[1] The defendant's husband stole $447,986.02 from the plaintiff Society while he was its treasurer. He is now in prison. The sum of $385,624.51 was paid to the Society by Mr Smythe in partial reparation. In this proceeding the Society seeks summary judgment against Mrs Smythe in relation to its claim for the balance outstanding, $62,361.51, together with interest of $154,253.80 upon the total defalcation figure calculated with reference to the full period over which the Society was out of its money.

[2] The claim is founded on two causes of action. First, that Mrs Smythe “remains unjustly enriched as a consequence of having had and received ...” the amount claimed. The second cause of action asserts that she knew, or ought to have known, of her husband's dishonesty and is therefore bound to account for her knowing receipt of the money. However, in the present summary judgment context only the first cause of action is relied upon being what is commonly called a claim for money had and received. Importantly I note that the Society seeks judgment as to liability only, leaving quantum for trial.

The Background

[3] At all relevant times Mr Smythe was an employee of Air New Zealand and the treasurer of the staff welfare fund administered by the plaintiff Society. On 26 June 2003 Mr Smythe was dismissed from the position of treasurer when his breach of trust was discovered.

[4] The defalcations were committed by drawing cheques in the period 1995 to 2003, as follows:

These amounts were paid into two bank accounts by a total of forty-three cheques. Thirty-seven of the cheques were paid into a joint account held by Mr and Mrs Smythe, but this account was held by Mr Smythe alone until December1997. The amount stolen by payment into this account to December 1997 was $87,643.20. The other bank account, into which six cheques were paid, was always a joint account of Mr and Mrs Smythe. Hence about $360,000 went into jointly held accounts.

[5] To facilitate the payment of reparation Mr and Mrs Smythe entered into a relationship property agreement which provided for the disposal of the matrimonial home and other assets, and for the division of the proceeds of sale. Mr Smythe raised a sum of about $35,000 from the realisation of assets (cars and a superannuation investment) being separate property. The other assets covered by the agreement were items of relationship property which were divided equally. Mr and Mrs Smythe had been married for 36 years at the time the agreement was concluded. Again in round terms Mr Smythe obtained about $220,000 as his share from the sale of the matrimonial home, over $120,000 from the sale or on account of four rental investment properties which the couple owned and about $5,000 from the sale of jointly owned equities. Thereby he in due course paid the reparation figure of $385,624.51.

[6] Upon implementation of the terms of the agreement Mrs Smythe retained two (of the original four) rental properties, these two having an equity of over $100,000 and an amount of $197,807.20 being her share from the sale of the matrimonial home. This sum is held in a solicitor's trust account pursuant to an undertaking and pending determination of this proceeding. She also has various household chattels and two motor vehicles.

[7] Against this background the plaintiff considers that Mrs Smythe even after the sale of the relationship assets is in an advantaged position which must reflect the benefit of her husband's defalcations to some significant degree. Mrs Smythe, however, refutes this. She points out that she has worked for the greater part of her married life and that she is presently homeless and in a reduced position as a result of her husband's actions. She sees herself as an innocent victim of his dishonesty.

The Society's Case

[8] Mr Wilson accepted at the outset that the plaintiff must satisfy the court that Mrs Smythe had no defence to the claim. He stressed that a defendant's right to have her day in court had, however, to be balanced against the need for a robust and realistic appraisal of the defences (or grounds of opposition) raised: Australian Guarantee Corporation (NZ) Ltd v. McBeth [1992] 3 NZLR 54 (CA).

[9] By way of introduction counsel submitted that a claim for money had and received was a common law personal restitutionary claim, able to be asserted on a stand alone basis and having its basis in unjust enrichment: Rod Lorna Motors Ltd v. Attorney General [1999] 2 NZLR 568 (CA), National Bank of NZ Ltd v. Waitaki International Processing (NZI) Ltd [1999] 2 NZLR 211 (CA) and Lipkin Gorman v. Karpnale Ltd [1991] 2 AC 548 (HL).

