Smith v Leveraged Equities Ltd

[2020] WASCA 122

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT  :   THE COURT OF APPEAL (WA)

CITATION:   SMITH -v- LEVERAGED EQUITIES LTD [2020] WASCA 122

CORAM:   BUSS P

BEECH JA

VAUGHAN JA

HEARD:   11 & 12 NOVEMBER 2019

DELIVERED          :   5 AUGUST 2020

FILE NO/S:   CACV 40 of 2018

BETWEEN:   EDWIN GEORGE SMITH

Appellant

AND

LEVERAGED EQUITIES LTD

First Respondent

TODD MICHAEL KING

Second Respondent

ACN 118 453 679 PTY LTD

Third Respondent

AUSTRALIAN STOCKBROKING AND ADVISORY SERVICES PTY LTD

Fourth Respondent

GLENICE BERYL KING

Fifth Respondent

ON APPEAL FROM:

Jurisdiction              :   SUPREME COURT OF WESTERN AUSTRALIA

Coram:   ALLANSON J

File Number            :   CIV 3124 of 2009

Catchwords:

Restitution - Unjust enrichment - Principles of 'strict recipient liability' - Whether first respondent received first share transfer as volunteer - Turns on own facts

Restitution - Unjust enrichment - Whether primary judge erred in law by failing to order first respondent to make restitution to the appellant in respect of second and third share transfers - Whether first respondent obtained benefit and unjustly enriched by the receipt of shares - Where return of shares without prejudice to appellant's claim - Whether return of shares by first respondent attributable to second and third share transfers - Whether change in position or provision of good consideration provide first respondent with available defences - Turns on own facts

Corporations - Whether appellant entitled to recover against fourth respondent pursuant to s 917E of the Corporations Act 2001 (Cth) - Whether disclosure for purpose of s 917D of Corporations Act 2001 (Cth) - Turns on own facts

Appeal - Whether new case advanced on appeal - Whether 'dealing' case relied on for ground of appeal the appellant's case as particularised for trial - Turns on own facts

Legislation:

Corporations Act 2001 (Cth), s 760A, s 761E, s 766A, s 766C, s 917A, s 917B, s 917C, s 917D, s 917F

Result:

Appeal on ground 1 allowed in part 
Matter partially remitted to primary judge for determination of defences and quantification
Appeal otherwise dismissed

Category:    B

Representation:

Counsel:

Appellant	:	S K Dharmananda SC & C S Williams
First Respondent	:	M N Solomon SC & T J Porter
Second Respondent	:	No appearance
Third Respondent	:	No appearance
Fourth Respondent	:	M Jones SC & J A Thornton
Fifth Respondent	:	No appearance

Solicitors:

Appellant	:	Solomon Brothers
First Respondent	:	HWL Ebsworth Lawyers (Perth)
Second Respondent	:	No appearance
Third Respondent	:	No appearance
Fourth Respondent	:	Wotton Kearney - Melbourne
Fifth Respondent	:	No appearance

Case(s) referred to in decision(s):

Airservices Australia v Ferrier [1996] HCA 54; (1996) 185 CLR 483

Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Co Ltd [2008] WASCA 119; (2008) 66 ACSR 594

Australasian Annuities Pty Ltd v Rowley Super Fund Pty Ltd [2015] VSCA 9; (2015) 318 ALR 302

Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662

Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14; (2014) 253 CLR 560

Barclays Bank Ltd v WJ Simms Son & Cooke (Southern) Ltd [1980] QB 677

Beachquest Pty Ltd v Interstate Mortgage and Investments Pty Ltd [2001] QSC 512; [2003] 2 Qd R 586

Black v Freedman & Co [1910] HCA 58; (1910) 12 CLR 105

Boyd v Fielding [2009] VSCA 237

Brady v Stapleton [1952] HCA 62; (1952) 88 CLR 322

Caltabiano v Electoral Commission of Queensland (No 1) [2009] QCA 182; [2010] 1 Qd R 100

Casaclang v Wealthsure Pty Ltd [2015] FCA 761; (2015) 238 FCR 55

Citigroup Pty Ltd v National Australia Bank Ltd [2012] NSWCA 381; (2012) 82 NSWLR 391

CMA Corporation Limited v SNL Group Pty Ltd [2012] NSWCA 138

Cook v Benson [2003] HCA 36; (2003) 214 CLR 370

Cory Brothers & Co v Owners of the Turkish Steamship 'Mecca' [1897] AC 286

Creak v James Moore & Sons Pty Ltd [1912] HCA 67; (1912) 15 CLR 426

David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353

Deputy Commissioner of Taxation v Falzon [2008] QCA 327; (2008) 74 ATR 76

Devaynes v Noble (Clayton's case) (1816) 1 Mer 571, 608; 35 ER 781

Distinctive FX Pty Ltd v Van Der Slot [2015] VSCA 328

Fahey v MSD Speirs Ltd [1975] 1 NZLR 240

Farah Constructions v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89

Farrow Finance Co Ltd (in liq) v ANZ Executors and Trustee Company Ltd [1998] 1 VR 50

Fistar v Riverwood Legion and Community Club Ltd [2016] NSWCA 81; (2016) 91 NSWLR 732

Garcia v National Australia Bank Ltd [1998] HCA 48; (1998) 194 CLR 395

Great Investments Ltd v Warner [2016] FCAFC 85; (2016) 243 FCR 516

Hepuru Pty Ltd v Belle [2009] NSWCA 252; (2009) 76 NSWLR 230

Hills Industries Ltd v Australian Financial Services and Leasing Pty Ltd [2012] NSWCA 380; (2012) 295 ALR 147

Leeson v Leeson [1936] 2 KB 156

Lipkin Gorman v Karpnale Ltd [1988] UKHL 12; [1991] 2 AC 548

London Passenger Transport Board v Moscrop [1942] AC 332

Moree Plains Shire Council v Goater [2016] FCAFC 135

National Companies & Securities Commission v Industrial Equities Ltd [1982] 1 NSWLR 42

Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538

Palmer v Sutherland (1869) 2 QSCR 44

Re Global Finance Group Pty Ltd (in liq); Ex parte Read [2002] WASC 63; (2002) 26 WAR 385

Re Hallett's Estate; Knatchbull v Hallett (1879) 13 Ch D 696

Re Muggleton; Ex parte Trenstone Pty Ltd (1993) 50 FCR 576

Re Sutherland; French Caledonia Travel Service Pty Ltd [2003] NSWSC 1008; (2003) 59 NSWLR 361

Re Walsh; Ex parte Deputy Commissioner of Taxation (NSW) (1982) 60 FLR 355

Scales Trading Ltd v Far Eastern Shipping Co Public Ltd [1999] 3 NZLR 26

Seymour v Pickett [1905] 1 KB 715

Sibbles v Highfern Pty Ltd [1987] HCA 66; (1987) 164 CLR 214

Smith v Leveraged Equities [No 3] [2018] WASC 84

Sociedad Agricola Topagri Ltda v BBC Techonologies Ltd [2014] NZCA 253

Toksoz v Westpac Banking Corporation [2012] NSWCA 199; (2012) 289 ALR 577

Visbord v Federal Commissioner of Taxation [1943] HCA 4; (1943) 68 CLR 354

Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491

Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 77 ALJR 1598

WorkPac Pty Ltd v Rossato [2020] FCAFC 84; (2020) 378 ALR 585

Yarra Capital Group Pty Ltd v Sklash Pty Ltd [2006] VSCA 109

Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40

JUDGMENT OF THE COURT:

Overview

1. The appellant, Edwin Smith, was an active share trader.  The second respondent, Todd King, was a licenced stockbroker.  From about 2001 Mr King was Mr Smith's broker.  At the time of the events relevant to this appeal - 2007 to 2008 - Mr King was a director of the third respondent, then known as Stripe Capital Pty Ltd (Stripe).  Stripe operated as a stockbroker.  When Mr King moved to Stripe, in 2006, Mr Smith engaged Stripe as his stockbroker and Mr King continued to act as Mr Smith's broker.

2. At the time of the relevant events, Mr King and Stripe were authorised representatives of the fourth respondent, Australian Stockbroking and Advisory Services Ltd (ASASL). ASASL held an Australian Financial Services Licence (AFSL) issued in accordance with pt 7.6 of the Corporations Act2001 (Cth). The appointment of Stripe and Mr King as authorised representatives was pursuant to an Authorised Representative Agreement.

3. As well as acting as a broker, Mr King was a share trader.  In August 2006 Mr King opened a margin lending account with the first respondent, Leveraged Equities, in the name of his mother - the fifth respondent, Glenice King.  Although the account was in the name of Mrs King, it was used for trading by Mr King.  On 1 August 2007, following a 30 July 2007 agreement between Mr King and Mr Smith, Mr Smith provided 85,000 shares in Wesfarmers Ltd (Wesfarmers) as collateral security for the margin lending account.  A June 2008 rights issue saw a further 10,625 Wesfarmers shares, attributable to the initial 85,000 shares, credited to the account.  Other Wesfarmers shares owned by Mr Smith were added as security for the margin lending account in January 2008 (25,000 shares) and March 2008 (15,000 shares).  Those second and third share transfers were not authorised by Mr Smith.  To the contrary, the transfers were made without Mr Smith's knowledge and by the use of false documents prepared by Mr King.

4. Leveraged Equities was not then aware of this, but became aware by late June 2008 or no later than about mid‑July 2008.

5. In due course, after becoming aware of Mr King's forgery, Leveraged Equities sold some of Mr Smith's Wesfarmers shares as held by way of security.  Mr Smith also made payments to Leveraged Equities to prevent the sale of further shares and to eventually obtain return of the balance of the shares.  Mr Smith commenced proceedings in 2009 to recover his losses.

6. At first instance Mr Smith was successful against Mr King and Mrs King.  The proceedings named Stripe as a defendant.  However, by the time of the trial (February to March 2016) Stripe had entered into liquidation.  Mr Smith never sought leave to proceed against Stripe. Accordingly, the claim against Stripe was not determined.  ASASL had also entered liquidation by the time of the trial.  Before trial Mr Smith obtained leave to proceed against ASASL.  While ASASL had participated in pre-trial interlocutory steps, it did not appear at the trial.  Nevertheless, Mr Smith's claim against ASASL was dismissed.  So too the primary court dismissed the claim that Mr Smith brought against Leveraged Equities.

7. On appeal Mr Smith seeks to set aside the dismissal of his claims against Leveraged Equities and ASASL.  In substance the claims as dismissed and sought to be allowed on appeal were claims that:

   1.Leveraged Equities was liable to make restitution to Mr Smith in relation to the Wesfarmers shares.  Mr Smith relied on what were said to be principles of 'strict recipient liability'[1] and contended that Leveraged Equities had been unjustly enriched by the shares.

   2.ASASL was responsible, pursuant to s 917B, s 917E and s 917F of the Corporations Act, for the conduct of Mr King and Stripe as ASASL's authorised representatives.  Among other things Mr Smith sought relief in the form of damages.

   [1] Appellant's submissions pars 33 - 36, 41, 46, 63 WAB 16 - 20, 25.

Background facts

1. On this appeal Mr Smith did not challenge any of the primary judge's factual findings; only conclusions from the facts were contested.[2]  Accordingly, it is convenient to recount the background facts by reference to the primary reasons.[3]  It should not, however, be thought that what follows is a comprehensive account of the primary reasons.  The primary judge had to contend with the claims against Mr King and Mrs King as well as the claims against Leveraged Equities and ASASL.  Also, at first instance Mr Smith raised many additional causes of action against Leveraged Equities which are no longer pursued on appeal.  It is only necessary to set out the background to the extent necessary to deal with the issues on appeal.

   [2] Appellant's submissions par 7 WAB 11.

   [3] Smith v Leveraged Equities [No 3] [2018] WASC 84 (primary reasons).

2. The nature of the relationship between the parties has been described at [1] to [6] above.  At the outset it should be acknowledged that the primary judge found that Mr King was seriously dishonest on several occasions (all of which resulted in the transfer of Wesfarmers shares belonging to Mr Smith).[4]  There were, however, no findings that Leveraged Equities knew of Mr King's dishonesty at the time of the transfers.[5]  Moreover, as to the 30 July 2007 agreement the primary judge made an express finding that he was not satisfied that Leveraged Equities was involved in the contravention constituted by Mr King's conduct.[6]

   [4] Primary reasons [16] - [18].

   [5] Primary reasons [294], [297], [299] - [302], [522], [546]. See also [127], [134], [150] - [151], [256], [265].

   [6] Primary reasons [543].

