Crouch and Lyndon (a Firm) v IPG Finance Australia Pty Ltd and Anor

[2014] HCATrans 16

[2014] HCATrans 016

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B49 of 2013

B e t w e e n -

CROUCH AND LYNDON (A FIRM)

Applicant

and

IPG FINANCE AUSTRALIA PTY LTD (ACN 124 131 102)

First Respondent

IPG INVESTMENTS AUSTRALIA PTY LTD (ACN 154 924 820)

Second Respondent

Application for special leave to appeal

FRENCH CJ
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

FROM CANBERRA BY VIDEO LINK TO SYDNEY

ON FRIDAY, 14 FEBRUARY 2014, AT 9.30 AM

Copyright in the High Court of Australia

____________________

MR B.W. WALKER, SC:   May it please the Court, I appear with my learned friend, MR R.S. ASHTON, for the applicant.  (instructed by Mullins Lawyers)

MR D.F. JACKSON, QC:   May it please the Court, I appear with my learned friend, MR C.D. COULSEN, for the respondents.  (instructed by Reardon & Associates Lawyers)

FRENCH CJ:   Yes, Mr Walker.

MR WALKER:   Your Honours, the issues that we seek to have canvassed in this Court may conveniently be found in the amended draft notice of appeal starting at page 65 of the application book.  Your Honours will see there in the paragraph numbered 2 and, in particular, its two arms, (a) and (b), that there is at the heart of the matter and the reasoning in the Court of Appeal through Justice Fraser the following matter which, in our submission, is of great public importance in the law of partnership regulated by statute.

CRENNAN J:   While we are looking, Mr Walker, at the amended notice of appeal, was there any ground of appeal before the Court of Appeal equivalent to ground 2(d)?  That is the ground relating the issue of common law reliance.

MR WALKER:   Not really, in this sense, that there had been – that issue was not live, bearing in mind the way the fate at first instance.  However, there were, in our submission, as we pointed out in our written submissions, there were submissions put concerning the common law equivalence of the provisions in question in relation to apparent authority.

In our submission, the way in which the provisions of section 8, concerning apparent authority that may be employed for section 13, is inherent, of course, in any use of that second limb of section 13.  There must be a demonstration that the carrying on in what is called “the usual way” of the kind of business in question is something which had the relevant impact that would render it just as a matter of legislative policy for a purported victim to enforce liability against an innocent party and that must come from the combination of that which is apparent – described by the statutory language to which I will come – and the conduct, reasonable in the circumstances, of the so‑called victim which can be summed up by the one word “reliance”.

FRENCH CJ:   I suppose what I am looking for, Mr Walker, is the extent to which the issues you raise rise above the level of characterisation of conduct for the purposes of application of the statute.

MR WALKER:   May I answer that this way?  In our submission, the matter which rises above what might be called “a case by case characterisation of particular facts” is the relation that this case raises very sharply between the first limb of section 13 and the use of section 8 for the purposes of the second limb of section 13.  So the first limb was one we succeeded on in the Court of Appeal – namely, that representations and associated departures from them, the so‑called wrongdoings, concerning the illegal mortgage finance activities in question were held not to be in the ordinary course of the firm’s practice.

FRENCH CJ:   These were illegal because the firm did not have the requisite insurance cover and necessary certificate to authorise them to do it?

MR WALKER:   Ultimately, in terms of regulatory provisions, yes, that is what renders them illegal but, of course, underlying and no doubt, as the Court of Appeal observed, leading to that statutory illegality was the thoroughgoing and irreconcilable breach of fiduciary duty and no doubt other duties involved in acting on both sides and the irreparable conflicts in question.

It is not merely, as it were, the documentation of an insurance policy and statutory permission; it had to do with the underlying nature of the conflicted conduct.  That was held – for reasons which, on the facts of the case, cannot be regarded with any surprise at all – not to be in the ordinary course of the firm’s practice.  In particular, as your Honours know, it is not as if there was any biography of the firm’s work by reference to clients’ cases and fees that showed that any such practice had ever performed any part of its life.

So that being held in our favour, notwithstanding those same acts have been held for the purposes of the second limb of section 13, which by concession includes the possibility of apparent as well as actual authority, to have been acts for carrying on in the usual way of the business of the kind carried on by the appellant.  Now, it is true, of course, the phrases I have just quoted for the first limb of section 13 and the provisions of section 8 employed for the purpose of the second limb of section 13, it is true they are different words.

