THE NEW ZEALAND GUARDIAN TRUST COMPANY LIMITED v TONY WILLIAM RALPH [2018] NZHC 121

THE NEW ZEALAND GUARDIAN TRUST COMPANY LIMITED v TONY WILLIAM RALPH[2018] NZHC 121 [13 February 2018]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-Ā-TARA ROHECIV-2016-485-742[2018] NZHC 121BETWEEN THE NEW ZEALAND GUARDIANTRUST COMPANY LIMITEDPlaintiffAND TONY WILLIAM RALPHDefendantHearing: 5 December 2017Appearances: R D Butler and D M Netherclift for the PlaintiffJ K Mahuta-Coyle for the DefendantJudgment: 13 February 2018JUDGMENT OF ASSOCIATE JUDGE SMITH[1] The plaintiff (NZGT) applies for summary judgment against the defendant(Mr Ralph) for the sum of $407,883.09. Mr Ralph is the husband of Mrs RebeccaRalph (Mrs Ralph), who misappropriated the sum of $360,808.30 over a period of10 years while she was an employee of NZGT. The misappropriated funds were heldon trust by NZGT for its clients, and NZGT paid out $407,883.09 to discharge itsliabilities to its clients arising from Mrs Ralph's defalcations. NZGT seeks to recoverthat sum from Mr Ralph, primarily on the basis that he knowingly received themisappropriated money, but it also pleads causes of action in conversion andindemnity.BackgroundThe proceeding against Mrs Ralph[2] While she was an employee of NZGT, Mrs Ralph was responsible formanaging client portfolios and accounts. Between 2004 and 2015, she systematicallymisappropriated $360,808.30 from 20 of her clients' accounts, including those ofelderly and intellectually disabled clients, as well as some for whom Mrs Ralph heldenduring powers of attorney. On 9 April 2015, NZGT discovered Mrs Ralph'smisappropriations.[3] NZGT filed a proceeding against Mrs Ralph in May 2016, seeking summaryjudgment. Mrs Ralph did not initially file a notice of opposition. Rather, she soughtan adjournment pending the result of the related criminal proceeding she was facing.1[4] In an affidavit filed in support of her adjournment application, Mrs Ralph madecertain admissions, and on 26 July 2016 I entered judgment against her on liability,with quantum to be determined at a hearing set for 24 November 2016.2[5] Mrs Ralph initially disputed the quantum of NZGT's claim, but on the eve ofthe quantum hearing she abandoned this opposition. On 29 November 2016 judgmentwas entered against her by consent in the sum of $407,883.09.[6] Mrs Ralph has not since made any payment to NZGT. NZGT has registered acharging order over Mrs Ralph's share of the home she owns with Mr Ralph, but it hasbeen impracticable to sell Mrs Ralph's share of the property without Mr Ralphagreeing to a sale. However, the mortgagee of the property has issued a Property LawAct notice against Mr and Mrs Ralph, and I was told at the hearing that a mortgageesale was scheduled for 13 December 2017.1 Mrs Ralph later pleaded guilty to criminal charges of obtaining by deception. At the time of thehearing of NZGT's summary judgment application against Mr Ralph, she had not yet beensentenced. Her sentencing was scheduled for 13 December 2017.2 New Zealand Guardian Trust Co Ltd v Ralph [2016] NZHC 1714.The proceeding against Mr Ralph[7] On 4 September 2017, NZGT brought this proceeding against Mr Ralph. Itapplied for summary judgment. The application for summary judgment was firstcalled on 24 October 2017, but I adjourned the application until 21 November 2017because Mr Ralph had only been served on 9 October 2017. I made directions forMr Ralph to file and serve any documents in opposition by 31 October 2017. No suchdocuments were filed.[8] At the second call, on 21 November 2017, Mr Mahuta-Coyle appeared forMr Ralph for the first time. Mr Mahuta-Coyle sought a further adjournment,informing me that the delay by Mr Ralph in taking steps to oppose the application hadbeen caused by him "burying his head in the sand". I granted the adjournment,substantially because of the nature of this claim, which called for a finding ofdishonesty on the part of Mr Ralph in circumstances where it appeared that he maynot have personally received the claimed money. There appeared to be at least thepossibility of a miscarriage of justice if he were not permitted to oppose theapplication. Costs of $1000 were awarded against Mr Ralph.