In recent months our papers have carried stories of the employee of Leighton Holdings who is said to have systemically taken some $20million from his employer over several years, and of Supreme Court proceedings in which the Public Trustee of Qld sought to recover some $3million taken from a mentally impaired man and then siphoned overseas.
Further south, there continues to be a steady stream of reported and unreported decisions of the Supreme Court of New South Wales, adjudicating attempts by banks and employers to recover funds taken by identity and cheque fraud.2
The increasing use of EFT and on-line banking, coupled with an aging population, means that cases of this kind are likely to continue to present themselves in coming years.
Whilst many of these cases end up as criminal prosecutions, in some the victim will wish to bring civil claims to recover what has been lost. However, fraud is not part of the bread and butter of civil practice, and few of us have first-hand familiarity with the law of fraud as it applies in a civil context.
This paper seeks to identify some of the key legal principles and practical issues that may arise if you are instructed by a client who wishes to trace and recover the proceeds of fraud in the civil courts. The paper is based around my own learning experience when presented with just such a client.
The starting point: Black v Freedman
The starting point remains the High Court’s decision in Black v S Freedman & Co (1910) 12 CLR 105.3
John Black was employed by S Freedman & Company. From 1907 he began stealing money from his employer, and took considerable sums over the next three years. Black later absconded, but was captured and arrested. Black’s wage was only £4 per week, but the evidence showed that he had paid several hundred pounds to wife, Isabella Black. Questions arose as to the employer’s right to claim any money from Isabella Black, who was not herself involved in the theft. Griffith CJ, Barton J and O’Connor J held that it could be inferred that the money that Isabella Black had received from her husband had been stolen by him, and that S Freedman & Company could recover the money from her. The critical passage in the judgment is that of O’Connor J, who said as follows (at p 110):
Where money has been stolen, it is trust money in the hands of the thief, and he cannot divest it of that character. If he pays it over to another person, then it may be followed into that other person’s hands. If, of course, that other person shows that it has come to him bona fide for valuable consideration, and without notice, it then may lose its character as trust money and cannot be recovered. But if it is handed over merely as a gift, it does not matter whether there is notice or not.
Importantly, the High Court did not suggest that John Black’s fiduciary relationship with S Freedman & Company was a necessary element to the tracing claim. The basis for the conclusion that the money was held on trust by John Black and could be traced into the hands of Isabella Black, was that it had been acquired by fraud, and not that it had been taken in breach of fiduciary duty.
This is how the case has been subsequently interpreted. Australian law has, in this respect, not been complicated by the debates that have dogged English law in recent years, as to whether fraud unaccompanied by a breach of fiduciary duty is sufficient to permit a tracing claim, and as to whether generalized pronouncements of the kind made by O’Connor J in Black v Freedman, are in fact too widely expressed.4
What counts as “fraud”?
Whilst O’Connor J spoke in terms of money that had been “stolen”, the authorities since that time appear to indicate that any dishonest taking or receiving of money will trigger a constructive trust: 
see eg. Bank of America v Arnell [1999] Lloyds Rep Bank 399 (recipient of money aware payer’s mistake due to fraud of another); Robb Evans v European Bank Ltd (2004) 61 NSWLR 75, [111], [113] (CA) (proceeds of credit card fraud); Westpac Banking Corporation v Ollis [2007] NSWSC 956, [18], [29]-[32] (exploiting bank error by writing ‘an avalanche’ of cheques); Wambo Coal Pty Ltd v Ariff (2007) 63 ACSR 429, [40] (Sup Ct NSW) (paying away money knowing it was received by mistake); Heperu Pty Ltd v Belle (2009) 76 NSWLR 230, [92]-[93] (CA) (proceeds of misappropriated cheques).