But the question is whether as a matter of purposive understanding of the provisions, section 8 being ancillary or auxiliary to section 13 at this point, the question is whether any point of substance, let alone so radically decisive as it turned out to be, it can be seen in those words and, we submit, that for the following reasons there is a very important issue for this Court of statutory interpretation of common form provisions which require attention, not least because of the impact they have on what might be called the commercial morality of the position.

CRENNAN J:   Is there any specific part of the appellate judgment to which you would direct us as demonstrating some error of law of the kind you have presaged in your account of the interaction between the different sections of the Act.

MR WALKER:   Very much so.  Could I suggest to your Honours as follows:  first of all, could I take to paragraph [45] on page 47.  One sees there in the last sentence of that paragraph about line 15, using a phrase which might be thought to presage the reference to “kind” in section 8, in relation to the first limb, his Honour held this:

Even allowing for some generality in the description of Crouch & Lyndon’s business for the purposes of s 13(1), acting for lenders in excluded mortgages –

and those are mortgages with these conflict and introduction problems –

could not be regarded –

I stress “could not be regarded”, so it is not a one‑off factual determination, it is looking to a characteristic likely to be generalised –

as being part of its business in circumstances in which both parties must have understood that it was uninsured and illegal.

Now, ally that with the last sentence of paragraph [47] on the same page at about line 55 where there is reference to the words of Lord Wilberforce in Dubai v Salaam, that they:

support the conclusion that the fact that it was within Wood’s actual authority to act on Crouch & Lyndon’s behalf upon a lender client’s instructions in negotiating, documenting, and administering mortgages other than excluded mortgages does not justify the conclusion that the same kind of acts –

and I stress the phrase “kind of acts” –

in relation to excluded mortgages were done within the course of Crouch & Lyndon’s business.

In other words, and one would hope significantly for the purposes of ascertaining the nature of a solicitor’s firm’s business, the matter of illegality was not a mere incidental element; it was a dividing line.  It was a watershed.

CRENNAN J:   But the judgment was only sustained on the grounds of apparent authority, was it not?

MR WALKER:   Quite so, and the point is that it was done so by saying that notwithstanding those two conclusions which, as your Honour is observing were in our favour, one then comes to the way in which apparent authority was dealt with starting on page 48 of the application book.  Before I come to, as it were, that second and, we say, erroneous part of the reasons, may I note in paragraph [49] the opening observations by his Honour which, in our submission, point up the fitness of these issues for this Court’s attention?  His Honour refers, at about line 28, to “evaluative tests” but evaluative tests should, in our submission, proceed by sound reasoning and logic which is defensible, seen against the purpose – the evident purpose – of the statutory provisions.  That is where the next step, in our submission, fails.

It starts at paragraph [51] with an observation about the language.  I have already noted that and, in our submission, that raises a question rather than answers it.  After the citations in question – none of which contains any passage contrary to the force of the arguments which prevail under section 13 and their analogous application in relation to section 8 – one comes at page 51, paragraph [54], to something which also favoured the position we took, bearing in mind the clear, clean biography of the firm’s conduct.  That is, his Honour said:

It seems an uncontroversial proposition that an act which is thought to fall within the general class of acts ordinarily done by a solicitor might be found upon closer examination of the nature and characteristics of the act to fall outside the solicitor’s apparent authority.

And when one goes back to the first limb of section 13, to perceive the nature of the mortgage business, deceitfully offered to be carried out by the delinquent partner in this case, and the fact that it had characteristics which placed it outside the ordinary course for section 13, in our submission, there was a very weighty indication that at this point in the reasons everything was indicating that apparent authority should have been decided the same.

We then come to paragraph [57] on page 52.  In our submission, what has occurred at that part of the reasons in relation to the critical part of section 8, which is extracted by his Honour at about line 28 or so is, in our submission, completely erroneous.  There is no indication here of any consideration by his Honour of the kind of business as it related to what had, factually, and as a conclusion, produced his Honour’s earlier conclusion about what was the ordinary course of the firm’s business.

CRENNAN J:   What about paragraph [58]?

MR WALKER:   And paragraph [58] I was about to come.  His Honour there is referring to features which, according to his paragraph [54], needed to be looked at.  It is there said that none of those which were said by us to be unusual should have caused the victim’s representative, or a reasonable person in his position, to question whether the delinquent is acting as a party of the firm or without my client’s authority. 

But, in our submission, the unusual features of the transactions represented to be proposed to be carried on were the very features which his Honour had already and so clearly and emphatically held could not permit them to be characterised as constituting the ordinary course of the firm’s practice, for reasons which were not incidental but central to their quality, namely, that they involved roles in relation to both sides of the transaction in particular.

