and Ms Wang was always the owner of the money. Ms Lin’s position changed after receiving the money and it would be unfair to require her to pay it back in full.
(d) To impose liability on her as an innocent third party to pay the value of the money she received which was returned in full would be unfair and unjust.
Money had and received
[71] The common law action for money had and received is available in New Zealand.20 It is based on receipt of another’s money and the cause of action is complete when the money is received.21 As the Court of Appeal said in Napier v
20 Napier v Torbay Holdings Ltd [2016] NZCA 608, [2017] NZAR 108 at [18]; and Martin v Pont
[1993] 3 NZLR 25 (CA).
21 Nimmo v Westpac Banking Corporation [1993] 3 NZLR 218 at 238 (HC).
Torbay Holdings Ltd, it is a personal claim, not a proprietary or in rem claim.22 It does not depend on proof of any wrongdoing or impropriety on the part of a recipient. It does not turn on the continued existence or retention of the money received. Although unjust enrichment may be seen as underpinning a claim for money had and received, there is no actual requirement of unjust enrichment.
[72] The underpinning unjustness has been highlighted in other cases as being receipt of money by a defendant who no longer has the right to retain it or has improperly disposed of it.23
[73] I observe that it is necessary to keep in mind the different categories of money had and received cases.24 More often, they are cases against a person who has received money directly from the claimant, for example where money is paid under a mistake of fact or for consideration that has failed. Another category is misappropriation by the defendant, as in Napier. But the cause of action extends to claims, as here and in Lipkin Gorman v Karpnale Ltd,25 where the defendant recipient has not received the money directly, but from another party, although successful cases are rare. One reason may be that this common law remedy is dependent on being able to trace a physical asset from one recipient to another,26 and the traditional view that at common law property in money, like other fungibles, is lost as such when it is mixed with other money.27 I will return to this aspect below.
[74] In Lipkin Gorman, Lord Templeman considered that in a claim for money had and received by a thief, the plaintiff victim must show that money belonging to him was paid by the thief to the defendant, and that the defendant was unjustly enriched
22 Napier v Torbay Holdings Ltd [2016] NZCA 608, [2017] NZAR 108 at [21]; and Agip (Africa) Ltd v Jackson [1989] 3 WLR 1367 (Ch) at 1380.
23 Nimmo v Westpac Banking Corporation [1993] 3 NZLR 218 (HC) at 238; and Torbay Holdings Ltd v Napier [2015] NZHC 2477 at [166]- [167].
24 I note, without joining the debate, the exhortation by the learned authors of Goff & Jones, [Charles Mitchell, Paul Mitchell and Stephen Watterson Goff & Jones the Law of Unjust Enrichment (9th ed, Thomson Reuters, London, 2016) at 1-36], that 150 years after the abolition of the forms of action, it would be desirable for claimants to abandon the old language of the forms of action when pleading claims in unjust enrichment, saying the old language conceals as much as it reveals about the nature of a claim. These words were quoted with approval (in relation to quantum meruit) in Benedetti v Sawiris [2013] UKSC 50, [2014] AC 938 at [178].
25 Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 (HL).
26 Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 (HL); and Torbay Holdings Ltd v Napier [2015] NZHC 2477 at [171].
27 Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 (HL) at 572 per Lord Goff of Chieveley.
and remained unjustly enriched.28 An innocent recipient of stolen money will be enriched if the recipient has not given full consideration. Complications arise if the recipient is the donee of a gift and innocently expends the stolen money, altering his or her position.
[75] Lord Goff of Chieveley considered that in these cases (where the defendant is a third party who has not received the money directly from the claimant) the action for money had and received is not usually founded upon any wrong by the third party. It is founded simply on the fact that the third party cannot in conscience retain the money – or, as we say nowadays, for the third party to retain the money would result in his unjust enrichment at the expense of the owner of the money.29 In the case of an innocent defendant, Lord Goff considered that there could be a change of position defence, available to a person whose position has so changed that it would be inequitable in all the circumstances to require him to make restitution, or alternatively to make restitution in full.30 His Lordship stressed, however, that the mere fact that the defendant has spent the money, in whole or in part, does not of itself render it inequitable, because the expenditure might in any event have been incurred in the ordinary course of things.
