Finlay v Silcon Industrial Pty Ltd

FINLAY & ORS v
SILCON INDUSTRIES PTY LTD & ANOR
[2003] SASC 236
Full Court: Doyle CJ, Nyland and Lander JJ

DOYLE CJ This is an appeal by defendants against a judgment entered against them by the District Court. The judgments were for the payment of money found to be owing to the plaintiff companies.
Background
The proceedings in the District Court have a long and tangled history, stretching back to 1998. The events in question began in about 1990. To understand the issues, it is necessary to summarise the history. I will be as brief as I can, and where possible will omit details that are not particularly important.
Silcon Industries Pty Ltd (“Silcon”) is a company that supplied and installed suspended ceilings and partitions in commercial properties. Mr Donnelly was the principal shareholder of Silcon, and also a director.
In 1990 Mr Finlay agreed with Mr Donnelly to keep the books and records of Silcon, and to provide administrative support, for payment at the rate of $20 per hour. It appears that over time he gradually assumed responsibility for an increasing range of work. He became a signatory to Silcon’s bank accounts. During that year he also agreed with Mr Donelly that if Silcon undertook work involving the installation of air-conditioning, he (Mr Finlay) would manage that work, and that the profits from it would be shared between Mr Finlay and Silcon. These arrangements were informal.
The other shareholder of Silcon was wanting to retire. During 1992 Findon Developments Pty Ltd (“Findon”) was formed with a view to Findon gradually taking over the business of Silcon. The other shareholder did not have an interest in Findon.
During 1992 Mr Donnelly and Mr Finlay agreed that Mr Finlay would maintain the records and accounts for Findon, on the same basis as for Silcon.
At some time during 1992 it was agreed that Mrs Finlay would assist Mr Finlay in relation to the work to be done for Findon. It seems that gradually she also assumed greater responsibilities. She became a signatory to the cheque accounts of Findon.
It was also agreed during 1992 that if Findon undertook air-conditioning work, Mr Finlay would handle that work and that the profits of that work would be shared between Mr Finlay and Findon. It was agreed that the air-conditioning business would be kept separate from the other work of Findon. The business name “Findon Air” was registered for that purpose, the intention being to conduct the air-conditioning business under that business name. I will refer to Findon Air as if it were a separate entity. Mrs Finlay was the sole signatory to the Findon Air cheque accounts.
In late 1993 Mr Donnelly became concerned about the financial affairs of Silcon and of Findon. The company bankers wanted financial statements, and apparently they were not available. Tax returns had not been prepared in due time. The bank accounts of Findon were short of funds, when, presumably, Mr Donnelly thought that they should not be short of funds. In November 1993 the authority of Mr Finlay and of Mrs Finlay to operate the accounts of Silcon and of Findon and Findon Air was terminated.
Mr Donnelly sought the assistance of accountants. He and the accountants sought documents and records from Mr Finlay. Some material was handed over after some delay, but a lot of what was needed and expected was not produced. Mr Finlay provided some answers to questions put to him about company records and transactions, but the information provided was not satisfactory. Mr Finlay made a written claim in early 1994 for payment for work done. He claimed payment to himself, on behalf of Mrs Finlay and on behalf of JA Finlay Family Trust (“the Family Trust”).
Mr Donnelly and accountants whom he employed continued to request information and documents into 1994.
In March 1994 Findon wrote to Mr Finlay Snr, who was trustee of the Family Trust. In that letter Findon denied any liability for claims made by the Family Trust for payment by Findon or Findon Air. Findon also demanded repayment of an amount of $33,100 allegedly drawn from Findon Air by the Family Trust.
Mr Donnelly reported the matter to the police in 1994. The police began to investigate his complaints.
In July 1995 police seized a substantial number of documents from the premises of Mr and Mrs Finlay. In September 1995 the police spoke to Mr Finlay and gave him a letter asking for further records. Mr Finlay refused to answer questions, and produced no further records.
In February 1998 Findon and Mr Donnelly issued proceedings out of the District Court against Mr and Mrs Finlay. The claim related to a residence purchased by Mr Donnelly as trustee for the Finlays. The claim was that Findon had paid about $30,000 towards the purchase of the house, and that the Finlays were liable to repay this amount. I will refer to this as the “Wells Street claim”.
Mr and Mrs Finlay filed their own defence and counter-claim in the action in March 1998. In this pleading they claimed that Findon owed money to them for book-keeping and administrative work carried out by them, and that money was owed to Mr Finlay for work carried out by him for Findon Air. The counter claim was for approximately $35,000. The plaintiffs and the defendants amended their pleading from time to time. By May 2001 the counter claim had expanded. It still appears to have been based on a claim for book-keeping work, for work done for Findon Air and for a share of profits made by Findon Air. By May 2001 the counter-claim had grown to $164,600.
These proceedings were ultimately overtaken by later proceedings. Although both actions were heard jointly, the judge entered judgment for the plaintiffs in the later action, and dismissed the 1998 action without any orders as to costs. This appears to have been done with the agreement of the parties, and no complaint is made about it. Accordingly, subject to one point, these proceedings can be put to one side.
It is also convenient to record here that although Mr Donnelly was a plaintiff in these proceedings and in the later proceedings, no judgment was entered in his favour, the judgment under appeal being in favour of Findon and Silcon. His role as a plaintiff can be put to one side
Late in 1998, the Director of Public Prosecutions decided not to prosecute Mr or Mrs Finlay.
