Unclaimed money: Westpac v. CIR

The Unclaimed Money Act applies to unpresented foreign currency drafts and bank cheques. Trading banks must hand over to Inland Revenue the face value of any issued drafts or cheques if they are not presented for payment within six years of issue. Westpac, Bank of New Zealand and ANZ National failed in their argument that banks could keep the money.

Unlike many other countries, legislation in New Zealand requires banks to close dormant accounts and hand the money over to Inland Revenue. Any person with a claim on the dormant account applies to Inland Revenue to get payment.

Three trading banks argued the position differed for unpresented bank cheques and foreign currency drafts. They argued the special status of these documents as negotiable instruments took them outside the legislation applying to dormant bank accounts: the funds were not “unclaimed” until the cheques and drafts were presented for payment.

Bank cheques and foreign currency drafts can be a commercially useful method of payment. A seller unsure of a buyer’s solvency can require the buyer to make payment to a bank and get the bank’s cheque or draft in return: the buyer’s suspect credit rating is replaced by the bank’s promise to pay. A small proportion of these bank cheques or drafts never get presented for payment, leaving a windfall for the bank – it has received payment in advance from its customer in return for issuing the cheque or draft, but has not been asked in turn to pay out by the intended recipient.

The Supreme Court ruled that the Unclaimed Money Act 1971 applied to the proceeds, even though the banks’ obligation to pay was technically conditional on the cheques and drafts being presented for payment.

Westpac v. CIR – Supreme Court (07.04.11)

04.11.006

Fraud: Down v. R.

White collar criminals are guilty of “using” a document to defraud when signing documents even if that person does not then physically perpetuate the fraud. The director of a scrap metal company was sentenced to 23 months imprisonment for her part in a $1.16 million fraud.

Carol Margaret Down unsuccessfully appealed her conviction after claiming the jury verdict was inconsistent: she was convicted on four counts of fraud and acquitted on one, when all five frauds used the same method to hoodwink a finance company.

Evidence was given that UDC Finance was conned into paying out $1.16 million to finance non-existent business equipment. Bins, a baling press and an excavator supposedly purchased for a scrap metal business were a fiction. The business used false sales invoices as evidence of the supposed purchases. Ms Down, as sole director, signed off on UDC loan applications to finance the fictitious purchase of the non-existent equipment.

Money from UDC passed through the scrap metal business bank account before being withdrawn in cash and disappearing without trace. Ms Down was co-signatory on the account.

In her defence, Ms Down argued that she was just a pawn in the fraud, being manipulated by two men who were the real managers of the business – one of the managers had been director of a failed company who was banned from acting as a company director.

The Court of Appeal ruled there was sufficient evidence for a jury to find that Ms Down knew the loan applications were based on false invoices, making her a party to the fraud. The fact the jury acquitted her on one charge (of five) could be explained as the jury accepting that Ms Down did not fully understand the true nature of the fraud when she signed the first loan application, but that she could not remain ignorant when there were subsequent loan applications based on assets the company did not have and resulting in substantial sums of money sloshing through the business.

Down v. Queen – Court of Appeal (06.04.11)

04.11.005