Brian Gardner Motors Pty Ltd v Bembridge

[2000] WASCA 400

BRIAN GARDNER MOTORS PTY LTD -v- BEMBRIDGE [2000] WASCA 400

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2000] WASCA 400
Case No:	SJA:1119/2000	Heard:	25 SEPTEMBER 2000
Coram:	HASLUCK J	Delivered:	18/12/00
No of pages:	16	Judgment Part:	1 of 1
Result:	Appeal allowed
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Parties:	BRIAN GARDNER MOTORS PTY LTD KARIN HOPE BEMBRIDGE
Catchwords:	Consumer Credit Code Appeal under Justices Act Customer compelled to pay for insurance cover by misrepresentation Misrepresentations allegedly made by car dealer's employees Whether car dealer liable for misrepresentations Issues of vicarious liability Admissibility of hearsay evidence
Legislation:	Consumer Credit (WA) Code, s 133(1)(a), s 176(1) Fair Trading Act 1987, s 81 Justices Act 1902, s 184(1)
Case References:	Fraser Henleins Pty Ltd v Cody (1945) 70 CLR 100 S & Y Investments (No 2) Pty Ltd v Commercial Union Assurance Co Australia Ltd (1986) 85 FLR 285 Stirland v Director of Public Prosecutions [1944] AC 315 Tesco Supermarkets Ltd v Nattrass [1972] AC 153 Universal Telecasters (Qld) Ltd v Guthrie (1978) 18 ALR 531 Nil

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA CITATION : BRIAN GARDNER MOTORS PTY LTD -v- BEMBRIDGE [2000] WASCA 400 CORAM : HASLUCK J HEARD : 25 SEPTEMBER 2000 DELIVERED : 18 DECEMBER 2000 FILE NO/S : SJA 1119 of 2000 BETWEEN : BRIAN GARDNER MOTORS PTY LTD

Appellant

AND

KARIN HOPE BEMBRIDGE
Respondent

Catchwords:

Consumer Credit Code - Appeal under Justices Act - Customer compelled to pay for insurance cover by misrepresentation - Misrepresentations allegedly made by car dealer's employees - Whether car dealer liable for misrepresentations - Issues of vicarious liability - Admissibility of hearsay evidence

Legislation:

Consumer Credit (WA) Code, s 133(1)(a), s 176(1)

Fair Trading Act 1987, s 81
Justices Act 1902, s 184(1)

Result:

Appeal allowed

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Representation:

Counsel:

Appellant : Mr J C Curthoys
Respondent : Mr R W Kinshela

Solicitors:

Appellant : Lynette P Quinlivan
Respondent : Ministry of Fair Trading

Case(s) referred to in judgment(s):

Fraser Henleins Pty Ltd v Cody (1945) 70 CLR 100
S & Y Investments (No 2) Pty Ltd v Commercial Union Assurance Co Australia Ltd (1986) 85 FLR 285
Stirland v Director of Public Prosecutions [1944] AC 315
Tesco Supermarkets Ltd v Nattrass [1972] AC 153
Universal Telecasters (Qld) Ltd v Guthrie (1978) 18 ALR 531

Case(s) also cited:

Nil

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1 HASLUCK J: This is an appeal pursuant to s 184(1) of the Justices Act 1902 against the decision of Mr R H Burton SM in the Perth Court of Petty Sessions on 23 June 2000 whereby the appellant was convicted of two charges brought pursuant to the Consumer Credit (WA) Code.

2 It is apparent from the learned Magistrate's decisions that the appellant was charged initially with four offences arising out of the same series of events. Two of the four charges were brought pursuant to provisions of the Fair Trading Act 1987 and involved allegations that a false representation was made to one Ian McLoughlin concerning the need for insurance cover in order to obtain a loan from Esanda Finance Corporation Ltd. The learned Magistrate dismissed these two charges. The matters in issue in respect of those two charges do not form part of the present appeal and need not be considered further.