FRENCH CJ:   Does this reduce to – and I am not being pejorative when I am saying this, it is just a matter of characterisation – in part an argument about internal inconsistency and the characterisations?

MR WALKER:   Very much so, your Honour, and that means it is an argument about the schematic and purposive reading of these very important provisions of the Partnership Act.  Without myself suggesting that reduction is a bad thing – it can produce the best flavours in a restaurant, as your Honours know – in our submission, yes, there is a focus and concentration which is to be seen in the point that we have isolated in our draft notice of appeal as the first point.

But there needs to be a consideration by this Court which has never been given.  There needs to be a consideration by this Court of how it is that that is so plainly shown to being in the ordinary course of a firm’s business for the purpose of the quasi‑representational nature of the apparent authority provision, section 8, falls to be described by the phrase which uses the word “usual”.  There is nothing “usual” about this.  The reason why it was incapable of being regarded for the first limb’s purposes as being in the ordinary course was that it had not happened.  It did not happen.  There was nothing usual, and it cannot be made usual by a lie to the effect that it was.

The firm was not telling the lie.  The question is whether we are responsible, given that there was a lie.  That responsibility, as section 8 interpreted by this Court to be a crystallisation of common law notions of reliance through detriment, that, in our submission, necessarily involved something other than the lie.

FRENCH CJ:   Is your special leave point to be found anywhere other than in grounds 2 and 3 of your draft notice?

MR WALKER:   Not really, your Honour, no.  Those are the points both sufficient for success.  Those are the points that convey the merit of the case whereby a person has been held liable, notwithstanding that something was done not in the ordinary course of the firm’s business and has been oddly held to have been nonetheless carried on in the usual way of carrying on business of a kind.  Now, the phrase “of a kind” obviously invites, indeed it literally means, that there is a genus or generality being proposed which may be larger in one sense – that is, at a higher level of abstraction – than what is depicted by an understanding of the particular firm’s activities.

That does not separate the nexus required by the statutory language that it be the kind of business carried on by the firm.  When one looked at the findings which informed the first limb conclusion, those are activities – that is, a manner of carrying on business – which cannot produce a kind abstracted at a level that abolishes the very distinction that one would have expected was a bright line boundary for a lawfully conducting of a solicitor’s business.

In our submission, it is for those reasons that when one comes to the following reasoning, perhaps at page 53, paragraph [61], in our submission, there was a failure by the Court of Appeal to look to the solid, factually based conclusion which had produced no liability under the first limb of section 13 and, rather, in paragraph [61] speculation is inserted in place of the necessary apparent conduct with the effect it would have via reliance on the victim.  In paragraph [61] one finds at its heart, about line 28, the following:

A client embarking upon a new business would often be unaware of, and might reasonably assume that the solicitor advising the client had complied with –

et cetera.  That rises no higher than the bromide that one would expect that, without special features, a person first encountering a solicitor expects that the solicitor will be complying with the relevant law.  That, with respect, finds no foothold in either the second limb of section 13 or section 8 informing its reference to authority.  It is not a matter about the assumption of ordinarily law abiding conduct, particularly by officers of court, which is all that paragraph [61] is really saying.

There was, in our submission, a failure to appreciate that the phrase “the usual way” in relation to the notion of carrying on required attention to the same activities and their characteristics which had produced success on the first limb.  It is for those reasons, in our submission, that this is a case which, as both the merit of the justice of the particular case, a completely innocent person equally duped as the victims of the lies, the outsiders, has been held liable notwithstanding a finding that his firm was not carrying on as part of its business any such dealings.  It is for those reasons, in our submission, that there is a failure of this decision and the reasoning supporting it to provide any safe or appropriate guidance to how a court is to look at the history of dealings for the purposes of apparent authority.  May it please your Honours.

FRENCH CJ:   Thank you, Mr Walker.  Mr Jackson, if you would address us in relation to the matters covered by grounds 2 and 3 in the draft notice.

MR JACKSON:    Yes.  Your Honours, may I just say one thing before doing that, and that is that our learned friend’s argument seems to have left out of account the fact that there was also liability found pursuant to section 14.  May I, your Honours, deal with that aspect of the matter before going on to what your Honours ask me? 