[10] The elements of the cause of action were described as receipt of the money, an absence of consideration from the recipient, producing an unjust enrichment of the defendant at the expense of the plaintiff. I did not understand Mr Lester to dispute these elements. Rather the difference between counsel was two-fold:

[a] whether payment into a joint account established a receipt by both account holders, without more, and

[b] whether on the evidence Mrs Smythe had been, and continued to be, enriched as a result of her husband's activities.

In others words counsel were at odds concerning proof of receipt and enrichment in the particular circumstances of this case.

[11] Mr Wilson argued that payment of the money into the joint accounts was decisive in relation to proof of receipt. He stressed that Mrs Smythe was a joint owner of the accounts, enjoyed drawing authority upon them and thereby enjoyed/incurred the legal rights and obligations of an account holder with her husband. Arrangements between husband and wife for the day to day operation of the account may give rise to rights inter se but these were not relevant in relation to the plaintiff Society. The need to establish receipt of a definite or ascertained sum was accepted, but said to be satisfied in this instance. Where direct receipt was shown there was said to be no need to trace the moneys beyond the bank accounts, nor did it matter that the stolen funds were mixed with legitimate moneys (Mr Smythe's salary).

[12] In relation to proof of benefit, or unjust enrichment, Mr Wilson stressed that since the plaintiff sought judgment as to liability only, it was only necessary to demonstrate there had been some loss caused to the plaintiff. In any event benefit was established either directly through receipt of the money into the joint accounts, or indirectly by the evidence which indicated that the accounts were operated to meet living and lifestyle expenses which otherwise would have had to be paid for by earnings. Finally, counsel submitted that there was clear evidence of continued enrichment or benefit demonstrated by the evidence of the rental investment properties and the cash sum still owned by Mrs Smythe. Hence, it was said, the case was one for summary judgment, at least as to liability.

Mrs Smythe's Case

[13] Mr Lester began by contending that receipt of the money was not satisfactorily established given that:

[a] $87,643.20 was paid into an account held by Mr Smythe alone (and interest was also claimed on this sum), and

[b] there was no correlation between the sums stolen by cheque and the amounts banked into the joint account.

As to this Mr Lester maintained that it was for the plaintiff Society to demonstrate receipt of the money, not speculate as to that outcome on the basis that there were large deposits into the joint accounts at about the time of the defalcations (although no coincidence of amounts).

[14] Assuming that as a joint holder of the account Mrs Smythe did obtain a bare legal title to the money, counsel contended that this was insufficient to establish benefit or enrichment. The claim was said to 'assume' that Mrs Smythe had the use and enjoyment of the money when proof of that aspect was necessary. In this regard Mrs Smythe deposed that the control of the joint accounts lay with her husband, that only on rare occasions (and at his insistence) did she issue cheques to meet children's expenses, and that she operated her own separate bank account into which her income was paid and from which she met her personal living expenses. This evidence was said to be fatal to the plaintiff's claim in a summary judgment context.

[15] Finally Mr Lester argued that if receipt and benefit was established to the requisite standard, there was no adequate evidence to demonstrate that Mrs Smythe remained unjustly enriched. In a case where the plaintiff had received back over $385,000 of the original sum of $447,000 stolen, 'a most careful and specific tracing exercise (was) required to identify the extent to which (if any) Mrs Smythe remained enriched ...'. This difficulty was demonstrated when it was borne in mind that the base figure claimed by the plaintiff was a sum of about $63,000, yet more than $87,000 was paid into one of the accounts before Mrs Smythe became a joint holder of it. This circumstance alone, counsel argued, demonstrated the need for 'a very careful tracing exercise'.

Discussion

[16] I am not persuaded that this is a case for summary judgment, even a judgment restricted to liability. Three aspects of the matter prompt me to that view. Firstly in the commentary on restitution in Halsbury (vol 9(1) : Contract) at paragraph 1140 appears the observation that:

... the money or its equivalent must be clearly proved to have come into the defendant's hands.

Whether payment to a joint account, where the defendant deposes that she does not operate the account, is sufficient to establish receipt is, I think, a contentious question. But in the event it is not a matter upon which I need form a final view.