The police then returned to Mr Finlay some of the documents seized from him. At trial Mr Finlay admitted destroying these documents. As to this the judge found at [54] that Mr Finlay did this so that the documents could not be used to his disadvantage in the 1998 action which was still on foot. While on this point it is convenient to record that the judge also found at [52] that Mr Finlay had dealt with other missing accounting records so as to prevent Silcon or Findon getting access to them. The judge found again that Mr Finlay did this to prevent the material being used to his disadvantage by the police and in any civil proceedings. These are serious findings.
On 10 December 1999 Mr Donnelly and his legal adviser inspected the documents that were still held by the police. The documents included copies of cheques that the police had obtained from the banks, including copies of the endorsements and markings on the rear of the cheques. They also examined such other original records relating to Silcon and Findon as the police held.
The proceedings
In November 2000 Silcon and Findon commenced a fresh action in the District Court. The defendants were Mr and Mrs Finlay, Mr Finlay Snr as trustee of the Family Trust and (later by amendment) J & L Finlay Nominees Pty Ltd (“Finlay Nominees”). Through the process of discovery the plaintiffs had learned that Finlay Nominees had replaced Mr Finlay Snr as trustee of the Family Trust on 10 October 1997.
Another defendant was G & G Modbury Triangle Nominees Pty Ltd (“Modbury”). Modbury was trustee of a Unit Trust in which the Family Trust held 55% of the units. Modbury was joined because of a claim that money of the plaintiffs had been paid to Modbury to meet calls made by Modbury on the trustee of the Family Trust in respect of the Family Trust’s units in the Unit Trust.
The Statement of Claim in its final form pleaded much of the above history.
The claim by Silcon (“the Silcon claim”) was for money taken by Mr Finlay from Silcon’s accounts between July 1992 and November 1993. The payments were identified in detailed schedules attached to the Statement of Claim. The claim was for a total of almost $300,000. Silcon alleged that Mr Finlay acted fraudulently and that he had converted its money.
The Silcon claim is also made against Mr Finlay Snr and against Modbury for money of Silcon allegedly paid to and received by them. In para 28.3 of the Further Amended Statement of Claim it is alleged that $34,060 was paid to the Family Trust and $51,700 to Modbury, the latter payment of course being for the benefit of the trustee of the Family Trust.
In the pleading of the Silcon claim, there is no allegation that Mrs Finlay is liable for the misappropriations. However, in the prayer for relief Silcon claimed a judgment for this money against Mr and Mrs Finlay. No explanation was offered to us for that discrepancy.
The Statement of Claim included a claim by Findon (“the Findon claim”).
The Findon claim was that Mr Finlay and Mrs Finlay had fraudulently misappropriated money from the accounts of Findon and again from Findon through the accounts of Findon Air. The amount claimed is almost $100,000. There is also a claim against them for money had and received in a like amount.
The Statement of Claim repeats the Wells Street claim. There is a claim for payments made by Findon in connection with the purchase of the property. Findon claims approximately $34,000.
The prayer for relief contains a claim against Mr Finlay Snr as trustee of the Family Trust and against Modbury for $85,760. That appears to be approximately $34,000 allegedly paid to the Family Trust and $51,000 allegedly paid to Modbury for the benefit of the Family Trust.
In January 2002 the plaintiffs joined Finlay Nominees as a defendant. As stated earlier, Finlay Nominees became trustee of the Family Trust on 10 October 1997.
As I understand it, the Wells Street claim was treated at trial as having been commenced in November 2000, although it was actually commenced in the 1998 proceedings. The 1998 proceedings and the later proceedings were heard together. The other claims, the Silcon claim and the Findon claim, were commenced in November 2000. A claim was first made against Finlay Nominees in January 2002. The unlawful misappropriations are alleged to have occurred between July 1992 and November 1993, with one or two trifling exceptions. However, as will appear, in his reasons the judge refers to payments beginning in May 1990.
The claim at trial was that the money of Silcon and Findon had been converted. It was a claim in tort. The claim against Finlay Nominees was for money had and received, or perhaps a restitutionary claim. The monies that were the subject of that claim were actually received by Mr Finlay Snr, who was the trustee at the time of the payment.
At trial the plaintiffs were hampered by the fact that many records relating to Silcon and Findon and the Family Trust had never been produced. It may be that enquiries to banks and other sources might have filled some of the gaps, but to fill all of the gaps would have been a major undertaking.
The defendants were not legally represented at trial. As a result, some uncertainties and ambiguities in the case for the plaintiffs were not properly probed.
The judge’s findings
The judge accepted the plaintiffs’ witnesses.
The judge found Mr Finlay to be “most unreliable”. He found, in effect, that Mr Finlay deliberately misled him in evidence about important matters. I have mentioned already the finding that Mr Finlay concealed important records and destroyed others, to prevent the plaintiffs from proving their claim. This is a serious finding. It was not challenged on appeal.
The judge found Mrs Finlay to be unreliable, and under her husband’s influence. He found that she knew the issues in the case and that she tailored her evidence to suit the Finlays’ interests.
The judge found that Mr Finlay Snr was honest. However, as trustee for the Family Trust he had acted at the direction of his son, and so had been an instrument of Mr Finlay’s wrong doing.
The judge rejected a claim by Mr Finlay about profit-sharing arrangements. The details do not matter. It suffices to say that attempts to justify certain payments as payments made on account of profits were rejected by the judge. In any event, the judge found that the claimed profits were not made. The judge rejected Mr Finlay’s claim that he had an agreement with Findon that the Family Trust would do work (both administrative and contractual) for Findon. He described his claim as “no more than an attempt by Finlay to explain away monies paid to the Finlay Trust”: [30]. He rejected a claim that Silcon agreed to pay rent for a property occupied by the Finlays, Mr Finlay claiming that the property was used in connection with Silcon’s business: [83]. Accordingly, he rejected an attempt to justify payments of almost $19,000 in respect of rent for a property occupied by Mr and Mrs Finlay. The judge rejected claims that various payments in respect of motor vehicles and other items of personal expenditure were properly paid from the accounts of Silcon or Findon, under an arrangement with one or other company. In other words, while the judge accepted that Mr and Mrs Finlay had performed work for Silcon and Findon, he rejected as untrue most of their attempts to justify payments made to Mr Finlay, to the Family Trust or to Modbury. The same applied to payments made to third parties on a number of occasions.