What I wanted to say about it first of all is that our learned friend’s argument does not, with respect, turn much, or at all, with respect, to the wording of section 14 and, also, the second preliminary thing I wanted to say about it was that it tends to infuse every act with whatever was said in the representation made at the start of the whole matter.  Because there was a case, of course, where money was paid in order to be given to persons, mortgagees, work was done, all that sort work, and our learned friend’s argument would seek to infect that in some way by what was said about where the clients would come from.

May I come then to section 14?  Your Honours will see that section 14(1)(a) is a simple provision.  It provides that the firm is liable to make good the loss if a partner receives money.  In doing so, the partner is acting within the scope of the partner’s apparent authority, and thirdly, misappropriates it.  Now, your Honours, this is, with respect, we would submit, a rather clear case.  It was a case where the partner received the money of third persons and misapplied it. 

The question which then arose was, and was simply whether, in receiving the money, receiving our money, Mr Wood was acting within the scope of his apparent authority.  In that regard, your Honours, the firm had two partners, Scott and Wood.  Each went his separate way.  Scott managed litigation.  Wood managed the commercial work.  Your Honours will see that referred to at page 9 in the primary judge’s reasons at paragraph [47], the bottom of the page, your Honours, and the top of the next.  Then, your Honours, as the Court of Appeal said at page 46 in paragraph [44], Scott left Wood to act in a manner which was “without any expressed limitation or checking of his work”.

Now, your Honours, if one goes then to paragraph [44] at page 46, you will see that at about lines 30 through to 52, your Honours will see the various activities that were engaged in.  The activities were such matters as substantial fees being paid, negotiating, documenting and administering loans are examples of work which is conventionally done by solicitors acting for lenders in mortgage loans, and your Honours will see also that the matters between about line 30 going down to about line 42.

Now, your Honours, all those activities in relation to documenting, taking in the money, disbursing the money, receiving it, are the very matters that are close to the heart rather than at the periphery of many solicitors’ practices.  Your Honours, it is clear that provisions like section 8, to which I will come in a moment, and sections 13 and 14 are intended to deal with cases where clients have been defrauded by mal or non‑performance of some of such functions and very frequently that will be accompanied by some misrepresentation in relation to the purpose or the manner of implementation of the transaction.  Your Honours, that is how frauds occur.  But the existence of some such misrepresentation as to purpose or implementation, we would submit, does not bring about a situation where what is being done is outside the ordinary work referred to in the last five lines of paragraph [44] in the Court of Appeal.

Could I go also, your Honours, to page 35, paragraph [14] and, your Honours, if one looks at the evidence that is there referred to, the notion that although there might be, or might have become some prohibitions on carrying out the work that is said to have been the subject of the representation without there being some regulatory requirements having been complied with, one can readily see that the view the conduct of that kind would to a person not a solicitor appear to be within the apparent authority of solicitors. 

Your Honours, if one goes to page 52, paragraph [57], what your Honours will see in paragraph [57], in particular in the last six or seven lines of it, what was said was that the representation was apparently designed to encourage people to retain the firm and your Honours will see “in the absence” – in the last few lines:

in the absence of any notice to the client of a relevant restriction upon a partner’s actual authority, it must be within a partner’s apparent authority to encourage the . . . firm –

et cetera.  Now, your Honours, those features, we would submit, indicate that, with or without reference to any representation as to whether it was normal for solicitors to do that kind of work or for these solicitors to do it, there was, in our submission, as the Court of Appeal held, a case falling directly within section 14(1)(a).  Your Honours, if one does treat the initial representation as relevant, the view of the Court of Appeal at page 52, paragraph [57] to which I have just referred does, we would submit with respect, seem correct.

Could I go, your Honours, following if I may the track, then to section 8 which is the provision which deals with apparent authority?  Your Honours, it is right to say, as this Court said in Hexyl that the provision has in a sense two limbs - one actual authority, one apparent authority – and the apparent authority is the relevant one here.

But, your Honours, if one is looking to determine whether the requirements for apparent authority are satisfied, there are only two things.  One is that there be an act of a partner.  That is the starting point.  Is the act that of a partner?  There is no question about that.  Your Honours will see that was accepted at the top of paragraph [57] at page 52 in the Court of Appeal.  Your Honours, the second thing is that the act be done for carrying on in the usual way of business:

“business of the kind carried on by a firm”

Your Honours, the contention that is suggested that there may be a requirement for representation by some person other than the partner acting does seem an unnecessary addition to the words of the provision, and it is an unnecessary addition because the starting point for section 8(1) is simply that there is the act of a partner.  It also does not sit well with the reversal of the burden of proof contained in paragraphs (a) and (b) of section 8(1). 