3. The primary judge found that Mr King was not a conservative investor.  Mr King was found to have traded in high volumes and to have borrowed heavily to do so.  The primary judge found that, on occasions relevant to the litigation, Mr King took market positions which left him very exposed when share values fell.[7]

   [7] Primary reasons [66].

4. The Authorised Representative Agreement between ASASL and Stripe permitted Stripe to use a trading system known as the 'E*Trade Trading System' for the execution of ASX transactions.[8]  However, Stripe and its directors (including Mr King) guaranteed the settlement of all trades Stripe executed.[9]  This was relevant to the trading Mr King conducted in Mrs King's name involving the Leveraged Equities margin lending account.  Mr King and Stripe were the named advisers and Mr King the authorised representative for Mrs King's margin lending account with Leveraged Equities.[10]  If Leveraged Equities would not fund particular trades (because, for example, the available security was inadequate) the contracts would still settle.[11]  The trading was conducted through E*Trade.  E*Trade was obliged to discharge Mrs King's obligation to purchase or sell shares whether or not Mrs King delivered the purchase price or shares.  In turn, ASASL was required to indemnify E*Trade.  Stripe and its directors, including Mr King, were to indemnify ASASL.[12]

   [8] Primary reasons [53].

   [9] Primary reasons [55].

   [10] Primary reasons [61].

   [11] Primary reasons [71].

   [12] Primary reasons [65]. See also at [71].

5. Accordingly, while the exposure for failed trades would fall on Mrs King, there was a coextensive liability that lay with Stripe and Mr King.[13]

   [13] Primary reasons [65]. See also at [71].

6. The primary judge made detailed findings as to the contractual terms on which Mrs King (and later Mr Smith) contracted with Leveraged Equities in relation to the margin lending account under a Margin Loan Facility Agreement dated 20 July 2006 between Mrs King and Leveraged Equities.[14]  The primary judge also addressed how such margin lending accounts were administered in fact.[15]  Importantly, Leveraged Equities reserved an absolute discretion to decline to advance a loan (cl 2.2(b)).[16]  The maximum amount Leveraged Equities was prepared to advance was based on the security value of all secured property.[17]  If at any time the total amount owing exceeded the security value by more than a buffer, the borrower (Mrs King) had to provide additional collateral, repay some or all of the total amount owing or sell or redeem some of the secured property so that the total amount owing no longer exceeded the security value (cl 4.1).  In the event of default Leveraged Equities was entitled to enforce a mortgage over the secured property.[18]

   [14] Primary reasons [153] - [188].

   [15] Primary reasons [189] - [211].

   [16] Primary reasons [164].

   [17] Primary reasons [159] - [161].

   [18] Primary reasons [166] - [170].

7. The maximum amount Mrs King could borrow would, typically, fluctuate on a daily basis insofar as the security value was a percentage of the market value of the shares held as security.[19]

   [19] Primary reasons [190].

8. Towards the end of July 2007 Mr King, using his mother's account, had entered into contracts to purchase shares with a total amount payable that exceeded $3.061 million.  The funds available in Mrs King's account were insufficient to settle the purchases.  Leveraged Equities would not advance settlement funds based on the value of the current security it held.[20]  Mr King needed to find cash or lodge security of sufficient value so that Leveraged Equities would lend the funds required to settle the trades against the value of the security.[21]

   [20] Primary reasons [69].

   [21] Primary reasons [72].

9. Mr King was aware that Mr Smith had sufficient Wesfarmers shares to provide collateral for the trades.[22]

   [22] Primary reasons [72].

10. Mr King contacted Mr Smith by telephone early on 30 July 2007; they met later that day.  Mr King offered Mr Smith $50,000 as consideration for the use of 85,000 Wesfarmers shares as collateral for about six weeks.  The discussions resulted in a written agreement[23] between Mr King and Mr Smith.  In substance the agreement provided for Mr Smith to provide collateral for Mrs King's Leveraged Equities account in the form of 85,000 Wesfarmers shares for a period of up to 15 September 2007.  Mr King agreed to pay $50,000 to Mr Smith for the use of the collateral.[24]

    [23] See Primary reasons [92] for the contents of the written agreement.

    [24] Primary reasons [77] - [110].

11. The primary judge found that the agreement and Mr Smith's acts pursuant to the agreement were induced by misleading or deceptive conduct on the part of Mr King.[25]

    [25] Primary reasons [402] - [438] (esp [407], [409] - [411], [421], [423] - [424], [438]).  See also at [570], [572] - [573].

12. When Mr King and Mr Smith met on 30 July 2007 to sign the written agreement, Mr King also provided - and Mr Smith signed - other documents to give effect to the arrangement.  These comprised:

    1.An Application Form for Mr Smith to be added as guarantor to Mrs King's account.[26]

    2.A Form of Acknowledgement of a Master Deed of Priority between an entity named Australian Clearing House Pty Ltd and Leveraged Equities.[27]

    3.An Authority Letter addressed to Leveraged Equities by which Mr Smith authorised the transfer of 85,000 Wesfarmers shares from his HIN (referring to 'Holder Identification Number' - a number which uniquely identifies a person as the holder of shares) to the margin loan account in the name of Mrs King.[28]

    [26] Primary reasons [96] - [97].

    [27] Primary reasons [96].

    [28] Primary reasons [104].

13. Mr Smith transmitted those documents to Leveraged Equities.[29]  The primary reasons do not state when this occurred.  It could not have occurred any earlier than 30 July 2007 (the day of the meeting) and was no later than 31 July 2007 (because Leveraged Equities contacted Mr Smith on 31 July 2007).[30]

    [29] Primary reasons [107].

    [30] Primary reasons [114] - [128].

14. In a subsequent section of his reasons the primary judge made detailed (and unchallenged) findings as to the process of the transfer of Mr Smith's shares to Leveraged Equities.[31]  The Application Form included an offer to give Leveraged Equities a mortgage; this was executed by an employee of Leveraged Equities under power of attorney given in the Application Form.[32]  Leveraged Equities could require that, as guarantor of Mrs King's account pursuant to the Application Form Mr Smith signed, Mr Smith's securities be held by a nominee or in a participant sponsored holding.[33]  Mr Smith insisted that the shares he provided as collateral be held under a sponsorship arrangement, rather than by a nominee, and that is what happened.  Thus there was no change in ownership.[34]  Mr Smith remained the registered owner of the shares.[35]  However, his proprietary rights were subject to the sponsorship agreement[36] and the mortgage in favour of Leveraged Equities.[37]

    [31] Primary reasons [257] - [363].

    [32] Primary reasons [357].

    [33] Primary reasons [359] - [360].

    [34] Primary reasons [361].

    [35] Primary reasons [362].

    [36] Primary reasons [362].

    [37] Primary reasons [363].

15. Following the processing of the Application Form and the Authority Letter the 85,000 Wesfarmers shares thus became collateral for Mrs King's margin lending account; the shares then provided about 80% of the security value in relation to the account.[38]  The outstanding trades (which might otherwise have failed) settled on 1 August 2007.[39]  From 10 September 2007 Mr King recommenced trading on his mother's account.[40]  While the $50,000 was paid to Mr Smith, the 85,000 Wesfarmers shares were not returned to him on 15 September 2007.[41]  Mr King was able to delay Mr Smith with promises.[42]

    [38] Primary reasons [212].

    [39] Primary reasons [213].

    [40] Primary reasons [218] - [219].

    [41] Primary reasons [222].

    [42] Primary reasons [223] - [228]. See also [234], [245], [260].

1. On 21 January 2008 Mrs King's account was in margin call; the security value left a shortfall of $333,421.27 as against the loan amount.[43]  Mr King asked Leveraged Equities to lodge further Wesfarmers shares against the account, sending Leveraged Equities, via email, an undated document purportedly signed by Mr Smith authorising the transfer of 25,000 Wesfarmers shares.[44]  Mr Smith's signature was forged by Mr King.[45]  The transfer of the 25,000 Wesfarmers shares was completed on 25 January 2008.[46]  The primary judge found that, at this time, Leveraged Equities had no reason to suspect dishonesty on Mr King's part - or that Mr King was acting outside his authority.[47]

   [43] Primary reasons [251].

   [44] Primary reasons [252].

   [45] Primary reasons [252].

   [46] Primary reasons [254].

   [47] Primary reasons [256].

2. Mr Smith travelled to Europe on 5 March 2008 and did not return until 12 April 2008.[48]

   [48] Primary reasons [263].

3. As at 8 March 2008 three pending trades on Mrs King's account were due to fail because of insufficient capacity in the margin lending account.  On 10 March 2008 Mr King caused another 15,000 Wesfarmers to be transferred to Mrs King's account.  The circumstances of the transfer were much the same as the second transfer involving the 25,000 shares in January 2008.  The transfer was implemented by a letter emailed to Leveraged Equities, purportedly signed by Mr Smith, authorising the transfer.  Again the letter was forged by Mr King.[49]

   [49] Primary reasons [264].

4. Leveraged Equities was not aware that the transfer of the 15,000 Wesfarmers shares was made without Mr Smith's authority.[50]

   [50] Primary reasons [265].

5. After Mr Smith returned from Europe, he demanded an explanation for the transfer of the additional 40,000 Wesfarmers shares.  Mr King blamed the transfer on clerical error.[51]  On 7 May 2008, 25,000 Wesfarmers shares were returned to Mr Smith.[52]  No findings were made as to the reasons for or circumstances of the return.  The finding is one of bare fact without elaboration: Mr King sent an email advising Mr Smith that shares would be coming back into his account; on 7 May 2008 the 25,000 Wesfarmers shares were returned.[53]  As will be seen, an issue arises in the appeal as to whether the return of these shares should be allocated to the initial tranche of 85,000 shares (Mr Smith's primary position) or the second or third transfers (the 25,000 and 15,000 shares as transferred in January and March 2008).  The returned shares could not relate to the 10,625 rights issue shares as the return pre-dated the rights issue.

   [51] Primary reasons [276].

   [52] Primary reasons [279].

   [53] Primary reasons [279].

6. On 2 June 2008 Wesfarmers made a rights issue.  This resulted in an accretion to the Wesfarmers shares in an amount of 10,625 shares.[54]

   [54] Primary reasons [281].

7. The rights issue shares were held in Mrs King's Leveraged Equities margin lending account.[55]  The primary judge made an unchallenged finding that the Wesfarmers shares that entitled Mr Smith to participate in the rights issue were the 85,000 shares held in an account under Mr Smith's HIN with Pirie Street Custodians as his sponsor.[56]  Pirie Street Custodians acted as the sponsor for the shares held on Mrs King's margin lending account with Leveraged Equities.[57]  Mr Smith remained the registered owner of the shares; however, his rights were subject to the sponsorship agreement.[58]

   [55] Primary reasons [281].

   [56] Primary reasons [545].

   [57] Primary reasons [360] - [362].

   [58] Primary reasons [362].

8. Mr Smith made contact with Leveraged Equities on 24 June 2008.[59]  Previously, by letter dated 13 June 2008, Mr Smith had sought return of 50,000 Wesfarmers shares, as originally transferred, and the rights issue shares (Mr Smith continued to be under the misapprehension that the transfer of the 40,000 shares the subject of the second and third transfers was a mistake).[60]  On 24 June 2008 Mr Smith sought that all of his Wesfarmers shares be returned to him; however, the current account position did not allow their release.[61]  In subsequent June 2008 telephone calls Mr Smith informed Leveraged Equities of the agreement as to the 85,000 shares.  The primary judge found that Leveraged Equities was not previously aware of an agreement of that kind.[62]  The primary judge also found that no one at Leveraged Equities was aware that the 21 January 2008 and 8 March 2008 authorities (as to the 25,000 and 15,000 Wesfarmers shares) were forged, or alleged to be forged, until the issue was raised by Mr Smith in late June 2008.[63]

   [59] Primary reasons [288].

   [60] Primary reasons [289] - [291].

   [61] Primary reasons [290(5)].

   [62] Primary reasons [294].

   [63] Primary reasons [297]. See also at [299] - [302].

9. The primary judge later reiterated that Leveraged Equities became aware of Mr King's fraud in relation to the second and third share transfers from about late June 2008 or, at the latest, by 17 July 2008.[64]  The relevant date in June 2008 appears to have been 24 June 2008.[65]  In any case, as at 17 July 2008, Leveraged Equities recorded that the second and third share transfers 'were indeed fraudulent'.[66]

   [64] Primary reasons [546].

   [65] See Primary reasons [522] (the primary judge was not satisfied that Mr Smith had shown that Leveraged Equities knew that Mr King had or was likely to have breached any putative fiduciary duties before, at the earliest, 24 June 2008).  See also Primary reasons [299] - [302].