Accepting that Mr and Mrs Finlay were entitled to payment at the rate of $20 per hour for accounting and administrative work, but finding that they were in breach of an implied obligation to keep proper records of the work done, the judge made an allowance in their favour in the sum of $18,000: [79] The judge also found that Mr and Mrs Finlay had no entitlement at all to pay personal expenses from Findon and Silcon accounts.
The judge appears to have taken the view that Mr and Mrs Finlay had been deliberately untruthful in their attempts to justify or support a significant number of payments to Mr Finlay or for their benefit in one way or another. He was also clearly influenced by their apparent failure to keep anything like adequate records of work done. As I understand his reasons he did not take the view that their attempt to justify payments was unsuccessful simply because they did not have adequate records. Rather, he found that they had been untruthful and unreliable in relation to a large number of payments, and accordingly was not prepared to give much credence at all to their claims. It appears that he was also influenced by the fact that, on his findings, payments had been made to the Family Trust and to Modbury without disclosing that to the companies, and by his finding that personal expenditure had been met from company accounts without the authority of the relevant companies. Clearly enough, the judge was of the view that Mr Finlay had embarked on a dishonest scheme over a lengthy period of time, and had concealed its nature by destroying or failing to create relevant records.
I interpolate here that on appeal Mr Finlay appeared in his own right. Ms Powell QC appeared for the other defendants. Ms Powell did not attempt to challenge the findings that there was a dishonest scheme of the kind described by me. As will appear, her submissions were of a more limited nature. Mr Finlay did argue that the judge should have made a substantial allowance for work done by him and by his wife. He referred to documents which he said supported his claim. He put forward an argument that, as a matter of common sense, he and his wife must have done much more work than the amount apparently allowed for by the judge. However, Mr Finlay did not make any attempt to challenge the judge’s findings on credit. I realise that, indirectly, he was challenging those findings by arguing that the judge should have made a much more substantial allowance for work done. But Mr Finlay did not put submissions that would in any way have shaken the judge’s conclusions on credit.
Accordingly, the appeal must be disposed of on the basis that the judge’s rejection of the evidence by Mr and Mrs Finlay must stand. That is of considerable significance.
Proceeding on the basis that the plaintiffs’ claims were in tort, and were subject to a six year time limit, the judge observed that the Wells Street claim was brought within time. None of that was challenged on appeal. The 1998 action was in respect of payments that began to be made in June 1993. The judge actually pronounced judgment in the second action, but as I understand it, the parties at trial and on appeal were content to proceed on the basis that the Wells Street claim was brought in time, even though the second action was commenced more than six years after the Wells Street causes of action arose.
But the Silcon claim and the Findon claim were not brought within time. Each separate payment gave rise to a separate cause of action. The limitation period in respect of the first payment pleaded would have expired in about July 1998 and in respect of the last payment in about November 1999. It is possible that a few payments were made within the limitation period, but there was no suggestion that separate consideration needed to be given to those payments.
The judge found that when, on 10 December 1999, Mr Donnelly inspected documents held by the police, he ascertained facts material to the plaintiffs’ case, and as proceedings were commenced within twelve months thereafter, the judge had a discretion to grant an extension of time: see s 48 (3)(b)(i) of the Limitation of Actions Act 1936 (SA). The judge exercised his discretion in favour of the grant of an extension of time.
Although Ms Powell submitted that the judge was wrong to exercise the discretion as he did, I consider that submission to be untenable. To the extent that it was relevant to consider the delay that occurred, and the reasons for the delay, the conduct of Mr Finlay in concealing and destroying important records was a powerful reason for exercising the discretion in favour of the plaintiffs. I consider that that factor supports an exercise of the discretion as against Mrs Finlay and the trustee of the Family Trust as well. Each of them acted, by and large, at the direction or at the request of Mr Finlay. On the judge’s findings, Mrs Finlay must have had some understanding that the payments being made to her husband and for her benefit were unlawful, and certainly that appropriate records were not being kept. The trustee of the Family Trust acted as directed by Mr Finlay, must have suspected that the payments to the trustee were not lawful, and must be taken to have identified himself with Mr Finlay’s refusal to provide proper records of payments to the Family Trust. To the extent that the exercise of the discretion called for consideration of the question whether there could be a fair trial, the only substantial obstacle to a fair trial was the unavailability of records relating to the payments from the Silcon and Findon bank accounts, and that, for the reasons given, was a problem of the defendants’ making.
That leaves for consideration the question of whether the judge erred in finding that, on 10 December 1999, Mr Donnelly ascertained facts material to the case.
The judge found that during the limitation period Mr Finlay was deliberately obstructive in relation to providing accounting records, and that this contributed to the plaintiffs’ failure to institute the action within time. However, he did not make a decision as to whether it was appropriate to grant an extension of time under s48(3)(b)(ii). That is the subject of a Notice of Alternative Contention by the plaintiffs on appeal.

