Cousens v Grayridge Pty Ltd

[2000] VSCA 96

SUPREME COURT OF VICTORIA
COURT OF APPEAL	Not Restricted

No. 7373 of 1997

SHIRLEY YVONNE COUSENS	Appellant/Defendant
v
GRAYRIDGE PTY. LTD. (ACN 053 359 612)	Respondent/Plaintiff
No. 6452 of 1998
HILLSIDE WAY PTY. LTD. (ACN 078 626 276)	Appellant/Defendant
v
GRAYRIDGE PTY. LTD (ACN 053 359 612)	Respondent/Plaintiff

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JUDGES:	CHARLES, BATT and CHERNOV, JJ.A.
WHERE HELD:	MELBOURNE
DATES OF HEARING:	15 and 16 November 1999
DATE OF JUDGMENT:	2 June 2000
MEDIUM NEUTRAL CITATION:	[2000] VSCA 96

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PRINCIPAL AND AGENT – Agent fraudulent – Authority of mortgage broker to receive mortgage advance on behalf of borrower – Actual (express or implied) and ostensible.

ESTOPPEL -            By deed – Inoperative provisions – Common law and equity – No estoppel from acknowledgment of receipt of advance.

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APPEARANCES:	Counsel	Solicitors
For the Appellants	Mr. R.L. Berglund	Webb Korfiatis
For the Respondents	Mr. R.E. Cook	S.V. Winter & Co.

CHARLES, J. A.:
CHERNOV, J.A.:

1. We have had the considerable benefit of reading in draft the reasons for judgment of Batt, J.A., and gratefully adopt his Honour’s careful statement of the facts involved in this appeal.  As his Honour observes, the practical question in each of these appeals is which of two innocent parties is to bear the financial loss resulting from the fraud of Bulfin.  We agree with respect with his Honour that, for the reasons given by him, Bulfin was not given express authority by the appellant to receive the relevant cheques from Winter nor ostensible authority to do so.  We also agree that the appellant and Hillside are not estopped by clause 3 of the deed of 14 July 1997 from denying liability.  We only differ from his Honour on the question whether Bulfin had implied authority to receive those moneys.  This difference arises principally because, in our view, the evidence relating to the mortgage transactions between March and July 1997 was admissible not as “similar fact” evidence, but rather (for reasons we shall explain shortly) because it is relevant to the determination of the terms of the agency relationship that existed between Lewer and Bulfin.  In our opinion this evidence shows that Bulfin had implied authority from Lewer to receive the net proceeds of the Winter loan for the purpose of applying them to the investments agreed upon between Lewer and Bulfin.  That Bulfin did not in fact use those moneys for that purpose is irrelevant to this issue. 

1. As Batt, J.A. has made clear in his judgment, Lewer’s acts in relation to the transactions in question bound the appellant.  The borrowings were made effectively for his benefit and the security provided for the loans was over his matrimonial home so that in the circumstances the appellant, who was a bare trustee of the land, was a mere signatory to the documents and exercised no decision-making power in relation to the borrowings.  As his Honour recounted, the appellant said in her evidence that she believed that as trustee “she was there for signing purposes” and as trustee, was accustomed to do whatever her brother told her to do.  Thus, the issue of the extent of Bulfin’s authority in relation to these transactions may be analysed without reference to the appellant because any actual authority that Bulfin had, in order to be effective, necessarily had to come from Lewer whose acts in that regard were, as we have said, binding on the appellant. 

1. It is clear that Lewer’s need for additional funds bordered on being desperate and that he readily embraced Bulfin’s proposal that he, Bulfin, would act on Lewer’s behalf to find lenders prepared to advance in total the maximum amount of money that could be raised on the security of the Frankston property and invest the borrowed funds as suggested by Bulfin, thereby generating the sort of cash flow that was required by Lewer.  The scheme that Bulfin devised for the borrowing of funds and for their investment happened to involve four mortgage transactions - the Quinn mortgage, the Feingold mortgage, the discharge of the Quinn mortgage and the variation of the Feingold mortgage, and the Winter mortgage - but these transactions were all part and parcel of the one scheme and, in our view, should not be considered as transactions that were discrete from one another.  Put another way, each transaction was but another phase of the borrowing and investment scheme devised by Bulfin and readily adopted by Lewer.  As Batt, J.A. says, the proposal was to invest in the meatworks called “Gillara” and Lewer agreed with Bulfin’s suggestion that “the sky was the limit, the more the better”.  Lewer agreed to Bulfin’s proposal that there would be a couple of others (other than a Hungry Jack’s franchise), but that Gillara was supposed to be “the big one”.  Lewer, as his Honour says, embraced the proposal to mortgage the land and invest the mortgage advance in the meatworks venture.  Lewer said in evidence that the Feingold loan was “not another deal or a better deal, it is just an extension of the original”, and agreed that “they are all part of the same transaction”.  In our view the Winter mortgage transaction was relevantly related to the earlier three transactions because it was a step, probably the last step, in the implementation of the overall project to borrow money on the security of the Frankston property for investment in the meatworks and the franchise.  All the mortgage transactions were effected over a relatively short period and were dependent upon the granting of security over the Frankston property.  In our opinion, they are all relevant to the question whether Bulfin had the implied authority of Lewer to receive the Winter moneys.

1. In Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd.[1], Diplock, L.J. discussed the distinction between an “actual” authority of an agent on the one hand, and an “apparent” or “ostensible” authority on the other.  Dealing with the former, his Lordship said –

   [1][1964] 2 Q.B. 480 at 502-3

“An ‘actual’ authority is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties.  Its scope is to be ascertained by applying ordinary principles of construction of contracts, including any proper implications from the express words used, the usages of the trade, or the course of business between the parties.  To this agreement the contractor is a stranger; he may be totally ignorant of the existence of any authority on the part of the agent.  Nevertheless, if the agent does enter into a contract pursuant to the ‘actual’ authority, it does create contractual rights and liabilities between the principal and the contractor.  It may be that this rule relating to ‘undisclosed principals, ‘ which is peculiar to English law, can be rationalised as avoiding circuity of action, for the principal could in equity compel the agent to lend his name in an action to enforce the contract against the contractor, and would at common law be liable to indemnify the agent in respect of the performance of the obligations assumed by the agent under the contract.”  (Emphasis added.)

Freeman & Lockyer was applied by the Court of Appeal in Hely-Hutchinson v. Brayhead Ltd.[2] and the passage in the judgment of Diplock, L.J. in the former case to which we here referred was quoted by Lord Wilberforce[3] and mentioned by Lord Pearson[4], in each case with approval.  In Hely-Hutchinson, the Court of Appeal held that, on the facts, actual authority was to be implied from the conduct of the parties and the circumstances of the case, in concluding that one Richards, the chairman and de facto managing director of the defendant company, was authorised to enter into two contracts on behalf of the company.  Lord Denning M.R. said[5] that such authority is implied -

“when it is inferred from the conduct of the parties and the circumstances of the case, such as where the board of directors appoints one of their number to be managing director.  They thereby impliedly authorise him to do all such things as fall within the usual scope of that office”.

In Hely-Hutchinson, such authority was implied from the circumstances that the board of directors by its conduct had acquiesced in Richards’ acting as its chief executive and committing the company to contracts without the necessity of sanction by the board[6].

[2][1968] 1 Q.B. 549

[3]at 587

[4]at 592-3

[5]at 583

[6]See 584, 592 and 593.

1. The judgment of Diplock, L.J. in Freeman & Lockyer was referred to with approval by Gibbs, Mason and Jacobs, JJ. in Crabtree-Vickers Pty. Ltd. v. Australian Direct Mail Advertising & Addressing Company Pty. Ltd.[7] (although this was a case of only ostensible, not actual, authority).  Hely-Hutchinson was followed in Bank of New Zealand v. Fiberi Pty. Ltd.[8], where Allen, J. observed[9] that –

“[t]he inference that actual authority has been conferred by a board of directors turns upon what the directors have acquiesced in, what they have been permitting to happen without demur, what the position is as they have allowed it to be.  The inference cannot be drawn from conduct of which they were wholly unaware and which [they] had no reason to suspect or anticipate”.

Freeman & Lockyer and Hely-Hutchinson are both cited by Bowstead on Agency[10] for the proposition that every agent has such authority as is to be inferred from the conduct of the parties and the circumstances of the case. 

[7](1975) 133 C.L.R. 72, at 79.

[8](1992) 8 A.C.S.R. 790

[9]at 809

[10]15th ed. (1985) in Article 32.

1. We have already mentioned the evidence given by Lewer that the mortgage transactions between March and July 1997 were all part of the same transaction, and his acceptance of Bulfin’s proposal that there should be several transactions undertaken on the strength of mortgages of his (Lewer’s) matrimonial home.  In our view it follows from the authorities to which we have just referred that evidence relating to the circumstances in which each of these mortgage transactions was entered into was admissible to establish both the conduct of the parties and the circumstances of the case, in order to determine what were the terms of the agency relationship that existed between Lewer (and through him, the appellant) on the one hand and Bulfin on the other. 

1. Although Bulfin had express authority from Lewer to procure proposals for loans (in the first instance, through the appellant) and to channel any borrowings into the agreed investments, he had no express authority to accept on Lewer’s behalf any loans that may have been proffered or to execute any of the contractual or necessary documents relating to the loans.  But an examination of the circumstances of each of the mortgage transactions shows that Lewer did not involve himself in any of the details or the administrative aspects of the transactions, leaving it to Bulfin to conduct such matters on his behalf.  Thus, it was Bulfin who dealt with the lenders’ agents, ensured that security documents reached Lewer and other relevant signatories on behalf of the borrower and attended the settlements.  It is apparent that neither Lewer nor the appellant attended any of the settlements or received the proceeds of the loans.  Indeed, it is not suggested that anyone other than Bulfin undertook these tasks for Lewer.  Lewer was well aware that Bulfin attended to those administrative aspects of the mortgage transactions and agreed, or at the very least, acquiesced, in that conduct.  It follows from this that a term was implied into Bulfin’s agency that, inter alia, he would either at settlement or otherwise receive on Lewer’s behalf the net proceeds of the loan moneys which he procured and invest them in the agreed enterprise.

