CITATION: Seiwa Australia Pty Ltd v Beard [2009] NSWCA 240

HEARING DATE(S): 3 & 9 July 2009

JUDGMENT DATE:
11 August 2009

JUDGMENT OF: Allsop P at 1; Campbell JA at 4; Macfarlan JA at 324

DECISION: Appeal dismissed with costs.

CATCHWORDS: PARTNERSHIP – partners – power of a partner to bind the partnership – determining the “business of the kind carried on by the firm” for the purpose of s 5 Partnership Act 1892 – whether “business of the kind carried on by the firm” is necessarily the business actually carried on by the partnership – meaning of “the usual way” in which the business is carried on – whether a judge can inform themselves using “common sense” of the business ordinarily carried on by a type of partnership firm – role of judicial notice in deciding this - PARTNERSHIP – partners – power of a partner to bind the partnership – ostensible authority – whether the ostensible authority of a partner is limited to what is necessary to carry on the partnership business – distinction between what is necessary to carry out a particular task and what is necessary to carry out the business of the partnership - PARTNERSHIP – partners – relevance of registration under Business Names Act 1962 to proof of identity of partners – difference between statutory facilitation of proof of identity of partners under Business Names Act 1962 and Business Names Act 2002 - APPEAL AND NEW TRIAL – appeal – general principles – interference with Judge’s findings of fact – limitations on an appellate court’s ability to assess the evidence – limitations extending beyond the trial Judge’s assessments of demeanour – advantages of a trial judge in weighing the account of a witness against contemporaneous documents - CONTRACTS – general contractual principles – parties – identification of parties – whether an objective bystander would conclude that a party to the contract was purporting to act on behalf of the partnership - CONTRACTS – general contractual principles – formation – whether a party can be held to an improbable promise where another party believes that the fulfilment of the promise was possible – whether such a contract can exist - EVIDENCE – witnesses – failure to call – inferences to be drawn – whether a Jones v Dunkel inference is open on the facts – no requirement for the trial judge to draw an adverse inference

LEGISLATION CITED: Business Names Act 1962
Business Names Act 2002
Evidence Act 1995
Partnership Act 1892

CATEGORY: Principal judgment

CASES CITED: Abalos v Australian Postal Commission (1990) 171 CLR 167
Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
Beyfus v Greene (1855) 1 VLT 348
Brettel v Williams (1849) 4 Exch 623; 154 ER 1363; 80 RR 726
Commercial Bank v Lakeman (1890) 7 WN (NSW) 40
Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541
Crown Glass & Aluminium Pty Ltd v Ibrahim [2005] NSWCA 195
Devries v Australian National Railways Commission (1993) 177 CLR 472
Dubai Aluminium Co Ltd v Salaam [2001] QB 113
Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
Gattellaro v Westpac Banking Corp [2004] HCA 6; (2004) 78 ALJR 394; 204 ALR 258
Gett v Tabet [2009] NSWCA 76
Goldberg v Jenkins (1889) 15 VLR 36
Gullett v Gardner (1948) 22 ALJ 151
Howell v Macquarie University [2008] NSWCA 26
ICI Australia Operations Pty Ltd v WorkCover Authority (NSW) [2004] NSWCA 55; (2004) 60 NSWLR 18
Jones v Dunkel (1959) 101 CLR 298
Jones v Hyde (1989) 63 ALJR 349; 85 ALR 23
Mercantile Credit Co Ltd v Garrod [1962] 3 All ER 1103
National Commercial Banking Corporation of Australia Ltd v Batty (1986) 160 CLR 251
NSW Cancer Council v Sarfaty (1992) 28 NSWLR 68
Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154; [2007] Aust Contract Reports 90-263 (90,058)
Placer Development Ltd v The Commonwealth (1969) 121 CLR 353
Polkinghorne v Holland (1934) 51 CLR 143
Prentice v Cummins (No 5) [2002] FCA 1503; (2002) 124 FCR 67
Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603
Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd [2008] NSWSC 1260
Shannon v Whiting (1900) 7 ALR 49
Smith v Harrison (1857) 26 LJ Ch 412
SS Hontestroom v SS Sagaporack [1927] AC 37
Taylor v Johnson (1983) 151 CLR 422
The Union Bank of Australia v Fisher (1892) 14 NSWLR (E) 1
The Union Bank of Australia v Fisher (1893) 14 NSWLR (E) 241
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
United Bank of Kuwait Ltd v Hammoud [1988] 1 WLR 1051; [1988] 3 All ER 418
Victorian Women Lawyers’ Association Inc v Federal Commissioner of Taxation [2008] FCA 983; (2008) 170 FCR 318
Walker v European Electronics Pty Ltd (In Liq) (1990) 23 NSWLR 1
Warren v Coombes (1979) 142 CLR 531
Woods v Multi-Sport Holdings Pty Ltd [2002] HCA 9; (2002) 208 CLR 460
Yarrabee Coal Company Pty Ltd v Lujans [2009] NSWCA 85

TEXTS CITED: Beale (ed), Chitty on Contracts, 30th ed (2008), Sweet & Maxwell
Fletcher, The Law of Partnership in Australia, 9th ed (2007) Lawbook Co
Treitel, Frustration and Force Majeure, 2nd ed (2004) Sweet & Maxwell

PARTIES: Seiwa Australia Pty Ltd (First Appellant)
Australia Seiwa Pty Ltd (Second Appellant)
Shojiro Azuma (Third Appellant)
Malcolm James Beard (First Respondent)
Gregory Charles Ralph (Second Respondent)

FILE NUMBER(S): CA 40437/08

COUNSEL: MW Young (Appellants)
A Leopold SC; SE Gray (Respondents)

SOLICITORS: Dixon Holmes Du Pont (Appellants)
Henry Davis York (Respondents)

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): 2806/04

LOWER COURT JUDICIAL OFFICER: Harrison J

LOWER COURT DATE OF DECISION: 27 November 2008

LOWER COURT MEDIUM NEUTRAL CITATION: Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd [2008] NSWSC 1260

- 5 -

CA 40437/08
SC 2806/04

ALLSOP P
CAMPBELL JA
MACFARLAN JA
11 AUGUST 2009

SEIWA AUSTRALIA PTY LTD & ORS v MALCOLM JAMES BEARD & ANOR

Judgment

1 ALLSOP P: I have read the reasons of Campbell JA and subject to the following comments I agree with them and with the orders his Honour proposes.

2 As to the question of the appropriate approach of an appeal court and the advantages of the trial judge I would refer to the reasons Beazley JA, Basten JA and myself in Gett v Tabet [2009] NSWCA 76 at [10]-[23]. I do not see any inconsistency of Campbell JA’s reasons with the Court’s views in Gett. There is no doubt that to a degree, in some cases, the trial judge has some advantage. It is also to be recognised, however, that, on occasions, the appeal court has its own position of advantage: Yarrabee Coal Company Pty Ltd v Lujans [2009] NSWCA 85 at [3].

3 Here, whilst I agree with the conclusion reached by Campbell JA not to interfere with the primary judge’s conclusion of fact as to the resignation of Mr Seeto and whilst I agree with the conclusion of Campbell JA that the primary judge’s acceptance of Mr Ralph’s evidence placed the primary judge in a position of advantage so as to call for evidence of incontrovertible facts or uncontested testimony or evidence which would make the conclusion glaringly improbable or contrary to compelling inferences, I do not conclude, and would not conclude on the evidence here, that the primary judge had any advantage for any other reason.

Nature of the Appeal

5 The Appellants are Mr Shojiro Azuma and two companies that he controls. In 1998 and 1999 the Appellants paid a total of US$4.6m to companies nominated by Mr Stephen Seeto, in the belief that the money was paid for the purpose of taking advantage of an enormously profitable investment opportunity. There were three amounts paid: US$3 million in May 1998, US$1.5 million in April 1999, and US$100,000 in May 1999. The US$100,000 for the third investment contract was provided to Mr Azuma by his friend Mr Nishiura. In December 1999, US$450,000 of the amount invested was repaid to the Appellants. However, despite making demand for it, the Appellants have not received back the remaining US$4,150,000, nor have they received any of the enormous profits they had been led to expect.

6 At least at the time of the payment of the first sum of money, Mr Seeto was a partner in an accounting firm called Gould Ralph & Company Chartered Accountants. The Respondents, Mr Malcolm Beard and Mr Gregory Ralph, were also partners in that firm. Mr Seeto had been the partner in the firm responsible for the Appellants’ work for some years. The Appellants contended that Mr Seeto was a partner at the time that all three investments were made, but the Respondents contended (and the judge found) that he had ceased to be a partner after the making of the first investment, but before the making of the second.

7 The Appellants brought an action against, inter alia, Mr Beard and Mr Ralph. Insofar as the action was brought against Mr Beard and Mr Ralph, the Appellants alleged that each contract pursuant to which they had paid over money was with the accounting firm, and hence that Mr Beard and Mr Ralph were liable for the breach of those contracts.

8 In the court below, the claim of the Appellants against Mr Beard and Mr Ralph was dismissed: Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd [2008] NSWSC 1260. A sufficient ground for the trial judge dismissing the action was his finding that the Appellants had not entered into any contract with Gould Ralph & Company.

9 The issues that arise on the appeal are:

1. At what date Mr Seeto ceased to be a partner in the firm. That raises a sub-issue about whether the judge should have drawn a particular Jones v Dunkel inference.

2. Whether there was no contract because a reasonable person could not have believed that he was entering a contract on the terms that Mr Seeto put forward.

3. Whether it is open to the Appellants to argue on appeal that the only contract with the partnership was that it would hold the funds in a custodian account.

4. Whether Mr Seeto purported to contract on behalf of the partnership.

5. Whether it was the Appellants or Mr Nishiura who was the contracting investor for the third investment.

6. Whether any contract that Mr Seeto entered bound the firm.

7. If Mr Seeto had resigned from the firm before the second investment contract was made, did he continue to have ostensible authority to contract on behalf of the firm?

8. Whether section 11 Partnership Act1892 provides an alternative route to liability of the partnership.

9. If there was a contract with the firm concerning the first investment, did that contract ever become operative?

The Factual Circumstances

10 The trial judge made the following findings, which are not challenged on the appeal, concerning the factual background to the case:

“2 Sho Azuma (‘Mr Azuma’) came to Australia from Japan as a 22 year old in 1988. He had limited English and little business experience. Australia Seiwa Pty Ltd (‘the second plaintiff’) was incorporated by him that year and Seiwa Australia Pty Ltd (‘the first plaintiff’) was incorporated in 1990. Together these companies acquired real estate holdings in New South Wales and Queensland. In 1990 Mr Azuma sought help from Stephen Seeto (‘Mr Seeto’).

3 Mr Azuma told Mr Seeto that he was new to Australia, was young and inexperienced with poor English and in need of assistance. Mr Seeto told him not to worry and that he would look after him. Mr Seeto said that his firm was called Gould Ralph and that he was one of the partners in the firm. He said, ‘We look after business people like you’ and ‘we charge a lot less than Deloittes’. Soon after that meeting Mr Azuma moved all of the companies’ accounting work to Mr Seeto’s firm that he knew as Gould Ralph.

4 Between that time and about 2001 Mr Azuma would see Mr Seeto approximately five or six times a month. He was introduced to Mr Seeto’s partners Malcolm Beard, the fourth defendant (‘Mr Beard’) and Gregory Ralph, the fifth defendant (‘Mr Ralph’). They provided him and his companies with accounting, taxation and auditing services. Mr Azuma said that by 1998 he regarded Mr Seeto as his closest and most trusted financial and investment adviser in all his business decisions in Australia. He made no business decisions without seeking guidance from Mr Seeto. Mr Seeto was duly appointed as a director of the first and second [plaintiffs] as well as other companies with which Mr Azuma was involved.”

11 In the proceedings below, the Appellants had sued not only Mr Beard and Mr Ralph, but had also sued Mr Seeto and two companies with which Mr Seeto was associated. On the first day of the trial Mr Seeto and those two companies settled the case brought against them, consenting to a judgment. None of the parties who remained in the case after that settlement called Mr Seeto as a witness. All the dealings that Mr Azuma had had concerning the making of the investments to which this litigation relates were with Mr Seeto. Mr Beard and Mr Ralph knew nothing about those dealings until long after Mr Azuma had made demand to Mr Seeto for return of the money invested. Thus, there was no oral or affidavit evidence in the trial that contradicted or challenged in any way Mr Azuma’s account of his dealings with Mr Seeto. Nor was there any challenge in cross-examination to Mr Azuma’s credit, or the accuracy of his recollection. In those circumstances, the trial judge made his findings of fact about the events that led up to the making of the investments by reproducing large parts of Mr Azuma’s affidavit.

Introduction to the Scheme, and Entering the First Investment Contract

12 The judge accepted Mr Azuma’s evidence as follows (at [5]):

“In about April 1998 Mr Azuma had a meeting with Mr Seeto at Mr Seeto’s office at 50 Bridge Street, Sydney. According to Mr Azuma the following conversation took place:

Seeto: ‘I have found this high return investment offshore which can return you a minimum of 50% a year. It’s completely safe, because our firm is in charge of the funds we receive from investors like you as custodian and I am the only signatory on our firm’s custodian account.’

Azuma: ‘What’s a custodian account?’

Seeto: ‘It’s like a trust account. You have dealt with accountants and lawyers before. You know how a trust account works, right?’

Azuma: ‘Yes. I know. It’s guaranteed by your professional insurance.’

Seeto: That’s right. But to exclude a lot of small investors, these investment opportunities often have a high minimum amount of investment required. We need a lot of money to qualify, a minimum of US$10 million. I have put in my own money. But we need more people to invest in order to qualify. Are you interested?’

Azuma: ‘Yes. But I don’t think I have US$10 million.’

Seeto: ‘That’s ok. Investors can put their money together to form a syndicate, like a group, until US$10 million is reached. I have already put my own money into one and made fantastic money from it already.’

Azuma: ‘So how does it work?’

Seeto: ‘You know, Sho, in this world, the banks have lots of ways of making a lot of money in a very short time. Nobody else has this kind of opportunities [sic]. A good example is the Royal Bank of Scotland. The way they do it is by taking money from investors like you which lifts their reserve level required by their central bank. With their higher reserve level, they are able to free large sums of money, many times the amount of your investment, to generate fast and large returns through their freed funds in trading programs. That’s why they can afford to pay you 50% a year. But they would only do this with a very specially selected approved group of investor syndicates. This is not available to everyone.’

