Supreme Court New South Wales Medium Neutral Citation: Break Fast Investments Pty Ltd v Perikles Giannopoulos (also known as Perry Giannopoulos) & Anor (No 5) [2011] NSWSC 1508 Hearing dates: 17 - 19 October 2011, 27 October 2011, 1-3 November 2011 Decision date: 09 December 2011 Jurisdiction: Equity Division Before: Black J Decision: Claim in unjust enrichment established; opportunity for further submissions as to quantum of relief Catchwords: EQUITY - trusts - constructive trust - liability for knowing receipt and knowing assistance REAL PROPERTY - indefeasibility - in personam exceptions to indefeasibility - whether available in respect of claim for monies received by volunteer and applied to reduction of mortgage RESTITUTION - monies had and received - liability of volunteer recipient of funds Legislation Cited: - Corporations Act 2001 (Cth) ss 128, 129 - Civil Procedure Act 2005 (NSW) - Real Property Act 1900 (NSW) s 42 Cases Cited: - Austotel Pty Ltd v Franklins Self-Serve Pty Ltd (1989) 16 NSWLR 582 - Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662 - Australian Capital Television Pty Ltd v Minister for Transport and Communications (1989) 86 ALR 119 - Bahr v Nicolay [No 2] [1988] HCA 16; (1988) 164 CLR 604 - Banque Belge Pour L'Etranger v Hambrouck [1921] 1 KB 321 - Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221 - Barclays Finance Holdings Ltd v Sturgess & Ors (1985) 3 ACLC 662 - Barnes v Addy (1874) LR 9 Ch App 244 - Bell Resources Holdings Pty Ltd v Commissioner of The ACT Revenue Collections (1990) 22 FCR 178; 2 ACSR 211 - Black v S Freedman & Co [1910] HCA 58; (1910) 12 CLR 105 - Belmont Finance Corp Ltd v Williams Furniture Ltd (No 2) [1980] 1 All ER 393 - Bofinger v Kingsway Group Ltd [2009] HCA 44; (2009) 239 CLR 269 - Boscawen v Bajwa [1996] 1 WLR 328 - Briginshaw v Briginshaw (1938) 60 CLR 336 - Burston Finance Ltd v Speirway Ltd [1974] 1 WLR 1648 - Challenger Managed Investments Ltd v Direct Money Corporation Pty Ltd [2003] NSWSC 1072; (2003) 59 NSWLR 452; 12 BPR 22,257 - Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] Ch 105 - Ciaglia v Ciaglia [2010] NSWSC 341; (210) 269 ALR 175 - Cochrane v Cochrane (1985) 3 NSWLR 403 - Commonwealth Bank of Australia v Mohamed Saleh [2007] NSWSC 903 - Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394 - Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 - Cook v Italiano Family Fruit Co Pty Ltd (in liq) [2010] FCA 1355; (2010) 190 FCR 474 - David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 - Fabre v Arenales (1992) 27 NSWLR 437 - Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 - Ford by his Tutor Watkinson v Perpetual Trustees Victoria Ltd [2009] NSWCA 186; (2009) 75 NSWLR 42 - Foskett v McKeown [2000] UKHL 29; [2001] 1 AC 102 - Gerard Cassegrain & Co Pty Ltd v Cassegrain [2011] NSWSC 1156 - Gertch v Atsas [1999] NSWSC 898; (1999) 10 BPR 18,431 - Gillies v Downer EDI Ltd [2011] NSWSC 1055 - Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101 - Ghana Commercial Bank v Chandiram [1960] AC 732 - Heperu Pty Ltd v Belle [2009] NSWCA 252; (2009) 76 NSWLR 230 - Heperu Pty Ltd v Belle [2011] NSWSC 1151 - Jones v Dunkel (1959) 101 CLR 298 - Kalls Enterprises Pty Ltd (in liq) v Baloglow [2007] NSWCA 191 - LHK Nominees Pty Ltd v Kenworthy [2002] WASCA 291; (2002) 26 WAR 517 - Linter Group Ltd v Goldberg (1992) 7 ACSR 580; 10 ACLC 739 - Lithgow City Council v Jackson [2011] HCA 36; (2011) 281 ALR 223 - Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 - Lurgi (Australia) Pty Ltd v Gratz [2000] VSC 278 - Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 - National Australia Bank Ltd v Rusu [2001] NSWSC 32 - Perpetual Trustees Australia Limited v Heperu Pty Ltd [2009] NSWCA 84; (2009) 76 NSWLR 195 - Phetteplace v Bucklin (1893) 18 R 1297 - Raulfs v Fishy Bite Pty Ltd [2011] NSWSC 105 - Re Diplock; Diplock v Wintle [1948] Ch 465 - Re Hill (1974) 23 FLR 329 - Robb Evans of Robb Evans & Associates v European Bank Ltd [2004] NSWCA 82; (2004) 61 NSWLR 75 - Robins v Incentive Dynamics Pty Ltd (in liq) (2003) 45 ACSR 244; 175 FLR 286; 21 ACLC 1030; [2003] NSWCA 71 - Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 - Port of Brisbane Corporation v ANZ Securities Ltd (No 2) [2002] QCA 158; [2003] 2 Qd R 661 - Saraceni v Mentha [2011] WASC 94 - Selanger United Rubber Estates Ltd v Cradock (No 3) [1968] 2 All ER 1073; [1968] 1 WLR 155 - Smith v Samuels (1976) 12 SASR 573 - Southern Cross Commodities Pty Ltd (in liq) v Ewing (1988) 14 ACLR 39 - State Bank of New South Wales Ltd v Swiss Bank Corporation (1995) 39 NSWLR 350 - Stuart v Kingston [1923] HCA 17; (1923) 32 CLR 309 - Super 1000 v Pacific General Securities [2008] NSWSC 1222; (2008) 221 FLR 427 - The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1; 225 FLR 1; 70 ACSR 1; [2008] WASC 239 - Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 - Wambo Coal Pty Ltd v Ariff & Anor [2007] NSWSC 589; (2007) 63 ACSR 429 - Westpac Banking Corporation v Ollis [2007] NSWSC 956 - Westpac Banking Corporation v Toksoz & Anor [2010] NSWSC 1509 Texts Cited: - J D Heydon, Cross on Evidence, 8th Australian ed, 2010 - P Butt, Land Law, 6th ed, 2010 - K Mason, J W Carter & G J Tolhurst, Mason & Carter's Restitution Law in Australia, 2 ed, 2008 - R P Meagher, J D Heydon & M J Leming, Meagher, Gummow & Lehane's Equity: Doctrines and Remedies, 4th ed, 2002 Category: Principal judgment Parties: Break Fast Investments Pty Ltd (Plaintiff) Perikles Giannopoulos (also known as Perry Giannopoulos) (First Defendant) Sandra Faraone (Second Defendant) Representation: Counsel: R.E. Dubler SC/C. Salpigtidis (Plaintiff) M.K. Condon (First and Second Defendants) Solicitors: Proctor Phair Lawyers (Plaintiff) Sage Solicitors (First and Second Defendants) File Number(s): 10/147040 Judgment 1These proceedings arise out of payments totalling $317,000 ("Monies") made by the Plaintiff ("Break Fast") to the First Defendant ("Mr Giannopoulos") that were, Break Fast contends, made by a former director of Break Fast, Mr Christos Voukidis ("Mr Voukidis") without authority and in breach of duty. This matter arises from two connected transactions that involve common individuals but different corporate entities. The first is the purchase and sale of Unit 1201 ("Unit 1201") in a property situated at Clarence Street in Sydney ("Clarence Street property") by Clarence Street Pty Limited ("CSPL") and the second is the payments made by Break Fast to Mr Giannopoulos. Both parties rely on aspects of these transactions to support their respective positions. 2It is necessary to say something further as to the identity of the persons involved in these transactions. Mr Giannopoulos is Mr Voukidis' first cousin and has worked with him for several periods in his working life. The Second Defendant ("Ms Faraone") is Mr Giannopoulos' wife. Mr Voukidis was a director of CSPL until 27 February 2008 and a director of Break Fast until 12 April 2010. Other persons who play important roles in the proceedings are Mr Theodore Baker, a director of Break Fast throughout the relevant period, and Mr Nicholas Anastasopoulos, a director of CSPL and a director of Break Fast since 25 November 2009. Messrs Giannopoulos, Baker and Anastasopoulos and Ms Faraone gave evidence in the proceedings. Mr Voukidis did not give evidence in the proceedings. 3It appears that Mr Baker held 2 of the 4 shares in Break Fast; Mr Voukidis held the third share; and another company associated with Messrs Voukidis, Baker and Anastasopoulos, Oxley Group Finance Pty Ltd ("Oxley") held the fourth share in Break Fast. There was also in evidence before me a draft Joint Venture Agreement in respect of Break Fast that raised the possibility (which has been the subject of other proceedings in the Supreme Court of Victoria) that other parties had interests in a joint venture involving Break Fast. 4The Third Defendant in the proceedings is Citigroup Pty Limited (to which I will refer as "Citibank") which was a lender to Mr Giannopoulos in respect of Unit 1201 and a property subsequently purchased by the Defendants ("Homebush property") and currently holds a mortgage over the Homebush property. Orders were made by consent between Break Fast and Citibank, which were not opposed by the Defendants, which deal with the effect of any orders for subrogation made in the proceedings and had the result that Citibank was relieved from the obligation to file and serve a Defence in the proceedings and was excused from attending the hearing. 5The Amended Statement of Claim filed by Break Fast is complex and somewhat convoluted but the Defendants took no objection to its form. I have also had reference to a "Schedule of Claims and Relief" provided by Break Fast as indicating the relief which is sought in respect of its various causes of action. 6In broad terms, Break Fast claims relief in unjust enrichment, under the principles in Black v S Freedman & Co [1910] HCA 58; (1910) 12 CLR 105, in subrogation and for knowing receipt and knowing assistance under the principles in Barnes v Addy (1874) LR 9 Ch App 244 . The major issues which need to be determined in the proceedings are: * whether the payments by Break Fast to Mr Giannopoulos were unauthorised and whether a claim for unjust enrichment is available in that situation; * estoppel, change of position and other defences raised by the Defendants in response to the unjust enrichment claim; * the quantum of any relief available under the unjust enrichment claim; * whether a claim under the principles in Black v S Freedman & Co is established; * whether a claim to subrogation is established; * whether claims under the knowing receipt and knowing assistance limbs of Barnes v Addy are established; and * whether proprietary and/or other remedies are not available to Break Fast by reason of s 42 of the Real Property Act 1900 (NSW). The witnesses 7There were several difficulties with Mr Giannopoulos' evidence. Notwithstanding his apparently clear recollection of conversations in some detail in his affidavit, he claimed to have little recollection of numerous matters under cross-examination. The events in issue in the proceedings involved conduct on the part of Mr Giannopoulos that was, at best, commercially inappropriate and on occasion misleading and his evidence as to aspects of these matters in cross-examination was unconvincing. In particular, Mr Giannopoulos failed to include any profit made by the option arrangements in respect of the Clarence Street property in his taxable income and I do not accept his evidence that he did not recall whether he had done so (see paragraph 16 below); the evidence establishes that he purchased Unit 1201 at an undervalue, in a transaction implemented by CSPL and its principals in order to seek to protect against a claim by the builder in respect of the Clarence Street property (see paragraph 25 below); and he provided misleading information to Citibank in respect of his loan application and I do not accept his evidence in cross-examination seeking to treat the accuracy of information in that application as the responsibility of the mortgage broker rather than himself (see paragraph 22 below). Mr Giannopoulos' response to questions as to these matters must impact on my assessment of his credit generally and I consider his evidence should be approached with caution. No matters emerged in the cross-examination of Ms Faraone which were improbable or which led me to form an adverse view as to her credit. 8Break Fast also draws attention to the Defendants' failure to lead evidence from Mr Voukidis and submits that a Jones v Dunkel ((1959) 101 CLR 298) inference should be drawn that Mr Voukidis' evidence would not assist the Defendants as to any relevant matter. In Fabre v Arenales (1992) 27 NSWLR 437 at 449-450, Mahoney JA (with whom Priestley and Sheller JJA concurred) observed that the significance to be attributed to the fact that a witness did not give evidence depended upon whether it was to be inferred that the reason the witness was not called was because the party expected to call him feared to do so, and that such an inference would not be available or would be of little significance if the reason why the witness was not called had no relevant relationship with the fact in issue and was, for example, because the witness had a reason for refusing to assist and the party who might call him was aware of this. Their Honours also observed that a party was not required to call a witness "blind", under pain of a detrimental inference. Cross on Evidence , 8 th Australian ed, 2010 observes that the rule has no application if the failure is explained by a reasonable explanation for not compelling the witness's attendance by subpoena, and notes that an explanation may arise from the fact that calling the witness would cause jeopardy or grave prejudice to the witness: Smith v Samuels (1976) 12 SASR 573 at 581. 9It is plain that Mr Voukidis and Mr Giannopoulos had a close relationship and there is evidence that Mr Voukidis has provided assistance to Mr Giannopoulos in respect of the conduct of the proceedings, including making documents available to Mr Giannopoulos. It appears that Mr Giannopoulos took steps to seek evidence from Mr Voukidis, but Mr Voukidis declined to provide voluntary evidence on the advice of his legal advisers, in circumstances that he is a defendant in other proceedings brought by Break Fast in the Supreme Court of Victoria. In my view, it can properly be said that Mr Voukidis was a witness in Mr Giannopoulos' camp, given the evidence of cooperation between them in preparation of the proceedings. However, I do not think that a Jones v Dunkel inference that Mr Giannopoulos did not call Mr Voukidis because his evidence would not assist should be drawn as a matter of common sense. Given the evidence that Mr Voukidis had been advised by his legal representatives not to provide an affidavit in these proceedings, and the existence of the Victorian proceedings brought against Mr Voukidis, the more likely inference is that Mr Giannopoulos did not wish to take the risk of calling Mr Voukidis on subpoena, in circumstances that he was opposed to giving such evidence and would potentially suffer adverse consequences from doing so. 10The Defendants made several criticisms of evidence of Mr Baker, who gave evidence in Break Fast's case, including that he had no recollection of some events; declined to alter his position when confronted with evidence that the Defendants contended had contradicted that position; and avoided answering questions which asserted propositions which were contrary to his case, and these criticisms had some justification. There were some difficulties with Mr Baker's recollection of events, including that he initially did not recall, and then on cross-examination denied, receiving an email from Mr Giannopoulos dated 22 September 2005 (Baker 13.10.11 [53] and T53.40 where Mr Baker observed that "I think I said numerous times I did not receive that email"). That email was ultimately located when Mr Baker's computer was forensically examined, together with a response by Mr Baker and a further email from Mr Giannopoulos. Mr Baker then asserted in cross-examination that he "probably" sent an email response to Mr Giannopoulos' email but that assertion was inconsistent with his previous evidence that he did not recall receiving Mr Giannopoulos' email and with the fact that no such response was located on his computer. It was plain that Mr Baker was alert to the issues in the case and he was, in my view, anxious to advance Break Fast's case in giving his evidence and reluctant to make any concession which might be inconsistent with that case. On occasions, his evidence was non-responsive. I consider his evidence should also be approached with caution. 