Fund Manager Insulated From Fraudulent Conversion Of Cheques

In Perpetual Trustees Australia Ltd v Heperu Pty Ltd [2009] NSWCA 84, the New South Wales Court of Appeal examined whether an investor who was the victim of fraud could recover lost funds from the manager of a common fund.

The fraud was perpetrated by the investor's mortgage broker who fraudulently utilised cheques given to him to invest in the fund. Rather than using those cheques to establish a type of mortgage off-set account, the fraudster used them for other purposes.

His fraud involved:

• using an account with the fund which he had fraudulently set up in his ex-wife's name

• delivering the cheques to the fund manager for conversion into units in the fund

• arranging for those units in the fund to be allocated to the account in his ex-wife's name, and