3 It is important to understand, however, that much of the transcript of the proceedings before the learned Magistrate reflects the evidence adduced in regard to the charges under the Fair Trading Act. In particular, there was a good deal of evidence directed to a defence available to the defendant under s 81 of the Act and related provisions. The effect of those provisions is that an employer may be excused from liability for the acts of his employees or agents if reasonable diligence has been exercised with a view to preventing the commission of an offence.

4 The two charges in respect of which convictions were eventually recorded against the defendant, being the charges the subject of the present appeal, arise under s 133(1)(a) of the Consumer Credit Code.

5 Under the first charge the respondent alleged that on or between 23 July and 17 October 1997 at Cannington, Brian Gardner Motors Pty Ltd trading as Brian Gardner Motors did require one Ian McLoughlin to pay for consumer credit insurance arranged by the said Brian Gardner Motors Pty Ltd with respect to a loan provided by Esanda Finance Corporation Ltd contrary to s 133(1)(a) of the Consumer Credit Code.

6 The second charge was that on or between the same period, the appellant trading as Brian Gardner Motors did require Ian McLoughlin to pay for gapcover insurance arranged by the appellant with respect to a loan provided by Esanda contrary to the provision just mentioned.

7 It will be useful to look briefly at the relevant statutory provisions. Section 133(1)(a) of the Consumer Credit Code provides that a credit provider or a supplier must not require a debtor or guarantor to take out insurance or to pay the cost of insurance taken out or arranged by the

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credit provider or supplier unless the insurance is compulsory insurance, mortgage indemnity insurance, insurance over mortgaged property or insurance of a nature and extent approved for the purpose of the section in question by the regulations.

8 The Code includes a schedule in which various terms are defined. A debtor is a person other than a guarantor who is liable to pay or to repay credit and includes a prospective debtor. A credit provider means a person that provides credit and includes a prospective credit provider. A supplier means a supplier of goods or services.

9 By s 176(1) the conduct of an officer, agent or employee of a credit provider acting within his or her actual ostensible authority will be imputed to the credit provider and taken to be the conduct of the credit provider. It is important to note that this provision speaks only of a "credit provider" and in its terms does not purport to apply to a supplier of goods and services.

10 The appellant's legal advisers sought particulars of the four charges laid against the appellant prior to the hearing. These particulars were provided in two letters dated 19 July 1999 and 10 January 2000 respectively. It follows from earlier discussion that some of the particulars are not relevant to the present appeal.

11 In essence it was alleged that in early July 1997 Mr McLoughlin negotiated with a salesman at the appellant's car yard at Cannington to purchase a Holden Calais motor vehicle, subject to finance. Mr Nievelstein, a finance and insurance officer employed by the appellant, submitted an application for finance on behalf of the customer to Esanda Finance via its online system on or about 11 July 1997. This application was declined.

12 A second application in relation to a different vehicle was also declined but a third application recording an intention on the part of Mr McLoughlin to pay a $1000 deposit and to purchase consumer credit insurance and gapcover insurance was approved by Esanda's computer lending assessment facility on or about 23 July 1997.

13 Mr McLoughlin objected to taking out and paying for insurance, but was informed by Mr Nievelstein that this was the only way the finance could be obtained. Nievelstein later conceded that these representations were false.

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14 The particulars included an allegation that the third application for finance was submitted jointly by Nievelstein and by his superior, John Vanderven, who was the appellant's manager of group finance, in that the third application for finance was transmitted via Mr Vanderven's computer.

15 The particulars include an allegation in these terms:

"That prior to going on leave for one week commencing 22 September 1997, Nievelstein told Vanderven that McLoughlin had been given the false impression that he was required to take out insurances. He asked Vanderven not to push the policies if they were not wanted. In response, Vanderven said that if McLoughlin wanted the car he would have to take the insurances."

16 The particulars go on to say that upon taking delivery of the vehicle in September 1997, McLoughlin entered into a formal loan contract with Esanda Finance. The loan contract referred to the insurances and the costs of the same were added to the amount of the loan. Subsequently, McLoughlin was advised by Esanda that no stipulations had been made in relation to the deposit or insurances and in due course Mr Nievelstein pleaded guilty to two charges of making false representations.