As to the claim that Mr Finlay and Mrs Finlay did substantial work for Silcon, the judge made the following finding at [72]:
“As I have said, I have no difficulty in accepting that the Finlays did some work for Silcon pursuant to the agreement between Silcon and Finlay for which Finlay is entitled to be paid; but, as I have said, no record was kept of such work; and I have no confidence in his evidence or that of Lorna Finlay on that topic for the purpose of finding how much of such work was done; and there is no other material before me on which I could rely for that purpose; and, really, no attempt was made to particularise such a claim, the Defence blandly reciting that “…..the Finlays, acting on their own behalf or Silcon or the Family Trust for Findon Developments carried out about 8,230 hours of work for both Silcon and Findon Developments at the rate of $20 per hour equates to $164,000.” I infer that the money was withdrawn with no real regard being had to whether money was owed by Silcon for that work. I infer that the failure to account for the work done was a convenient way of setting up a subsequent allegation of lawful justification in the hope that the recipients of the money would not be brought to account for it.”
In considering this finding it is appropriate to bear in mind the general rejection by the judge of the evidence by Mr Finlay and Mrs Finlay.
Turning to the claim by Silcon, for reasons not explained the judge dealt with payments beginning in May 1990. No point was taken about this on appeal and so I say no more about it. The judge dealt with the payments under a number of different headings, these being headings identified by the plaintiffs at trial. The headings were: payments to Mr Finlay and the Finlay Trust; cheques drawn for petty cash or for cash; payment of motor vehicle expenses; payment of electricity accounts; payments to Modbury; payments of rent on the Finlays’ residence and miscellaneous payments. These categories covered a large number of separate payments.
Many of the payments were made to Mr Finlay. Many were made to the Family Trust. Others were made to third parties, but for the benefit of Mr Finlay or Mrs Finlay. Some were made to Modbury.
In his reasons the judge does not attempt to identify or to quantify the amounts paid to Mrs Finlay or for her benefit. Nor does he separately quantify the amount paid to the trustee of the Family Trust. As will appear, on appeal this gives rise to the question of the basis upon which the judge arrived at the amounts for which he gave judgment against Mrs Finlay and Finlay Nominees.
It was not disputed at trial that all of the payments were made by Mr Finlay or by Mrs Finlay acting under his general direction, even though on some occasions Mrs Finlay may have drawn a cheque on the Findon account without specific reference to Mr Finlay. Accordingly, assuming that the payments were unauthorised, Mr Finlay was liable to Silcon and to Findon in respect of the payments on the basis that he made them or authorised them or caused them to be made. But the subordinate role of Mrs Finlay, and the fact that the Family Trust is liable only as a recipient of wrongly appropriated monies, made it necessary to consider the particular amount for which each of them was liable.
In substance, the judge found that Mr and Mrs Finlay were engaged in a continuing course of misappropriation of the funds of Silcon and of Findon, taking money for their own purposes. The judge rejected evidence given by them to justify the payments made. There was no dispute that the relevant payments were made. The issue at trial was whether they were justified. In effect, the judge found that Mr and Mrs Finlay had embarked on a fraudulent enterprise, concealed by the failure of Mr Finlay in particular, and Mrs Finlay to a lesser extent, to keep proper records relating to the payments, and further concealed by Mr Finlay’s destruction of documents.
The judge’s findings provided a firm basis for his order that judgment should be entered for Silcon and for Findon against Mr Finlay for approximately $227,000 and for $43,861.41 respectively. On the judge’s findings, Mr Finlay was liable for all of the payments made.
The judge ordered that judgment be entered against Mrs Finlay for almost exactly the same amount. There was one small payment in respect of which he did not order that judgment be entered against her. It is insignificant and can be put to one side. The difficulty, to which I have already referred, is that she was not a signatory to the Silcon accounts. The fact that she was the person who signed the cheques drawn on the Findon accounts supports the judgment against her in favour of Findon for $43,861.41. She was the one who misappropriated that money, even though she was acting under the general directions of her husband. On the judge’s findings she must have understood that the payments were not properly made. But the question remains as to the basis upon which the judge directed that judgment be entered for Silcon against her for approximately $227,000.
As to this, the judge says nothing at all.
The judge ordered that judgment be entered against Finlay Nominees for $112,852.85, a little less than half of the amount for which judgment was given for Silcon against Mr and Mrs Finlay. The judge appears to have treated two large groups of payments as payments for which Mr Finlay, Mrs Finlay and the trustee were all equally liable. The first group is a group of payments said by the judge to be made to Mr Finlay or to the Family Trust. The second group is a group of payments made to Modbury.
That latter group amounted to $51,700, and there appears to be no difficulty in treating the trustee as having received the money and as being liable to make repayment of it. I will return to this point.
As to the first group, the list set out in the judge’s reasons indicates that some payments went to Mr Finlay, some were cash cheques, some went to the trustee of the Family Trust and some to third parties. In the circumstances it seems to me that it would be appropriate to treat the payments to the trustee as monies received by the Trust, but to treat all other payments as monies received by Mr Finlay. The respective amounts are $48,231.00 and $6,421.85 Mr Finlay, of course, is liable to Silcon in respect of the whole amount.
That leaves the question of whether the judgment against Finlay Nominees can stand for the full amount for which it was entered.
At the conclusion of the trial the plaintiffs did not seek an order against Mr Finlay Snr, on the basis that if a judgment was obtained against Finlay Nominees, that would suffice for the plaintiffs’ purposes. No judgment was sought against Modbury.
Finally, the judge ordered an enquiry and account in relation to certain cheques and cash withdrawals, apparently doing so on application by the plaintiffs. I can see no reason for making this order. Either the plaintiffs had or had not made out a claim in respect of these monies. On appeal, Mr Tilmouth QC, who also appeared for the plaintiffs at trial, was unable to offer any real explanation for this order.
