Pope v Flinders Management; King v Mane Market P/L No. Scciv-00-718, Scciv-00-717

POPE v FLINDERS MANAGEMENT PTY LTD
KING v MANE MARKET PTY LTD
[2001] SASC 278
Full Court: Doyle CJ, Nyland and Gray JJ

DOYLE CJ I would dismiss the appeals and the cross-appeal. I agree with the reasons given by Gray J. There is nothing that I wish to add to those reasons.
NYLAND J I agree that the appeals and cross-appeal should be dismissed for the reasons expressed by Gray J.
GRAY J
Background
The Litigation
The trials from which these appeals and a cross appeal are brought were heard together. They were the subject of a combined set of reasons.
The appellants, David Pope and Tyrone King, were the defendants in the actions and the respondents Flinders Management Pty Ltd (“Flinders Management”) and Mane Market Pty Ltd (“Mane Market”) were the plaintiffs.
Flinders Management claimed the proceeds of a cheque drawn on its account on the basis that payment of the proceeds to Mr Pope was an unauthorized payment amounting to conversion. The cheque was signed by Russel Temple, one of its directors, and made payable to Mr Pope in the sum of $60,000. In the alternative Flinders Management sought relief for a breach of a constructive trust, sought an order for restitution and sought Corporations Law relief.
Mr Pope admitted receiving and endorsing the cheque in favour of Mr Temple. Mr Pope’s defence was that the cheque was the repayment of a loan that he had made to Flinders Management in or about May 1994. Alternatively, it was said the cheque was paid to him as a refund of an investment that he had made with Flinders Management at or about the same date.
Mane Market claimed the proceeds of two cheques drawn on its account. Both cheques were signed by Mr Temple, one for $20,000 and the other for $80,000. The cheque for $20,000 was made payable to Mr King. The cheque for $80,000 was made payable to Mr Temple. It was asserted that Mr King received both cheques in circumstances that amounted to conversion. In the alternative it was alleged that Mr King without the authority of Mane Market delivered both cheques to Mr Temple and thereby received the property of Mane Market, being $100,000.00, in such circumstances to cause a constructive trust to arise in favour of Mane Market. Other alternative claims were advanced, but all depended upon Mr King receiving both cheques.
Mr King admitted receiving the cheque for $20,000. Mr King’s defence was that the cheque was the repayment of part of a loan of $25,000 he made to Mane Market in or about January and February 1994. Alternatively it was said that the cheque was the repayment for an investment he had made by advances to Mane Market as a member of “the Ocean East Group” of companies. His defence to the claim for the $80,000 was that he had no knowledge or dealing with the cheque.
The Trial Judge’s Conclusions
The trial judge rejected Mr Pope’s defences and entered judgment for Flinders Management in the amount of $60,000. Mr King’s defences were rejected with respect to Mane Market’s claim for $20,000 and judgment was entered for Mane Market in that sum. However, the trial judge rejected Mane Market’s claim for $80,000.
Mr Pope and Mr King have appealed against the judgments entered against them. Mane Market has cross appealed with respect to the dismissal of its claim for the $80,000.00.
The Personal Relationships
The relationships between Mr Temple, Mr Weeks, Mr Pope and Mr King are important. The following findings of the trial judge were not challenged:
“King gained the degree of Bachelor of Education in 1985 when he was about 21 years old and then worked as a teacher in country areas until 1989 when he became a fireman with the South Australian Fire Brigade. He said he met Temple (who is about 5 years his senior) in 1978 and while he was studying he worked at Temple’s hotels, the Victor Harbour Hotel and the St Leonards Hotel.
...
King said that in 1992 he and Temple had a common interest in horse racing as a hobby and then, in 1993, when Temple acquired with Manuel a number of horses and wanted to bet on them but there was no telephone betting available in South Australia, King was recruited to fly to interstate race meetings to place bets, at better odds, often in amounts as large as $60,000 to $100,000. King said that Weeks, whom he learned in 1993 was to become involved in the Newmarket Hotel, was also a punter and an associate of Manuel and King often placed bets for Weeks. King said that in the years 1994 to 1996 he was earning $6,000 per month for going interstate to place bets, none of which he declared as income.