It seems that in determining what constitutes “dishonesty” for the purposes of the principle, the body of case law establishing what counts as “dishonesty” in the crime of fraud may be applied by analogy.5
This rather generalized right to bring an equitable tracing claim founded upon the dishonest taking of money, or (if legal title passes) property, [6] stands in sharp contrast to other much more closely proscribed causes of action that are founded upon dishonesty. The three familiar instances are as follows:
(a) damages for the tort of deceit: this requires proof that the plaintiff suffered loss by reason of a fraudulent representation made by the defendant, that the defendant intended the plaintiff to rely upon.7 In contrast, a representation and reliance does not need to be established for a tracing claim founded upon fraud;
(b) fraudulent misrepresentation permitting the rescission of a contract: here again, the orthodox view is that a representation must be proved;8
(c) dishonest assistance in a breach of trust: this requires proof of a pre-existing trust of the relevant assets, or perhaps a pre-existing fiduciary relationship.9 Neither a prior trust, or fiduciary relationship, needs to be proved for a tracing claim founded upon the fraudulent taking of money or property.
Tracing the proceeds of fraud
Tracing “Tracing” has been said to be neither a claim nor a remedy, and is rather the process by which a claimant demonstrates what has happened to its property, identifies its proceeds and the persons who have handled or received them. The successful completion of a “tracing exercise” may be a preliminary to the making of a personal or proprietary claim, to the extent either is available: Foskett v McKeown [2001] 1 AC 102 at 128 per Lord Millett, approved and applied in Robb Evans of Robb Evans and Associates v European Bank Limited [2004] NSWCA 82 at 103 [133] (Spigelman CJ, with whom Handley JA and Santow JA agreed), and Heperu Pty Ltd v Belle (2009) 76 NSWLR 230 at [89] (CA) (Allsop P, with whom Handley and Campell JAA agreed).10
The leading text on the law of tracing is still probably Lionel Smith’s seminal work, The Law of Tracing (OUP, 1997).11
Tracing in cases of fraud The approach adopted where the proceeds of fraud are traced were recently summarized by Allsop ACJ in Toksoz v Westpac Banking Corporation (2012) 289 ALR 557, 579-80 (NSWCA) (in the context of a bank’s claim against the wife of a thief who had stolen some $1million by identity fraud):
[8] Money can be traced notwithstanding an inability of the follower to connect each link in the chain of accounts. Commonsense and reasonable inference play their part, especially if there is fraud involved and if there is a lack of explanation, when the circumstances cry out for honesty to be explained, if it can be.
[9] A number of cases reveal a sensible robust approach to the tracing of moneys from theft: R v Powell (1837) 7 Car & P 640 ; 173 ER 280; Harford v Lloyd (1855) 20 Beav 310 ; 52 ER 622; Black; Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 ; [1992] 4 All ER 512; El Ajou v Dollar Land Holdings Plc [1993] 3 All ER 717 ; and see the discussion in L D Smith, The Law of Tracing, Clarendon Press, Oxford, 1997, p 263 and the other cases there cited. The expression “tracing by exhaustion” is sometimes used. Where the facts as proved are sufficient to permit the inference that moneys have been received or property bought without there being an honest source available to explain the wealth and the sums or value can be seen as referable to the following party’s property wrongfully obtained, such that the inference is open that the wrongfully obtained funds were the source of the wealth, the funds can be so treated. One does not need to be able to show every link in the chain of accounts from and through which the money passed. Inferences will be more easily drawn, as here, in circumstances where the funds were stolen, the person who is said to have provided the funds was one of the thieves who stole money from the follower, when the recipient has an apparent close relationship with the thief, which recipient gave no value for it, has no personal source of income and gives no explanation as to the source or circumstances of the receipt of the money or any honest source of it.
[10] None of this is the expression of a principle of law. It is the expression of the available approach to fact finding in the presence of fraud and lack of explanation when plainly called for.
Constructive trust The claim asserted will usually be for the declaration of a constructive trust over identified assets in the hands of the defendant(s), or perhaps assets to be identified, together with ancillary orders to give effect to the trust. The ancillary orders will include orders adapted to the delivery over of possession and legal title to the relevant assets, to the plaintiff as beneficial owner.
Charge Where the target asset has been acquired in part using misappropriated funds and partly with other monies, the plaintiff is entitled to claim either a proportionate beneficial interest in the asset, or a charge to the extent of his money that has been applied to acquire the asset: Allianz Australia Insurance Limited v Rose Marie Lo-Guidice [2012] NSWSC 145 at [32], [33] (cheque fraud).
In practice, a charge will be claimed if the asset has decreased in value since the date of acquisition, and proportionate beneficial ownership will be asserted where it has increased in value.