Azuma: ‘I guess you got approved already?’

Seeto: ‘I know this guy; his name is Andrew Mansell. He is in charge of this in Australia. We are partners. I can introduce you to him if you are interested.’

Azuma: ‘Yes, I am. But he is not the person in control of the money I put in. Is that right?’

Seeto: ‘That’s right. Absolutely. That’s why our firm has established a custodian account to be controlled by me only. On top of that, if you are worried about safety, Gould Ralph has insurance to cover situations if something happens to your money. Our insurance cover is $20 million. We also have the world’s biggest insurance company Lloyds to cover us on top of that. Don’t forget the money only sits in our custodian account to get you 50% a year return. If you want us to invest into other programs, then the return will be even higher.’

Azuma: ‘I am happy with 50%. If you can make it happen and guarantee the money will be returned to me safely, I will pay double your normal charges for your advice.’

Seeto: ‘Thank you Sho. You are helping me also if you can join in this investment. One condition though: to have your 50% return, you must keep the money in the custodian account for a minimum of 12 months. If you want it earlier than that, you can; but then you will only get normal interest rates like any bank in Australia would pay you. You just need to give us 45 days notice.’

Azuma: ‘That sounds great. Let’s do it.’

Seeto: ‘How much can you put in? The minimum amount for each investor is US$100,000; the more the better. Otherwise, we have to wait until we get to US$10 million before we can qualify. These things also have a deadline when these programs will close and become unavailable and you will have to wait for the next one available.’

Azuma: ‘I think I can get about US$3 million.’

Seeto: ‘Great. I’ll speak to Andrew and see whether that’s enough.’”

13 A few days later, Mr Azuma had a meeting at Mr Seeto’s office with Mr Seeto and Mr Mansell. Mr Seeto introduced Mr Azuma to Mr Mansell. Mr Mansell said:

“After speaking with Stephen, I understand that you are interested in our offshore investment opportunities. I have prepared some documents for you to go through.”

14 He then handed Mr Azuma a bound document headed:

“ HIGH YIELD CAPITAL
ENHANCEMENT PROGRAM

PREPARED FOR MR. SHO AZUMA

STRICTLY PRIVATE AND CONFIDENTIAL ”

15 After Mr Azuma looked at the document briefly, the following conversation took place:

Azuma: “With my English, I cannot possibly understand this. Is that just like what you said to me about how it works, right?”

Seeto: “It doesn’t talk about any investment program specifically. But it is like an education. It tells you the background of why high returns are possible and how it works in the financial world. However, with our custodian account investment, you get a fixed 50% a year, guaranteed by our firm’s professional insurance and Lloyd’s insurance cover.”

Mansell: “How much can you put in? We need a minimum of US$10 million to qualify; otherwise, everyone will miss out until the next one available which we don’t know when.”

16 Mr Seeto said he could get about US$3 million. Mr Seeto suggested that Mr Azuma should get any other friends who were wealthy and wanted to invest to also do so. Mr Seeto said that he did not understand the document, and his Japanese friends would not understand it either, so he would need to have a Japanese translation of it. Mr Seeto agreed to that, and said:

“Let me give you some other documents about how our custodian account and insurance works; otherwise, they might be scared.”

17 Mr Seeto then handed him a document, in the form of a standard form letter on the letterhead of “Gould Ralph Services Pty Ltd Chartered Accountants”. The heading of the typed text of the letter was:

“GOULD RALPH SERVICES PTY LIMITED

ACTING AS CUSTODIAN”

18 Mr Seeto said:

“These are just some standard documents that you should give them to your wealthy Japanese friends. You should have a look at them. It tells you how our custodian account works and the insurance aspect that I told you about the other day.”

19 Mr Azuma said he would need to have those documents translated into Japanese too. Mr Seeto said:

“Good idea. Make sure the Japanese translator does not tell anyone about this investment. Get him to sign an agreement that he won’t tell anyone. Otherwise, we will all break the rules of secrecy about the investment and lose the deal.”

20 The conversation continued:

Azuma: “… When I get the money ready, should I just transfer that to your firm’s account?”

Seeto: “I will give you the account which we use to pool everyone’s money together before sending to our firm’s offshore custodian account.”

Azuma: “Ok. I’ll call you about it when I get the US$3 million ready to transfer.”

Seeto: “One other thing. I suggest that you open a bank account with Lloyds Bank offshore for your profits to be paid into directly, without coming to Australia. You should get a British Virgin Island company to be the account holder. I have the British Virgin Island company and Lloyds Bank’s account opening documents ready here for you to just sign. After that, just leave the rest to me.”

Azuma: “I can see you are so organised.”

21 Mr Seeto handed Mr Azuma some documents, indicated where Mr Azuma was to sign, and Mr Azuma signed them without reading them or keeping a copy.

22 The first document that Mr Azuma received at that meeting had on its front page an “IMPORTANT NOTICE” that stressed, over 10 lines of closely typed text, that the program to which the document referred “can only be offered to qualified recipients” and was confidential information.

23 The second page of that document was headed:

“ Seeto Group

Funding of High Yield Private Investment/Bank Debenture Programs ”

24 It continued:

Dear Sho

In accordance with our meeting I have compiled the following documentation as listed in the index for your reference for your Corporations[’] consideration.

The Seeto Group in conjunction with its associates in the United States and the United Kingdom have internationally Pre-Approved investment partners with bankers and traders within the top 25 trading Banks in the United Kingdom, (Barclays Bank PLC, National Westminster and Midland Banks) and Europe, (Swiss Banking Corporation, Union Bank of Switzerland and Credit Suisse) which enables us to participate in I.M.F./FED registered Bank Trade Programs. We also have access to the major trading banks within the United States and it should be understood from the outset that all programs are registered and approved by the US Treasury and the FED and are duly stamped with their registration approval numbers.

The information found herein, should be used as a guide for the development of a program which will attain the necessary yield for your investors, given the parameters as developed between you and the trustees, and matching those parameters with the trading facilities and programs available to us today, we feel that in order to best serve the client, we must utilize the I.M.F Trade programs, in that the I.M.F programs yield the greatest returns and the highest level of security for the investment Dollars. Also, given the fact that the I.M.F. permits a return of I.M.F Trading Dollars as grants to humanitarian projects, a paring [sic] of yield and grant monies will be suitable to the needs of the client.

The most lucrative of the HIGH YIELD BANK TRADE PROGRAMS that are currently in effect, are the short term and Table Top Funding Programs. Both consist of minimum investments of USD$100,000,000.00 and the ‘Principal Amount’ remains fully guaranteed by a 106% PBG from the trading bank and the profits are provided for by Bank Guaranteed Pay Orders which are issued 72 Hours after the ‘Investment Amount’ has been utilised for trading. The risk is ZERO, profits are absolute, not on a best effort basis. At each contract period the profits are based on the amount of funds placed for that period.

Should you and your associated parties be ready willing and able to enter into a Joint Venture Contract with the Seeto Group and its associates and can bring forward the USD$100,000.00 minimum do not hesitate to contact either myself or Stephen Seeto and we will make ourselves available to structure this transaction, for a potential closing.

Yours sincerely,

[signature]

Andrew R. Mansell”

25 A line at the bottom of that letter appears in a font different to that of the letter itself, and has an appearance like that of the contact details that sometimes appear at the foot of the page of the standard form letterhead of a business organisation:

“Level 40, 50 Bridge Street, Sydney NSW 2000 Australia: Telephone: +61 29 328 [XXXX] Mobile: [04XX XXX XXX] Facsimile: +61 29 418 [XXX]”

26 Appearing behind that letter was an index, as follows:

“1. Summary of Trading in Bank instruments

2. Procedures and Implementation process of the High Yield Investment Program

3. Exhibit 1. Specimen Text Non-Circumvention Non-disclosure Agreement

4. Exhibit 2. Specimen Text / Proof of Funds

5. Exhibit 3. Specimen Text / Letter of Intent

6. Exhibit 4. Specimen Text / Joint Venture & Yield Distribution Agreement

7. Exhibit 5. Specimen Text / Bank Guarantee”

27 There followed seven documents, each behind a page bearing one of the respective headings set out in the index.

28 The text of the first of those documents had a subheading “I.M.F REGISTERED BANK TRADE PROGRAMS”. It gave an account of how the problem of extensive destruction in Word War II came to be dealt with through international agreements derived from the Bretton Woods Convention, how by 1961 “USD were in short supply as the United States was faced with a dwindling Gold Supply to back additional dollars” and how that problem was dealt with.

“The FED recognizes a tier of High quality banks, usually in the top 100, which it authorizes to deal in the INVESTMENT AND DEBENTURE ISSUANCE PROGRAM. Those are the APPLICANT or PRIME BANKS.

…

… The INTERNATIONAL MONETARY FUND (IMF) as guided by the G7, utilize the INTERNATIONAL BANK TRADE PROGRAMS (The latest and most up to date) to fund world relief programs for nations who’s [sic] ability to handle internal crisis, due to the ravages of war, famine and natural disasters, have brought them to the brink of financial ruin, making it impossible to aid their own, let alone the people of other nations.

^st

29 After naming two of these “HIGH YIELD BANK TRADE PROGRAMS”, and the way of paying money to participate in such a program, it continued:

“… Should an individual, Corporation or Entity wish to apply their Funds to a Trade Program, it must also be understood at this time, that due to the fact that there are only seven Internationally known and accepted Bank Traders, dealing with trades outside the banks themselves, there are only a limited number of acceptable and Pre-Approved Investment Partners acceptable to each of those Bank Traders. The Seeto Group and its associates are known to bank traders and bankers and have been accepted as a trading partner by them.

As an acceptable Investment Manager to the Bank Trade Programs, The Seeto Group has joined those Bank Trade Programs currently in operation as a JOINT VENTURE PARTNER and BENEFICIARY with individuals and corporations who have brought forward their CASH and LETTERS OF CREDIT.

…

In order to simplify the variety of documents required to enter, close, fund and be funded, in the latest of the High Yield Short Term Bank Trading Programs, the following texts have been perfected and made available to you as a trading partner with The Seeto Group.”

30 The second document in the index purported to set out the procedures for participation in the “HIGH YIELD BANK TRADE PROGRAM”. The document included the following:

“As discussed The Seeto Group, though its overseas sources, is ready, willing and able to proceed, as an active VENTURE PARTNER, with you and your clients, for entry into the HIGH YIELD BANK TRADE PROGRAM.”

31 It set out a series of steps for participation. One of them was the sending of a letter of intent, which:

“… typically enumerates the facts and functions of the principal and their willingness to bring forward either CASH (U.S. DOLLARS), STANDBY LETTERS OF CREDIT, CERTIFICATE OF TIME DEPOSITS or ANY OTHER ACCEPTABLE INSTRUMENT for Hypothecation by THE SEETO GROUP …”.

32 A prerequisite to entering into a trade program was the provision by a bank of a document, in a standard form, that the applicant has a certain amount in US dollars standing to its credit in an account with that bank. The next step was:

“Upon receipt of the formal PROOF OF FUNDS, the bank trading officer will immediately make to be issued, a BANK TRADING CONTRACT to The Seeto Group, as its trading partner. This contract, as issued to The Seeto Group, is in conjunction with the formal CONTRACTUAL AGREEMENT previously mentioned. This CONTRACTUAL AGREEMENT between the parties, stipulates irrevocably, the entry into a specific trade program, while stipulating, but not limited to, the entry and exit date, the yield and or compounding factors, I.M.F. PROGRAM requirements, signed and agreed to by that TRADER and its FED COUNTER PART. This contract is produced and delivered to The Seeto Group at the trading desk, within the officers of that bank trader. Acceptance of this contract by The Seeto Group, is critical to the entry timing and the trades [sic] ability to obtain the stated yields of the stipulated HIGH YIELD BANK TRADE PROGRAM, as found in this contract.”

33 The sixth document in the index was a pro forma agreement that identified its parties as following:

The Seeto Group

34 It provided for the respective percentages in which The Seeto Group and the asset owner would share the net yield. It included a term:

“The parties agree that the Asset Owner shall appoint The Seeto Group, as Attorney – In – Fact, to act for and on behalf of the Asset Owner in the matter of execution of all documents for the implementation of the contemplated Asset/Bank Trade Program.”

35 It concluded with provision for the “asset owner” to sign by its corporate seal, and for “The Seeto Group” to also affix its corporate seal.

36 The evidence casts no light on whether something called The Seeto Group actually exists, or, if it does, on any characteristics of that entity.

37 The first of the documents that Mr Seeto handed to Mr Azuma at the meeting was, as I have said, on a letterhead of Gould Ralph Services Pty Ltd Chartered Accountants. The letterhead included an ACN, and the address at level 40 AMP Centre, 50 Bridge Street, Sydney 2000 Australia. It also included a telephone number, a facsimile number, and the email address “[email protected]”. At the foot of the first page was a logo with the words “Liability is limited by the Accountants Scheme”. The letter was not dated, addressed to anyone, or signed. However, there was provision for the insertion into the standard form letter of a date, and the name and address of a recipient. After “Dear Sir/s” and the heading I have mentioned earlier (at para [17]) above the text continued:

“We have been asked to contact you in relation to a transaction you may be entering whereby you have been asked to deposit funds into our custodian account we have established. This letter defines our role, and outlines the procedures we will follow in our capacity as custodians.

The funds deposited are under our firm’s sole control, are not leined [sic], encumbered or pledged in any way. The funds are held by our firm as custodian and will only be withdrawn on return of funds to the depositor. We note that with respect to this matter, we are not soliciting funds from depositors nor are we providing investment advice. Our role is purely as custodian of the funds deposited by you.

We note that as a professional firm, we have current professional indemnity insurance taken out with Lloyds of London Insurance (through Resource Underwriting Pacific Pty Ltd). A certificate of currency of this policy can be provided. In addition, depositors have the option of additional insurance by purchasing Deposit Protection Insurance (“DPI”) with Lloyds of London for a cost of 0.5% (half of one percent) of their deposit amount.

Procedures

1. On advice of the depositor’s details we will communicate with the depositor by facsimile to confirming [sic] that we are expecting their deposit. Where DPI has been requested, we will provide a Lloyds Insurance Cover Note for the pending deposit.