...
Temple and Weeks were members of a syndicate which betted on horseracing. In that connection and beginning in about 1992, King (who had been acquainted with Temple since about 1978) acted as an agent for Temple and sometimes for Weeks journeying to interstate racing tracks to place bets on horses. Pope, by about 1990, was working in his father’s business as a bookmaker. In that year eight bookmakers formed a venture called Adbet which, as I understand it, was the first to be granted a licence in South Australia to conduct betting over the telephone. In the course of that business Pope, in about 1993 and 1994, came to know Temple and Weeks and also King.”
In late 1993 the interest in the hotel businesses was “sharpened” by the prospect of the introduction of poker machines. This interest, as later discussed, led to Mr Pope and Mr King advancing monies to Mr Temple.
The Company Structure
To understand the claims and defences it is necessary to trace the relevant history in the context of a complicated group of companies. Most members of the group were controlled by Mr Temple and Mr Weeks. However, third party interests were involved, in particular, in one of the companies related to the group, Scenic Outlook Pty Ltd (“Scenic Outlook”). On the hearing of the appeal the court was informed without objection that the third party held a 50% interest in Scenic Outlook.
Much turns on Mr Temple’s activities. The trial judge found that he was the managing director of the holding company Ocean East Pty Ltd (“Ocean East”) and the director of other companies in the group, including Flinders Management and Mane Market.
Mr Temple and Mr Weeks each held a 50 per cent interest in Ocean East, the holding company of a group that conducted a number of hotel businesses. Mr Temple and Mr Weeks operated Ocean East.
Ocean East was the trustee of the Temple Weeks Trust. It had a number of subsidiaries, most, but not all, were wholly owned. Ocean East held all the shares in Flinders Management. Flinders Management acted as trustee of the Flinders Hotel Trading Trust and traded as the Flinders Hotel and Lord Raglan Hotel.
Mane Market acted as the trustee of the New Market Trading Trust and traded as the Newmarket Hotel. The majority of the shares in Mane Market were held by Ocean East. There appeared to be minority third party interests held through an entity Kevandir Management Pty Ltd.
Ocean East also held 55.6 per cent of Mane Lion Pty Ltd (“Mane Lion”). Mane Lion acted as a trustee of the Old Lion Hotel Trading Trust and traded as the Old Lion Hotel.
Through Flinders Management, Ocean East held a three quarter interest in North East Management Pty Ltd (“North East Management”). Scenic Outlook, a related entity, held a minority interest in North East Management Pty Ltd. North East Management acted as trustee of the Windsor Hotel Trading Trust and traded as the Windsor Hotel. The Windsor Hotel was not acquired until about April 1994.
In November 1994 Ocean Central Pty Ltd (“Ocean Central”) was incorporated. Ocean East held all the shares in Ocean Central and, through wholly owned subsidiaries, operated the Brighton, Grange and Port Anchor Hotels.
At trial there was considerable confusion about the group’s activities. Extensive secondary business and accounting records were placed before the trial judge. However these records were inadequate and incomplete. The trial judge made the following observation:
“…both sides in these two actions readily agree [about] the unsatisfactory state of the financial records of each plaintiff and the similar state of records of other members of the group.”
The records did not allow for any proper “audit” to be undertaken. The lack of any primary records and the accepted dishonesty of Mr Temple rendered the secondary records of little evidentiary value. As the trial judge observed:
"What Temple did beginning in October 1995 to justify his actions by constructing or assisting in the construction of King’s letters and other responses to Williams was, in my view, done to disguise for as long as possible his apparently fraudulent behaviour toward the Ocean Central group and its members."
Issues on Appeal and Cross Appeal
There were three issues raised by Mr Pope and Mr King. The first was a challenge to the findings of the trial judge that relevant group companies were not indebted to Mr Pope and Mr King. The second was whether the trial judge should have made a finding that Mr Temple had the authority to solicit funds on behalf of the group of companies or any member of the group. Finally, the appellants complained that the trial judge should have found that Mr Temple had authority to repay loans from the funds of Flinders Management and Mane Market.