[9] I also made an interim suppression order prohibiting publication of any detailsof this case, and preventing a search of the Court file, pending further orders of theCourt. Similar orders had been made in the civil proceeding against Mrs Ralph, onthe basis that publication might unfairly prejudice her position in the pending criminalproceeding against her. The civil claim against Mr Ralph traversed much of the sameground as the civil case against Mrs Ralph, and counsel were unable to tell me on5 December 2017 that the need for the non-publication order no longer existed.[10] Mr Ralph filed a notice of opposition and two affidavits in support on24 November 2017.The claims against Mr Ralph[11] NZGT alleges that Mr Ralph knowingly received three different categories offunds misappropriated by Mrs Ralph:(a) $270,137.81 paid into the joint bank account of Mr and Mrs Ralph (thejoint account payments);(b) $10,000.00 paid into the trading account of Mr Ralph's business (thetrading account payments); and(c) $80,281.26 paid directly into the accounts of Mr Ralph's creditors,comprising payments to two of his employees, and to his landlord (thecreditor payments).[12] NZGT alleges that Mr Ralph must have been aware of these payments, and thatis sufficient for an inference of knowledge, or at least an inference of wilful blindness,with respect to Mrs Ralph's misappropriations.Mr Ralph's oppositionNotice of opposition[13] Mr Ralph says that he had no knowledge of his wife's actions, and that he hadno cause to make inquiries that would have given him such knowledge. He says thathe gave over complete control of his finances to his wife, including both their jointaccount and his business account. He never saw any of the payments made into thebank accounts or to the creditors, and was not aware of them or their source.Mr Ralph's affidavit[14] Mr Ralph is a 58-year-old builder. During the relevant period he was self-employed, trading as T Ralph Building. He had commenced a relationship withMrs Ralph around 1994 or 1995, and they were married in 2002.[15] Mr Ralph said that between 1995 and 2000 a lot of his work as a builder tookhim away from Wellington, and that it was during this time that Mrs Ralph took overthe management of his business' finances. Mr Ralph described his role in therelationship as "to go to work and to look after our property", while Mrs Ralph "hasalways been responsible for managing our personal finances". He said that he trustedher completely, and never had any reason to think that she was not managing theirfinances properly or that they were receiving money that they had not earned.[16] Mr Ralph said that he did not check his bank accounts, or review accounttransactions. Nor would he have any reason to. If he ever required something for thepurposes of his business, he would ask Mrs Ralph and she would tell him if they couldafford it. If he needed cash, he would withdraw it from an ATM, or use the businessATM card. Receipts he may have received disclosing account balances would nothave meant much to him, whether the balance was negative or positive by severalthousand dollars. He said that he would check with Mrs Ralph daily whether heneeded to pay incidental expenses during the week.[17] Mr Ralph stated that money always seemed tight, and that he never had causeto think that he and Mrs Ralph were living beyond their means. A house was purchasedin 2008, which Mr Ralph knew cost around $320,000, and he acknowledged that heknew what the regular mortgage payments were going to be. However, he said thatMrs Ralph took care of ensuring they were paid. The only time Mr Ralph recalled thateither of them travelled overseas was in 2015, when Mrs Ralph visited her sister inSydney.[18] Mr Ralph admitted that he negotiated the wage rates for his two employees,but he claims that Mrs Ralph always took care of the payroll during their employment.[19] The main customer for T Ralph Building was Jennian Homes. Mr Ralph saidthat he negotiated rates for different stages of the building work he carried out forJennian. Once a stage was complete he would get Mrs Ralph to issue an invoice.[20] While Mr Ralph accepted that, in hindsight, it might seem that he was naïvenot to know about his wife's misappropriations, he said that until her confession in2015 he had no reason to doubt her honesty.Mrs Ralph's affidavit[21] Mrs Ralph provided an affidavit confirming that, since 2000, she wasresponsible for, and completely managed, the couple's joint finances and the financesof T Ralph Building. She said that at no point during the period of her offending didshe let on to Mr Ralph what she had done. As she put it, her behaviour was somethingshe "kept inside". She said that Mr Ralph "had more than enough on his plate" dealingwith a deteriorating knee and serious ongoing health problems of two of his children.