17 Against this background, certain facts were agreed by the parties prior to the hearing and incorporated in a statement of agreed facts. For present purposes, it is sufficient to note that according to the statement the officer bearers of the defendant company at the material times were Ernest Brian Gardner, Jenny Marie Gardner and Terry Leslie West. Mr Vanderven was the defendant's group finance and insurance manager and Mr Martin Nievelstein was employed as a finance officer. The making of the loan agreement and the provision of insurance premiums of $2542 in respect of the consumer credit insurance and $795 in respect of the gapcover was also admitted, such insurances not being compulsory or approved insurances for the purposes of s 133 of the Code.

18 The parties also agreed that a loan in respect of the consumer credit insurance and $795 in respect of the gapcover was taken out, such arrangements not being compulsory or approved insurances for the purposes of s 133 of the Code. It was agreed that the loan agreement was a credit contract, Mr McLoughlin was a debtor, the appellant was a supplier and Esanda was a "linked credit provider" to the defendant.

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19 In the course of his opening address at the hearing before the learned Magistrate, counsel for the prosecution confirmed that "the facts alleged in this case" had been provided to the appellant's solicitors by way of the particulars mentioned earlier. He went on to say in regard to the two credit code charges that the relevant arrangement had been made on behalf of the appellant by its group finance and insurance manager, Mr Vanderven, while Mr Nievelstein was on leave. He contended that Mr Vanderven's actions should be regarded as the actions of the appellant's employer for all intents and purposes.

20 It is apparent from these preliminaries that although Nievelstein was said to have been instrumental in misleading the customer as to Esanda's requirements, the prosecution case was conducted upon the basis that Nievelstein's superior, Mr Vanderven, had knowingly played an active part in "requiring" the customer to take out insurance contrary to the prohibition in the code.

21 Counsel for the prosecution led evidence from the manager of the recoveries' section of Esanda to the effect that the third application for finance was approved by an automatic computer checking process and the contract showed both the insurances the subject of the charges. He confirmed that Esanda did not require either of the two insurance policies be taken out by Mr McLoughlin. A Mr Hickman from AIM Insurance gave evidence that AIM received the insurance premiums and that the appellant received a commission in respect of the relevant policy.

22 Mr Nievelstein confirmed that he spoke to Mr McLoughlin after he was introduced to him by a car salesman. He confirmed that it was he who included the insurance premiums in the first application for finance. He said in evidence that about a week after the second application for finance was declined he was informed by Mr Vanderven that the credit assessment criteria on the computer on line system had been relaxed with the result that applications that had previously been processed might now be approved. With this thought in mind, Mr Nievelstein took the McLoughlin application to Mr Vanderven's office and keyed in the application - the third application - on Vanderven's computer. This was done under Mr Vanderven's password. The application included the insurance cover.

23 Mr Nievelstein said further that when he subsequently advised Mr McLoughlin that the application had been approved, and described the terms, Mr McLoughlin made it clear immediately that he wasn't going to take any insurance. Mr Nievelstein told the client (falsely) that the

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finance was conditional upon the insurance cover. Because the vehicle was not yet available for delivery, the matter was left in abeyance. Mr Nievelstein decided that the insurance issue could be resolved when the car was picked up.

24 It transpired that the car was to become available while Mr Nievelstein was on leave. He said in evidence that he took the file to Mr Vanderven, explained the situation, told him that he had done the "wrong thing" in the expectation that he would be reprimanded. According to Mr Nievelstein, Mr Vanderven said words to the effect that "if Mr McLoughlin wants a car, he'll take the insurance". At the hearing before the learned Magistrate no objection was taken to this evidence given by Nievelstein.

25 The transcript reveals that Mr Nievelstein then gave some further evidence directed to the same point (again without objection):

"When did Mr McLoughlin sign the various documentation?---I think it was - - I went on holidays on the Saturday, which is a strange time, but it was Saturday; I knocked off at 1.00. From memory, I believe he signed up on the Tuesday.

That was during the week that you were away?---Yes.

What did you discover upon your returning from leave?---I came back on the Saturday morning and I was there, 10, 15 minutes and John [Vanderven] walked into my office with the file, saying, 'We've got a problem with Mr McLoughlin.' And I said, 'What's the problem? Surely you didn't leave the insurance in the contract.' He said, 'Yeah. Both the insurances are still in the contract and he doesn't want them.'