1. Bulfin’s conduct in relation to the mortgage transactions, including the receipt of moneys advanced pursuant to the Quinn, Feingold and Winter mortgages, was not, in our view, conduct of which Lewer was “wholly unaware” or which he had “no reason to suspect or anticipate”[11] that Bulfin would engage in for the purpose of raising money and investing it in the meatworks and the franchise.  Thus, Bulfin’s implied actual authority to receive the Winter moneys is to be inferred from the conduct of Lewer in his dealings with Bulfin beginning at the time when he first embraced the borrowing and investment scheme, and from what he permitted Bulfin to do in putting that scheme into effect.  A brief analysis of each of the mortgage transactions demonstrates, in our view, that Bulfin fulfilled an administrative and facilitative role in relation to those transactions necessarily with the consent and acquiescence of Lewer which included attending settlements and receiving the net proceeds of the borrowed funds.

   [11]Bank of New Zealand v. Fiberi Pty. Ltd. (1992) 8 A.C.S.R. 790 at 809.

1. In relation to the Quinn mortgage (which was dated 23 April 1997), the trial judge found that Lewer and the appellant gave express authority to Bulfin which included receiving the money advanced and investing the advance in 74 Manly Pty. Ltd.  Batt, J.A. accepts that this critical finding is not shown to be incorrect save that this part of Bulfin’s authority, whilst actual, would seem on the evidence to be implied rather than express.  Whether the authority was implied or express, the finding by the trial judge of the existence of such authority at the outset of these mortgage transactions appears to us on the evidence to be impregnable. 

1. The loan proceeds of the Feingold mortgage (which was dated 23 May 1997) were paid to NVJ Pty. Ltd. (“NVJ”) on the authority of the appellant and Lewer’s wife.  NVJ was a company which seems to have been under the control of Bulfin’s son.  It was described by the trial judge as a “Bulfin company”.  The circumstances of the settlement of this mortgage transaction were not, in our view, relevantly dissimilar to the first loan which was channelled to 74 Manly Pty. Ltd.  The trial judge inferred that Bulfin was present at the Feingold settlement, a conclusion which we think was open to his Honour.  Lewer did not attend the settlement, and it has never been suggested that anyone other than Bulfin attended on his behalf.  Lewer and the appellant both said in evidence that Bulfin (and, for that matter, NVJ) had no authority to receive the amount advanced and that they were unaware that the Feingold loan moneys had been drawn down.  The trial judge firmly rejected the last proposition and found that Bulfin had express authority to receive these moneys, a finding based largely on the contents of Exhibit A and his Honour’s acceptance of the fact that the appellant and Lewer’s wife applied their signature to the document after the body of writing thereon had been completed.  There is, in our view, no basis shown for rejecting the additional finding of the trial judge that Bulfin was present at settlement and received the amount advanced less fees and disbursements, and that both the appellant and Lewer were aware before the end of May that this mortgage transaction had been completed.  The fact that Exhibit A includes a request that the funds advanced be paid to NVJ does not, in our view, affect the conclusion that Bulfin received the cheques as agent for the appellant.  Nor does it mean that the attendance of Lewer and the appellant at settlement was thereby rendered unnecessary.  The case made by Mr. Berglund for the appellant was that these moneys were to be “invested in a Hungry Jack’s venture”.  Consistently with the authority Bulfin had been given to receive and invest funds in Gillara (and which had been the source of the authority exercised one month earlier in the Quinn transaction) it is in our view probable that, if the appellant or Lewer saw the name NVJ on Exhibit A, they regarded it simply as the means by which their funds were being channelled by Bulfin on their behalf into Gillara.  As in the case of the Quinn transaction and in keeping with commercial sense, Lewer would have expected his interests to be represented at settlement.  Neither he nor his sister attended to such details and in the circumstances it was, we think, open to the trial judge to infer that, to the knowledge of Lewer, or at least with his acquiescence, Bulfin attended the settlement on his behalf, and there received the net proceeds of the Feingold loan.

1. The third mortgage transaction involved a variation of the Feingold mortgage loan which was increased from $155,000 to $330,000 on the security of the first mortgage over the Frankston property and the additional funds were used to discharge the Quinn mortgage.  It is not clear on the evidence what was the extent of Bulfin’s role in this transaction, but it is apparent that it was entered into as part of, and a continuation of, the scheme devised by Bulfin. 

1. As far as the Winter mortgage transaction is concerned, Bulfin’s role in relation to it was not different in substance from that which he performed in respect of the Quinn and Feingold mortgages.  He was obviously closely involved with Lewer in relation to the transaction.  That is evidenced from, inter alia, the letter he wrote to Winter on approximately 18 June 1997 which reflects the change in the trustee of Lewer’s family trust.  Information as to the change can only have been given to him by Lewer, probably for the purpose of pursuing the Winter loan.  It is also apparent that Lewer was well aware that Bulfin had approached Winter for the loan and that he approved the terms on which these moneys were to be lent.  The security documents were sent by Winter to the appellant but care of Bulfin and it was Bulfin who delivered them to the appellant and Lewer for execution.  Again, it was Bulfin who returned the executed documents to Winter.  That Lewer was well aware that Bulfin was acting effectively on his behalf in relation to all the administrative aspects of the transaction can also be gleaned from the lack of any reaction from Lewer to the terms of Winter’s letter of 17 July 1997 to the appellant (which was seen by Lewer), which refers to Bulfin acting on the appellant’s behalf in relation to the delay in the settlement of the transaction, a request for which had previously been communicated by Bulfin to Winter on behalf of the borrowers.  Furthermore, as was the case with the two earlier settlements, Bulfin collected the relevant cheques apparently on behalf of the borrower at (or, on one view, shortly after) the settlement of the Winter transaction.  Again, neither Lewer nor his sister attended the settlement and, given Bulfin’s previous and continuing role in the transaction on behalf of Lewer, the clear inference is, we think, that he was there with the authority of Lewer. 

1. Thus, in our opinion, Bulfin’s role as mortgage broker included acting on behalf of Lewer in respect of all administrative matters relating to each of the mortgage transactions that were entered into as part of the scheme promoted by Bulfin, which had been accepted by Lewer.  Bulfin’s conduct included attending settlements and receiving the moneys advanced on behalf of Lewer who, in turn, was well aware that Bulfin was performing these tasks on his behalf and, in the circumstances, acquiesced in that conduct. 

1. It follows, in our view, that the trial judge was entitled to find Bulfin had implied authority from Lewer, inter alia, to receive the net proceeds of the Winter loan.  That Bulfin acted fraudulently before and after the receipt of those moneys does not, in the circumstances of the present case, detract from his implied authority so to act on behalf of Lewer, and thus on behalf of the appellant. 

1. Consequently, we are of the view that the appeals should be dismissed.

BATT, J. A.:

1. From a practical point of view the real question in each of these appeals is which of two innocent parties is to bear the financial loss resulting from the fraud and forgery of one Keith Bulfin, a fraudster who at the time of the trial was, and is probably still, serving a substantial sentence of imprisonment for a number of serious offences of dishonesty.  In legal terms the critical question is whether Bulfin had the authority of the appellant mortgagor Shirley Yvonne Cousens (“the appellant”) to receive from the respondent mortgagee Grayridge Pty. Ltd. the net amount of the moneys which it had been agreed should be lent by the respondent to the appellant on the security of a mortgage over land at Frankston and the repayment of which the appellant Hillside Way Pty. Ltd. (“Hillside”) had guaranteed.  I have not found the resolution of the legal question easy. 

1. At all material times the appellant has been the registered proprietor of land situate at and known as 50 Warringa Road, Frankston.  Her brother, Gary John Lewer (“Lewer”), and his wife, Katherine Macdonald (“Macdonald”), lived there.  The land was an asset of Lewer’s family trust, the Lightning Enterprises Trust, which was constituted by a deed of trust dated 14 October 1994.  The appellant became the registered proprietor in virtue of her being the trustee of that trust.  By deed dated 19 June 1997 she retired as trustee and was replaced by Hillside, but the land has not yet been transferred to Hillside. 

1. Lewer, a commodities dealer conducting his business from his home, “had a need to generate some cash” because he was facing “a reasonable tax problem” arising from alleged understatement of income over ten years.  Through a finance consultant he was referred to Bulfin in 1997.  The trial judge found that Lewer dealt with Bulfin upon the basis that Bulfin was an arranger of finance and an investment adviser.  Bulfin and Lewer met in Brighton and discussed “ways and means of generating a fair profit”.  Lewer told Bulfin that he had an unencumbered property and that its value was about $650,000.  A week or so later they met again and Bulfin outlined a business scheme involving the purchase of a meatworks to supply the Hungry Jack’s/Burger King restaurant chain with beef.  Essentially the scheme involved investing in a meatworks called “Gillara” and in a Hungry Jack’s franchise.  Bulfin suggested that the land at Frankston be used to facilitate mortgages – “to take mortgages over the property and use the funds to invest”.  Lewer said in evidence that Bulfin told him that “the sky was the limit, the more the better” and he agreed.  Bulfin said that initially an investment would be made in a company known as 74 Manly Pty. Ltd., which was looking to borrow $155,000 at 14 or 15 per cent interest, and that “after three months a $20,000 cash back return including the principal” would be made, which Lewer explained as meaning “a lump sum of $20,000 profit would be made at the end of three months.”  It seems that 74 Manly Pty. Ltd. was to invest in a Hungry Jack’s franchise.  Lewer said in evidence that Bulfin proposed “that there would be a couple of others along similar lines and probably including Gillara, which was the meatworks; that was supposed to be the big one.” The trial judge found that Lewer was enthused by the business arrangement proposed by Bulfin and embraced the proposal to mortgage the land and invest the mortgage advance in the meatworks venture.

