MBF Australia Limited v Malouf [2008] NSWCA 214

MBF Australia Limited v Malouf [2008] NSWCA 214

Fraud by Mr Hill gave rise to a trust in favour of Mr Malouf. MBF, having acquired only limited rights and notice of the trust prior to obtaining all rights, cannot resist a trust over the entire proceeds. Because MBF failed to value or distinguish any entitlement acquired bona fide and without notice, it must account to Mr Malouf for the entire sum. The cheque being crossed 'not negotiable' also prevented MBF acquiring better title than the defrauding party held.

Parties
Appellant: MBF Australia Limited; Respondent: Samuel John Malouf
Jurisdiction
Australia
Judgment Date
05 September 2008
Procedural Posture
Appeal / Judgment in the New South Wales Court of Appeal
Outcome
Appeal dismissed with costs.
Legal Topics
Fraud, Trusts Arising From Proceeds of Fraud, Bona Fide Purchaser for Value Without Notice, Bills of Exchange, Effect of 'not Negotiable' Crossing on Cheque, Holder in Due Course
Equity Banking and Finance Fraud Trusts Arising From Proceeds of Fraud Bona Fide Purchaser for Value Without Notice Bills of Exchange Effect of 'not Negotiable' Crossing on Cheque Holder in Due Course

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Parties

MBF Australia Limited

Appellant

Samuel John Malouf

Respondent

Procedural Posture

Appeal / Judgment in the New South Wales Court of Appeal

Legal Issues

  1. 1 Did Mr Hill hold the bank cheque and/or its proceeds on trust for Mr Malouf?
  2. 2 Did MBF on or about 6 December 2000 purchase the cheque or rights in respect of the cheque?
  3. 3 If so, what rights did MBF then purchase?

Ratio Decidendi

Fraud by Mr Hill gave rise to a trust in favour of Mr Malouf. MBF, having acquired only limited rights and notice of the trust prior to obtaining all rights, cannot resist a trust over the entire proceeds. Because MBF failed to value or distinguish any entitlement acquired bona fide and without notice, it must account to Mr Malouf for the entire sum. The cheque being crossed 'not negotiable' also prevented MBF acquiring better title than the defrauding party held.

Court Disposition

Appeal dismissed with costs.

Orders

  • Appeal dismissed with costs.