Lauchlan v SA Police

[2000] HCATrans 346

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Adelaide  No A47 of 1999

B e t w e e n -

WARREN WILLIAM LAUCHLAN

Applicant

and

SOUTH AUSTRALIAN POLICE

Respondent

Application for special leave to appeal

GAUDRON J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT ADELAIDE ON WEDNESDAY, 9 AUGUST 2000, AT 3.28 PM

Copyright in the High Court of Australia

MS E.M. HOLMES:  If the Court pleases, I appear for the applicant in this matter.  (instructed by Douglas Wardle)

MR B.M. SELWAY, QC, Solicitor-General for the State of South Australia:  If the Court pleases, I appear with my learned friend, MS E.J. SHAW, for the respondent.  (instructed by the Director of Public Prosecutions (South Australia))

GAUDRON J:   Yes, Ms Holmes.

MS HOLMES:   Your Honours, this matter raises principally two matters of importance in the applicant’s submission.  The first matter of fundamental importance is the nature and content of a notion of an entrustment ‑ ‑ ‑

GUMMOW J:   Where do we find the text of the section?

MS HOLMES:    Your Honour, my friend has been kind enough to provide the Court, I understand, with a book of cases, including some legislation, and I think, behind the tab marked “CLCA” – I think it is the final page.

GAUDRON J:   It is a red tab, I think.  Mine is read.  I mean, if one were at the outer limits of entrustment, it may raise the question you suggest, but you have proceeded in your written submissions, have you not, as though the entrustment were to be discerned from the basis on which the co-signatory signed the cheque, whereas, ought you not be looking at the relationship between the company and the applicant?

MS HOLMES:    Indeed, your Honour, and on that point, the applicants have, in fact, filed a supplementary outline.  Have your Honours had the opportunity of reading that outline?

GAUDRON J:   When was that filed?

MS HOLMES:    That was filed on ‑ ‑ ‑

GAUDRON J:   Yes, yes, thank you.

MS HOLMES:    If your Honour pleases.  That outline, to some extent, addresses your Honour Justice Gaudron’s question.  It is the applicant’s position that this matter is peculiar for the reason that there, in fact, from the standpoint of the company, was no purpose.  There was no purpose for the entrustment whatsoever.  Your Honour, in this matter, as your Honour would be aware, the applicant wrote two cheques ‑ ‑ ‑

GUMMOW J:   They were not cheques, actually.  They were cash cheques, were they not?

MS HOLMES:    Your Honour, the Full Court, I think it was, with respect – sorry, Justice Wicks, on the first appeal got that wrong.

GUMMOW J:   Were not they all paid cash?

MS HOLMES:   The second cheque was made out to cash, if your Honour pleases.

GAUDRON J:   The cheque which was misappropriated, if we can use that word, was written out to cash.

MS HOLMES:    That is right.  The first cheque, indeed, your Honour, I need to ‑ ‑ ‑

GUMMOW J:   The one that was misappropriated was made out to cash.

MS HOLMES:    Yes, your Honour.

GUMMOW J:   That is what I am trying to put to you.  That is not a cheque.  It is a mandate on the bank.

MS HOLMES:    Yes, thank you, your Honour.  I use the term cheque loosely ‑ ‑ ‑

GAUDRON J:   I presume you accept it is a valuable security.

MS HOLMES:    Yes, that is accepted by the applicant.

GUMMOW J:   Why is it not entrusted?

MS HOLMES:    For this reason, your Honour, that an entrustment may or may not require, and this is uncertain, in my submission, a common or mutual intention or purpose.

GAUDRON J:   On whose part?

MS HOLMES:    Well, common, in my submission, your Honour, means on the part of both the person entrusting the valuable security and the person in trustee with the valuable security.

GAUDRON J:   In this case, the person entrusting it was the corporation.

MS HOLMES:    That is right.

GAUDRON J:   Acting through its agents.

MS HOLMES:    Yes, your Honour.

GAUDRON J:   Of which your client was one.

MS HOLMES:    With respect, your Honour, the applicant was not, in this context, an agent of the company.

GAUDRON J:   He was never anything but an agent of the company, was he?

MS HOLMES:    The position was this, your Honour ‑ ‑ ‑

GUMMOW J:   What was he going to go down to the bank as?