11The Defendants also criticised Mr Baker's approach to discovery, on the basis that Mr Baker did not undertake comprehensive searches for discoverable documents and, in particular, failed to produce notebooks that recorded relevant events in 2005. I do not consider that those criticisms were ultimately shown to be well-founded, given Mr Baker's evidence as to the extent of the searches that had been undertaken, and the fact that the Defendants have not established that the documents which were not made available on discovery are in Mr Baker's care, custody and control. I also do not accept the Defendants' criticism of the extent of email searches undertaken by Mr Baker, and I note that the additional emails which were located when Mr Baker's computer was examined by a forensic specialist were not shown to have been capable of being identified by the searches which Mr Baker had said he had made. The Defendants also made various criticisms of the extent to which Mr Baker had reviewed his personal bank records prior to giving evidence but I do not think that the Defendants established that Mr Baker was under any obligation to undertake such a review as to warrant adverse comment in that regard. 12An attack was also made by the Defendants upon the credit of Mr Anastasopoulos, who also gave evidence in Break Fast's case, having regard to issues as to the adequacy of his production of documents in response to subpoena. Although there were plainly inadequacies in that production, I do not consider that the Defendants have established that those inadequacies were deliberate or such as to impugn Mr Anastasopoulos' credit. Chronology of events 13Because the transactions relating to the Clarence Street property, Unit 1201 and the payments by Break Fast to Mr Giannopoulos are interconnected, it is useful to set the evidence surrounding them in a single chronology. I will refer below to those facts which are established by documentary evidence and also to the key witnesses' evidence in respect of several of these events. I have had regard to the issues which I have noted above as to the witnesses' credit in assessing that evidence. 14The Clarence Street property was developed by CSPL, which was appointed as venture manager to develop that property under a Joint Venture Agreement dated 6 September 2001. On 4 June 2002, CSPL entered a Put and Call Option with Mr Giannopoulos in respect of level 4 of the property (Giannopoulos 3.10.11, Ex PG-1). Mr Giannopoulos paid $300,000 for the option plus GST. There is difficulty in accepting Mr Giannopoulos' evidence that he understood the Put and Call Option over level 4 of the Clarence Street property to be effective in accordance with its terms, where that would have required him to purchase level 4 of the Clarence Street property for a purchase price of $2.45 million when his annual income was at that time $120,000 per annum (T166). I am not satisfied that Mr Giannopoulos' evidence that he then had shares in another entity and could have sought assistance from his parents (T167) provided an adequate answer to that difficulty. 15A letter dated 3 February 2003 between CSPL and Mr Giannopoulos varied the Put and Call Option by substituting level 4 for level 5 as the property the subject of the option. The letter of variation also provided that Mr Giannopoulos would not exercise the call option in respect of level 5 and that he consented to the sale of level 5 by CSPL, in consideration of which he was to receive any net proceeds of sale of level 5 exceeding $2,450,000 (exclusive of GST) following completion of the sale. CSPL then entered into a contract of sale of land to a third party in respect of level 5 for the sum of $2,650,000 on 4 February 2003 and that sale settled in December 2003. The variation of the Put and Call Option from level 4 to level 5, at a time that a buyer had been found for level 5 but not for level 4, was plainly to Mr Giannopoulos' advantage and CSPL's disadvantage. 16Although Mr Giannopoulos gave evidence of his understanding that he had obtained a profit on the sale of level 5, he claimed not to recall whether he had declared that profit in his tax returns. I do not accept Mr Giannopoulos' evidence in that regard. The profit made on this transaction would have been material to Mr Giannopoulos having regard to his income, and the corresponding tax liability would also be material where he had not received that profit in cash, and I regard it as highly unlikely that Mr Giannopoulos would not now recall how he had dealt with that tax liability. The evidence establishes that Mr Giannopoulos did not in fact include any profit in respect of the option arrangements in respect of the Clarence Street property in his taxable income for the relevant year. 17In January 2004, Mr Voukidis put a proposal to Mr Giannopoulos that Mr Giannopoulos should invest in Unit 1201 in the Clarence Street property. Mr Giannopoulos' evidence is that the purchase price for the apartment was to be $905,000 and Mr Voukidis told him that: "All you need to do is roll over the $550,000 that you are due to receive from the sale of the option into the Apartment and we will put in the rest and then upon resale of the property you will receive a further $200,000 and we will receive the balance. Our intention is to fitout and resell the apartment within 6 to 12 months and we have independent valuations that suggest the apartment would sell for a return of approximately $2 Million." (Giannopoulos 3.10.11, [15]-[17]) Mr Giannopoulos' evidence is that he was also told by Mr Voukidis of litigation between CSPL and a builder which had worked on the Clarence Street property and the need to "show the sale of the unit is at arm's length", notwithstanding that he was also told that the transaction would be effected by him providing personal cheques to CSPL and Mr Voukidis and others arranging for money to be deposited into his account to pay for the cheques (Giannopoulos [19]). 18Communications between Mr Giannopoulos and his solicitor in relation to the purchase of Unit 1201 in the first half of 2004 indicates an expectation that a Mr Crotti, and subsequently Mr Baker, would be loaning funds in respect of the purchase of the unit. In particular, it appears that it was contemplated in conversations between Mr Giannopoulos and his solicitor in March 2004 that Mr Baker would provide the funds for the purchase of Unit 1201 (Ex PG19, PG24). It is probable, on the evidence, that Mr Voukidis rather than Mr Baker was the source of that information. Mr Baker's evidence is that he was not informed of, nor party to, any proposal involving the sale of Unit 1201 to Mr Giannopoulos at the time it occurred (Baker 13.10.2011 [31]). It was put to Mr Baker that in 2004 he was contemplating advancing funds in relation to Mr Giannopoulos' purchase of Unit 1201 but he denied that proposition (T47). On balance, I accept Mr Baker's evidence in this regard. 19Contracts for the sale of Unit 1201 were exchanged on 6 May 2004 and Mr Giannopoulos' company, Connor FC Pty Ltd ("Connor FC"), provided a cheque in the sum of $90,500 on account of the deposit, on Mr Voukidis' undertaking that it would not be banked (Giannopoulos 3.10.11 [27]). 20On 21 June 2004, CSPL and Mr Giannopoulos executed a "Deed of Set-Off and Release" by which CSPL acknowledged the variation of the Put and Call Option Agreement and, by clause 2(a), acknowledged that the sum of $550,000 was due to Mr Giannopoulos (Ex PG 37, D3), which was applied to the purchase of Unit 1201. Mr Baker gave evidence in cross-examination of his understanding that an amount of $500,000 was payable to Mr Giannopoulos in respect of the transaction (T80). Settlement of the sale of Unit 1201 occurred on 22 June 2004 and Mr Giannopoulos provided a personal cheque in the amount of $265,748.15 from Connor FC. Mr Giannopoulos gives evidence of a conversation with Mr Voukidis that the cheque would not be deposited until funds were provided to him (Giannopoulos 3.10.11 [31]). Mr Giannopoulos was advised by his solicitors that the settlement process proposed was "highly unusual" and had the potential to lead to claims from CSPL in the event of insolvency or a change in its shareholders or directors. 21Mr Giannopoulos gave evidence of a conversation with Mr Voukidis just before or just after settlement of Unit 1201 in words to the following effect, which was admitted as evidence of the conversation not as proof of the facts asserted: [Voukidis]: "Theo [Baker] hasn't contributed his share of the funds to finish off the apartments. Will you take out a loan to assist us?" [Giannopoulos]: "I don't mind, but who will pay the loan off?" [Voukidis]: "Theo [Baker] will pay the loan repayments. You will not be responsible for the loan." At some point in this conversation Chris [Voukidis] told me [Giannopoulos] the proposed loan was to be in the order of $1 million. [Giannopoulos:] "That's fine as long as I don't have to pay the loan off". (Giannopoulos [34]). 22Mr Giannopoulos' evidence was that he was subsequently contacted by a finance broker who told him "[t]he guys have asked me to arrange a loan for the unit at Clarence Street". Mr Giannopoulos applied to Citibank for a loan of $1.2 million by an application dated 19 May 2004 (Ex P7). The information provided to Mr Giannopoulos in respect of his loan application to Citibank was incomplete and misleading, although he attributed this to the conduct of the mortgage broker who completed the relevant form, notwithstanding that Mr Giannopoulos signed that form. In particular, the information provided to Citibank did not disclose the fact that there were other parties interested in the loan (assuming the correctness of Mr Giannopoulos' account that Messrs Baker, Anastasopoulos and Voukidis were taking responsibility for the loan payments); information provided as to rental income from the unit was incorrect where Mr Giannopoulos understood that he was entitled to occupy the property and in fact did so; and information as to monies on deposit contained in the loan application was also incorrect. 23A valuation report prepared for the purposes of the Citibank loan referred to a value of Unit 1201 at 28 June 2004 of $1.9 million, while noting the need for minor works to be finished including carpets, rear terrace areas, bathroom fit-outs, staircase balustrade and electrical work. 24A loan approval was received from Citibank in the amount of $1,045,000 on 7 July 2004 and that loan settled on 29 July 2004 with the payment of $1,040,554 (being the net proceeds from the loan after payment of loan fees) into Mr Giannopoulos' Citibank Offset Savings Account ("Offset Account"). The proceeds of the Citibank loan were subsequently disbursed in accordance with Mr Voukidis' directions (Giannopoulos 3.10.11 [39]-[40]), by payment of $544,000 to Jeddah Projects Pty Limited, a company controlled by Mr Voukidis; $396,603.60 to Connor FC; and $50,000 to Community Life Limited, a company associated with Mr Baker, with an amount of $49,950.40 remaining in the Offset Savings Account to pay future interest on the Citibank loan. Mr Giannopoulos' evidence was that the amount paid to Connor FC was used to permit the cheques which he provided at settlement of the property to be presented by CSPL and to reimburse him the costs of stamp duty and legal fees for the purchase. Mr Giannopoulos' evidence was also that he asked Mr Voukidis why a payment was being made to Mr Baker (or his company) in the amount of $50,000 and was informed that "[b]ecause Theo [Baker] was paying the loan, he wanted some of the money" (Giannopoulos [46]). Mr Baker's evidence was that the amount of $50,000 repaid to Community Life was in part repayment of funds previously advanced by Mr Baker (T29.24). It is not necessary to resolve the dispute as to this matter for the purpose of these proceedings. 25Mr Giannopoulos resided in Unit 1201 from about December 2004 until about July 2010 (Giannopoulos 3.10.11 [52]-[53]). Mr Giannopoulos' evidence on cross-examination was that he understood that he was the registered proprietor of Unit 1201 but that he was holding it on behalf of the shareholders in CSPL and that should not be revealed on the face of any documents, both so that the builder would not find out and also because there was an issue with home warranty insurance (T177). Mr Baker's evidence was that he first became aware that Mr Giannopoulos had moved into Unit 1201 in early 2005 and that Mr Voukidis informed him that "[CSPL] will get the benefit" and that "[o]nce the units are sold the profits will flow through to [CSPL]" (Baker 13.10.11 [44]). Mr Baker gave evidence of having been told by Mr Voukidis in the first half of 2005 that: "We had to raise finance to do the fitout so the units were sold to friendly parties ... the units are being held for [CSPL]. They will be sold soon. When they are sold the profits will be realised by [CSPL]." Mr Baker also gave evidence that he was told by Mr Voukidis of the need to keep the units out of CSPL "in case the litigation with the builder goes bad" (Baker 13.10.11 [45]). 26Mr Giannopoulos' evidence was that he requested Mr Voukidis to have Mr Baker start making the repayments on the Citibank loan in March 2005, and that a payment of $15,000 was deposited into the Offset Account with the description "Direct Credit Netbank Peri-Clarence" on 18 May 2005 which he assumed was made by Mr Baker, who (to Mr Giannopoulos' knowledge) banked with the Commonwealth Bank. Mr Baker's evidence was that he did not recall making a payment to Mr Giannopoulos' Citibank account on 18 May 2005 and had not searched his bank accounts to determine whether such a payment had been made (T40). Mr Baker subsequently said that he did not believe that he made the payment (T41.24). 27A series of emails were exchanged between Messrs Giannopoulos, Voukidis, Anastasopoulos and Baker in September 2005 concerning the Citibank loan to which I will refer below. Oxley made a payment to the Citibank Offset Account on 27 March 2006 (T157, Ex PG60). There was further correspondence between Messrs Giannopoulos, Voukidis and Baker on 16-17 May 2006 to which I will also refer below. Mr Giannopoulos' evidence was that he was again told by Mr Voukidis that Mr Baker would make the payments on the Citibank loan when he followed up with Mr Voukidis before he departed for his honeymoon in June 2006. 28Payments were made by Break Fast to Mr Giannopoulos' Citibank Offset Savings Account from May 2006 until October 2009 (Baker 23.9.11 [31]; Giannopoulos 3.10.11 [85]). They were variously described in narrations to the payments as "Direct Credit Bfi - loan - Careerpath" (Giannopoulos [89]-[90]) and "Direct Credit Transfer Interest/Dir Fee" (Giannopoulos [95]-[96]). Mr Giannopoulos' evidence is that he noticed that an amount was deposited into the Offset Account on 26 May 2006, and that he believed the payment came from Mr Baker and did not know what the reference to "Bfi" related to and did not associate those letters with Break Fast. Mr Giannopoulos also gave evidence that he believed that subsequent deposits made with a notation referring to "Careerpath" were made by Mr Baker as Career Path was, to his knowledge, also Mr Baker's company. He gave evidence that he did not recall if he noticed the change in the narration which occurred in May 2008, but it did not cause him to change his belief as to the source of the payments. Mr Baker's evidence was that he did not authorise and was not aware of the payments made by Break Fast to Mr Giannopoulos which Mr Voukidis had arranged from Break Fast funds without his authority. I will reach findings as to whether those payments were authorised by Break Fast below. 