“Egregrious” fraud: manager ordered to repay $1m


“Egregrious” fraud: manager ordered to repay $1m

A company recovered more than $1m from a former employee who had misappropriated materials and money from the business.


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A manager who misappropiated materials and money from his former employer has been ordered to repay more than $1 million.

The company brought causes of action in conversion, contract and breach of fiduciary duty and sought to recover the value of the cash obtained and misappropriated. 

[Full text of this case: Artcraft Pty Ltd & anor v D & anor [2014] SASC 108 (15 August 2014)]

It was alleged that between 17 September 2007 and 18 October 2011 the man took a large quantity of his employer's metal and had it delivered to a scrap metal recycler. He appropriated to himself almost $500,000 from the sale of the property.

His former employer sought damages for the value of the metal, estimated to be about $1 million as well as an award of exemplary damages.

In the SA Supreme Court Justice Kelly found the defendant had perpetrated a fraud on his employer of “a most egregious kind”.

The matter had been reported to the SA police but, for reasons not explained, no charges were ever laid.

The company also settled its case against a receiver of the misappropriated materials for a payment of $253,000.

The manager denied the company’s accusations, but Justice Kelly said phone records involving recipients of the stolen goods were fatal to his defence.

The court noted that being in a senior position, he was familiar with the strengths and weaknesses of the company’s inventory system.


The court found the manager had, over an extended period of time (four years), perpetrated fraud on his employer. Not only did he steal hundreds of thousands of dollars from his employer, but he co-opted other subordinates to unwittingly provide assistance in his fraudulent design.

The manager was a trusted senior manager in the production area and he took advantage of this trust. 

Exemplary damages

Acknowledging that an award of exemplary damages was rare and exceptional, the court said it was justified here and awarded $50,000 in this respect.

The established test for exemplary damages related to conscious wrongdoing and contumelious disregard for the company’s rights. 


Ordering the manager's wife to pay the company $59,800, the court said she was aware her husband was bringing cash into the household which could not be explained by his legitimate source of income.

The bottom line: Employment situations can give rise to opportunities for fraud to occur and the assistanceof the general law courts can be engaged to seek recovery in such cases

Artcraft Pty Ltd & anor v D & anor [2014] SASC 108 (15 August 2014)  

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