Overseas assets A proprietary interest can be asserted even over assets located overseas, as long as the owner or custodian of the assets is subject to the jurisdiction of the Queensland court: Ewing v Orr Ewing (1883) 9 App Cas 34, 40; also, Macmillan Inc v Bishopgate Investments Trust plc [1996] 1 WLR 387, 398F-G, 408 (CA). Nor is it necessary for the law of the place where the assets are located to recognize equitable rights or the concept of a trust, before an equitable interest may be asserted: El Ajou v Dollar Land Holdings plc [1993] 3 All ER 717, 736-7 (Ch D) per Millett J (rev on other grounds); L Smith, The Law of Tracing (OUP, 1997) p 277; also, Virtel Limited v Zabusky [2006] 2 QdR 81, [62]-[63] per de Jersey CJ.
Personal claim An important claim in this context, is the constructive trustee’s personal obligation to account for the value of the property received.12 So, if the fraudster (or, perhaps, a third party recipient compelled to hold as trustee) pays away the money obtained, so that there remain no traceable proceeds over which a trust can be asserted,13 he or she will be subject to a personal obligation to account for the value of that property: Lurgi (Australia ) Pty Ltd v Gratz [2000] VSC 278, [79], [80], [85]; Wambo Coal Pty Ltd v Ariff (2007) 63 ACSR 429, [64] (Sup Ct NSW). Indeed, causing the money to be paid away is likely to be a breach of the constructive trustee’s obligation to get in the trust estate, and to return it to the beneficial owner: Lurgi (Australia ) Pty Ltd v Gratz [2000] VSC 278, [79]; Robb Evans v European Bank Ltd (2004) 61 NSWLR 75 at [116], [162] (CA); Heperu Pty Ltd v Belle (2009) 76 NSWLR 230 at [114] (CA).
Where it is money that has been taken, a claim for money had and received will also lie against the recipients of the misapplied fund (save for a bona fide purchaser for value).14
Advantages of a tracing claim
The main advantages of a tracing claim in the context of fraud are as follows.
First, where proceeds can be traced and identified and a proprietary interest asserted over them, the claimant will rank ahead of all unsecured creditors in respect of those assets. Where the defendant is insolvent (as will often be the case in fraud cases), a proprietary claim will usually be the only claim of value.
Second, a wider range of remedial orders can be sought, in order to vindicate the proprietary interest. Orders for delivering possession and title to identified assets will be made, and an injunction may be ordered or even a receiver appointed, either at an interlocutory stage or in aid of execution, where appropriate.15
Third, a tracing claim has the advantage that it will often permit a claim to be brought against third parties. As O’Connor J explained in Black v Freedman, the money or property taken can be traced into the hands of all third party recipients, save those who can establish that they are bona fide purchasers for value. This effectively increases the size of the asset pool against which recovery can be sought.
Key practical issues
First issue: protecting assets and obtaining information
In cases of fraud, urgent steps will usually need to be taken to gain information as to where the relevant assets are, and to preserve them if possible. The English courts developed several types of interim order directed to that end, and they are now well established in Queensland.
Freezing order The order most commonly sought to protect assets is a freezing order. A freezing order is not an injunction, and is not an order made in respect of any particular property; it simply binds the respondent personally, ordering him or her to not deal with their property otherwise than according to the terms of the order.16
In Queensland, the procedure and the usual form of the order are set out in a comprehensive practice direction, which is modeled on the English practice (number 1 of 2007, which should be read with rule 260A of the Uniform Civil Procedure Rules 1999).
To obtain a freezing order, an a pplicant must show a good arguable case on an accrued or prospective cause of action, and prove that there is a danger that a judgment or prospective judgment will be wholly or partially unsatisfied because the judgment debtor might abscond or their assets might be removed from Australia or disposed of, dealt with or diminished in value: see UCPR r 260A(1).
The second requirement, of risk of dissipation, tends to be easier to prove if there is evidence of fraud, and there is some authority that if dishonesty can be shown, this alone is sufficient to give rise to an inference that assets may be dissipated or disposed of.17
Asset disclosure order An ancillary order requiring a respondent to disclose the value and location of their assets is regularly made,18 particularly where a prima facie case of fraud is shown. Rule 260B(2)(a) of the UCPR makes provision for this type of order, and it is reflected in the terms of the pro-forma order in the practice direction (para 8 and 9).