1. In mid-June Bulfin wrote to S.V. Winter & Co., solicitors, seeking a loan of $190,000 for a term of 12 months on the security of a second mortgage over the Frankston land.  Bulfin and Mr. Winter, an experienced solicitor specialising in mortgages, had dealt with each other on three previous occasions, once when Bulfin himself borrowed money from a client of Mr. Winter and twice when the borrowers were clients of Bulfin.  Bulfin’s apparently undated letter did not disclose the name of his client, but it did state that the land was owned by a family trust, Lightning Enterprises, whose trustee was Hillside, the sole director of which was Lewer of 50 Warringa Road Frankston.  The trial judge inferred from the letter that Lewer had recently informed Bulfin of the details of the change in trustee.  Since that change did not occur until 19 June 1997 and since Mr. Winter’s response to Bulfin’s letter was dated 19 June, his Honour inferred that Bulfin’s letter was likely to have been written on or about 19 June 1997.[12]  From the contents of the letter his Honour further inferred that Lewer was privy to the approach made to Mr. Winter for a second mortgage and that Bulfin was expressly authorised by Lewer to act as mortgage broker on behalf of the appellant, the registered proprietor.  (That Lewer could act on behalf of the appellant and make arrangements binding her is shown by the facts that she was a bare trustee of the land, that it was his matrimonial home, and that in relation to it she was accustomed to do whatever her brother told her to do.)  In his letter of 19 June Mr. Winter wrote to the appellant, care of Bulfin, offering to lend $190,000 for one year at 15 per cent per annum interest.  Security was to be a registered second mortgage over the land and mortgage insurance.  The letter required the appellant, if agreeable to the offer, to sign an acceptance and an application for mortgage insurance.  On 25 June 1997 the appellant (the judge found) signed the acceptance document and the next day she signed an application for the issue of a mortgage guarantee policy.  On 7 July 1997 Mr. Winter wrote to the appellant enclosing twelve documents for her attention in relation to the proposed second mortgage advance by the respondent of $190,000 for a period of one year at 15 per cent interest.  The letter and enclosures were hand-delivered to the appellant by Bulfin.  On 9 July she signed the documents that required to be signed by her and Bulfin returned them to Mr. Winter’s firm on or after 14 July.  One of the documents was the mortgage to the respondent.  It was signed by her in the presence of an independent solicitor, Mr. Bernard Davis.  It was executed also by Lewer on behalf of Hillside as guarantor in the presence of another independent solicitor.[13]

   [12]Mr. Winter’s response refers to a letter from Bulfin “dated 18th June”.  There was no such letter in evidence, but it seems virtually certain that Mr. Winter was referring to the apparently undated letter.  Presumably, Mr. Winter ascertained Bulfin’s client borrower’s name in a telephone conversation.  His shorter letter of the same date to Bulfin suggests such a possibility. 

   [13]The guarantor’s obligations are contained in clause 28 of the Memorandum of Common Provisions.

1. A deed dated 14 July 1997 was executed between the appellant as borrower, the respondent as lender and Hillside as guarantor.  The appellant signed the deed in the presence of Mr. Davis and her brother.  Clause 3 recorded that the lender (the respondent) had agreed to lend to the borrower (the appellant) the principal sum of $190,000, and continued:-

“... and the Borrower hereby acknowledges that it has on the date hereof received payment of the Principal Sum from the Lender or the principal sum has otherwise been paid in accordance with its authorisation.”

On no view was that acknowledgment correct:  if the respondent advanced moneys under the mortgage to the appellant, that did not occur until 25 July 1997.  Mr. Winter said in cross-examination that he did not rely on that clause. The deed of loan also provided that the respondent should not be under any obligation to lend any money to the appellant unless and until any collateral security the respondent required had been effectively given to it.  The collateral security specified in the schedule to the deed included a registered second mortgage over the Frankston land.  Logically, therefore, it would seem that, whether or not it did so, the execution of the deed, “the primary document” according to Mr. Winter, should have preceded the execution of the mortgage.

1. In a letter dated 17 July 1997 posted to the appellant Mr. Winter, after completely identifying the transaction, said:

“On instructions received from Keith Bulfin acting on your behalf[14] that settlement would be effected on 10 July 1997 we received the principal sum from our client.  We now understand ... that settlement is unlikely to take place until next week. 

Accordingly we advise that our client requires interest on the principal sum as from 10 July 1997, which sum pursuant to the Loan Agreement is payable from the principal sum at settlement.” 

The appellant said in evidence that she did not recall receiving the letter and that, if it was posted to her, she would have forwarded it to her brother.  The trial judge was satisfied that she did receive it, but considered it unlikely that she gave it much attention.  He found, however, that when Lewer received it from the appellant he probably read the contents and understood the import of the passage quoted.  Lewer did not communicate with Mr. Winter before settlement and the judge inferred that by his silence he approved the instructions given by Bulfin. 

[14]Emphasis supplied.

1. Settlement or, seemingly, partial settlement of the mortgage transaction took place at the office of the Law Institute on 25 July 1997.  It was attended by a titles office clerk employed by S.V. Winter & Co., a representative from Quinn & Quinn (the solicitors for the first mortgagees, whose mortgage was being discharged), and a representative from Feingold Partners (whose clients, till then second mortgagees, were to become the first mortgagees and were advancing a further $155,000, which, subject to minor prior disbursements and a minor retention, was to be applied towards discharge of the existing first mortgage).  His Honour said that it was also attended by Bulfin, purporting to represent the mortgagor and guarantor; but there appears to be no evidence of this, and the unchallenged evidence of Mr. Winter that, after settlement, he saw Bulfin collect from his secretary at his office the two critical bank cheques next mentioned, if not inconsistent with his Honour’s statement, at least points very strongly against its accuracy.  Bank cheques for $156,943.76 in favour of the Australian and New Zealand Banking Group Ltd. and $4,368.36 payable in favour of Lander & Rogers had been obtained by Mr. Winter in anticipation of settlement.  At the Law Institute a cheque for $14,322.16 was handed by his clerk to Quinn & Quinn’s representative and one for $100 to Feingold Partners’ representative for attending the settlement and making the duplicate title (upon its release by Quinn & Quinn) available to enable registration of the mortgage in favour of the respondent.  S.V. Winter & Co.’s legal fees of $2,156, a procuration fee of 1.5 per cent of the principal sum, namely $2,850[15], and interest on the loan from 10 July to the date of settlement, being $1,639.72, were deducted by Mr. Winter’s firm from the principal sum.  Following settlement, Mr. Winter paid $5,720 for the mortgage insurance premium to an insurer and, he said, $2,000 to Bulfin for his brokerage fee.  Those amounts had likewise been deducted from the principal sum.  The total of all the amounts mentioned is $190,100.  His Honour thought that Bulfin’s brokerage fee was 1 per cent of the principal sum, that is $1,900, not $2,000, and that Winter was probably mistaken about the amount of the fee paid to Bulfin.  But the explanation lies rather, it seems to me, in Mr. Winter’s evidence that the production fee of $100 was already allowed for in his fees of $2,156.  On that basis, the two bank cheques above-mentioned represented the net amount of the principal sum that was available to the borrower. 

   [15]The acceptance, signed by the appellant and dated 25 June 1997, of the respondent’s offer of finance stated that a cheque for $2,850 was enclosed in payment of fees.  But there was no double payment.  For Mr. Winter did not receive such a cheque and Bulfin told him to deduct the fee from the advance. 

1. As already mentioned Bulfin collected the two bank cheques from Mr. Winter’s secretary.  Mr. Winter instructed his secretary to obtain a receipt for them.  Bulfin signed a receipt dated 25 July 1997 for the two bank cheques received from Winter “pursuant to an authority from Shirley Yvonne Cousens”.[16]  Bulfin came to receive the cheques, and the “authority” referred to came into existence, in the manner set out in the next three paragraphs. 

   [16]The receipt does not appear to have been tendered below, but his Honour in making the finding set out verbatim in the text above, and Mr. Winter, each referred to the page of the Court Book at which the receipt was to be found.

1. One of the documents sent by Mr. Winter to the appellant and signed by her on 9 July was an “Authority to Complete, Acknowledgement and Disbursement Authority” addressed to S.V. Winter & Co. and the respondent.  The document authorised them to complete the security documents and make any amendments required to obtain registration.  The document also authorised and requested them to disburse the principal sum of $190,000 as follows:

“TO:  Grayridge Pty. Ltd. – Interest in advance pursuant 

to 8a Loan Agreement.  Being 10/7/97 to 31/7/97      $1,639.72

TO:  S.V. Winter & Co, as per account  $2,156.00

TO:  S.V. Winter & Co – 1.5% Procuration fee  $2,850.00

TO:  Mortgage insurance premium  $5,720.00

TO:  Balance as Mortgagor Directs  $179,274.00.”

Those sums were totalled as $190,000.  In the entry relating to interest the figure “10” in the first date and the amount of interest were handwritten.  The expression “8a” is a reference to item 8(a) of the schedule to the deed dated 14 July 1997, by which, as part of the borrower’s agreement to pay interest on the principal sum at the rates specified, the first interest payment “from the date hereof” to the end of the current month was to be paid in advance “on the date hereof”.[17]  His Honour observed, correctly with respect, that obviously, when the document was prepared, interest had not been calculated or inserted in it and that without interest the balance of $179,274 was correct.  When interest is deducted the balance is in fact $177,634.28.

[17]The deed was of course not dated until 14 July, presumably because it was not received by Mr. Winter, executed by the appellant and Hillside, until that date.  The commencing date of 10 July for the calculation of interest is in fact referred to in the letter to the appellant of 17 July already mentioned.

1. A further document in the form of a handwritten letter dated 9 July 1997 addressed to Mr. Winter and purporting to be signed by the appellant was received by him with the rest of the mortgage documents.  It was common ground at trial and on appeal that the signature “S.Y. Cousens” on the letter was a forgery, almost certainly perpetrated by Bulfin.[18]  Indeed, as his Honour said with the support of the statement of a forensic expert tendered on behalf of the appellant and Hillside, the letter appeared to have been written by Bulfin because the same ink was used to write the signature as was used to write the body of the letter.  The letter was in these terms:

   [18]There were two other documents in which, his Honour found, Bulfin had forged the appellant’s signature.  Bulfin had, he said, probably handwritten the documents themselves.  One purported to be a Statement of Income and Expenditure of the “Lightning Ridge Trust” [sic], the other to be a Statement of Assets and Liabilities of the “Lightning Ridge Trust” [sic].  The appellant denied signing them and disputed the accuracy of their contents.  The documents had been prepared by Bulfin for the purposes of the mortgage guarantee insurance.  They falsely inflated the income and the assets of the Trust and misrepresented the nature of its business.  They were received in good faith by Mr. Winter on 27 June.  The first-mentioned document was dated 27 July 1997, whilst the second was dated 27 June.  From Mr. Winter’s evidence and the chronology of events it is clear that the first document was misdated.

“Please arrange the following cheques from the second mortgage amount provided.

