Man Financial Australia Ltd v NIML Ltd

[2006] HCATrans 537

[2006] HCATrans 537

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M94 of 2006

B e t w e e n -

MAN FINANCIAL AUSTRALIA LIMITED (FORMERLY ORD MINNETT JARDINE FLEMING FUTURES LIMITED)

Applicant

and

NIML LIMITED

Respondent

Application for special leave to appeal

KIRBY J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 29 SEPTEMBER 2006, AT 12.30 PM

Copyright in the High Court of Australia

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friends, MR J.B.R. BEACH, QC and MR C.M. CALEO, for the applicant.  (instructed by Freehills)

MR. A.G. UREN, QC:   If the Court pleases, I appear with my learned friend, MR P.J. RIOARDAN, SC, for the respondent.  (instructed by Monahan & Rowell)

KIRBY J:   The Court would be assisted by hearing from you first, Mr Uren.

MR UREN:   I wonder if we might address ourselves to the reasons why special leave is said to be appropriate in this case rather than to run through the argument itself.  It seems to us there are four points which are relevant on the application for special leave.  This is done by way of, in a sense, putting in our own words the propositions which we ‑ ‑ ‑

KIRBY J:   We are not quite hearing you.  This is a big court. 

MR UREN:   I am sorry, your Honour.  This is by way of putting ‑ ‑ ‑

KIRBY J:   There is no court in Australia where the Bench is so far away from counsel.  We like to be closer normally, but you will have to speak up or I will not hear you.

MR UREN:   I hesitate at this present stage to confess that your Honour is not the first person who has made that observation with respect to myself, rather than the Bench.  The four points we make is this – and it is really putting in our own words what we think corrects the spin which appears in the submissions for the applicant, if I could describe it in that way without it being offensive.

KIRBY J:   Can I address your attention to that matter that has, at least in my mind, led to the procedure which has been adopted and that is paragraph 27 on page 93 of the application book where the applicant has laid emphasis upon the impact which this decision has on the banking transactions of very many persons and, therefore, if we have a case of this kind with well represented parties and with interesting legal questions, you might well walk away with success, but is it not a matter suitable to the grant of the special leave given the role of this Court in such questions of law?

MR UREN:   Your Honour has, coincidentally, I think, alighted on our first point, which is really this.  This is the case in which the – if, let us say, an ordinary course had been followed, that is to say the cheques in question had been sent to Man Financial instead of being delivered to the bank with Man Financial’s request, if they had been given to Man Financial and Man Financial, in the course of the hundreds or thousands of cheques it gets per week, had sent them off in the ordinary bundle to its bank for collection, then it is perfectly clear that Man Financial would be guilty of conversion or be liable in conversion because it would have dealt with the cheques, which was somebody else’s property in this case, in a way which denies the rights of that person in the cheques. 

Now, what has happened in the present case is, for its own convenience, Man Financial has not adopted that course but it has short‑circuited the route from the person who was going to pay it to its bank by saying to that person, “You go and pay direct.  You save me the trouble.  You go and do it.  I won’t have to do it myself for reasons of convenience”, whether it be commercial convenience presented by the type of business it was carrying on or otherwise, but for reasons of convenience which relate to itself alone and its own business it allowed the cheques to be deposited straight into its account.

HAYNE J:   That may be so, and does that not bring you up to the tension to which the applicant points at page 88 in paragraphs 8 and 10 of its argument?  Paragraph 8, a denial vicarious responsibility; paragraph 10 ‑ ‑ ‑

MR UREN:   No, it does not, with respect.  If I can go back to what I was putting is this.  What is said to be the point of importance in paragraph 27 merely relates to the way in which the applicant itself decides to conduct its own business.  The cheques were delivered to its agent for collection by a method which it had authorised.  In those circumstances, it is our submission that there is no point of public importance or sufficient likelihood of error when what is said to be the ground of the point of public importance is simply that the ordinary method of MFA getting paid its cheques and having it deliver it to its bank was circumscribed by it telling somebody else that it could do it direct. 

There is no real difference, in substance, we would submit, between MFA taking the cheques to the bank itself and telling somebody else it can take the cheques.  The difference is one which makes the culpability, let us say, of MFA, if that is the correct word, more clear rather than less, because it has taken out of its own hands the ability to see whether the cheque, which is being paid to its bank account is one to which it has title or not.  So blindfolding itself by the actions which it has undertaken, it now says that its actions in giving itself this commercial blindfold entitle it to special leave.  Why should that be the case?  It has done this for its own reasons and it has allowed a course of action to take place which has facilitated the perpetration of a fraud. 

Now, these are not matters which, in our submission, give rise to points of public importance in favour of Man Financial; they are matters which make Man Financial’s position more culpable and more liable rather than less liable.  It just said to somebody, who turned out to be a thief, “You do directly what otherwise we would be doing ourselves”, and that is the simple fact of what has occurred.  If other people wish to do that, then they should take upon themselves the difficulties and responsibilities which that course gives rise to.  