An order of this kind is of particular importance where the defrauded party wishes to undertake a tracing exercise. It may be the best, or indeed the only, practical means of locating the proceeds of the money or property taken.
Search order Whilst the Anton Pillar or search order is often associated with copyright cases, it is also now established that in appropriate circumstances, orders of this kind may be granted in fraud cases.
The purpose of the order is to preserve or secure evidence which is or may be relevant to an issue in proceedings or anticipated proceedings: rule 261A of the UCPR. There are three requirements for the order to be made, which are set out in rule 261B.19
Reference should also be made to rules 261 to 261F of the UCPR, and Practice Direction 2 of 2007, which provides a very detailed pro-forma form of order.
Again, evidence of fraud will tend to assist in satisfying the conditions for the making of a search order. One such condition is that “there is a real possibility that the respondent might destroy the material or cause it to be unavailable for use in evidence in a proceeding or anticipated proceeding before the court” (rule 261B(c)(ii)), and it has been said that:20
It has certainly become customary to infer the probability of disappearance or destruction of evidence where it is clearly established on the evidence before the court that the defendant is engaged in a nefarious activity which renders it likely that that he is an untrustworthy person. It is seldom that one can get cogent or actual evidence of a threat to destroy materials or documents. So it is necessary for it to be inferred from the material which is before the Court.
Restricting travel The UCPR gives the Supreme Court power to make an ancillary order restraining a defendant from leaving the jurisdiction and requiring the delivery up of any passports: see the last line of r 259(2)(c), and r 260B of the UCPR. [21] There is probably also an inherent power in the court to make the order.22
An order prohibiting a defendant from leaving the jurisdiction may be coupled with a further order that the defendant deliver up his or her passports to the person who serves the interim order on the defendant: Bayer AG v Winter [1986] 1 All ER 733.
References A useful reference is Biscoe, Freezing and Search Orders (Butterworths, 2008).
Second issue: concurrent criminal liability
The conduct that triggers the right to trace the proceeds of fraud in equity, will usually also involve the commission of a criminal offence; in particular, the crime of fraud,23 or the offence of stealing.24
This overlap with the criminal law raises two issues of practical importance.
First, the High Court’s decision in Reid v Howard (1995) 184 CLR 1 establishes that an ancillary order that the respondent swear an affidavit as to the whereabouts and value of his or her assets (discussed above), will not be made in terms that undermine the respondent’s right to claim privilege against self-incrimination. This restriction is, however, accounted for in the pro-forma order that forms part of our practice direction. It makes the obligation to swear an affidavit as to assets, subject to the entitlement to object to doing so on the ground that providing the information will tend to incriminate the respondent.
In Reid v Howard, the High Court left open the possibility that an asset disclosure order might still be made in the face of the assertion of the privilege against self-incrimination, if the police had given an undertaking not to use any disclosed information in criminal proceedings or investigations.25 Whilst there is English authority that this is possible,26 the point remains open in Australia, as also is the question of whether the QPS could properly give such an undertaking.
Second, if complaint is made to the police and a police investigation is commenced, or criminal proceedings are instituted, this will have implications for civil proceedings that may be commenced.