   [66] Primary reasons [298].

10. Commencing from late 2008 there were extensive communications and negotiations between Mr Smith and Mr King with a view to Mr King making Mr Smith whole.[67]  It is not necessary to outline these dealings or the terms of a deed that was signed by Mr King and his partner.[68]

    [67] Primary reasons [304] - [322]. See also [331], [335] - [336].

    [68] Primary reasons [314] - [317].

11. In August 2008, Mr Smith requested that Leveraged Equities return the Wesfarmers shares.  Mr Smith said that they had been fraudulently transferred to Leveraged Equities by Mr King.  Leveraged Equities, by one of its officers, said that the shares could not be released.[69]  On 23 December 2008, Mr Smith, by his solicitors, demanded that Leveraged Equities make immediate transfer to him of the balance of the Wesfarmers shares then held by Leveraged Equities.[70]

    [69] Primary reasons [323].

    [70] Primary reasons [350].

12. By August 2008 Mrs King's margin loan account was suspended.  As at 31 August 2008 the loan totalled $2,899,557.13 and there was a security value shortfall.  Over the ensuing months the share price of the Wesfarmers shares dropped.  Margin calls were made.  Sometimes Mr Smith made payments to Leveraged Equities to reduce Mrs King's debt and avoid the sale of his Wesfarmers shares.  On other occasions there was a transfer or sale of Wesfarmers shares.

13. The primary judge recorded the following transactions:

    1.On about 18 September 2008 Mr Smith paid $150,000 and authorised the sale of 10,000 Wesfarmers shares (which realised $290,060.61).[71]

    2.On about 27 October 2008 Mr Smith paid $130,000 to Leveraged Equities and transferred a further 15,000 Wesfarmers shares to be held as security.[72]

    3.On about 5 December 2008 Leveraged Equities sold 68,000 Wesfarmers shares receiving an amount of $1,125,248.67 on 10 December 2008.[73]

    4.On 9 September 2011 Mr Smith paid Leveraged Equities an amount of $764,983.20 to clear Mrs King's margin lending account.[74]

    [71] Primary reasons [325].

    [72] Primary reasons [326].

    [73] Primary reasons [348].

    [74] Primary reasons [354].

14. The $764,983.20 was paid by Mr Smith to Leveraged Equities after he commenced proceedings against Leveraged Equities.[75]  The amount was paid without prejudice to any claims by Mr Smith against Leveraged Equities including the claims made in the action.[76]  After payment, on about 20 September 2011, Leveraged Equities transferred the then balance of the Wesfarmers shares it held in relation to Mrs King's margin lending account - some 47,625 unencumbered shares - to Mr Smith.[77]  The primary judge stated that: [78]

    It is not possible to say whether the shares then returned included shares from the second and third share transfers [ie the 25,000 shares in January 2008 and the 15,000 in March 2008] or the rights issue [the 10,625 in June 2008].

    [75] Primary reasons [353] - [354].

    [76] Primary reasons [354].

    [77] Primary reasons [355].

    [78] Primary reasons [355].

15. Accordingly, in total Leveraged Equities applied 78,000 Wesfarmers shares owned by Mr Smith[79] and received an amount of $1,044,983.20 in cash payments from him.[80]

    [79] The 10,000 shares sold on 18 September 2008 and the 68,000 shares sold on 5 December 2008.

    [80] Made up of $150,000 (18 September 2008), $130,000 (27 October 2008) and $764,983.20 (9 September 2011).

Primary judge's findings on the various claims

The claims against Mr King

1. Mr Smith pursued claims against Mr King for breach of fiduciary duty, breach of a duty of care, breach of contract and misleading or deceptive conduct (the latter relying on s 10 of the Fair Trading Act 1987 (WA), s 1041H of the Corporations Act and s 12DA of the Australian Securities and Investment Commission Act 2001 (Cth)).[81] The misleading or deceptive conduct claim succeeded insofar as it relied on s 10 of the Fair Trading Act 1987.[82]  However, the primary judge dismissed the claims for breach of duty of care[83] and breach of contractual duty.[84]  The primary judge also rejected the breach of fiduciary duty claim.[85]

   [81] There were also claims based on making false or misleading statements in contravention of s 12 of the Fair Trading Act 1987 (WA), s 1041E of the Corporations Act and s 12DD of the Australian Securities and Investment Commission Act 2001.

   [82] Primary reasons [424], [430], [438].

   [83] Primary reasons [392] - [398].

   [84] Primary reasons [399] - [401].

   [85] Primary reasons [389] - [391].

2. The primary judge concluded that, in making the 30 July 2007 agreement, Mr King was not bound by fiduciary obligations.[86]  That finding is challenged as part of ground 2 (and inferentially as part of ground 3).  Mr Smith's case on appeal as to the initial 85,000 share transfer relied, among other things, on establishing that the transfer of the shares occurred as a result of a breach of fiduciary duty owed by Mr King to Mr Smith.

The claims against Mrs King

[86] Primary reasons [380]. See also [381] - [388], [449].

1. Mr Smith was held to be entitled to recoup the amounts he paid on behalf of Mrs King as guarantor of her liabilities to Leveraged Equities.[87]

The claims against Leveraged Equities

[87] Primary reasons [577].

1. The primary judge dismissed a number of claims against Leveraged Equities which are no longer pursued on appeal.  These were claims by way of:

   1.Misleading or deceptive conduct.[88]

   2.Unconscionable conduct (relying both on the general law and various statutory provisions).[89]

   3.Knowing receipt of property transferred in breach of fiduciary duty.[90]  (Here the primary judge again referred to not being satisfied that Mr King breached fiduciary duties to Mr Smith with regard to the 30 July 2007 agreement.)[91]

   4.Conversion.[92]

   [88] Primary reasons [450] - [488].

   [89] Primary reasons [489] - [518].

   [90] Primary reasons [519] - [525].

   [91] Primary reasons [521].

   [92] Primary reasons [550] - [553].

2. The claims dismissed by the primary judge, and now re-agitated on appeal, were claims that Leveraged Equities had been unjustly enriched at Mr Smith's expense.

3. The primary judge held that the 85,000 initial share transfer was pursuant to Mr Smith's guarantee of Mrs King's margin lending account and the sponsorship agreement where the breach of fiduciary duty alleged by Mr Smith had not been established.[93]  Among other things that was a finding that the benefit had been transferred to Leveraged Equities under a contract.  In connection with Mr Smith's unjust enrichment claim the primary judge had earlier referred to authority that, where a benefit was transferred under a contract, the fact of the contract would provide the recipient with a right to retain the benefit until the contract was avoided or set aside.[94]  The primary judge held that the contract between Mr Smith and Leveraged Equities was not liable to rescission under statute by reasons of Mr King's breaches.[95]  Nor was the primary judge satisfied that Mr Smith had established causes of action in misleading or deceptive conduct, or unconscionable conduct, entitling him to rescission of his agreements with Leveraged Equities.[96]  Also, his Honour was not satisfied that Mr Smith had established the basis alleged for restitution of the shares and traceable benefits retained by Leveraged Equities.[97]

   [93] Primary reasons [542].

   [94] Primary reasons [536].

   [95] Primary reasons [543].

   [96] Primary reasons [544].

   [97] Primary reasons [544].

4. These conclusions as to the initial share transfer are challenged by ground 2 of Mr Smith's appeal.

5. The primary judge concluded that the 85,000 shares were the shares that entitled Mr Smith to participate in the rights issue.  The mortgage to Leveraged Equities extended to those shares.  The primary judge held that the guarantee was a sufficient basis for the rights issue shares to be retained - Mr Smith having not established a basis for setting aside the guarantee as against Leveraged Equities.[98]

   [98] Primary reasons [545].

6. The primary judge held, however, that on becoming aware of Mr King's fraud in relation to the second and third share transfers, Leveraged Equities could no longer rely on the guarantee or mortgage as authority to retain those shares as security.  The primary judge stated that, subject to other defences, Mr Smith was entitled to the return of the shares, but by September 2011 all remaining shares had been returned.[99]  The primary judge, without determining 'change of position' and 'good consideration' defences on the part of Leveraged Equities, made no provision for relief against Leveraged Equities and ultimately dismissed the claim against Leveraged Equities.[100]

   [99] Primary reasons [546], [548].

   [100] Primary reasons [579]. See also the orders of the court dated 29 March 2018 par 2 BAB 1.

7. The primary judge stated that:

   1.In practical terms 25,000 Wesfarmers shares had been returned to Mr Smith in May 2008 - stating, in the following sentence, that Leveraged Equities was still entitled to hold the shares 'initially transferred'.[101]  On appeal Leveraged Equities relied on this statement in contending that there was an unchallenged factual finding that the shares that were returned to Mr Smith on about 7 May 2008 were the 25,000 shares the subject of the second share transfer.[102]

   2.It was not clear what would have occurred had Leveraged Equities returned the 15,000 shares (as transferred in March 2008) in July 2008.  His Honour stated that the return was likely to have triggered a margin call.  The primary judge was unable to calculate the extent to which such a margin call would have caused the sale of Mr Smith's Wesfarmers shares as held as security.  However, any margin call would have resulted in the sale of at least some of Mr Smith's shares.  The primary judge thus stated that 'the return of shares is likely to have caused Mr Smith substantial loss.'[103]

   3.The remaining 47,625 Wesfarmers shares were returned to Mr Smith in September 2011.[104]

   4.Leveraged Equities retained no further shares.  With uncertificated holdings it was not possible to identify whether the shares that were sold were from the initial transfer, the rights issue or the second and third share transfers.  But Leveraged Equities no longer held any shares which could be the subject of the order sought.[105]

   [101] Primary reasons [547]. See also [549].

   [102] Appeal ts 79 - 81, 83 - 86.

   [103] Primary reasons [547].

   [104] Primary reasons [548].

   [105] Primary reasons [549].

8. In this respect the primary judge referred to Mr Smith claiming an order for the delivery of the shares the subject of the second and third share transfers, less any shares returned to him.[106]  That, however, was not the full extent of the relief sought.  There was a more general claim for restitution.[107]  And Mr Smith pleaded that Leveraged Equities must make restitution for, among other things, the shares or the value of the shares.[108]

   [106] Primary reasons [549]. See also Appellant's ninth amended statement of claim dated 28 May 2013 (SOC) par A(vii) BAB 189.

   [107] SOC par A(ii) BAB 188.

   [108] SOC par 74 BAB 179.

9. Ground 1 challenges the primary judge's reasoning and conclusion summarised at [47] above.

The claims against ASASL

1. Mr Smith's claim against ASASL was based on the position of Stripe and Mr King as authorised representatives of ASASL and the responsibility attributed to ASASL as a financial services licensee under ch 7 div 6 of the Corporations Act.  The nature of the claim, and the primary judge's reasoning in relation to the claim, is more readily understood after considering the statutory provisions relied on by Mr Smith.  Accordingly, the primary judge's reasons are considered at [259] to [262] below.  For now it sufficies to state that the claim was dismissed.

Grounds of appeal and notices of contention

1. Mr Smith relied on four grounds of appeal.  Three grounds were directed to the failure of Mr Smith's case against Leveraged Equities.  Ground 1 concerned the second and third share transfers.  Ground 2 concerned the first share transfer.  Ground 3 concerned the 10,635 rights issue shares but was derivative on ground 2 insofar as the shares that entitled Mr Smith to participate in the rights issue were the 85,000 shares as initially transferred.  The fourth ground was directed to ASASL.

2. Ground 1 relied on the primary judge's finding, at [546] of the primary reasons, that subject to defences Mr Smith was entitled to the return of the second and third share transfers (ie the 25,000 and 15,000 share transfers on 25 January 2008 and 10 March 2008 made as a result of Mr King's forgeries).  Mr Smith alleged error in not ordering restitution on the basis that such shares had been already returned where: (1) Leveraged Equities obtained benefits from the shares; and (2) the return of the remaining balance of 46,625 shares on 20 September 2011 was pursuant to an agreement that the transaction would be without prejudice to Mr Smith's claims.

3. Leveraged Equities sought to uphold the primary judge's finding dismissing the claim.  In the alternative, by notice of contention, Leveraged Equities submitted that the primary judge's decision should be upheld on the basis that:

   1.Leveraged Equities changed its position in relation to the receipt of the second and third share transfers.

   2.Leveraged Equities provided good consideration for the receipt of the second and third share transfers.