2. Once the deposit has been received into our custodian account we will again fax the depositor confirming receipt of their funds and that their funds are held in our custodian account. The length of the deposit will be stipulated in the agreement between the depositor and the transacting party. The period will be confirmed to the depositor. Where DPI has been purchased we will confirm that a policy will be issued within 14 days of the deposit date.

3. Once the transaction period has expired, we will return funds directly to depositors to their banking co-ordinates as stipulated in the agreement between the depositor and the transacting party.

No fees are charged to the depositor for our custodian services. Our fees are paid by the transaction party.

Gould Ralph Services Pty Limited and Stephen Andrew Seeto

Gould Ralph & Company is a Chartered Accounting firm established in 1975 with an emphasis on revenue law. During the next decade the practise [sic] saw substantial growth, particularly in the areas of general accounting and auditing. The firm consists of four partners and employs approximately 30 staff.

Stephen Seeto holds a Bachelor of Economics Degree from the University of Sydney and is a Fellow of the Institute of Chartered Accountants in Australia. Stephen is a registered company auditor, a Justice of the Peace and holds various directorships both in listed and private companies. Stephen joined Gould Ralph & Company in 1987 having left Peat Marwick Hungerford as a manager. He was accepted into partnership in 1989.

Resource Underwriting Pacific Pty Ltd (‘RUPPL’)

RUPPL was established in 1991. As part of the Chartwell Managing Agents Limited group (one of the largest managing agencies in the Lloyd’s insurance market), RUPPL provide direct access to the Lloyd’s insurance market.

We trust that the enclosed information is beneficial for your purposes. Should you wish to discuss the matter further, please do not hesitate to call the writer on 61412 679588.

STEPHEN A. SEETO B.Ec., F.C.A.”

38 The second document that Mr Seeto handed to Mr Azuma at the meeting was not specifically referred to by the trial judge. However, Mr Azuma’s evidence about it being handed to him by Mr Seeto at that meeting was quite clear, and was not challenged. It was a single page document headed “SECURED FUNDS PROGRAM”. Relevant parts of it were:

“THIS PROGRAM IS STRUCTURED TO ALLOW AN INVESTOR TO ENTER AN INVESTMENT PROGRAM WITHOUT THE RISK OF PRINCIPAL INVESTED. INVESTED FUNDS ARE DEPOSITED WITH A HIGHLY RESPECTED FIRM OF ‘CHARTERED ACCOUNTANTS’ CUSTODIAN ACCOUNT WHERE ALL DEPOSITS ARE COVERED BY PROFESSIONAL INDEMNITY INSURANCE.

IN ADDITION TO THE PROFESSIONAL INDEMNITY INSURANCE THE PARTICIPANT MAY PURCHASE AN OPTIONAL LLOYD’S DEPOSIT PROTECTION INSURANCE POLICY FOR 0.5% (HALF OF ONE PERCENT) OF THE PRINCIPAL AMOUNT. THIS COVER IS FOR 100% OF THE INVESTED FUNDS AND THE ‘KEY TERMS’ ARE DETAILED BELOW:

(i) THE POLICY IS IN THE NAME OF THE INVESTOR

(ii) INSURED SUM IS 100% OF THE INVESTMENT AMOUNT

(iii) INSURING CLAUSE – THEFT OF INVESTMENT SUM BY ACCOUNTANT, PARTNER, EMPLOYEE OR BANKER OR EMPLOYEE THEREOF.

(iv) ANY ACT, ERROR OR OMISSION (OTHER THAN THEFT) COMMITTED BY ACCOUNTANT, PARTNER OR EMPLOYEE OR BANKER OR EMPLOYEE THEREOF.”

39 After setting out the rate at which profits would be paid, it said:

“PROCEDURES:

1. PROVIDE OVERNIGHT BANK STATEMENT NO OLDER THAN 3 DAYS (72 HOURS).

2. NON-SOLICITATION LETTER.

3. LETTER OF INTENT.

4. CORPORATE RESOLUTION (IF APPLICABLE)

5. INVESTOR, IF ACCEPTED WILL RECEIVE A JOINT VENTURE AGREEMENT TO BE EXECUTED WITH THE PROGRAM FACILITATOR.

6. INVESTOR WILL THEN EXECUTE THE AGREEMENT, WITH THE PRINCIPLE FACILITATOR & PROVIDE INSURANCE DIRECTIVES & DISBURSEMENT INSTRUCTIONS FOR THEIR PROFITS.

7. INVESTOR WILL RECEIVE A LETTER OF UNDERTAKING FROM THE CHARTERED ACCOUNTING FIRM INDICATING THEY ARE ABOUT TO RECEIVE THEIR DEPOSIT. WHERE INSURANCE HAS BEEN REQUESTED INVESTOR WILL RECEIVE A COVER NOTE OF THE LLOYD’S INSURANCE POLICY TO BE ISSUED IN THEIR OWN NAME.

8. ONLY NOW WILL THE INVESTOR TRANSFER FUNDS INTO THE CHARTERED ACCOUNTING FIRM’S CUSTODIAN ACCOUNT.

9. INVESTOR WILL RECEIVE THE LLOYD’S DEPOSIT PROTECTION AND INDEMNITY INSURANCE POLICY WITHIN 14 DAYS.”

40 While it is not explained who the “facilitator” is, the only joint venture agreement that is contained in the draft documentation is the joint venture agreement between The Seeto Group and the proposed investor, which was contained in the bundle of documents that Mr Mansell handed to Mr Azuma.

41 A week or two later Mr Azuma received a letter enclosing some documents relating to a British Virgin Island company that he had evidently acquired. A few days after that, around 7 May 1998, he opened a US dollar account with the National Australia Bank and caused the conversion and transfer of US$3,010,000 from the Australian dollar term deposit account that the First Appellant had with the NAB to Mr Azuma’s personal US dollar account.

42 A few days after that, Mr Azuma had a further conversation with Mr Seeto, as follows:

Azuma: “I have US$3 million ready to be transferred to the custodian account now. Can you give me the details of your firm’s custodian account?”

Seeto: “That’s great. But as I told you, we need to get US$10 million before we can qualify to invest. I have an account where I put everyone’s money in before I send it to our offshore custodian account once it gets to US$10 million. The account name is Seito Ocean Pty Limited. This is one of my family companies. I am the signatory on that account. As I told you, I am also putting my own family money into the custodian account investment through this family company. That’s why I am getting everyone to put their money into this account first. Once we get to US$10 million in that account I will send it to our firm’s offshore custodian account.”

43 Mr Seeto then gave him the BSB and bank account numbers of a bank account. The conversation continued:

Azuma: “Ok. I will send the money to that account. When do you think you will get enough in that account to invest in your firm’s offshore custodian account?”

Seeto: “Within a week or two. Make sure that you transfer your money into that account in the next few days.”

Azuma: “I will.”

44 On or about 13 May 1998, Mr Azuma transferred US$3 million from his own US dollar account with the NAB to the bank account whose details Mr Seeto had provided to him. That account was an account of Seito Ocean Products Pty Ltd. It is a company the shares in which are held by two people with the surname Seeto (but not the Mr Seeto with whom Mr Azuma was dealing). However the Mr Seeto with whom Mr Azuma had been dealing was one of the four directors of the company (all of whom had the surname of Seeto), and one of the two secretaries of the company (both of whom had the surname Seeto).

45 Around 13 May 1998, Mr Azuma said to Mr Seeto:

“I have just transferred US$3 million to your Seito Ocean account. Can you please let me know when you have put it in the offshore custodian account?”

46 A few weeks later, Mr Seeto said to Mr Azuma:

“I’ve just sent your US$3 million to our custodian account. So, in 12 months time, we will all be 50% richer.”

The Kim How Documentation

47 Mr Azuma agreed he had received a letter dated Friday, 25 September, that bears a fax transmission notation of being transmitted on 25 September 1998. The letter was on the letterhead of “Kim How Group”. The bottom of the letterhead identified three companies, namely Kim How Trading Pty Ltd, Kim How Holding Coy Pty Ltd and Rosca International Pty Ltd. It gave an address that was the same as the address that Mr Azuma had, in other evidence, identified as the address of Mr Seeto’s home.

48 That letter was signed by Mr Mansell and gave some details of “the programs that are currently available this week, which we have been considering”. It gave a sketch, of the order of 10 lines long, concerning each of eight different investment programs that were said to be available. For each, it stated the minimum amount of investment. Those amounts ranged from US$100,000 to US$10 million. The returns were all extraordinary – they ranged from 30% per month less (unspecified) commissions, to 1,400% in 10 banking days. The letter makes no reference to Gould Ralph & Co, or to Gould Ralph Services Pty Ltd.

49 Mr Azuma also received a fax dated 2 November 1998 from Mr Seeto, on letterhead of Kim How Group. It purported to give an explanation of how “a return of say 30-50% a month” was achievable. In the transaction described, the central actor is called “The Trading Group” (not otherwise identified). Gould Ralph Pty Ltd, and Gould Ralph Services Pty Ltd, are nowhere mentioned. The scheme referred to in that letter was said to be “for a minimum placement of USD$2 million.” It differed from the scheme that had been outlined in April 1998 because the return was many times higher, and Mr Azuma was to place the amount of his investment into a nominated bank account that was held in Mr Azuma’s own name, the presence of which would make that bank willing to lend to Mr Seeto an amount equal to the amount deposited.

Entering the Second Investment Contract

50 Around February 1999 Mr Seeto told Mr Azuma that he was trying to put together another group of investors and enquired whether he or his friends had any money to participate. The conversation continued:

Seeto: “I am trying to put together another group of investors. The minimum amount is again US$100,000. Do you or your friends have the money to participate?”

Azuma: “Is this the same custodian account investment as last time?”

Seeto: “Yes. 100% guaranteed safety. I am the only one controlling the account; plus our firm’s professional insurance cover of $20 million. On top of that, we also have Lloyds insurance. Let me give you a full set of documents that will explain all of this. You and any of your friends can have a look at them at any time. I think you have already seen these documents before.”

51 Mr Seeto gave him a bundle of documents. Part of it was another copy of each of the letters that Mr Seeto had handed to Mr Azuma at the meeting around April 1998 that Mr Mansell attended. However, there were some additional documents.

52 One of them was a draft letter dated 6 February 1999 that was on plain paper, not letterheaded paper. Its form was:

“Dear Sir

Transfer to Gould Ralph Services Pty Limited Custodian Account

We have been advised that you intend to forward the sum of US$_00,000 (United States Dollars) representing US$_,000 to be held in our Custodian Account to in [sic] trust for you and US$_,000 for the purchase of Deposit Protection Insurance.

Enclosed is a 30 day Cover Note for you[r] principal sum. Of course the cover note will only be valid if the funds for the insurance is forwarded. We note that the original of the insurance policy will be forwarded to you within 14 days from the receipt of funds into our Custodian Account.

Your funds will be held in our account for a period of 12 (twelve) months and will be returned to you at the expiration of this period. Notice of Cancellation may be made at any time by the PARTICIPANT(S) by formal written advise [sic] for the return of the initial investment. Participant(s)[’] capital will be returned within forty five (45) days of the given notice.

The original of this letter will be forwarded to you by DHL following the receipt of your funds and will act as our official acknowledgement to you of the receipt.

We note that our role in this matter is as custodian only and that we are not providing you with investment advice nor are we party to any transaction you may be entering into with respect to these funds.

53 Another of the additional documents was one that appeared to be a policy schedule concerning insurance effected with a Lloyd’s syndicate. The insured was Gould Ralph Services Pty Ltd, the “professional business” was “custodians”, and the period of insurance was 10^th February 1999 to 10^th February 2000. Another was a blank form headed “Certificate of Insurance”. It stated:

“This is to certify that in accordance with the authorisation granted under the Master Policy Number 98/032/9724 to Gould Ralph Services Pty Ltd by Resource Underwriting Pacific Pty Ltd for an [sic] on behalf of Syndicate 839 Underwriters at Lloyd’s (the Underwriters) and in consideration of the premium specified herein, the said Underwriters are hereby bound to insure in accordance with the terms and conditions of the attached Certificate of Insurance and/or contained herein and or endorsed hereon.”

54 It then set out a schedule, which contained blanks, but was in a form appropriate for identifying an insurance cover. The document had provisions for being signed on behalf of Resource Underwriting Pacific Pty Ltd on behalf of the Lloyd’s syndicate, by Mr Seeto.

55 Another of the documents was headed:

“GOULD RALPH SERVICES PTY LTD
CUSTODIAN ACCOUNT
BANK TRANSFER DETAILS”

56 It gave details for remitting funds to a New York bank, into an account called “ROYAL BANK OF SCOTLAND INTERNATIONAL LIMITED, JERSEY” and with a reference “COVER PAYMENT TO BENEFICIARY OF BELOW SWIFT MT100”. It also said that information should be “SENT DIRECTLY TO THE ROYAL BANK OF SCOTLAND IN JERSEY OTHERWISE DELAYS COULD BE INCURRED”, and purported to give identifying details of an account whose beneficiary was Gould Ralph Services Pty Limited.

57 Mr Azuma enquired whether it would be necessary to translate any of the documents into Japanese. Mr Seeto said he did not think so, as they were similar to the ones he gave Mr Azuma before. He enquired how much Mr Azuma could put in, and Mr Azuma said he thought he could get about US$1.5 million in about two months time.

58 About two months later Mr Azuma told Mr Seeto that he had US$1.5 million ready to go, and enquired whether he should transfer the money then, or wait until Mr Seeto was ready with everybody else’s investment funds. Mr Seeto said, “We are ready to go now. Don’t wait”. The conversation continued:

Azuma: “Ok. Can you give me the bank details of your firm’s custodian account?”

Seeto: “It’s in the documents I gave you 2 months ago. I can give you another copy.”

59 Mr Seeto then gave him another copy of the document headed “Gould Ralph Services Pty Limited Custodian Account Bank Transfer Details”. Mr Seeto recommended that Mr Azuma should open a new bank account with the Royal Bank of Scotland, and said he had their bank account opening details “ready here for you to sign”. Mr Azuma then and there signed the documents put in front of him without reading them or keeping a copy.

60 On 9 and 12 April 1999 Mr Azuma caused the transfer of US$1.5 million from the First Appellant’s NAB account to the Jersey account of Gould Ralph Services Pty Limited, in accordance with the document that Mr Seeto had given him.