MR KINSHELA: Did Mr McLoughlin sign the insurance details when he attended the car yard in your absence?---When I was on leave Mr Vanderven actually done the sign-up of the loan contract and the insurance policies.

So what did Mr Vanderven say to you on your return from leave?---Basically that we had a problem with Mr McLoughlin. He now didn't want the insurance policies. And of course I said, 'Well, he didn't want them to start with. That was clear.' I then congratulated John, thinking, 'He's done a real good sell job for him to accept these policies.' I then rang

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Mr McLoughlin in a very cheery mood. I didn't think there was any real problem if John talked him into accepting the policies."

26 Mr Nievelstein was challenged in cross-examination with particular reference being made to a statement made prior to the hearing which did not include any mention of what Mr Vanderven had allegedly done. Nonetheless, he did not resile from the evidence he had given before the Magistrate at the hearing.

27 Mr McLoughlin was called as a witness on behalf of the prosecution. He referred to his negotiations with the appellant's car salesman but was not examined in any detail about his dealings with Mr Nievelstein. He then described the circumstances in which he took delivery of the vehicle and in the course of doing so recalled discussing insurance requirements with Mr Vanderven.

28 At this stage, objection was taken to the admission of any evidence of that kind by counsel for the appellant upon the basis that there was no reference to any such discussion with Mr Vanderven in the pre-trial particulars. After a short adjournment, counsel for the prosecution indicated that he would not continue with this line of questioning. I note, however, that in his reasons for decision, the learned Magistrate said in regard to this issue that "I rejected that evidence as the defence had asked twice for particulars and that matter had not been included in those particulars. I rejected that evidence as the prosecution is bound by its particulars."

29 The appellant called Mr West, a director of the company, who said he first knew of the insurance problem when the contract was rewritten to delete insurances and deposit. Under cross-examination Mr West confirmed that Mr Vanderven was senior business manager for the appellant's group but with a particulars focus on the appellant's car yard at Cannington which was the biggest dealership. He was entitled to commissions on insurance cover negotiated by finance and insurance officers under his control. He was responsible for training the finance people to sell some of these added benefits to the customer. He had an important role in the group. He had autonomy but was not in a position to override the general manager. Normally he would report to Mr West or to Brian Gardner and he would be responsible to the general managers in each of the car yards.

30 Mr Vanderven gave evidence and confirmed that he was group finance manager, having been employed by the appellant for 10 years. He

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said that he first became involved in the McLoughlin transaction when the finance application was resubmitted to Esanda using his logon code, but as the machine immediately approved the application, he had no further input with regard to the deal at all.

31 He went on to say that the only other input he had was when Mr McLoughlin came to pick up the car. He arranged for Mr McLoughlin to sign the paperwork. He was not aware of any problem with the loan agreement and the insurance cover on it. Under cross-examination, he denied on several occasions that there had been any discussion between Mr Nievelstein and himself prior to the former going on leave to the effect that McLoughlin was objecting to the insurance component of the finance or that Mr Nievelstein had been party to a misrepresentation about a supposed requirement by Esanda that insurance cover be included. According to Mr Vanderven, he was not and would not be a party to any such deception.

32 It was against this background that the learned Magistrate was prepared to find beyond reasonable doubt that Mr Vanderven was told by Mr Nievelstein of the insurance problem before Mr Vanderven signed up Mr McLoughlin.

33 The Magistrate concluded that Mr Vanderven was high up enough in the corporate structure of the company to bind the appellant, but his finding in that regard seemed to lead simply to the conclusion that in regard to the charges under s 133(1)(a) of the Consumer Credit Code, the due diligence defence was not available to the appellant because Mr Vanderven could be regarded as the corporation for that purpose.

34 The learned Magistrate went on to say that he had proof beyond reasonable doubt "on the evidence adduced before me, putting aside any consideration of the evidence of Mr McLoughlin which I rejected, that Mr Vanderven compelled the taking out of the insurances by Mr McLoughlin when he signed him up." He then convicted the appellant of the two charges brought pursuant to the Code. It is apparent from his reasoning that his decision to convict was influenced by his conclusion that the conversation between Mr Nievelstein and Mr Vanderven prior to the former going on leave took place as the former alleged.