The reason is that in such a case, there is some prospect that the alleged fraudster will be able to successfully apply to stay the civil claim, until completion of the criminal proceedings, on the basis that this is necessary to preserve his privilege against self-incrimination, or otherwise to ensure that he or she receives a fair trial.27
The relevant principles were explained by Wootten J in McMahon v Gould (1982) 7 ACLR 202:
(a) Prima facie a plaintiff is entitled to have his action tried in the ordinary course of the procedure and business of the court (Rochfort v John Fairfax & Son Ltd at 19);
(b) It is a grave matter to interfere with this entitlement by a stay of proceedings, which requires justification on proper grounds (ibid);
(c) The burden is on the defendant in a civil action to show that it is just and convenient that the plaintiff’s ordinary rights should be interfered with (Jefferson v Bhetcha at 905);
(d) Neither an accused (ibid) nor the Crown (Rochfort v John Fairfax & Sons Ltd at 21) are entitled as of right to have a civil proceeding stayed because of a pending or possible criminal proceeding;
(e) The court’s task is one of “the balancing of justice between the parties” (Jefferson Ltd v Bhetcha at 904), taking account of all relevant factors (ibid at 905);
(f) Each case must be judged on its own merits, and it would be wrong and undesirable to attempt to define in the abstract what are the relevant factors (ibid at 905);
(g) One factor to take into account where there are pending or possible criminal proceedings is what is sometimes referred to as the accused’s “right of silence”, and the reasons why that right, under the law as it stands, is a right of a defendant in a criminal proceeding (ibid at 904). I return to this subject below;
(h) However, the so-called “right of silence” does not extend to give such a defendant as a matter of right the same protection in contemporaneous civil proceedings. The plaintiff in a civil action is not debarred from pursuing action in accordance with the normal rules merely because to do so would, or might, result in the defendant, if he wished to defend the action, having to disclose, in resisting an application for summary judgment, in the pleading of his defence, or by way of discovery or otherwise, what his defence is likely to be in the criminal proceedings (ibid at 904-5);
(i) The court should consider whether there is a real and not merely notional danger of injustice in the criminal proceedings (ibid at 905);
(j) In this regard factors which may be relevant include:
(i) the possibility of publicity that might reach and influence jurors in the civil [sic] [28] proceedings (ibid at 905);
(ii) the proximity of the criminal hearing (ibid at 905);
(iii) the possibility of miscarriage of justice eg by disclosure of a defence enabling the fabrication of evidence by prosecution witnesses, or interference with defence witnesses (ibid at 905);
(iv) the burden on the defendant of preparing for both sets of proceedings concurrently (Beecee Group v Barton);
(v) whether the defendant has already disclosed his defence to the allegations (Caesar v Somner at 932; Re Saltergate Insurance Co Ltd at 736);
(vi) the conduct of the defendant, including his own prior invocation of civil process when it suited him (cf Re Saltergate Insurance Co Ltd at 735—6);
(k) The effect on the plaintiff must also be considered and weighed against the effect on the defendant. In this connection I suggest below that it may be relevant to consider the nature of the defendant’s obligation to the plaintiff;
(l) In an appropriate case the proceedings may be allowed to proceed to a certain stage, eg, setting down for trial, and then stayed. (Beecee Group v Barton).
In Queensland, McMahon’s case has been applied by McMeekin J in Hamilton Island Enterprises Ltd v Johnstone [2010] QSC 38, Daubney J in Osric Investments v Probs [2007] QSC 293, and in the Federal Court by Logan J in Wide Bay Conservation Council Inc v Burnett Water Pty Ltd [2008] FCA 1900.
Doubts have been raised as to whether these guidelines place too little weight on the privilege against self-incrimination, in light of the High Court’s decision in Reid v Howard (1995) 184 CLR 1 (see, for example, Osric Investments v Probs [2007] QSC 293 at [12]), but it is submitted that the principles do continue to apply, unless modified by the High Court.29
Given that police will generally not act until complaint is made, in each case consideration has to be given to whether a complaint should be made. This ultimately must be a decision of the client, but it may be a matter where the client requests advice about whether to do so. A criminal complaint must not be made to further a civil proceedings. However, where a criminal act is believed to have been committed there is a public interest in this being brought to the attention of the police. Under the Police Powers and Responsibilities Act 2000 (Qld), police officers are given the responsibility of determining in a given case if it is appropriate to lay criminal charges.
It is important to recognize that the police are only permitted to commence proceedings against a person for a criminal offence where the officer “reasonably suspects” such an offence has been committed.30 It would be necessary for sufficient evidence to justify that reasonable suspicion be provided to police or be capable of being lawfully obtained by police before a charge was preferred. If a person is charged, then the police have a significant range of powers which are available to restrict the defendant’s capacity to further dissipate or hide assets obtained by fraud. These powers potentially complement steps taken by the victim of the fraud through the civil processes discussed in this paper.
It will also be necessary for the client to consider the potential for a criminal complaint to lead to the alleged fraudster being able to successfully apply to stay any civil recovery proceedings, relying upon the principles explained above.
When considering the involvement of the police, the potential operation of the Criminal Proceeds Confiscation Act 2002 (Qld) should also be considered. This statutory regime operates independently from the general law principles considered in this paper. The legislation is not adapted to restoring the proceeds of crime to the victim, but to the stripping away of the proceeds of 
crime for the benefit of the State.31
Third issue: need to rescind?