However, as no point was taken separately in relation to this order on appeal, I propose to say no more about it.
Extension of time
Section 48(1) of the Limitation of Actions Act 1936 (SA) gave the District Court power to extend the time for instituting the action. As I have explained above, the second action was out of time in relation to each of the payments the subject of a claim, although the parties treated the Wells Street claim, originally brought in the 1998 action, as within time.
Section 48(3)(b) provides:
“(3) This section does not –
(a)…
(b) empower a court to extend a limitation of time prescribed by this Act unless it is satisfied –
(i) that facts material to the plaintiff’s case were not ascertained by him until some point of time occurring within twelve months before the expiration of the period of limitation or occurring after the expiration of that period and that the action was instituted within twelve months after the ascertainment of those facts by the plaintiff; or
(ii) that the plaintiff’s failure to institute the action within the period of the limitation resulted from representations or conduct of the defendant, or a person whom the plaintiff reasonably believed to be acting on behalf of the defendant, and was reasonable in view of those representations or that conduct and any other relevant circumstances,
and that in all the circumstances of the case it is just to grant the extension of time.”
The meaning of this provision was considered by the High Court in Sola Optical Australia Pty Ltd v Mills (1987) 163 CLR 628. The court said (at 636) that “materiality” is
“a broad general requirement that is capable of satisfaction by objective inquiry.”
The court went on to say:
“A fact is material to the plaintiffs’ case if it is both relevant to the issues to be proved if the plaintiff is to succeed in obtaining an award of damages sufficient to justify bringing the action and is of sufficient importance to be likely to have a bearing on the case.”
This reflects a liberal approach to the meaning of s 48(3)(b)(i), and makes the exercise of the ultimate discretion all the more important.
Ms Powell argued that the judge erred in finding that on 10 December 1999 Mr Donnelly had ascertained facts material to the plaintiffs’ case. The only finding the judge made was at [60] to the effect that in the case of some of the cheques that Donnelly inspected that day:
“…the information on the cheque as to the payee did not correspond with what appeared on the cheque butt.”
The judge treated that as a fact material to the case. But Ms Powell rightly pointed out that the judge was wrong. Although the plaintiffs had contended that there was a discrepancy between cheque butts and cheque faces, and had provided a schedule making that claim, the suggested discrepancies had not in fact occurred. Subject to trivial exceptions, the information on the cheque butts corresponded with the information on the face of the cheques. The judge seems not to have noticed this.
However, although the judge erred in this respect, in my view there is no doubt that on 10 December 1999 Mr Donnelly ascertained facts material to the plaintiffs’ case.
Silcon and Findon no doubt had information, or ready access to information, that showed how much had been withdrawn from their accounts. However, there was obviously considerable uncertainty on their part as to the recipient of each payment, the reason for each payment and the propriety of each payment. In view of Mr Finlay’s failure to produce proper records, there would have been solid reason to doubt the veracity of information in their possession (such as cheque butts) that was attributable to him or to Mrs Finlay..
I consider that the information disclosed on the face of the cheques constituted facts material to the plaintiffs’ case, even though that information corresponded with what was on the butts. It would have been material to ascertain that the butts were accurate, and equally material to ascertain that they were inaccurate. In short, it was material to ascertain whether or not the butts were accurate. I do not suggest that this was a matter of great importance, but I consider that the relationship between the information on the butts and on the face of the cheques amounted to facts material to the case.
Second, and more importantly, as Mr Donnelly said in evidence the plaintiffs also wanted to know whether the documents seized by the police included invoices or other primary documents that would explain or justify the payments made by cheque and the cheques cashed. They were unable to find documents that did this. The fact that the documents seized by the police did not include records that might justify payments made was relevant to issues to be proved if the plaintiffs were to succeed. In relation to this point it is relevant to bear in mind that until Silcon and Findon began to call on Finlay for an explanation for payments made, they apparently had no knowledge at all of payments being made to the Family Trust. Quite apart from that they must have been working in the dark to a considerable degree, bearing in mind Mr Finlay’s failure to produce relevant documents. In my view it was material for the plaintiffs to ascertain what information was available from such records as might be available. Accordingly, the nature and extent of the information available from the records in the possession of the police was itself a material fact or matter.
Third, there were notations on the rear of a number of the cheques apparently indicating how the proceeds of some cash cheques had been applied. Some of these notations raised further questions about the reasons for the cashing of the cheques.
Accordingly, although the judge’s reasons do not support his finding, the evidence before him did provide a solid basis for the finding that the plaintiffs ascertained facts material to their case on 10 December 1999. On that basis I would uphold the finding.
For reasons that I have already given, the challenge to the conclusion that in the circumstances it was just to grant an extension of time cannot succeed. In the circumstances it was inevitable, if the plaintiffs established matters entitling them to invoke the discretion, that the discretion would be exercised in their favour. The fact that the plaintiffs might have inspected the documents held by the police sooner than they did is not a reason to exercise the discretion against them: SolaOptical at 636.
The judge does not refer to the fact that the extension that he granted operated against Mrs Finlay and Finlay Nominees and Mr Finlay Snr as well. He appears to have overlooked this.
The facts referred to were material to the case against each defendant.
For reasons given by me above, Mrs Finlay was implicated in the withholding of records and the failure to provide relevant records. It was inevitable that the discretion be exercised against her as well. Mr Finlay Snr had acted at the direction of Mr Finlay during the time when the payments were made to him as trustee. It is difficult to believe that he did not have reason to doubt the propriety of the substantial payments being made to the Family Trust. In any event, on the judge’s findings he apparently acted generally as instructed by his son. Either he or his son made claims against Findon, once the dispute arose. In his capacity as trustee of the Trust, and subsequently Finlay Nominees in the same capacity, likewise were implicated in the failure to provide appropriate records of payments made to the Trust. In the circumstances, there was every reason to exercise the discretion as against Mr Finlay Snr and Finlay Nominees in its capacity as replacement trustee.