Quinn & Quinn solicitors   $50,000.00

K.W. Bulfin   $2,000.00

Lander & Rogers   $4,368.36

Australia & New Zealand Banking Group          $122,905.64

I hereby authorise Mr. Keith Bulfin to collect the cheques on my behalf. 

Yours Faithfully

S.Y. Cousens.”

The total of the amounts of the four cheques requested equalled the “Balance as Mortgagor Directs” in the Disbursement Authority of the same date, $179,274.00.  Like the Disbursement Authority, the letter did not allow for the deduction of interest of $1,639.72.

1. Mr. Winter in good faith accepted the forged letter as a genuine authority from the appellant.  On the day before settlement Feingold Partners’ settlement clerk contacted Mr. Winter and told him that settlement was going to be done in a different way and that the cheque from his firm in favour of Quinn & Quinn was to be reduced to $14,322.16 and the cheque in favour of the bank to be correspondingly increased to $156,943.76.  Mr. Winter telephoned Bulfin and asked him whether that change was in order and he said that it was. 

1. Both Lewer and the appellant denied in evidence that Bulfin had authority to receive the net advance accounted to them for the two bank cheques he received.  In her counterclaim the appellant pleaded that no moneys had been advanced to her pursuant to the deed, that no moneys were secured by the mortgage and that she was not indebted to the respondent.[19]  It was also pleaded that the moneys had been paid otherwise than in accordance with her directions. 

   [19]It was later accepted that the disbursements listed in the Disbursement Authority dated 9 June 1997 and signed by the appellant constituted a small exception.

1. Not surprisingly, since they were not his clients, Mr. Winter had no communications, written or oral, with the appellant or Lewer.  He said in cross-examination that he had an authority that the cheques would be picked up by Mr. Bulfin, “and that’s what I acted upon and I also obtained from Mr. Bulfin a receipt for those cheques.”  He had earlier said in cross-examination that he relied on the written instructions contained in the forged letter of 9 July and the subsequent “direction” (as he termed it) from Bulfin that it was in order to change the amount of the cheques payable to Quinn & Quinn and to the bank.  Towards the end of his cross-examination he agreed that his assertion that he was authorised to act upon Bulfin’s instructions was based solely upon what Bulfin told him about his occupation (namely, that he was a mortgage broker).  At the time of the subject transaction Mr. Winter was aware that Bulfin was a bankrupt.  Mr. Winter in addition heard on the radio or read in a newspaper that Bulfin had been charged with the offences for which he was subsequently imprisoned.  Bulfin told him what the charges were about and that he was going to plead guilty.  Mr. Winter was unable to say, and the evidence did not show, whether that conversation was before or after the subject transaction was completed.  He did, however, say that he thought it occurred when Bulfin was in his office either delivering documents or picking documents up.  The evidence does not affirmatively show any reason for Bulfin to be doing either of those things after the completion of the subject transaction.  That suggests that it occurred before the completion of the transaction.  On the other hand, it seems that the charging of Bulfin was not reported until September 1997.  I may say immediately that I do not think that Mr. Winter’s knowledge of Bulfin’s bankruptcy or (if he had it at the time) of his criminality assists in the resolution of the legal question posed in this appeal. 

1. For the purpose of assisting in determining whether Bulfin was agent for the appellant in the subject transaction and, if so, the terms of that agency, his Honour received, subject to objection on behalf of the appellant and Hillside, evidence of three mortgage transactions relating to the Frankston land earlier in 1997 in respect of which the appellant was the mortgagor and Bulfin was, allegedly, a mortgage broker acting as the appellant’s agent.  Having reserved his decision, in the course of his reasons his Honour said that he was “now satisfied” that the evidence was relevant in the proceedings before him.  He continued:

“A business relationship between Bulfin and Lewer commenced in or about March 1997, shortly before the Quinn mortgage was registered, and continued up to, and possibly beyond, the date the Winter mortgage was registered.  In order to determine the nature and scope of the relationship between Bulfin and Lewer or Bulfin and Cousens when the Winter mortgage was registered in July 1997 it is necessary to understand the nature and scope of the relationship between March and July.  The evidence revealed that the first and second transactions were strikingly similar and Bulfin played a leading role as mortgage broker in each transaction.  In relation to the Winter mortgage the transaction was different to the first and second transactions in that Bulfin tendered at settlement a written document ... containing a forged signature of Cousens.  The document purported to authorise Bulfin to collect cheques on Cousens’ behalf.”

His Honour stated that he would take into account the evidence touching all the transactions, saying that the role of Bulfin between March and July 1997 was relevant to the issue of agency raised in the two proceedings before him.  Later, under the heading of the consequences of forgery by an agent his Honour recapitulated the evidence of agency, saying that shortly before the Quinn mortgage Bulfin had express authority from Cousens and Lewer, or from Lewer who was acting for and with the approval of Cousens, to (amongst other things) attend settlement and to receive the money advanced and to invest it in a Hungry Jack’s restaurant and/or a meatworks.  The authority, his Honour said, was conferred orally, in general terms and by implication.  The evidence also supported, his Honour stated, a finding that Bulfin had apparent authority from Lewer and Cousens.  Amongst the factors which his Honour considered made it apparent to Quinn & Quinn that Bulfin was authorised to act as agent for Cousens, Lewer and Macdonald was the circumstance that Bulfin and not Cousens and Lewer attended settlement.  His Honour then said:

“The same considerations apply to the Feingold mortgage and the Winter mortgage.  The three mortgage transactions were closely connected both in time and purpose and the same persons were involved – Bulfin, Cousens, Lewer and Macdonald.  Macdonald was involved in the Quinn and Feingold mortgages, Cousens and Lewer in the three mortgages.  Moneys were obtained from mortgages for the purpose of business investments and Bulfin was the mortgage broker in each instance.”

His Honour rounded off this portion of his reasons by saying that from the evidence of similar facts one might reasonably conclude that Bulfin was the authorised agent of Cousens and Lewer throughout the relevant period. 

1. The three transactions have already been mentioned incidentally, but it is now necessary to consider them in more detail.  The first concerned a loan of $155,000 made by Quinn & Quinn on behalf of three lenders on the security of the first mortgage over the land (“the Quinn mortgage”).  The instrument of mortgage was dated 23 April 1997.  His Honour concluded that, as a consequence of the facts referred to in para.18 above, a relationship of agency was created between Lewer and Bulfin by express agreement.  So much may be accepted.  It is the terms of the agency that require investigation.  The appellant said in evidence that on a date she could not remember Lewer told her that he was looking at an investment in Hungry Jack’s and that she would be needed to come down and sign some “papers” or some “mortgage papers”.  Subsequently, Lewer drove her to the offices of Marks and Davis, solicitors, where she met Bulfin and signed a number of documents in the presence of Mr. Davis as an independent solicitor.  Those documents were for the purposes of the Quinn mortgage and of investing the advance of $155,000 in 74 Manly Pty. Ltd. by way of a loan to it.  That loan was to be made by Macdonald, to whom apparently the appellant, without any documenting of the loan, was to lend the advance under the Quinn mortgage.  The borrowing for the purpose of making a loan to 74 Manly Pty. Ltd. was the first transaction that Bulfin proposed to Lewer as mentioned in para.18 above.  The appellant said in evidence that she never authorised Bulfin to give directions as to what should happen to the cheques representing the moneys borrowed on the Quinn mortgage.  His Honour doubted that she had applied her mind to how the advance would be made or who would receive it, for she relied upon her brother.  She believed that as trustee “she was there for signing purposes”.  She was inexperienced in business matters and the financial investment proposed by Bulfin to Lewer was of no concern to her.  The only documents tendered in evidence in relation to the Quinn mortgage were the mortgage itself and a deed dated 7 March 1997 between 74 Manly Pty. Ltd. as borrower and Macdonald as lender.  That deed is extremely poorly drafted[20] and conferred little security upon the lender.  Under it the borrower agreed to pay interest monthly at the rate of 12 per cent per annum and to repay the principal sum at the expiration of six months.  Repayment was to be made by the issue of shares in the float of a company called Beekay Ltd. to the value of $175,000 “from the entitlement of the borrower”, but in the event that the float of Beekay Ltd. was not completed before the repayment date a cash repayment of $175,000 was to be made by the borrower.  As his Honour said, that differed from what Bulfin had originally proposed.  His Honour said that at the settlements of the Quinn mortgage, the Feingold mortgage and the instant mortgage the appellant and Lewer were absent.  That seems correct.  He then said that Bulfin represented the mortgagor “as is usual when a mortgage broker is involved”.  As will appear, I do not consider that statement entirely accurate. When Lewer was asked whether anyone authorised making the advance to 74 Manly Pty. Ltd. he said in evidence that a disbursement authority (scil., to that effect) signed, he thought, by the appellant was given to Quinn & Quinn. 

   [20]Even Macdonald’s first name and surname were misspelled in it.

1. His Honour expressed his conclusions as to the Quinn mortgage as follows:

“I find that Lewer and Cousens gave express authority to Bulfin to find a person willing to advance a substantial sum on the security of the said land, to arrange the terms of a loan of $155,000, to arrange for the appropriate persons to execute documents for and on behalf of the mortgagor, to attend the settlement on behalf of the mortgagor, to receive the money advanced and to invest the advance in 74 Manly Pty. Ltd. ... Bulfin did everything he was expressly authorised to do as agent for Cousens and Lewer.”

His Honour said that evidence in support of those findings was found in the documents referred to, the evidence of the appellant, Macdonald and Lewer and inferences which might be drawn from the evidence.  He placed no reliance upon Bulfin’s evidence other than his statement that he had received a broker’s fee for arranging for moneys to be borrowed on the security of the Frankston land.  His Honour concluded this section of his judgment by noting that there was apparently a dispute on foot between 74 Manly Pty. Ltd. and Macdonald and Lewer.[21] 

[21]Views on the facts expressed in these reasons naturally will not bind the parties to that dispute, if still extant.

1. The critical words in his Honour’s finding concerning Bulfin’s authority in relation to the Quinn mortgage are that Lewer and the appellant gave him “express authority” to “attend the settlement on behalf of the mortgagor, to receive the money advanced and to invest the advance in 74 Manly Pty. Ltd.”.  The evidence on the question of authority is scant, but, since someone must have received the net advance from Quinn & Quinn and neither Lewer nor Cousens attended settlement whether personally or by a solicitor, I am not satisfied that his Honour’s critical finding is incorrect, save that this part of Bulfin’s authority, whilst actual, would seem on the evidence to be implied rather than express.  I shall later consider whether the evidence is admissible as evidence of a similar fact. 