35 The grounds of appeal are as follows:

"(i) The learned Magistrate erred in law in finding that the actions of Mr Vanderven constituted the acts of the Applicant.

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(ii) The learned Magistrate erred in fact in finding that 'Mr Venderven compelled the taking out of the insurances by Mr McLoughlin when he signed him up' when there was no evidence of any such conversation between Mr Vanderven and Mr McLoughlin."

36 Let me now turn to the first ground of appeal.

37 The first ground of appeal is that the learned Magistrate erred in law in finding that the actions of Mr Vanderven constituted the acts of the appellant.

38 In regard to the first ground of appeal, counsel for the appellant drew attention to s 176 of the Code which provides that the conduct of an agent or employee of a credit provider acting within his or her actual or ostensible authority could be imputed to the credit provider. This suggested that the Code specifically dealt with the circumstances in which the conduct of an agent or employee is to be imputed to a corporation. In the present case, however, having regard to the statement of agreed facts, it was clear that the appellant was a supplier. Since the Code did not provide that the conduct of an officer, employee or agent of a supplier is to be imputed to that corporation as a matter of statutory interpretation, it was not open to the court to impute the conduct of Mr Vanderven to the appellant company. Hence, the prosecution case that the appellant by its officers, agents or employees had required Mr McLoughlin to take out insurance had not been established beyond reasonable doubt and the convictions should be quashed.

39 Counsel for the respondent answered these submissions by saying that s 176(1) of the Code should not be regarded as an exhaustive statement in regard to the liability of a corporation for the acts of its officers or employees. The Code was a code essentially covering the liability of credit providers and was silent as to the position of suppliers. The Code's failure to provide liability provisions for suppliers or other persons did not make these persons immune from the general principles applicable to the question of the responsibility of a body corporate for the conduct of its officers.

40 Counsel for the respondent submitted that the question of the circumstances in which a supplier corporation will be liable for the conduct of its officers, employees or agents falls to be determined by common law principles.

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41 In that regard, counsel placed reliance upon the reasoning of the House of Lords in Tesco Supermarkets Ltd v Nattrass [1972] AC 153. In that case, Lord Reid said at page 170:

"I must start by considering the nature of the personality which by a fiction the law attributes to a corporation. A living person has a mind which can have knowledge or intention or be negligent and he has hands to carry out his intentions. A corporation has none of these: it must act through living persons, though not always one or the same person. Then the person who acts is not speaking or acting for the company. He is acting as the company and his mind which directs his acts is the mind of the company. There is no question of the company being vicariously liable. He is not acting as a servant, representative, agent or delegate. He is an embodiment of the company or, one could say, he hears and speaks through the persona of the company, within his appropriate sphere, and his mind is the mind of the company. If it is a guilty mind then that guilt is the guilt of the company. It must be a question of law whether, once the facts have been ascertained, a person in doing particular things is to be regarded as the company or merely as the company's servant or agent. In that case any liability of the company can only be a statutory or vicarious liability."

42 According to counsel for the respondent, the Tesco principle has found more liberal expression in subsequent cases in which corporate bodies have been held to act through middle managers in the absence of any finding that they have been delegated unfettered power by a company's board of directors. S & Y Investments (No 2) Pty Ltd v Commercial Union Assurance Co Australia Ltd (1986) 85 FLR 285 at 310.

43 In Universal Telecasters (Qld) Ltd v Guthrie (1978) 18 ALR 531, Bowen CJ and Franki J indicated that the persons relevant for consideration in deciding whether a company knew of the material matters are those who are to be treated as the company itself. The basic test is whether the employee is one who, by the memorandum and articles of association, or as a result of action taken by the directors or by the corporation in general meeting pursuant to its articles, has been entrusted with the exercise of the powers of the corporation.