[76] The Court of Appeal in National Bank of New Zealand Ltd v Waitaki International Processing (NI) Ltd adopted Lipkin Gorman and held that the change of position defence applies in New Zealand.31
[77] Based on these authorities, I conclude that an honest belief that money received was not stolen does not provide a defence to a money had and received claim. However, a money had and received claim may not be available where an innocent recipient has given full consideration or changed his or her position such that it would be inequitable in all the circumstances to require restitution.
28 Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 (HL) at 560.
29 At 572.
30 At 580.
Tracing at common law
[78] Tracing at common law is neither a cause of action nor a remedy, but serves an evidential purpose.32 The scope of the common law right to trace in the age of electronic bank transfers has been uncertain because equity’s ability to trace into a mixed fund has made it almost redundant. However, in this case Worldwide has not pursued Ms Lin in equity (for knowing receipt, for example).
[79] In Agip (Africa) Ltd v Jackson, Millett J stated that money could be followed at common law into and out of a bank account and into the hands of a subsequent transferee, provided that it did not cease to be identifiable by being mixed with other money in the bank account derived from some other source.33 In that case, the claim for money had and received was defeated because the money could not be followed by treating it as the proceeds of a cheque presented by a collecting bank in exchange for payment by a paying bank, transmitted by electronic transfer. Nothing passed between the banks but a stream of electrons.34 That led Blanchard J to comment in Nimmo v Westpac Banking Corporation that it had been said that common law tracing is defeated by a transmission of funds electronically.35
[80] As the cause of action for money had and received is complete when money is received, mixing by Ms Lin herself in her account is irrelevant.36 But, according to these authorities, mixing by Ms Wang before transfer to Ms Lin may destroy the claim.37
[81] I do not consider that transmission of funds electronically necessarily defeats tracing at common law. This case does not involve international inter-bank transfers through a bank clearing system such as those in Agip and Nimmo (Nimmo also involved an inter-company transfer, presumably by book entry).
32 Agip (Africa) Ltd v Jackson [1990] Ch 265 (Ch) at 285.
33 At 285.
35 Nimmo v Westpac Banking Corporation [1993] 3 NZLR 218 (HC) at 238.
36 Agip (Africa) Ltd v Jackson [1990] Ch 265 (Ch) at 285.
37 In Torbay Holdings Ltd v Napier, Woolford J said these rules did not apply where the funds are mixed prior to the payment which constitutes receipt, citing ASB Securities Ltd v Geurts [2005] 1 NZLR 484 (HC) at [57], but I understand that to mean mixed prior to the payment which constitutes the mistake or misappropriation, as the case may be.
[82] Moreover, I consider that there is now only one set of tracing rules, applicable to common law and equitable claims alike. That was the position reached by Lord Steyn and Lord Millett in Foskett v McKeown.38 Their comments were obiter, but there is much academic support for this conclusion.39
[83] Taking this approach, and applying well accepted equitable tracing rules to a common law claim, it is possible to trace through inter-account bank transfers, so as to identify the credit to the transferee’s account as the product of the debit to the paying customer’s account, whether the transfer is “in-house” or “inter-bank”, and in the latter case, regardless of the particular process by which the inter-bank payment process operates.40
[84] Tracing (as opposed to following) assets is the process of identifying a new asset as the substitute for the old.41 Where the amounts and timing of credits into and debits from a bank account differ, it will be a matter of evidence and inference as to whether the debits credited to a third party are a substitute for the credits. A pragmatic approach is appropriate. But I do not consider that the onus on a fiduciary who has mixed funds held on trust with his or her own funds applies, such that the fiduciary must establish that part, and what part, of the mixed fund is his or hers.42
38 Foskett v McKeown [2000] UKHL 29; [2001] 1 AC 102 (HL) at 113 per Lord Steyn and 127-9 per Lord Millett.
39 See, for example, Lionel D Smith The Law of Tracing (Clarendon Press, Oxford, 1997) at 162- 174; Peter Birks 'The Necessity of a Unitary Law of Tracing' in Ross Cranston (ed) Making Commercial Law, Essays in Honour of Roy Goode (Clarendon Press, Oxford, 1997) at 258; Simon Baughen Tracing a Future for the Common Law: the Action for Money Had and Received After Foskett v McKeown (2002) 31(2) CLWR 165 at 165-166; and Charles Mitchell, Paul Mitchell and Stephen Watterson (eds) Goff & Jones The Law of Unjust Enrichment (9th ed, Thomson Reuters, London, 2016) at 7–18. For a contrary view, see Shalson v Russo [2003] EWHC 1637 (Ch), [2005] CH 281 at [103]- [104] where Rimer J concluded that Foskett v McKeown had not ‘swept away’ the distinction between common law and equitable tracing. While it is true the proposition I have adopted is not the ratio of that case, which is what I take Rimer J to be saying, I nonetheless adopt it as a correct and desirable statement of the law.