1. The second earlier transaction concerned a loan of $175,000 made by Feingold Partners, solicitors, on behalf of two lenders on the security of the second mortgage over the Frankston land (“the Feingold mortgage”).  The instrument of mortgage was dated 23 May 1997.  His Honour, referring to discussions between Lewer and Bulfin, said that he was satisfied that Lewer was prepared to use the Frankston land to raise more capital to invest in a venture such as the Gillara meatworks with “an influential individual”.  Lewer trusted Bulfin and was more than content to continue the authority given to Bulfin to borrow more money for investment purposes.  His Honour stated that the Feingold mortgage was arranged in a strikingly similar manner to the Quinn mortgage by Bulfin, “the only significant difference being the absence of a credible investment document.”  On this occasion, his Honour said, the advance was paid to NVJ Pty. Ltd., a Bulfin company, on the authority of Macdonald and the appellant.  It is not necessary to try to discover the complete history of the negotiation of this mortgage.  The following suffices.  The appellant visited the offices of Marks and Davis on 9 April and 16 May 1997 for the purpose of executing a number of documents in connection with it.  On each occasion Bulfin and Macdonald were present.  The appellant said that she did not discuss the new mortgage loan with Lewer.  She was, she said in evidence, “purely there to sign”.  In a statutory declaration for the Consumer Credit Code made on 16 May 1997 the appellant wrote the word “Investment” as the particular purpose for which the credit was being provided.  Below that word, in handwriting, possibly that of Bulfin, were added the words:  “The funds are to be invested into shares in Hungry Jack’s and meat processing works for Burger King”.  The appellant signed the mortgage as mortgagor in the presence of Mrs. Christine Marks as independent solicitor and Macdonald also signed it as guarantor in Mrs. Marks’ presence.  His Honour found that on the occasion of their second visit to the office of Marks and Davis Macdonald had signed, and the appellant had signed as witness, a handwritten document dated 16 May 1997 in relation to the Feingold mortgage.  The document was only part of Ex.A, but I shall follow his Honour in calling it Ex.A.  It was addressed to the relevant partner of Feingold Partners and the body of it read:

“Please pay the sum of $175,000 less my legal fees to NVJ Pty. Ltd. (a company owned by Nicholas John Bulfin of 23 Seymour Grove Brighton). 

Thank you.”

Macdonald and the appellant admitted their signatures but claimed that the handwriting above their signatures was added later.  His Honour found to the contrary.  In relation to the Feingold mortgage Feingold Partners received a letter dated 22 May 1987 [sic] purportedly signed by Nick Bulfin on behalf of NVJ Pty. Ltd. and bearing that company’s seal.  The body of it read:

“Please pay the following amounts on my behalf. 

$25,000.00  J.M. Smith & Emmerton

$25,000.00  David  Tonkin & Associates

The balance to E.R. Bulfin.

Thank you”

The letter appears to me to be in the hand of Bulfin, but the description of the exhibit (“from Nick Bulfin on behalf of NVJ Pty. Ltd.”) shows that the signatory was accepted as being Bulfin’s son, Nicholas.  Certainly there appears to have been no dispute below that that was so.  It seems to me, therefore, that his Honour was in error in describing the letter as “signed by Bulfin”.  It would seem that E.R. Bulfin was Bulfin’s wife, for the latter’s name was Elizabeth. 

1. Settlement of the Feingold mortgage took place in the absence of Lewer, the appellant and Macdonald.  His Honour inferred that Bulfin was present and received the amount advanced less fees and other disbursements “pursuant to Ex.A”.  The appellant and Lewer said in evidence that, whilst they were aware that a lender had been arranged for $175,000 and that documents executed by the appellant, Macdonald and Lewer were for a second mortgage, they were unaware that the advance had been “drawn down”.  They denied that Bulfin or NVJ Pty. Ltd. had authority to receive the amount advanced less fees etc.  But, his Honour said, Ex.A showed otherwise.  His Honour relied on a letter dated 26 May 1997 from Feingold Partners posted to the appellant at her private address as contradicting her claimed lack of knowledge of the “draw down”, for the first two paragraphs indicated that settlement of the Feingold mortgage had been effected on Friday 23 May 1997 by advancing the sum of $175,000.  His Honour did not accept that the appellant did not read and understand the letter, and found that both she and Lewer were aware before the end of May that Bulfin had completed the second mortgage transaction and had received the amount advanced less fees etc.  He said that it was “unarguable that Feingold advanced moneys to Bulfin pursuant to the Feingold mortgage on 23 May 1997.”  His Honour continued:

“I find that Bulfin had express authority from Lewer and Cousens in about March 1997 to find another person willing to lend a substantial amount on the security of the said land, to arrange the terms of the loan, to arrange for the appropriate persons to execute documents for and on behalf of the mortgagor, to attend the settlement on behalf of the mortgagor and to receive the money advanced. 

I am satisfied that Lewer expressly authorised Bulfin in March or April 1997 to continue to find mortgage lenders for the purpose of raising capital on security of the said land for investment in Hungry Jack’s and Gillara and that Cousens agreed in the decision of Lewer.  The authority given to Bulfin in March or April was of a continuing kind.  ...  Lewer never concerned himself in the detail of the transactions.  ...  Lewer was acting in his own interests and Cousens was his puppet simply signing the document put before her.”

1. The judge concluded this section of his reasons by saying that it seemed likely that Bulfin had wrongly taken the proceeds and used them for his own purposes.  His Honour had earlier mentioned that there was on foot in the Court a proceeding between the appellant and the mortgagees under the Feingold mortgage (as varied as discussed below) in which the appellant was denying that the varied principal sum had been advanced to her and denying that she was in default of any obligation under the deed of variation of mortgage.[22] 

   [22]Again, views on the facts expressed in these reasons will naturally not be binding in that proceeding, if still extant.

1. The question is whether his Honour’s critical finding that Bulfin had express authority from Cousens to attend the settlement of the Feingold mortgage on her behalf and to receive the money advanced is shown by the evidence to be incorrect.  In considering that I accept as correct his Honour’s finding, challenged on appeal but dependent on his assessment of credibility, that the body of Ex.A was completed before Macdonald and the appellant applied their signatures to the sheet of paper and I assume that his Honour’s inference that Bulfin was present at settlement and received the amount advanced less fees and other disbursements is correct, though, in view of the supervening letter from Nick Bulfin, I do not consider that the receipt was “pursuant to Ex.A”, at least by itself.  I accept too his Honour’s finding that the appellant and Lewer were both aware before the end of May that the Feingold mortgage transaction had been completed.  It may not necessarily follow that they knew that it had been completed by Bulfin or that he had received the amount advanced less fees etc.  But for present purposes I assume knowledge on their part of both those matters.  With regard to his Honour’s statement that it is unarguable that Feingold advanced moneys “to Bulfin” pursuant to the Feingold mortgage on 23 May 1997, the words “to Bulfin” are ambiguous.  They may mean that Bulfin received the cheques payable to others or that he received cheques payable to or negotiable by himself.  Be that as it may, if Bulfin collected the cheques at settlement he did not, in my opinion, do so as the agent of the appellant.  For, since his Honour rejected evidence that would have made Ex.A a forgery or akin thereto[23], the appellant had at the least made NVJ Pty. Ltd. the authorised payee.  For her attestation was in all the circumstances capable of being construed as amounting to concurrence in the authorisation by Macdonald and his Honour so found.[24]  It might be said in view of the letter from Nick Bulfin on behalf of NVJ Pty. Ltd. that, if Bulfin collected the cheques there mentioned, he was doing so as agent for his wife.  It is not, however, necessary to go so far.  It seems to me that by Ex.A the appellant showed that attendance at settlement on her behalf was not necessary, for she asked that the principal sum be paid to NVJ Pty. Ltd:  she did not merely ask for a cheque payable to NVJ Pty. Ltd. to be produced at settlement.  Since, in my view, Bulfin was not the appellant’s agent to receive the cheques, I consider that his Honour’s abovementioned critical finding is not correct and that the evidence about the Feingold mortgage is not evidence of a “similar fact”.  Even if what I have stated so far is incorrect, the nature of the settlement of the Feingold mortgage is, as it seems to me, not sufficiently similar to that of the settlement of the subject mortgage for the evidence to be admissible as a similar fact.

   [23]If Ex.A were a forgery or akin thereto, I do not think it could be contended that Bulfin’s receipt of the mortgage advance was authorised by the appellant.

   [24]It is true that on Ex.A the appellant’s signature is that of a witness only, but, as Mr. Gurgeil of Feingold Partners explained, Macdonald was the lender in the other half of the transaction and what I might loosely call the “beneficial” borrower under the Feingold mortgage, as he understood it.

1. The third previous transaction relied on by his Honour was the discharge of the Quinn mortgage and a deed of variation of the Feingold mortgage by which the principal sum under that mortgage was increased by $155,000 to $330,000.  The amount of the increase was applied towards the discharge of the Quinn mortgage, thereby making the Feingold mortgage a first mortgage and allowing the rates of interest under it to be reduced.  The discharge and the deed of variation are both dated 28 July 1997.  The deed of variation was signed by the appellant before Mr. Davis as independent solicitor.  It was signed by Macdonald as guarantor before another independent solicitor. 

1. His Honour was satisfied that Lewer and the appellant were aware that $330,000 had been advanced by Feingold Partners on first mortgage and that the loan which had been initially advanced by Quinn & Quinn’s clients had been increased by a further $155,000.

1. In my respectful view, it is clear from the nature of this third prior transaction and from what I have said much earlier that it cannot be treated as a similar fact.  For, since at settlement the cheque for $175,000 (less proper deductions, if any) obtained by Feingold Partners had to be handed to Quinn & Quinn, no question could arise of Bulfin’s receiving or being authorised to receive the $175,000. 