[22] Mrs Ralph's evidence was that in 2015 she felt that she could not "bottle it allup inside" anymore. She said that she "walked away" from her employment withNZGT, and the same afternoon confessed to Mr Ralph what she had done. She statedthat he was in "total disbelief and shock" when she told him - he could not believe thatshe "of all people would have done that". Their relationship then become verystrained. She asked him to leave her on numerous occasions, but he refused.[23] Mrs Ralph concluded her affidavit by saying that: "Since leaving NZGT I havebeen open and upfront during both the civil and criminal proceedings, and I am beingopen and honest in this affidavit."Principles relating to plaintiffs' summary judgment applications[24] The Court may enter summary judgment against a defendant if the plaintiffsatisfies the Court that the defendant has no defence to a cause of action in theplaintiff's statement of claim, or to a particular part of any such cause of action.3 Anapplication for summary judgment is made by interlocutory application, withsupporting affidavits. There is not normally any cross-examination of deponents atthe hearing of a summary judgment application — the issue is whether the plaintiffhas produced sufficient evidence in the affidavits to show that the defendant has noreasonably arguable defence which should be allowed to go forward to trial.[25] In Pram Enterprises Ltd (in liq) v Mansfield I summarised the relevantprinciples in the following terms:4[31] The principles to be applied in considering an application forsummary judgment have been clearly established through decisions of theCourt of Appeal such as Pemberton v Chappell, Grant v NZMC Ltd andWestpac Banking Corporation v M M Kembla New Zealand Ltd. Thefollowing broad principles are to be applied:3 High Court Rules 2016, r 12.2(1).4 Pram Enterprises Ltd (in liq) v Mansfield [2016] NZHC 230 (footnotes omitted).(a) The plaintiff must satisfy the Court that the defendant has no arguabledefence to the claim brought against it. The issue is whether there isa real question to be tried.(b) It is generally not possible to determine disputed issues of fact basedon affidavit evidence alone, particularly when issues of credibilityarise. Issues of law, even though they may be complex, can, however,be determined in an application for summary judgment.(c) Although the Court should adopt a robust approach, summaryjudgment may be inappropriate where the ultimate determinationturns on a judgment that can only properly be reached after a fullhearing of all the evidence.[32] In Pemberton v Chappell, the Court of Appeal held:Where the defence raises questions of fact upon which the outcomeof the case may turn it will not often be right to enter summaryjudgment. There may however be cases in which the Court can beconfident — that is to say satisfied — that the defendant'sstatements as to matters of fact are baseless. The need to scrutiniseaffidavits, to see that they pass the threshold of credibility, isreferred to in Eng Mee Yang v Letchumanan.[33] In Eng Mee Yang, the Privy Council said:Although in the normal way it is not appropriate for a Judge toresolve conflicts of evidence on affidavit, this does not mean thathe is bound to accept uncritically as raising a dispute of fact whichcalls for further investigation, every statement on an affidavithowever equivocal, lacking in precision, inconsistent withundisputed contemporary documents or other statements made bythe same deponent, or inherently improbable in itself it may be.SubmissionsNZGT[26] Mr Butler submits that the fact of the payments is itself sufficient for the Courtto infer that Mr Ralph was either aware of Mrs Ralph's misappropriations or that hewas wilfully blind to them. Mr Ralph's defence that he never saw any of thetransactions because Mrs Ralph was controlling the finances is inherently improbable,and the evidence in support of that defence inherently lacks credibility. The Courtshould take a "robust approach" and reject this evidence.