40 Agip (Africa) Ltd v Jackson [1990] Ch 265 (Ch) at 289-290 and [1991] Ch 547 (CA) at 566-567; El Ajou v Dollar Land Holdings plc [1993] EWCA Civ 4; [1994] 2 All ER 685 (CA); Foskett v McKeown [2000] UKHL 29; [2001] 1 AC 102 (HL); Relfo Ltd (in liquidation) v Varsani [2014] EWCA Civ 360, [2015] 1 BCLC 14; and Federal Republic of Brazil and another v Durant International Corpn [2015] UKPC 35, [2016] AC 297. See Charles Mitchell, Paul Mitchell and Stephen Watterson Goff & Jones the Law of Unjust Enrichment (9th ed, Thomson Reuters, London, 2016) at 7-32.
41 Foskett v McKeown [2000] UKHL 29; [2001] 1 AC 102 (HL) at 127 per Lord Millett.
42 Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2011] EWCA CIV 347, [2011] 3 WLR 1158 (overruled but not on this finding). Even in the case of a fiduciary, the Privy Council in Ryde Holdings Ltd v Rainbow Corporation Ltd [1993] UKPC 40 stated that if it is possible to tell with tolerable certainty that, whatever may be the amount of the trustee’s profits, it cannot have excluded a particular figure, that figure and no more should be awarded.
[85] In Torbay Holdings Ltd v Napier, Woolford J limited tracing on the money had and received claim against defendants liable without proof of fault to money paid directly into their accounts where no complex questions of tracing arose.43
Ms Lin’s receipt
[86] Ms Lin did not plead to the allegation that she received $558,468.50 of Worldwide’s money into her personal bank account from Ms Wang. Mr Allan submitted that as a consequence the allegation is admitted.44 At trial, Mr Lu’s analysis of Ms Wang’s bank account identified transfers from Ms Wang’s ASB account to Ms Lin’s ASB account totalling $558,468.50 in 371 individual transfers between December 2014 and January 2017. Ms Lin did not dispute that she received transfers into her account, but she said that she honestly believed those funds belonged to Ms Wang. She now accepts the funds were Worldwide’s, but says that was not her understanding at the time. Her case is that she was an innocent recipient. Further, her position is that that in many instances the transfers were fleeting in that she withdrew the money immediately from her account at SkyCity and gave it to Ms Wang so she could gamble.
[87] Ms Lin admits that she withdrew not less than $604,994 from her account at SkyCity between December 2014 and January 2017, including $46,525.50 of her own money in addition to the funds transferred from Ms Wang.
[88] I consider that Ms Lin received amounts totalling $558,468.50 into her bank account from Ms Wang irrespective of whether she withdrew a corresponding amount in cash soon after receipt and gave it to Ms Wang. There may be cases where money passes momentarily through a bank account without being in the control of the account holder such that it might not be received at all, but I conclude this case is better considered in terms of whether there was repayment to Ms Wang and, if so, whether that precludes relief. I deal with this further below.
43 Torbay Holdings Ltd v Napier [2015] NZHC 2477 at [175].
44 High Court Rules 2016, r 5.48(3).
[89] Ms Lin does not dispute that Ms Wang had funds that belonged to Worldwide. But, particularly bearing in mind Ms Lin’s unrepresented status, I proceed to examine the evidence presented showing how the money can be traced to Ms Lin’s account.
Whether the money transferred to Ms Lin belonged to Worldwide or Ms Wang – essentially a tracing issue
[90] Worldwide’s evidence did not specifically seek to match Ms Wang’s bank account receipts of money belonging to Worldwide (by electronic transfers directly from customers or by cash deposits received from them) with transfers to Ms Lin. Indeed, that would have been difficult as the 371 transfers from Ms Wang’s account to Ms Lin’s account were of round number amounts that would likely not correspond directly with customer payments into Ms Wang’s account. Inevitably, there was mixing of funds in Ms Wang’s account. While this may have been problematic applying the traditional view of common law tracing, I have concluded that there is no such constraint on tracing here.
[91] I consider that applying contemporary tracing rules Worldwide’s money can be traced through Ms Wang’s account to Ms Lin’s account.