For those reasons I would uphold the judge’s decision to grant an extension of time as against each defendant, even though it must be said the judge’s reasons for doing so are inadequate.
By an Amended Notice of Alternative Contention the plaintiffs contended that the judge should have granted an extension of time under s 48(3)(b)(ii). I agree.
The judge found at [62] that during the limitation period Mr Finlay was “deliberately obstructive” in relation to the provision of records. I consider that the same finding can and should be made against Mrs Finlay and Mr Finlay Snr. They all failed to produce relevant records. Mrs Finlay must have known that payments she was making from Findon accounts were not properly made. She made no attempt to produce appropriate records. She was complicit in the obstruction by Mr Finlay. Mr Finlay Snr as trustee was aware of claims being made against the Family Trust, and likewise failed to provide records to support or to explain those payments. The judge found that this conduct contributed to the plaintiffs’ failure to institute the action within time, and that finding also is clearly correct. It is not necessary, in my opinion, for the conduct of the defendants to be the sole explanation for the failure to proceed within time. While it may well be that the plaintiffs could have brought proceedings sooner than they did, the difficulty of the plaintiffs’ circumstances is obvious, and it is not surprising that the institution of proceedings was delayed. It was reasonable to wait while the police investigated the matter, in the hope that they would turn up relevant material, or bring a prosecution that would result in helpful evidence becoming available.
It follows that the judge should have found that the failure to institute the action within the period of limitation resulted from conduct of each defendant. As well, the judge could and should have found that Mr Finlay was a person whom the plaintiffs reasonably believed to be acting on behalf of Mrs Finlay and Mr Finlay Snr. From a practical point of view he was speaking for all of them, and representing all of them. A basis for the grant of an extension of time having been made out, it was again inevitable that the discretion to grant an extension of time would be exercised in favour of the plaintiffs.
The position of Finlay Nominees requires separate consideration. It may be, in relation to this defendant, that an extension of time to the date of its joinder in the proceedings (January 2002) was required. My view is that the conduct of Mr Finlay Snr should, for these purposes, be attributed to Finlay Nominees. As trustee replacing Mr Finlay Snr, Finlay Nominees should be treated for these purposes as standing in the same position as Mr Finlay Snr. To the extent that it is relevant, I note that the plaintiffs learned of the appointment of Finlay Nominees only from the process of discovery.
It follows that an extension of time should have been granted under s 48(3)(b)(ii) as against each defendant. I would uphold the Amended Notice of Alternative Contention.
Liability of Mr Finlay and Mrs Finlay
I have already explained why I would reject Mr Finlay’s submission that the judge should have made a much greater allowance in favour of Mr Finlay (and Mrs Finlay) for work done by them for Silcon and for Findon. The submission fails because the judge comprehensively rejected the evidence, mainly from Mr Finlay, purporting to justify the payments made as payments for work done by Mr Finlay and Mrs Finlay pursuant to arrangements with Silcon and with Findon, or as payments on account of profits made by Findon Air.
It is convenient to deal here with some points argued by Ms Powell for Mrs Finlay because, if sound, these points would assist Mr Finlay as well.
There is no reason to think that the judge overlooked the serious nature of the findings that he made against Mr Finlay and Mrs Finlay, or the impact of that in considering whether the plaintiffs had made out their case on the balance of probabilities. It is not necessary to refer to the case law on this point. The judge referred on a number of times to the dishonest nature of the conduct involved. His rejection of the evidence of Mr Finlay, and Mrs Finlay, was quite emphatic. His finding about Mr Finlay’s conduct in relation to financial records told heavily against Mr Finlay. It told also against Mrs Finlay, although to a lesser extent. She also failed to produce records that should have been kept and, one would think, to some extent must have been kept. There was a clear basis for the judge to find that together they had milked the accounts of Silcon and Findon with no real regard to their entitlement to do so.
I do not accept the submission that the judge reversed the onus of proof. Ms Powell submitted that the judge used a shortfall in the defence case (the judge’s failure to accept the claim that the money was due to Mr Finlay and Mrs Finlay) to establish the case that the plaintiffs had to establish to the required degree of proof.

The plaintiffs produced what evidence they could about the payments made, and about the basis of those payments. The plaintiffs’ case involved a denial, no doubt in fairly general terms, of any justification for those payments. The payments were made by Mr Finlay or by Mrs Finlay, and the circumstances in which those payments were made were known to them. This case is a clear example of the principle that if one party to a case must prove a negative (here, lack of authority to make payment) and the other party is better placed to contradict that proposition, because it involves proof of a matter under the control of and within the knowledge of that other party, and not at all or only in a limited way known to the former party, then the latter party bears an evidential burden to support the existence of authority. Failure to produce adequate evidence may, ultimately, add weight to the former party’s assertion of the negative proposition (here, lack of authority to make the payment). In the present case the plaintiffs’ evidence pointed in a substantial way to the conclusion that unauthorised payments had been made. The defendants knew whether they were authorised, and if they were authorised the defendants knew why. The rejection by the judge of the attempts to justify those payments left the plaintiffs’ evidence more or less unchallenged, and the failure of those who had knowledge of the relevant circumstances to provide any satisfactory answer enabled the judge to attribute greater, and the necessary, weight to the plaintiffs’ case.