[27] With respect to Mrs Ralph's affidavit, Mr Butler notes that she is a convictedfraudster. He submits that her testimony cannot be given any weight. Mr Butlerhighlights two aspects of her affidavit that he says illustrate that lack of credibility.First, Mrs Ralph claimed that she had taken an "honest and upfront" approach to thecivil proceeding against her. In fact, she initially tried to adjourn the proceeding, thenwaited until the last moment before admitting the quantum of NZGT's claim.Secondly, she said that she "walked out" of her employment with NZGT, apparentlyattempting to create the false impression that she made a confession to her employerdue to a crisis of conscience. In fact, her misappropriations had been discovered byNZGT, and she only left her employment after she was confronted with themisappropriation allegations.[28] Mr Butler submits that if the Court rejects Mrs Ralph's evidence, that shouldbe dispositive of the claim in NZGT's favour. Because Mr Ralph's evidence ismaterially similar, his evidence ought to be rejected as well.[29] Mr Butler asks the Court to view Mr Ralph's late engagement with thisproceeding with scepticism. There is nothing in his affidavit that could not have beenput forward initially. If Mr Ralph regarded the allegations against him as untrue, onewould expect him to have been "incensed" by them, and to have responded at the firstpossible opportunity.[30] Generally, Mr Butler submits that it defies probability that Mr Ralph wouldhave abdicated all responsibility for the financial affairs of his own business, as wellas his domestic financial affairs. This is especially the case given his admission that"[m]oney has always seemed tight".[31] Specifically with respect to the trading account payments, Mr Butler submitsthat the fact that all payments were made in a relatively tight cluster should havebrought them to the attention of Mr Ralph. There were three payments into the tradingaccount, two of $3,500 and one of $3,000, made in September, October and November2008. The trading account was where all of Mr Ralph's income went from the early1990s until 2016, and Mr Ralph would surely have noticed the impact of an injectionof $10,000 within a period of three months, particularly if money was tight.[32] With respect to the creditor payments, Mr Butler invites the Court to infer thatMr Ralph directed that those payments be made for his benefit. Mr Butler submitsthat it would be absurd if Mr Ralph was not aware that his employees were being paidby a third party, and that any failure to investigate this would amount to wilfulblindness.[33] With respect to the joint account payments, Mr Butler notes that Mr Ralph wasaware of the mortgage payments and the purchase price of the house. He submits thatan inference should be drawn from those facts that Mr Ralph must have at least hadsome involvement in the couple's domestic finances.[34] Referring again to Mr Ralph's statement that money was tight, Mr Butlersubmits that it is inherently improbable that Mr Ralph would not have discussed thecouple's finances with his wife for 16 years, or that he would not have noticed anincrease in living standards.Mr Ralph[35] Mr Mahuta-Coyle submits that the Court cannot be sure that Mr Ralph hadknowledge of, or was wilfully blind to, Mrs Ralph's misappropriations. The affidavitsof Mr and Mrs Ralph provide an evidential basis for a defence, and it is not possibleto determine the credibility of that evidence without proceeding to trial. The claimsmade in the two affidavits are not so inherently improbable that they can dismissedoutright.[36] Mr Mahuta-Coyle draws the Court's attention to two other cases involvingknowing receipt between husband and wife.5 Both of these cases involved claims bythe defendant that they were unaware of their spouse's misappropriations, and in bothcases the Court accepted those contentions. Both cases were decided after a trial, noton summary judgment applications. Mr Mahuta-Coyle submits that a claim that onepartner was not involved in relationship finances is not the kind of claim that canproperly be dismissed on a summary judgment application.5 Worldtel NZ Ltd v Kim HC Auckland CIV-2009-404-1158, 30 September 2011; Torbay HoldingsLtd v Napier [2015] NZHC 2477, [2015] NZAR 1839.