NIML Ltd v MAN Financial Australia Ltd

SUPREME COURT OF VICTORIA

COURT OF APPEAL

No. 7113 of 2000

NIML LTD.
(ACN 007 016 186)

v.

MAN FINANCIAL AUSTRALIA LTD.
(FORMERLY ORD MINNETT JARDINE FLEMING FUTURES LTD.)
(ACN 001 662 077)

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JUDGES:		BUCHANAN and NETTLE, JJ.A. and BONGIORNO, A.J.A.
WHERE HELD:		MELBOURNE
DATE OF HEARING:		15, 16 and 17 May 2006
DATE OF JUDGMENT:		19 June 2006
MEDIUM NEUTRAL CITATION:	[2006] VSCA 128	1st Revision 6 July 2006

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BANKS AND BANKING – Cheque – Conversion of cheque - Cheque drawn by fraudulent employee of appellant in pretended exercise of authority to draw cheques on appellant’s account for appellant’s purposes – Cheque deposited with collecting bank for credit to account of respondent – Collecting bank the same bank as paying bank – Whether bank’s authority to pay cheque amounted to authority to collect proceeds for account of respondent.

AGENCY – Ostensible authority - Whether ostensible authority of fraudster to draw cheques included ostensible authority to deposit cheques for collection -  Notice - Whether collecting bank respondent’s agent to know - Whether notice to collecting bank as agent for respondent was notice to respondent.

TORTS - Conversion - Whether collecting bank liable for conversion of cheque – Vicarious liability - Personal liability as principal of innocent agent - Whether respondent vicariously or personally liable for conversion of cheque by collecting bank – Whether protection afforded to collecting bank by s. 95 of Cheques Act 1986, extended to respondent – Cheques Act 1986, ss. 94 and 95.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr A.G. Uren, Q.C. with Mr P.J. Riordan, S.C.	Monahan and Rowell
For the Respondent	Mr J.B.R. Beach, Q.C. with Mr C.M. Caleo	Freehills

BUCHANAN, J.A.:

1. In my opinion the appeal should be allowed, the judgment below set aside and judgment entered for the appellant for damages for conversion for the reasons stated by Nettle, J.A.

NETTLE, J.A.:

1. This is an appeal from a judgment given in the Commercial and Equity Division on 15 December 2004.  The appellant (“NIML”) sought to recover from the respondent (“MFA”)[1] some $2.6 million misappropriated from NIML by one of its employees.  The theft was effected by means of cheques drawn on NIML’s account with Westpac Banking Corporation (“Westpac”) and the crediting of the proceeds of the cheques to thief’s private futures trading account with MFA.  NIML contended that MFA was liable for conversion of the cheques or alternatively for the amount of the cheques as moneys had and received to the use of NIML or alternatively as property knowingly received in breach of trust.  The judge dismissed the claim.

   [1]Formerly, Ord Minett Jardine Fleming Futures Ltd.

The facts

1. At relevant times NIML managed the funds of the Norwich Life group of companies and of a number of large external superannuation funds.  It  had a cheque account with Westpac at the Westpac branch at 341 George Street, Sydney (“the NIML account”).  It was a term of the NIML account that all cheques be signed by two authorised signatories.  Shane Burke,…