The primary issue on the cross appeal was the correctness of the trial judge’s acceptance of Mr King’s evidence. It was said that His Honour’s findings were “contrary to the evidence and the weight of the evidence”.
The first issue is whether Mr Pope and Mr King had made loans.
Mr Pope - A Loan or Investment
In early 1994 Mr Pope was introduced to Mr Temple as a potential investor. Mr Pope claimed that Mr Temple told him that he was the managing director of the group of hotels “The Ocean, or Ocean Central” and that:
“they were buying the Windsor, and the Flinders Hotel, The Newmarket Hotel, The Old Lion Hotel, and that’s all I remember at that stage.”
Mr Pope understood that he would have “the opportunity to invest in the poker machine revenue of a hotel or a group of hotels”.
About one week after their initial discussion, Mr Temple told Mr Pope that he had the opportunity “to invest anything from $10,000 to $100,000” into the hotel group. He asked Mr Pope if he would he like to invest. Mr Pope said that he would. Mr Temple told Mr Pope that once the money was paid he “was going to allot it to the group of hotels, and then it would be moved to a particular hotel or spread between some hotels.” The possibility of the Windsor Hotel or the Flinders Hotel were mentioned. Mr Temple added that “at some stage down the track, that [the allotment] would be finalised” and Mr Pope would “get some share certificates, some company share certificates, or something like that”. No documentation was received. The arrangement was vague in the extreme.
Mr Pope paid a total of $60,000 to Mr Temple in four separate amounts. On 11 April 1994, $15,000 cash, on 29 April 1994 $10,000 cash, on 20 May 1994, a bank cheque for $10,000 and on 20 May 1994 $25,000 cash.
When delivering the bank cheque on 20 May 1994 Mr Pope said to Mr Temple that it:
“was [the] final payment towards poker machine investment in the group of hotels.”
The trial judge summarised Mr Pope’s evidence about a subsequent change in the arrangement as follows:
“[It] meant that I would have been a shareholder in the group of hotels, not just the poker machine revenue and operations, but the whole group, a shareholder in all aspects of the whole group, which I did not want to be a part of ... I didn’t want to be a hotelier. The hotels that I knew of were very unprofitable, from just my general knowledge.’ And [Mr Pope] told Temple he ‘wouldn’t mind (the investment) back.’ He said Temple told him he could reinvest the money at about 15% which he agreed to, he and Temple then went to Temple’s office, Temple produced the cheque ‘and then I just signed it over and that was the end of the meeting.”
Mr Pope said that he “pestered” Mr Temple for the return of the investment or the delivery of share certificates and was told on 29 June 1995:
“the group of hotels were changing structure and that the return on my investment, which I had kept on pestering him about, was not going to be anywhere near what he promised, and that he suggested that there was not going to be any return at all on it by way of interest.”
The trial judge made the following findings about the nature of Mr Pope’s investment.
“Except for the bank cheque for $10,000 payable to Temple, Pope has no record of the moneys he said he paid to Temple. In his letter to Williams dated 12th June 1996 Pope wrote that he advanced $60,000 to Temple –
‘.... in approximately April 1994, to invest in a hotel. I was later told about the probable formation of a group of hotels, to be known as Ocean Central Ltd. I was told my investment would be treated as a loan until this group was formed at which time I’d the option to invest or receive my $60,000 back, with interest.”
The letter does not speak of investing in poker machine revenue, or in poker machines, but an investment in an unnamed hotel, and the letter clearly implies that Ocean Central was first mentioned to Pope after he had paid his money to Temple. Ocean Central was not incorporated until November 1994. The letter does not mention share certificates but an investment in an hotel, or a loan with an option to invest in a ‘group’ to be formed. Pope said the letter, which he signed, was prepared by Temple. I infer he read it before he signed it. The letter, in my opinion, contradicts Pope’s evidence of what he said he was told by Temple, or by King in Temple’s presence, before or at the time he handed moneys to Temple. The differences bring me to conclude that Pope had little or no understanding of what was to be done with the moneys he paid, except that he anticipated a very large return, and his dealings with Temple were based on the trust he had in Temple concerning Temple’s hotel interests, whatever they might have been, and the advent of poker machines. I do not accept the import of Pope’s evidence that Temple was soliciting moneys for the Ocean Group, however called; Exhibit P5 speaks of an investment in an hotel. It may well be that Temple mentioned the Windsor Hotel which, as I have said, was purchased on 29th April 1994 and in which Scenic Outlook took a 25% interest. In my opinion the moneys Pope paid to Temple were for him to use as he saw fit on the footing that Pope was trusting him to produce a high return on some venture concerning an hotel and poker machines. I am not satisfied that Temple had authority from the plaintiff or any member of the group to solicit funds whether by way of loan or otherwise.”