29Mr Giannopoulos and Ms Faraone married in June 2006, resided together at Unit 1201 from July 2006, exchanged contracts to purchase the Homebush property for the sum of $896,000 on 8 December 2007 and completed the purchase of the Homebush property in January 2008 (Giannopoulos 3.10.11 [107]-[109], [111]). 30In March 2008, Mr Voukidis requested Mr Giannopoulos to change the Citibank loan in respect of Unit 1201 to make it interest only. 31Mr Baker advised Mr Giannopoulos on 30 October 2009 that the payments which had been made to him by Break Fast were not authorised and sought to require that those amounts be repaid to Break Fast (Baker 13.10.11, Ex TB-10). Mr Baker reiterated the claim that Mr Giannopoulos was not entitled to those payments on 30 November 2009 (Baker 23.9.11 [34]). 32Contracts for the sale of Unit 1201 were exchanged on 21 May 2010 and the sale of the unit proceeded, after a caveat had been lodged by Break Fast and with Break Fast's consent, on condition that the surplus proceeds from the sale be paid in reduction of the Defendants' mortgage over the Homebush property (Giannopoulos 3.10.11 [121]). On settlement of the sale of Unit 1201 on 30 July 2010, Mr Giannopoulos paid the balance of the proceeds in the amount of $240,423.38 into the Homebush Offset Mortgage Account and $42,247.07 into the Homebush Offset Savings Account (Giannopoulos 3.10.11 [123]). Claim in unjust enrichment 33Break Fast brings a personal claim in unjust enrichment against Mr Giannopoulos (Amended Statement of Claim [6M]) and Ms Faraone (Amended Statement of Claim [6CC], [9], [11]-[12]). Break Fast contends that a remedy in unjust enrichment is available where the Defendants have obtained a benefit at the expense of a plaintiff and a vitiating factor such as misappropriation is present: David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 378-379. A claim for monies had and received may be established in respect of monies paid over without authority, which remain the property of the payer, unless a third party has received the money in good faith and for valuable consideration: Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 at 572. In Heperu Pty Ltd v Belle , [2009] NSWCA 252; (2009) 76 NSWLR 230, the Court of Appeal held that an action at law in money had and received is available to restore the value of the benefit retained by a volunteer where that benefit is traceable in equity from misappropriated funds (at [144], [153]). I will refer further to that decision below. 34The Defendants contend that Break Fast cannot maintain its unjust enrichment claim by reason of the High Court's decision in Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89. The Defendants contend that the High Court considered there was no role for a claim founded on unjust enrichment in the case of breaches of fiduciary duty. I am, of course, bound by the High Court's decision that a claim in unjust enrichment should not be permitted in substitution for a claim for knowing receipt under the first limb of Barnes v Addy . However, I do not consider that the decision in Farah Constructions excludes an unjust enrichment claim arising from payments made without authority, as distinct from payments made with authority but in breach of directors' or officers' duties. The High Court referred (at [141]) without disapproval to the decision in Lipkin Gorman v Karpnale Ltd , which allowed a claim for unjust enrichment in respect of an unauthorised payment, and also referred to the common law cause of action in money had and received arising in the case of a payment made with a vitiating factor such as mistake, duress or illegality and noted that no such factor had not been identified in Farah Constructions beyond the director's alleged breach of fiduciary duty (at [150]); see also Heperu Pty Ltd v Belle at [152]. In this case, Break Fast's claim for unjust enrichment does not depend upon an allegation of breach of fiduciary duty but rather upon an allegation that the relevant payments were made without its authority. 35I will deal below with a defence raised by the Defendants under s 42 of the Real Property Act , so far as the Plaintiffs seek proprietary relief in respect of Unit 1201 or the Homebush property. I am conscious of Rein J's observation in Raulfs v Fishy Bite Pty Ltd [2011] NSWSC 105 at [88]. "... There seems to be considerable force in the proposition that in the absence of a claim that meets the requirements of Barnes v Addy , as laid down in Consul Development and confirmed in Farah , and in the absence of conduct falling within the fraud exception, there is no scope for an in personam claim independent of a claim against a fund or property in [a volunteer's] hands to be maintained: see Farah ." However, I do not understand that observation to exclude the possibility of a personal claim for monies had and received which is not based upon an allegation of breach of fiduciary duty and does not seek to assert an interest in real property. Whether the relevant payments were unauthorised 36In order to make good its claim in unjust enrichment, Break Fast seeks to establish that the payments made by Mr Voukidis had not been authorised by it and did not reflect any obligation owed by Break Fast. Specifically, in paragraph 3D of the Further Amended Statement of Claim, Break Fast pleads that Mr Voukidis "wrongfully without any obligation or requirement to do so" transferred or caused to be transferred the amount of $317,000 in "unauthorised payments" from Break Fast to Mr Giannopoulos' Citibank account between 26 May 2006 and 26 October 2009. Break Fast also contends that Mr Voukidis' conduct in making or causing the monies to be paid involved a breach of his general law and statutory duties, although, as I have noted above, that proposition is not necessary to a claim arising on the basis that the relevant payments were made without Break Fast's authority. 37The Defendants admit the receipt of the Monies but denies that the payments were unauthorised or, alternatively, say that Mr Giannopoulos was entitled to receive them. In particular, the Defendants contend that Mr Giannopoulos was entitled to receive the Monies by reason of an agreement between Messrs Baker, Voukidis and Anastasopoulos to pay amounts he was required to pay to in respect of the Citibank loan (Further Amended Defence to Amended Statement of Claim, [3D]). I will deal with the evidence relating to authority and "entitlement" together since the same matters were relied on for both submissions. 38There is no evidence that the payments made by Break Fast to Mr Giannopoulos were authorised by a formal resolution of Break Fast's then directors, Messrs Voukidis and Baker. There is also no direct evidence that the payments were authorised by any informal decision of the then directors of Break Fast, acting in that capacity. There is evidence that Mr Voukidis did not have authority to make such payments in the ordinary course since Mr Baker gave evidence, without objection, that: "The directors of Break Fast never agreed that Voukidis could make payments other than that which is associated with the Wellington Parade Property". (Baker 23.9.11 [23]) The reference to the "Wellington Parade Property" is to a property owned by Break Fast in Melbourne. Mr Voukidis did not give evidence and no inference that the payments were authorised by him in an exercise of his powers as a director of Break Fast can be drawn from the mere fact of the payments, which is equally consistent with their being made without such authority. 39Mr Baker's evidence is that he did not authorise or consent to or know of the transfers from Break Fast to Mr Giannopoulos (Baker 23.9.11 [32], T26.24-41, T112.42-45). That evidence was vigorously challenged by the Defendants but, on balance, I accept it, on the basis that it is corroborated by Mr Baker's later attempt to prevent payments by Mr Voukidis from Break Fast's funds to which I refer below. 40Mr Giannopoulos' evidence at times asserted an obligation on the part of Messrs Voukidis, Baker and Anastasopoulos collectively to make payments on the Citibank loan, consistent with his pleaded case, and at times asserted a particular liability of Mr Baker for that loan. The position that Messrs Voukidis, Baker and Anastasopoulos were collectively liable to meet the Citibank loan was reflected in Mr Giannopoulos' evidence (which was admitted as proof of his understanding) that he understood the agreement between Messrs Baker, Anastasopoulos, Voukidis and himself was: * That I [Mr Giannopoulos] would enter into a Contract for the Sale of Land for the purchase of the Property [Unit 1201] for an amount of $905,000; * That the $550,000 I [Mr Giannopoulos] was to receive from the sale of Option would be rolled over into the purchase of the Property; * That Chris [Voukidis], Nick [Anastasopoulos] and Theo [Baker] would then arrange for the Property to be transferred into my [Mr Giannopoulos'] name; * That Chris [Voukidis], Nick [Anastasopoulos] and Theo [Baker] would pay all of the expenses in relation to the transfer of the Property into my [Mr Giannopoulos'] name, including the stamp duty and my [Mr Giannopoulos'] solicitor's costs; * That Chris [Voukidis], Nick [Anastasopoulos] and Theo [Baker] would complete the fitout of the Property and proceed to sell it; * That I [Mr Giannopoulos] would receive the $550,000 that was rolled over into the purchase of the Property and an additional amount of $200,000. (Giannopoulos [18]). 41Mr Giannopoulos' explanation of the commercial logic of the arrangement given in re-examination was also consistent with an arrangement with Messrs Voukidis, Baker and Anastasopoulos, rather than arrangement with Mr Baker personally. That evidence was that: "Because they were meant to put the capital up front, they didn't do that and therefore I took out this loan on their behalf and they were to pay the interest. It was - like I put my capital up front and that was part of the deal and the part of the deal was I was to live there. They were supposed to put up their share of the funds, they didn't do that and in lieu of that I took out the loan and they were to pay the interest." (T254). 42Mr Baker acknowledged that Messrs Voukidis, Anastasopoulos and he had at least an indirect interest in Unit 1201, denied that they were responsible for the payments on the Citibank loan although he conceded (as the evidence made clear) there were discussions as to assisting Mr Giannopoulos with such payments, and denied that he had any personal responsibility for the loan. In particular, Mr Baker's evidence was that his understanding was that the friendly parties to whom the three apartments had been sold (including Mr Giannopoulos in respect of Unit 1201) held them in the interests of CSPL and that, notwithstanding the title to those apartments was in the name of those people, CSPL could control the disposition and use of the apartments (T73.19, T27) and Mr Baker understood in substance that CSPL controlled the relevant apartments (T74.22), Mr Baker's evidence was also that the individual owners took the responsibility for the loans and were allowed a significant upside (T81.9) and he denied that he was responsible for meeting the mortgage payments for Unit 1201 (T81.14) and denied that he had agreed to repay the Citibank loan (T104-105, T109). 43In my view, the proposition that Mr Baker had accepted personal responsibility for the Citibank loan is inconsistent with email correspondence in May 2005 by which Mr Baker sought clarification of the ownership of the units at the Clarence Street property and Mr Voukidis responded by referring to a residual profit to the "parties who provided the necessary funds for the purchase" rather than by referring to any responsibility of Mr Baker for the loan in respect of Unit 1201. 44Mr Giannopoulos relies on the fact that a meeting took place between Messrs Voukidis, Anastasopoulos and Baker concerning Unit 1201 on 13 May 2005 and, on 18 May 2005, Mr Baker transferred $15,000 from a Commonwealth Bank account maintained in Brisbane to Mr Giannopoulos' Citibank account. I do not consider that I can draw the inference that that payment relates to Unit 1201 or acknowledges any liability of Mr Baker to make payments in respect of the loan on Unit 1201, still less a liability of Break Fast to make such payments, since the evidence discloses a range of other financial transactions between Mr Giannopoulos and Mr Baker to which that payment may be referable. The Defendants also rely on what they characterise as Mr Baker's "deliberate failure to search for any records of the payment" to support this inference. I do not consider the allegation of a deliberate failure to search for records has been made good, having regard to Mr Baker's evidence of the extent of searches which were undertaken to comply with discovery requirements in these proceedings. 45By email dated 22 September 2005, Mr Giannopoulos wrote to Messrs Voukidis, Anastasopoulos and Baker stating, inter alia, that: "I personally took out the above loan on proviso that you would support me in relation to the repayment." The terms of that email are not consistent with an obligation of Mr Baker alone to provide such support. An email dated 22 September 2005 from Mr Anastasopoulos to Mr Voukidis in turn stated that "[t]he ball (loan) is in Theo's [Baker's] court!!!!". Mr Giannopoulos also relies on an email dated the same day purporting to set out Mr Baker's response "Voukidis strikes again", which was the subject of some controversy before me. Mr Baker's evidence was that he did not recall the email exchange and had searched the emails held on his computer and had not been able to locate that email exchange (Baker 13.10.2011 [53]). Mr Baker also gave evidence "the words 'Voukidis strikes again!' do not appear to be words that I would use" although that evidence was questioned by evidence of an earlier email from Mr Baker expressing a somewhat similar sentiment in stronger terms. 46By email dated 23 September 2005, Mr Giannopoulos sent an email to Mr Baker indicating that: "I spoke with Nick [Anastasopoulos] and he tells me that you had all come to the agreement that you would take care of apartment no 1." There is no evidence that Mr Baker subsequently responded denying any such agreement. At its highest, this exchange of emails amounts to a representation by Mr Anastasopoulos, left uncorrected by Mr Baker, that the loan was Mr Baker's responsibility. 47There was further correspondence between Messrs Giannopoulos, Voukidis and Baker on 16-17 May 2006. On 17 May 2006, Mr Giannopoulos sent an email to Mr Baker which again asserted "[t]he original deal never included me taking out a loan. I did that to help you guys." I do not accept Mr Baker's evidence that he regarded Mr Giannopoulos' emails of May 2006 as a request for a loan (T99.40), since there is nothing in the terms of those emails to indicate either a request by Mr Giannopoulos or an offer by Mr Baker of such a loan, and Mr Giannopoulos' emails instead assert an obligation on the part of others to make the relevant payments. 