[92] Although there were many other transactions into and out of Ms Wang’s ASB bank account, Ms Wang repeatedly received funds belonging to Worldwide into her account and made withdrawals from the credit balance for her own gambling and by way of transfer to Ms Lin in rounded sums of between $100 and $5,000, often more than once a day when they were gambling.
[93] Ms Wang’s balance in her 00 account was generally modest. When she received larger sums, she often transferred a substantial part to her other accounts. I am satisfied that the money Ms Wang transferred to Ms Lin was misappropriated from Worldwide. The only exceptions evident from my review of Mr Graham’s work, where the transfers to Ms Lin are traceable from unchallenged receipts by Ms Wang, are Ms Lin’s receipts from 30 December 2015 to 2 January 2016, totalling $11,700, which are traceable from Ms Wang’s unchallenged receipt of $76,632 from Li He Ming on 30 December 2015. Therefore, I consider that Worldwide can trace
$546,768.50 of its money through Ms Wang’s account to Ms Lin’s receipts.
Whether Ms Lin has given full consideration or changed her position
[94] I have concluded that an honest belief that money received was not stolen does not provide a defence to a money had and received claim. But Ms Lin’s belief may still be relevant to the remaining issue, which is whether Ms Lin has given full consideration or changed her position such that it would be inequitable in all the circumstances to require restitution. Although it may make no difference, I note that I consider Ms Lin has the burden of proof on these matters, as they are in the nature of defences.45
[95] Worldwide submitted that Ms Lin assisted Ms Wang to deceive ASB in relation to her gambling and in some cases used the money herself for gambling and personal expenses. Mr Allan characterised both aspects as ‘use’ of Worldwide’s money. He submitted Ms Lin did not receive the money in good faith and for valuable consideration, resulting in unjust enrichment at Worldwide’s expense.
[96] As to assisting to hide Ms Wang’s gambling from ASB, Ms Lin said she found out that Ms Wang, like her, had a gambling habit and was using her parents’ money for gambling. Having lost nearly half of her parents’ money, Ms Wang needed to borrow from the bank to buy a house. Ms Lin acknowledged that Ms Wang told her that a mortgage broker’s advice had been to minimise withdrawals at SkyCity particularly in the period before Ms Wang submitted a loan application to ASB. Ms Wang asked Ms Lin if she could transfer money to Ms Lin’s account and get cash so the withdrawals at SkyCity did not show on Ms Wang’s bank statement. Ms Lin agreed. Ms Lin said this arrangement with Ms Wang began in early 2015 and continued through 2016, even though she asked Ms Wang to stop after ASB had queried the transactions. Ms Lin said that sometimes she allowed Ms Wang to withdraw the cash herself using Ms Lin’s bank card if Ms Lin was busy gaming. Ms Chiang, a friend of Ms Lin’s, confirmed an example of this.
45 Although I note there is some controversy as to whether these are defences or denials of parts of the cause of action, I agree with the authors of Goff & Jones that they are better characterised as defences: Charles Mitchell, Paul Mitchell and Stephen Watterson Goff & Jones the Law of Unjust Enrichment (9th ed, Thomson Reuters, London, 2016) at 1-28–1-32.
[97] While such an arrangement may well have made Ms Lin a party to misleading the bank, particularly when Ms Lin explained the transactions to ASB on the basis that Ms Wang was her friend and had forgotten her bank card, I do not consider that affects whether it is inequitable for her to make restitution to Worldwide. It would of course be different if her knowledge extended to the fact that the money was stolen from Worldwide. Then she would not be an innocent recipient receiving the money in good faith.
[98] As to Worldwide’s submission that Ms Lin used the money herself, Worldwide disputes Ms Lin’s evidence that when Ms Wang transferred money into her account she immediately withdrew it and gave cash back to Ms Wang. Ms Lin accepted in cross-examination that in some instances she used the money deposited by Ms Wang. Ms Lin said that she always paid Ms Wang back straight away, in 95 per cent of cases by cash withdrawal but in other cases with other money of her own or by selling personal items to each other. Insofar as repayment occurred, Ms Lin effectively gave consideration and I consider it would be inequitable to require her to make restitution to Worldwide. If Ms Lin used money received from Ms Wang for gambling herself or for personal expenses, she has not given full consideration nor changed her position and would be required to make restitution to Worldwide.