[37] Mr Mahuta-Coyle submits that no evidence has been provided of Mr Ralph'sactual knowledge of the payments or of Mrs Ralph's misappropriations. NZGT's caserelies entirely on inference, but there is no evidence of any specific instance ofsuspicion by Mr Ralph, nor any evidence that Mr and Mrs Ralph were living beyondtheir means or that they had made any inexplicably large purchases.[38] With respect to Mrs Ralph's affidavit, Mr Mahuta-Coyle concedes that she hasa credibility problem, but he submits that that does not mean her evidence can bedismissed outright. Given her acknowledged fraud on her employer there is nothinginherently improbable about her lying to her husband about her misappropriationsuntil 2015.[39] Finally, Mr Mahuta-Coyle submits that the cause of action in knowing receiptcannot apply to the creditor payments, as Mr Ralph never directly received those fundshimself. Equally, there is no evidence of any involvement on his behalf which couldform the basis of a claim of knowing assistance in the making of the creditor payments.Discussion and conclusionsPrinciples relating to knowing receipt[40] Liability for knowing receipt arises where there has been a transfer of propertyto a recipient in breach of fiduciary obligations owed by the transferor, and it wouldbe unconscionable for the recipient to retain the property because of the recipient'sstate of knowledge regarding the breach.6 A finding of knowing receipt ordinarilyresults in the recipient being required to account in equity to the beneficiaries, byrestoring the property which has been lost.7[41] In the recent case of McLennan v Livaja, the Court of Appeal clarified theforms of constructive knowledge that will be sufficient to establish knowing receipt.86 McLennan v Livaja [2017] NZCA 446 at [38].7 McLennan, above n 6, at [40].8 At [45]. An application for leave to appeal in McLennan v Livaja was dismissed by theSupreme Court on 1 February 2018 ([2018] NZSC 1).The Court adopted the test applicable in cases of dishonest assistance, as set out by theSupreme Court in Westpac New Zealand Limited v MAP and Associates Limited:9[27] The key ingredient in the cause of action for dishonest assistance isthe need for a dishonest state of mind on the part of the person who assists inthe breach of trust. We agree with the statement in Barlow Clowes that sucha state of mind may consist in actual knowledge that the transaction is one inwhich the assistor cannot honestly participate. But it may also consist in whatwe would describe as a sufficiently strong suspicion of a breach of trust,coupled with a deliberate decision not to make inquiry lest the inquiry resultin actual knowledge. For the purpose of this alternative, it is necessary thatthe strength of the suspicion that a breach of trust is intended makes itdishonest to decide not to make inquiry. That state of mind, which equityequates with actual knowledge, is usually referred to as wilful blindness. Itinvolves shutting one's eyes to the obvious and can thus fairly be equated withthe dishonesty involved when there is actual knowledge.Application of principles in this case[42] There is no question in this case that Mrs Ralph breached her fiduciaryobligations. Nor is there any question that Mr Ralph received, either alone or jointlywith Mrs Ralph, the proceeds of those breaches (except in the case of the creditorpayments, which I address below). The sole question to be determined is whetherMr Ralph acted dishonestly, either because he had sufficient knowledge, or becausehe was wilfully blind.[43] The burden is on NZGT to show that Mr Ralph has no reasonable prospect ofsuccessfully making out his defence on that point. I do not consider that it has beenable to do so.[44] I do not consider it inherently implausible that Mr Ralph, a builder by trade,would have given responsibility for his domestic finances/business financial affairs tohis wife. First, Mrs Ralph managed the financial affairs of others for a living.Secondly, it is a relatively common state of affairs in New Zealand for self-employedtradesmen to leave the business "book work" to their spouses or partners, andtradesmen who do that will show varying levels of interest in the financial details.Those who show little or no interest may be careless or negligent, but without more I9 Westpac New Zealand Limited v MAP and Associates Limited [2011] NZSC 89, [2011] 3 NZLR751 at [27].do not think they could be fixed with the dishonest state of mind required to make outa case of knowing receipt.