MS HOLMES:    In that respect, in that narrow sense, if your Honour pleases, the applicant was an agent of the company but for the purposes of this particular event, the applicant was not entrusted with a blank cheque book.  The applicant always had to get a counter signatory.  The applicant was never entrusted with a blank chequebook.  The applicant, by going to a director of the company when the applicant required a counter signatory for a specific purpose, and in this case the purported purpose was to pay wages, was, at that point, entrusted, on the Crown’s case, with a particular cheque.

GAUDRON J:   And why not?

MS HOLMES:    Well, the applicant’s submission is, your Honour, that at that point the company never intended to entrust the applicant with this cheque.  The applicant was never entitled to this cash cheque ‑ ‑ ‑

GAUDRON J:   I dare say the company never had any intention other than that cheques drawn to cash on the company’s account, in the possession of any of its agents, were entrusted to those agents for the purposes of the company.

MS HOLMES:    Indeed, your Honour, but ‑ ‑ ‑

GAUDRON J:   Well, is that not sufficient?

MS HOLMES:    In my submission, that is not sufficient, your Honour, and may I start by saying in response to that question, that this would lead to the peculiar situation in these circumstances that when the applicant received the counter-signed valuable security, the applicant, upon receipt, could never use that security for the purported purpose.  You see, the applicant tricked the director, as agent of the company, into believing that there was a purpose but, indeed, there was no purpose.  So, if this is ‑ ‑ ‑

GAUDRON J:   What does it matter what purpose the co-signatory had if, as you concede, the company had no purpose in allowing your client to have cash cheques drawn on the company account other than for the purposes of the company?

MS HOLMES:    It matters, with respect, your Honour, because the – well, for two reasons.  The first reason is that the section 184 requires that there be an entrustment for a particular purpose.  If that purpose does not exist and, in fact, if once the applicant had possession of valuable security, they could not apply it for that purpose ‑ ‑ ‑

GUMMOW J:   The purpose was to take it to the bank to get the wages.  I mean, there is a deep air of unreality about all of this, I must say.

MS HOLMES:    Well, with respect, your Honour ‑ ‑ ‑

GUMMOW J:   A perfectly ordinary transaction really.

MS HOLMES:    Yes ‑ ‑ ‑

GUMMOW J:   Go down and get the wages with a cash cheque.

MS HOLMES:    Your Honour, there is no question, on what your Honour says, that there may have been an offence that occurred ‑ ‑ ‑

GAUDRON J:   You are making up this purpose, are you not, for the purposes of this section, “Any person…..being entrusted”  ‑ ‑ ‑

GUMMOW J:   “in order that”  ‑ ‑ ‑

GAUDRON J:  

in order that he may retain in safe custody, or apply, pay or deliver for any purpose or to any person, the property or any part thereof –

Now, all he has to do is - he is entrusted with a cheque, that he should retain it or apply it for the company’s purposes.

MS HOLMES:    Or for a purpose, your Honour.

GAUDRON J:   Well, for any purpose, “or apply”, for the company’s purpose.

MS HOLMES:    With respect, your Honour, in my submission, the whole notion of an entrustment requires an interpretation of the terms of the entrustment, and your Honours will be aware of the decision of this honourable Court in Stephens, where two Judges, his Honour Chief Justice Barwick, as he then was, with whom I think Justice Stephens agreed ‑ ‑ ‑

GAUDRON J:   A somewhat different factual situation, was it not?

MS HOLMES:    Yes, it is a difficult ‑ ‑ ‑

GAUDRON J:   Where you had to identify some relationship between the persons concerned, but it is very difficult in identifying the relationship between your client and the company.  He was an agent of the company; he was a trusted agent of the company; is that not right?

MS HOLMES:    He was an agent of the company in certain respects, your Honour, but when the applicant obtained a counter-signatory for a particular purpose, and he took along the print-out of the wages and said to the counter-signatory, “I need to pay these wages” - and this is the second time he had done this.  The first time he did it and got a cheque made out to Armaguard counter‑signed.  But on the second occasion, he went to the second counter signatory, who was a director, and said, with the print-out, “I need money to pay these wages”.  In fact, he did not need money to pay those wages, they had already been paid.

GAUDRON J:   If that was the purpose on which the cheque came to him, that was not the purpose for which he used it, was it?

MS HOLMES:    With respect, your Honour, he could not use it for that purpose because that purpose had been fulfilled.