4. As senior counsel for Mr Smith accepted at the appeal hearing, ground 2 was dependent on a premise that Leveraged Equities received the initial 85,000 share transfer as a volunteer: it was accepted that '[i]f Leveraged Equities is not a volunteer, then ground 2 must fail'.[109]  Nevertheless, based on the premise that Leveraged Equities received the shares as a volunteer, Mr Smith contended that the primary judge was in error in failing to order restitution by reason of erring in law in not finding that the transfer occurred as a result of a breach by Mr King of fiduciary duties he owed to Mr Smith.  Mr Smith contended that, as Leveraged Equities was a volunteer, Leveraged Equities was liable to account for the shares where they were received by reason of a breach of fiduciary duty.  Ground 3 was tied to ground 2 insofar as ground 3 concerned the 10,635 rights issue shares and the shares that entitled Mr Smith to participate in the rights issue were the initial 85,000 shares.[110]  Senior counsel for Mr Smith accepted that ground 3 must fail if ground 2 failed.[111]

   [109] Appeal ts 64.

   [110] Appeal ts 52, 55, 64. See also Primary reasons [545].

   [111] Appeal ts 64.

1. In answering grounds 2 and 3, Leveraged Equities sought to sustain the primary judge's finding - rejecting the challenge to the finding that there was no relevant breach of fiduciary duty - and otherwise relied on similar contentions as to change of position and good consideration as with ground 1.

2. Ground 4 alleged that the primary judge erred in law in holding that Mr Smith could not recover from ASASL pursuant to s 917E of the Corporations Act.  Three aspects of the primary judge's reasoning were challenged.  Those matters, and a notice of contention point raised by ASASL which essentially repeated its answer to ground 4(a) of the appeal, are best explained when addressing ground 4.

The 'strict recipient liability' principles in restitution as invoked by Mr Smith

1. On appeal there was no dispute between Mr Smith and Leveraged Equities as to the applicable restitutionary principles that Mr Smith invoked in support of his two unjust enrichment claims.  Rather, the dispute was as to whether the recipient liability principle for which Mr Smith contended was engaged on the factual findings of the primary judge.

2. An innocent volunteer who receives personal property in circumstances of theft or fraud cannot, when that is discovered, retain the property or its traceable product as against the true owner, but must account to the owner for the identifiable property remaining.[112]  In Heperu Pty Ltd v Belle Allsop P (as his Honour then was) explained the principle in terms that the innocent recipient could not knowingly seek to retain the property or its proceeds without, in effect, becoming a party to the act of the wrongdoer and liable accordingly.[113]  It is the inconsistent subsequent dealing or retention by the recipient, after he or she learned of the true position, that affects the recipient's conscience and gives rise to the liability.[114]  The principle extends to require restoration where a volunteer receives the property as a result of a breach of fiduciary duty.[115]

   [112] Black v Freedman & Co [1910] HCA 58; (1910) 12 CLR 105, 109, 110 - 111; Lipkin Gorman v Karpnale Ltd [1988] UKHL 12; [1991] 2 AC 548, 559, 563, 565 - 566; Heperu Pty Ltd v Belle [2009] NSWCA 252; (2009) 76 NSWLR 230 [92] - [93], [153] - [154], [163]; Fistar v Riverwood Legion and Community Club Ltd [2016] NSWCA 81; (2016) 91 NSWLR 732 [30], [36], [47]; Great Investments Ltd v Warner [2016] FCAFC 85; (2016) 243 FCR 516 [55], [59], [64] - [69] (this case involving the transfer of company assets 'without authority').

   [113] Heperu Pty Ltd v Belle [92].

   [114] Heperu Pty Ltd v Belle [92], [154]; Fistar v Riverwood Legion and Community Club Ltd [30], [45], [47].

   [115] Black v Freedman & Co (108 - 109); Australasian Annuities Pty Ltd v Rowley Super Fund Pty Ltd [2015] VSCA 9; (2015) 318 ALR 302 [121]; Great Investments Ltd v Warner [55], [60], [65].

3. The strict liability of the innocent volunteer recipient is subject to defences.[116]

   [116] Great Investments Ltd v Warner [54] - [55], [60], [64], [67] - [68].

4. In this court, Leveraged Equities directed attention to observations made by the Full Court of the Federal Court of Australia in Great Investments Ltd v Warner.[117]  Those observations, which were also the subject of consideration by the primary judge,[118] were in the context of the Full Court addressing the applicable principles concerning liability for receipt of a company asset transferred without authority.  The Full Court identified two different situations.  The first situation was where a company transferred a benefit to a recipient under a valid contract.  A valid contract, unless rescinded, provided a reason for the recipient to retain the benefit.[119]  The Full Court noted, but did not determine, that a question then arose as to whether an election to rescind sufficed, as opposed to an order for rescission.[120]  The second situation was the 'simpler scenario' where a benefit was transferred by a company without its authority and without a contract.  Then:

   [T]he company may be entitled, subject to defences, to a proprietary claim if the recipient still has the specific benefit.  Even if the recipient does not retain the benefit, the company will have a personal claim against the recipient, again subject to defences.[121]

   [117] First respondent's submissions pars 43 - 49 WAB 46 - 47.

   [118] Primary reasons [535] - [537].

   [119] Great Investments Ltd v Warner [56] - [57].

   [120] Great Investments Ltd v Warner [58].

   [121] Great Investments Ltd v Warner [60].

5. It will be necessary to refer back to these observations, and the use Leveraged Equities sought to make of them, when addressing grounds 2 and 3.  In short, Leveraged Equities contended that the recipient liability principle for which Mr Smith contended was not engaged as the relevant benefits were transferred under valid contracts (the various transactions comprised in Mr Smith's guarantee of Mrs King's margin lending account) which remained on-foot despite Mr Smith having sought an order setting them aside.[122]  In that respect it will be recalled that the primary judge dismissed the claims against Leveraged Equities alleging misleading or deceptive conduct or unconscionable conduct.  It was by those claims that Mr Smith sought an order setting aside the transactions constituted by the Application Form, the Authority Form and the initial share transfer in relation to the 85,000 Wesfarmers shares.

   [122] First respondent's submissions pars 43 - 47, 49 WAB 46 - 47.

6. For now it suffices to foreshadow that, while the question of rescission must be confronted, the anterior issue that arises in relation to the principle of strict recipient liability invoked by Mr Smith is whether Leveraged Equities was relevantly a volunteer as to the initial share transfer (the 85,000 shares) and the rights issue shares (the 10,625 shares).  That is an anterior issue as ground 2 was expressly premised on Leveraged Equities so being a volunteer.  It is difficult to see how Leveraged Equities is to be characterised as a volunteer where it retained the relevant benefits as transferred under contractual arrangements which Mr Smith had attempted unsuccessfully to avoid (which failure was not challenged on appeal).

7. At the appeal hearing Mr Smith dealt with the grounds of appeal in their enumerated order.  However, ground 1 concerns the second and third share transfers; they are subsequent in time to the initial share transfer, which is the subject of ground 2.  As between Mr Smith and Leveraged Equities it makes more sense to deal with the grounds in order of the underlying chronology.  Accordingly, we will deal first with grounds 2 and 3 (ground 3 being associated with ground 2) and then turn back to ground 1.

Disposition: The initial 85,000 Wesfarmers shares and the 10,635 rights issue Wesfarmers shares (Grounds 2 and 3)

1. Ground 2 and Mr Smith's submissions in support of ground 2 were substantially directed to challenging the primary judge's conclusion that there was no breach of fiduciary duty on the part of Mr King in bringing about the transfer of the initial 85,000 Wesfarmers shares.  However, as has been seen, the ground was premised on the basis that Leveraged Equities received the shares as a volunteer.  Consideration of the premise reveals that it is misconceived: Leveraged Equities did not receive the shares as a volunteer as it provided valuable consideration.  It follows that ground 2 cannot succeed.  Ground 3 falls with ground 2.

No pleading or finding that Leveraged Equities was a volunteer

1. Mr Smith's pleading did not allege that Leveraged Equities received the initial 85,000 share transfer as a volunteer.  By contrast there was such a pleading as to the second and third share transfers.[123]  Mr Smith also pleaded that Leveraged Equities provided no consideration for the rights issue shares being held through the margin loan facility on their issue and that Leveraged Equities thus received those shares as a volunteer.[124]  Before this court, however, senior counsel for Mr Smith conceded that the rights issue shares related to the initial 85,000 share transfer.[125] The primary judge made a similar finding at [545]. The mortgage in favour of Leveraged Equities under the margin lending facility included as collateral all 'New Rights' (which included a bonus issue) attaching to or arising out of the secured property.[126]  In the circumstances, as senior counsel for Mr Smith correctly conceded, ground 3 was tied to ground 2.[127]  It follows that Leveraged Equities could not have received the rights issue shares as a volunteer unless it also received the initial 85,000 shares as a volunteer.

   [123] SOC par 54.1 BAB 174.

   [124] SOC par 65 BAB 176.

   [125] Appeal ts 52, 55, 64.

   [126] GAB 30 cl 1.2(c), GAB 48. See also Primary reasons [160].

   [127] Appeal ts 64.

2. Before this court Mr Smith sought to explain the failure to plead that Leveraged Equities received the initial share transfer as a volunteer as having been the subject of supplementary written submissions filed with leave after trial.[128]  Senior counsel for Mr Smith suggested that the parties proceeded on the basis that there was an enlargement of the pleadings by the supplementary submissions.[129]

   [128] Appeal ts 54 - 56, 58.  See also Primary reasons [530] - [533].

   [129] Appeal ts 58.

3. The primary judge made orders permitting the parties to rely on the supplementary submissions.  Those orders did not provide for any expansion of Mr Smith's case.  They simply gave the parties leave to make submissions regarding the effect of the decisions in Fistar v Riverwood Legion and Community Club Ltd and Great Investments Ltd v Warner.  In the course of the appeal hearing this court was provided with Mr Smith's submissions filed pursuant to the leave so granted.[130]  The submissions recorded that Fistar and Great Investments concerned liability principles where a volunteer received property without the authority of the property's true owner or as a result of breach of duties.[131]  It was then asserted that:

   These principles apply to the claims made by [Mr Smith] in respect of all the shares …

   The facts on which Mr Smith is entitled to succeed on the basis of the principles set out in those passages of Fistar and Great Investments are pleaded.[132]

   [130] Appellant's submissions dated 20 December 2016 in action CIV/3124/09.

   [131] Appellant's submissions dated 20 December 2016 in action CIV/3124/09 par 2.

   [132] Appellant's submissions dated 20 December 2016 in action CIV/3124/09 pars 3 - 4.

4. Accordingly, before the primary judge there was no suggestion that - by leave - there was an enlargement of Mr Smith's pleaded case by the supplementary submissions.  The assertion on behalf of Mr Smith was that the strict liability claim based on Leveraged Equities receiving the first share transfer (ie the 85,000 shares) as a volunteer had already been pleaded.  That assertion also appears in par 5 of Mr Smith's supplementary submissions before the primary judge:

   So far as the initial tranche of shares is concerned, the breach of duties by Mr King leading to the shares being held as collateral is pleaded in paragraph 31 to 34 of the Ninth Amended Statement of Claim ('SOC').  Leveraged Equities provided no consideration for the transfer of the initial tranche and is a volunteer: see para 14.3 of the SOC …[133]

   [133] Appellant's submissions dated 20 December 2016 in action CIV/3124/09 par 5.

5. That submission is not borne out by par 14.3 of the SOC, which provides:

   The Collateral Contract contained express terms to the following effect … Todd King would pay $50,000 to Smith within three business days of the 85,000 Wesfarmers Ltd shares being transferred back to Smith.[134]

   [134] BAB 149.

6. In answering submissions Leveraged Equities addressed the effect of Fistar and Great Investments.[135]  Leveraged Equities did not directly address Mr Smith's assertion that the volunteer point had been pleaded.  Leveraged Equities did, however, submit that Fistar supported Leveraged Equities on the volunteer issue[136] - indicating that Leveraged Equities did not accept that it was, in the relevant sense, a volunteer.  In reply Mr Smith said that he obtained no financial benefit from the transactions the subject of the guarantee - being materially misled as to the nature of those transactions - and that he (ie Mr Smith) was a volunteer.  In that regard then counsel for Mr Smith made reference to a passage in Garcia v National Australia Bank Ltd[137] which spoke of recognition that a surety, obtaining no financial benefit from a transaction, is a volunteer.[138]

   [135] First respondent's submissions dated 31 January 2017 in action CIV/3124/09.

   [136] First respondent's submissions dated 31 January 2017 in action CIV/3124/09 pars 10 - 11.

   [137] Garcia v National Australia Bank Ltd [1998] HCA 48; (1998) 194 CLR 395 [31].