It does not sit well with that, your Honours, for two reasons.  First, because the structure creates a prima facie obligation not dependant on the existence of any representation at all or any reliance and, secondly, it allows partners to escape by establishing the matters in 8(1) and (b), neither of which turns on the existence of a representation.

So, your Honours, if I could just say if one looks simply at section 8(1) and at section 14(1)(a), this was a case that fell directly within it.  Could I come back then, I am sorry, your Honours, to have taken a long time to get there, but to the ‑ ‑ ‑

FRENCH CJ:   Your point on section 14 is that, is it correct, that the prospects of success in relation to the – that the application of section 14 means that the prospects of success of an ultimate appeal, are not sufficient to warrant the grant of special leave?

MR JACKSON:   Your Honour, they are, in our submission, modest and to use the old expression, “have much to be modest about”.  Your Honours, we would submit it is a case that really does fall within section 14(1)(a) and whilst one might say, well, there is always a question in every case about what is the course of business, 14(1)(a) is a short answer to the case, we would submit.  Your Honours, could I come then to the amended draft notice of appeal which your Honours will see at page 65 and I think your Honour was asking me about grounds 2 and 3.

FRENCH CJ:   Yes.

MR JACKSON:   Your Honours will see, first of all, that ground 2 turns on a matter which I have addressed in part I think already.  What I wanted to say about it is this.  If your Honours look at the concluding words of ground 2, about line 29 on page 66, what you will see is the importation of the notion of common law reliance, when in fact if one is looking at the apparent authority as applying to section 13, apparent authority is a concept which is dealt with by section 8.  The terms of section 8 turn on the events that are referred to in it and they are events which have been satisfied.  We would submit that, in broad terms, the arguments that are encapsulated in ground 2 are ones that your Honours really do not, in the end, arise.  They do not arise because it involves an assumption as to the content of section 8(1) which is not correct. 

Yours Honours, could I turn then to ground 3?  Your Honours will see that the various matters that are referred to in ground 3, particularly in (a), (b), (c), (d) and (e), are matters which, in our submission, really are not entirely correct representations of what the position was in relation to them.  If I could go, for example, to 3(e), your Honours will see that in the passage that was – to the reference, your Honours, in the reasons for judgment of the Court of Appeal – sorry, your Honours, I just lost the passage where his evidence was accepted about dealing with – sorry. 

It is a passage I took your Honours to before, I think – I have just lost the number of it – where there was reference to his evidence that the people in New South Wales and Victoria had engaged in transactions – Mr Salameh’s evidence that people had engaged in this conduct, solicitors had engaged in it to his knowledge and, your Honours, the evidence that he gave in relation to those matters was accepted by the primary judge.

CRENNAN J:   Paragraph [44] I think you had in mind at page 46.

MR JACKSON:   Yes, thank you, your Honour, yes.  So that one also had a situation where, if your Honours look at the passages of evidence from which the submission made out in paragraph 3 are taken.  Your Honours will see that that evidence referred to in the pages of a document which we have given the Court called “Respondent’s Supplementary Application Book”.  These pages are the evidence from which these submissions are taken. 

If your Honours look at the page which has at the bottom page 3‑35, your Honours will see at about line 29 it remained Mr Wood’s primary function, the contracts and clients – and it was said “Contracts”.  Your Honours will see about halfway between 30 and 40:

But the whole idea was that [he] would source the deals?‑‑Mr Wood would – yes.  Yes.  He would. 

That was really what he brought to the table, wasn’t it?  That was his real value add, his real contribution, finding the deals?‑‑That was part of his value add.

Your Honours will see that going down to the bottom of the page:

Yes, [he was to be] as one source.

Now, your Honours, if one goes then to ‑ ‑ ‑

CRENNAN J:   Line 42 too, “it’s not just finding”.

MR JACKSON:   Yes, I am sorry, “You need to make sure the securities are in place”.  Now, your Honours, I could take your Honours through the other pages but what your Honours will see is that, hardly surprisingly, this was a factor.  One of the factors was that they were to introduce the clients that brought us to them, but having brought us to them, they were then to do the work of solicitors and the work of solicitors included the various matters to which I have referred in relation to which, your Honours, we provided the money and, in terms of section 14, the money was taken and it was taken, your Honours, if I could use the words, by a partner who was acting within the scope of the partner’s apparent authority.  He received the money from us, a third person, and misapplied it.