The trial judge then concluded:
“I am satisfied that except for assertions made by Temple to Williams, and others, and upon which various draft accounts or ‘loan schedules’ were prepared, there is no evidence that Pope’s moneys found their way into the Ocean Group, or any member of it, particularly the plaintiff Flinders Management. Temple’s assertions were, I find, without any evident foundation in the material before the Court. What in fact happened to moneys Pope said he paid to Temple is unknown, but I am satisfied they were not paid to the plaintiff or any other member of the Ocean Group.
Accordingly I find that at the time Temple handed the cheque for $60,000 to Pope, and Pope then indorsed it to Temple, Pope was not a creditor of, or in any guise an investor in, the Ocean Group or any member of it.”
These findings present a formidable obstacle to Mr Pope’s appeal. The trial judge’s rejection of Mr Pope’s evidence has not been directly challenged. The conclusions drawn were open. The fact that Mr Pope trusted Mr Temple to invest as Mr Temple saw fit was supported by the absence of the requirement by Mr Pope for there to be any contemporaneous documentation. The evidence did not support a conclusion that Flinders Management had the responsibility or authority to repay any loan or investment of Mr Pope.
The appellant has failed to demonstrate any error on the part of the trial judge. No evidence has been identified as being overlooked. The trial judge has not had regard to irrelevant material. His conclusions are not unfair or unreasonable. Findings of fact supported by evidence have been made. They have not been successfully challenged on appeal
Mr King - A Loan or Investment
Mr King said that he wished to invest in gaming machine operations He said he paid monies to Mr Temple for that purpose in January and February 1994. Mr King asserted that Mr Temple told him that the money:
“was going into an Ocean Central pot of money to be distributed”.
Later he was told:
“that the money was going into the Windsor Hotel”.
On 25 January 1994 Mr King’s accountants wrote to Mr Temple advising:
“We are the accountants for Mr & Mrs Tyrone King.
Tyrone has asked us to advise you that the shares representing his 10% interest in the gaming-machine operations at the Windsor Hotel are to be held in the name of:
Decemel Pty Ltd (ACN: 062 984 249) as trustee for the T P & E J King Family Trust.”
The trial judge concluded that the contents of the letter of 25 January 1994 should be regarded as an accurate reflection of Mr King’s instructions. He noted that no contrary evidence was called.
The letter made no mention of Ocean Central. As earlier observed, the Windsor Hotel was not acquired until April 1994.
A letter dated 11 April 1995 on Scenic Outlook letterhead was signed by Mr Temple as managing director. The letter asserted:
“Tyrone King has placed $100,000.00 (one hundred thousand dollars) on loan with the above named company.
Tyrone will receive a Share Certificate in due course.
The Shares will be in Ocean Central Ltd.”
Mr King said that he solicited this letter from Mr Temple to be supplied to Mr King’s banker to support an application for a bank loan.
As earlier observed Scenic Outlook was not a member of the Ocean Group. A third party held shares in Scenic Outlook. Mr Temple also had an interest. Scenic Outlook had a minority interest in North East Management. The evidence did not establish that Flinders Management had authority to pay debts of Scenic Outlook.
Against this background the trial judge said:
“King maintained in his evidence that the moneys he paid to Temple were for an investment in poker machines and not by way of a loan to any particular hotel. I find that, based upon the trust he had in Temple, King left it entirely to Temple to deal with King’s moneys as Temple considered appropriate concerning King’s objective to derive a return in connection with poker machines. [The letter of 11 April 1995] shows that Temple placed King’s moneys with Scenic Outlook as a loan, apparently with a view to, at some point, securing for King by some means shares in Ocean Central. No such shares were ever issued.”