   [138] Appellant's submissions dated 8 February 2017 in action CIV/3124/09 par 2.

7. In his reasons the primary judge stated that the effect of the further submissions was to extend the claim for restitution based on receipt of the shares by Leveraged Equities to the shares in the initial transfer (ie the 85,000 shares).[139]

   [139] Primary reasons [533].

8. There was always a claim for restitution in relation to the initial share transfer.  As pleaded there was a claim for restitution grounded in alleged misrepresentation and unconscionable conduct.[140]  It would appear, however, that the primary judge understood the thrust of the supplementary submissions to be - without objection by Leveraged Equities - that Mr Smith's restitutionary claim in relation to the first share transfer was extended to encompass strict liability based on receipt of property as a volunteer where the property was received without authority or as a result of breach of fiduciary duty.  The primary judge went on to consider Mr Smith's case as advanced on that basis.[141]  That is of significance insofar as the reasons of the primary judge are usually the best indication of what matters were in issue between the parties at trial.[142]

   [140] SOC par 73.2 BAB 178 - 179.

   [141] Primary reasons [534] - [545].

   [142] Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 77 ALJR 1598 [50].

9. We thus accept that, in relation to Mr Smith's strict liability restitution claim, this is a case where the parties have chosen to disregard the pleadings and have enlarged the issues beyond the pleaded case by the supplementary submissions filed post-trial.  That course is to be deprecated.  It is apt to cause confusion, or at least debate, as to what issues were before the primary court.  There should have been an appropriate amendment to Mr Smith's pleaded case to unequivocally identify that Mr Smith sought to visit liability on Leveraged Equities in respect of the initial share transfer on the basis that Leveraged Equities received the 85,000 shares as a volunteer.  Any departure from a cause of action as alleged should be reflected in an appropriate amendment so that the exact cause of action alleged forms part of the court's record and is capable of being referred to where the necessity arises.[143]

   [143] London Passenger Transport Board v Moscrop [1942] AC 332, 347.

10. In this court Mr Smith contended that the primary judge had found that Leveraged Equities was a volunteer.[144]  Such a finding was integral to Mr Smith's argument on appeal insofar as ground 2 was premised on Leveraged Equities receiving the initial share transfer as a volunteer and ground 3 failed if ground 2 failed (see [54] above).

    [144] Appeal ts 59.  See also Appellant's submissions pars 8, 63, 65 WAB 12, 25.  Compare Appellant's reply to the first respondent's notice of contention par 18 WAB 84 (where it is correctly recorded that the primary judge found that Mr Smith was a volunteer).

11. There was no finding by the primary judge that Leveraged Equities received these shares as a volunteer.  The passage relied on by Mr Smith on appeal[145] appears at [504] of the primary judge's reasons:

    I accept the plaintiff's submission that the transaction was voluntary.  The question is whether, as a surety, Mr Smith obtained any gain from the contract, the performance of which he guaranteed.  Although Mr Smith entered the arrangement with Mr King for reward, he would not benefit from the performance of the loan agreement.  In relation to Leveraged Equities he was a volunteer.  (emphasis added)

    [145] Appeal ts 59.

12. That was not a finding by the primary judge that Leveraged Equities received the initial 85,000 share transfer as a volunteer.  Rather, it was a finding that - in relation to Leveraged Equities and the transaction as undertaken - Mr Smith was a volunteer.  The passage speaks to the position of Mr Smith rather than Leveraged Equities.  In that respect the passage occurs in the course of the primary judge's consideration of Mr Smith's unconscionability claim.  It followed consideration of the passage in Garcia v National Australia Bank Ltd as was referred to in Mr Smith's reply supplementary submissions before the primary judge.  The primary judge was dealing with a submission, in the context of Mr Smith's unconscionability claim, that viewed from the perspective of Mr Smith the transaction was voluntary and he, Mr Smith, was a volunteer.  In other words there was no consideration moving from Leveraged Equities to Mr Smith.  But to suggest that this constitutes a finding that Leveraged Equities received the initial share transfer as a volunteer is incompatible with the words used by the primary judge and the context in which the finding appears.

13. The primary judge made no finding on the question of whether Leveraged Equities received the 85,000 initial share transfer as a volunteer.  The primary judge rejected Mr Smith's strict liability claim on two other bases.  First, that the breach of fiduciary duty alleged by Mr Smith had not been established.[146]  Second, that Mr Smith had not established that he was entitled to rescind the agreement between himself and Leveraged Equities.[147]  Thus it was unnecessary for the primary judge to make a finding on the unpleaded issue of whether Leveraged Equities was a volunteer for the purpose of the strict liability claim.

    [146] Primary reasons [542].

    [147] Primary reasons [543] - [545].

14. There is no ground of appeal alleging error on the part of the primary judge in not considering - and thereby failing to determine - whether Leveraged Equities received the 85,000 initial share transfer as a volunteer. Such an additional ground was necessary for Mr Smith to succeed based on grounds 2 and 3. As the premise of grounds 2 and 3 was never established - there being no finding that Leveraged Equities received the 85,000 Wesfarmers shares as a volunteer - grounds 2 and 3 cannot succeed. That alone means that both grounds should be dismissed given the concessions made by senior counsel for Mr Smith as recorded at [54] above.

15. In any case, for reasons now discussed, the premise that underpins grounds 2 and 3 is incorrect: Leveraged Equities did not receive the initial share transfer as a volunteer.

Leveraged Equities was not a volunteer

1. Apart from pointing to the primary judge's finding at [504] of the primary reasons - which, as previously noted, refers to Mr Smith as a volunteer rather than Leveraged Equities - Mr Smith simply asserted that Leveraged Equities received the shares as a volunteer.  The highest that the point was developed was to state that Leveraged Equities was not a taker for value.[148]

   [148] Appellant's submissions par 63 WAB 25.

2. For the purposes of the strict recipient liability principle in restitution, as relied on by Mr Smith on appeal, a 'volunteer' is a person who receives the relevant property without providing valuable consideration for it.

3. This is apparent enough from the authorities which establish the principle.  Black v Freedman & Co distinguishes between a volunteer and those who take for valuable consideration.[149]  In Lipkin Gorman the casino was a volunteer as the contracts of gaming pursuant to which it received the funds were rendered void by the gaming legislation.  Lord Goff specifically noted that the casino, by accepting the bet, did not thereby give valuable consideration because it was under no legal obligation to honour the bet.[150]  In Heperu Pty Ltd v Belle Allsop P refers, with apparent approval, to the volunteer as a person who gave no consideration for the payments as received.[151]  This understanding of the concept of a volunteer is consistent with that applying in the context of Barnes v Addy knowing receipt liability.[152]

   [149] Black v Freedman & Co (109), (110).

   [150] Lipkin Gorman v Karpnale Ltd (577).

   [151] Heperu Pty Ltd v Belle [41], [82].

   [152] Farah Constructions v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 [189]. See also at [157] where, in relation to restitution-based liability, Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ confirm that a purchaser 'for value' is not a volunteer.

1. The question of what is meant by the concept of a 'volunteer' in the present context received more detailed consideration in two relatively recent intermediate appellate court decisions.

2. Australasian Annuities Pty Ltd v Rowley Super Fund Pty Ltd concerned a superannuation fund.  The plaintiff, Australasian Annuities Pty Ltd, borrowed substantial funds and effected payment of much of the money to the superannuation fund by way of transactions described as employer super contributions, eligible termination payments and loans to the sole director of the plaintiff.  Later, after receivers had been appointed to the plaintiff, proceedings were commenced seeking to recover the funds from the superannuation fund.  Among other things the plaintiff sought restitution on the basis that the superannuation fund received the funds as a volunteer.  At first instance it was concluded that the trustee of the superannuation fund was not a volunteer because it gave valuable consideration for the money as received.

3. While an appeal was allowed for other reasons, the Court of Appeal of Victoria upheld, by majority, the trial judge's conclusion that the trustee of the superannuation fund was not a volunteer.

4. In separate reasons the majority, Warren CJ and Garde AJA, referred to the High Court decision of Cook v Benson[153] in concluding that the trustee was not a volunteer.  Rather, the payments were made in return for obligations to be performed by the trustee in accordance with the trust deed establishing the superannuation fund.  The rights and benefits in fact provided to the members of the superannuation funds were sufficient to amount to consideration for the purpose of the transactions, meaning that the trustee was not a volunteer.[154]  Garde AJA referred to the rights as constituting 'substantial and valuable consideration' for the contributions[155] which was not executory in nature.[156]  Neave JA, who dissented on the volunteer point, concluded that the trustee was a volunteer because it had not provided valuable consideration when it received the money.[157]  In her Honour's view, unlike the commercial trustee in Cook v Benson, the trustee was not a purchaser who in a commercial sense provided a quid pro quo for the money paid to it as trustee.[158]

   [153] Cook v Benson [2003] HCA 36; (2003) 214 CLR 370.

   [154] Australasian Annuities Pty Ltd v Rowley Super Fund Pty Ltd [119] - [123] (Warren CJ); [306] - [308] (Garde AJA).

   [155] Australasian Annuities Pty Ltd v Rowley Super Fund Pty Ltd [308(c)].

   [156] Australasian Annuities Pty Ltd v Rowley Super Fund Pty Ltd [308(b)].

   [157] Australasian Annuities Pty Ltd v Rowley Super Fund Pty Ltd [150].

   [158] Australasian Annuities Pty Ltd v Rowley Super Fund Pty Ltd [146].

5. The other decision is Fistar v Riverwood Legion and Community Club Ltd.  There the appellant, Ms Fistar, succeeded on appeal because she was found not to be a volunteer.

6. Ms Fistar gave a fraudster $598,853.53 with a view to it being invested and returned in time for her to complete the purchase of a property.  At the time of settlement of the property the fraudster supplied a bank cheque for $599,999.99 in favour of the vendor to Ms Fistar's solicitors.  The bank cheque so procured by the fraudster was obtained largely using money stolen from a community club.  The club brought proceedings.  Relying on Heperu Pty Ltd v Belle the trial judge found that a personal action at law was available against Ms Fistar for money had and received as an innocent volunteer who had received stolen money.  On appeal Ms Fistar argued that the claim for money had and received was not available against her.  One of her reasons for disputing the availability of such relief was that she was not a volunteer.  Leeming JA (Bathurst CJ and Sackville AJA agreeing) found that the strict liability restitution claim must fail as Ms Fistar did not receive the bank cheque as a volunteer; it was a repayment of an existing and enforceable debt.[159]

   [159] Fistar v Riverwood Legion and Community Club Ltd [81].

7. Leeming JA noted that two decisions relied on by the club, in which third party recipients were held to be volunteers, were cases where no consideration was provided because of the nature of the transaction.[160]  His Honour observed:

   [It] surely cannot be right that if a debtor pays a creditor using funds belonging in equity to a third party, of which fact the creditor is entirely unaware, then the creditor can be regarded as a volunteer and therefore, subject to other defences, is liable to disgorge the funds through a claim of money had and received.  That would amount, as was said by Sackville AJA during the hearing, to a 'substantial change to the conduct of commercial transactions'.[161]

   [160] Fistar v Riverwood Legion and Community Club Ltd [71].

   [161] Fistar v Riverwood Legion and Community Club Ltd [79].

8. The relevant question was whether Ms Fistar gave value.  Ms Fistar did so as Ms Fistar (by her solicitors) received the bank cheque in discharge of the fraudster's existing and enforceable obligation to repay her.[162]

   [162] Fistar v Riverwood Legion and Community Club Ltd [71] - [72], [81].

9. Accordingly, in terms of the strict recipient liability principle invoked by Mr Smith on appeal, a person is not a volunteer where valuable consideration is provided by the recipient - either money or money's worth - in return for the property.  As is made plain by Fistar,[163] it does not matter whether the consideration is provided to the owner of the property or to another.  It will suffice that, in a commercial sense, the recipient provided a quid pro quo for the property it received.  Whether an executory promise will suffice is unclear.  There is some suggestion in Australasian Annuities Pty Ltd v Rowley Super Fund Pty Ltd that in answering such a restitutionary claim the provision of 'valuable consideration' requires the performance of a promise.  In Great Investments Ltd v Warner the Full Court identifies that there is older precedent which establishes that value is not provided for the purpose of the defence of bona fide purchaser for value where a promise is executory and not executed.[164]  For reasons that will be apparent, on the facts of the present case there is no need to resolve whether a recipient who has only provided an executory promise will remain a volunteer until the promise is performed.

