Third-party fraud — interception of email account for purpose of requesting payment by electronic funds transfer
Estoppel by representation — ostensible authority — whether Plaintiff bound by representation of authority — whether reliance on representation reasonable — whether Defendant put on inquiry
Contract — Failure to mitigate — whether claim for recovery of monies was an action in debt — assessment of date of breach of contract — whether failure to alert Defendant amounted to a failure to mitigate
Estoppel by representation — silence — whether failure to respond to Defendant’s emails was a representation that contract had been complied with — whether reliance on Plaintiff’s conduct reasonable
Quick Take
1Where an unknown fraudster gains access to a party's email account and sends a fraudulent payment direction impersonating that party, the email is a nullity: the account holder made no representation about the fraudster's authority, and representations about the authority of the person whose account was compromised do not extend to authorise the acts of the unknown attacker (applying Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146).
2A claim for a contractual purchase price that has been earned through executed consideration is an action in debt, not damages for breach of contract, even where the precise sum required post-completion calculation under the contract; the defence of failure to mitigate does not apply to such a claim (applying Young v Queensland Trustees Ltd, Pavey & Matthews Pty Ltd v Paul, Commissioner of Taxation v Bendel).
3A recipient of a fraudulent email requesting payment to a new bank account is put on inquiry by suspicious circumstances — including the time of sending, inconsistency with prior nominations, and deficiencies in supporting documents — and failure to verify the changed details before making payment tells against the reasonableness of reliance on any representation as to the sender's authority.