There is a distinction between cases where money or property is transferred away under a contract that has been induced by fraud, and where the fraudulent taking or receiving happens outside the context of any contract.
Usually, fraud on the part of one contracting party will not prevent a contract from arising.32 It will, instead, render the contract voidable at the instance of the innocent party, conferring a right in that party to elect to set the contract aside ab initio.33
Legal and beneficial title passes in money and property transferred under a voidable contract, and that title cannot be got back until the contract is rescinded or an election to do so is made. Until such time as there is an election to disaffirm the contract, all that the innocent party holds is the “mere equity” of his right to set aside the contract. After the contract is set aside, the rescinding party can assert a beneficial interest in the property or money transferred, or in their traceable substitutes, as against both the transferee, and third party recipients: see Alati v Kruger (1955) 94 CLR 216, 224; Fysh v Page (1956) 96 CLR 233; Daly v Sydney Stock Exchange (1985) 160 CLR 371, 387-9; further, The Law of Rescission (OUP, 2008), Ch 16.
The practical point is that it is in each case necessary to consider whether the defrauded party has parted with money or property under a contract or purported contract, or not. If no contract has been entered, there is no difficulty. If, on the other hand, a contract has been concluded, in order to effectively bring a claim for restitution of what has been given, the injured party must elect to avoid the transaction. This will in turn require attention to other issues that inevitably arise in this fact pattern: what is the risk that any such election will turn out to be wrongful, and expose the client to a claim for damages for breach of contract; what is the prospect that the client has so conducted himself that the right to rescind has in fact been lost; and has the client obtained benefits under the impugned contract that will have to be returned upon rescission?
Fourth issue: ethical and evidential considerations
The fourth practical matter that will arise where a claimant wishes to trace the proceeds of fraud, are the ethical and evidential issues that attend claims of this kind.
Restrictions on alleging fraud Barristers’ rules of conduct have long provided that an allegation of fraud should not be pleaded unless there is a sufficient basis for it. The principle is now expressed in rules 64 and 65 of the Barrister’s Conduct Rules, 23 December 2011.34 Failure to comply with the rule carries potential exposure to a wasted costs order against counsel.35
When made, allegations of fraud must be pleaded with particularity (UCPR, rule 150(1)(f)).
Standard of proof An allegation of fraud should be supported by cogent evidence. The court will require the allegation to be clearly proved, and by reference to a standard of proof commensurate with the seriousness of the allegation: Briginshaw v Briginshaw (1938) 60 CLR 336, 362-3 (per Dixon J).
Full disclosure for ex parte hearing At the interlocutory stage, it is common for both a freezing order and a search order to be sought without notice. The order will typically expire at the return date for the application, when the matter will come back before the court on notice.
Where the application is made ex parte it is vital to ensure that there is placed before the court, all facts that are material to the exercise of the court’s discretion, including matters that weigh against the granting of the relief, or that would adversely limit its scope. The client will otherwise be at risk of having the order discharged at the return date for failure to having made proper disclosure, and possibly having the undertaking as to damages called upon.
It will often be the case that any circumstances that weigh against the making of the order sought, or that would limit its terms adversely, is protected by legal professional privilege. Under the Barrister’s Conduct Rules 2011, counsel must seek instructions from the client to waive privilege in respect of that matter, and if those instructions are not given, the barrister must not appear on the application (rule 30).
Conclusion
I hope that this brief survey has provided at least one perspective on the legal and practical points that arise if you receive instructions to act for a client who appears to have parted with assets in circumstances of fraud, and who may therefore have rights to recover them back, if they can be traced and found.
A key point that I want to leave you with is that when we look into this corner of the law, we find that the civil courts possess an exceptional armory to deal with cases of fraud, and for that reason it is always worth carefully reviewing the options at your client’s disposal, before fixing upon the course of action that you will recommend.
Dominic O’Sullivan
Footnotes
1. Queensland Bar Association Annual Conference, Sheraton Mirage, Gold Coast. Thanks are due to Stewart Webster, Benedict Power, Andrew Hoare, Jennifer Waldon and John McKenna SC, for their valuable assistance in connection with this paper.