   [163] Indeed, this was also the case in Australasian Annuities Pty Ltd v Rowley Super Fund Pty Ltd.  The trustee of the superannuation fund did not provide consideration to the plaintiff.  Rather, the payments were made in return for the obligations undertaken to provide the rights and benefits to which the members of the superannuation fund became entitled to under the rules of the superannuation fund.

   [164] Great Investments Ltd v Warner [109].

10. Ultimately, when pressed on the volunteer point, senior counsel for Mr Smith expressed the argument for Mr Smith in this way:

    The proposition … is that in circumstances where Mr King procured these events in circumstances where Mrs King’s account was going to be in margin call at the time that Mr Smith made the agreement with Mr King and thereafter arranged for shares to be transferred, no consideration had been received by Mr Smith.[165]

    [165] Appeal ts 61.  But compare appeal ts 60 where, seemingly, it was said on his behalf that Mr Smith did not contend that Leveraged Equities was a volunteer merely because it did not give consideration to Mr Smith but gave consideration to a third party.

11. Accordingly, the proposition was that, at the time the shares were transferred, no consideration was received by Mr Smith.  However, in the course of argument senior counsel for Mr Smith apparently accepted that there was consideration moving from Leveraged Equities to benefit Mrs King;[166] and that, in general, consideration could be given by providing something to a third party.[167]  Moreover, on behalf of Mr Smith it was accepted that Leveraged Equities subsequently allowed Mrs King (or Mr King) to continue trading.[168]

    [166] Appeal ts 59 - 60.

    [167] Appeal ts 61.

    [168] Appeal ts 61.

12. The absence of any consideration flowing to Mr Smith is not determinative of whether Leveraged Equities was a volunteer.

13. Leveraged Equities provided substantial and valuable consideration in return for the 'transfer' of the 85,000 Wesfarmers shares (we refer to 'transfer' as, at Mr Smith's insistence, there was no change in ownership - rather Mr Smith's proprietary rights became subject to the sponsorship agreement and Leveraged Equities' mortgage).  The relevant commercial context was that:

    1.Mr King, trading on Mrs King's margin lending account, had entered into contracts to purchase securities - with amounts payable totalling more than $3.061 million - without available funds in Mrs King's account to settle the purchases and where Leveraged Equities would not advance settlement funds on the value of the securities it then held.[169]

    2.Under the margin lending arrangements between Leveraged Equities and Mrs King the amount Leveraged Equities was prepared to lend was based on the security value of the secured property in relation to the account.[170]  Accordingly, Mr King needed to find cash or lodge security of sufficient value so that Leveraged Equities would lend the funds required against the value of the security.[171]

    3.That is what happened.  As a consequence of the agreement between Mr Smith and Mr King the 85,000 Wesfarmers shares became collateral security for Mrs King's margin lending account.  As at 31 July 2007 the shares provided 60% of the market value of the securities held in relation to the margin lending account and over 80% of the security value.[172]  On 1 August 2007 the purchase contracts settled relying, in part, on advances made by Leveraged Equities under the margin lending facility and, in part, on the proceeds from some sale contracts.[173]

    4.On the faith of the additional 85,000 Wesfarmers shares introduced as collateral security in relation to Mrs King's margin lending account, and in particular the additional security value derived thereby, Leveraged Equities was prepared to and did make further advances to Mrs King to allow her to complete the pre-existing contracts to purchase securities.  As found by the primary judge, the contracts to purchase securities as were settled on 1 August 2007 might otherwise have failed.[174]

    [169] Primary reasons [69].

    [170] Primary reasons [159] - [161], [190].

    [171] Primary reasons [72].

    [172] Primary reasons [212].

    [173] Primary reasons [213].

    [174] Primary reasons [213].

14. In the circumstances Leveraged Equities provided consideration in exchange for the introduction of the 85,000 Wesfarmers shares as collateral security in relation to the margin lending account: Leveraged Equities advanced additional amounts under the margin lending facility allowing Mrs King to complete the purchase of the securities the subject of the purchase contracts.  Leveraged Equities was not a mere volunteer but instead took for value.

15. It is, in our view, not necessary to consider whether - given the rights and obligations under the margin lending facility - substantial and valuable consideration was provided simply so far as the Wesfarmers shares became subject to the sponsorship agreement and the mortgage.  Clause 2.2(b) may have implications for such an argument (see [13] above).  The commercial reality is, however, that upon receipt of the initial share transfer Leveraged Equities did in fact make an advance that would not otherwise have been made.  In so doing Leveraged Equities provided valuable consideration for Mr Smith's share transfer, consideration that was not merely executory.

Conclusion as to grounds 2 and 3

1. Leveraged Equities did not receive the initial 85,000 Wesfarmers shares as a volunteer.  The premise to ground 2 has not been made out.  Ground 2 should be dismissed for that reason.  Ground 3 was dependent on ground 2 and thus should also be dismissed.  It is not necessary to address Mr Smith's challenge to the primary judge's finding as to breach of fiduciary duty.

2. In answer to grounds 2 and 3, Leveraged Equities also relied on the circumstance that the primary judge had refused Mr Smith's claim to set aside the contractual arrangements between Leveraged Equities and Mr Smith (see [60] - [61] above).

3. It should be accepted that ground 2 must proceed on the basis that the contractual arrangements between Leveraged Equities and Mr Smith are valid.  The challenge to those contractual arrangements failed before the primary judge and there has been no appeal against those findings.  The primary judge found that Mr Smith was not entitled to rescission of the agreements on the basis of the causes of action propounded at trial.[175]  The contractual arrangements between Leveraged Equities and Mr Smith were the foundation for Leveraged Equities' rights in relation to the initial 85,000 Wesfarmers shares.  Unless and until the contractual arrangements were avoided they provided a right - and therefore a reason - for Leveraged Equities to retain the benefits derived from the contractual arrangements.[176]

   [175] Primary reasons [543].

   [176] Great Investments Ltd v Warner [57] - [58].

4. At the appeal hearing senior counsel for Mr Smith submitted that if the breach of fiduciary duty was established one of the consequences might have been the rescission of the various agreements between Mr Smith and Leveraged Equities.[177]  The difficulty with that submission was that there was no challenge to the primary judge's finding that, at the time of the transaction, Leveraged Equities was not aware of what Mr King was doing and the dishonest means Mr King was prepared to use.[178]  Senior counsel for Mr Smith then suggested that specific relief might need to be subject to a condition, referring to Great Investments Ltd v Warner at [69].[179]

   [177] Appeal ts 53.

   [178] Primary reasons [127], [522] - [524].  See also at [150] - [151], [256], [265], [506].

   [179] Appeal ts 53 - 54.

5. The passage relied on from Great Investments Ltd v Warner notes that it is unnecessary to explore particular foundational issues.  Their Honours go on to state:

   There was no submission, for instance, that any of the appellants had any defence of change of position which would raise other issues such as whether a defence of change of position could be effected by an order that specific relief was subject to a condition: see the discussion in Häcker B, Consequences of Impaired Consent Transfers (Mohr Siebeck Tübingen, 2009) pp 155-156 and Nelson v Nelson (1995) 184 CLR 538.[180]

   [180] Great Investments Ltd v Warner [61].

6. It may be accepted that on occasions it is appropriate for the court to grant relief only on condition.  Nelson v Nelson, as referred to in the passage relied on, is an example: there a declaration as to beneficial entitlement was subject to a requirement that the appellant be denied a benefit obtained by her unlawful conduct.[181]

   [181] Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538, 571 - 572, 617 - 618.

7. As interesting a diversion such a possibility may present to a change of position defence, the suggestion is not one that requires further exploration in the present appeal.  First, this is a case where Mr Smith failed, at trial, to establish his claimed basis for rescission of the contractual arrangements between himself and Leveraged Equities.  In that regard it is unnecessary to consider the point left open in Great Investments Ltd v Warner as to whether an election to rescind may suffice as opposed to an order for rescission.  Any purported election in the present case was necessarily ineffective insofar as there was found to be no basis to rescind on the grounds as relied upon by Mr Smith.  Second, there is no ground of appeal challenging the primary judge's finding denying the claim for rescission.  Nor, assuming that it might be entertained on appeal - as to which there must be considerable doubt - was there any suggestion of some alternative basis for rescission beyond the half-formed suggestion relying on breach of fiduciary duty.  Finally, and in any event, senior counsel for Mr Smith did not develop the contention.  There was, for example, no indication of what condition Mr Smith might submit to other than contending in the abstract that there might be a rescission on condition.[182]  That, however, presupposes that Mr Smith had established some basis for rescission - and none was advanced on appeal.

   [182] Appeal ts 64.

8. In the circumstances the non-avoidance of the contractual arrangements between Mr Smith and Leveraged Equities provides a further answer to ground 2 (and thus to ground 3).  Apart from the fact that Leveraged Equities was not a volunteer, the contractual arrangements between Mr Smith and Leveraged Equities provided the right for Leveraged Equities, as the recipient of the Wesfarmers shares the subject of the initial share transfer and the rights issue, to retain that benefit.

9. Grounds 2 and 3 should be dismissed.

Disposition: The 40,000 Wesfarmers shares transferred to Leveraged Equities pursuant to the forged letters of authority (Ground 1)

The primary judge's refusal of relief

1. Ground 1 concerns the primary judge's dismissal of Mr Smith's unjust enrichment claim in relation to the second and third share transfers (the 25,000 shares transferred on 25 January 2008 and the 15,000 shares transferred on 10 March 2008).  These differed from the first share transfer as the second and third share transfers were made without authority on the part of Mr Smith.  The second and third share transfers were the result of Mr King's forgeries.

2. The primary judge's reasons for dismissing this aspect of Mr Smith's claim are summarised at [46] - [48] above. Importantly, in a finding unchallenged by Leveraged Equities on appeal, the primary judge held that - subject to defences - Mr Smith was entitled to the return of these shares.[183]  Thus the starting position - both before the primary judge and on appeal - was that Mr Smith had established his case in restitution in relation to return of the shares the subject of the second and third share transfers.  However, in apparent conflict with that initial finding, and without determining the pleaded defences of change of position and good consideration, the primary judge proceeded to refuse Mr Smith any relief as to the second and third share transfers.  Whether the primary judge was correct to do so - there being no challenge by Leveraged Equities to his Honour's initial conclusion as to entitlement to return of the shares - is, logically, the first issue that arises in relation to ground 1.

   [183] Primary reasons [546].

3. Putting aside, for now, a question of appropriation that arises as to the 25,000 Wesfarmers shares returned to Mr Smith on 7 May 2008 (see [120] - [191] below), the primary judge refused relief as:

   1.It was likely that, had Wesfarmers shares been returned to Mr Smith in July 2008, it would have triggered a margin call in relation to Mrs King's margin lending facility and caused Mr Smith substantial loss.[184]

   2.The remaining shares were returned to Mr Smith in September 2011.[185]  As at the date of the hearing before the primary judge Leveraged Equities no longer held any shares which could be the subject of the order sought for delivery up.[186]

   [184] Primary reasons [547].

   [185] Primary reasons [548].

   [186] Primary reasons [549].

4. In written submissions Leveraged Equities asserted that Mr Smith was not entitled to restitution in respect of the second and third share transfers.[187]  However, beyond recounting the primary judge's reasons, Leveraged Equities did not advance argument in support of upholding the refusal of relief.  Instead Leveraged Equities referred to its change of position defence, it being suggested that this was supported by the circumstances that: (1) following the second and third transfers there were further transactions in Mrs King's lending account; and (2) the return of Wesfarmers shares to Mr Smith would have seen a margin call.[188]  The change of position defence was not relied on by the primary judge and cannot, independently of a notice of contention, justify his Honour's refusal of Mr Smith's claim for relief.  The possible change of position defence ought instead to be considered within the rubric of Leveraged Equities' notice of contention.

   [187] First respondent's submissions par 14 WAB 39.

   [188] First respondent's submissions pars 3 - 13 WAB 39.

1. ASASL admitted the signing of the Authority Letter and the Application Form.  ASASL also admitted that Mr Smith caused the 85,000 shares to be held as collateral supporting the margin loan facility (but not that there was a 'transfer').  Otherwise the allegations were denied.[388]

   [388] Fourth respondent's amended defence dated 10 September 2010 pars 9, 15 BAB 299, 302 - 303.

2. Notably, while it was common ground that Mr Smith 'had caused' the 85,000 Wesfarmers shares to be held as collateral supporting the margin loan facility, there was no plea by Mr Smith alleging that Mr King had arranged for any transfer (let alone an allegation of a dealing on the part of Mrs King by disposing of the shares - that being the gravamen of ground 4(a) and its particulars - and a corresponding acquisition on the part of Leveraged Equities).  The high-water mark of Mr Smith's pleading is the allegation that, consistent with the agreement between Mr Smith and Mr King, Mr Smith caused the shares to be transferred to be held as collateral.  As mentioned, in written and oral submissions senior counsel for Mr Smith contended that the Authority Letter was provided to Leveraged Equities by Mr King (as Mrs King's representative) and that the transfer was done by Mr King, as agent, either for Mrs King or Mr Smith, or alternatively, that Mr King arranged for the transfer (see [273] - [277] above).  None of that was pleaded.