If 50,000 or 10,000 or any other number of creditors in the course of them conducting their own affairs say to their debtors, “You can pay my bank direct instead of paying me and giving me the job of presenting the cheque”, why should that be a matter which gives rise to a point of public importance in their favour such that it is likely to be said that this short‑circuiting of the process gives rise to some defence which they would not have had if they had taken the cheque into their own hands and not authorised somebody else to pay cheques directly into their account?  They should be more rather than less liable for that in that course. 

Although the point which is made in paragraph 27 is one of factual distinction between this case and many cases in which there is a conversion of cheques, nonetheless it is not a point which is exculpatory.  In our submission, it is a point which is one which gives rise to less features of exculpation.  The person who takes the cheque to the bank is doing so on the instructions and authority of the person who would be paying it in themselves if they got the cheque.  So we say, rhetorically, why should that be said to give rise to a point of law in their favour?  I must say we, with the greatest of respect, are unable to see it.  We have been unable to see it at the beginning of the case and we are unable to see it after reading my learned friend’s submissions. 

The point of exculpating someone who allows somebody else to pay directly into their account is not one which is inherently attractive.  If this case has held, as it seems to us to have done, that people who allow that to be done run the risk which they would have run had they received the cheque in their own hands, then it is not a matter of public importance that that situation be reversed.  It may be a matter of public importance if the contrary had been held because people could then avoid the responsibilities of the laws of conversion by letting somebody else do something for them which they would have done themselves if their business had been conducted differently. 

This is a case in which, in our submission, the appropriate rule was recognised which is that there is no difference in favour of the applicant simply because it allowed somebody else to pay directly into its account for its own purposes instead of paying directly into the account itself and receiving the cheque itself.  So it is a simple point.  It is rather like a recent…..situation in perhaps a broader sense.  So, in our submission, paragraph 27 gives rise to no proposition at all in favour of the granting of special leave; rather, to the contrary.  That then is the first point that we were going to make in favour of the denial of special leave.

The next point is that the applicant says that it has no liability for what Westpac did, even though it seems to us in law there is no doubt that Westpac was the agent of the applicant, because the specific act was not directly authorised.  Now, we take it by that to mean that the specific act of Burke paying the specific cheque on the particular occasion that he did was not the subject of a specific or direct authorisation but, in our submission, Justice Nettle correctly stated the law in this regard at page 66 of the application book in a way which it does not seem to us is denied by the applicant ‑ ‑ ‑

HAYNE J:   Well, while you are at that page, page 67, paragraph 56 at line 40, what are the acts of Westpac there referred to?  Are they the same acts that are encompassed by paragraph 35, page 61, line 2?

MR UREN:   Yes.  The authorisation is not with respect to a specific cheque but it is with respect to a class of cheques.  In other words, Burke was authorised to pay cheques directly into MFA’s account with Westpac.  That is what he did.  What he did was within the class of actions that he was authorised to do, namely, to pay into the account of Westpac ‑ ‑ ‑

HAYNE J:   Is paragraph 35 a finding that Westpac’s treatment of the paper was not a conversion?

MR UREN:   No.  It is not liable for conversion because ‑ ‑ ‑

HAYNE J:   That is to say, is it a finding that Westpac did not act with respect to the paper in a manner inconsistent with the rights of the person immediately entitled?

MR UREN:   No.  It is a finding that Westpac, as the paying bank, was entitled to rely on the apparent authority of Burke as in respect of payment.  Westpac accidentally, in this case, had two capacities.  One was the paying bank and one was the collecting bank.  As the collecting bank, the only person whose authority it can act on is the authority of its client or its customer, and that is MFA.  As the paying bank, the only person whose authority it can act on is the authority of NIML. 

Westpac may or may not, depending on the circumstances, which have not been investigated in this case, have had a defence under the Cheques Act of good faith and no negligence, or it may also have had a defence of a common law nature of apparent authority.  That is a different issue.  But the fact that Westpac is not liable for conversion of the cheques does not mean that Westpac did not do an act which in law would constitute a conversion.  What it means is that Westpac has got a defence, but Westpac’s defence cannot inure – if I go back a square.  Westpac’s defence, if there is one, in relation to its position as a paying bank, of course, cannot inure in favour of Man Financial because Man Financial is not acting for it as a paying bank, and so far as Westpac’s defence as a collecting bank might be concerned that is a defence which is personal to the bank. 