48Mr Baker's first response to Mr Giannopoulos' email was to suggest that the amount be paid from Mr Baker's claim against another company by which Mr Giannopoulos was then employed. In a further email, Mr Baker denied any "direct relationship" with the Citibank loan and suggested that payments be made by OnetoFour, which was another entity associated with Messrs Voukidis, Baker and Anastasopoulos, and repeated the suggestion of payment of monies which he claimed against a third party toward that loan. Mr Voukidis in turn responded to Mr Baker's position by asking Mr Baker the rhetorical question "if you are taking no responsibility for the Citibank loan, then are you are expecting no benefit?" That response is consistent with an attempt to persuade Mr Baker to accept responsibility for the Citibank loan, on the basis that he might then obtain any consequential benefits in respect of Unit 1201, rather than any existing acceptance of responsibility for that loan by Mr Baker. In cross-examination, Mr Baker rejected the proposition that his denial of a "direct relationship" with the Citibank loan in his email dated 17 May 2006 conceded the existence of an indirect relationship with that loan, other than through his investment in CSPL (T104.39). Mr Baker also denied that, after the exchange of emails which took place on 16-17 May 2006, he agreed to cause the funds of Break Fast to be paid to the Citibank mortgage (T112.45). 49In my view, to the extent the email exchange on 16-17 May 2006 conveys a representation by Mr Baker, it is equivocal, since he plainly does not accept direct responsibility for the Citibank loan; and, to the extent that it suggests that monies otherwise due to Mr Baker might be used to make loan payments, that would be consistent with Mr Baker's position as one of the principals of CSPL and the possibilities raised by Mr Baker do not extend to payments made by Break Fast. 50The Defendants rely on the fact that, some nine days after the exchange of emails on 16-17 May 2006, Break Fast made the first of the impugned payments. The Defendants contend it should be inferred that those payments were authorised by Messrs Voukidis and Baker, as directors of Break Fast, following that exchange of emails. However, I do not consider that I should draw that inference, in the fact of Mr Baker's unequivocal denial of it, in the absence of evidence from Mr Voukidis and in the face of subsequent communications where Mr Baker has consistently sought to prevent other payments being made by Mr Voukidis from Break Fast's accounts. The more probable explanation, in my view, is that Mr Voukidis authorised the relevant payments without Mr Baker's authority since the communications on 16-17 May 2006 had not resolved the question of who would make payments on the Citibank loan. 51The Defendants contend that Mr Baker would have been expected to have responded in writing denying the content of Mr Giannopoulos' emails of September 2005 and May 2006 if he considered they were false, and they rely on the absence of a clear denial of that proposition. I do not consider that the absence of a response establishes that Mr Baker accepted responsibility for the loan, or was likely to have authorised payments towards the loan from Break Fast, in circumstances that Mr Giannopoulos had referred to a collective responsibility of Messrs Voukidis, Anastasopoulos and Baker for the loan, and Mr Baker had no need to respond to that contention so far as it concerned Mr Voukidis and Mr Anastasopoulos. Mr Giannopoulos himself gave an account to his solicitor of the circumstances giving rise to these proceedings, which was apparently discovered without a claim to legal professional privilege (Ex P9), which referred to representations made to him by Mr Voukidis and to an expectation that Messrs Voukidis, Baker and Anastasopoulos collectively would take responsibility for the loan, rather than to any acceptance of personal responsibility for that loan by Mr Baker. By email dated 1 February 2007, Mr Voukidis provided Mr Baker with a further explanation of the ownership of the units in the Clarence Street property which referred to finance on the units in a manner which did not indicate that Mr Baker had accepted responsibility for the loan in respect of Unit 1201. 52The inference that the relevant transactions were unauthorised also finds support from correspondence between Mr Baker and Mr Voukidis in the period from December 2008, when Mr Baker objected to payments which he had discovered were being made by Mr Voukidis from Break Fast's account and directed Mr Voukidis and Break Fast's bank to cease those payments, although he was not successful in securing that result. Those directions did not contain any exclusion for the payments to Mr Giannopoulos, which one would have expected had the payments to Mr Giannopoulos been authorised. By email dated 18 August 2009, Mr Baker asked Mr Voukidis to "confirm that there were no direct debits occurring". Mr Voukidis responded, somewhat evasively, that no such debits were occurring "without your knowledge or consent" and Mr Baker in turn responded that "I'll interpret that as meaning that NO direct debits are occurring". These exchanges are also inconsistent with Mr Baker then having knowledge that the direct debit facility on Break Fast's account was being used to transfer funds to Mr Giannopoulos in payment of the Citibank loan. Mr Baker again objected to the payments when he discovered, in the second half of 2009, that they had continued and then advised Mr Giannopoulos that the payments made to him were unauthorised when he became aware of those payments. In my view, this correspondence provides strong support for Break Fast's contention that the relevant payments were unauthorised. 53The Defendants rely on evidence given by Mr Esquivel, who works with Mr Voukidis and previously provided accounting and bookkeeping services to Break Fast to support the proposition that Mr Baker permitted Break Fast's payments toward the loan to continue from the time he began to receive bank reconciliations in early 2009 until 26 October 2009. The Defendants contend that the only explanation for that course is that Mr Baker, as a director of Break Fast, approved the payments. I do not consider that I can properly draw that inference. There is no evidence as to the content of the bank reconciliations said to have been provided to Mr Baker which would allow me to conclude that they squarely drew Mr Baker's attention to the payments being made to Mr Giannopoulos. 54The Defendants alternatively contend that the Monies paid by Break Fast to Mr Giannopoulos were funded from directors' fees of Mr Baker or of Mr Voukidis. I do not accept the submission that the Monies were directors' fees of Mr Baker. While there had been an earlier discussion between Mr Voukidis and Mr Baker as to the possible payment of directors' fees to Mr Baker, that appears to have been conditional on Break Fast's capacity to pay those fees; the discussion related to the payment of directors' fees for the years ending 30 June 2005, 30 June 2006 and 30 June 2007 (Ex P5) and contemplated a further agreement in respect of directors' fees in subsequent years; and Mr Baker gave evidence, which I accept, that there was no further discussion as to payment of directors' fees to him (T120-121). Given the evidence that Mr Voukidis had control of Break Fast's bank account, and the absence of evidence from Mr Voukidis, I cannot attribute any weight to the description of payments made by Break Fast after 26 May 2008 in bank statements as "directors' fees". The Defendants' contention that Mr Baker had consented to the application of his director's fees to payments to the Citibank loan is also inconsistent with Mr Baker's email dated 25 August 2009 to Mr Voukidis seeking an explanation, by reference to affidavits which had been sworn by Mr Voukidis in Victorian proceedings, "why you claim to having paid me [Baker] a director's fee when I have never received these amounts or any other amounts from Break Fast" and seeking "an explanation of where these funds actually went". 55I also do not accept the Defendants' alternate submission that the Monies were directors' fees of Mr Voukidis. In a reconciliation of directors' fees prepared by Mr Voukidis (Baker 13.10.11, Ex TB-6, p 618), substantially all of the relevant payments are purportedly allocated to Mr Baker's director's fees rather than Mr Voukidis' director's fees. The emails between Mr Voukidis and Mr Baker do not contain any assertion by Mr Voukidis that the Monies were due to him as directors' fees, and, as I have noted above, Mr Voukidis did not give evidence in the proceedings. 56Although Mr Voukidis represented to Mr Giannopoulos that Messrs Voukidis, Baker and Anastasopoulos would attend to repayment of the Citibank loan and Mr Giannopoulos' emails are consistent with his having held that understanding, the evidence does not establish that Mr Baker had in fact accepted such an obligation or that he authorised payments by Break Fast as a means of discharging such an obligation. Nor does that evidence establish any "entitlement" on Mr Giannopoulos' part to receive such payments from Break Fast as distinct from Messrs Voukidis, Baker and Anastasopoulos personally. Estoppel defence 57The Defendants raise an estoppel defence, contending that Break Fast is estopped from alleging that the payments were unauthorised or that Mr Giannopoulos was not entitled to the payments. The Defendants contend that Break Fast (by its directors) represented that the directors and/or Break Fast would cause the payments due to Citibank pursuant to the mortgage over the Clarence Street property to be repaid from their and/or its own resources (Further Amended Defence [15](b) - (i)]). 58In Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 at 428, Brennan J observed that to establish an estoppel the first thing it was necessary for the plaintiff to prove was that (at 428): "... the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship." In Austotel Pty Ltd v Franklins Self-Serve Pty Ltd (1989) 16 NSWLR 582 at 610, the elements of an estoppel were formulated as requiring: "the creation or encouragement by the Defendant in the Plaintiff of an assumption that a contract will come into existence or a promise be performed or an interest granted to the Plaintiff by the Defendant, and reliance on that by the Plaintiff, in circumstances where departure from the assumption by the Defendant would be unconscionable." In Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394, Deane J observed at 444 that the law does not permit an unconscientious departure by one party: "from the subject matter of an assumption which has been adopted by the other party as the basis of some relationship, course of conduct, act or omission which would operate to that other party's detriment if the assumption be not adhered to for the purposes of the litigation." 59Three key elements of an estoppel claim were summarised by Pembroke J in Summerhill Business Estate v Equititrust [2010] NSWSC 776 at [42]ff as that the defendant's words or conduct must be clear and unambiguous; the defendant's conduct in relying to its detriment on those words or conduct must be reasonable; and the defendant must know or intend that the plaintiff will act or abstain from acting in reliance on those words or that conduct or, in effect, have some reasonable expectation that its words or conduct will induce some detrimental reliance by the plaintiff. In Evans v Evans [2010] NSWSC 170 at [36], Brereton J observed that the defendant's knowledge or intention that the party who adopts an assumption will act or abstain from acting in reliance on it "is easily inferred where the adoption, assumption or expectation is induced by the making of a promise or representation, but may also be found where a defendant encourages a plaintiff to adhere to an assumption or expectation already formed, or acquiesces in an assumption or expectation when, in conscience, objection ought to be stated. The unconscionability which attracts the intervention of equity is the defendant's failure, having induced or acquiesced in the adoption of the assumption or expectation, to fulfil it, or otherwise to avoid the detriment which that failure would occasion." 60In my view, the Defendants have not established that Break Fast paid any part in the creation of an assumption on their part. This is sufficient to mean the estoppel claim must fail against Break Fast. I have set out my findings in respect of the various dealings, particularly the emails of September 2005 and May 2006, on which the Defendants rely in support of this defence in paragraphs 45-49 above. There is, in my view, no basis for a finding that Mr Baker was acting on behalf of Break Fast at the meeting on 13 May 2005, where he was involved in dealings with the Clarence Street property in his personal capacity and as a party interested in CSPL. There is, in my view, no basis for a finding that the representations made by Messrs Voukidis and Anastasopoulos, including the email from Mr Anastasopoulos to Mr Voukidis on 22 September 2005 asserting Mr Baker's responsibility for the loan, were made on behalf of Break Fast, where those persons were also involved in the matter for CSPL and in their personal capacities. There is no evidence that that email was sent to or relied on by Mr Giannopoulos and it does not represent that any payment would be made by Break Fast. There is also no basis for finding that the agreement of which Mr Anastasopoulos informed Mr Giannopoulos, to which reference was made in Mr Giannopoulos' email dated 23 September 2005, was made on Break Fast's behalf. There is also no indication that Mr Baker's emails of May 2006 were sent on Break Fast's behalf. In any event, Mr Giannopoulos did not rely on these communications to purchase Unit 1201 or accept the liability under the Citibank loan, which he had taken out in July 2004 and was already contractually obliged to repay. 61Mr Giannopoulos' evidence is that, if he had been aware that Break Fast contended that he and Ms Faraone were not entitled to the benefit of the Monies he would have changed his expenditure dramatically; he would have sold the Clarence Street property earlier, reducing the asking price if it was necessary to do so; and would not have purchased the Homebush property, but would have asked Ms Faraone to purchase a small townhouse; would not have bought a BMW X5; and Ms Faraone would not have spent the substantial amount of money spent on the renovation of the Homebush property. Ms Faraone's evidence is that, had she known of Break Fast's claim, she would not have permitted Mr Giannopoulos to purchase the BMW vehicle and would have chosen to purchase a townhouse that did not require substantial renovations rather than purchasing the Homebush property which would require substantial work before it became habitable. 62This evidence of Mr Giannopoulos and Ms Faraone is directed to detriment arising from non-disclosure of Break Fast's claim, rather than reliance on any suggested positive representation by Break Fast that Mr Giannopoulos was entitled to the Monies. I do not consider that the detriments on which Mr Giannopoulos and Ms Faraone relied were established on the evidence. The Defendants have not, in my view, established that Mr Giannopoulos would have sold Unit 1201 at an earlier date, as he contends, had he been aware of Break Fast's position. Mr Giannopoulos was then occupying that unit without paying rent on it and he did not in fact sell Unit 1201 when Break Fast put him on notice of its claim in October 2009, but instead assumed personal responsibility for paying the mortgage. In oral evidence, Mr Giannopoulos gave an explanation of the later sale of Unit 1201, not by reason of Break Fast's claim, but by reference to the fact that the Defendants had purchased the Homebush property, had a growing family and no longer wished to live in an apartment. I also do not consider that the purchase of or renovations to the Homebush property have been shown to be a detriment, where there is no evidence that their current value is less than the expenditures on them. 63The Defendants also did not sell the BMW X5 after being notified of Break Fast's claim and the evidence does not establish that they made any other substantial changes to their expenditures when notified of Break Fast's claim. Change of position defence 64The Defendants also seek to establish a defence of change of position in respect of the claim of unjust enrichment. Break Fast responds that the expenditure said to constitute the change of position was not made in reliance upon receipt of the relevant monies, was in respect of ordinary living expenses, cannot be maintained as assets were purchased and cannot constitute acting "on the faith of the receipt". 