1. His Honour concluded that Bulfin was authorised by the appellant and Lewer expressly (orally) and impliedly, as I understand it, to receive the net moneys advanced by the respondent; that Bulfin also had apparent (ostensible) authority to deal with S.V. Winter & Co. and in particular to receive the net moneys advanced by the respondent; that the appellant was in any event estopped from denying that she received the principal sum from the respondent lender by reason of clause 3 of the deed dated 14 July 1997; and that the appellant, Lewer and Hillside were “bound” by Bulfin’s forgery by reason of the actual and apparent authority conferred on Bulfin.  Leaving aside the sum deducted at settlement for interest, the appellant made no payment of interest to the respondent and in particular did not pay the interest which the deed, to which the mortgage was collateral, provided to be paid on 1 September 1997.  Whether or not it was necessary to do so, notice to pay and notice to quit were served upon the appellant and copies were served upon Hillside.  If the principal sum was advanced to or at the direction of the appellant, that is, if Bulfin was authorised to receive it or to direct its disbursement, there is no dispute but that the respondent was entitled in the Supreme Court proceeding brought by it against the appellant (No.7373 of 1997) to judgment for possession of the Frankston land and to dismissal of the appellant’s counterclaim for a declaration that the mortgage did not secure the repayment of any moneys whatsoever and an order that the respondent deliver up the duplicate instrument of mortgage together with a discharge of it and any duplicate of the certificate of title in its possession, and was also entitled in the proceeding commenced by it against Hillside in the County Court and transferred to the Supreme Court (No.6452 of 1998) to judgment for the principal sum of $190,000 plus interest.

1. I have already referred to the bases on which his Honour concluded that Bulfin was authorised to receive the net amount of the agreed advance (or the appellant was precluded from denying receipt).  I have also earlier summarised Mr. Winter’s evidence as to what factors he relied upon as showing Bulfin’s authority.  But before I set out my conclusions it is desirable also to state how the respondent pleaded its case on the central question and how it argued the case on appeal.  In its amended reply to defence and counterclaim[25] in the proceeding against the appellant (which was adopted referentially in its reply to amended defence in the proceeding against Hillside) the respondent pleaded that Bulfin was at all material times acting as agent for the appellant either pursuant to her “direct” authority or her ostensible authority.  By way of particulars it was said that the appellant had either expressly authorised Bulfin or had held out to the world that Bulfin was authorised on her behalf to negotiate the loan for her; to collect mortgage and loan documentation for her to sign from the respondent’s solicitors; to arrange for a solicitor to execute or witness certain certificates in relation to the transaction; to return the mortgage and loan documentation to the respondent’s solicitors after execution; to communicate her directions as to disbursement of funds at settlement to the respondent’s solicitor; and to attend at settlement on her behalf.  The express authorisation was said to be oral and contained in conversations between the appellant and Bulfin in or about June 1997, the substance of which was that the appellant requested Bulfin to negotiate the loan and to perform the other acts and matters just referred to.  The holding out was said to have occurred when in June and July 1997 the appellant knowingly permitted Bulfin to undertake the steps referred to in all the acts and matters just set out. 

   [25]The document in the appeal book is entitled “Proposed amended reply” etc., but it seems that leave to amend was granted.

1. In the respondent’s outline of submissions to this Court it was said that the forged authority was “to a certain extent a red herring.  It was not this document that Winter relied on at settlement.  It was the phone call from Feingold, as approved by Bulfin, ... on which Winter relied.”  It was put that clearly Cousens and Lewer authorised Bulfin to attend settlement and that that meant “in all probability” that they authorised him to give the settlement figures and obtain the funds at settlement.  He had done so before to their knowledge.  It was also submitted that Winter did not rely on any prior transactions.  The evidence of earlier transactions was, it was submitted, relevant simply because it helped to provide the existence of an actual authority to attend at settlement.  In those circumstances the belief of Winter was irrelevant.  In any event Bulfin had ostensible authority to act in the transaction as agent for the mortgagor and, as broker, to do things, including attending at settlement and receiving cheques, that a broker might normally do.  Clause 3 of the deed was also relied on.  The respondent’s oral argument, whilst much more extensive, was substantially along the same lines.

1. I can now set out my conclusions.  In the course of his reasons his Honour rightly rejected out of hand a contention for the appellant and Hillside that Bulfin was the agent of the respondent.  No more need be said about this.  Nor realistically, was Bulfin the agent of 74 Manly Pty. Ltd. in the Quinn & Quinn transaction.

1. Bulfin was undoubtedly authorised by Lewer (and thus, for reasons already given, by the appellant) to act on the appellant’s behalf to find a lender prepared to advance money on a second mortgage of the Frankston land, to negotiate the terms of the loan and to collect and deliver documents between the appellant and Hillside on the one hand and the lender’s solicitor on the other.  But equally undoubtedly he did not have the full or unlimited authority in the transaction.  Thus, he was not authorised to sign the deed of loan, the mortgage or various other documents the respondent required for either the appellant or Hillside.  Leaving estoppel temporarily aside, the question is, as already stated, whether he was authorised to receive the net amount of the agreed advance.  An agent to negotiate a contract by no means necessarily has authority to receive moneys payable under it.  It is settled law that an agent employed to find a purchaser has no implied authority to receive the purchase money in the sense that a receipt by the agent is a receipt by the principal and will therefore discharge the purchaser:  Petersen v. Moloney[26].  Similarly, even a person who acts as solicitor for a mortgagee in preparing mortgage documents and who holds the security and is authorised to receive the payments of interest on the mortgagee’s behalf is not thereby authorised to receive the payment of the principal moneys without the mortgagee’s actual authority:  Martin v. Diamantikos[27].

   [26](1951) 84 C.L.R. 91 at 95

   [27][1964] V.R. 593 at 597-598

1. I find it convenient to consider first the question of ostensible authority to receive the net advance.  A finding of ostensible authority cannot be based upon the Quinn & Quinn transaction – or indeed the Feingold transactions.  This is because, even if they would otherwise have been sufficient for the purpose, Mr. Winter was unaware of the earlier transactions and did not rely upon them, whereas, for ostensible authority to be made out, the representation of the authority of the putative agent, that is, the holding out of that person as authorised, has to be made to the person contracting or otherwise relevantly dealing with the putative agent and, in addition, the representee must have relied upon the representation:  Crabtree-Vickers Pty. Ltd. v. Australian Direct Mail Advertising & Addressing Co. Pty. Ltd.[28], where Lush, J. applied the principles enunciated by Diplock, L.J. in Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd.[29]; on appeal, Crabtree-Vickers Pty. Ltd. v. Australian Direct Mail Advertising &  Addressing Co. Pty. Ltd.[30], where the principles in Freeman & Lockyer were approved[31] and, although for somewhat different reasons, the decision on ostensible authority was upheld and, more materially, the requirement of awareness of the representation was emphasised[32].  Turning to the subject transaction:  the case for the respondent as particularised was not made out in that, despite some fairly general evidence[33], it was not shown, on my understanding of the evidence, that the appellant “knowingly permitted” Bulfin to undertake the presently relevant steps of communicating her directions as to the disbursement of funds at settlement to Mr. Winter and attending at settlement on her behalf (which, for present purposes, I shall assume includes receiving at Mr. Winter’s office later the net amount of the agreed advance).  For it does not follow simply from the fact that Bulfin took those steps[34] that Lewer for the appellant or the appellant herself authorised him to take them.  The word “knowingly” is critical.  Notwithstanding the above particularisation, I shall consider Mr. Winter’s evidence.  He said that he relied on the written instructions contained in the forged letter of 9 July 1997 and Bulfin’s subsequent “direction” agreeing to the change in the amount of the cheques.[35]  So far as these two matters are relied on as showing ostensible authority, they are insufficient in that the representation of authority cannot be made by the putative agent himself or herself, but must be made by the putative principal or a person proved to be authorised by the putative principal to make the representation:  Crabtree-Vickers[36], which was expressly proved by the High Court[37].  It is scarcely necessary to say of the forged document that by hypothesis it is not a representation or holding out by the appellant[38].  The respondent argued that the forged document was overtaken or superseded by Bulfin’s subsequent “direction” agreeing to Feingold Partners’ proposal and so was unaffected by the forgery.  I doubt that, for the “direction” implicitly adopted the general basis of the forged document, but the point is not of significance.

   [28][1975] V.R. 607 at 614

   [29][1964] 2 Q.B. 480 at 505-506

   [30](1975) 133 C.L.R. 72

   [31]at 78

   [32]at 79-80 and towards the end of 81

   [33]For instance, that Bulfin “basically grabbed the ball and ran with it himself”.

   [34]I do not by this mean to imply that the directions communicated as to disbursement of funds were the appellant’s:  there is no evidence of this.

   [35]Mr. Winter’s letter of 17 July 1997 suggests that he also relied on Bulfin’s earlier instructions that settlement was to be effected on 10 July.  That instruction does not bear on the authority to receive payment at settlement.  In any event, it suffers from the same deficiency as I proceed to identify in the text.

   [36]at (V.R.) 614 and 615

   [37]at (C.L.R.) 78

   [38]See further para.55 and fn 45 below.

1. Since Bulfin did not have ostensible authority to receive the net amount, it is necessary to consider whether he had actual authority.  Actual authority may be express or implied.  As particularised, the actual authorisation alleged by the respondent was express and, more specifically, oral.  There was, however, no evidence of a conversation between the appellant and Bulfin in or about June 1997 in which she requested him to communicate her directions as to the disbursement of funds or to attend at settlement on her behalf (assuming, again, that any such latter request would have included receiving later the net amount of the agreed advance).  Indeed the appellant denied that she had done so.  But, as mentioned, Mr. Winter’s evidence was that he relied upon the forged letter of instructions and Bulfin’s oral direction as to variation of the amounts of the cheques.  The former, however, being forged, is not an authority from the appellant.  Bulfin’s subsequent direction did not purport to be an authority from the appellant but to be authorised by her.  Of such authorisation, however, there was, on my understanding, no evidence. 

1. The question of actual authority to receive the net amount of the agreed advance, then, resolves itself into whether evidence of any similar fact (that is, of a strikingly similar occasion on which Bulfin had actual authority to receive the net amount advanced) was to be taken as showing that on the instant occasion Bulfin had actual authority to receive the net amount of the agreed advance.  For reasons similar to those given by Gummow, J. (when a member of the Federal Court of Australia) in D.F. Lyons Pty. Ltd. v. Commonwealth Bank of Australia[39] I have already indicated that the evidence relating to the Feingold mortgage and to its variation and the simultaneous discharge of the Quinn & Quinn mortgage was, contrary to the trial judge’s decision, inadmissible because the facts shown by that evidence were not “similar” to the fact in issue before his Honour, in that their common characteristics were not significant for the purpose of the inquiry at hand, namely, whether Bulfin had actual authority to receive the net amount of the agreed advance. 

