Clayton Robart Management Limited v Siu

[1988] HCATrans 73

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No Sll8 of 1987

B e t w e e n -

CLAYTON ROBARD MANAGEMENT LIMITED

Applicant

and

WILLIAM SIU

Respondent

Application for special leave to

appeal

MASON CJ

WILSON J

Clayton

BRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 22 APRIL 1988, AT 11.55 AM

Copyright in the High Court of Australia

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MR R.A. CONTI, QC: If it please the Court, I appear with MR J.M. IRELAND for the applicant. (instructed by

Sly and Russell)

MR A.M. GLEESON, QC:  May it please the Court, I appear with

my learned friend, MR A.J. BANNON, for the respondent.

(instructed by McKimm & Associates)

MR CONTI:  Your Honours, the scope of this application can be

very shortly stated. The manager or trustee of

a property trust or a cash management trust in Australia
must now get what is called a dealer's licence under
the SECURITIES INDUSTRIES ACT - a trustee or a manager.
So that if he wishes to raise funds from the public,
as the manager and trustee does on behalf of the fund -
what he does, he raises units in a trust fund and he

must have this dealer's licence.

If a person is to solicit business for him, then

he must have what is called a dealer's representative

licence. Now, the code does not indicate what is the

scope or ambit of the authority of the dealer's

representative. That must remain, we accept,	ultimately
a question of fact in each circumstance.

Now here, of course, we are concerned about whether

the authority to solicit business, which was common

ground below, existed in the dealer's representative,

carried with it an authority to collect the money, that

is, as I say, the moneys the subject of the applications

for units. The mat~er, Your Honours, is for practical

purposes - and I am not now talking about issues of law,

I am talking about practical circumstances - it is very

important for the securities industry for two reasons:

there is firstly the consequence that the funds - existing

equity funds owned by the unit holders, they will be

liable to be depleted in circumstances where

tmknown to the trustee or the manager, funds have been

accepted by a dealer's representative destined - intended

to be destined for those funds, or certainly for an

application for units in those funds - which may or may

not be granted - yet may not get there.

is this, that it will, for practical purposes, limit The second reason

the scope of fund raising if the manager or trustee is

obliged to return applications for units that are not

accompanied by the cheque of the applicant himself as

payer rather than the cheque of the representative

licence. So, it has those important features.

Now, Your Honours, where an issue boils down to inferences

from facts, as to whether they give rise to an agency in

certain circumstances, there will often be - and we

submit there are here - questions of mixed fact and law.

Many years ago, as Your Honours may recall - I have the

authority with me, if necessary, to hand up to in

PETERSEN V MOLONEY - this Court held that when an estate

agent received the purchaser's cheque for the deposit -

the payment of the deposit - the moneys were held on

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behalf of the purchaser until the contract of sale was

entered into and, in effect, therefore, the vendor

ratified the authority of the agent to hold a deposit

on his behalf. They were questions of fact in that

case. The inferences that the Court drew were that the

agency involved was a question - they did not expressly
say so but, in effect, it was determined as a mixed

question of fact and law because an agent, as has been

said, is a person who is authorized - this is an agent

in a legal sense and not the popular sense - to create

legal representations or legal relationships. It was

common ground below that where you have an authority

to solicit business then in law you have an authority to make representations and the principal can be sued

in relation to misrepresentations.

But here the finding of the court, as it went

further - the authority was to create, in effect, some

sort of legal relationship because the moneys on payment

to the representative represented a payment to the

principal himself. Your Honours, it is in this area

of the securities industry that there is an important practical question arising and it is a question as to

whether, as it were, there are similar principles

by analogy to be applied to estate agents or not is a

valid principle and so on.

MASON CJ: Are you putting this forward as a basis of general

importance which warrants the grant of special leave?

MR CONTI:  Your Honour, yes.

MASON CJ: There was no hint given of it in the affidavit

in support of the application.

MR CONTI: That is so.

MASON CJ: The affidavit suggested that the JONES V DUNKEL

principle was the foundation for the grant of special

leave.

MR CONTI:  That is so. Your Honours, as. a pure question

of law, the only question arising is whetlier the - an

extension of the JONES V DUNKEL principle is

offered by His Honour the President, when, at page 34

of the application book, between lines 12 and 18,

His Honour seems to be saying that where a plaintiff

makes suggestion, in other words, purports to raise

issues in a case as to, for instance, the existence

of actual authority granted to the defendant, then

the principle may there apply. He seems to pick that

up - it seems to pick up as an extension from what

His Honour says at the foot of page 26. Just really

beginning on the last line of 25 His Honour poses the
question and then says:

In a rational procedure for the resolution of disputed issues of fact, it would not

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be unreasonable to expect a party in the
best position to do so to place before the

tribunal of fact the relevant evidence in

its possession, at least so far as such

evidence was relevant to the resolution

of disputed questions.