“I have found that none of the moneys paid by King to Temple went into the Ocean Group earmarked with King’s name. The entry in the Windsor journal concerning the $25,000 is probably to be attributed to false information provided by Temple.
... but whatever his purpose, by April 1995 he had by some means brought the $25,000 back into Scenic Outlook for that is the plain effect of P22 [the letter of 11 April 1995].
I find therefore that at the date of the cheques, the subject of the claim against King, he was not a creditor of or an investor in Mane Market, Ocean East, Ocean Central or any member of the Ocean group - his debtor, if any, was Scenic Outlook.”
For Mr King’s appeal to succeed, these conclusions have to be overturned. In my view there was adequate evidence to support the trial judge’s finding. The letter of 11 April 1995 forms part of that evidence. It has not been demonstrated that any relevant evidence was overlooked or that the trial judge had regard to any extraneous material. His conclusion was open on the evidence. The challenge to it must be dismissed.
The Issue of Agency

Mr Pope and Mr King complained about the trial judge’s finding that Mr Temple did not have actual implied or ostensible authority to act on behalf of Flinders Management and Mane Market. The specific findings of the trial judge included the following:
“Williams[1] described Temple to be the managing director of Ocean Central which was incorporated some months before Williams came upon the scene. Although the evidence is that Temple, as between himself and his co-directors including Weeks (who lived in Queensland) was the person responsible in an executive capacity for the Weeks/Temple hotel ventures, it is not open to the court to find that Temple also acted as the managing director of the group before the incorporation of Ocean Central, or that he was at any time the managing director of each or any other member of the group.
There is before the court a copy of the articles of association of each plaintiff. The articles provide that the directors may at their discretion borrow moneys for the purposes of the company, with or without security; they also provide that the directors may confer their powers as directors upon a managing director appointed by them. Each of the plaintiffs, as the trustee of its particular trust, has power under the relevant trust deed to raise or concur in raising money thought by the trustee to be expedient for any purpose in relation to the trust. However, as I have said, there is no evidence upon which it can be found that Temple was the managing director of either of the plaintiffs. As managing director of Ocean Central, even without specified powers conferred upon him, Temple had an implied power to “do all usual things as fall within the scope of that office”: Hely-Hutchinson v Brayhead Ltd, but borrowings for other than the ordinary day-to-day business of the company are outside the usual authority of a managing director; Re Tummon Investments Pty Ltd.
...
I am not satisfied that Temple had authority from [Flinders Management] or any member of the group to solicit funds whether by way of loan or otherwise.
...
I am satisfied that by the date he drew that cheque Temple had no authority from [Flinders Management] directly or indirectly to pay King $20,000.
...
I find, Temple had no authority to draw or sign the cheque [to Mr Pope].”
[1] Stephen Gerard Williams had been acquainted with Mr Weeks since 1975. He was an investor, property developer and associate of Mr Weeks. In early 1995 Mr Williams was asked by Mr Weeks to investigate the property holdings of the Ocean Central Group and devise methods of improving those assets. He later became the Director of Ocean Central.
Counsel for Mr Pope and Mr King submitted that the failure of Flinders Management and Mane Market to call Mr Weeks and other witnesses should have led not only to the conclusion that, their evidence would not have assisted Flinders Management and Mane Market but that as a consequence, the trial judge should have found that Mr Temple had actual authority to solicit funds for entities in the Group and to repay monies from Flinders Management and Mane Market.
The failure of Flinders Management and Mane Market to present witnesses was addressed by the trial judge:
“The plaintiff’s failure to call Gray, Krantz, Bates or Bettison was criticised by the defendants. As to Bettison there is nothing in the evidence I have heard to suggest that he would have been able to contribute anything of relevance to the plaintiffs’ case; as an employee of Quintex he does not appear to have played any part in the events material to these actions. Bates, the plaintiff’s (sic) informed the Court (Exhibit P32), was overseas at the time of the trial. Krantz, as I have said, evinced an attitude of non-co-operation with the plaintiff’s solicitors, and, in my opinion, no inference can or should be drawn that he would not have been able to assist the plaintiffs. Gray was an employee of Execucorp, a company controlled by Temple, which provided book-keeping services to the Group and, in my view, he would have been equally available to any party; I infer that if called his evidence would not have assisted the case of any party.
