Over a period of 15 years, former financial controller of Sydney’s Moriah College, Augustine “Gus” Nosti, stole over $7.3 million from the school. Most were gambled.
This article discusses the New South Wales Supreme Court Decision in Moriah War Memorial College Association v Augustine Robert Nosti [2020] NSWSC 942 (23 July 2020).
The Case
Between January 2004 and March 2019, Mr Nosti was employed by Moriah College as Financial Controller and Financial Manager. During his employment, Mr Nosti, having access to the college’s tax portal, fraudulently diverted tax refunds owed to Moriah College into designated personal accounts in the name of himself and his wife, Melynda Maree Nosti. Over the 15-year period between 2004 and 2019, Mr Nosti defrauded the college for a total of $7,337,282.
When Mr Nosti’s thefts were uncovered in late 2019, Moriah College sued Mr Nosti and his wife, Mrs Nosti, in the New South Wales Supreme Court in an attempt to recover the stolen funds. Mr Nosti admitted his thefts and filed a submitting appearance.
Mr Nosti told the court that the majority of the misappropriated funds had been gambled away, predominately through the use of 'the pokies’. However, a small amount of stolen funds were able to be traced into Mrs Nosti’s house, reducing her mortgage.
In a judgement handed down on 23 July 2020, his Honour Justice Hammerschlag found that Mr Nosti was a trusted senior employee who breached his fiduciary duties to Moriah College in the most “egregious fashion”. Consequently, His Honour ordered that Mr Nosti repay Moriah College the misappropriated funds in totality.
However, perhaps the most significant aspect of this case was the dispute between Mrs Nosti and Moriah College, who the college had sued jointly, and whether Mrs Nosti (in the words of Justice Hammerschlag) was also an “object of Gus’ treachery”.
Moriah College brought a claim against Mrs Nosti under the first limb of Barnes v Addy (1874) LR 9 Ch App 244, under which a recipient of trust property with sufficient knowledge of the breach of trust is liable as a constructive trustee. If successful, Moriah College sought equitable compensation of $4,306,599 or $2,744,227, depending on when Mrs Nosti had knowledge of the breach.
In the alternative, Moriah College sought restitution for the benefit of the misappropriations Mrs Nosti received as a volunteer and retained after notice of Moriah College’s claim. This cause of action is widely recognised in New South Wales in the cases of Heperu Pty Ltd v Belle (2009) and Sze Tu v Lowe (2014) 89 NSWLR 317.
Mrs Nosti denied having any knowledge of the stolen funds and gave evidence that her husband controlled all the family’s finances and had access to her bank accounts.
In her opening statement to the court, Mrs Nosti’s barrister, Kirralee Young, asserted that Mrs Nosti’s only suspicions of her husband were that he may be having an affair.
“She thought, quite properly, that perhaps he’s having an affair with somebody else. That’s where her mind ran and you’ll hear from her she put that to him… but I think the love of his life is the gambling”, Ms Young said.
Ultimately, the restitutionary claim succeeded, with Mrs Nosti ordered to pay $77,905, the benefit received from the reduction in her mortgage.
“While there is no denying that Mr. Nosti is a thief, this case illustrates the tremendous toll gambling takes on society as a whole. Tighter restrictions need to be placed on the public’s ability to access gambling and on the institutions that promote pokies.” Justeen Dormer, Dormer Stanhope
The Rise of Online Gambling
In delivering his paper “Gambling and the law in the 21st century”, Justice Andrew Bell revealed that almost $24 billion was lost in gambling in Australia in 2016/2017.
Of particular concern is the rise of online gambling as it is currently a legal grey area and severely unregulated.
Online gambling platforms (commonly referred to as “social casinos”) are applications that simulate the casino environment. On 2 July 2020, they were amongst the top-grossing games on Google Play Store.
When the bars and casinos closed during the height of the COVID-19 pandemic in 2020, data provided by analytics firm, SEMrush, found that between February and April, web searches for online pokies tripled.
As social casinos do not have a cash-out function, they are not technically considered gambling as they are not encapsulated by State and Territory guidelines imposed to protect gamblers from their habit in traditional gambling environments.
For example, in NSW, the Office of Liquor, Gaming and Racing limits the maximum bet on pokies in hotels and clubs to be $10 per spin. In contrast, Aristocrat’s online gambling application ‘Lightning Link Casino’ allows for a maximum of approximately $36 per spin. This discrepancy reveals the potential for online gambling to do considerably more financial harm than traditional methods.
The Productivity Commission’s Gambling Report (2010) recommended a reduction in bet limit to $1 a spin to counter this discrepancy, protect problem gamblers and reduce harm.
Evidently, the case of Mr Nosti proves to be a stark reminder of the adverse impacts of gambling and its pervasion in all aspects of our society.
If you run a business and have had large amounts stolen from you by problem gamblers or are personally impacted, we'd like to hear from you. We will assess your position and advise the best legal solution. Contact us today.