The finding by the judge that the payments made by Mr Finlay and Mrs Finlay respectively were not authorised was correct.
Liability of Mrs Finlay
As I noted earlier, the judge directed that judgment be entered against Mrs Finlay, in respect of money taken from the Silcon accounts, for the same amount as he directed against Mr Finlay, with one trifling exception.
But Mrs Finlay was not a signatory to the Silcon accounts. As I understand the evidence, it was never suggested that she was. Also, as I understand the evidence, Mrs Finlay was not working for Silcon at the time when the earlier payments were made, although the judge has not made a finding about that. Some evidence suggests that she began to work for Silcon in September 1991. The evidence indicates that from time to time she would have entered details on Silcon cheques for her husband to sign. It may be that she received some of the money drawn from the Silcon accounts. However, my impression is that no attempt was made to prove that she did receive any particular amounts. In saying that I do not overlook the possibility that payments from the Silcon account were made for her benefit, in the sense of being made to discharge liabilities that she and her husband had incurred. But there appears to be no attempt to prove that she was the direct recipient of any of the money from the Silcon accounts.
As I noted earlier in these reasons, the pleading of the Silcon claim is entirely against Mr Finlay. There is no allegation against Mrs Finlay, subject to the curious inclusion of her in the prayer for relief.
Ms Powell submits that the judge erred in holding Mrs Finlay liable for the payments made from the Silcon accounts.
Mr Tilmouth sought to support the judge’s conclusion by arguing that Mrs Finlay was a joint tortfeasor with Mr Finlay in relation to the payments from the Silcon accounts. That conclusion would require a finding that in relation to the misappropriation from the Silcon accounts, Mrs Finlay and Mr Finlay engaged in concerted action to a common end: TheKoursk [1924] P 140 at 156.
I do not accept the submission by Mr Tilmouth.
To begin with, Silcon faces the difficulty that it did not plead a claim against Mrs Finlay.
As to that, Mr Tilmouth submitted on appeal that at trial it was made clear in his cross examination of Mr Finlay that Silcon was alleging that Mr and Mrs Finaly were jointly milking the Silcon accounts. Even assuming that this was made clear, as it probably was, this was after the close of the plaintiffs’ case. Mrs Finlay was unrepresented at trial. There was no application to amend the pleadings. In my view it would be unfair to allow Silcon to depart from its pleaded case in those circumstances.
There was evidence on which a case that Mrs Finlay was a joint tortfeasor in relation to the Silcon accounts might be made out. She was carrying out clerical work. She prepared cheques to be signed by Mr Finlay and by Mr Donnelly. In a general way, I agree that she and Mr Finlay were milking the company accounts, having regard to the judge’s findings. It may have been open to the judge to find that after working for Silcon for some period of time Mrs Finlay must have realised that the payments being authorised by her husband were in truth unauthorised. The judge might have been able to make a finding that, as from a certain point, Mrs Finlay was participating in a scheme to misappropriate the money of Silcon. But none of this was probed or established at trial.
In the circumstances, I consider that the judge erred in this respect. Silcon should be held to its case as pleaded.
However, the judgment directed in favour of Findon should stand. Mrs Finlay was a signatory to its accounts. Mr Finlay was not.The Statement of Claim alleges in par 13 that Mrs Finlay was the sole signatory for the Findon Air account. The Defence admits this. The evidence indicates that her involvement in the affairs of Findon and Findon Air was greater than it was in relation to Silcon. From time to time Mrs Finlay drew cheques of her own initiative, when the payments were, as she claimed, routine payments. As time went on she must have realised that payments being made from the accounts of Findon and Findon Air were not authorised. In any event, there is an express finding that Mrs Finlay signed cheques amounting to $29,611.41, in respect of which the judge directed that judgement be entered for Findon against Mrs Finlay: [97] and [98].
The judge directed that judgment be entered for Findon against Mr and Mrs Finlay for $43,861.41 inclusive of interest. It appears the judge mistakenly included an amount of $13,000 in respect of which he directed that there be an enquiry and account: [92]. The allowance for interest appears to be $1,250.00. In any event, according to his reasons these were withdrawals from the Silcon account, although some of the money went to Findon Air and some to Mr Finlay. I do not understand why an enquiry and account was ordered in relation to this amount, but as the plaintiff sought this order, the judgment for Findon should be varied to remove from it the amount in respect of which an enquiry and account was ordered.
Accordingly, the appeal by Mrs Finlay should be allowed in part. The judgment entered for Silcon against Mrs Finlay should be set aside.
It is convenient to record here that the judgement for Silcon against Mr Finlay should stand, but should be entered for a single consolidated amount. The judgment as directed and as entered is in an irregular form, because it purports to be three separate judgments against Mr and Mrs Finlay for three separate amounts.
The judgment in favour of Findon against Mr and Mrs Finlay should be set aside. For that should be substituted a judgment against each of them for $29,611.41. That sum is inclusive of interest.
Liability of Finlay Nominees
The judge directed that judgment be entered in favour of Silcon against Finlay Nominees for $112,852.85 inclusive of interest. This amount is approximately one half of the total amount for which Silcon obtained judgment against Mr and Mrs Finlay.
Of this amount, $51,700 is money paid from the accounts of Silcon to Modbury. Those payments are clearly payments to Mr Finlay Snr as trustee of the Family Trust. They were made to answer calls on units in a Unit Trust, the units being held by Mr Finlay Snr as trustee of the Family Trust.
An amount of $54,652.85 appears to be attributable to a large number of payments from the accounts of Silcon to Mr Finlay, to third parties and to the Family Trust. A schedule of the payments is set out in the Judge’s reasons: [75]. I referred to this group of payments earlier in my reasons: at [64]. I assume that where, in that schedule, the payee is referred to as being the Family Trust, the payment was made either to Mr Finlay Snr as trustee or to a third party for the benefit of Mr Finlay Snr as trustee.