[99] Cross-examination matching the ASB bank statements and the SkyCity gaming records provided the following examples:
(a) Ms Lin’s first two receipts from Ms Wang were on 16 December 2014, totalling $2,000. According to Ms Lin, the arrangement with Ms Wang began in early 2015 so these receipts are not explicable on that basis. They appear to have been used for Ms Lin’s own expenses. Ms Lin had lost almost $20,000 gambling in the preceding week and this ASB account had a very small balance.
(b) Ms Lin’s next four receipts, on 21 December 2014, totalling $3,600, were all matched with corresponding withdrawals – within minutes – at SkyCity referenced SKYCITY VIPBLACK CASHAUCKLAND. Again, they are not explicable on the basis of the arrangement with
Ms Wang which Ms Lin said began in early 2015. Ms Lin had lost over
$14,000 gambling since 16 December 2014 and again her account had a very small balance.
(c) Her two receipts on the evening of 14 February 2015, totalling $2,000, were matched with a corresponding series of withdrawals that night or the next day, totalling the same amount, also referenced SKYCITY VIPBLACK CASHAUCKLAND. Ms Lin had lost over $10,000 gambling on 12 February 2015 and over $6,000 on 14 February 2015 before the transfer from Ms Wang. Again, her account had a very small balance at the time of the transfers. Ms Wang was likely not gambling at SkyCity that day, in which case these receipts are also not explicable on the basis of their arrangement. Ms Lin’s suggestion that Ms Wang might have been gambling then as they did not always use their loyalty cards, due to a concern that the casino can control the machine, seems very unlikely given their extensive use of the loyalty cards overall.
[100] These instances traversed in oral evidence do not support Ms Lin’s explanation. However, they make up only a small proportion of the 371 receipts into Ms Lin’s account and were all in the early period from December 2014 to February 2015. By themselves, they do not lead me to infer that Ms Lin’s explanation is incorrect.
[101] Review of the relevant receipts and withdrawals from Ms Lin’s account indicates that, of the $546,768.50 of Worldwide’s money that Ms Lin received into her account from Ms Wang:
(a) Ms Lin transferred $20,000 back to Ms Wang’s account. In this respect, Ms Lin gave full consideration and I consider it would be inequitable to require her to make restitution to Worldwide.
(b) In relation to the remaining receipts, a corresponding (or occasionally greater) withdrawal or series of withdrawals almost always occurred
soon after – usually within minutes – at SkyCity.46 Only $24,628.50 of the remaining $526,768.50 received was not matched with such corresponding withdrawals.
(c) There were about 165 instances from March 2016 onwards of a receipt by Ms Lin from Ms Wang occurring when Ms Lin’s bank account was overdrawn, so the receipt immediately repaid Ms Lin’s overdraft. In aggregate, the amount of overdraft repaid was $76,241.78. The corresponding withdrawal at SkyCity, as mostly occurred, would have taken the account back into overdraft (unless there was another credit in the meantime).
[102] The inference to be drawn from the corresponding withdrawals depends on what they were. The vast majority were referenced SKYCITY VIPBLACK CASHAUCKLAND. The evidence from ASB witnesses indicated these were electronic EFTPOS transactions at SkyCity. Worldwide submitted these were transfers to Ms Lin’s VIP BLACK CASH loyalty card, which she used to gamble. Ms Lin said she withdrew cash at the VIP Black cashier, which she gave to Ms Wang. Ms Zheng of ASB, who explained transactions she had included in a suspicious transaction report, thought the transactions were physical cash withdrawals using Ms Lin’s ASB Cashflow card. If so, the reference to SKYCITY VIPBLACK CASHAUCKLAND may be a reference to the EFTPOS machine in the VIP room rather than the loyalty card. There were similar transactions by Ms Wang with the same SKYCITY VIPBLACK CASHAUCKLAND reference, which appeared to use her ASB card.
[103] On the other hand, if the transactions used the VIP BLACK CASH loyalty card, Ms Lin’s explanation would only be possible if that loyalty card could be used to obtain cash as well as for gambling and purchases at SkyCity. Mr Reid from SkyCity said the SkyCity VIP Black card could be used to obtain cash. But the transactions do not seem to appear on SkyCity’s records of deposits onto and withdrawals from Ms Lin’s loyalty card. It would also seem unnecessary to transfer money at an
EFTPOS terminal from a Cashflow bank card to a loyalty card in order to obtain cash, rather than withdraw cash directly from the bank card at the same EFTPOS terminal. There was no suggestion such a convoluted transaction offered a loyalty benefit.