So, if I could conclude our submissions by saying this.  We submit, your Honours, with respect, that this is a rather clear case.  It is really simply one of a solicitor acting for a mortgagee, getting the money from the mortgagee to advance on settlement but taking it.  It is the very kind of thing, we would submit, for which sections 8 and 14 are designed to assist in providing a remedy.

Now, there may be other issues one can say in relation to section 13, but even section 13 involves, as the Court of Appeal recognised, value judgments and, your Honours, it is no more than a case of applying the principles to the particular case, and may I just say, your Honours, that no doubt it is hard on partners who have to pay up to people who have lost through the defaults or defalcations of other partners of which they were not aware.  But if one has a situation where the manner of conduct of the partnership is so elementarily lacking in checks to ensure that events of this kind cannot happen, then, your Honours, one’s sympathy in the matter has to be a little more muted, with respect.

FRENCH CJ:   Thank you, Mr Jackson.  Yes, Mr Walker.

MR WALKER:   Your Honours, the argument by my learned friend concerning section 14 as if it has separate life, is really not the way in which Justice Fraser for the Court of Appeal saw it.  At pages 55 and 56 of the application book, starting in paragraph [68], it is seen that it is expressed, as it were, coda style; it follows from all that had happened before because section 14 required an equivalence between the course of its business and the ordinary course of the business, sections 14 and section 13 – that is how paragraph [68] started out, his Honour held – and, so far as apparent authority was concerned, section 8 was equally engaged. 

Paragraph [69] in particular highlights the neat way in which section 14 simply tucked in behind the findings in relation to section 13, “ordinary course” and section 8 “usual way of carrying on business of the kind”.  It is for those reasons, in our submission, that section 14 does not provide a separate reason and, with respect, for the reasons we have put in writing and in address concerning section 13, this is not a case for us to be badged like Mr Attlee. 

There remains on the findings by the Court of Appeal, on the basis of the actual activities, actually conducted, rather than the subject of lies concerning the firm’s business, it remained that, subject to the representations, were simply not acts in the ordinary course of business and no explanation is given by the argument advanced today or in the reasoning in the Court of Appeal as to what transforms that which was not in the ordinary course into that which was carrying on in the usual way business of the kind carried on.

In our submission, in relation to what my friend has said as a matter of principle concerning the role of what might be called representational elements in section 8, the apparent authority point, one only has to look at the critical expressions that we proffer for the attention of this Court – namely, “the usual way” and the “kind carried on” – to see that what is

being spoken of there is by contrast with the lies told by the delinquent, one is there talking about what was actually able to be seen or perceived or understood from what the firm was doing – not lies about what it might do, that it had never done, but rather what the firm was doing.

That is the representational element and it totally accords with what this Court has suggested in the past is the same purpose behind these statutory provisions as produced the common law on the subject.  It is the clarity and the stability of definition and separation of liable and not liable cases which, in our submission, is not assisted but rather put back by the Court of Appeal’s approach and, in our submission, the puzzle, which is presented by the conflict between the first and second limbs of section 13 and the first limb of section 13 and section 14 via section 8 is something which remains, on these findings, an important opportunity for this Court to advance the law in this area.  May it please your Honours.

FRENCH CJ:   Thank you, Mr Walker.  The Court will adjourn briefly to consider what course it will take.

AT 10.13 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.18 AM:

FRENCH CJ:   The applicant, a law firm, was found liable in the Supreme Court of Queensland for loss suffered by the respondents as a result of wrongful acts of one of the partners in connection with the misappropriation of money obtained from the respondents as loans for non‑existent borrowers purportedly introduced by the firm.  The applicant seeks special leave to appeal from the decision of the Court of Appeal, dismissing its appeal from the decision of the primary judge. 

The applicant contends that the Court of Appeal erred in its application of section 8(1) of the Partnership Act 1891(Qld), in holding that a representation by the wrong‑doer and other wrongful acts were in the usual way of business of the kind carried on by the applicant.  The applicant complains that, in so finding, the Court of Appeal failed to have regard to the requirement that the plaintiff demonstrate reliance upon the conduct.  The applicant also complained of the Court of Appeal’s finding that the wrong‑doer acted with apparent authority for the purposes of section 14 of the Act.

In our opinion, and having regard to the findings of the Court, including its findings in relation to the question of apparent authority, the prospects of success are not such as to warrant the grant of special leave.  Special leave will be refused with costs.  The Court has to adjourn briefly to establish the link to Brisbane.

AT 10.18 AM THE MATTER WAS CONCLUDED