If one reads those two passages together one gains the

notion that JONES V DUNKEL might have some sort of

investigative tribunal-type procedure, that one moots

abroad the issue and therefore one should expect to

be obliged to call evidence on that question.

His Honou~ the President put the case on

ostensible autority. Mr Justice McHugh and Mr Justice Clarke

below put on the basis of implied actual authority.

In relation to ostensible authority, His Honour the President

at page 20 of the application book, develops ostensible

authority from line 4 and says:

They -

meaning Hooker and Clayton Robard - Clayton Robard is the

sole applicant here -

provided Mr Heslop and JLS -

which is Mr Heslop's company -

with prospectuses and application forms. It

is clear from the evidence that they knew it

was his practice to attach JLS stamps and

labels to such forms. They were aware that

Mr Heslop had applied for and was licensed as a dealer's representative. The documents which the appellants sent to Mr Heslop said,

in effect, that he was the funds' representative.

They did indeed pay him commission at a rate of

4\%. They expected him to receive monies .....

the purpose of providing him with the prospectuses

and application forms was clearly to facilitate -

and so on.

But on close analysis none of those facts are a

representation by Clayton Robard to the prospective

investor because what happened was, they certainly

provided prospectuses to Heslop, the representative,

but he put the sticker on his name, he put his stamp

of his name upon the application forms.	It was he
who entirely dealt with the plaintiff.

MASON CJ: What authority did he have, on your case?

MR CONTI:  To solicit business and therefore liable only for

misrepresentations. And to facilitate the business,

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he had authority to attend to collection of the

application form when signed and accept the cheque

of the prospective applicant drawn in favour of the fund. He had authority to solicit business but not to collect the money himself.

BRENNAN J:  To collect cheques in favour of the fund but not to

collect cheques in favour of himself?

MR CONTI:	Yes, that is so.
BRENNAN J:	And the limitation on that authority with respect

to cheques was to be found in the form itself?

MR CONTI:  That is so, yes. Your Honours, can I just say

the one final matter of substance, it seems to us with

respect, that is important. The position in which

the fund is placed is this: merely by the fact that

it receives the dealer representative's cheque -

this is, with respect, the point made by

Mr Justice McLelland below - merely by reason of the

fact that it receives the dealer's cheque does not,

of itself, give rise to the inference that those funds

are necessarily the funds held on any particular

agency. They may well be the funds held by the

dealer as agent for the applicant. That was the

point which His Honour Mr Justice McLelland mainly

departed from the majority.

WILSON J: Would he earn the cormnission in that case?

MR CONTI:  He would not earn the cormnission unless and until the

application had been lodged; the trustee had decided

to accept it and the units were allotted . Merely by

receiving the funds gave him no right to cormnission.

And the dealer was placed in a situation where it

receives the representative's cheque and why should he
draw the inference that the representative is abusing
the actual authority flowing from the provisions of
the prospectus that all cheques have to be drawn by

the applicant?

WILSON J:  But it was not an isolated ~ase, was it? There was

evidence of what, 36 cases?

MR CONTI: No, there was 26 cases. That is so.

WILSON J: And presumably reflecting a course of procedure

whereby, presumably, they wouldrot have got any money

direct from the investors who chose to deal through

this dealer otherwise than through the dealer's own cheques.

MR CONTI: 

Your Honour, it would not matter how many, with

respect - how many cheques came drawn by Heslop or
the amount thereof. Why should the fund dealer as in
the case by analogy, a vendor - the sale of land before
the contract is exchanged - assume otherwise than that

the cheque - that the moneys  held by the dealer -

moneys emanating from the dealer are held as agent for

the prospective investor.

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WILSON J:	But in the context where the prospectus stipulates that cheques - moneys payable on that prospectus
should be payable to the fund, that procedure is not
followed,but nevertheless the moneys are received
and credited to the investor - - -
MR CONTI:	That is so.

WILSON J: - - - does that not ground an inference that they were acquiescing in a departure from the procedure expressed in the prospectus?

MR CONTI:  Your Honour, of course it grounds an inference that

the procedure has not been followed, and I accept that,

WILSON J: And that they were therefore holding out Heslop as

authorized to receive the money on their behalf?