Entering the Third Investment Contract

61 Around April 1999 Mr Azuma spoke to a friend of his, Mr Terry Nishiura, enquired whether he was interested, and gave him a copy of the Japanese translation of various of the documents he had received.

62 In late April 1999 Mr Azuma, Mr Nishiura and Mr Seeto met at the Intercontinental Hotel in Sydney. Mr Azuma’s evidence about that meeting was admitted on the basis that his account of what Mr Seeto said was admitted as proof that those words were said, not of their truth. After introductions, Mr Seeto said to Mr Nishiura:

“... Sho might have already told you. I am a senior partner of a chartered accountant firm called ‘Gould Ralph’. I know an investment which is an IMF registered program which provides very high return with the security of our accounting firm’s exclusive control of the money invested. As you might know, we as accountants also have a $20 million insurance cover to guarantee the security of your money. On top of that, we also take out the extra insurance with the world’s biggest insurer called Lloyds. You leave your money in our firm’s custodian account for 12 months and you will get 50% return on your money. But the minimum amount of investment is US$100,000.”

63 A few days later Mr Azuma, Mr Nishiura and Mr Seeto met again, this time at Mr Seeto’s office in the AMP Building, Sydney. Mr Nishiura asked for an explanation about the IMF registered program, in simple English. Mr Seeto said:

“The IMF program tells you about how these big financial institutions can make the big money, and therefore are able to pay investors like you the 50% return with money simply sitting in a secure custodian account.”

64 Mr Nishiura sought, and was given, confirmation that Mr Azuma had already invested in the program. The conversation then continued:

Nishiura: “Ok. Although I don’t really understand how this much money can be made, I trust your ability as a professional accountant. At least, my money is safe with your accounting firm. What should I do next to participate in the investment?”

Seeto: “How much do you have to invest? The minimum is US$100,000.”

Nishiura: “I can only invest US$100,000.”

Seeto: “That’s ok. Here are some documents about our custodian account details for you to send money to. Here are some forms for you to sign to open an offshore bank account so that your profits can be paid directly into your own offshore account.”

65 Mr Seeto then handed Mr Nishiura some documents, and indicated where Mr Nishiura was to sign.

66 By about 6 May 1999 Mr Azuma had received a total of US$100,000 from Mr Nishiura, which Mr Azuma transferred to his personal account. On 10 May 1999 Mr Azuma caused US$100,000 to be transferred from the First Appellant’s NAB account to the account of Gould Ralph Services Pty Limited in Jersey, using the same procedure as had been used for transfer of funds to make the second investment. The account of the making of the third investment that I have given so far is derived from the evidence of Mr Azuma.

67 Mr Nishiura swore an affidavit that gives an account of events that differs in some respects from that given by Mr Azuma. According to Mr Nishiura, the initial meeting with Mr Seeto was attended not only by himself and Mr Azuma, but also by another man called Hide-Kakuda, who was introduced by Mr Azuma as someone who was going to invest money in the IMF Program. Mr Nishiura gives evidence that Mr Seeto handed him his business card, and annexes a copy of it. It says in large letters “Gould Ralph & Company Chartered Accountants”, with no “Pty Ltd”, and no ACN. However, the card contains the same logo as appears on the letterhead of Gould Ralph & Company Chartered Accountants Pty Limited, and the statement “Liability is limited by the Accountants Scheme”. It gives the same address, telephone and facsimile number as appears on the company’s letterhead. The card as originally printed also provided a similar email contact address to that which appears on the letterhead, but that email contact address was crossed out in handwriting, and in its place was written “[email protected]”. In larger printing than the address, the bearer of the card was identified as “Stephen A. Seeto”.

68 According to Mr Nishiura, the conversation continued:

Azuma: “Stephen works for a Chartered Accountant Company called Gould Ralph and he has an investment program called ‘IMF’.”

Seeto: “Yes that is right I have been working as an accountant for many years and for Gould Ralph for several years. Azuma has told you about the ‘IMF’ Program, they secure money and you get high returns 50% on your investment. You have to make a decision quickly because the invitation of the scheme expires soon.”

69 After some discussion about insurance, it continued:

Seeto: “… You have to hurry because the applications are closing soon. Why don’t we hold another meeting later on.”

Nishiura: “OK that sounds like a good idea, here is my business card you can reach me on my mobile telephone.”

70 Mr Nishiura also gave an account of a further meeting either that day or in the days that immediately followed, at Mr Seeto’s office in the AMP Building, attended by Mr Seeto and Mr Azuma. Mr Nishiura said they were joined by another person, concerning whom Mr Seeto said:

“This is Andrew Mansell. He is one of our employees here, and he assists me with the IMF program. Terry I have some private companies. The IMF program may go through my private companies or through Gould Ralph & Co. If I am busy and you cannot contact me, please contact Andrew.”

71 Mr Seeto then handed Mr Nishiura a business card relating to an entity called “Kim How Group”. The card identified the bearer as:

72 It gave an address that was the same as Mr Seeto’s home address. It gave his home phone and fax contact details, and also his business phone and fax contact details. Those latter details are the same as those that appear on the letterhead of Gould & Ralph Chartered Accountants Pty Ltd. On it, Mr Seeto wrote Andrew Mansell’s name and contact details.

73 The judge did not choose between the different accounts of the conversations given by Mr Azuma and Mr Nishiura.

The Unravelling

74 It is unnecessary to recount the detail of the attempts that Mr Azuma made thereafter to obtain more information about his investments, and the profits he was supposed to receive from them. In February or March 2001 Mr Seeto told Mr Azuma that he (Mr Seeto) had permitted Andrew Mansell to be a signatory on “our custodian account” and that he took from it “your money, my money, lots of other investors’ money.” Mr Seeto told Mr Azuma that “if the other partners of my firm get to know about this, I will lose all control over it”. Mr Azuma agreed to leave Mr Seeto to deal with his partners.

75 Having received no documents, and no information, Mr Azuma’s trust and patience finally expired in May 2003, when he instructed lawyers to commence investigations.

Issue 1 – When Mr Seeto Ceased to be a Partner

Gould Ralph Services Pty Limited

76 The company that at the time of the events involved in this case was known as Gould Ralph Services Pty Ltd was incorporated in 1985 under a different name, and adopted the name Gould Ralph Services Pty Ltd in August 1986. Over the period in which the three investments the subject of this litigation were made, its directors were Mr Seeto, Mr Ralph, Mr Beard and a Mr Brian Barnett. According to the ASIC records the latter three directors ceased to hold office on 1 April 2001. Over the period in which the three investments were made, there were two shareholders in the company, namely Mr Ralph (as to 9,000 shares) and Mr Seeto (as to 1,000 shares). Mr Barnett was never a partner in Gould Ralph & Company.

77 Mr Seeto and Mr Ralph had each been a secretary of the company during the period the three investments were made, but Mr Ralph ceased to be a secretary, according to the ASIC records, on 1 April 2001.

78 Effective from 20 April 2001, the name of the company was changed to Seeto Financial Services Pty Ltd. At some time not identified in the ASIC records, but between the lodgement of an annual return on 21 November 2000 and the conducting of a search on 18 May 2004, Mr Ralph ceased to be a shareholder, and Mr Seeto came to hold all 10,000 issued shares. Mr Ralph gave evidence that on 1 April 2001 control of the company was transferred to Mr Seeto, and that he transferred his shares to Mr Seeto for nominal consideration.

Gould Ralph & Company

79 Gould Ralph & Company is a partnership that began in 1982. Mr Seeto was admitted as a partner in 1992.

80 Mr Ralph gives evidence as follows:

“… Gould Ralph & Company has [since the instigation of Gould Ralph Services Pty Ltd as the practice company in approximately 1986*] only provided audit and, to a limited extent, insolvency services to its clients. The reason for the limited activities of the partnership is that when Gould Ralph & Company was formed and prior to the changes to the Corporations Act allowing ‘Authorised Audit Companies’ in 2004, the Corporations Law did not allow audit firms to operate within a limited liability structure. For that reason, the first defendant, then called Gould Ralph Services Pty Limited, could not be registered as an auditor or undertake statutory audit work. In my experience and to my observation, Gould Ralph & Company provided those audit services and Gould Ralph Services Pty Limited did not. In my experience and to my observation, we maintained a dichotomy between the partnership carrying out only audit and insolvency services and the first defendant carrying out other accounting and taxation work.”

81 Mr Beard explained:

“I was an audit partner, so I was a registered company auditor and did audit work.”

82 The trial judge found (at [53]) that Mr Seeto resigned from the partnership in October 1998. On the basis of that finding, the first investment was made during the period he was a partner, but the second and third investments were not.

83 There was no written partnership agreement, nor was there any writing whereby Mr Seeto resigned, nor any document in which the ongoing partners agreed with Mr Seeto that the partnership of which Mr Seeto was a member was ended.

84 Mr Ralph gave evidence, that the judge accepted, that in October 1998 Mr Seeto said to Mr Ralph:

“I am resigning from the practice. I am too busy with family businesses and my other investments but think I should remain a director of Gould Ralph Services for the time being to maintain the relationship with the tax clients I’ve introduced.”

Payment Records

85 Numerous items of evidence, some of them documentary, are relevant to the date of Mr Seeto’s resignation.

86 An extract from the payroll register of Gould Ralph & Co relating to Mr Seeto for the period 30 January 1998 to 30 June 2004 was in evidence. It shows that Mr Seeto was paid $5,000 per month up to the end of October 1998, apart from in June 1998, when he received nothing. After October 1998 no further payments were made to him. These payments of $5,000 per month were made by direct credit.

87 From the fact that they were an identical amount each month, I would infer that they were in the nature of drawings on account of profits, rather than the totality of the remuneration he received. That inference is confirmed by the tax return of the partnership for the year ended 30 June 1998, which shows Mr Seeto having a distribution of net income from the partnership of $58,800, ie $1,200 less than the amount that would accrue over a year at the rate of $5,000 per month.

88 That tax return shows that the only other distribution of partnership income in that year was to Mr Beard, who received a somewhat smaller sum from the partnership than Mr Seeto received. In other words, notwithstanding that Mr Ralph was a partner, and identified in the partnership tax return as the contact partner for the taxation office, he received no distribution from the partnership.

89 The partnership tax return for the year ended 30 June 1999 shows that Mr Seeto received a distribution of $20,000 in that tax year. That is consistent with him having been paid $5,000 for each of the four months July to October 1998, but nothing thereafter. Mr Ralph received a distribution of $3,000. Mr Beard received a distribution numerous times larger than the distribution Mr Seeto had received.

90 The partnership return for the year ended 30 June 2000 makes no mention of Mr Seeto at all, and distributes the partnership income virtually equally (though with a $200 difference) between Mr Beard and Mr Ralph.

91 None of the partnership tax returns bears a date of preparation or lodgement. Mr Ralph’s evidence was:

Mr Seeto’s Ongoing Connection with the Premises

92 At all times relevant to these proceedings both Gould Ralph & Company and Gould Ralph Services Pty Ltd occupied premises in the AMP building at Level 40, 50 Bridge Street Sydney. Mr Ralph said that the premises in 1999 had “signs over the reception for Gould Ralph & Company, Gould Ralph Services and other subtenants”. Both Mr Ralph and Mr Beard gave evidence that, after he ceased to be a partner, Mr Seeto continued to have an office on Level 40, 50 Bridge Street Sydney, which he occupied as a subtenant. Mr Ralph’s cross-examination included, in a context where 1999 was the period being talked about:

93 In April 2001, Mr Ralph was aware that Mr Seeto “was maintaining contact with some of his clients at the Gould Ralph Services … he was providing assistance to those clients in their relationship with our staff.” Mr Ralph’s evidence included:

94 When asked about Mr Seeto’s work in June 2000, Mr Ralph’s evidence was:

“HIS HONOUR

The Respondents’ Knowledge of the Investment Scheme and Bank Account

95 Mr Ralph gave evidence that he had no knowledge prior to 2001 about any investment scheme organised by Mr Seeto, but that in about 2001 he had come to understand, from two American investors who called at his office, that Mr Seeto had been involved in “some scheme involving bond trading in the USA”.

96 In 2001, some days after the visit of the Americans, Mr Seeto told Mr Ralph that “he had done silly things and he had established an account without our knowledge in the Channel Islands”. Mr Ralph was told by his former partner Mr Gould at that time that Mr Seeto had told Mr Gould that he had arranged investments into that account in America, from Americans, and that a sum of money had been seized by a US government authority. The information that Mr Ralph then acquired was that “a bank teller had alerted the Customs agencies or whatever in Florida when somebody turned up to transfer a large sum of money. Ten-odd million dollars.”

97 Mr Ralph said that prior to 2001 he was not aware that the company ever had a custodian account, and he did not authorise any such account. Nor was he aware that it had an insurance policy with Lloyd’s, and did not authorise any such policy. Further, prior to 2001 he had never heard of IMF registered trade bank programs, and was not aware that the company had an account with the Royal Bank of Scotland in the Channel Islands, or anywhere else outside Sydney, and he did not authorise any such account.

98 Mr Beard likewise gave evidence that prior to 2001 he was neither aware of nor authorised any activities by the partnership outside audit or insolvency activities. As well, he was not aware of, and did not authorise, anything to do with any custodian bank account.

The Business Names Records

99 A search of the business names records shows that the name “Gould Ralph & Company” was renewed by documents lodged in September 1991, December 1994, September 1997, and August 2000. A “Statement of Change in Certain Particulars” was lodged on 29 June 2001.

100 A Statement of Renewal of Registration of a Business Name form that was issued on 24 August 2000, shows that the business name “Gould Ralph & Company” had a business of “chartered accountants”, and the proprietors of the business name were Mr Beard, Mr Ralph and Mr Seeto. Mr Ralph signed that form, and after it was lodged in August 2000 it was available on search of the Business Names Register.

101 A “Statement of Change in Persons” form prescribed under the Business Names Act 1962, was received in the registry on 29 June 2001. All the blanks in the form that had been filled in, apart from three signatures, were filled in by typing. It stated that Mr Seeto had ceased to carry on business under the business name on 7 December 1999. It was signed by Mr Ralph in two separate places, one relating to Mr Seeto ceasing to carry on business under the name, and the other relating to Mr Ralph continuing to carry on business under the name. Alongside each signature the “Date signed” was said to be “7/12/1999”.