[17] The same paragraph in Halsbury contains the further observation that the money claimed as having been had and received 'should be a defined and ascertained sum'. Here there is an ascertained sum in the sense that the amount stolen is defined with exactitude. However, I accept Mr Lester's submission that the base figure claimed ($62,361.51) is not a definite sum received by Mrs Smythe when two surrounding circumstances are brought to account. These are that about $87,000 was paid into one of the accounts before it became joint and the payment of a significant amount by way of restitution ($385,624.51) further clouds matters.

[18] The third concern is perhaps more fundamental in nature and probably subsumes the two matters which I have already discussed as well. Summary judgment is sought as to liability only. In the course of submissions this prompted me to raise with Mr Wilson whether a judgment as to liability, in the context of a restitutionary claim, would be of any utility. Mr Lester made the same point but in more emphatic terms when he argued that it was not possible to have a judgment restricted to liability in the present context.

[19] I am not sure that that is so. In a straight-forward case where money was received, without consideration, but the recipient asserted a change of position in relation to only part of the fund, a judgment as to liability may be apposite. On the other hand where a defendant denies receipt for the entire sum claimed, and, raises defences which extend to the entire sum, generally there may be little scope to dissect the issues of liability and quantum.

[20] This, I think, reflects the nature of the claim. In The Law of Restitution Goff and Jones, (5th edition) at p 16 in a discussion of the general principles which underpin unjust enrichment the author's note:

A restitutionary claim is for the benefit, the enrichment gained by the defendant at the plaintiff's expense; it is not one for loss suffered.

This observation emphasises that in the final analysis recovery is dependent upon the demonstration of injustice - that it would be unjust for the defendant to retain the money (or its equivalent). It follows that an inquiry into all the circumstances of the case is necessary. Liability does not automatically follow from proof that there has been the receipt of an ascertained sum without consideration provided for it. Rather the gist of the claim is that it would be unjust for the defendant to retain the money because an unjust enrichment would result.

[21] This is not to say that restitutionary claims will never be susceptible of resolution by summary judgment. Clearly that is not so. Martin v. Pont [1993] 3 NZLR 25 (CA) is a comparatively recent example of a case where summary judgment was entered against the defendant firm of accountants (whose employee stole the relevant fund), which decision was upheld on appeal. One of the causes of action was for money had and received, which claim succeeded and was upheld in the Court of Appeal. But for the reasons to which I have already referred, I see the present case as in a different category and unsuited for summary judgment.

[22] The sense of my concern is well-illustrated by a case cited in the commentary to r137 in McGechan on Procedure (volume 1). That rule creates the discretion to give judgment on liability alone. Its exercise, however, may be inappropriate where the issues of liability and quantum are rolled up such as to deny the opportunity to sensibly consider one in isolation from the other. In Ghent v. Brinkman (HC Wellington, CP379/87, 11 September 1987) Eichelbaum J said:

This is not a case where there is any clear dichotomy between issues affecting liability on the one hand and damages on the other. The claims for aggravated and exemplary damages appear to open up virtually the whole field of the conduct of the respective parties, necessarily leading to an examination of all aspects of the relationship between them. Likewise with the question of the possible reduction of the plaintiffs' damages ... Thus the Court would perforce have to examine and pronounce upon the very issues which by virtue of a summary judgment (as to liability) would have been presumed to have been decided in favour of the plaintiffs. Not only would that mean that the summary judgment procedure would have conferred little advantage from the point of view of saving expense and time but it would put the Court in the position where it might make findings which would not readily be reconciled with a holding that there was no tenable defence.

Although spoken in the context of a claim distinctly different from the present one, I consider these words are of equal application in the circumstances of the present case.

Result

[23] For these reasons the application for summary judgment is refused. The defendant is entitled to costs which are allowed on a 2B basis for a half day hearing. The proceeding shall be the subject of a directions conference before the Master on Monday, 3 May 2004 at 11.45 am and is to be assigned to a Judge for its substantive disposal.

Signed at 9.00 am on 19 March 2004.

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Solicitors:
Duncan Cotterill & Co, Christchurch for Plaintiff
Layburn Hodgins, Christchurch for Defendant