2. Eg, Allianz Australia Insurance Limited v Rose Marie Lo-Guidice [2012] NSWSC 145; Toksoz v Westpac Banking Corporation (2012) 289 ALR 557 (CA); para 10 below.
3. See also, Creak v James Moore and Sons Pty Ltd (1912) 15 CLR 426, 432 (stolen goods); J Tarrant, “Theft Principle in Private Law” (2006) 80 ALJ 531.
4. See, for example, Shalson v Russo [2005] 1 Ch 281, [109] — [117] per Rimer J.
5. Lawrie v Hwang [2012] QSC 422 at [76], [134], [147] (criminal law as to fraudulent taking from a person of impaired intellect applied to a tracing claim).
6. In the case of property as opposed to money, a constructive trust only arises if legal title to the property passes to the fraudster. If it does not, a trust cannot arise because the victim has never ceased to be the owner of the property. In that case, the claimant’s rights are instead found in the common law actions for wrongful interference with possession (conversion, trespass etc.), and in the case of goods, also the self-help remedy of reception. These rights can be enforced against the fraudster, or whoever else may come to possess the property thereafter (nemo dat quod non habet). Money is different, because the recipient will usually obtain legal title. As to the transfer of title to money, Sinclair v Brougham [1924] AC 398, 418; Porter v Latec Finance (Qld) Pty Ltd (1964) 111 CLR 177; Ilich v R (1987) 162 CLR 110; Fox, [1996] RLR 60, 69-70; and in the case of transfers of money between bank accounts, R v Preddy [1996] AC 815, 834; Foskett v McKeown [2001] 1 AC 102, 128.
7. For discussion, P McGrath, Commercial Fraud in Civil Practice (OUP, 2008) 11-29; RP Balkin and JLR Davis, The Law of Torts 4th edn (Lexis Nexis, 2009) [23.12]-[23.40].
8. The Law of Rescission (OUP, 2008) at [4.02], [4.05].
9. Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89.
10. As was helpfully observed by John Greenwood QC in the discussion following delivery of the paper, and referring to Re Diplock [1948] Ch 465 (CA), the key feature of the tracing exercise is that the Plaintiff may trace his proprietary interest in the money or property taken, into exchange substitutes for it; for example, property bought with the money taken, or money received from the realization of property taken.
11. See also, D Fox, Property Rights in Money (OUP, 2008) Ch 5, 6, 7.
12. The same obligation is owed by the knowing recipient of trust property: Lewin on Trusts 18th edn (Sweet & Maxwell, 2008) at [42-23]; C Harpum “The Stranger as Constructive Trustee” (1986) 102 LQR 114 and 267, at p 269.
13. That is, assuming that there exists no asset into which the money can be traced; cf. note 10 above.
14. Colonial Bank v Exchange Bank of Yarmouth, Nova Scotia (1885) 11 App Cas 84 (payment to wrong bank); Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 (dishonest taking of client money by solicitor); Break Fast Investments Pty Ltd v Giannopoulos [2011] NSWSC 1508, [33]; also, Restitution Law in Australia 2nd edn (Lexis Nexis, 2008) at [308]. See also, Heperu Pty Ltd v Belle (2009) 76 NSWLR 230, [143]- [145], [153] (CA), applied Break Fast Investments Pty Ltd v Giannopoulos [2011] NSWSC 1508, [33]-[34], [80] (suggesting that the claim is limited to value surviving where the recipient is innocent).
15. Masri v Consolidated Contractors International Co SAL [2009] QB 450 (CA); Hall v Foster [2012] NSWSC 97; also, Young, Croft and Smith, On Equity 2009, at 1144-6.
16. Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd (1985) 1 NSWLR 545 at 558.
17. See Lock International plc v Beswick [1989] 1 WLR 1268 at 1280; Yousif v Salama [1980] 1 WLR 1540. But see: Thorne Investments Ltd v Tomlinson [2003] EWCA Civ 1272 at [28] (Gibson LJ).
18. See, e.g. Ballabil Holdings Pty Ltd v Hospital Products Pty Ltd (1985) 1 NSWLR 155; Sup Ct of Qld PD 1 of 2007, para 8.