GAUDRON J:   Well, exactly.  Therefore, he satisfies the terms of subsection (a).

MS HOLMES:    Well, in my submission, your Honour, he does not, because, in fact, there has been no entrustment for a purpose.  In my submission, your Honour, an entrustment may or may not require a common intention as a requirement, that is uncertain from Stephens.  But in the applicant’s submission, a common intention certainly is required.  That is the nature of entrustment.  Otherwise, your Honour, the applicant may be guilty of larceny by trick, larceny as a servant.  But one thing, in my submission, your Honour, that he is not guilty of, is fraudulent conversion.  He has not been entrusted for a purpose.  There was never a purpose.  The purpose did not exist.

When he got possession of the cheque, he could not go and fulfil that purpose, that was impossible.  In my submission, your Honour, these are matters that, in many contexts when the notion of entrustment arises, are critical. 

The second point of importance that this matter raises is the nature of a conversion.  On the Crown case, the cheque or the valuable security was converted when it was taken to the bank and cashed.

GUMMOW J:   It was not converted.  Conversion is not the right word, is it?

MS HOLMES:    Yes, well, I am sorry, your Honour, yes, that a conversion occurred at that stage.  In the ‑ ‑ ‑

GUMMOW J:   Conversion of what?

MS HOLMES:    On the respondent’s case, that is when a conversion of the thing entrusted occurred.  That is the respondent’s case.  The applicant ‑ ‑ ‑

GUMMOW J:   The word “conversion” does not appear in the section, does it?

GAUDRON J:   Yes.

GUMMOW J:   “fraudulently converts to his own use or benefit” – “fraudulently converts”.

MS HOLMES:    Your Honour, at the point where the applicant went to the ‑ ‑ ‑

GUMMOW J:   The “proceeds”, you see.

MS HOLMES:    With respect, your Honour, the applicant was never charged with converting the proceeds and the Crown has explicitly stated on each occasion this matter had been before the court that it does not rely on an allegation that the proceeds were converted.  Now, in my submission, your Honours, when the applicant went down and exchanged the valuable security for cash from the bank, if there was an entrustment, at that stage he did nothing contrary to the terms of the entrustment.  The applicant may have converted the proceeds.  Now, at the stage of the authorities, at this stage, your Honours, there are many cases to which my friend has referred in the outline which suggest that something – a conversion for the purposes of the Act has occurred when the bank pays money in, if you like, exchange for the valuable security.

But all of those cases, in my submission, are when someone in the circumstances of the applicant banks the cheque or deposits it into an account.  At that stage, a relevant conversion, in my submission, has occurred because something has happened that is contrary to the terms of the entrustment.  But when, in this case, if there has been an entrustment, the applicant received cash from the bank in exchange for the valuable security, in my submission, your Honours, there has been no conversion.  There has been no act done contrary to the entrustment if, indeed, there was an entrustment, which is contrary to the applicant’s submission.

The notion of conversion is present in nearly all the relevant Acts, your Honours.  The Crimes Act of New South Wales talks of appropriation but the Court of Appeal of New South Wales in the matter of Glenister, which is in my friend’s outline, clearly states that the common law ideas of conversion apply equally to the Code States and to the New South Wales notion of misappropriation.  This is a matter, in my submission, your Honours, that is worthy of consideration by this honourable Court. 

Your Honours, in my submission, finally, in relation to the notion of entrustment, it is important to start by analysing the section and analysing what, in fact, is required for an entrustment.  An entrustment is something that requires interpretation and in the case of Stephens ‑ ‑ ‑

GUMMOW J:   It may be a bailment may be good enough, might it not?

MS HOLMES:    It could be a bailment.  I mean, this ‑ ‑ ‑

GUMMOW J:   Why you need a fiduciary duty does not immediately appear to me.  I know they said that in Stephens.  Why you would inject that into criminal law, I cannot imagine.

MS HOLMES:    It still has been held, with respect, your Honour, since then that a fiduciary duty is required.  In this respect, the South Australian legislation is peculiar in requiring a fiduciary duty apart from certain provisions in the New South Wales Crimes Act which still talk of this notion of entrustment or intrustment, as the case may be, which still on the authorities requires a notion of fiduciary duty.

GAUDRON J:   Well, in any event, you have that here, have you not?

GUMMOW J:   Yes, exactly.