[45] If Mr Ralph's evidence that he had no involvement in the business or domesticfinances during the relevant period were accepted, I do not think it could be said withany degree of certainty that he was aware of the relevant payments (and/or ofcircumstances putting him on enquiry as to their source). It follows that, on the limitedevidence presently available, no inference of dishonest knowledge can safely be drawnfrom the fact of the payments alone. Beyond the question of knowledge of thepayments, there is no evidence that Mr and Mrs Ralph were enjoying a lavish lifestyleor even that Mr Ralph knew what Mrs Ralph's salary was. There was no evidence ofwho filed the tax returns for T Ralph Building. Mr Ralph did say that he negotiatedwages with his employees, but it was Mrs Ralph who looked after the payroll.[46] The concept of wilful blindness does not take the position any further forNZGT. If Mr Ralph was unaware of the payments, he would have had no reason to besuspicious.[47] Mr Butler submitted that the credibility of Mr Ralph's denial of knowledgeshould be considered against his late engagement with these proceedings, and inparticular the fact that he did not deny knowledge of Mrs Ralph's wrongdoing until hesigned his affidavit. I accept that may raise a credibility issue, but I note that theminutes of a meeting held on 28 April 2015 between employees of NZGT and Mrs andMr Ralph recorded Mr Ralph's statements that he was "in shock", and that he couldnot "believe that it is [Mrs Ralph] who has done this." The same minutes recordMrs Ralph's denial that Mr Ralph was in any way to blame for her actions. In thosecircumstances, I do not consider that any delay by Mr Ralph in putting forward a denialof involvement in his wife's activities justifies the outright rejection of his evidence.It is no more than a factor to be considered in assessing the credibility of the evidencehe will give at trial.[48] I accept Mr Butler's submission that Mrs Ralph's evidence should be viewedwith considerable caution given her fraudulent actions, and what I accept arestatements within her affidavit which appear to be designed to put her in a better lightthan the circumstances may justify. However, that does not mean that everythingMrs Ralph says must be false. There is nothing inherently improbable in her essentialclaim that she concealed her fraudulent activity not only from her employer but alsofrom her husband.[49] And even if aspects of Mrs Ralph's evidence may be unreliable, the Courtwould not be compelled to reject Mr Ralph's evidence on the essential issue of whathe knew (or should have known if he had made the enquiries an honest person wouldhave made). All that I think can be said at this stage is that the corroborative value ofMrs Ralph's evidence is diminished by her actions, making it less likely that the Courtwould find her evidence helpful in considering whether to accept Mr Ralph's evidence.[50] No evidence was produced showing that Mr Ralph had actual knowledge ofMrs Ralph's misappropriations. NZGT's strongest arguments relate to the threepayments made into the trading account, which was a personal account of Mr Ralph's.I accept that, without more, those payments might have been sufficient to create aprima facie case of knowing receipt by Mr Ralph, but he has now denied knowledgeof them. And there is no evidence that these payments resulted in any suspiciouspurchases, or that Mr Ralph ever discussed them with Mrs Ralph. I was also informedat the hearing that Mr Ralph's trading account had an overdraft limit of $13,000. Thebalance would have fluctuated, as with any trading account from which bills are paid,and the three payments (the largest of which was only $3,500) may not have attractedmuch attention if Mr Ralph only glanced at the bank statements, and their effect wasmerely to reduce a modest overdraft. That appears to have been the case with the twopayments of $3,500; at the times these payments were made the trading account wasoverdrawn by more than $13,000.[51] The same can be said of the joint account payments. Mr Butler relied onMr Ralph's admission that money appeared to be tight, but there is no evidence thatMr Ralph experienced any improvement in living standards, or anything else thatmight have caused him to wonder where the money was coming from. His case issimply that he was unaware of the misappropriated funds coming into the jointaccount, and I do not think NZGT has produced sufficient to prove that that contentionis so clearly false that Mr Ralph should be denied the opportunity to go to trial on it.