65In Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 at 579, Lord Goff of Chieveley observed that: "... [W]here an innocent defendant's position is so changed that he will suffer an injustice if called upon to repay or to repay in full, the injustice of requiring him so to repay outweighs the injustice of denying the plaintiff restitution." In Australia and New Zealand Banking Group Limited v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662 at 673, the High Court emphasised that a change of position by the recipient is relevant to whether an order for restitution would be unjust. 66The defence of change of position requires that the defendant have acted to its detriment on the faith of, that is in reliance on, receiving the money: David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 395-386; Port of Brisbane Corporation v ANZ Securities Ltd (No 2) [2002] QCA 158; [2003] 2 Qd R 661 at [13]. In State Bank of New South Wales Ltd v Swiss Bank Corporation (1995) 39 NSWLR 350 at 355, the Court of Appeal observed that knowledge derived otherwise from the payer cannot be relevant in deciding whether a change of position by the payee occurred on the faith of the receipt. However, in Perpetual Trustees Australia Ltd v Heperu Pty Ltd [2009] NSWCA 84; (2009) 76 NSWLR 195 at [139], Allsop P and Handley AJA interpreted the requirement that information came from the "payer" expressed in State Bank of New South Wales Ltd v Swiss Bank Corporation as "no more than a requirement that the change of position be on the face of the receipt and its attendant circumstances", and indicated that they did not view the Court's observation in that case as "narrowly constraining the notion of acting on the faith of the receipt". 67Several matters were originally relied upon to support the change of position defence and are now not pressed, including the cost of the wedding of Mr Giannopoulos and Ms Faraone, their wedding ring and their honeymoon. As noted above, the Defendants rely on their purchase of a BMW X5 in March 2007 support of the change of position defence. In my view, the defendants have not established that that purchase was made on the faith of the receipt of payments from Break Fast, since Mr Giannopoulos had himself made payments on the mortgage for Unit 1201 in December 2006, a short period before that purchase. The Defendants also rely on the purchase and renovation of the Homebush property in support of the change of position defence. Mr Giannopoulos' evidence does not establish that he took these steps by reference to the receipt of the payments by Break Fast; rather, that evidence seeks to establish that he took those steps on the basis of his understanding that Messrs Voukidis, Baker and Anastasopoulos had accepted responsibility for the mortgage payments. I also do not consider that the purchase or renovation of that property has been shown to be a detriment in the relevant sense, in the absence of evidence that the monies expended are not capable of being realised on a sale of the property. 68The position that a person who acquires assets which have continuing value could rely on that acquisition to establish a change of position without making any attempt to account to a claimant for the continuing value of the assets has also been rejected in at least some of the US case law: Phetteplace v Bucklin (1893) 18 R 1 297, quoted with approval in K Mason, J W Carter & G J Tolhurst, Mason & Carter's Restitution Law in Australia , 2 ed, at [2418]. 69The Defendants contend that a change of position defence is also established because Mr Giannopoulos remained in occupation of Unit 1201 as a result of an agreement with Mr Voukidis, believing that Mr Voukidis was acting for the principals of CSPL, and could have vacated that unit and left the principals of CSPL to deal with the property as it wished; agreed to let CSPL market the property; and would have sold Unit 1201 upon being told of Break Fast's claim (Giannopoulos [129]). I have dealt with the position in respect of the sale of Unit 1201 in paragraph 63 above. Whatever the position in respect of CSPL and its principals, I do not consider that these matters support a change of position defence referable to the payments made by Break Fast. 70Break Fast also contended that the defence of change of position was not available because the Defendants, or at least Mr Giannopoulos, could not establish that they have acted in good faith. Break Fast relies on the matters relating to the variation of the Put and Call Option Agreement in respect of level 4 of the Clarence Street property to which I have referred in paragraph 15 above. Although that evidence raises a serious question whether the variation of the Put and Call Option Agreement from level 4 to level 5 was in the interests of CSPL. 71Break Fast also relied on the circumstances of the sale of Unit 1201 to Mr Giannopoulos as inconsistent with good faith. The question whether the sale of Unit 1201 to Mr Giannopoulos was made at undervalue was vigorously agitated by both parties. There was an associated factual contest between Break Fast on the one hand and Mr Giannopoulos on the other as to the state of completion of Unit 1201 as at the date of the sale of that unit to Mr Giannopoulos in mid-2004. Break Fast contended that Unit 1201 was nearing completion with only minor works to be finished at that time and Mr Giannopoulos contended that the substantial works were still to be done at that time. The evidence to which I referred in paragraphs 23 and 25 above indicates that it is likely the sale of Unit 1201 occurred at undervalue, at a point at which the unit was largely complete, in the face of the builder's claim against CSPL. The transaction also took place, as I have noted above, in the context that Mr Giannopoulos was intended to hold Unit 1201 as nominee for CSPL and its principals (using that term in a broad commercial rather than a legal sense) so that CSPL or its principals would derive any economic benefit on the sale of the unit other than for the amount of the profit promised to Mr Giannopoulos. I note, however, that it appears that Mr Giannopoulos later disregarded those arrangements when he sold Unit 1201 and paid the proceeds into the Homebush mortgage without accounting for those proceeds to CSPL. 72I should also note that there is evidence that Mr Giannopoulos acquired that unit on the same terms as Mr Crotti, who is presently a director of Break Fast and had previously agreed to acquire the unit. The Defendants contended that a Jones v Dunkel inference should be drawn from the fact that Break Fast did not lead evidence from Mr Crotti as to this issue. In my view, the strength of the inference which can be drawn is limited by the fact that Break Fast sought to call Mr Crotti to give evidence, albeit at a late stage, but was not given leave to do so over the Defendants' objection, and the inference that Break Fast "feared" to call him is necessarily weakened where it sought to do so. 73The variation of the Put and Call Option over level 4 of the Clarence Street property and the sale of Unit 1201 to Mr Giannopoulos were anterior steps in the arrangements which led to the creation of the Citibank loan. However, each of these transactions occurred some time prior to the payments made by Break Fast to Mr Giannopoulos, and I do not consider that the circumstances of those transactions are such that Mr Giannopoulos could not otherwise be said to have acted in good faith in receiving the payments made by Break Fast toward the Citibank loan. It is not necessary for me to reach a final decision as to that matter where I have found that the Defendants' change of position defence was not established on other grounds. The relief claimed by Break Fast against Mr Giannopoulos in respect of unjust enrichment 74Break Fast contends that it is entitled to relief against Mr Giannopoulos requiring that he account for and pay to it the Monies plus interest from the date of payment (Amended Statement of Claim [C]-[E], [J], [M] [6M(a)]). This contention raises complex issues of fact and law which were not fully addressed in Break Fast's submissions. 75This contention raises the question whether the common law action for monies had and received or unjust enrichment allows recovery of the Monies initially received by Mr Giannopoulos or only those monies to the extent he retained and was benefited by them. I should first refer to the relevant authorities. In Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662 at 672-673, the High Court observed that "mere payment out of the money received by way of over-payment will constitute no defence to the action unless it can be shown that [the defendant] would sustain some identifiable and unjust detriment by reason of the mistaken payment if it were required to refund it". The Court also observed that: "notwithstanding that the grounds of the action for recovery are framed in the traditional words of trust or use and that contemporary legal principles of restitution or unjust enrichment can be equated with seminal equitable notions of good conscience, the action itself is not for the enforcement of a trust or for tracing or the recovery of specific money or property. It is a common law action for recovery of the value of the unjust enrichment and the fact that specific money or property received can no longer be identified in the hands of the recipient or traced into other specific property which he holds does not of itself constitute an answer in a category of case in which the law imposes a prima facie liability to make restitution. Before that prima facie liability will be displaced, there must be circumstances (e.g. that the payment was made for good consideration such as the discharge of an existing debt or, arguably, that there has been some adverse change of position by the recipient in good faith and in reliance on the payment) which the law recognizes would make an order for restitution unjust." 76In Port of Brisbane Corporation v ANZ Securities Limited (No 2) [2002] QCA 158; [2003] 2 Qd R 661, McPherson JA (with whom Davies JA and Mullins J agreed) referred to the speeches of Lord Templeman and Lord Goff in Lipkin Gorman v Karpnale and noted that: "it will be seen that both of their Lordships, with whom the other Law Lords agreed, regarded retention of the money (Lord Goff), or remaining unjustly enriched (Lord Templeman) as elements of the cause of action in a case like this where the defrauded plaintiff claims restitution from a recipient of the money." 77In Ford by his Tutor Watkinson v Perpetual Trustees Victoria Ltd [2009] NSWCA 186; (2009) 75 NSWLR 42, Allsop P and Young JA noted that an inquiry as to the injustice of the retention of any money or benefit lies at the root of a claim for unjust enrichment and of any defence such as change of position; that a similar emphasis on retention as the foundation for the restitutionary action can be seen in the cases dealing with voluntary receipt of monies belonging to another and later discovery of that fact; and that the question of receipt and benefit should be viewed as matters of substance and not form or legal technicality. 78In Heperu Pty Ltd v Belle [2009] NSWCA 252; (2009) 76 NSWLR 230, Allsop P (with whom Campbell JA and Handley AJA agreed) observed that the common law action for money had and received extended to property retained by a volunteer where the proprietary benefit was traceable in equity from misappropriated funds. Allsop P noted that the reasoning in Banque Belge Pour L'Etranger v Hambrouck [1921] 1 KB 321 was directed to the existence of a fund which continued to be held in money and that that case would also be authority where the retained property was an interest in land, commensurate with the traced proceeds of the plaintiff's funds; and observed that Banque Belge was not authority for the proposition that, if monies were traceable into non-money assets (as here, real estate), a personal remedy in money had and received in the amount of the sum of money traced into the property exists, independently of the liability to repay or restore what is held. Allsop P also pointed out that, where the funds that could be identified as paid into the mortgage accounts went to pay off (with other funds) both principal and interest, the value of the relevant assets may conceivably have fallen. Allsop P noted that identifying the common law right in that way focused upon: "the measure of the value surviving in the hands of an innocent voluntary recipient when notice of the claim is received, rather than the measure of value received" Allsop P also observed that this view was conformable with the underlying conception that it is the inequitable retention of money or benefit that lies at the root of unjust enrichment. (at [145]) 79Allsop P also noted that the approach of the Court of Appeal in Banque Belge and of Lord Templeman in Lipkin Gorman supported an obligation at law "to restore, in money terms, the value of the retained proprietary benefit derived" from the initial receipt of funds which were traceable in equity to other property, and noted that the importance of retention of benefit, as a matter of substance, could also be seen in Ford by his Tutor Watkinson v Perpetual Trustees Victoria Ltd [2009] NSWCA 186; (2009) 75 NSWLR 42 (at [153]). Allsop P concluded that: "[t]he remedy, both at law and in equity should focus upon the value properly attributable to the earlier receipts derived from misappropriations and still retained by the volunteer at the relevant time" (at [157]). 80I am bound to follow the Court of Appeal's decisions in Ford by his Tutor Watkinson v Perpetual Trustees Victoria Ltd and Heperu Pty Ltd v Belle and determine the claim by unjust enrichment by reference to the amount retained by Mr Giannopoulos as at the relevant time, which in this case is October 2009 when notice of Break Fast's claim was given to Mr Giannopoulos. 81Turning now to the relevant evidence in respect of the application of the monies to mortgage payments as to Unit 1201: * The Citibank Offset Mortgage Account relating to Unit 1201 was in the name of Mr Giannopoulos only and was established on 26 July 2004 when an amount of $1,045,000 was debited to it. * Principal and interest payments were made until 25 March 2008 and payments of interest only were made after that date (Giannopoulos [97], Ex PG-43). As at 25 March 2008, the balance of the account was $998,417.26 in debit. The amount of the loan was reduced only by $20,206.17 between 25 May 2006, the day before the first of the payments made by Break Fast, and the last of those payments on 25 March 2008. The principal due under the loan was not thereafter reduced until the sale of Unit 1201. * Contributions were made by Mr Giannopoulos as well as Break Fast to payments in respect of the loan on Unit 1201. Mr Giannopoulos deposited money into the Citibank Offset Account to pay interest repayments between January and early March 2005 in the amount of $40,000; deposited a further amount of $10,000 into the Offset Account from his personal company account to meet interest payments in September 2005; and made further deposits into the Offset Account in October and December 2005 and January 2006 at Mr Voukidis' request (Giannopoulos [65], [75] and [88]). A reconciliation provided by Mr Giannopoulos to Mr Baker in April 2010 indicated that Mr Giannopoulos personally contributed the amount of $101,822.50 to payments on that loan over the relevant period (Baker 23.9.11 [40]). * Additional amounts were credited to the Citibank Offset Account arising from a payment of $15,000 on 18 May 2005 made from an unidentified source and a further payment by Oxley on 27 March 2006. * Mr Giannopoulos also paid strata levies and council rates from the amounts paid by Break Fast into the Citibank Offset Account, which conferred no permanent benefit on him, and account keeping fees were also debited to that account. 