The absence of Weeks from the witness box is not so easily explained from the plaintiff’s standpoint. Weeks and Temple effectively controlled the group and each member of it and although, as I find on the evidence, Temple conducted the day-to-day activities of the group, it could reasonably be expected in my opinion that Weeks would have had first-hand knowledge of events, particularly in 1993 and 1994, which led to loans into the group by non-institutional lenders for the purpose of acquiring hotels or poker machines, the latter acquisitions, as I understand the evidence, being the reason for the acquisition of additional hotels. Weeks, it appears, sourced from among his own friends or acquaintances moneys which were apparently used for the group’s purposes. Upon what basis those funds were obtained and precisely how they were accounted for within the group is only as clear as the records of the group might reveal, but those records are in an unsatisfactory state although, as I understand the implication in the evidence of those whom the plaintiff did call, there has been greater success in identifying the funds contributed by those introduced by Weeks.”
The unexplained failure by a party to call a witness, may, in appropriate circumstances lead to an inference that the uncalled evidence would not have assisted that party’s case. The rule in Jones v Dunkel[2] permits the drawing of such an inference. A trial judge is entitled to take that matter into account in deciding whether to accept any particular evidence which relates to a matter on which the absent witness could have spoken. The rule also allows a trial judge to more readily draw an inference fairly to be drawn from other evidence.
[2] (1959-60) 101 CLR 298
The trial Judge made express reference to the fact that Mr Weeks was not called as a witness by Flinders Management and Mane Market. He considered that it:
“could reasonably be expected that ... Weeks would have first-hand knowledge of events ... which led to loans into the group by non-institutional lenders for the purposes of acquiring hotels or poker machines”.
However he considered that the unsatisfactory nature of the records of the group precluded findings as to the basis on which the funds were obtained and precisely how they were accounted for within the group. Such an approach was open to the trial Judge as a matter within his discretion. No error has been demonstrated. There has been no identification of any inference fairly to be drawn from other evidence not drawn by the trial Judge.
The rule in Jones v Dunkel does not permit an inference that the untendered evidence would have been damaging to the party failing to tender such evidence. The rule cannot be employed to fill gaps in the evidence or to convert conjecture and suspicion into inference or fact.
I do not consider that any error has been demonstrated on the part of the trial judge in his application of the rule in Jones v Dunkel. His Honour had regard to the relevant principles. I reject the submission that the trial judge erred in failing to make a positive finding that Mr Temple had actual authority from Flinders Management or Mane Market to solicit and repay monies because Mr Weeks was not called as a witness by Flinders Management and Mane Markets.
Agency of a Director
At trial, the issue of Mr Temple’s authority to raise and repay loans for the group was a matter of much debate.
The trial judge found that Mr Temple was the managing director of Ocean Central. He was also a director of other companies in the group, including Flinders Management and Mane Market. However as the trial judge observed there was no evidence which established that Mr Temple acted as managing director of either company. In Northside Developments Pty Ltd v Registrar-General[3] Dawson J said at [205]:
“Nor does an ordinary, individual director of a company have any ostensible authority to bind the company. A managing director may have wide powers, actual or ostensible. In Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd[4] it was held that a person who had assumed the powers of a managing director of a property company with the company’s approval had apparent authority to engage architects on the company’s behalf, this being within the ordinary ambit of the authority of a managing director of a company of that kind. And even ordinary directors may have quite significant functions entrusted to them by the company, although usually these are of a more or less formal nature, such as affixing the company seal to documents which the company requires to be executed: see Lennard’s Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd[5]. But the position of director does not carry with it any ostensible authority to act on behalf of the company. Directors can act only collectively as a board and the function of an individual director is to participate in decisions of the board. In the absence of some representation made by the company, a director has no ostensible authority to bind it.”