102 Mr Beard had signed an annexure to the form, certifying that he was continuing to carry on business under the business name. That signature appeared alongside a space where the “Date Signed” had been filled in, in typing, with “7/12/1999”. Mr Beard could not remember when he signed it, but said that “I would have thought that Stephen ceased as a partner well before this”. He said “I would have viewed that he would have ceased when he ceased audit work”. Mr Beard had no explanation for the date of 7 December 1999 on the document, and said “I would have thought it was around about October ’98, when he ceased doing audit work …”. Mr Beard’s cross-examination continued:

“HIS HONOUR

Q. Why do you think it was October ’98?

A. Well, Stephen and I did a lot of audits [sic] work together, particularly on public companies, the biggest was Finemore Holdings which was, involved a lot of staff, a lot of travel to, particularly to Wagga, Melbourne, Albury, so it was quite an involved process, and Stephen had other things on his mind, he was, had other directorships, he had other businesses and he didn’t enjoy the detailed audit work, so he, at the end June ’98 he said, look, I’m not going to do this any more, I’m going to do other things, I mean, he had, a director of Adavale which is another listed company, wasn’t a client, but he was interested in that, it took him to China--

103 The Statement of Change in Persons form had a footer, that was part of the form rather than a typed addition, saying “BN FORM 6 APRIL 2001”.

104 An ASIC search shows that that Statement of Change in Persons form was both lodged and processed on 29 June 2001. Thus, prior to 29 June 2001 the Business Names Register relating to Gould Ralph & Company would have shown Mr Beard, Mr Ralph and Mr Seeto as the proprietors of the business name.

105 When Mr Ralph was first questioned in cross-examination about the business name record, he acknowledged that Mr Seeto had been one of the proprietors of the business name. The cross-examination continued:

…

106 Mr Ralph had no recollection of signing the document, and said it was not his understanding that it was prepared in 2001, in particular between April and June of 2001.

107 Mr Ralph said that probably the office manager at the time, Dorothy Lewis, was involved in the preparation of the document. She was still alive, and living in Northern New South Wales at the time of the trial. Mr Ralph said:

108 He said that he may have signed it without looking at it. When his attention was drawn to the footer on the form, he said:

109 He denied he did that in the middle of 2001 because he had a concern about Mr Seeto’s activities.

The Quality Control Manual

110 There is a document called a “Quality Control Manual” that Mr Ralph describes as “generated for use (and in fact used) internally within Gould Ralph & Company and Gould Ralph Services Pty Limited.” The coversheet of that manual identifies it as relating to:

Gould Ralph Services Pty Limited”

111 The index identifies the following practice areas:

“– Audit

– Taxation

– Accounting services

– Company secretarial”

112 The section of the manual headed “Introduction” includes:

“This manual is intended to serve number of purposes:-

* to standardise various procedures within the Firm;

* to outline the firm’s views and standards in connection with both the management of a professional practice, and the conduct of professional work[;]

* to act as [a] training aid for new staff and a reference aid for existing staff; and

* to form a vital part of the firm’s quality control system required by the ethical rulings of the Institute of Chartered Accountants in Australia.

…

The firm undertakes each assignment in the name of Gould Ralph Services Pty Limited (‘GRS Pty Limited’) or Gould Ralph & Company, GRS Pty Limited is a limited liability practice company approved by the Institute of Chartered Accountants. Gould Ralph & Company is a partnership. The only assignments which will be undertaken in the name of Gould Ralph & Company are those which a company is prohibited from undertaking, ie statutory audit under the Corporations Law, receivership and liquidations. All other assignments will be undertaken by Gould Ralph Services Pty Limited. Staff should ensure that all outward correspondence is on the appropriate letterhead.”

113 The introduction goes on to refer to the “firm” in a way that covers both the activities of the partnership and the activities of the practice company.

114 In a section headed “Professional Independence” standards that “[a]ll partners and staff are required to adhere to” are identified. Some of the specific procedures to achieve that objective are identified as being:

“New staff members are required to complete and sign an ‘Independence Checklist for Partners and Employees’ (Form…) after reviewing the current client listing.

On an annual basis an updated client listing is circulated to all partners and staff, who are required to sign the ‘Independence Checklist for Partners and Employees’ (Form…) to confirm continued compliance with independence guidelines[.]

The senior partner is responsible for clearing conflicts arising from employees they have employed. This may involve communications with the accounting bodies where the conflict can not be resolved internally.”

115 A section of the manual relates to a professional development program. Professional development “is considered an essential part of the firm’s activities”. The “administrative partner” is responsible for the formulation and implementation of “firm policy” regarding the professional development program. There is a requirement for a minimum number of hours of continuing professional education to be completed by “each partner and professional employee” each year. The professional development program is reviewed annually “at a partners meeting”.

116 The balance of the manual repeatedly refers to “firm” as the entity that is carrying out the practice. In particular, in each of the practice areas of taxation, accounting services, company secretarial, and audit, it is the “firm” that is carrying out the activity.

The Insurance Proposals

117 On 20 December 1998 Mr Ralph signed a proposal form seeking professional indemnity insurance. The “Insured” was identified as “Gould Ralph & Company (& associated entities per attached)”. Those “associated entities” were identified as including:

GOULD RALPH & COMPANY

The practice partnership entity, acting as Auditor and Liquidator (being professional practice not able to be conducted through incorporated entities).

GOULD RALPH SERVICES PTY LIMITED

This company principally acts as a practice company and trustee of the practice trust. The company also acts in miscellaneous nominee circumstances on behalf of clients.

SPUNTILL PTY LIMITED

This company receives cash funds from clients and invests same in bank bills and short term deposits at call with licensed operators such as:

Accordingly, this company handles the administration of short term deposits on behalf of clients, via a pooled fund. Additionally acts in nominee circumstances on behalf of clients.”

118 Another four companies, that carried on activities including being trustee of a “service trust” or acting as “nominee” on behalf of clients were also named.

119 In a part of the form requesting the “Name of all Partners/Principals/Directors”, the names of Mr Ralph, Mr Seeto, Mr Beard and Mr Barnett appeared. There was insufficient space on the form to identify the qualifications and professional body membership of those people, so a typed annexure was included. Under the heading “Item 2 – Partners” it listed the qualifications of each of Mr Ralph, Mr Seeto, Mr Beard and Mr Barnett. On that page, Mr Beard and Mr Barnett were each referred to as an “Associate Partner”. They were described in that way even though Mr Barnett had never been a partner of the partnership, only a person who carried out professional accounting work for Gould Ralph Services Pty Ltd.

120 A request for “the approximate percentage of your fee income derived from the following fields of work” listed percentages in relation to auditing, accounts preparation or bookkeeping, receiverships, liquidations or bankruptcies, taxation, and “Others” (specified as being share registry). In other words, those percentages were percentages of the combined fee income of the partnership and of Gould Ralph Services Pty Ltd.

121 On 28 June 2000, Mr Ralph submitted another proposal form for professional indemnity insurance. The entities to be insured were identified as “Gould Ralph & Company”, “Gould Ralph Services P/L”, and other entities listed on an annexure. That annexure included Spuntill Pty Ltd, and described its activities in the same way as the 1998 proposal had done.

122 The space in the form for “Names of all Principals/Directors” was again filled in with the names of Mr Ralph, Mr Beard, Mr Barnett and Mr Seeto, though this time alongside Mr Seeto’s name appeared “(Part time)”. The question relating to total numbers of “Partners/Directors” was answered by saying that there were three full-time and one part-time.

279 Salwey (who by this time had been admitted as a partner of the firm) then obtained possession of the deeds by some means not disclosed on the evidence, and deposited them with the CBC Bank as security for an overdraft. When the solicitors for the plaintiff bank requested the deeds be returned to them, Salwey obtained possession of the deeds from the CBC Bank, and sent them to the solicitors for the plaintiff bank. The judge held (at 21) that, once the deeds were returned on this occasion to the plaintiff bank, Ralfe was discharged of his obligation to return the deeds. That decision was confirmed on appeal (14 NSWLR (E) 241 at 256).

280 Later, the CBC Bank asked Salwey for return of the deeds. He wrote a letter to the Union Bank in July 1888, saying that the mortgagors were forming a company to take over the property, and had asked for inspection of the deeds, and asked to borrow the deeds on the basis that they were returnable on demand. The plaintiff bank then returned the deeds to Salwey, who redeposited them with the CBC Bank. At that stage the CBC Bank registered its security, thus obtaining a statutory priority for its mortgage.

281 At all times there had been one member of the firm who knew nothing about the activities of Ralfe and Salwey concerning these deeds. Ralfe knew nothing about Salwey re-borrowing the deeds in July 1888. The plaintiff bank sought to recover its loss from the partners of Salwey. There was evidence from the senior partner of the bank’s firm of solicitors (at 5) that “it was the most common thing in the world for one firm of solicitors to give up deeds to respectable firms on an undertaking to return them, and that it was done every week, and he had done it himself.”

282 There were questions about whether the firm was bound concerning two different transactions: – the borrowing of the deeds by Ralfe in January 1886, and Salwey’s later borrowing of the deeds in July 1888. The decision of the court, both at first instance and on appeal, was that neither borrowing bound the firm.

283 Owen CJ in Eq at 15, approved the statement of Parke B in Brettel v Williams (1849) 4 Exch 623 at 630; 154 ER 1363 at 1366; 80 RR 726 at 732 (also reported at 19 LJ Ex 121 at 124-5) that:

Hawtayne v Bourne

284 It was a matter of considerable importance in this case that the mortgage of the plaintiff bank was merely an equitable mortgage by deposit so that the deeds were (at 15)

“… not merely muniments of title, but were themselves the security held by the bank, and were in the custody of [the bank’s solicitors] as agents or trustees for the bank; so that Ralfe, in taking these original deeds, placed himself in the position of [the bank’s solicitors], and held them as the bank’s security for the bank.”

285 It is the fact that it was possession of the deeds that constituted the plaintiff bank’s security that explained Owen CJ in Eq’s remark at 17-18 concerning the alleged practice of solicitors lending deeds to each other:

“… no practice can, in my opinion, authorise the lending by a solicitor of original deeds which themselves are the security of that solicitor’s client, and which have been deposited by the client with the solicitor for safe custody, and the borrowing of such deeds by a solicitor without the knowledge of his partner cannot make such partner liable if the deeds are subsequently lost or misapplied. It is no part of a solicitor’s business, in this way, to make himself liable for a security held, not by his own client, but by the client of another solicitor. The distinction between deeds held as security, and deeds which are merely muniments of title may be illustrated … by supposing the security to be jewels. If jewels had been deposited in a bank as security for an overdraft, and the depositor had instructed his solicitor to prepare a bill of sale over those jewels in order to raise money to pay off the bank, and the solicitor had borrowed the jewels from the bank in order to make a schedule of them for the bill of sale, and those jewels had been fraudulently made away with by the solicitor, can it be contended that his partner, in ignorance of the transaction, would be liable? It is no answer to say that dealing in jewellery is no part of a solicitor’s business. The jewels were borrowed to enable him to prepare a proper schedule to the bill of sale, just as the deeds were borrowed to prepare the abstract, and the preparation of the schedule to the bill of sale was just as much a solicitor’s business as the preparation of an abstract of title. In each case the security-holder could have refused to allow his security to go out of his possession, and in such case the schedule or the abstract of title would have to be prepared where the security was, and probably – and in the case of the abstract certainly – at greater expense to the client, but in neither case could it justify one partner fastening on another partner a risk and liability which he never consented to undertake, and which, if he had known of it, he might have refused to incur.”

286 After pointing out that in the case before him the depositor of the deeds, Stephen, was not a client of Ralfe, and thus the case before him was an even stronger case than the example of the jewels he continued (at 18):

“Again, there was no potential necessity for this borrowing of the deeds. The bank or its solicitors could have refused to lend them, and in that case the abstract of title would have been prepared either at the office of the bank’s solicitors, or from examined copies of deeds, or in some other way. This may have created an inconvenience, or increased expense to Ralfe’s client; but a potential necessity for entering into a transaction such as to create a reasonable implication that there is power to do it, only arises when the transaction is a proper consequence of the relation between the parties, but not where it is done only to obviate an inconvenience or to save expense.”

287 On the appeal, the judgment of the Full Court, delivered by Manning J, said, at 247-8:

“… we cannot see how it came within the scope of the partnership business for Ralfe to borrow for the benefit, not of his firm, but of himself and his co-adventurers, deeds to which they had no claim, while they were held as a security by the bank, and the temporary possession of which was not in the slightest degree necessary to carry out the business undertaken. It is no doubt the business of solicitors, for a vendor, to prepare an abstract of title, but this could and should be done from extracts taken from the original deeds without disturbing the possession of the mortgagees. They were under no obligation to produce the original deeds for inspection by the purchaser’s solicitor, who could, and should also, had he so desired, have compared the original deeds with the abstract again without disturbing the possession. It might possibly be a little, or even a great deal, more convenient to have free access to the original deeds at any time, but any expense that might have been occasioned by a departure from the proper practice would fall on the client only, and be a source of profit to the firm.”

288 At 249, Manning J said that:

“… the ‘conduct of business as ordinarily carried on’ is only another way of saying ‘acting within the scope of the business.’”

289 Manning J at 249 referred to an argument “that a partner could bind his firm by taking some action which, while not actually necessary, might be very convenient in the interests of the firm.” He said that that was not the law, and repeated the quotation from Brettel v Williams on which the trial judge had relied (set out at para [283] above). Manning J continued, at 249:

Partnership

^th

In re Cunningham & Co Ltd

necessity

290 There being no necessity in the case before him, and (as his Honour later held) no evidence of sanction by the other partners, the initial borrowing by Ralfe did not bind his partners.

291 I have dealt with this case at some length because in Fletcher, The Law of Partnership in Australia, 9^th ed, at [6.15] (p 166), it is treated as authority for the proposition that “For an act to be usual in a particular kind of business it must be reasonably necessary and not merely convenient, for the carrying on of that type of business.” I do not accept that Union Bank v Fisher is authority for so wide a proposition.

292 I shall assume that the kind of business that partnerships of solicitors carry on involves conveyancing, drawing of wills, obtaining probate and administering the distribution of deceased estates, and drawing commercial agreements. Even if the members of a partnership of solicitors had agreed among themselves that they would not draw wills, if a partner of the firm were to undertake the drawing of a will, while apparently acting as a partner of the firm, his act in undertaking the drawing of that will would bind the firm (as against someone who did not know of the limitation on type of work that they had agreed), because it is an act of a type that is usual for a solicitor to do. That is so even though there is no necessity for solicitors to draw wills to carry on the type of business involved in being a solicitor.