44 In the present case, there was compelling evidence that Mr Vanderven's position as the group finance manager made him the most

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senior employee in the finance area of the appellant company. He occupied an important position and it was acknowledged that he had a substantial degree of autonomy to train and supervise personnel. He reported to the two directors, but there was no evidence to suggest that he took instruction from them in his own area of finance and insurance.

45 Accordingly, in regard to this ground of appeal, I consider that the learned Magistrate correctly concluded from the evidence before him that the appellant company was personally liable for the offence against s 133(1)(a) of the Code. The requisite elements of the offence had been performed on behalf of the company by a person to whom the functions of the directors, in the discrete area of consumer finance, had been fully delegated.

46 I will now turn to the second of the two grounds of appeal.

47 I have already noted that as a consequence of the delivery of particulars before the hearing and the way in which the prosecution case was opened, it became necessary for the prosecution to establish beyond reasonable doubt that Mr Vanderven, as the senior finance officer, knowingly participated in the events that are said to amount to a requirement that Mr McLoughlin take out insurance cover, contrary to the prohibition contained in the Code.

48 It was clearly not sufficient for the prosecution to point simply to the misconduct of Mr Nievelstein in bringing about the forbidden result whereby the customer, Mr McLoughlin, felt compelled to pay for insurance cover he did not want. Accordingly, it was necessary for the prosecution to establish that at the time Mr Vanderven signed up Mr McLoughlin he knew that the relevant papers made provision for insurance cover and that Mr McLoughlin was acting in the belief that no other option was available to him.

49 There is some evidence, apart from the conversation complained of in the ground of appeal, which might arguably support an inference that Mr Vanderven had the required degree of knowledge. He was senior to Mr Nievelstein and occupied the office next door to the latter. The third application for finance containing the insurance cover was prepared by Mr Vanderven's computer and there is therefore some basis for concluding that in the course of preparing the third application, Mr Vanderven, in the normal exercise of his responsibilities, must have been informed of what had taken place and of Mr McLoughlin's objection to the insurance cover. Nonetheless, bearing in mind that the prosecution

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case must be established beyond reasonable doubt, it is doubtful that the required degree of knowledge on Mr Vanderven's part could be made out unless the Court was in a position to take account of the evidence given by Mr Nievelstein as to what he told his superior before going on leave.

50 Counsel for the appellant submitted that the relevant conversational exchanges were hearsay. The rule is that an assertion other than one made by a person while giving oral evidence in the proceedings is inadmissible as evidence of the facts asserted. It was immaterial that Mr Vanderven was called as a witness at the hearing. The effect of the Nievelstein evidence was to introduce into evidence an out-of-court assertion by Vanderven to the effect that he, like Nievelstein, would insist that the insurance cover be included, notwithstanding McLoughlin's objection to it.

51 I accept that such an assertion should be characterised as hearsay. I note in passing that the learned Magistrate did not address his mind to this consideration. This was probably because no objection was taken to the evidence in question on such a ground at the hearing.

52 I digress briefly to say that it is not necessarily fatal to the appellant's case that the hearsay assertions of Mr Mr Nievelstein were admitted without objection at the hearing. If a miscarriage of justice has occurred because inadmissible evidence has been admitted, it is open to an appeal court to review the verdict. This appears from the judgment of Viscount Simon in Stirland v Director of Public Prosecutions [1944] AC 315 at 327:

"It has been said more than once that a judge when trying a case should not wait for objection to be taken to the admissibility of the evidence, but should stop such questions himself: see Rex v Ellis. If that be the judge's duty, it can hardly be fatal to an appeal founded on the admission of an improper question that counsel failed at the time to raise the matter. No doubt, as was said in the same case, the court must be careful in allowing an appeal on the ground of reception of inadmissible evidence when no objection has been made at the trial by the prisoner's counsel. The failure of counsel to object may have a bearing on the question whether the accused was really prejudiced. It is not a proper use of counsel's discretion to raise no objection at the time in order to preserve a ground of objection for a possible appeal, but where, as here, the reception or rejection of a question involves a principle of exceptional public importance,

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it would be unfortunate if the failure of counsel to object at the trial should lead to a possible miscarriage of justice. There is nothing in the Act of 1898 to suggest that such an objection is necessarily invalid unless taken at the time, and in other branches of the law the right to object on appeal that evidence was inadmissible is not necessarily forfeited by the failure to object when the evidence was given. The object of British law, whether civil or criminal, is to secure, as far as possible, that justice is done according to law, and, if there is substantial reason for allowing a criminal appeal, the objection that the point now taken was not taken by counsel at the trial is not necessarily conclusive."