[52] With respect to the creditor payments, the fact that Mr Ralph's employees werebeing paid by a third party might not have been picked up by Mr Ralph – it wasMrs Ralph who ran the business' payroll. Similarly, the payments to the landlordmight not have come to his attention if Mrs Ralph was the person who made or set upthe payments. These are matters for consideration at trial, where the Court will havethe benefit of seeing the witnesses under cross-examination and all of the relevantdocuments will be before the Court.[53] To summarise, NZGT relies heavily on inference to support its case againstMr Ralph, and it presents little in the way of evidence to demonstrate dishonestknowledge on his part. Now that he has sworn an affidavit denying any knowledge ofthe payments, summary judgment is inappropriate. I also note in that regard WoolfordJ's comment in Torbay that a finding of knowing receipt should not be made withoutstrong evidence, as it is essentially criminal conduct.10Creditor payments[54] In view of my findings above on the extent of Mr Ralph's (arguable)knowledge, it is not strictly necessary to address Mr Mahuta-Coyle's argument that,even if Mr Ralph was aware of them, the creditor payments were never received byhim. However, I will deal with the argument briefly.[55] In response to Mr Mahuta-Coyle's argument, Mr Butler submitted that a'payment by direction' would suffice, and that the existence of such a direction shouldbe inferred in this case. Mr Butler relied on the Court of Appeal decision in Torbay,referring to Asher J's use of the phrase "Mr Napier and his associates" when discussingthe destination of the relevant payments (the relevant payments were made not onlyinto Mr Napier's bank account, but also into Mrs Napier's account and into theNapiers' family trust account).11 Further, Mr Butler argued that there has beenconsiderable alignment of restitutionary causes of action, and that the unjustenrichment here was the same as if Mr Ralph had received the money himself.10 Torbay, above n 5, at [192].11 Napier v Torbay Holdings Ltd [2016] NZCA 608 at [27].[56] I am not aware of any other case where a claim in knowing receipt has beenmade out with respect to property received directly by a third party but which benefitsthe defendant. While it is not necessary to decide the point, I think it is arguable forMr Ralph that the defendant must have actually received the property for a claim inknowing receipt to lie. (Although other causes of action such as knowing assistance,and possibly conversion, might be available in those circumstances.) The unjustenrichment may be the same regardless of whether the defendant receives the moneyhimself or herself or whether the money is received by some third party in satisfactionof an obligation owed by the defendant to the third party, but the Court of Appeal heldin McLennan that it is the unconscionability of the receipt, not the fact of unjustenrichment, that is the basis of a claim in knowing receipt.12[57] I do not think Torbay supports Mr Butler's argument on this point. In that case,Mrs Napier was also a defendant. She and Mr Napier were both beneficiaries of theirfamily trust, and so they could be considered to have beneficially received paymentsmade to that account. Importantly, the Court of Appeal stated that it did not considerMrs Napier or the Family Trust to be third parties with respect to themisappropriation.13 In this case the landlord and the employees who received themisappropriated funds presumably were "third parties", in the sense that expressionwas used by the Court of Appeal in Torbay.