293 The type of necessity that was involved in Union Bank v Fisher was of a more focused type – it looked at what was necessary to carry out a particular task that the solicitor had agreed, in the course of carrying out business that is of the kind that the firm carries on, to carry out. It accepted that the drawing of abstracts of title was part of the usual conduct of a solicitor’s business, and accepted that preparation of an abstract required the solicitor to have access to the deeds, so that the relevant details could be copied and included in the abstract. What Union Bank v Fisher held was not necessary was to borrow the original of the deeds from someone who held the deeds as their security for a mortgage by deposit of title deeds. The point is expressed by A’Beckett CJ in Beyfus v Greene (1855) 1 VLT 348 at 349:

"These and other cases, whilst upholding the general principle that one partner has authority to bind the rest in regard to partnership transactions, in the ordinary modes of creating such obligations, showed that when these modes departed from, an authority must be proved in respect of the whole [ie from all the partners] before the act of one will bind the remainder."

294 A different type of necessity, which is really a species of implied actual authority, exists in relation to those acts that are necessary to carry on the business that has been expressly agreed to be carried on. It is illustrated in Commercial Bank v Lakeman (1890) 7 WN (NSW) 40 at 41, where Darley CJ (with whom Windeyer and Foster JJ agreed) said:

“Now although we may have knowledge of the nature of the business of stock and station agents as that business is carried on by large firms in Sydney, yet we do not see how, without evidence upon the subject, we are to know what it is in small towns such as Hay and Narrandera. We do not know if these men had power to borrow money or if the nature of their business necessitated it, and a partner has only power to borrow money where the nature of the business requires it.”

Respondents’ Submissions on Section 5

Partnership Act

295 Mr Leopold submits that Mr Seeto was not engaged in carrying on “business of the kind” carried on by the partnership, because that business was only of being auditors or insolvency practitioners.

296 He submits that section 5 does not permit the agglomeration of the “groups of entities” connected in some way with the partnership, in a way that would enable the general accountancy activities of Gould Ralph Services Pty Ltd to be taken into account for deciding what is “business of the kind” carried on by the firm.

297 As well, Mr Leopold submits that Mr Seeto’s dealings fall outside the “usual way” in which the kind of business that the firm carries on is done. He submits that if the kind of business is just that of auditing and insolvency, that result clearly follows. He also submits that even if the kind of business is regarded as being that of an accountancy practice, the result still follows. He submits that it is not possible to treat the transaction as a mere isolated custody of money – rather, the way it was presented to Mr Azuma was that it was a necessary incident of a much larger investment transaction, which was itself highly unusual.

298 He also submits that the custodian account arrangements were no ordinary trust account. The account existed to facilitate transactions that were available only to “a very specially selected approved group of investor syndicates”. It was located in Jersey, on the other side of the world to where the firm carried on business. There was no indication that the monies held in it were actually held on trust. While Mr Seeto said it was “like a trust account”, he did not say it was a trust account, or that the money in it would be held on trust. Nor does any of the documentation make any mention about the money in it being held on trust.

Decision on Whether Mr Seeto’s Actions Bound the Partners and the Firm

299 I accept that when section 5 talks about “the firm” it is talking about an actual partnership, not an economic entity for carrying on business, whatever the structure of that entity might be. That emerges from section 4 Partnership Act which at the relevant time provided:

Meaning of firms

Persons who have entered into partnership with one another are for the purpose of this Act called collectively a firm, and the name under which their business is carried on is called the firm-name.”

300 However, acceptance of that aspect of Mr Leopold’s argument does not lead to the conclusion that the relevant “business of the kind carried on by the firm” in the present case was that of auditing and insolvency.

301 Here there was an actual partnership, and Mr Seeto was a member of that partnership for at least part of the time relevant to this litigation. When the second limb of section 5 imposes liability on the partners and the firm by reference to the “business of the kind carried on by the firm”, it does so in a way that will give effect to the common law doctrine of ostensible authority. Thus, the “business of the kind carried on by the firm” is what the kind of business would reasonably seem to be to someone dealing with the firm, and in particular to someone who had had the type of contacts and dealings with the firm that the plaintiff had had. It is in this way, by reference to the circumstances of the particular case, that one solves the question about with what degree of generality the “business of the kind carried on by the firm” is to be described.

302 In the present case, some, but not all, of the matters that led to the conclusion that Mr Seeto was purporting to contract on behalf of the partnership are to be taken into account in deciding what was the relevant “business of the kind carried on by the firm”. Because the second limb of section 5 states when it is that there is ostensible authority for a partner to act on behalf of the firm, it is only those dealings that a plaintiff has had that are truly part of the activities of the firm that can be relied on as the basis for ostensible authority. The only time that representations made by Mr Seeto to Mr Azuma fit into that category is when they are the type of representation that Mr Seeto had actual authority to make on behalf of the firm. Ostensible authority arises from representations made by or (actually) on behalf of the partners sought to be made liable, not from the partner in the position of Mr Seeto making representations of a type that he has no authority to make.

303 The sort of representations that are relevant to what someone in Mr Azuma’s position would reasonably take the business of the firm to be are:

– the statement by Mr Seeto that he was a partner of a firm of accountants called Gould Ralph.

– Mr Seeto introducing Mr Azuma to his partners, and the partners acquiescing in being introduced as Mr Seeto’s partners.

– The provision of accounting, taxation and audit services to Mr Azuma, and the companies he controls, from the one set of offices, and with the one contact person (namely Mr Seeto) and with signage that Mr Ralph agreed might give someone the impression that, even after he had ceased to be a partner, Mr Seeto was working for Gould Ralph.

– The sending of an engagement letter from the partnership concerning the provision of audit services.

– The partners permitting the company to use a letterhead that had as its most prominent aspect the name Gould Ralph Services Pty Ltd Chartered Accountants, at a time when the partnership used a letterhead extremely similar in typesetting and get-up that had as its most prominent aspect the name Gould Ralph & Company Chartered Accountants.

– The absence of any explanation to Mr Azuma about the different activities of the company and the partnership.

– The indiscriminate billing of all types of accountancy work together in the one memo of fees.

– Mr Ralph knowing that Mr Azuma was continuing to meet with Mr Seeto at the 40 Bridge Street offices even after October 1998.

– The absence of any explanation to Mr Azuma at any time in or after October 1998 about Mr Seeto having ceased to be a partner of the firm.

304 This list does not include the state of the business name register from time to time, the terms of the Quality Control Manual, and the terms of the insurance proposals, because Mr Azuma knew none of those matters.

305 In all these circumstances the types of dealings that Mr Azuma had had with the firm were such as to make it reasonably seem that the business of the firm with which he was dealing was that of chartered accountants.

306 Whether section 5 applies in the present case will therefore depend on whether Mr Seeto’s actions in entering the relevant contracts count as carrying on in the usual way the business of chartered accountants.

307 I accept that operating a trust account was part of the usual way in which the business of chartered accountants was carried on in Sydney at the times relevant to this case. That is so even though it was possible to carry on the business of a chartered accountant without operating a trust account, and in that sense the operation of a trust account was not necessary to carry on the business of chartered accountants.

308 I accept that it could be part of the usual way in which the business of chartered accountants was carried on in Sydney at those times for the accountant to receive into the trust account money that the client was, to the knowledge of the accountant, intending to invest. That could be so even if the investment was, to the knowledge of the accountant, to be an outlandish and improbable one.

309 The holding of the money in the “custodian account” was an essential element of the scheme that Mr Seeto presented to Mr Azuma (and indeed was part of the reason why the scheme’s returns were said to be not as large as would be available if a different mode of “increasing the reserves” of the banks were adopted). I do not accept that there is a basis in the evidence, judicial notice or inference for concluding that it is part of the usual way in which the business of a chartered accountant was carried on in Sydney at that time, for an accountant to hold money in a trust account as an essential part of, rather than a preliminary and inessential step to, the client making an investment that is on any reasonable criterion outlandish and improbable – as the investments in the present case were. Particularly is that so when the investment is one that will be made with an entity in which the accountant has a personal interest, in partnership with someone who is not themselves a partner of the accountancy firm. Even more is that so when the investment is one that the accountant has recommended to the client.

310 Even though holding money for a client was a type of transaction that was part of the usual way in which the business of chartered accountants was carried on, the usual mode by which that sort of activity was carried on was by a conventional trust account. The “custodian account” of the company is not shown to have had a title that made it clear that the money in it was held on trust – ie, there was no clear express trust concerning the money in it. The undisputed evidence of Mr Ralph was that it was not the case that many accountancy firms have “custodian accounts”. It has not been shown that one of the usual modes of a Sydney accountancy firm holding a trust account (let alone a “custodian account”) is to do so in a foreign tax haven. It has not been shown that the particular mode of holding money for a client, namely in a “custodian account” rather than a trust account, was itself part of the usual way in which the business of chartered accountants was carried on, nor that it was necessary to enable the holding of money for a client to take place.

311 The context of Mr Beard’s evidence, in which he said concerning a trust account “you would have it audited”, related to the time that was relevant to the transactions. While the accounting practice standard that was in evidence, and which included the requirement for the trust account to be audited, post dated the relevant time period, it is nonetheless a piece of retrospectant evidence that provides a small amount of support for the conclusion that at the relevant time an audited trust account was the usual way in which accountants held money for clients. That a trust account is periodically audited is clearly an important safeguard concerning the money in it, not a matter of inessential detail. There is no evidence that the “custodian account” was the subject of any audit. That provides another way in which paying the money into the custodian account was not part of the usual way in which the business of chartered accountants was carried on in Sydney at the time.

312 When the payment of the money into a “custodian account” for the purpose of and as part of the scheme that Mr Seeto was promoting was not part of the usual way in which the business of chartered accountants was carried on in Sydney at the time, the Appellants have failed to show that the partners and the firm were bound by Mr Seeto having contracted, purportedly on behalf of the partnership, that the money would be paid into a “custodian account”, held there, and in due course returned.

Issue 7 – Ostensible Authority

313 Against the possibility that Mr Seeto was held to have resigned from the partnership in October 1998, the Appellant made submissions about whether the second and third contracts had been entered with ostensible authority of the partnership. For the reasons already given in discussing the application of section 5 Partnership Act, the transactions were not entered within Mr Seeto’s ostensible authority as a partner.

Issue 8 – Section 11 Partnership Act

314 Section 11 Partnership Act at the relevant time provided:

Misapplication of money or property received for or in the custody of the firm

In the following cases, namely:

(a) Where one partner acting within the scope of the partner’s apparent authority receives the money or property of a third person and misapplies it, and

(b) When a firm in the course of its business receives money or property of a third person, and the money or property so received is misapplied by one or more of the partners while it is in the custody of the firm,

the firm is liable to make good the loss.”

315 If the section is read literally, it does not apply in the present case, because neither a partner, nor the firm, has received any money from the Appellants – the only entity that has received money from the Appellants is the overseas “custodian account” of Gould Ralph Services Pty Ltd. The judge had noted, at [86] that:

“… It would on one view be a curious result if the section did not extend to activities otherwise falling within its terms simply because the vehicle for the receipt of the funds was a corporate extension of the wrongdoing partner.”

316 The judge’s answer to that oddity, at [87] was that:

in his capacity as a partner of the firm

317 Mr Young submits:

“The proposition that a partnership acting in its ordinary course of business cannot, as a matter of principle, receive money by having it paid by the payer to a third party is a very strange one, and it is doubly strange when the third party on its face is closely linked with the partnership. Persons and entities of all descriptions routinely accept payment by means such as payment to the entity’s agent, solicitor, bank, or service company amongst a host of other possibilities. In the circumstances, the proposition that a payment made by the appellants to Gould Ralph Services Pty Ltd at the request of Mr Seeto was a payment that must, as a matter of principle, have been a payment made outside the ordinary course of business of the partnership is clearly unsustainable.

In any event, one is in the present case dealing with the first limb of s 11, where the question is whether Mr Seeto was acting within the scope of his apparent authority in receiving the money, not whether the money was paid in the ordinary course of business of the partnership. The learned trial judge has thus not properly directed himself to the relevant test.”

318 In the course of argument Mr Young abandoned any reliance on section 11(b).

319 In considering the applicability of section 11(a) I shall take the same course as the trial judge took, and shall assume without deciding that a receipt of money by a corporate vehicle closely connected with a partnership, such as Gould Ralph Services Pty Ltd, counts as a receipt by a partner, at least when it is a partner who directs that the payment be made to that company. However, it is still necessary for such a receipt to be “within the scope of the partner’s apparent authority”. For the reasons earlier given, it was not within the scope of Mr Seeto’s apparent authority as a partner of the firm to contract that Gould Ralph Services Pty Ltd would receive the money and hold it in its “custodian account” as the means by which the Appellants could make the investments that Mr Seeto was promoting.

Issue 9 – Did the First Investment Contract Become Operative?

320 A separate ground upon which the Respondents seek to support the judgment in their favour concerning the first investment contract is that, even if there were to be a contract that bound the firm concerning money in the custodian account, that contract is not shown to have become operative. The arrangement under which the amount of the first investment was paid into the bank account of Seito Ocean Pty Ltd was put forward by Mr Seeto as an interim arrangement, to apply temporarily, while funds were being collected to make up the US$10 million needed for the actual investment. Mr Seeto’s explanation of what would happen to the money while it was in the account of Seito Ocean Pty Ltd did not involve any promises purportedly made by the partnership. The promise that Mr Seeto made purportedly on behalf of the partnership was that money in the custodian account would be held safe for the term of the investment, and returned when that term was over. When the money was paid to Seito Ocean Pty it was not in the custodian account, and the term of the investment had not started to run. Thus, at that time any contract purportedly entered on behalf of the partnership had not attached.

321 The only evidence that the US$3 million ever was paid into the custodian account was Mr Azuma’s evidence about Mr Seeto telling him that it had been so paid. There was no documentary confirmation that it had ever been paid. On the appeal, Mr Young accepted that it seemed as though the money had disappeared while in the Seito Ocean account. It follows that any contract purportedly made on behalf of the partnership by Mr Seeto concerning the first investment amount never attached.