53 It is apparent, then, that it is open to the appellant in this appeal to contend that the learned Magistrate's crucial finding was flawed because it was based upon inadmissible hearsay as to what passed between Nievelstein and Vanderven before the former went on holiday, notwithstanding a failure to object to such evidence at the hearing.

54 A further question arises, however, as to whether the disputed assertions fall within any of the exceptions to the rule against hearsay.

55 The rule is that self-serving statements of the parties to litigation are usually inadmissible as evidence of their truth on account of the possibility of fabrication, but statements adverse to the maker's case are received as proof of the truth of their contents in civil and criminal proceedings. A statement can be regarded as an admission when it is a statement adverse to a party's case. The rationale whereby admissions are received as evidence against the party making them is that what a party himself admits to be true may reasonably be presumed to be so. Cross on Evidence, 6th Aust Ed, par 33,440.

56 Statements made to third parties by an agent within the scope of the agent's authority and during the continuance of the agency may be received as admissions against the principal in litigation to which the latter is a party.

57 The authority to have such conversations or make such communications is not necessarily coterminous with an authority to act on behalf of the principal: Cross (supra). Thus, in Fraser Henleins Pty Ltd v Cody (1945) 70 CLR 100 the High Court confirmed that a mere director had no implied authority to make the admissions binding the company, but that such authority existed in the case of a general manager. I note

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also that a direct result of the requirement that the making of the admission must be within the scope of the agent's authority if it is to be received against the principal is that a servant's admission is usually inadmissible in cases in which it is sought to make the master vicariously liable in tort. See Cross (supra) par 33,545.

58 The decided cases also suggest that the statement of the agent which is tendered as an admission must, on the preponderance of authority, have been made to a third person, not to the principal, unless it has been adopted by the principal or unless the agent had authority to make the statement in the course of a duty to do so; eg, to make entries as a record: Cross (supra) par 33,540.

59 It follows from my reasoning in regard to the first ground of appeal that Mr Vanderven had sufficient standing within the company to speak authoritatively on the company's behalf in regard to finance applications. If the matter is viewed in that light, then statements made by Mr Vanderven about his attitude to the third application for finance, and his willingness to have the insurance cover included notwithstanding Mr McLoughlin's objection, were arguably admissible as admissions made on behalf of the company that fall within the exception to the rule against hearsay mentioned earlier. They were statements against the interest of the appellant company in circumstances in which Mr Vanderven could be regarded as an agent of the company.

60 The difficulty is, however, that the statements in question were not strictly statements or admissions made to a third party. In my view, for that reason, they should not have been received in evidence. This view follows from the rationale I mentioned earlier. An admission against interest made to a third party can be presumed to be true, but a conversational aside made to a subordinate is not of the same order. A manager may feel obliged to make remarks to subordinates or to his colleagues which he does not necessarily regard as true. Such remarks are often made simply to keep the peace at the workplace or in the belief that what is being said represents company policy. To my mind, it is for this reason that the exception to the rule against hearsay is thought to be limited to admissions made to a third party.

61 Accordingly, in my view, the learned Magistrate erred in allowing the conversations between Mr Nievelstein and Mr Vanderven, including the crucial words spoken by the latter, to be received in evidence. If this evidence is excluded, the Magistrate did not have sufficient evidence before him that Mr Vanderven compelled the taking-out of the insurances

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by Mr McLoughlin when he signed him up. Thus, I find for the appellant in regard to this ground of appeal.

62 For these reasons the appeal will be allowed. A question then arises as to whether the matter should be remitted to the learned Magistrate for a further hearing. In a situation of this kind, where the success of the prosecution case depended upon evidence now held to have been wrongly received, I am not persuaded that a further hearing should be ordered. Accordingly, the convictions will be quashed.