[58] In the event, I am not satisfied that there is sufficient evidence to draw theinference that Mr Ralph must have directed that the creditor payments be made, or atleast participated in the making of such a direction. Such a finding would be necessaryto make out NZGT's claim, whether it is based in knowing receipt or in conversion(see [61] below). The argument based on "payment by direction" fails for that reason.The conversion and indemnity causes of action[59] Mr Butler did not place any significant reliance on the pleaded "indemnity"cause of action at the hearing, and I note that a liability to indemnify is pleaded as partof the knowing receipt cause of action in NZGT's statement of claim. There is also a12 McLennan, above n 6, at [38]-[40].13 Torbay, above n 11, at [31].stand-alone "indemnity" cause of action pleaded, but there was no contract ofindemnity between Mr Ralph and NZGT and Mr Butler did not articulate in hissubmissions any clear basis on which "indemnity" might provide a separate groundon which summary judgment could be entered.14 It appears to be no more than an"accessory" pleading to the knowing receipt and conversion causes of action.[60] NZGT's conversion cause of action includes a pleading that Mr Ralph wasaware of his wife's conversion of the funds, and I have already found that whether ornot that is so is an arguable matter which should be determined at trial. Theinvoluntary receipt of the property without knowledge is not by itself conversion,15and the conversion cause of action in the statement of claim alleges only "accessoryliability" against Mr Ralph, citing Mrs Ralph's dishonest misappropriation of the fundsand (at paras 11 and 12) Mr Ralph's actual or constructive knowledge of them. Thereis no allegation (for example) of conversion by Mr Ralph by using the money paidinto the trading account.[61] Quite apart from NZGT's pleading, it appears that the conversion cause ofaction might also face difficulties in that the tort of conversion is generally restrictedto goods, and does not apply to currency. As Asher J stated in Auto Sounds and AlarmsLtd (in receivership and in liquidation) v Crone:16Moreover the receipt of an electronic transfer of cash, as distinct frominterferring with goods, is not conversion.[62] While it appears that the cases have recognised an exception to that principlewhere the defendant has converted specific identifiable sums,17 it is not clear if thatexception would apply in this case where, at least in respect of the three amounts paidinto Mr Ralph's business trading account, the payments appear to have been madeelectronically by direct credit.14 There was no separate pleading of a money had and received cause of action, or an unjustenrichment cause of action, and Mr Butler did not put the case for NZGT on either of those basesat the hearing.15 Todd, Burrows and Atkin (eds) The Law of Torts in New Zealand (online loose-leaf ed, WestlawNZ) at [12.3.02(5)].16 Auto Sounds and Alarms Ltd (in receivership and in liquidation) v Crone [2013] NZHC 1227 at[173], citing Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 (HL) at 559. See also McKay vJohnston [2016] NZHC 1691 at [45].17 See for example the decision of the Māori Appellate Court in Adlam v Savage [2015] NZAR 746at [138].[63] As to the possibility of "conversion by direction", at the very least, the causeof action would clearly require proof that there was some direction by Mr Ralph (or atleast a direction of which he was aware and in which he participated in some way),and I have found that it is arguable on the evidence produced so far that Mr Ralph wasnot aware of the misappropriations and did not participate in any such direction. I donot think the conversion cause of action provides NZGT with any better basis for itssummary judgment application than the knowing receipt cause of action. In thosecircumstances, the summary judgment application must be dismissed.Discharge of interim suppression order[64] Since the hearing, I have received memoranda from counsel confirming thatMrs Ralph has now been sentenced, and that no suppression orders were made in thecriminal proceeding against her which might reasonably require that any details of thiscase should remain suppressed. In those circumstances, there will be an orderdischarging the interim suppression order and the order preventing any search of theCourt file that I made in this proceeding on 21 November 2017.Result[65] The plaintiff's application for summary judgment is refused.[66] The costs of the application are reserved.[67] The interim orders made on 21 November 2017 suppressing publication of anydetails of this case, and preventing any search of the Court file, are discharged.Associate Judge SmithSolicitors:Richard Broad, The New Zealand Guardian Trust Co Ltd, for the PlaintiffBreaden McCardle Lawyers Ltd, Paraparaumu, for the Defendant