322 In my view these matters provide a separate reason why the appeal fails concerning the first investment contract.

Order

323 I propose that the appeal should be dismissed with costs.

: I agree with Campbell JA.

**********

Details

AGLC: Seiwa Australia Pty Ltd v Beard [2009] NSWCA 240
Case: [2009] NSWCA 240
Decision Date: 11 August 2009

CaseChat Overview and Summary

Seiwa Australia Pty Ltd appealed to the Court of Appeal of New South Wales against a decision of a judge who found that a partnership, Beard, was bound by a contract entered into by one of its partners. The dispute concerned whether the partner had the authority, either actual or ostensible, to bind the partnership to the contract.

The Court of Appeal was required to determine whether the partner's actions fell within the "business of the kind carried on by the firm" as contemplated by section 5 of the *Partnership Act 1892* (NSW), and whether the judge had erred in their assessment of the evidence, including the application of judicial notice and the drawing of inferences. Specifically, the court considered the meaning of "the usual way" in which a business is carried on and whether a partner's ostensible authority was limited to what was necessary to carry on the partnership business, as opposed to merely carrying out a particular task. The relevance of registration under the *Business Names Act 1962* (NSW) to the proof of identity of partners was also a consideration.

The Court of Appeal upheld the trial judge's findings, reasoning that the judge was entitled to inform themselves, using common sense and judicial notice, of the ordinary business practices of a partnership of the type in question. The court found that the partner’s actions were within the scope of the partnership's business and that an objective bystander would have concluded the partner was purporting to act on behalf of the partnership. The court also held that the trial judge was not required to draw an adverse inference from the failure of a party to call a witness. The appeal was dismissed with costs.

Orders

Orders of the court

Appeal dismissed with costs.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

Actions

Citations

Seiwa Australia Pty Ltd v Beard [2009] NSWCA 240

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Citation 3

…y Ltd (No.7) [2019] FCA 496 Russell Gould Pty Ltd v Ramangkura (No.2) [2015] NSWCA 14 Seiwa Australia Pty Ltd v Beard (2010) 75 NSWLR 74 South Sydney DRLFC v News Limited (2000) 177 ALR 611 State of NSW v Lepore (2003) 212 CLR 511 Thompson v Palmer (1933) 49 CLR 507 Tomlinson v Ramsay Food Processing Pty Ltd (2015) 2…
Ryan Wealth Holdings Pty Ltd v Baumgartner [2018] NSWSC 1502
Citation 4

…9) 75 NSWLR 74; [2009] NSWCA 240 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Simonius Vischer & Co v Hold & Thompson [1979] 2 NSWLR 322 State of New South Wales v Julianne Higgins by her tutor David Benedict O’Shea; Barnardos Australia v Julianne Higgins [2005] NSWCA 244 State of New South Wales v Moss (2000…
Crouch and Lyndon (a Firm) v IPG Finance Australia Pty Ltd [2013] QCA 378
Citation 5

…Rinehart v Welker (2012) 83 NSWLR 347; [2012] NSWCA 1, cited Seiwa Australia Pty Ltd v Beard (2009) 75 NSWLR 74; [2009] NSWCA 240, considered Sunland Waterfront (BVI) Ltd v Prudential Investments Pty Ltd [2013] VSCA 266, cited COUNSEL: R Ashton for the applicant C D Coulsen for the respondent SOLICITORS: Mullins L…
Crouch and Lyndon (a Firm) v IPG Finance Australia Pty Ltd [2013] QCA 220
Citation 6

…[1957] 1 All ER 325; [1956] EWCA Civ 5, cited Seiwa Australia Pty Ltd v Beard (2009) 75 NSWLR 74; [2009] NSWCA 240, cited United Bank of Kuwait Ltd v Hammoud [1988] 1 WLR 1051; [1988] 3 All ER 418, considered Uxbridge Permanent Benefit Building Society v Pickard [1939] 2 KB 248; [1939] 2 All ER 344, considered Walk…
In the matter of DCM Solar Pty Limited (in liquidation) [2013] NSWSC 323
Citation 7 (Para 1)

…contracting parties was also adopted by the Court of Appeal, having been treated as common ground by the parties, in Seiwa Australia Pty Ltd v Beard [2009] NSWCA 240 at [179] ff and by Ward J in El-Kazzi v Kassoum [2009] NSWSC 99 at [20]. In FloMin Inc v Australian Raw Materials Corporation Pty Ltd (formerly named…
The Age Company Ltd v Liu [2013] NSWCA 26
Citation 8 (Para 1)

…43 at 158-159; National Commercial Banking Company of Australia v Batty [1986] HCA 21; (1986) 160 CLR 251 at 298; Seiwa Australia Pty Limited v Beard [2009] NSWCA 240; (2009) 75 NSWLR 74 at [249]-[260].…
Aboody v Ryan [2012] NSWCA 395
Citation 9 (Para 1)

…n principles in Fox v Percy [2003] HCA 22; 214 CLR 118, as to which see Gett v Tabet [2009] NSWCA 76 at [10]-[23] and Seiwa Australia Pty Ltd v Beard [2009] NSWCA 240 at [2] and [140]-[154]. The appellants pointed to a number of considerations that were said to be inconsistent with the findings and to be sufficient…
Lederberger v Mediterranean Olives Financial Pty Ltd [2012] VSCA 262
Citation 10 (Para 1)

…the terms of the contracts.[39] [38] Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541, 547; Seiwa Australia Pty Ltd v Beard (2009) 75 NSWLR 74, [301]. [39] Construction Engineering (Aust.) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541.…
QBE Insurance (Australia) Limited v Durkin [2012] NSWSC 72
Citation 11 (Para 1)

…46, (2010) 57 MVR 194 (Schmidt J). In that case her Honour referred to the scheme of the Act as discussed by Young JA in Allianz Australia Ltd v Ward [2009] NSWCA 240 at [48]-[51] who observed that the legislature doubtlessly considered that there would be a review for obvious error by an assessor but only for obvi…
Nominal Defendant v Rooskov [2012] NSWCA 43
Citation 12 (Para 1)

…vantage, varies with the particular subject matter that the trial judge has decided - see generally the discussion in Seiwa Australia Pty Ltd v Beard [2009] NSWCA 240 at [140]-[154] (a passage not reproduced in the report of the case at (2009) 75 NSWLR 74). In deciding whether error has been shown, it must also be…
Tomasetti v Brailey [2011] NSWSC 1446
Citation 13

…) 160 CLR 251 Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 Salib v Gakas [2010] NSWSC 505 Seiwa Australia Pty Ltd v Beard [2009] NSWCA 240; (2009) 75 NSWLR 74 Sweetman v Bradfield Management Services Pty Ltd [1993] FCA 598; (1994) ATPR 41-290 Sydney Refractive Surgery Centre Pty Ltd v Co…
MH v R [2011] NSWCCA 230
Citation 14 (Para 2)

…giving respect and weight to the trial judge. Some of the various areas of a trial judge's advantage are mentioned in Seiwa Australia Pty Ltd v Beard [2009] NSWCA 240 at [150]-[154].…
Durham v Durham [2011] NSWCA 62
Citation 15 (Para 1)

…timony, in which a trial judge can be in a superior position to that of an appellate judge ( Fox v Percy at 126 [23]; Seiwa Australia Pty Ltd v Beard [2009] NSWCA 240; 75 NSWLR 74 at [147]-[154]). Any decision that the trial judge came to a wrong decision must be made bearing in mind the possibility that the trial…
Morley v Australian Securities and Investments Commission [2010] NSWCA 331
Citation 16

…Ltd v McGuiness [2000] NSWCA 29; (2000) 49 NSWLR 262; Shalhoub v Buchanan [2004] NSWSC 99; Shepherd v The Queen (1990) 170 CLR 575; Tim Barr Pty Ltd v Nauri Gold Coast Pty Ltd [2008] NSWSC 657; Transport Industries Insurance Co Ltd v Longmuir (1997) 1 VR 125; Trevitt v NSW TAFE Commission [2001] NSWCA 363; Vines v…
Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd (No 2) [2010] NSWSC 118
Citation 17

…ourt Act 1970 Supreme Court Rules Uniform Civil Procedure Rules CATEGORY: Consequential orders CASES CITED: Seiwa Australia Pty Ltd v Beard [2009] NSWCA 240 Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd [2008] NSWSC 1260 Simmons v Colly Cotton Marketing Pty Ltd [2007] NSWSC 1092 Sirius Shipping Corpora…
Mastronardi v State of New South Wales [2009] NSWCA 270
Citation 18

…v State of New South Wales (District Court of New South Wales, Boulton ACDJ, 6 May 2008, unreported) Seiwa Australia Pty Ltd v Beard [2009] NSWCA 240 PARTIES: Fabian Mastronardi - Appellant State of New South Wales - Respondent FILE NUMBER(S): CA 40261/08 COUNSEL: B J Gross QC with K Ryan – Appellant M Cashion SC…
"H" v State of New South Wales [2009] NSWDC 193
Citation 19

…ation Commission of the Northern Territory [1998] HCA 5; (1998) 192 CLR 431 Seiwa Australia Pty Ltd v Beard [2009] NSWCA 240 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 State of NSW v Moss [2000] NSWCA 133 State of Victoria v Bryar & Anor [1970] 44 ALJR 174 Strinic v Singh [2009] NSWCA 15 Thatcher v…

Cases Cited

Statutory Material Cited

ROSE & BAUDIN [2012] FamCAFC 171
Citation 1

…um Co Ltd v Salaam [2001] QB 113 Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 Gattellaro v Westpac Banking Corp [2004] HCA 6; (2004) 78 ALJR 394; 204 ALR 258 Gett v Tabet [2009] NSWCA 76 Goldberg v Jenkins (1889) 15 VLR 36 Gullett v Gardner (1948) 22 ALJ 151 Howell v Macquarie University [2008] NSWCA 26 ICI Australi…
Yarrabee Coal Co Pty Ltd v Lujans [2009] NSWCA 85
Citation 2

…(2002) 208 CLR 460 Yarrabee Coal Company Pty Ltd v Lujans [2009] NSWCA 85 TEXTS CITED: Beale (ed), Chitty on Contracts, 30th ed (2008), Sweet & Maxwell Fletcher, The Law of Partnership in Australia, 9th ed (2007) Lawbook Co Treitel, Frustration and Force Majeure, 2nd ed (2004) Sweet & Maxwell PARTIES: Seiwa Austra…
Gett v Tabet [2009] NSWCA 76
Citation 3

…[2004] HCA 6; (2004) 78 ALJR 394; 204 ALR 258 Gett v Tabet [2009] NSWCA 76 Goldberg v Jenkins (1889) 15 VLR 36 Gullett v Gardner (1948) 22 ALJ 151 Howell v Macquarie University [2008] NSWCA 26 ICI Australia Operations Pty Ltd v WorkCover Authority (NSW) [2004] NSWCA 55; (2004) 60 NSWLR 18 Jones v Dunkel (1959) 10…
Smith v Harrison [2008] TASSC 78
Citation 4

…Pty Ltd [2008] NSWSC 1260 Shannon v Whiting (1900) 7 ALR 49 Smith v Harrison (1857) 26 LJ Ch 412 SS Hontestroom v SS Sagaporack [1927] AC 37 Taylor v Johnson (1983) 151 CLR 422 The Union Bank of Australia v Fisher (1892) 14 NSWLR (E) 1 The Union Bank of Australia v Fisher (1893) 14 NSWLR (E) 241 Toll (FGCT) Pty Ltd v Alph…
Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd [2008] NSWSC 1260
Citation 5

…Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd [2008] NSWSC 1260 Shannon v Whiting (1900) 7 ALR 49 Smith v Harrison (1857) 26 LJ Ch 412 SS Hontestroom v SS Sagaporack [1927] AC 37 Taylor v Johnson (1983) 151 CLR 422 The Union Bank of Australia v Fisher (1892) 14 NSWLR (E) 1 The Union Bank of Australia v…
Victorian Women Lawyers' Association Inc v Federal Commissioner of Taxation [2008] FCA 983
Citation 6

…wyers’ Association Inc v Federal Commissioner of Taxation [2008] FCA 983; (2008) 170 FCR 318 Walker v European Electronics Pty Ltd (In Liq) (1990) 23 NSWLR 1 Warren v Coombes (1979) 142 CLR 531 Woods v Multi-Sport Holdings Pty Ltd [2002] HCA 9; (2002) 208 CLR 460 Yarrabee Coal Company Pty Ltd v Lujans [2009] NSWC…
Howell v Macquarie University [2008] NSWCA 26
Citation 7

…t v Gardner (1948) 22 ALJ 151 Howell v Macquarie University [2008] NSWCA 26 ICI Australia Operations Pty Ltd v WorkCover Authority (NSW) [2004] NSWCA 55; (2004) 60 NSWLR 18 Jones v Dunkel (1959) 101 CLR 298 Jones v Hyde (1989) 63 ALJR 349; 85 ALR 23 Mercantile Credit Co Ltd v Garrod [1962] 3 All ER 1103 National C…
Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154
Citation 8

…(1992) 28 NSWLR 68 Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154; [2007] Aust Contract Reports 90-263 (90,058) Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 Polkinghorne v Holland (1934) 51 CLR 143 Prentice v Cummins (No 5) [2002] FCA 1503; (2002) 124 FCR 67 Ryledar Pty Ltd v Euphoric Pty…
Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65
Citation 9

…1503; (2002) 124 FCR 67 Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd [2008] NSWSC 1260 Shannon v Whiting (1900) 7 ALR 49 Smith v Harrison (1857) 26 LJ Ch 412 SS Hontestroom v SS Sagaporack [1927] AC 37 Taylor v Johnson (1983) 15…
Crown Glass & Aluminium Pty Limited v Ibrahim [2005] NSWCA 195
Citation 10

…1985) 155 CLR 541 Crown Glass & Aluminium Pty Ltd v Ibrahim [2005] NSWCA 195 Devries v Australian National Railways Commission (1993) 177 CLR 472 Dubai Aluminium Co Ltd v Salaam [2001] QB 113 Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 Gattellaro v Westpac Banking Corp [2004] HCA 6; (2004) 78 ALJR 394; 204 ALR 25…
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52
Citation 11