19. 261B Requirements for grant of search order
The court may make a search order if the court is satisfied thatâ
(a) the applicant has a strong prima facie case on an accrued cause of action; and
(b) the potential or actual loss or damage to the applicant will be serious if the search order is not made; and
(c) there is sufficient evidence in relation to a respondent thatâ
(i) the respondent possesses important evidentiary material; and
(ii) there is a real possibility that the respondent might destroy the material or cause it to be unavailable for use in evidence in a proceeding or anticipated proceeding before the court.
20. Dunlop Holdings Ltd v Staravia Ltd [1982] Com LR 3 at 3, approved in Lock International plc v Beswick [1989] 1 WLR 1268 at 1280 and IndiciiSalus Ltd v Chandrasekaran [2007] EWHC 406 at [15] by Warren J; also, P Biscoe, Freezing and Search Orders (Butterworths, 2008) at [7.32].
21. See Talacko v Talacko (2009) 25 VR 613; [2009] VSC 444.
22. See Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 617 and 623; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at [26]. Formerly, b efore judgment in cases of an equitable debt or demand, an order could be made in the nature of a writ of ne exeat colonia, preventing a defendant quitting the jurisdiction without giving adequate bail or security, if a real ground appeared for believing that the defendant was seeking to avoid the jurisdiction or that if the defendant was allowed to depart the plaintiff will lose his debt or be prejudiced in his remedy: Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at [39] (for discussion, Talacko v Talacko (2009) 25 VR 613) . Where the demand was one at common law, t he writ of capias ad respondendum was available on similar grounds. However, these writs were abolished in Queensland by s 129(1) of the Supreme Court of Queensland Act 1991 (Qld), introduced by the Civil Justice Reform Act 1998 (Qld). Although s 207 of the Civil Procedure Act 2011 (Qld) provides that s 129 is henceforth omitted from the Supreme Court Act 1991 (Qld), it is submitted that the effect is not to revive either of these old writs. Rule 935 and 942 of the Uniform Civil Procedure Rules 1999 (Qld) and s 100 of the Civil Procedure Act 2011 (Qld) provide for the issue by the Supreme Court of Queensland of a warrant for the arrest of a person on grounds similar to those that would formerly have permitted the issue of a writ of ne exeat colonia and capias ad respondendum, and on terms providing that the defendant not be arrested, or be released, if security identified in the warrant is provided.
23. Section 408C(1). By section 408(2), if the property or the yield to the offender from the dishonesty or the detriment caused exceeds $30,000, the offender is liable to imprisonment for up to 12 years.
24. Sections 390, 391,398; Ilich v R (1987) 162 CLR 110.
25. (1995) 184 CLR 1 at 15 — 16.
26. Istel Ltd v Tully [1993] AC 45.
27. Criminal proceedings will not, however, provide a ground for staying civil confiscation proceedings commenced under the Criminal Proceeds Confiscation Act 2002 (Qld) — s93.
28. The reference should be to criminal proceedings.
29. De Simone v Bevnol Constructions And Developments Pty Ltd [2010] VSCA 23 at [8]-[9]; also, Re APCH (No 2) [ 2012] VSC 576 at [19] – [24].
30. S365 and 382 of the Police Powers and Responsibilities Act 2000
31. This occurs by the means of forfeiture orders, which vest the relevant property in the State (ss 56, 59, 153, 164, 202, 214) and proceeds assessment orders, which require payments of money to the State secured by a charge (s77, 79, 86, 88, 184, 196), pursuant to schemes administered by the DPP and the CMC respectively. Cf. section 210 (permitting certain amounts to be paid to the victims of crime).
32. Shogun Finance v Hudson [2004] 1 AC 919, [6]-[8] (fraud does not itself negative contractual intention).
33. Alati v Kruger (1955) 94 CLR 216; also, The Law of Rescission (OUP, 2008) [10.23], [10.25].
34. Compare the more restrictive rule in the Code of Conduct of the Bar of England and Wales, 8th edition:
704. A barrister must not devise facts which will assist in advancing the lay client’s case and must not draft any statement of case, witness statement, affidavit, notice of appeal or other document containing:
… (c) any allegation of fraud unless he has clear instructions to make such allegation and has before him reasonably credible material which as it stands establishes a prima facie case of fraud…
35. Compare Medcalf v Mardell [2003] 1 AC 120.