82Turning now to the Homebush property, Mr Giannopoulos' evidence was that the bank accounts from which the repayments for the loan on Unit 1201 and the loan on the Homebush property made were kept separate and the monies between them were never intermingled; interest payments made to the Homebush loan account were direct debited from another account, the Homebush Offset Savings Account and the money deposited into the Homebush Offset Savings Account was his personal money which was derived from his employment or the sale of his investments; and Break Fast, Mr Baker, Mr Voukidis or Mr Anastasopoulos had not deposited money into the Homebush Offset Savings Account or the Homebush loan account. Counsel for Break Fast conceded in closing submissions that no money from Break Fast went into the Homebush Offset Savings Account of Mr Giannopoulos and Ms Faraone from which payments into the Homebush Mortgage Account were made (T424.27). 83It follows that, although Mr Giannopoulos received $317,000 from Break Fast, the amount of the reduction in principal in the loan on Unit 1201 between May 2006 and November 2009 is no more than $20,206.17 and that amount reflects not only payments by Break Fast but also by Mr Giannopoulos, the third party deposit on 18 May 2005 and the amount of $15,000 paid by Oxley on 27 March 2006. Break Fast cannot have contributed more than the amount of the reduction in the principal on Unit 1201 to the monies paid down on the Homebush mortgage. Indeed, it seems likely that the largest contribution to the monies applied to that mortgage was the fact, for which Break Fast contends, that CSPL had initially sold Unit 1201 to Mr Giannopoulos at undervalue allowing him later to derive a substantial profit on its sale. 84Break Fast has made no substantive submissions as to how the matters to which I have referred in paragraphs 81-83 above are to be taken into account in determining the extent to which Mr Giannopoulos was enriched focussing instead on a claim to recover the entirety of the Monies. There is some force in the Defendants' submission that: "The plaintiff does not seek to define the pool of assets which might be amenable to the personal remedy, let alone take into account holding costs or give credit for payments made by Giannopoulos or to third parties. In these circumstances, the claim for unjust enrichment fails." However, I do not consider that it would be proper to simply dismiss Break Fast's claim under this head for that reason. The preferable course, in my view, is to allow the parties the opportunity to make short additional written submissions as to the extent of any enrichment of Mr Giannopoulos, having regard to the findings which I have reached above. I propose to allow the parties the opportunity to do so. Claim for unjust enrichment against Ms Faraone 85Break Fast also brings a claim for unjust enrichment against Ms Faraone. Break Fast seeks to put that claim on the basis that Mr Giannopoulos paid the deposit, stamp duty and expenditures in respect of improvements on the Homebush property. Break Fast contends that such payments could not have been made without Mr Giannopoulos' use of the Monies, having regard to his income and assets over the period. Break Fast also contends that it was only possible for the Defendants to acquire the Homebush property by reason of a loan made in excess of the purchase price, which was secured against Unit 1201, which was only possible because of payments made by Break Fast in respect of the loan over Unit 1201. 86I do not understand these matters to establish a claim for monies had received or an unjust enrichment claim. In particular, they do not establish that Ms Faraone in fact received any of the Monies. In Boscawen v Bajwa [1996] 1 WLR 328, Millett LJ emphasised the importance of the tracing process to establishing a claim in unjust enrichment, noting that that process allows the plaintiff to show what has happened to his property, identify the persons who have handled or received it and justify his or her claim that the money which they handled or received can properly be regarded as representing his or her property; and that, without that process, he or she cannot show that the defendant's unjust enrichment was at his or her expense; and that the process is not confined to a case where the plaintiff seeks a proprietary remedy and is equally necessary where he or she seeks a personal remedy against a knowing recipient. 87In National Australia Bank Ltd v Rusu [2001] NSWSC 32 at [38], Bryson J held that the receipt of indirect benefits, by way of payment made to a financier which reduced third parties' liability to that financier, did not amount to the receipt of funds. A similar argument to that which is now put by Break Fast was rejected in Westpac Banking Corporation v Toksoz & Anor [2010] NSWSC 1509, where Palmer J observed that the wife in that case could not be held accountable for the value of goods initially acquired by her husband "unless it can be shown that she actually received those goods and services or their value" (at [148]) by an exercise in the nature of tracing. As his Honour noted, that approach reflects the role of tracing as the means by which a claimant "demonstrates what has happened to his property, identifies its proceeds and the persons who have handled or received them, and justifies his claim that the proceeds can properly be regarded as representing his property": Foskett v McKeown [2000] UKHL 29; [2001] 1 AC 102 at 128. 88Break Fast has not shown that Ms Faraone received its property or property which can be traced from that property, and I therefore do not consider that Break Fast has made good a claim in unjust enrichment against Ms Faraone. Claim under Black v S Freedman & Co 89Break Fast pleaded that the Defendants have received monies as volunteers (Amended Statement of Claim [6G]-[6J], [6BB], [6DD], [7]-[9], [13]-[14]) and hold them on trust for Break Fast under the principles established by Black v S Freedman & Co [1910] HCA 58; (1910) 12 CLR 105. In oral submissions, Counsel for Breakfast confirmed that a proprietary claim in respect of Black v S Freedman & Co was pursued against both Mr Giannopoulos and Ms Faraone. 90In Black v S Freedman & Co , the High Court held that money given by a thief to a third party who received that money as a volunteer could be recovered by the victim of the theft although the third party had not participated in the theft. In Wambo Coal Pty Ltd v Ariff & Anor [2007] NSWSC 589; (2007) 63 ACSR 429 at [40]-[41], White J summarised the relevant principles as follows: "Where property is stolen, the property is trust property in the hands of the thief and can be traced into the hands of a third party who receives the property otherwise than as a bona fide purchaser of the legal estate for value without notice. The property is trust property in the hands of the thief because the thief is bound in conscience to hold the property on behalf of its true owner. Whether the trust is characterised as a resulting trust ( Robb Evans of Robb Evans & Associates v European Bank Ltd (2004) 61 NSWLR 75; [2004] NSWCA 82 at [1-3]-[117]) , or as a constructive trust ( Westdeutsche Landesbank v Islington London Borough Council per Lord Browne-Wilkinson at 716), the trust is of an institutional rather than a remedial character. It arises because the conscience of the thief is bound. In the same way, where property is acquired by fraud and there is a complete failure of consideration, the trust arises immediately on the receipt of the property: Orix Australia Corporation Ltd v Moody Kiddell & Partners Pty Ltd [2005] NSWSC 1209 at [155]-[156] and cases cited. So, in Neste Oy v Lloyds Bank plc [1983] 2 Lloyd's Rep 658, referred to with apparent approval in Re Goldcorp Exchange Ltd [1995] 1 AC 74 at 104; [1994] 3 NZLR 385 at 404, where the payee received payment from its principal of moneys which were not impressed with an express trust, but which were to be used in performance of a contract which the payee knew could not take place, the payee held the payment on trust for the payer from the time of its receipt. The circumstances which created the trust in Neste Oy were that the payee knew (as was the fact) that there could be no performance under its contract, so that there was a total failure of consideration for the payment, and the payment could not in conscience be retained. The trust was an institutional trust which attached to the moneys from the time of receipt." 91In Heperu Pty Ltd v Belle at [92], Allsop P summarised the effect of the principle as that: "a person entirely innocent of a fraud who comes to know that he or she has received and still retains the proceeds of, or taken advantage of, a fraud to which he or she was not party, cannot knowingly seek to retain those proceeds or that advantage, without, in effect, becoming a party to that fraud and liable accordingly..." 92There is a preliminary question as to whether the High Court's decision in Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 excludes the application of the principle in Black v S Freedman & Co in cases of knowing receipt, where a claim under Barnes v Addy is available and indeed is brought in this case. The view that such a claim is not available in that situation was accepted by the authors of Mason & Carter's Restitution Law in Australia , 2 ed, 2008, at 130 [313]. However, I am bound by the Court of Appeal's decision in Heperu Pty Ltd v Belle , where Allsop P (with whom Campbell JA and Handley AJA agreed in this regard) held that nothing in Farah Constructions was intended to deny relief in a case where a volunteer held property in respect of which a claimant had a proprietary interest or a charge from the tracing of proceeds of misappropriated funds (at [159]-[162]); see also Raulfs v Fishy Bite Pty Ltd [2011] NSWSC 105 at [80]. Whether the Defendants were volunteers 93The Defendants contend that they gave consideration for Break Fast's payments commencing in May 2006 by reason of Mr Giannopoulos' purchase of Unit 1201 and taking out the Citibank loan. I do not accept that contention, because Mr Giannopoulos had purchased Unit 1201 and taken out that loan before Break Fast's payments commenced in May 2006 and Break Fast also obtained no benefit from those transactions. 94The Defendants also contend that Mr Giannopoulos is not a volunteer in respect of the payments received from Break Fast, because he paid money towards the purchase of the Homebush property or gave monies worth in the form of personal covenants to Citibank. In my view, the purchase of the Homebush property or the entry into the associated Citibank mortgage cannot be treated as consideration for the making of the payments by Break Fast commencing in May 2006 so as to prevent Mr Giannopoulos being treated as a volunteer in respect of the receipt of those payments, by reason of the timing of the transactions and the fact that Break Fast again obtained no benefit from the transaction. 95Break Fast also contends that any consideration provided by Mr Giannopoulos by the purchase of Unit 1201 was unlawful. I have dealt with the relevant factual matters in paragraphs 70-73 above but it is not necessary for me to reach a determination as to this matter since I have not found that Mr Giannopoulos gave consideration for the receipt of the Monies so as to prevent him being treated as a volunteer for the purposes of the principle in Black v S Freeman & Co . Defence under s 42 of the Real Property Act 96This issue arises because a claim under Black v S Freedman & Co is directed to property, and the only property to which such a claim can now attach in the present facts is the Homebush property. I will deal with each of these matters in turn. 97In Lurgi (Australia) Pty Ltd v Gratz [2000] VSC 278 at [74]-[75], Byrne J observed that, where a volunteer comes under an obligation in respect of stolen funds after having received notice of the theft, the trust attaches only to stolen funds then in the recipient's hands; and, where those funds are no longer held by the recipient and tracing is possible, to other property in the recipient's hands which had been purchased with those stolen funds. In Port of Brisbane Corporation v ANZ Securities Ltd , McPherson JA (with whom Davies JA and Mullins J agreed) similarly observed at [37] that liability on that basis can exist only in respect of property remaining in the possession or control of a person to whom the beneficial ownership was transferred, or from whom it resulted. 98In Heperu Pty Ltd v Belle at [154]-[155], Allsop P also emphasised that the claim in Black v S Freedman & Co was a claim against the assets in the volunteer's hands, observing that: "To call the volunteer recipient a constructive trustee and to call upon him or her to account as a constructive trustee (because he or she upon discovery of the fund or asset belonging to another has become one) does not mean the volunteer comes under personal liabilities, independently of, or beyond, the obligation to restore the fund or asset and any attendant obligation. He or she does not, for instance, become liable to pay damages for the moneys received that led to the fund or asset being created, as if he or she were a knowing participant in the fraud. It is also important to recognise that the trust rests on the existence of property rights and in that sense is not purely remedial. The court declares that a trust exists and existed (though the innocent volunteer did not know it) ..." 99In this case, t he Monies were initially paid into Mr Giannopoulos' Citibank Offset Account in respect of Unit 1201 and then transferred into the Citibank Loan Account in respect of Unit 1201. At that point, the Monies were received by Citibank, although Mr Giannopoulos thereby discharged his obligation to pay interest on the loan and, until the loan account was changed to interest only, reduced the principal on the loan in respect of Unit 1201. The amount paid to reduce the loan on the Homebush property when Unit 1201 was sold was also received by Citibank although the Defendants received the benefit of a reduction on their loan on the Homebush property. In these circumstances, any trust arising under the principle in Black v S Freedman & Co would need to be imposed not on the monies which were received by Citibank without notice of any claim by Break Fast but on Unit 1201 or the Homebush property. 100The Defendants contend that relief is not available on this basis by reason of s 42 of the Real Property Act . I will deal with the application of that section here although it will also be relevant to the proprietary claims made by Break Fast under Barnes v Addy to which I will refer below. Section 42 of the Real Property Act relevantly provides that: "Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud , hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded ..." [emphasis added] 101The reference to "fraud" in this section is "to be construed as meaning something more than mere disregard of rights of which the person sought to be affected had notice, and as importing something in the nature of personal dishonesty or moral turpitude" and involves "dishonesty on the part of the registered proprietor in securing his registration as proprietor": Stuart v Kingston [1923] HCA 17; (1923) 32 CLR 309 at 329; Bahr v Nicolay [No 2] [1988] HCA 16; (1988) 164 CLR 604 at 614; Gerard Cassegrain & Co Pty Ltd v Cassegrain [2011] NSWSC 1156 at [168]; P Butt, Land Law , 6 th ed, 2010 at [2069]. The allegations made against Mr Giannopoulos, and a fortiori Ms Faraone, in these proceedings do not amount to an allegation of fraud for the purposes of s 42 of the Real Property Act 1900 (NSW). 