MR CONTI:  That is where the majority and minority diverge

below. Mr Justice McLelland said, "Look, just on that

material alone how can the manager infer that those
funds are not there held by the representative on

behalf of the prospective applicant for whatever purpose?"

But bear in mind that payment to the representative

does not mean that the prospective investor is going to

get his units. They may be oversubscribed.

BRENNAN J: If one construes the authority that was given to

the agent as authority to facilitate the transfer of

the funds to be deposited from the depositor to the

fund, then can one not then construe the words in

the prospectus as a limitation upon that authority and a limitation which is disregarded by the agent in such

a fashion that disregarding it it is none the less

within the ostensible scope of his authority in

facilitation of the transfers?

MR CONTI:  Your Honour, with respect, ostensible authority

does not arise because all the representation which

is made by Clayton Robard to the prospective investor

is what is contained in the prospectus and, add to that

Mr Heslop is an authorized representative. That, alone,	if one likes, the sticker and the stamp saying that
is not enough to represent that he can collect the money. Authority to solicit business does not carry with it authority to receive the moneys of the
principal.

BRENNAN J: That depends on the nature of the business, surely.

MR CONTI: Well, it does, that is so.

BRENNAN J: And here.isthe question of collecting money for

investment;you have an agent who has the forms and

you have his services available for the transfer

of the funds to the head office, why is it not then

his authority so far as the performance of those

functions is concerned to say, Well, ordinarily you

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make it out in favour of the head office but it is

all right if you do it by giving it to me."?

MR CONTI: In those circumstances the prospective investor

could not reasonably assume that payment to the

representative is payment to the principal himself

because the units may never be allotted.

WILSON J: But even direct payments might be refunded on the

basis there were not units.

MR CONTI: That is so.

WILSON J: Well, what is the difference? I mean, what is the

significance of the point you draw?

MR CONTI: Well, the significance of the point is that a legal

relationship is said to come into existence on the

payment of the funds to the representative, namely, a

legal relationship between Clayton Robard and the

prospective investor.

WILSON J: Yes, but you are putting it that that could not

have been so because the units might not be available.

MR CONTI:  That is one reason. I do not put that as a decisive

reason.

WILSON J:  I was merely observing that the same could be said

then of money paid direct to the fund.

MR CONTI:  Your Honour, if one takes the insurance broker analogy

where this Court has held that in the ordinary course,

notwithstanding that the broker can hang on to the

premium for months and invest it on his own behalf

with the authority of the insurer and with the knowledge

of the insurer until it is paid to the insurer, and

until it is paid to the insurer there is no payment

to the insurer, there is no deemed payment to the

broker, and why? And when I say "and why", even in

the context that insurance proposals with the insurance

company's name and the broker's stamp upon it
are being used for the signing of the proposal.	Now,

in those circumstances there was clear authority to

solicit business but one needs more than an authority

to solicit business to receive the funds to which

that business relates.

WILSON J:  But that case, if I remember rightly, turned on the

evidence in the case of the system and practice

involving brokers.

MR CONTI:  Yes, Your Honour, but one would have thought that

in those circumstances the facts were a fortiori

t0 the· present circumstances where here the

principal does not even know the representative has

got the moneys; in the case there, the principal

knows not only has he got the moneys but he has

invested them for his own advantage.

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WILSON J: And he acquiesces in it.

MR CONTI:  And the insurer acquiesced in that situation.

Nevertheless, it was held that payment to the broker

was not payment to the insurer.	Now, Your Honours
that is only an analogous situation.	One can draw'

distinctions in the two types of business operations.

WILSON J: It may have been connnon to the BROKER's case as

well, I do not recall, but the further fact here

that it was known to the fund that the agent had put

his stamp on the prospectus because the prospectus

ended up back with the fund with the agent's stamp on

it.

:MR.CONTI:  Yes, that is so. Your Honours, in sunnnary, we

put the situation simply in two ways: an authority

to solicit business is not per se an authority to

collect funds. Number 2:  in the present case

all that can be reasonably inferred as to the knowledge

of a manager or a trustee is when he gets the cheque -

it does not matter on how many occasions - from a

representative, that those funds could be held for a

variety of reasons in trust at the point of payment

up to the time of payment to the principal for the

prospective investor.

MASON CJ:  The Court need not trouble you, Mr Gleeson.

The Court considers that the decision of the Court

of Appeal is not attended with sufficient doubt to justify the grant of special leave to appeal. The

application is refused.

MR GLEESON:  I apply for costs, Your Honour.

MASON CJ:  With costs. The application is refused with costs.

AT 12.17 PM THE MATTER WAS ADJOURNED SINE DIE

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