That leaves unexplained an amount of $6,500, which I assume represents a lump sum award of interest.
For reasons not explained by the judge, the judge appears to have treated Mr Finlay Snr as trustee as liable for all payments, regardless of the identity of the recipient.
In his reasons the judge lists the payments, and the information given on the stub and cheque face, in each case, as to the identity of the payee. The cheques in relation to which the stub or face of the cheque or both indicate that payment was to the Trust Fund or for the benefit of the Trust Fund amount to $48,231. It seems to me that Silcon is entitled to judgment, subject to the point considered below, against Finlay Nominees for the amount of $51,700 paid to Modbury, and for this further amount of $48,231. However, as no submissions were directed on appeal to the break up of the payments itemised by the judge at [75], the parties should be given an opportunity to put submissions on that topic. Subject to that, and subject to the point about to be dealt with, I would set aside the judgment against Finlay Nominees and enter judgment for Silcon against Finlay Nominees for $99,931.
Ms Powell submitted that Finlay Nominees could not be made liable to Silcon. I reject that submission.
The judge gave no explanation for his finding against Finlay Nominees. Nevertheless, in my opinion it is liable.
The money in question was received by Mr Finlay Snr as trustee, or paid by Mr Finlay for the benefit of the Trust, in the sense of discharging a liability of the trustee or increasing the assets of the Fund. In other words, the money in question has been paid to or for the benefit of the trustee of the Family Trust, in the sense of being paid to discharge a liability payable by the trustee of the Family Trust or to increase the assets held by the trustee of the Family Trust.
As to this money, Mr Finlay Snr was a volunteer. He provided no consideration at all on behalf of the Family Trust. It must be questionable whether he received the money in good faith, but even if he did, the Trust provided no consideration.
It appears to be clear law that in these circumstances an action could have been brought for money had and received against Mr Finlay Snr as trustee of the Family Trust. The matter was barely touched on in argument before us, but it appears to me that the following proposition in Mason and Carter, “Restitution Law in Australia” (1995, Butterworths) is supported by authority:
“At common law a person with legal property in money could bring a personal action for money had and received against a third party who had received it otherwise than in good faith and for valuable consideration.”
This proposition is supported by the decision of the House of Lords in Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548.
Finlay Nominees now holds the Trust Fund as trustee. In my view, upon its appointment as trustee, Finlay Nominees assumed the rights and liabilities of Mr Finlay Snr, to the extent that they were incurred in his capacity as trustee of the Family Trust. Finlay Nominees can be in no better position than was Mr Finlay Snr. No defence was or is raised by Finlay Nominees in the nature of change of position or anything like that. There is no requirement for Silcon to prove that the funds in question are still in the possession of Finlay Nominees. There is no need to embark on a tracing exercise. Finlay Nominees is liable as trustee to restore to Silcon the money received by Mr Finlay Snr, or the benefit received by him, in each case in his capacity as trustee of the Family Trust.
Were the facts to be more fully investigated, it may be that Mr Finlay Snr is personally liable to Silcon for conversion of the monies involved, or for the knowing receipt of wrongfully misappropriated money. This matter was not argued and I will say no more about it.
For those reasons, and subject to further submissions as to the correct amounts, I would allow the appeal by Finlay Nominees, set aside the judgment entered against it, and substitute a judgment for Silcon against Finlay Nominees as trustee of the Family Trust in the sum of $99,931 and such allowance for interest as is appropriate.
Cross Appeal
The plaintiffs cross appealed, seeking judgment against Mr Finlay Snr.
As I understand the submissions by Mr Tilmouth, the cross appeal is pressed only if the judgment against Finlay Nominees is set aside. Having regard to the orders that I propose, as I understand it, the cross appeal would not be pursued. Nor could it be, because at trial Mr Tilmouth informed the judge that in the event of Silcon obtaining a judgment against Finlay Nominees, it did not seek a judgment against Mr Finlay Snr.
Accordingly, the cross appeal should be dismissed.
Conclusions
For the reasons given above, the following orders should be made.
The judgment entered in the District Court should be set aside. It is entered in an irregular form.
The appeal by Mr Finlay should be dismissed. Judgment should be entered in the District Court for Silcon against Mr Finlay in the sum of $227,001.14 and for Findon against Mr Finlay in the sum of $29,611.41.
The appeal by Mrs Finlay should be allowed. Judgment should be entered in the District Court for Findon against Mrs Finlay in the sum of $29,611.41. The action by Silcon against Mrs Finlay should be dismissed.
The appeal by Finlay Nominees should be allowed. Judgment should be entered for Silcon against Finlay Nominees in the sum of $99,931, subject to further submissions as to the precise amount and as to the question of interest.
The order for the taking of an enquiry and account should stand.
The cross appeal should be dismissed. The order in the District Court dismissing the action against Mr Finlay Snr should stand.
It will be necessary to hear the parties as to the question of interest on the above amounts and as to the costs of the trial. The order as to the costs, as expressed in the judgment, is in any event erroneous.
The order dismissing Action No. 242 of 1998 with no orders to cost should stand. Having regard to the manner in which the proceedings were conducted, that order was appropriate.
It will be necessary to hear the parties as to the costs of the appeal.
NYLAND J: I agree with the reasons of the Chief Justice and have nothing to add. I agree with the orders proposed by him.
LANDER J: I agree with the orders proposed by the Chief Justice and with his reasons.

[2003] SASC 236

31 July 2003