3. At the appeal hearing senior counsel for ASASL developed a submission that the case at trial in relation to the initial share transfer involved (and only involved) a financial product advice case and the second and third share transfers (no longer the subject of ground 4) involved a dealing in a financial product case.[389]  The submission was that the earlier descriptions distribute between the three transactions.[390]  We are unable to accept that submission.  It relied on a close reading of the SOC and attributed meaning to the circumstance that, as to the initial share transfer, Mr Smith caused the Wesfarmers shares to be transferred but with the second and third share transfers Mr King caused the Wesfarmers shares to be transferred.  In our view the pleading simply reflected the fact that, on Mr Smith's case, he authorised the initial share transfer but the second and third share transfers were procured by forgery.  ASASL's argument did not address what is apparent on the natural reading of the particular in par (a) to [290] above: Mr Smith alleged the provision of a financial service by both the provision of financial product advice and dealing with the Wesfarmers shares (including dealing with those Wesfarmers shares the subject of the initial share transfer).

   [389] Appeal ts 114 - 120.

   [390] Appeal ts 114.

4. In that regard the further particulars clarified that so far as Mr Smith relied on the alleged provision of a financial service it was contended that 'Todd King … dealt with the Wesfarmers Ltd shares the subject of the First Share Transfer, the Second Share Transfer and the Third Share Transfer, which shares constituted financial products'.

5. In answering ASASL's contention on the pleading point, senior counsel for Mr Smith took this court to Mr Smith's written opening submissions at trial.  Consistent with the case as particularised the alleged provision of a financial service as opened included Mr King providing financial product advice to Mr Smith and Mr King dealing with shares.[391] Those opening submissions also, by footnote, directed the primary judge to the statutory provisions including the definition of 'dealing' in s 766C. Among other things it was said:

   Relevantly, 'dealing' includes arranging for a person to 'acquir[e] a financial product' or 'dispo[e] [sic] of a financial product': s 766C(1)(a) and (e) and (2). (emphasis added)

   [391] Appellant's opening submissions for trial dated 27 January 2016 par 228.

6. On the face of the written opening submissions it might be thought that Mr Smith sought, at trial, to present a case that relied on s 766C(2) whereby Mr King dealt with the Wesfarmers shares by arranging for others to acquire and dispose of them. However, this was not a case where ASASL participated at the trial; it filed a defence but did not appear at the trial.[392]  The primary judge observed that, with ASASL not participating in the trial and Mr King unrepresented, the issues raised in the plea that the impugned conduct was conduct related to the provision of a financial service 'were not properly explored at trial'.[393]

   [392] Primary reasons [9].

   [393] Primary reasons [428].

7. In these circumstances we consider the questions for determination must be assessed based on Mr Smith's pleaded case as particularised.  There could not be any enlargement of the issues by the manner in which the trial was conducted.  That is all the more so given the sparse particularisation as provided in response to ASASL's request for further particulars and Mr Smith's refusal to provide additional particularisation of the method by which the financial service was alleged to have been provided.  Mr Smith had ample opportunity - pre-trial when asked - to state with precision the sort of dealing case (by way of provision of a financial service) he was advancing against ASASL.  Mr Smith chose to provide particulars that were largely non-responsive.  The consequences of any inadequacy of the case as particularised cannot be alleviated by a fleeting footnoted reference in lengthy opening submissions for a trial in which ASASL did not participate.

8. While we are unable to accept ASASL's submission that Mr Smith only ran a dealing case as to the second and third share transfers, there is nevertheless a substantial disconformity between Mr Smith's case as particularised in his pleaded case and the alleged provision of a financial service as particularised in ground 4(a) (ignoring, for immediate purposes, those parts of Mr Smith's submissions on appeal that exceeded the scope of ground 4(a)).

9. Specifically, as to the claim based on the provision of a financial service by dealing in a financial product:

   1.Mr Smith's case at trial as particularised, so far as is now relevant, was that Mr King dealt with the Wesfarmers shares (which shares constituted financial products).

   2.Mr Smith's case on appeal, as particularised in ground 4(a), was that Mrs King (not Mr King) and Leveraged Equities dealt with the Wesfarmers shares by disposing and acquiring of them respectively; but, in addition, that by arranging for Mrs King and Leveraged Equities to do so, Mr King also dealt with the shares (such arranging constituting a 'dealing' in a financial product within the s 766C(2) meaning of the term).

10. In addition, Mr Smith's case at trial as particularised was that financial services were provided to Mr Smith or Mrs King.  On appeal, as specified in ground 4(a), it was that Mr King provided a financial service to Mrs King or Leveraged Equities.  (Although, as mentioned, in oral submissions at the appeal hearing senior counsel for Mr Smith only said that there was a provision of a financial service to Mrs King (see [276] above)).

11. Mr Smith's case on appeal thus exceeded - and thereby departed from - the pleaded case advanced at trial in at least two material respects.  First, in alleging that Mrs King and Leveraged Equities dealt with Mr Smith's Wesfarmers shares; and that Mr King dealt with the shares by arranging for Mrs King's and Leveraged Equities' dealing.  Second, in alleging that Mr King provided a financial service to Leveraged Equities.  As particularised for trial the dealing in a financial product case was that Mr King dealt with the Wesfarmers shares and provided a financial service to Mr Smith or Mrs King.  But the case as so particularised was in a context where the material plea as to the action taken in relation to the 85,000 Wesfarmers shares was only that Mr Smith caused the shares to be transferred from him to be held as collateral; and, moreover, where there was no plea to the effect that Mr King arranged for the transfer.

12. Turning then to Mr Smith's submissions on appeal, ground 4(a) did not itself raise the contention - first advanced in Mr Smith's written reply submissions and then repeated in the oral submissions of senior counsel for Mr Smith - that the shares were dealt with by disposal by Mr King acting as agent for one of Mrs King or Mr Smith. Nor that, so far as any disposal was by transfer by Mr Smith (as opposed to Mrs King), Mr King arranged for the transfer and thereby dealt with the shares. Strictly, those further matters were outside the scope of ground 4(a). Nevertheless, like ground 4(a) itself, they raised new points that went beyond Mr Smith's pleaded case - raising issues as to agency and whether, in terms of s 766C(2), there was an 'arranging' vis-à-vis Mr Smith.

13. Once these differences are appreciated we are unable to accept Mr Smith's submission that his case on appeal was open and run on the pleading as particularised at trial insofar as Mr King could be taken - in terms of s 766C(2) - to have dealt with the Wesfarmers shares by arranging for others to deal in the shares.

14. The particularised allegation as pleaded was that Mr King dealt with the shares, not that he arranged for Mrs King and Leveraged Equities to deal with the shares by disposing of and acquiring the shares respectively (let alone the alternatives introduced after Mr Smith filed his appellant's case which exceeded ground 4(a) as particularised).  Were the case at trial to have extended to some form of derivative dealing due to arranging for another to engage in conduct constituting a dealing - or even the unparticularised claim of disposal by Mr King as agent for another - there should have been an allegation that there was a relevant dealing on the part of Mrs King and Leveraged Equities, one that was arranged by Mr King (in the latter case as agent).  There was not.  The pleaded case in the SOC got no higher than the allegation that Mr Smith caused the 85,000 Wesfarmers shares to be transferred from him to be held as collateral.

15. It may be accepted that Mr Smith's particularised case advanced the proposition that Mr King dealt with the initial Wesfarmers shares. Given the breadth of s 766C's definition of the term 'dealing' the case now sought to be advanced on appeal may be made to fit within the particulars if the particulars are read in isolation and the statutory definition is accepted to be engaged without discrimination. In truth, however, Mr Smith's case on appeal seeks to take advantage of the imprecision within, and non-responsive nature of, the particulars to contend that what is a new case on appeal is open on the particulars. When consideration is given to the pleadings as a whole, the case now advanced - one of dealing by Mr King in arranging for Mrs King to dispose of the shares and Leveraged Equities to acquire the shares - is more than merely not obvious. Indeed, it would be over-generous to characterise the case as merely being obscure. It is, in our view, not reasonably capable of identification on a fair reading of Mr Smith's statement of claim as particularised.

16. ASASL's initial answer to ground 4(a) should be accepted.  The dealing case that is now asserted by Mr Smith on appeal is a departure from Mr Smith's pleaded case.  Mr Smith seeks to advance a new case on appeal.

17. In the alternative Mr Smith contended that the facts relied on are incontrovertible such that, even if the case was not raised below, it does not mean that the case cannot be considered on appeal.  That contention was not developed in Mr Smith's written or oral submissions.

18. There were no relevant admissions by ASASL.  In suggesting that the facts were incontrovertible Mr Smith could only be relying on the primary judge's factual findings and the documentary evidence.  The primary judge made findings as to the 30 July 2007 agreement, Mr Smith's execution of the Application Form and the Authorisation Letter and the material provisions of the contractual documentation.[394]  His Honour also made findings as to how the accounts were administered in fact.[395]  In addressing the events of 30 and 31 July 2007 the primary judge made a finding that Mr King transmitted the Application Form and the Authority Letter to Leveraged Equities.[396]  We are, however, unable to identify any express finding that Mr King did so as agent for either Mr Smith or Mrs King (and the primary judge expressly found that Mr King was not acting on behalf of Leveraged Equities).[397]  To the contrary the former is potentially inconsistent with the circumstance that - as was Mr Smith's pleaded case[398] - Mr King was the counterparty to the 30 July 2007 agreement; and, more strongly so, the primary judge's finding that Mr King did not purport to be acting on behalf of or in Mr Smith's interests.[399]  Moreover, in his case against Leveraged Equities, Mr Smith - inconsistently with what is asserted in relation to ASASL in relation to ground 4(a) - observed that there was no finding that Mr King dealt with Leveraged Equities as Mr Smith's agent, stating, to the contrary, that Mr King was the representative of Mrs King.[400]  As to Mrs King, the primary judge found that she apparently participated in the opening of the account and gave Mr King authority to represent her;[401] but the extent of that authority is not the subject of any finding, ie it may or may not have extended to any dealing in respect of the 85,000 shares.  As to that, the primary judge also found that Mr King used the account in his mother's name for his (Mr King's) personal trading.[402]

    [394] See generally Primary reasons [73] - [188].

    [395] Primary reasons [189] - [211].

    [396] Primary reasons [107].

    [397] Primary reasons [107].

    [398] SOC par 13 BAB 149.

    [399] Primary reasons [384]. See also [391] (although there referring to the 2008 share transfers the reasoning would apply equally to the initial share transfer).

    [400] Appellant's reply to the first respondent's notice of contention par 12 WAB 83.

    [401] Primary reasons [566].

    [402] Primary reasons [61]. See also at [566].

19. Accordingly, it cannot be accepted that - on the primary judge's findings - the so-called facts relied on by Mr Smith on appeal are incontrovertible as was baldly asserted in Mr Smith's written submissions.[403]  To the contrary, so far as Mr Smith's argument in support of ground 4(a) relied on the contention that Mr King acted as an agent, the point required the determination of factual issues which the primary judge did not resolve (no doubt because they were not in issue).  Nor, in terms, did the primary judge make a finding that Mr King arranged for Mrs King to dispose of the 85,000 Wesfarmers shares.

    [403] Appellant's reply submissions par 13 WAB 96.

20. In any case, so far as Mr Smith seemingly relies on the primary judge's findings as establishing the facts incontrovertibly, the contention overlooks that facts and circumstances going towards 'arranging', and whether Mr King was an agent for Mrs King or Mr Smith, were not in issue before the primary judge having regard to the case then advanced by Mr Smith.  There was no occasion for the parties to adduce evidence or delve into the points now sought to be agitated.  Neither Mr King nor Mrs King gave evidence.  And, as the primary judge observed, the issues raised by the plea that there was conduct related to the provision of a financial service 'were not properly explored at trial'.[404]

    [404] Primary reasons [428].