102In Farah Constructions Pty Ltd v Say-Dee Pty Ltd , the High Court held that only certain legal or equitable causes of action against a registered proprietor operate as an in personam exception outside the language of s 42(1). The Court referred with approval to the judgment of Tadgell JA in Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 and the majority judgments in the Full Court of the Supreme Court of Western Australia in LHK Nominees Pty Ltd v Kenworthy [2002] WASCA 291; (2002) 26 WAR 517. In Super 1000 v Pacific General Securities [2008] NSWSC 1222; (2008) 221 FLR 427, White J undertook a detailed review of the case law and observed that the effect of those decisions, particularly LHK Nominees Pty Ltd v Kenworthy , is that the in personam exceptions to indefeasibility under Real Property Act s 42 do not extend to claims arising under the knowing receipt limb of Barnes v Addy (1874) LR 9 Ch App 244. I agree with his Honour's reading of those cases and his explanation of their effect. In my view, that the same result must follow in respect of a claim under Black v S Freedman & Co which arises from the fact that a person is placed on notice of an unauthorised receipt of funds, which does not amount to an allegation of fraud in the sense of dishonesty, as distinct from an allegation that that person is bound in conscience to recognise the claimant's rights once they are placed on notice of them. 103Accordingly, in my view, Break Fast is unable to establish a claim by reference to the principles in Black v S Freedman & Co in respect of the Monies, so far as they have been applied to pay down the Homebush mortgage. The position is distinguishable from the result in Heperu Pty Ltd v Belle , where Allsop P noted that no issue had been raised at trial or on appeal by way of a defence under s 42 of the Real Property Act . Other matters in respect of the Black v Freedman claim 104For the reasons noted above, I do not consider that Break Fast can succeed in its claim under Black v S Freedman & Co . I should nonetheless deal with the quantum of such a claim, if it were otherwise established. The decision in Heperu Pty Ltd v Belle establishes that a volunteer's obligation is to recognise the wronged party's entitlement to restoration of the funds derived from the wrong, to the extent that he or she retains the funds or their traceable products with notice of the wronged party's claim: Heperu Pty Ltd v Belle at [163]. The reduction in the principal indebtedness to the mortgagee for the relevant property was the measure of compensation adopted in respect of a Black v S Freedman & Co claim in the subsequent decision in Heperu Pty Ltd v Belle [2011] NSWSC 1151 at [51]-[54]. Break Fast accepted in its submissions that the remedy for a claim under Black v S Freedman & Co should focus upon the value of the property attributable to the earlier receipts derived from the misappropriation and still retained by the volunteers at the relevant time" and identified the relevant time as October 2009 when notice of Break Fast's claim was given to Mr Giannopoulos. 105Break Fast nonetheless contends that it is entitled to the amount of $282,670.45 paid on to the Homebush mortgage, on the basis that Mr Giannopoulos received that sum as a constructive trustee for Break Fast, plus interest. In my view, Break Fast would have been entitled to no more than $20,206.17 in a claim under Black v Freedman & Co for the reasons noted in paragraph 83 above, and that amount would need to be further adjusted so far as it reflected the contributions of other parties to the reduction of the principal due on Unit 1201. 106Break Fast also contended that it was entitled to the increase in the value of Unit 1201 between its purchase for a price of $905,000 and its sale for $1,365,000 on 30 July 2010. I cannot accept that submission, for several reasons: So far as that submission assumed that any increase in the property of Unit 1201 would be recoverable by Break Fast, it was inconsistent with Break Fast's contention that Mr Giannopoulos did not have any "equity" in Unit 1201 and that any profit arising on a sale of the property belonged to CSPL. So far as the submission assumed that there was an increase in the value of Unit 1201 over that period, it was inconsistent with Break Fast's submission that Unit 1201 was purchased by Mr Giannopoulos at undervalue. If, as Breakfast contended and I have found is likely to be the case, that unit was purchased at undervalue, then the fact that it was sold at a profit does not indicate any increase in the value of the asset. A comparison of the valuation of the unit undertaken for Citibank at the time of its purchase (to which I have referred in paragraph 23 above) and its sale price suggests that the value of Unit 1201 in fact declined between its purchase and its sale. Break Fast's comparison of the purchase price of Unit 1201 in June 2004 and its sale price in May 2010 also did not establish an increase in value which could properly be claimed by Break Fast where payments made by Break Fast did not commence until May 2006. Any increase in the value of the property which could properly be claimed by Break Fast would need to be determined from May 2006 and there was no evidence before me as to the value of Unit 1201 as at that date. A claim on this basis would also need to be adjusted so far as it reflected the contributions of other parties to the payments on the Citibank loan. In the absence of evidence to allow this calculation to be undertaken, this claim would also not have been established for that reason. Subrogation 107Break Fast claims a right of subrogation to the rights of Citibank (Amended Statement of Claim [6EE]) against both Defendants and seeks relief by way of a declaration of rights of subrogation, a charge over the Homebush property and an order for sale of the Homebush property (Amended Statement of Claim [R]-[U]). Break Fast contends that it has a charge over the sale proceeds of Unit 1201 as if a mortgagee which can be traced to the amount paid into the Homebush property and that it is also entitled to rely on the personal covenants against Mr Giannopoulos to support a judgment for the Monies. 108In Re Diplock ; Diplock v Wintle [1948] Ch 465, the Court of Appeal held that the discharge of a loan secured over property by wrongfully paid funds did not give the person entitled to those funds any interest in the property over which the security was discharged. In Boscawen v Bajwa [1996] 1 WLR 328 at 335, Millett J took a contrary view and observed that, where a plaintiff's money has been used to discharge a mortgage on the defendant's land, then the Court may treat the land as subject to a charge by way of subrogation in favour of the plaintiff. In that case, monies provided by a building society were paid into a solicitors' trust account, mixed with other funds and then paid to the outgoing mortgagee for the benefit of the vendors of a property, and the building society was subrogated to the rights of the outgoing mortgagee. In Heperu Pty Ltd v Belle at [135], Allsop P (with whom Campbell JA and Handley AJA agreed) observed that the views of Millett LJ were to be preferred to the reasoning of Lord Greene MR in Re Diplock and I am bound to adopt that approach. 109In Banque Financiere de la Cit e v Parc (Battersea) Ltd [1999] 1 AC 221 at 232-233, Lord Hoffmann referred to a function of subrogation "to reverse or prevent unjust enrichment which is not based upon any agreement or common intention of the party enriched and the party deprived" and referred to several cases in which securities were "kept alive" on the basis that a third party which paid off a security was presumed in equity to intend that it be retained for the benefit of that party. 110On the other hand, in National Australia Bank v Rusu [2001] NSWSC 32, a claim to subrogation was not established where monies were paid to a financier which reduced the liability of third parties on the loan, in circumstances that the payer was obliged both to the financier and to the third parties to make those payments. The present case is not analogous, because there is no suggestion that Break Fast was under any obligation to make the relevant payments to Citibank and the findings which I have made indicate that it was also not under any obligation to make the payments to Mr Giannopoulos or Ms Faraone. 111In Challenger Managed Investments Ltd v Direct Money Corporation Pty Ltd [2003] NSWSC 1072; (2003) 59 NSWLR 452; 12 BPR 22,257 at 22,269, Bryson J observed that Lord Hoffmann's reasoning in Banque Financiere de la Cit e v Parc (Battersea) Ltd does not: "provide an explanation for the mortgagor's being treated as bound, in equity, to treat the person who paid off the previous mortgage as entitled to security under it. Restitution would provide a basis for treating the mortgagor as obliged to restore to the person who paid it the amount which had been paid to the mortgagee: the concept is inadequate for also treating the mortgagor as obliged to hold the payer secured. This is particularly clear where, as in this case, and in other cases where subrogation has been held to exist, the mortgagor in fact had no dealings with the payer ..." 112That passage was cited by the High Court with apparent approval in Bofinger v Kingsway Group Ltd [2009] HCA 44; (2009) 239 CLR 269 at [97]. In Bofinger, the High Court also approved Millett LJ's observation in Boscawen v Bajwa that: "The equity arises from the conduct of the parties on well settled principles and in defined circumstances which make it unconscionable for the defendant to deny the proprietary interest claimed by the plaintiff." 113Subrogation was treated as available as a remedy when funds were misapplied and were traceable to a payment discharging a debt in Cook v Italiano Family Fruit Co Pty Ltd (in liq) [2010] FCA 1355; (2010) 190 FCR 474 at [92]ff. The question whether subrogation was available in a similar situation to this case was identified, but did not have to be resolved, in Raulfs v Fishy Bite Pty Ltd [2011] NSWSC 105 at [90]. 114It would arguably be unconscionable for the Defendants to deny an interest corresponding to Break Fast's payments, to the extent they had funded a part of the reduction in the Defendants' mortgage over the Homebush property. I do not consider that position is affected by the fact that, as the Defendants contend, Mr Giannopoulos has suffered losses in other dealings with CSPL and Messrs Voukidis and Anastasopoulos and, possibly, Mr Baker, since Break Fast is a separate entity to its directors and shareholders. However, I do not understand that the claim in subrogation could be established for an amount greater than the contribution made by Break Fast to the reduction of the principal secured by the mortgage on Unit 1201, to which I have referred in paragraphs 81-83 above, and the consequent reduction on the Homebush mortgage. 115In these circumstances, it is possible to resolve the claim to subrogation on a relatively narrow basis. It is well established that "there is no occasion for equity to intervene by way of subrogation where there is available to the third party a remedy at law or in equity sufficient to avoid an unconscionable result": Cochrane v Cochrane (1985) 3 NSWLR 403 at 405. It may be that the observations of Bryson J in Challenger Managed Investments to which I have referred above reflect a similar principle. In my view, the remedy in unjust enrichment to which Break Fast is entitled would avoid an unconscionable result and an order for subrogation in respect of the amount of such relief is therefore not necessary or appropriate. 116The Defendants contend that the principle of subrogation should not be available to "circumvent" the protections afforded by s 42 of the Real Property Act . An issue as to the application of s 42 of the Real Property Act could arise if the creation of a security interest in Break Fast, by way of subrogation, is treated as the acquisition of a new and independent security. However, that question was not fully explored before me, as it was also not fully explored in Saraceni v Mentha [2011] WASC 94 at [39], and it is not necessary for me to resolve it given the conclusion which I have reached above. 117The Defendants also contend that, to the extent of the amounts Mr Giannopoulos had paid toward the mortgage on the Clarence Street property, he is subrogated to Citibank's interest in priority to Break Fast's claim (Further Amended Defence [15(m)]). I do not consider that claim can succeed, both because equity will not permit a debtor to obtain priority to a subsequent encumbrance by paying off its mortgage and then keeping it alive against that subsequent encumbrance ( Boscawen v Bajwa at 342 per Millett LJ). Claim in knowing receipt 118Break Fast also pleaded claims in knowing receipt and knowing assistance against both Mr Giannopoulos and Ms Faraone; sought to establish a constructive trust to the extent that the Monies could be traced to the Homebush property (Amended Statement of Claim [6P] - [6X]); and also claimed relief by way of equitable compensation or damages in the amount of the Monies plus interest (Amended Statement of Claim [H], [J] and [U]). 119In oral submissions, Counsel for Breakfast indicated that both a personal claim for equitable compensation and a proprietary claim were pursued against Mr Giannopoulos under the principles in Barnes v Addy (T366.30). Counsel for Breakfast also confirmed that a proprietary claim in respect of Barnes v Addy was pursued against Ms Faraone (T366.32) but indicated that no allegation of knowing participation in the breach of fiduciary duty claim was put against Ms Faraone. I understand that a claim for knowing receipt but not a claim for knowing assistance is pursued by Break Fast against Ms Faraone. 120Under the first limb of Barnes v Addy (1874) LR 9 Ch App 244 at 251-252, a person who receives company property from a director will hold it on trust for the company if he or she knows, or the circumstances are such that he or she ought to know, that the director is acting in breach of duty: S elangor United Rubber Estates Ltd v Cradock (No 3) [1968] 2 All ER 1073; [1968] 1 WLR 1555; Belmont Finance Corp Ltd v Wi l liams Furniture Ltd (No 2) [1980] 1 All ER 393 per Buckley J at 405; Southern Cross Commodities Pty Ltd (in liq) v Ewing (1988) 14 ACLR 39 per von Doussa J at 69; Linter Group Ltd v Goldberg (1992) 7 ACSR 580; 10 ACLC 739; Robins v Incentive Dynamics Pty Ltd (in liq ) (2003) 45 ACSR 244; 175 FLR 286; 21 ACLC 1030; [2003] NSWCA 71. In Kalls Enterprises Pty Ltd (in liq) v Baloglow [2007] NSWCA 191, the Court of Appeal of the Supreme Court of New South Wales examined the case law in which the first limb of Barnes v Addy had been applied to breach of fiduciary duty by a company director and held that line of authority was to be followed until the High Court said otherwise (at [152]-[159]) and Owen J expressed the same view in The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) at [4721]. 