   [39](1991) F.C.R. 597 at 603-607

1. That leaves the Quinn & Quinn mortgage evidence for consideration.  That the party propounding similar fact evidence was unaware of the similar fact at the time does not render the evidence inadmissible[40].  Whether or not Lord Denning, M.R.’s statement in Mood Music Publishing Co. Ltd. v. De Wolfe Ltd.[41] that the evidence propounded, if logically probative or relevant in determining the question in issue, would be admitted “provided that it is not oppressive or unfair ... and also that the other side has fair notice of it” is correct,[42] it was not contended for the appellant and Hillside before us, either in writing or (apart from a statement that the ground of appeal covered unfairness) orally, that the evidence, if otherwise admissible, should be excluded on discretionary grounds.  Accordingly, the ultimate question here, as it seems to me, is whether the proper conclusion from the fact that Bulfin was authorised to receive the net sum advanced by Quinn & Quinn’s clients and invest it in 74 Manly Pty. Ltd. is that he was in the instant transaction authorised to receive the net amount of the agreed advance.  The borrower, the property mortgaged and the broker were the same in both cases and there were “similarities” between them.  But after anxious consideration I have come to the view that that conclusion is not the proper one.  Since there is only one arguably similar fact, no system or established course of conduct is demonstrated.  Moreover, the finding in respect of the Quinn & Quinn transaction is based on inference:  the exiguous evidence relating to that transaction does not show any actual authorisation of Bulfin by Lewer or the appellant to receive the net amount.  Further, since the net amount advanced by Quinn & Quinn’s clients was intended to be passed, at least notionally, to Macdonald and by her lent to 74 Manly Pty. Ltd., since there was already in existence the agreement between Macdonald and that company relating to that proposed investment and, in particular, since Quinn & Quinn were given a disbursement authority in favour of 74 Manly Pty. Ltd., the correct inference is that Bulfin was authorised to receive the net amount of the Quinn & Quinn advance only in the sense of receiving a cheque payable to 74 Manly Pty. Ltd.  Admittedly, even so, a receipt by Bulfin would be a receipt by the appellant and would discharge the purchaser.  But the facts  of that transaction are different from those of the present one:  in the former, unlike the latter, the destination of the balance was controlled and specifically ordained by the appellant in a document signed by her.  In the latter there was wanting a direction as to the balance “by Mortgagor” (or her duly authorised agent).  It is not altogether clear whether the view which I have expressed (that is, that the evidence does not prove the fact to be proved) means that the evidence of the Quinn & Quinn mortgage is inadmissible or, though admissible, is, on a correct finding, insufficient.  In Cross[43] it is stated that similar fact evidence is merely evidence “from which the tribunal of fact is asked to infer the existence of the fact in issue”.  On that basis, the evidence would be admissible but open to be found insufficient.  On the other hand, in Martin v. Osborne[44], a case the reasoning in which Australian courts have treated as applicable to, if not determinative of, questions of similar fact evidence in civil cases, Dixon, J. described the relevant circumstances of which evidence was admissible as those “whose relation to the fact in issue consists in the probability or increased probability, judged rationally upon human experience, that they would not be found unless the fact to be proved also existed.”[45]  If that be the test of admissibility – and subsequent cases have applied the test - then the evidence of even the Quinn & Quinn mortgage was not, on the view I have expressed, admissible.  Whichever be the correct analysis is not important to the outcome of these appeals.  What is important is that, as I see it, it was not proved that Bulfin had express relevant authority. 

   [40]Woodward v. Buchanan (1870) L.R. 5 Q.B. 285

   [41][1976] Ch.119 at 127

   [42]As to which Northrop, J. in Mister Figgins Pty. Ltd. v.Centrepoint Freeholds Pty. Ltd. (1981) 36 A.L.R. 23 at 31 disagreed as regards oppression and unfairness and Cross on Evidence para.[21290] doubts his Lordship’s correctness in regard to notice or surprise. 

   [43]op. cit., para.[21280]

   [44](1936) 55 C.L.R. 367 at 375

   [45]Emphasis added.  Earlier on that page Dixon, J., speaking in the context of a prosecution, stated the requirement to be that, according to the common course of human affairs, the degree of probability that the occurrence of the facts proved would be accompanied by the occurrence of the fact to be proved is so high that the contrary cannot reasonably be supposed.  Evatt, J. at 385 spoke of the task of admeasuring the probability or improbability of the fact or event in issue, if we are given the fact or facts sought to be adduced in evidence.

1. It may be that the evidence of the three earlier transactions was admissible for the purpose of showing that Bulfin was the agent of the appellant, not the respondent.  If so, they would be similar facts for that purpose.  But, even if admissible, for the reasons I have earlier given they did not amount to similar facts for the purpose of the inquiry at hand.

1. Before us Mr. Cook for the respondent sought to avoid any problem concerning similar fact evidence by an alternative submission that what I have so far treated as three previous transactions were all one transaction with the subject transaction, so that the evidence of the dealings with Quinn & Quinn and Feingold Partners was in any event admissible.  He relied on evidence of Lewer to the effect that, as counsel put it, it was all part of one transaction.  Lewer said, for instance, that the Feingold loan was “not another deal or a better deal, it is just an extension of the original”, and he agreed with the proposition that “they are all part of the same transaction”.  No doubt, the borrowing and investing of the funds necessary to produce sufficient profit or income to solve Lewer’s tax problem could for certain purposes be characterised as a single transaction.  It might even be said that Bulfin’s engagement to negotiate loans and find investments was a single one.  But I do not think that vis-à-vis the three sets of lenders it can be said that there was one transaction.  This is shown by the different authority given to Bulfin in respect of the Feingold mortgage.  To put this another way, even if it was all one transaction the variance in Bulfin’s critical authority as regards Quinn & Quinn and as regards Feingold Partners precludes there being any assurance about his critical authority as regards S.V. Winter & Co.

1. I conclude, therefore, that Bulfin did not have express relevant authority. 

1. Finally on the question of authority, it is necessary to consider whether Bulfin had implied actual authority.  I have considered whether the fairly general evidence mentioned earlier shows implied authority to receive the net advance.  But I think not.  In his evidence in cross-examination Mr. Winter did at one point say that his assertion that he was authorised to act upon Bulfin’s instructions was based solely upon Bulfin’s telling him that he, Bulfin, was a mortgage broker.  Having regard to what Bulfin did in the matter, I would be prepared to disregard the hearsay aspect of that evidence and to take as a fact that Bulfin was a mortgage broker.  Although it was not pleaded, it was argued for the respondent on the appeal that as a mortgage broker Bulfin had authority to attend settlement and receive the cheques.  I am inclined to think that, if he did, the authority would be implied, arising from the (asserted) fact that mortgage brokers always, or usually, did those things.  However, the evidence, particularly that of Mr. Peter Bruce Davis, a solicitor, which I have considered but do not trouble to set out, did not, in my view, establish, in accordance with Con-Stan Industries of Australia Pty. Ltd. v. Norwich Winterthur Insurance(Australia) Ltd.[46], a custom or usage that mortgage brokers have their borrowers’ authority to receive the net amount of the agreed advance and in particular to receive it by cheques payable to or negotiable by themselves. The evidence showed, in my view, no more than that in a particular case a mortgage broker might be authorised to receive an appropriate cheque for the net balance of the agreed advance.  But whether that was so or not depended in each case upon specific authorisation.  It was not proved that in every case or nearly every case[47] a mortgage broker (where employed) attends settlement and receives the net amount of the agreed advance.  I therefore conclude, contrary to the trial judge, that it was not shown that Bulfin had the necessary authority by implication. 

   [46](1986) 160 C.L.R. 226 at 236-238.

   [47]For a custom or usage does not have to be universal or without exception:  Con-Stan Industries of Australia at 236.

1. It thus appears to me that Bulfin did not have the necessary authority, whether actual or ostensible, to make the handing to him of the two bank cheques an advance by the respondent to the appellant or “as Mortgagor directs” within the meaning of the Disbursement Authority dated 9 July 1997 and signed by the appellant.  I have been very well aware of the tardiness with which the appellant, Lewer and Hillside raised the contention that there had been no advance to the appellant in response to demands served upon the appellant and Hillside.  I have also been equally aware of the strong criticisms to which the conduct of the appellant, Lewer and Hillside and the evidence of the appellant, Macdonald and Lewer were open[48].  (I shall not further lengthen these reasons by listing the criticisms.)  Nevertheless, what the respondent required was evidence of actual authorisation by Lewer or the appellant of Bulfin to receive the net amount or evidence of the holding out by Lewer or the appellant of Bulfin as so authorised; and the criticisms do not, I think, show or give rise to such evidence, even inferentially.  Mere speculation is of course insufficient.  In the absence of specific authorisation to receive the advance, the strongest way of putting the respondent’s case is to say that Lewer expressly or impliedly left everything relating to borrowings for approved “investments” to Bulfin to do.  But the evidence does not, I think, show this.  Indeed, as regards certain documents, it is inconsistent with it. 

   [48]But I have not departed from any finding of his Honour based on credit.

1. In so far as the appellant’s or Lewer’s conduct may be said to amount to subsequent acceptance of or subsequent acquiescence in the payment to Bulfin, ratification of his unauthorised conduct (assuming it purported to be on behalf of the appellant) was neither pleaded nor argued.  It may be thought unlikely that a principal would ratify dishonest conduct that did or might work against the principal.  It is convenient to note here that the respondent did contend that at least immediately after settlement of the Quinn & Quinn and Feingold mortgages the appellant knew that the advances had been made and knew, directly or inferentially, that they had been received by Bulfin, with the consequence, in effect, that she had conferred authority on him by ratification at least.  But, for the reasons stated earlier, she had already given Bulfin a specific and presently distinguishable authority in the Quinn & Quinn transaction; and, as I have concluded, in the Feingold transaction Bulfin did not receive the proceeds as her agent.  Any express approval was confined to payment to 74 Manly Pty. Ltd. and NVJ Pty. Ltd.