…) 14 NSWLR (E) 241 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 United Bank of Kuwait Ltd v Hammoud [1988] 1 WLR 1051; [1988] 3 All ER 418 Victorian Women Lawyers’ Association Inc v Federal Commissioner of Taxation [2008] FCA 983; (2008) 170 FCR 318 Walker v European Electronics Pty…
ICI Australia Operations Pty Ltd v Workcover Authority of New South Wales [2004] NSWCA 55
Citation 12

…CI Australia Operations Pty Ltd v WorkCover Authority (NSW) [2004] NSWCA 55; (2004) 60 NSWLR 18 Jones v Dunkel (1959) 101 CLR 298 Jones v Hyde (1989) 63 ALJR 349; 85 ALR 23 Mercantile Credit Co Ltd v Garrod [1962] 3 All ER 1103 National Commercial Banking Corporation of Australia Ltd v Batty (1986) 160 CLR 251 NSW…
Gattellaro v Westpac Banking Corporation [2004] HCA 6
Citation 13

…CA 22; (2003) 214 CLR 118 Gattellaro v Westpac Banking Corp [2004] HCA 6; (2004) 78 ALJR 394; 204 ALR 258 Gett v Tabet [2009] NSWCA 76 Goldberg v Jenkins (1889) 15 VLR 36 Gullett v Gardner (1948) 22 ALJ 151 Howell v Macquarie University [2008] NSWCA 26 ICI Australia Operations Pty Ltd v WorkCover Authority (NSW…
Prentice v Cummins (No 7) [2003] FCA 1162
Citation 14

…1934) 51 CLR 143 Prentice v Cummins (No 5) [2002] FCA 1503; (2002) 124 FCR 67 Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd [2008] NSWSC 1260 Shannon v Whiting (1900) 7 ALR 49 Smith v Harrison (1857) 26 LJ Ch 412 SS Hontestroom v SS…
Fox v Percy [2003] HCA 22
Citation 15

…2 Dubai Aluminium Co Ltd v Salaam [2001] QB 113 Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 Gattellaro v Westpac Banking Corp [2004] HCA 6; (2004) 78 ALJR 394; 204 ALR 258 Gett v Tabet [2009] NSWCA 76 Goldberg v Jenkins (1889) 15 VLR 36 Gullett v Gardner (1948) 22 ALJ 151 Howell v Macquarie University [2008] N…
CGM investments Pty Ltd v Chelliah [2003] FCA 79
Citation 16

…167 Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Beyfus v Greene (1855) 1 VLT 348 Brettel v Williams (1849) 4 Exch 623; 154 ER 1363; 80 RR 726 Commercial Bank v Lakeman (1890) 7 WN (NSW) 40 Constructio…
Prentice v Cummins [2002] FCA 1503
Citation 17

…horne v Holland (1934) 51 CLR 143 Prentice v Cummins (No 5) [2002] FCA 1503; (2002) 124 FCR 67 Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd [2008] NSWSC 1260 Shannon v Whiting (1900) 7 ALR 49 Smith v Harrison (1857) 26 LJ Ch 412…
Woods v Multi-sport Holdings Pty Ltd [2002] HCA 9
Citation 18

…s (1979) 142 CLR 531 Woods v Multi-Sport Holdings Pty Ltd [2002] HCA 9; (2002) 208 CLR 460 Yarrabee Coal Company Pty Ltd v Lujans [2009] NSWCA 85 TEXTS CITED: Beale (ed), Chitty on Contracts, 30th ed (2008), Sweet & Maxwell Fletcher, The Law of Partnership in Australia, 9th ed (2007) Lawbook Co Treitel, Frustra…
Grout v Gunnedah Shire Council (No 3) [1995] IRCA 117
Citation 19

…Ltd v Batty (1986) 160 CLR 251 NSW Cancer Council v Sarfaty (1992) 28 NSWLR 68 Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154; [2007] Aust Contract Reports 90-263 (90,058) Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 Polkinghorne v Holland (1934) 51 CLR 143 Prentice v Cummins (No 5) [2002] F…
DeVries v Australian National Railways Commission [1993] HCA 78
Citation 20

…NSWCA 195 Devries v Australian National Railways Commission (1993) 177 CLR 472 Dubai Aluminium Co Ltd v Salaam [2001] QB 113 Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 Gattellaro v Westpac Banking Corp [2004] HCA 6; (2004) 78 ALJR 394; 204 ALR 258 Gett v Tabet [2009] NSWCA 76 Goldberg v Jenkins (1889) 15 VLR 36 Gu…
Abalos v Australian Postal Commission [1990] HCA 47
Citation 21

…judgment CASES CITED: Abalos v Australian Postal Commission (1990) 171 CLR 167 Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Beyfus v Greene (1855) 1 VLT 348 Brettel v Williams (1849) 4 Exch 623; 154 ER…
Jones v Hyde [1989] HCA 20
Citation 22

…60 NSWLR 18 Jones v Dunkel (1959) 101 CLR 298 Jones v Hyde (1989) 63 ALJR 349; 85 ALR 23 Mercantile Credit Co Ltd v Garrod [1962] 3 All ER 1103 National Commercial Banking Corporation of Australia Ltd v Batty (1986) 160 CLR 251 NSW Cancer Council v Sarfaty (1992) 28 NSWLR 68 Pethybridge v Stedikas Holdings Pty Ltd […
National Commercial Banking Corporation of Australia Ltd v Batty [1986] HCA 21
Citation 23

…nal Commercial Banking Corporation of Australia Ltd v Batty (1986) 160 CLR 251 NSW Cancer Council v Sarfaty (1992) 28 NSWLR 68 Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154; [2007] Aust Contract Reports 90-263 (90,058) Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 Polkinghorne v Holland (193…
Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd [1985] HCA 13
Citation 24

…40 Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541 Crown Glass & Aluminium Pty Ltd v Ibrahim [2005] NSWCA 195 Devries v Australian National Railways Commission (1993) 177 CLR 472 Dubai Aluminium Co Ltd v Salaam [2001] QB 113 Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 Gattellaro v Westpa…
Taylor v Johnson [1983] HCA 5
Citation 25

…S Hontestroom v SS Sagaporack [1927] AC 37 Taylor v Johnson (1983) 151 CLR 422 The Union Bank of Australia v Fisher (1892) 14 NSWLR (E) 1 The Union Bank of Australia v Fisher (1893) 14 NSWLR (E) 241 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 United Bank of Kuwait Ltd v Hammoud [1988] 1…
Warren v Coombes [1979] HCA 9
Citation 26

…onics Pty Ltd (In Liq) (1990) 23 NSWLR 1 Warren v Coombes (1979) 142 CLR 531 Woods v Multi-Sport Holdings Pty Ltd [2002] HCA 9; (2002) 208 CLR 460 Yarrabee Coal Company Pty Ltd v Lujans [2009] NSWCA 85 TEXTS CITED: Beale (ed), Chitty on Contracts, 30th ed (2008), Sweet & Maxwell Fletcher, The Law of Partnership in Au…
Placer Development Ltd v The Commonwealth [1969] HCA 29
Citation 27

…s 90-263 (90,058) Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 Polkinghorne v Holland (1934) 51 CLR 143 Prentice v Cummins (No 5) [2002] FCA 1503; (2002) 124 FCR 67 Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd [2008]…
Jones v Dunkel [1959] HCA 9
Citation 28

…rkCover Authority (NSW) [2004] NSWCA 55; (2004) 60 NSWLR 18 Jones v Dunkel (1959) 101 CLR 298 Jones v Hyde (1989) 63 ALJR 349; 85 ALR 23 Mercantile Credit Co Ltd v Garrod [1962] 3 All ER 1103 National Commercial Banking Corporation of Australia Ltd v Batty (1986) 160 CLR 251 NSW Cancer Council v Sarfaty (1992) 28 NSWLR…
Jones v Dunkel [1959] HCA 8
Citation 29

…ty (NSW) [2004] NSWCA 55; (2004) 60 NSWLR 18 Jones v Dunkel (1959) 101 CLR 298 Jones v Hyde (1989) 63 ALJR 349; 85 ALR 23 Mercantile Credit Co Ltd v Garrod [1962] 3 All ER 1103 National Commercial Banking Corporation of Australia Ltd v Batty (1986) 160 CLR 251 NSW Cancer Council v Sarfaty (1992) 28 NSWLR 68 Pethybrid…
Polkinghorne v Holland [1934] HCA 28
Citation 30

…The Commonwealth (1969) 121 CLR 353 Polkinghorne v Holland (1934) 51 CLR 143 Prentice v Cummins (No 5) [2002] FCA 1503; (2002) 124 FCR 67 Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd [2008] NSWSC 1260 Shannon v Whiting (1900) 7 AL…

AI Chat coming soon

CITATION:	Seiwa Australia Pty Ltd v Beard [2009] NSWCA 240
HEARING DATE(S):	3 & 9 July 2009
JUDGMENT DATE:	11 August 2009
JUDGMENT OF:	Allsop P at 1; Campbell JA at 4; Macfarlan JA at 324
DECISION:	Appeal dismissed with costs.
CATCHWORDS:	PARTNERSHIP – partners – power of a partner to bind the partnership – determining the “business of the kind carried on by the firm” for the purpose of s 5 Partnership Act 1892 – whether “business of the kind carried on by the firm” is necessarily the business actually carried on by the partnership – meaning of “the usual way” in which the business is carried on – whether a judge can inform themselves using “common sense” of the business ordinarily carried on by a type of partnership firm – role of judicial notice in deciding this - PARTNERSHIP – partners – power of a partner to bind the partnership – ostensible authority – whether the ostensible authority of a partner is limited to what is necessary to carry on the partnership business – distinction between what is necessary to carry out a particular task and what is necessary to carry out the business of the partnership - PARTNERSHIP – partners – relevance of registration under Business Names Act 1962 to proof of identity of partners – difference between statutory facilitation of proof of identity of partners under Business Names Act 1962 and Business Names Act 2002 - APPEAL AND NEW TRIAL – appeal – general principles – interference with Judge’s findings of fact – limitations on an appellate court’s ability to assess the evidence – limitations extending beyond the trial Judge’s assessments of demeanour – advantages of a trial judge in weighing the account of a witness against contemporaneous documents - CONTRACTS – general contractual principles – parties – identification of parties – whether an objective bystander would conclude that a party to the contract was purporting to act on behalf of the partnership - CONTRACTS – general contractual principles – formation – whether a party can be held to an improbable promise where another party believes that the fulfilment of the promise was possible – whether such a contract can exist - EVIDENCE – witnesses – failure to call – inferences to be drawn – whether a Jones v Dunkel inference is open on the facts – no requirement for the trial judge to draw an adverse inference
LEGISLATION CITED:	Business Names Act 1962 Business Names Act 2002 Evidence Act 1995 Partnership Act 1892
CATEGORY:	Principal judgment
CASES CITED:	Abalos v Australian Postal Commission (1990) 171 CLR 167 Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Beyfus v Greene (1855) 1 VLT 348 Brettel v Williams (1849) 4 Exch 623; 154 ER 1363; 80 RR 726 Commercial Bank v Lakeman (1890) 7 WN (NSW) 40 Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541 Crown Glass & Aluminium Pty Ltd v Ibrahim [2005] NSWCA 195 Devries v Australian National Railways Commission (1993) 177 CLR 472 Dubai Aluminium Co Ltd v Salaam [2001] QB 113 Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 Gattellaro v Westpac Banking Corp [2004] HCA 6; (2004) 78 ALJR 394; 204 ALR 258 Gett v Tabet [2009] NSWCA 76 Goldberg v Jenkins (1889) 15 VLR 36 Gullett v Gardner (1948) 22 ALJ 151 Howell v Macquarie University [2008] NSWCA 26 ICI Australia Operations Pty Ltd v WorkCover Authority (NSW) [2004] NSWCA 55; (2004) 60 NSWLR 18 Jones v Dunkel (1959) 101 CLR 298 Jones v Hyde (1989) 63 ALJR 349; 85 ALR 23 Mercantile Credit Co Ltd v Garrod [1962] 3 All ER 1103 National Commercial Banking Corporation of Australia Ltd v Batty (1986) 160 CLR 251 NSW Cancer Council v Sarfaty (1992) 28 NSWLR 68 Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154; [2007] Aust Contract Reports 90-263 (90,058) Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 Polkinghorne v Holland (1934) 51 CLR 143 Prentice v Cummins (No 5) [2002] FCA 1503; (2002) 124 FCR 67 Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd [2008] NSWSC 1260 Shannon v Whiting (1900) 7 ALR 49 Smith v Harrison (1857) 26 LJ Ch 412 SS Hontestroom v SS Sagaporack [1927] AC 37 Taylor v Johnson (1983) 151 CLR 422 The Union Bank of Australia v Fisher (1892) 14 NSWLR (E) 1 The Union Bank of Australia v Fisher (1893) 14 NSWLR (E) 241 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 United Bank of Kuwait Ltd v Hammoud [1988] 1 WLR 1051; [1988] 3 All ER 418 Victorian Women Lawyers’ Association Inc v Federal Commissioner of Taxation [2008] FCA 983; (2008) 170 FCR 318 Walker v European Electronics Pty Ltd (In Liq) (1990) 23 NSWLR 1 Warren v Coombes (1979) 142 CLR 531 Woods v Multi-Sport Holdings Pty Ltd [2002] HCA 9; (2002) 208 CLR 460 Yarrabee Coal Company Pty Ltd v Lujans [2009] NSWCA 85
TEXTS CITED:	Beale (ed), Chitty on Contracts, 30th ed (2008), Sweet & Maxwell Fletcher, The Law of Partnership in Australia, 9th ed (2007) Lawbook Co Treitel, Frustration and Force Majeure, 2nd ed (2004) Sweet & Maxwell
PARTIES:	Seiwa Australia Pty Ltd (First Appellant) Australia Seiwa Pty Ltd (Second Appellant) Shojiro Azuma (Third Appellant) Malcolm James Beard (First Respondent) Gregory Charles Ralph (Second Respondent)
FILE NUMBER(S):	CA 40437/08
COUNSEL:	MW Young (Appellants) A Leopold SC; SE Gray (Respondents)
SOLICITORS:	Dixon Holmes Du Pont (Appellants) Henry Davis York (Respondents)
LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	2806/04
LOWER COURT JUDICIAL OFFICER:	Harrison J
LOWER COURT DATE OF DECISION:	27 November 2008
LOWER COURT MEDIUM NEUTRAL CITATION:	Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd [2008] NSWSC 1260