[3] (1990) 170 C.L.R. 146 at 205
[4] [1964] 2 Q.B. 480
[5] [1915] A.C. 705 at p.715
If an individual director is to have that power it must be as an agent delegated by the proper authority in the usual case by the Board of Directors. The evidence did not establish any relevant delegations.
Agency to solicit or repay monies
The trial judge correctly considered that given Mr Temple’s position as managing director of Ocean Central he had authority to do all the usual things that form the scope of that office.[6]
[6] Hely-Hutchinson v Brayhead Ltd & Anor [1968] 1 QB 549 at 583
Neither Mr Pope nor Mr King identified the terms of any contract entered into by Mr Temple on behalf of any company in the group. The arrangements for their investments were spoken of only in general and vague terms. There was no evidence that the transactions undertaken were part of Mr Temple’s functions as managing director of any Group entity. There was no evidence that any of the transactions were entered into in the ordinary course of business. No documentation was created. No receipts were given. There was no evidence that the usual duties of a managing director included the soliciting or repaying of monies. It follows that Mr Temple did not have authority to act on behalf of Flinders Management or Mane Market or for that matter any company within the group for the purposes of soliciting funds.[7] The trial judge was entitled to take the view that soliciting or repaying monies were outside the ordinary course of business of the companies.
[7] Tummon Investments Pty Ltd (in liq) (1993) 11 ACSR 637 at 631-640
It was submitted that Mr Temple made payments by cheque of debts of the group of companies from the accounts of Flinders Management and Mane Market in the ordinary course of business. As a result, it was contended that Mr Temple had implied or ostensible authority to repay Mr Pope and Mr King’s loans. Attention was drawn to a number of payments made in or about June 1995.
However the issue of authority to repay loans was the subject of specific board discussion. The relevant minutes were in evidence. According to these records, and the oral evidence, there was an agreement that no repayments of loans would be made. The minutes of Ocean Central provide:
“Because of the need to avoid a cash payout to the group at present, Russell had advised any ‘loan providers’ who did not wish to become shareholders would not be repaid until December 31 1995 (but had indicated interest would be payable).”
His Honour found that if, contrary to his view, Mr Temple did have implied authority to repay any such authority was effectively withdrawn on 15 June 1995.
“I am satisfied that by the date he drew that cheque Temple had n o authority from the plaintiff directly or indirectly to pay King $20,000. Even if Temple, prior to June 1995, had authority to solicit funds for the purposes of the plaintiff, and I am not satisfied he did, such authority did not also give him actual or implied authority to repay funds so obtained; and merely that he was a sole signatory to cheques drawn on Mane Market’s bank account did not invest him with any such authority. If, contrary to my view, Temple did have implied authority to repay, from the account of any member of the group, moneys solicited for the group or a member of it, that authority was effectively withdrawn on 15^th June 1995 with respect to loan providers (Exhibit P40); therefore if I am in error in determining that King did not lend or otherwise provide money to the plaintiff, still the cheque delivered to King was without the plaintiff’s authority.”
In my view the attack on these findings is without substance. The evidence established no more than that Mr Temple was a director of Flinders Management and Mane Market, and that he was the sole signatory to cheques drawn on their bank accounts. On 25 June 1995 it was specifically resolved and agreed that “loan providers” would not be repaid. Any authority to repay loans was withdrawn.
Cross Appeal of Mane Market
The cross appeal concerned the cheque for $80 000 dated 30 June 1995. The cheque was drawn on Mane Market’s account, was signed by and made payable to Mr Temple. There was no evidence as to who collected the proceeds of the cheque or through whose account the cheque was negotiated. The original cheque had apparently been lost. The quality of the photocopied cheque did not allow for the endorsement on the reverse side to be deciphered.
As earlier observed the trial judge accepted Mr King’s evidence that he had no dealings with the cheque and knew nothing of it.
The critical findings of the trial judge were as follows:
“It is I think significant that the cheque in the action concerning Pope was made payable to him and King was the payee of the cheque for $20,000. That Temple made the cheque for $80,000 payable to himself is consistent with King’s evidence that he did not see or know of that cheque - it is not improbable that in drawing the cheque payable to himself Temple did so for his own purposes and King was not informed. I am not satisfied that at the time the cheque was drawn or negotiated King knew about it and neither am I satisfied that he obtained the proceeds of the cheque.