1. As against the criticisms I have been discussing, I draw some comfort for my conclusion on authorisation from the consideration that it is unlikely that Bulfin would have forged a direction to pay and authority to collect cheques if in fact he had authority and could have given the direction himself[49]. 

   [49]This might be inferred hearsay or opinion evidence of Bulfin, but I am not using it to make a finding of fact but simply as an argumentative consideration. 

1. Towards the end of his reasons the trial judge said that in all the circumstances he found that the appellant and Lewer were “bound by Bulfin’s forgery”, as was Hillside.  The appellant and Lewer were bound by Bulfin’s forgery by reason, his Honour said, of the actual and apparent authority conferred on Bulfin.  His Honour then said:

“The transaction was completed with the actual or apparent authority of Lewer and Cousens and the principal is liable for the fraud of their agent acting within the scope of his authority, whether the fraud is committed for the benefit of the principal or for the benefit of the agent.”

Since I consider that Bulfin did not have relevant authority, whether actual or apparent, the principle cited by his Honour is inapplicable, but I desire to make some further comments.  It is true that one of the three cases cited by his Honour[50] is authority for the principle his Honour relied on.  But, even on his Honour’s view on authorisation, I do not think that the principle applies.  The principal (the appellant) was not being sued for a fraud committed upon the respondent plaintiff, but for moneys said to have been advanced to the principal, that is, in essence for breach of contract.  If the agent was authorised to receive the money, then there had been an advance to the principal.  It is only in that respect that authorisation is relevant.  The other two cases cited at this point by his Honour[51] are not authority for the principle he invoked.  Rather, they show that, in the absence of holding out a document forged by an agent purportedly in the name of the principal, of which the principal is unaware, does not bind the principal:  it is a nullity.  They thus show, in my respectful opinion, that it is not correct to speak of the appellant and Lewer or Hillside being “bound by [the] forgery”.  Those persons might, if a different view to mine were taken on the question of authority, be held liable to the respondent, but not because they were bound by the forgery. 

[50]Lloyd v. Grace, Smith & Co. [1912] A.C. 716

[51]Ruben v. Great Fingall Consolidated [1906] A.C. 439 and Northside Developments Pty. Ltd. v. Registrar-General (1990) 170 C.L.R. 146 at 193

1. It becomes necessary to consider his Honour’s decision upholding the alternative basis of the respondent’s claim against the appellant, namely, estoppel by virtue of clause 3 of the deed of 14 July 1997[52].  As at that date no money had been advanced and Mr. Winter knew the acknowledgment in the clause to be untrue.  But, subject to what follows, it is clear that at common law the appellant[53] is by that clause precluded from denying receipt of the principal sum or its payment in accordance with her authorisation:  Greer v. Kettle[54].  Estoppel by deed is not confined to statements in recitals but applies also, and indeed originally applied only, to statements in operative provisions:  Coke on Litt (1832 edn., vol.2) 352(b); Greer v. Kettle per Lord Maugham[55] and, for instance, Helmich & Taylor v. Thorp & Strathdee[56].  If estoppel by deed is now properly to be considered as a form of estoppel by convention (as Sir Alexander Turner may be said to have demonstrated[57]), then it may be that even at common law no estoppel arose here, for there is no estoppel by convention unless it can be shown that the alleged assumption has in fact been adopted by the parties as the conventional basis of their relationship (Con-Stan Industries of Australia[58]) and here the alleged assumption that by 14 July 1997 the principal sum had been received by the appellant or otherwise paid in accordance with her authorisation was not adopted by the parties as a basis of their relationship since Mr. Winter on behalf of the respondent and Bulfin (assuming that he can be said to have had authority from the appellant to this extent) proceeded to organise thereafter a settlement and Mr. Winter disbursed the very money allegedly assumed already to have been earlier received or paid as authorised. 

   [52]Since the respondent relied on the deed in its amended reply and defence to counterclaim (in response to reliance on it by the appellant in her counterclaim), it may be accepted that the rule that the estoppel is available only in an action brought on the deed (Spencer Bower & Turner, Estoppel by Representation, 3rd. edn., 168 and 175) was satisfied.

   [53]Hillside was not a party to the acknowledgment in clause 3, though it seems to have joined in the deed largely for conformity.  But if clause 3 prevented the appellant from denying liability for the principal sum, Hillside’s guarantee would make it liable, secondarily, for the principal sum.  A default under the deed was by a clause in the mortgage to which the appellant and Hillside were parties deemed to be a default under the mortgage. 

   [54][1938] A.C. 156.

   [55]at 168-169

   [56][1997] 3 N.Z.L.R. 86 at 92

   [57]Spencer Bower & Turner, op. cit., 161-175 and 172-175.  See also Greer v. Kettle at 166-167 per Lord Russell of Killowen, pace, perhaps, Lord Maugham at 171; and Con-Stan Industries of Australia at 244-245.  The changes in the reach and basis of estoppel by deed since Coke’s time are explained in The Law of Australia, Title 35.6, Estoppel, page 20, para.[19].

   [58]at 244

1. Even if the last point were to be disregarded, the position in equity is and was always different in this respect, that where there are proper grounds for rectifying a deed, such as because it is based upon a common mistake of fact, then to the extent of the rectification there can plainly be no estoppel based on the original form of the instrument.  Perhaps the pre-eminent example of that is the well known rule of Chancery Courts in regard to a receipt clause in a deed not effecting an estoppel if the money has not in fact been paid.  In a simple case of that kind it is unnecessary to counterclaim for rectification.  Since the fusion of law and equity, the rule in equity prevails.  All this is explained in the speech of Lord Maugham in Greer v. Kettle[59], which, whilst arguably strictly obiter on the point rather than providing a second actual basis for decision, was agreed in by Lords Atkin and Macmillan at least.  It is stated in Spencer Bower & Turner[60] that a recital or acknowledgment in the text of an instrument, in which one party acknowledges receipt of consideration moneys from another, while sometimes of value as an admission, will not support an estoppel.  Similarly in Petersen v. Moloney[61] the High Court (Dixon, Fullagar and Kitto, JJ.) stated that the acknowledgment of payment in a transfer did not create an estoppel against the transferor, but was evidence against her, though in the circumstances not strong evidence.  That statement does not depend upon the fact that a transfer of Torrens Title land is not by deed (though it has the effect of a deed when registered), for their Honours cited a passage from Burchell v. Thomson[62] dealing with receipt clauses in deeds in particular, as well as in other instruments.  The decision in Helmich & Taylor v. Thorp & Strathdee refusing to allow a mortgagor to go behind the recital of receipt of an advance in a mortgage document is, in my view, clearly distinguishable, for Fisher, J. held that the rule relating to receipt clauses had nothing to do with cases in which the parties had deliberately adopted the fiction of an antecedent payment as a convenient formula for defining an executory obligation to make a real payment in the future, in that case for shares, there never being any intention (as there was here) that funds would actually pass from the mortgagee to the mortgagor.  That case would seem to exemplify the exception of “circumstances special to a given transaction” allowed in Spencer Bower & Turner[63]. 

   [59]at 171-172

   [60]op. cit., 165

   [61]at 100

   [62][1920] 2 K.B. 80 at 86 (reversed on appeal, though without criticism of the passage cited)

   [63]op. cit., 166

1. Mr. Cook, however, contended that the present was a case where equity would not grant rectification.  He relied on a number of factors, namely, that the mortgagee was innocent; that the situation was caused by the appellant and her broker; that the appellant executed many of the documents, allowing them to be circulated to the respondent and others; that the appellant received part of the consideration, namely payment of the expenses and the small amount needed to finalise the settlement of the discharge of the Quinn & Quinn mortgage, so that there could only be partial rectification, which would create a problem; and that Lewer had used the proceeds of sale of long stolen opal to buy the Frankston property.  None of these factors, alone or together, in my view would warrant refusal of rectification by way of the deletion of the relevant part of clause 3.  Most overlook the fact that clause 3, by which the appellant acknowledges having received payment etc. “on the date hereof”, is found in a document dated 14 July 1997, that is, well before the actual settlement when moneys were paid or retained in discharge of expenses and in payment to Quinn & Quinn.  The last factor relied on does not raise an equity affecting the appellant’s notional claim for rectification.  It has nothing to do with the transaction of mortgage of the Frankston land or the rights and liabilities of the appellant and the respondent in relation thereto. 

1. His Honour cited only the part of Lord Maugham’s speech relating to the rule of common law and rejected the appellant’s submission that the respondent was not entitled to rely on clause 3.  Whilst acknowledging that the principal sum had not been received by the appellant when the deed was executed, his Honour said that interest had become payable on the principal sum and liability for disbursements had been incurred.  Liability for interest from before advance of principal, namely, from 14 July, however, only arose by reason of the execution of the deed on the very day[64].  The subsequent letter of 17 July cannot, in my view, be used to show that as at 14 July interest had become payable from 10 July.  Even if the appellant had become liable informally for certain minor[65] disbursements, that did not require refusal of rectification of clause 3, which concerned a large principal sum, particularly because the existence of that liability (and any liability for interest) did not denote that a loan had been made and because under the deed the respondent was able to compel the execution of a mortgage to secure reimbursement of any disbursements and, for that matter, payment of any interest.  Indeed it had the mortgage by 14 July.

   [64]The respondent’s offer conveyed by S.V. Winter & Co. by letter of 19 June 1997 did not provide for this.

   [65]By reason of the appellant’s acceptance on 25 June 1997 of the offer, which provided for this.

1. Reference was made during argument to the decision of the Court of Appeal in Abound Catering, Conventions & Receptions Pty. Ltd. v. Bizane Pty. Ltd.[66].  But that case is quite distinguishable in that, although the accounting statement to which the clause there in question referred was known or suspected to be incorrect, the clause was a stipulated-for warranty of the accuracy of the statement, that is, a contractual promise on which the parties proceeded. 

   [66][1999] VSCA 53

1. For the reasons I have given I consider that the appeals should be allowed.  In proceeding No.7373 of 1997 I would set aside the judgment below and substitute, on the claim, judgment for the defendant and, on the counterclaim, a declaration and an order as to delivery up such as mentioned earlier.  In proceeding No.6452 of 1998 I would set aside the judgment below and substitute judgment for the defendant on the claim.

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