MS HOLMES:    The applicant concedes that it is likely there is fiduciary duty, yes.  But what the applicant says there is not here, is any notion of common intention, whether one looks subjectively, whether one looks at it objectively.

GAUDRON J:   Well, I do not understand why you need to write common intention into the section anyway.  I can well understand why you need to look for common intention when you cannot find a distinct relationship, but the section does not say that.

MS HOLMES:    No, the section does not say that, your Honour, but in many circumstances, and this is one such circumstance, the terms of the entrustment must be ascertained.  Similar, if your Honour pleases, to the case of interpreting a contract, which is really what the High Court were doing in Stephens.  They were interpreting the contract to determine the nature of the relationship between the parties and, therefore, the nature of the entrustment.  So, in my submission, in that sense, some sort of common intention or, at the very least, a common purpose is required.

It is very difficult, in my submission, your Honour, to see how, indeed, there can be an entrustment from the company’s point of view to the applicant when the company was tricked into thinking there was a purpose.  The company never intended at all to pay the applicant, or for the applicant to have possession of the valuable security.

GAUDRON J:   They intended him to apply the valuable security or its proceeds for the purposes of the company.

MS HOLMES:    With respect, your Honour, if that had have been the terms of the entrustment, the applicant would have been entrusted ‑ ‑ ‑

GAUDRON J:   That would have been necessarily the terms of this entrustment arriving from the relationship he had as agent of the company.

MS HOLMES:    With respect, your Honour, if either the relationship he had or the terms of the entrustment were such, the applicant would have been able to draw cheques himself without the need for a counter signatory.  The fact that he had to go and get a counter signatory means it is at that stage that the applicant is entrusted with a certain thing, in this case a valuable security, and it is at that stage that one must look at the terms of the entrustment.  The terms of the entrustment was that the applicant would use that money, or the proceeds, for a certain purpose.

Now, in my submission, your Honours, the applicant could not – it was not possible to use those proceeds for that purpose at that stage.  That may be because he is guilty of larceny of the valuable security.  Larceny by trick, if you like, maybe for any number of reasons.  But at that stage, he could not then go and serve the purported purpose.  In my submission, it is that notion that distinguishes the concept of fraudulent conversion and the concept of an entrustment from other offences such as larceny or embezzlement. 

Finally, your Honours, I emphasise the fact that the applicant has been charged specifically with fraudulent conversion of the particular made-out security, not with conversion of the cheque book or a blank cheque, but of a particular made-out security.

GAUDRON J:   Of a cash cheque.

MS HOLMES:    Of a cash cheque, yes.  Cheque made out to cash, your Honour.

GAUDRON J:   Yes, a mandate to the bank.

MS HOLMES:    Yes, a mandate to the bank to pay out that amount of money.  The applicant has not been charged with conversion of the proceeds and it has been the Crown ‑ ‑ ‑

GAUDRON J:   That surely does not matter, does it?  If he was entrusted with this mandate to the bank, on any view of the facts, he fraudulently converted the proceeds to his own use and benefit.

MS HOLMES:    The applicant may have fraudulently converted the proceeds but it is never ‑ ‑ ‑

GAUDRON J:   Yes.  Well, it may not be never but, Ms Holmes, this Court is hardly likely to grant leave for a fine debating point when the facts clearly bring it within the subsection.

MS HOLMES:    If your Honour pleases, it is an important point of principle that people are not convicted of something for which they are not charged ‑ ‑ ‑

GAUDRON J:   Well, he was charged with an offence under 184.  It must all turn on entrustment in the end, must it not?

MS HOLMES:    In my submission, your Honour, it turns on what he is charged with which was an entrustment of the cash cheque, or a cheque made out to cash.  He was not charged with either entrustment of the proceed – well, with respect, your Honour, the correct charge in relation to proceeds would have been embezzlement of the proceeds, and the South Australian legislation clearly distinguishes between these offences.  But he was not charged with embezzlement of the proceeds.  If your Honours please.

GAUDRON J:   Yes, thank you, Ms Holmes.  We need not trouble you, Mr Solicitor.  Do you seek costs in this matter?

MR SELWAY:   No, your Honour.

GAUDRON J:   In this matter we are satisfied that the proposed appeal enjoys no prospect of success and, accordingly, special leave is refused.

AT 3.49 PM THE MATTER WAS CONCLUDED