[104] I consider that Ms Lin likely withdrew cash at SkyCity rather than transferred credit to her SkyCity loyalty card. The bank details do not assist, however, in determining whether Ms Lin gave the cash to Ms Wang or used it herself.
[105] As indicated, Ms Wang had similar transactions with the same SKYCITY VIPBLACK CASHAUCKLAND reference. Among Ms Wang’s many debits at SkyCity, debits with this reference began in October 2014 and continued regularly through 2015 and 2016. Commonly Ms Wang made such withdrawals of $1,000 at a time, several times a day, when Ms Lin was also gambling at SkyCity. For example, on the nights of 27 and 28 January 2016, Ms Lin received $12,000 from Ms Wang in seven transactions and made seven corresponding withdrawals with the same reference within minutes of each receipt. During the same period, Ms Wang made five withdrawals totalling $8,000 with the same reference. In January 2016 overall, the month when Ms Lin received the most from Ms Wang ($70,000) and had corresponding withdrawals at SkyCity for most of it, Ms Wang also withdrew $73,300 with the same reference. This is inconsistent with Ms Lin’s explanation of their arrangement, which she said was to enable Ms Wang to avoid withdrawals at SkyCity showing on Ms Wang’s bank statement. The fact that corresponding withdrawals occurred on 21 December 2014, even before the arrangement was said to begin, and on 14 February 2015 (and 9 December 2016) when Ms Wang was likely not gambling, also casts doubt on it as the explanation. Absent that explanation, the inference may well be that the money was being used to fund gambling by them both. An innocent explanation based on daily withdrawal limits appears unlikely given the more elaborate explanation given. Both were losing money gambling at SkyCity. Over the 27 and 28 January 2016 period referred to, Ms Lin lost $3,702 and Ms Wang lost
$18,870 and over the month of January 2016 Ms Lin lost over $32,000 and Ms Wang lost over $200,000. This would suggest the majority of the funds were exhausted by Ms Wang’s gambling. But does it mean that Ms Lin has given full consideration or changed her position such that it would be inequitable in all the circumstances to require restitution?
[106] Stepping back, Ms Lin was also gambling heavily at SkyCity. She lost a total of $947,383 gambling at SkyCity between 2010 and 31 March 2017. Her losses were not broken down by period, but at least a fair proportion of the total must have been lost during the period of the receipts from Ms Wang from December 2014 onwards. Ms Lin made a passing reference to finding out that Ms Wang, like her, had a gambling habit and was using her parents’ money for gambling, but she gave no real explanation as to the extent of her funds used for gambling. She generally had a small balance in her ASB account and made modest transfers from her other accounts. Also, her denial in cross-examination that Ms Wang transferred her money when she needed it was inconsistent with her earlier evidence that they lent each other small amounts when short of cash.
[107] In all the circumstances, I infer that at least some of the money received from Ms Wang was used for Ms Lin’s own gambling. On the evidence, I cannot ascertain with any precision how much of the total received by Ms Lin was effectively repaid to Ms Wang. The funds were likely used by them both to gamble at SkyCity. Ms Lin therefore did not repay all the money. She did not give full consideration. The fact that Ms Lin used at least some of the money herself also undermines her explanation substantially. That, together with my other findings, leads me to conclude that she likely suspected that Ms Wang was not transferring her own money – at least when ASB contacted her to query the transactions. Ms Lin said she told Ms Wang to stop after her honeymoon in early 2016, but the receipts continued for another year.
[108] In all the circumstances, I am satisfied that Ms Lin is not an innocent recipient who has given full consideration or changed her position such that it would be inequitable to require restitution. I reach that conclusion whether or not the burden is on Ms Lin. The exception is the $20,000 clearly transferred back to Ms Wang’s account.
Result
[109] Subject to a maximum total recovery of $1,435,708.95 (including any recovery from ASB Bank), Worldwide is entitled to judgment as follows:
- (a) against Ms Wang on the first and second causes of action for
$1,310,729;
(b) against Ms Wang on the third cause of action for $1,435,708.95 plus interest;
(c) against Ms Lin for $526,768.50; and
(d) against Ms Jun for $1,435,708.95 plus interest.
[110] The parties did not address costs. My preliminary view is that Worldwide is entitled to costs on a 2B basis plus disbursements. If costs cannot be agreed, Worldwide is to file and serve a memorandum within 21 days and any memoranda in response are to be filed and served 14 days after service of Worldwide’s memorandum.
Gault J
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