121In Super 1000 v Pacific General Securities (2008) 221 FLR 427; [2008] NSWSC 1222 at [204], White J observed that: "Liability under the first limb of Barnes v Addy extends not only to persons who receive trust property, but to persons who receive property with the requisite knowledge that the transfer is made in breach of fiduciary duty ( Kalls Enterprises Pty Ltd (in liq) v Baloglow at [152]-[160]). There are many cases in which the first limb of Barnes v Addy has been applied to make a third party liable as constructive trustee where the third party receives property of a company with knowledge that the property has been transferred in breach of a director's fiduciary duty ( Belmont Finance Corporation Ltd v Williams Furniture Ltd (No 2) [1980] 1 All ER 393 and the cases cited in Kalls Enterprises Pty Ltd (in liq) v Baloglow at [157])." 122In Kalls Enterprises Pty Ltd (in liq) v Baloglow [2007] NSWCA 191 at [176] and following, Giles JA appeared to accept that the four categories of knowledge identified by the High Court in Farah Constructions in respect of knowing assistance were also applicable to liability for knowing receipt under the first limb of Barnes v Addy . In Westpac Banking Corporation v Ollis [2007] NSWSC 956 at [48], Einstein J noted this would have the result that a recipient of trust property will be treated as having knowledge of the breach of trust where he or she has (1) actual knowledge, or (2) wilfully shuts his or her eyes to the obvious, or (3) wilfully and recklessly fails to make such inquiries as an honest and reasonable person would make, or (4) has knowledge of circumstances which would indicate the facts to an honest and reasonable person. Owen J took the same view in The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) above. The question of Mr Giannopoulos' knowledge must also be assessed, in respect of the Barnes v Addy claim, by reference to the requirement for clear and cogent proof under Briginshaw v Briginshaw (1938) 60 CLR 336. 123I do not accept Mr Giannopoulos' evidence that he did not recognise that payments in respect of the Citibank loan were being made by Break Fast. However, there are several factors which, in my view, indicate that Mr Giannopoulos did not have the requisite degree of knowledge to establish a claim under Barnes v Addy . The emails of September 2005 and May 2006 and the representations made by Mr Voukidis and Mr Anastasopoulos, to which I have referred in paragraphs 45-49 above, indicate that Mr Giannopoulos had been informed that the principals of CSPL would be making payments in respect of the Citibank loan, albeit there was some debate as to how that would occur, and there is no evidence that Mr Baker contradicted those representations at that time. Mr Giannopoulos had no reason to expect that those payments would not be made by corporate entities associated with the principals of CSPL; payment was made on one occasion from an associated entity, Oxley, and there was no evidence before me that that payment was unauthorised; the narrations to the relevant payments did not suggest any impropriety in those payments; and there is no suggestion in the evidence that Mr Voukidis communicated any lack of authority to make the payments to Mr Giannopoulos. 124In these circumstances, Mr Giannopoulos did not have actual knowledge of any misapplication of Break Fast's property; he had no reason to believe those payments were not authorised by Messrs Baker and Voukidis as Break Fast's directors (albeit possibly in an informal manner) and no reason to believe that such payments amounted to a breach of duty where he had no notice that they would not be appropriately dealt with in directors' loan accounts or by shareholder consent and no notice of insolvency or near insolvency of Break Fast. In these circumstances, it is also not established that Mr Giannopoulos had deliberately shut his eyes to any breach of duty; or had abstained in a calculated way from making such inquiries as an honest and reasonable person would make; or knew of facts which to an honest and reasonable person would indicate the existence of the trust and the fact of misapplication. The claim for knowing receipt against Mr Giannopoulos accordingly fails. 125Recipient liability also cannot be established against Ms Faraone because it is not established that she was a recipient of the monies in any relevant sense: National Australia Bank Ltd v Rusu at [38]. There was also no evidence before me which was capable of establishing that Ms Faraone had notice of any application of Break Fast's property by Mr Voukidis in breach of duty under any of the applicable standards. Mr Giannopoulos' evidence was that it has been his habit not to speak to Ms Faraone about his financial affairs, that they keep separate bank accounts and that she has used her own accountant to prepare her tax returns. He gave evidence that he did not inform her of the funding arrangements relating to Unit 1201 until after these proceedings commenced. Ms Faraone gave evidence that she and Mr Giannopoulos have always maintained separate finances and separate bank accounts; that she did not discuss her finances with Mr Giannopoulos and did not discuss his finances with him or inquire as to his asset position or financial dealings. The claim for knowing receipt against Ms Faraone must also fail on that basis. 126The Defendants also rely on a defence under s 42 of the Real Property Act in respect of this claim. As I noted in paragraph 102 above, White J held in Super 1000 v Pacific General Securities that the decision of the Full Court of the Supreme Court of Western Australia in LHK Nominees Pty v Kenworthy [2002] WASCA 291; (2002) 26 WAR 517, approved by the High Court in Farah Constructions , required the conclusion that the in personam exceptions to indefeasibility under Real Property Act s 42 do not extend to claims arising under the knowing receipt limb of Barnes v Addy ; see also Ciaglia v Ciaglia [2010] NSWSC 341; (2010) 269 ALR 175 at [115]. I take the same view. A proprietary claim in respect of the Homebush property on the basis of knowing receipt would also fail for this reason. Claim in knowing assistance 127As I have noted above, Break Fast also seeks to establish liability on the basis of the second limb of Barnes v Addy , on the basis of knowing assistance in a dishonest and fraudulent design on the part of a fiduciary, against Mr Giannopoulos. That claim was not pursued in oral submissions against Ms Faraone. 128A third party may be liable as a constructive trustee if he or she knowingly assists a trustee in a dishonest and fraudulent design: Barnes v Addy (1874) LR 9 Ch App 244. In order to make good such liability, Break Fast must first establish that Mr Giannopoulos in fact assisted Mr Voukidis in a breach having the relevant character. However, t here was no evidence that Mr Giannopoulos took any step to assist or facilitate any such breach of duty by Mr Voukidis or had any involvement in that breach other than by receiving the monies paid by Break Fast. (For completeness, there was also no evidence to establish that Ms Faraone had any involvement in that breach other than for her husband's receipt of the monies paid by Break Fast.) In my view, a third party's receipt of funds paid by a director in breach of duty, where the third party has taken no step to facilitate or associate himself or herself with that breach, may give rise to a claim for knowing receipt, but does not, without more, establish a claim for knowing assistance. This finding is sufficient that the claim for knowing assistance against Mr Giannopoulos must fail, although I will deal with the question of knowledge below. 129The Australian formulation of the knowledge requirement for knowing assistance is found in the High Court's decision in Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373. The Privy Council took a different approach in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378, holding that dishonesty on the part of a third party was sufficient to establish liability, irrespective of the fiduciary's state of mind, if the relevant breach of duty by the fiduciary was established. In Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89, the High Court noted that Royal Brunei differed from Consul Development in omitting the requirement that a fiduciary had engaged in dishonest and fraudulent design and that Australian Courts should continue to apply that requirement until the High Court further dealt with the matter (at [160]-[164]). The Court also observed that Consul Development was authoritative as to the question of knowledge required to satisfy the second limb of Barnes v Addy , requiring (1) actual knowledge or (2) wilfully shutting one's eyes to the obvious or (3) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make or (4) knowledge of circumstances which would indicate the facts to an honest and reasonable man, and held that mere knowledge of circumstances which would put an honest and reasonable man in inquiry is not sufficient to establish liability for knowing assistance. 130For the reasons which I have set out above in respect of the claim for knowing receipt, I do not consider that knowledge of a breach of fiduciary duty by Mr Voukidis, still less a fraudulent and dishonest one, was established on the part of Mr Giannopoulos under the applicable standards. The claim for knowing assistance against Mr Giannopoulos must also fail on that basis. (For completeness, there was also no evidence which was capable of establishing that Ms Faraone had such knowledge under any of the applicable standards.) 131The Defendants also advance a defence on the basis that they have an indefeasible interest in the Homebush property under s 42 of the Real Property Act 1900 (Further Amended Defence15(o)). In LHK Nominees Pty Ltd v Kenworthy the majority did not consider that accessorial liability under the second limb of Barnes v Addy established an in personam exception to indefeasibility under s 42 of the Real Property Act . In Super 1000 v Pacific General Securities , White J identified areas of potential difficulty with that reasoning, but held that he was bound to follow it, and I am also bound to do so. Accordingly, even if this claim had otherwise been successful, no proprietary relief would have been available in respect of the Homebush property in respect of this claim. Defence under Corporations Act s 129 132The Defendants rely on s 129 of the Corporations Act 2001 (Cth) to contend that they were entitled to assume that Break Fast was acting at the instance of its officers and agents who in turn were properly performing their duties (Further Amended Defence [15(e)]). Section 128 of the Corporations Act provides that a person is entitled to make the assumptions specified in s 129 in relation to dealings with a company and the company is not entitled to assert in proceedings in relation to those dealings that any of the assumptions are incorrect. The specified assumptions include assumptions as to the authority of a person appointed as a director and that the officers and agents of the company properly perform their duties to the company. A person is not entitled to make such an assumption if at the time of the relevant dealing they knew or suspected the assumption was incorrect: s 128(4). 133In Barclays Finance Holdings Ltd v Sturgess & Ors (1985) 3 ACLC 662 at 667, Wood J observed that the reference to "dealings" in a predecessor of this section was to a transaction with a company, not a step taken unilaterally in the course of a transaction. In Bell Resources Holdings Pty Ltd v Commissioner of ACT Revenue Collections (1990) 22 FCR 178; 2 ACSR 211 at 228, von Doussa J indicated that he understood his Honour to have meant by "transaction" the making of the relevant contract, although his Honour noted that a broader meaning to the notion of "dealing" had been given in Australian Capital Television Pty Ltd v Minister for Transport and Communications (1989) 86 ALR 119 at 156. Even on a broader view, I can see no basis for reading the reference to "dealing" with a company in ss 128 and 129 of the Corporations Act as applying to the mere receipt of an unauthorised payment from a company in the absence of any other transaction or contract with it. Otherwise, the section would have the very surprising result that any party who received an unauthorised or mistaken payment made by a company would be entitled to assume that it was a proper one, unless the disqualifying factors were present. For this reason, I consider that the defence under this section must fail. 134As I have noted above, a person is not entitled to make the assumptions specified in s 129 if at the time of the dealings he or she knew or suspected that the assumption was incorrect: s 128(4). Break Fast contends that Mr Giannopoulos must have had suspicions as to the probity of Mr Voukidis' conduct as a director so as to fall within that exception and, in particular, contends that Mr Giannopoulos knew that the relevant assumption was incorrect by reason of the circumstances surrounding the sale of Unit 1201 to Mr Giannopoulos. I accept that the circumstances of the sale of that unit were such as to indicate to Mr Giannopoulos that Mr Voukidis was prepared to take steps to seek to put the assets of CSPL out of reach of potential claims by third parties, by transferring those assets to persons such as Mr Giannopoulos under informal arrangements, and I also accept that those transactions might in some circumstances constitute a breach of duty owed by Mr Voukidis to CSPL, at least if the company was in a situation of potential insolvency, or be voidable on application of a liquidator of CSPL. However, it does not follow that Mr Giannopoulos had any basis to know or suspect that Mr Baker and Mr Voukidis had not authorised, formally or informally, the payments made by Break Fast to him, for the reasons I have set out above in dealing with the Barnes v Addy claims. 135In any event, the assumptions specified in s 129 would not assist the Defendants in respect of the claims for unjust enrichment (which has succeeded against Mr Giannopoulos) where their subjective knowledge that the payments were unauthorised is not necessary to the cause of action against them. Laches and acquiescence 136The Defendants contend that Break Fast's claim (to the extent it is founded in equity) is defeated by laches and acquiescence (Further Amended Defence [15(j)]). I do not consider that these defences are established. The evidence to which I have referred above indicates that Break Fast (through Mr Baker) had sought to prevent unauthorised payments being made by Mr Voukidis and had advanced its claim against Mr Giannopoulos as soon as the circumstances giving rise to that claim were established. Orders 137On the basis of these findings, Break Fast's claim to a personal remedy against Mr Giannopoulos in unjust enrichment should succeed to the extent of any enrichment which Break Fast can establish on the evidence, but I will allow the parties an opportunity to make further written submissions as to the extent of such enrichment and the appropriate orders. Break Fast's claim in unjust enrichment against Ms Faraone fails. 138Break Fast's claims under the principles in Black v S Freedman & Co and for knowing assistance and knowing receipt have not been established. Break Fast has not established its claim for subrogation to Citibank's mortgage over the Homebush property since the relief in unjust enrichment is sufficient to avoid an unconscionable result. Break Fast also does not succeed in its other claims for proprietary relief in respect of the Homebush property by reason of s 42 of the Real Property Act . 139I will hear the parties, including Citigroup Pty Limited, in respect of costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 December 2011