I have found that none of the moneys paid by King to Temple went into the Ocean Group earmarked with King’s name. The entry in the Windsor journal concerning the $25,000 is probably to be attributed to false information provided by Temple. Temple in April 1995 represented that King’s moneys had been placed with Scenic Outlook and I infer they were used by that company. There is no evidence that the proceeds of the $80,000 cheque found their way into Scenic Outlook’s account. King said in October 1995 Temple told him he was hoping to invest the balance of King’s money, the amount in excess of $20,000, but that I find falls far short of proof on Mane Market’s part that King directly, or through the agency of Temple, obtained the proceeds of the $80,000 cheque.
I do not overlook the evidence that King in various ways acknowledged that he had received $100,000 from “Ocean Central” but in my view King had never had, except for Exhibit P22, any real understanding of what happened to the moneys he paid to Temple. In 1995 Temple was manipulating the funds of the various companies in the group for his own purposes - that is evident from the claims made against Temple in the Supreme Court (Exhibit P111); he obviously knew that he could not justify any of the assertions he made to, among others, Williams that King and Pope had contributed funds as the Krantz loan schedule represented. What Temple did beginning in October 1995 to justify his actions by constructing or assisting in the construction of King’s letters and other responses to Williams was, in my view, done to disguise for as long as possible his apparently fraudulent behaviour toward the Ocean Central group and its members.
King’s participation, as I find at Temple’s behest, to support Temple by replying to Williams and the plaintiffs’ solicitors as he did, does him no credit but what he put forward in those replies does not, in my opinion, advance the plaintiff’s case that King converted the $80,000 cheque. At best it is but another example of the need for caution in assessing the worth of King’s evidence.”
Counsel for Mane Market accepted that for the cross-appeal to succeed it was necessary to overturn the trial judge’s acceptance of Mr King’s evidence that he had no involvement in and knew nothing about the cheque for $80,000.
The remarks of Brennan, Gaudron and McHugh JJ at (479) in Devries v Australian National Railways Commission[8] are apposite:
“More than once in recent years, this Court has pointed out that a finding of fact by a trial judge, based on the credibility of a witness, is not to be set aside because an appellate court thinks that the probabilities of the case are against – even strongly against – that finding of fact. If the trial judge’s finding depends to any substantial degree on the credibility of the witness, the finding must stand unless it can be shown that the trial judge ‘has failed to use or has palpably misused his advantage’ or has acted on evidence which was ‘inconsistent with facts incontrovertibly established by the evidence’ or which was ‘glaringly improbable’.”
[8] (1992-93) 177 CLR 472 at 479
Attention was drawn to those parts of the trial judge’s reasons where Mr King’s evidence was criticised and rejected. However it was open to the trial judge to accept part of Mr King’s evidence and to reject the remainder. No error has been identified in the approach of the trial judge. He has not been shown to have had regard to irrelevant material or failed to have regard to relevant material. The trial judge has not palpably misused his advantage. He has not acted on evidence that is inconsistent with facts incontrovertibly established. His findings were not glaringly improbable
Conclusion
For these reasons, the appeals and cross appeal must be dismissed.
LIST OF CITATIONS AS THEY APPEAR IN THE JUDGMENT
1Stephen Gerard Williams had been acquainted with Mr Weeks since 1975. He was an investor, property developer and associate of Mr Weeks. In early 1995 Mr Williams was asked by Mr Weeks to investigate the property holdings of the Ocean Central Group and devise methods of improving those assets. He later became the Director of Ocean Central.
2 (1959-60) 101 CLR 298
3 (1990) 170 C.L.R. 146 at 205
4 [1964] 2 Q.B. 480
5 [1915] A.C. 705 at p.715
6 Hely-Hutchinson v Brayhead Ltd & Anor [1968] 1 QB 549 at 583
7 Tummon Investments Pty Ltd (in liq) (1993) 11 ACSR 637 at 631-640
8(1992-93) 177 CLR 472 at 479

[2001] SASC 278

29 August 2001