Earlier this month, Sydney woman Christine Lee was arrested and charged with dishonestly obtaining financial advantage by deception and knowingly dealing with the proceeds of a crime for overdrawing $4.6 million from her Westpac account. The money had come from an accidental unlimited overdraft by Westpac that put millions of dollars into Lee’s account when she opened it in 2012.

Significantly, magistrate Lisa Stapleton granted Lee bail, stating that it wasn’t proceeds of crime and that it was Westpac’s fault for the accidental credit transfer. We examine your rights and legal obligations surrounding mistaken transactions, either from the bank or you, and courts’ attitude towards similar cases.

Background

In 2012, Westpac inadvertently gave Lee’s newly opened account an unlimited overdraw facility. Between 2014 and 2015, Lee allegedly overdrew up to $4.6 million, transferring it to other accounts and spending about $1 million on handbags and luxury items.
Lee’s lawyer argued that the police would have difficulties proving the spending was illegal, to which the magistrate agreed, stating that Lee did not take the money from Westpac but rather Westpac had given it to her. As it was the bank’s mistake, Lee did not act fraudulently. If this is decided to be the case, Lee would owe the bank the money she had spent but would not have broken the law.

Bank Error

The magistrate’s attitude is sure to start a fierce legal battle. In the past, similar cases have seen the unintended recipient of accidental bank credit as guilty of theft and fraud, such as the case of ‘accidental millionaire’ Gao in New Zealand, who fled the country with a $10 million overdraft but was caught and arrested two years later, spending over a year in prison.

Bank errors can happen and in these cases, the money still belongs to the bank. In general, spending money that is not rightfully yours is straightforward theft, and at the very least, you will need to repay what you have spent. There is a possibility that fraud charges can be applied as under the Crimes Act 1900 (NSW) section 192E, a person who obtains a financial advantage through deception or dishonesty will be held guilty of fraud. However, based on the magistrates’ initial attitude in Lee’s case, it would seem that courts are taking a stricter view of banks and financial institutions on mistaken transactions. In particular, as is the case for Lee, if the unintended recipient did not deliberately obtain the money through deceptive or dishonest means, it may simply be seen as human error.

Mistaken Transactions

What happens when an account holder mistakenly transfers money to somebody else or transfers the wrong amount? Are they able to get the money back?

It has long been established in David Securities v Commonwealth Bank [1992] HCA 48 that a mistaken payment may be recoverable since the recipient is unjustly enriched under equity, as long as the plaintiff can show the payment was made because of a mistake. This principle was codified in the ePayments Code, which most Australian banks are subscribers of.

The Code sets that in general if an account holder has made a mistaken internet payment due to inputting the wrong BSB or account number, they should be able to get the money back if they report it within ten business days if the amount is still in the unintended recipient’s account. If the matter is reported after ten days but within seven months, they may still be able to have the amount returned although the process will take longer as the unintended recipient will be given a chance to establish that they are entitled to the funds. However, it will be difficult to get the money back after seven months as it then depends on the consent of the unintended recipient.

Conclusion

At the moment, it remains to be determined if Lee defrauded the bank and committed a crime or if she legally withdrew the money but must repay the amount. Regarding mistaken transfers, however, the best policy is not to use any accidental transfer you may have received as you are likely to have to repay it, and at the same time always review your transactions so you are aware if you have accidentally transferred money to the wrong account.

Adi Snir

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