What the applicant seeks to do here is basically to rely on a defence which has been held in a case which has stood for a long time in the judgment of Mr Justice Isaacs in the Permewan Wright Case, a defence which is personal for the bank itself and given for commercial reasons no doubt applicable to banks in their own favour.  But the fact that Westpac is not liable for conversion does not mean that Westpac has not done an act which is a denial of the title of the person who is entitled to the cheque.  There is no doubt that NIML was always entitled to the cheque and there is no doubt, in our submission, that what has been done with respect to the cheque is denial of its title. 

Now, there may or may not be a defence in Westpac given by the Cheques Act or so far as collection is concerned, but it is not clear, I must say, and it has not been explained why that makes the case one in which Man Financial has the benefit of the defence which was given peculiarly to the bank and for reasons which, no doubt, relate to bankers, but it is true that the applicant in this case has endeavoured to construct a basis for such a submission by saying that the true nature of the principal’s liability for the acts of its agent depends on the acts of the agent constituting a tort but, in our submission, the true description of liability relates to the attribution of the acts of the agent, if they are properly authorised, to the principal, not the attribution of the torts.  It is a matter of confusion to insist that the principal is limited to that of torts and not to actions in general. 

In any event, I see that time is expiring.  It would seem to us that there is no public interest to be served in adjudicating upon the point of whether somebody who, if they had received the cheques themselves and given them to their bank, would have been liable for conversion is not liable for conversion because instead of receiving the cheques and giving them to the bank it tells somebody else they can receive the cheques and give them to the bank.  That is all this case amounts to.  There is no more and no less in it than that. 

The endeavours to escape liability which invention has given rise to really relate to the denial of that proposition and to the assertion of the proposition that it is much better for people not to receive cheques but to let people pay into their bank direct because by doing so nobody will be liable for conversion.  The bank will not be liable because it may have a defence under the Cheques Act and the payee will not be liable either because it has never seen the cheque. That is all this case amounts to and the contrary of that proposition was affirmed by the Court of Appeal and, in our submission, no public interest or point of public importance arises with respect to the reversing of that situation.  If the Court pleases.

KIRBY J:   Yes, thank you, Mr Uren.  Mr Jackson, the Court does not need your assistance generally but there are two questions.  First of all, if special leave is granted, as it will be, how long would the hearing of the matter last in your estimate?

MR JACKSON:   Your Honour, I think it is a one‑day case.

KIRBY J:   Do you agree with that, Mr Uren?

MR UREN:   Not entirely, your Honour, because we foreshadowed the possibility or the likelihood of raising either by way of notice of cross‑contention or by cross‑appeal the ‑ ‑ ‑

KIRBY J:   You did not mention these intimidating thoughts in your ‑ ‑ ‑

MR UREN:   Well, I certainly would not wish to intimidate the Court by anything I have said, but nonetheless ‑ ‑ ‑

KIRBY J:   But you say it is a day and a half?

MR UREN:   ‑ ‑ ‑ it is a matter mentioned in our submissions.

KIRBY J:   I would have thought the issue is refined and with counsel now in the case the matter would only be a day’s case.

MR UREN:   If I mention the words “knowing recipient of trust moneys” and things of that sort, it may be the case would take a little longer.

KIRBY J:   Yes, I will consider ‑ ‑ ‑

HAYNE J:   Were those issues alive in the courts below?

MR UREN:   Yes, they were.  They were raised in the Court of Appeal.  The Court of Appeal said it did not disagree or it agreed with the findings of the trial judge but the other bases of claim were dealt with by the trial judge ‑ ‑ ‑

KIRBY J:   Justice Nettle said he was inclined to agree with the trial judge on those points, did he not?

MR UREN:   Yes, he did.  Now, if we do have to proceed by way of cross‑appeal, then we do have to seek special leave, which could be done at the hearing itself.  That seems to be the ordinary course ‑ ‑ ‑

KIRBY J:   That could be moved for at the return of the present appeal.

MR UREN:   It could, yes, in which case ‑ ‑ ‑

KIRBY J:   Yes, thank you.  Do you adhere to your estimate of a day, Mr Jackson, in light of what ‑ ‑ ‑

MR JACKSON:   Your Honour, at the time when I said a day I had not directed my attention to the point my learned friend made and I think it is probably right to say it would take more than a day.  I suspect not more than a day and a half.

KIRBY J:   Yes.  I drew to the attention of the parties of my use of Westpac as the bank and I am grateful to the parties for indicating that they had no objection to my participating in the special leave hearing, but for the purpose of the return of the appeal is there any contingency in which Westpac would be liable in these proceedings or not?

MR JACKSON:   Not as far as we know, your Honour.

KIRBY J:   No.   Both parties agree with that?

MR UREN:   No, we cannot see any basis upon which Westpac could be the subject of any criticism at the moment, your Honour.

KIRBY J:   Yes, thank you very much.  There will be a grant of special leave to appeal in this matter.  I will note that the parties estimate that it will take a day and a half.

AT 12.53 PM THE MATTER WAS CONCLUDED