Where the father controlled the son's account and obtained the benefit of the funds deposited into it, was the son liable to make restitution for monies paid into it?

Miraki v Griffith [2021] NSWCA 263 (29 October 2021)

Intro:-

This appeal relates to a claim for restitution in respect of four payments said to have been made by Ms Sepideh Miraki (Mrs Miraki).

Facts:-

The appellant, Sepideh Miraki, appealed from a decision of the District Court rejecting her claim for restitution in respect of four payments made for luxury Versace furniture and home accessories which were never delivered. The goods were ordered from a business run by Dominic Griffith. His son Joshua Griffith, aged 17 at the time the order was placed, assisted him in the business. The first two payments were made into an American bank account in the name of Dominic Gerard Groupe De Luxe Ltd.

The third and fourth were paid into Joshua’s personal account. All four payments were made by Barton Contractors Australia Pty Ltd, a company of which Mrs Miraki was formerly a director but not at the time of the payments. The claim was initially pleaded in contract. A claim in restitution was later pleaded against Joshua on the basis of a total failure of consideration. The District Court entered judgment in favour of Mrs Miraki against Dominic in the sum of $116,279.91 but rejected the claim against Joshua. Mrs Miraki appealed from that part of the decision.

The primary judge (Strathdee DCJ) found that Dominic was operating the business while Joshua was simply providing assistance under his father’s control and direction. The judge also found that Dominic controlled the bank account in Joshua’s name and used it as his own. Accordingly, her Honour accepted that Joshua did not receive any benefit from the first three payments and was not liable to make restitution. Her Honour did not determine the claim as to the fourth payment, accepting a submission by Joshua that, in the way in which the case was opened and conducted, that claim was taken to have been abandoned.

Issues:-

(1) whether Joshua obtained a benefit from any of the payments so as to be liable to make restitution of those amounts;

(2) whether the primary judge erred in not permitting the appellant to run her pleaded case concerning the fourth payment; and

(3) by notice of contention filed by Joshua, whether the appellant was entitled to restitution of amounts paid by the company, Barton Contractors.

Consideration:-

In relation to the first two payments deposited into the New York account, Mr Allen, who appeared for Mrs Miraki on the appeal, submitted that as Joshua had requested Mrs Miraki to pay the monies to Dominic’s account (by virtue of his name appearing on the invoice; and had supplied the account details so that the payments could be effected, those matters in some way resulted in Joshua benefitting in the requisite sense, such that he was liable to make restitution of those amounts.

If there were some evidence that Joshua had benefitted from the direction to pay money into the New York account because, for example, payment to the holder of that account in turn discharged some liability Joshua had to that person or entity, then it is possible that, in such circumstances, Joshua could have been held to be personally liable to make restitution to the payer. That would be on the basis that Joshua had been enriched or was benefitted by the discharge of a pre-existing liability to the controller or holder of the bank account to which he directed payment. But that was not this case and the pure act of direction did not generate a liability in Joshua. He neither received the payments nor was shown to have benefitted from their receipt by Dominic.

Mrs Miraki’s contention was that, prima facie, the receipt of funds in the CBA account to which he was not entitled rendered Joshua liable to make restitution to her in respect of those funds. This submission, however, needed to overcome the point made in Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 at 673–674; [1988] HCA 17, where it was held that:

“The prima facie liability to make restitution is imposed by the law on the person who has been unjustly enriched. In the ordinary case of a payment of money, that person will be the payee. However, when the person to whom the payment is directly made receives it as an intermediary (e.g., as agent for a designated principal), there may be uncertainty about the identity of the actual recipient of the benefit at the moment of payment. If the circumstances are such that the intermediary is to be seen as being himself the initial recipient of the benefit, his prima facie liability will ordinarily be displaced when he has handed the money received on to the person for whom he received it. In such a case he has, in the event, not retained ‘the benefit of the windfall’ but been ‘a mere conduit-pipe’ (see per Collins M.R., Continental Caoutchouc & Gutta Percha Co v. Kleinwort, Sons & Co.) and ‘the only remedy is to go against the principal’: per Greene M.R., Gowers v. Lloyds and National Provincial Foreign Bank Ltd.” (footnotes omitted).

In the present case, the primary judge held that Joshua did not receive the benefit of the third payment. As I have pointed out above, it is implicit in that finding and in the entry of judgment against Dominic, which was referable to that payment (in addition to the first and second payments), that the primary judge must necessarily have held that Joshua received the third payment as a mere conduit or intermediary or, as it is sometimes put, had the benefit of a “payment over” defence: see K Mason, JW Carter and GJ Tolhurst, Restitution Law in Australia (4th ed, 2021, LexisNexis) at [441]–[442]; AFSL at [8]. Expressed slightly differently, Joshua was not liable because, although payment was made into a bank account in his name, he did not appropriate the payment to his own benefit and thus was not enriched: see J Edelman and E Bant, Unjust Enrichment (2nd ed, 2016, Hart Publishing) at 78, 384.

In making her finding that the third payment was not to Joshua’s benefit, notwithstanding that it was paid into the CBA account which was in his name, the primary judge looked to the substance rather than the form of the matter. This was entirely in accordance with settled authority: see Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344 at 376; [1993] HCA 4; Dart Industries Inc v Decor Corporation Pty Ltd [1993] HCA 54; (1993) 179 CLR 101 at 111; [1993] HCA 54; AFSL at [137].

Issue 2

The opening submissions created the impression that the amounts claimed were only the first three payments. It was open to the primary judge to conclude that the claim had been narrowed accordingly. In any event, Joshua did not receive any benefit from the fourth payment.

Issue 3

It also follows that it is not necessary to decide the Notice of Contention point, which was to the effect that if any restitutionary claim lay against Joshua, that claim was not one for Mrs Miraki to agitate but was a claim which Barton had, it being recalled that it was in fact Barton that had made the four payments: cf, Nikolic v Oladaily Pty Ltd [2007] NSWCA 252 at [97].

Some exiguous evidence was led to the effect that Barton was a company with which Mrs Miraki had a loan account, and it was submitted that her direction of Barton to make payments for the goods which she had ordered did not detract from her standing as a plaintiff to maintain the action for restitution.

The primary judge held that whether the monies were paid to Joshua and Dominic by Barton or Mrs Miraki was irrelevant. That observation was not correct. Mrs Miraki could only sustain a claim in restitution if she could demonstrate that the defendants were enriched at her expense. If it had been able to be established that the payments made by Barton in turn discharged an amount owed to Mrs Miraki on her loan account with the company, she probably would have had sufficient standing to pursue her claim. Whether that was so was not a matter upon which the primary judge made any finding. It was a matter for Mrs Miraki to establish given that, prima facie, it was Barton that was the source of the four payments the subject of the claim for restitution and therefore the party at whose expense any unjust enrichment had been obtained.

Had it been necessary to decide the question, I would have upheld the point raised by the Notice of Contention, namely that Mrs Miraki was not or had failed to establish that she was the proper plaintiff.

Conclusion:-

The appeal should be dismissed with costs.