21. We do not accept that the factual conclusions relevant to the case that Mr Smith has sought to advance under the rubric of ground 4(a) were beyond controversy.  For example:

    1.The proper characterisation of Mr King's involvement in the transfer of the 85,000 Wesfarmers shares might have been met by calling evidence. Neither party made submissions on the metes and bounds of the term 'arranging' in s 766C(2) of the Corporations Act.  Necessarily it refers to the process by which a person negotiates, or otherwise brings into effect, a relevant dealing in a financial product.  While the term is undoubtedly broad, ultimately whether a person's activities constitute an 'arranging' will involve a question of degree.  As the question is inherently evaluative it will be informed by close consideration of the factual context in which the acts relied on occurred.

    2.Insofar as Mr Smith now contends that Mr King dealt in the shares by arranging for a dealing in the shares by others - essentially in providing for the transmittal of Mr Smith's authorisation - consideration would need to be given to the interaction between s 766C(2) and s 766A(3). It is not immediately apparent that simply passing on a completed form is outside the course of work ordinarily done by clerks or cashiers. However, in the absence of proper investigation of the evidentiary matrix at trial the proper delineation between a s 766C(2) 'arranging' and the exemption under s 766A(3) becomes obscure.

    3.There might have been examination of the circumstances pertaining to whether, as belatedly contended for in support of ground 4(a), Mr King effected the transfer of the Wesfarmers shares 'as agent' either for Mrs King or Mr Smith.

    4.There might have been additional contextual evidence adduced so as to inform the evaluative question of whether the impugned conduct 'related to' the putative provision of a financial service - necessarily an enquiry involving a question of degree.

22. Similarly, it cannot be concluded that additional evidence might not have been led, or that additional cross-examination might not have occurred, had the issues sought to be raised by ground 4(a) (as expanded in written reply submissions and oral submissions) been litigated at trial.  In addition, the pleaded case did not articulate a readily understandable dealing case vis-à-vis Mr King.  ASASL, then in liquidation, might well have been prepared to allow the court to address that case on its merits (there being no obvious dealing by Mr King) rather than participate in a lengthy trial at considerable cost.  However, it might well be that had the sort of case now advanced been articulated in the pleadings, ASASL might have thought it necessary to appear to answer the point, as indeed has transpired on appeal.  We are unable to conclude that, had the case now advanced on appeal been properly pleaded and articulated pre-trial, the course of the proceedings could not or would not have altered.

23. These matters are fatal to the suggestion that Mr Smith's dealing case, as now sought to be advanced on appeal as a new case, ought to be entertained.  It is well understood that a point cannot be raised for the first time on appeal where it could possibly have been met by calling evidence at the trial.[405]  The present is one of those cases.  In addition, in all the circumstances it cannot be said that allowing the points advanced in support of ground 4(a) to be litigated now, as a new case, could work no injustice on and could occur without prejudice to ASASL.  Nor, in our view, is it in the interests of justice to allow the new case to now be litigated.  That is all the more so given Mr Smith's opaque response to ASASL's request for further and better particulars of the allegation as to provision of a financial service.

    [405] Water Board v Moustakas (497 - 498); Whisprun Pty Ltd v Dixon [51]. See also Zerjavic v Chevron Australia Pty Ltd [66.3], [67] (and the cases recited therein at fn 138).

24. Although, exceptionally, there are cases in which a party may advance a new case on appeal, it is not in the interests of justice to allow Mr Smith to raise ground 4(a) on appeal.  It advances a new case, not raised and not open on the pleaded case at trial, where the facts as claimed to justify the case now advanced were not admitted and were not beyond controversy.  Ground 4(a) should be dismissed on the basis that it raises new points which should not be entertained on appeal.

Ground 4(a) and the statutory construction question

1. The failure of ground 4(a) on the anterior point of whether it raised a new case on appeal, one not open on the pleadings, means that it is not necessary to resolve the statutory construction questions raised by ground 4(a).  Nor, in our view, is it appropriate to do so where a further characterisation issue arises in any event as to whether, in all the circumstances, Mr King relevantly arranged for Mrs King and Leveraged Equities to engage in conduct constituting a dealing as asserted in ground 4(a).

2. That said, even if Mr Smith is correct in his contention that the grant of a security interest in relation to shares constitutes a 'disposing of a financial product' for the purposes of s 766C(1)(e) of the Corporations Act, it is difficult to understand how there was a relevant disposal by Mrs King.  In that regard Mr Smith's case, as formulated in ground 4(a), was that there was a dealing, by disposal, by Mrs King rather than Mr Smith.  But, as Mr Smith remained the owner of the Wesfarmers shares at all times, only Mr Smith (or someone duly authorised acting on Mr Smith's behalf) could grant a security interest.  There was no suggestion that Mrs King had such an authority.  Moreover, the primary judge found that the mortgage and sponsorship agreements were executed by an employee of Leveraged Equities pursuant to a power of attorney given by Mr Smith in the Application Form.[406]  As ground 4(a), in its terms, is confined to a dealing by disposal by Mrs King rather than Mr Smith, ground 4(a) cannot succeed even if Mr Smith's preferred construction is upheld.

   [406] Primary reasons [357].

3. In the circumstances we do not propose to embark on the further point of statutory construction raised by ground 4(a).  That question should await an occasion where the point will be determinative.

Ground 4(b) - was there a finding in terms of s 917D?

1. Mr Smith's failure on ground 4(a) means that the appeal must be dismissed so far as ASASL is concerned.  However, had ground 4(a) been upheld it still would have been necessary for ground 4(b) to succeed for the appeal against the dismissal of Mr Smith's claim against ASASL to be allowed.  In the circumstances we propose to deal with ground 4(b).

2. Ground 4(b), in terms, alleges that the primary judge erred in finding that div 6 of pt 7.6 was unavailable simply because Mr King's conduct was outside his authority as ASASL's representative. The primary judge found that Mr King's conduct was outside the scope of his authority.[407] There is no challenge to that finding by notice of contention. If that was all that was found, Mr Smith's complaint by ground 4(b) would have merit. Section 917B plainly operates to make a financial services licensee responsible for the conduct of a representative whether or not the conduct is within authority. However, lack of authority may provide the basis for a defence where that fact is disclosed to the client in accordance with s 917D of the Corporations Act.

   [407] Primary reasons [567].

3. By ground 4(b) Mr Smith also claimed that there was no finding of disclosure of Mr King's lack of authority under s 917D. In answer to that contention ASASL pointed to [567] of the primary judge's reasons:

   In his dealings with Mr Smith on 30 July 2007, Mr King made clear that he was acting on behalf of his family and in a private capacity.

4. Accordingly, ground 4(b) turns on a characterisation of the primary judge's reasons: does [567] constitute a finding of disclosure of lack of authority so as to ground the exception in s 917D? Importantly, if on its true construction that is found to be the purport of the finding, there was no ground challenging the finding as erroneous. As senior counsel for Mr Smith confirmed at the appeal hearing,[408] Mr Smith's challenge by ground 4(b) went to whether the primary judge made a finding that s 917D applied.

   [408] Appeal ts 65.

5. Mr Smith submitted that:

   1.As an exception, the onus was on ASASL to make good the requirements of s 917D.[409]

   2.Merely because someone was acting on behalf of his or her family or in a private capacity did not answer the requirements of s 917D.[410]

   3.Section 917D required that three matters be satisfied: (1) the conduct must be not within authority; (2) that fact must be disclosed before reliance on the conduct; and (3) the clarity and prominence of the disclosure must be such as a person would reasonably require for the purpose of deciding whether to acquire the relevant financial service.[411]  There was no finding with respect to the clarity and prominence of the disclosure.[412]

   4.The passage relied on made no reference to s 917D.[413]

   5.In the 30 July 2007 conversation between Mr Smith and Mr King, Mr King was asked what would happen if he were 'hit by a bus'.  Mr King responded that: 'Stripe would look after it'.[414] However, as will be seen from the passage reproduced at [326] below, this was a selective account of the primary judge's reasons on this point. The primary judge went on to expressly find that this statement was insufficient to alter the personal and private character of the agreement.

   [409] Appeal ts 72.

   [410] Appeal ts 72.

   [411] Appeal ts 73 - 74.

   [412] Appeal ts 74, 144 - 145.

   [413] Appeal ts 74.

   [414] Appeal ts 74.  See Primary reasons [387] (see also at [95]).

6. In construing the primary judge's reasons it is necessary to consider the reasons as a whole. The following features of his Honour's reasons ought to be considered. First, at [558] of the primary reasons, the primary judge referred to ASASL's defence. The defence invoked s 917D, alleging disclosure that Mr King was not acting within the scope of his authority as an authorised representative, and pleaded that the 30 July 2007 agreement was to be a private agreement. ^[415] Second, at [561], the primary judge noted that ASASL's liability depended on the operation of s 917A, s 917B, s 917E and s 917F, but was 'subject to the exception in s 917D'. Third, at [563], the primary judge reproduced s 917D in full. Fourth, at [567], before coming to the conclusion mentioned at [322] above, the primary judge made the finding that Mr Smith's conduct was not within his authority in relation to ASASL. Finally, at [77] - [110], [381] - [389] and [402] - [411], the primary judge made detailed findings as to the events of 30 July 2007 and the nature of the dealing between Mr Smith and Mr King (the latter in connection with whether the transaction was one where fiduciary duties applied).

   [415] Fourth respondent's amended defence dated 10 September 2010 par 10(a) BAB 299.

7. As to the last matter, the primary judge made the following findings (which are unchallenged for the purpose of ground 4(b)):

   Second, there was no element of financial advice in Mr Smith's account of what happened and what was said.  The plaintiff identifies nothing within the scope of Mr King's or Stripe Capital's contractual arrangements with Mr Smith which might contemplate Mr King providing services in relation to such an arrangement, let alone Mr King and Mr Smith being parties to one.

   Third, the transaction was carried out in a way inconsistent with any ordinary business relationship.  It was initiated in an early morning telephone call.  Mr King appeared to be calculating the number of shares he needed while speaking on the phone; he offered double the consideration that Mr Smith agreed to - an amount Mr Smith thought was silly.  The phone call was followed up by Mr King driving immediately to Mr Smith's home with a personal agreement as well as the Leveraged Equities documents that needed to be signed.  The agreement had the heading 'Confidential Contractual Agreement'.

   Fourth, Mr King did not purport to be acting on behalf of, or in Mr Smith's interests.  On the account he gave to Mr Smith, Mr King was acting in a personal capacity on behalf of his mother and stepfather.  From what Mr Smith said of the phone call and the later meeting, I do not believe that he could reasonably have thought that Mr King was purporting to advise him, or to act in his interests.  The only things Mr King said about the risks or benefits of the arrangement was his own undertaking to not trade on the account while Mr Smith's shares were held as security.

   Fifth, Mr Smith accepted that there had been nothing like this proposal in their relationship to then.

   Sixth, on Mr Smith's account, with one exception, Mr King did not say or do anything by which he purported to act on behalf of Stripe Capital.  None of the documents were on Stripe Capital forms or stationary and none of them mentioned that firm.  The only relevance of Mr King being a broker was that he was the broker to Mrs King's account, a position which he said would enable him to ensure no purchases were made and to provide statements of trade activity.

   The exception is that Mr King said 'Stripe would look after it', in response to Mrs S asking what would happen if Mr King 'got hit by a bus'.  That statement is not, in my opinion, sufficient to alter the personal and private character of the agreement.[416] 

   [416] Primary reasons [382] - [387].

8. When the primary judge's reasons are considered in full, and the passage from [567] of the primary reasons is properly understood in its context, we consider that - contrary to the burden of ground 4(b) - the primary judge did make a finding that the exception in s 917D applied.

9. The primary judge was alive to the defence and its statutory requirements. His Honour twice mentioned the exception created by s 917D. He reproduced s 917D immediately before setting out his findings on the claim against ASASL. Then, at [567] of the primary reasons, the primary judge commences by making a finding as to whether Mr King's conduct was within authority. No such finding was necessary for, and was immaterial to, responsibility in terms of s 917B (which his Honour had correctly identified was the relevant provision rather than s 917C). The finding that the conduct was not within the scope of Mr King's authority thus signals that his Honour was turning, at [567], to consider the defence under s 917D as had previously been adverted to in the primary reasons. The final sentence is perhaps unhappily expressed. Ordinarily it would be expected that in addressing a statutory defence there would be mention of the provision and its various integers. The relative terseness of the sentence might be explained as the product of the primary judge having had to work through a pleading which planted a forest of forensic contingencies.[417] Nevertheless, when read in context we apprehend that - by referring to Mr King as having made it clear that he was acting on behalf of his family and in a private capacity - his Honour was determining, for the purposes of s 917D(b) and (c), that there had been the requisite disclosure to make out the defence in accordance with s 917D. That is all the more so when there is reference to the earlier parts of the primary reasons. There is no other evident rationale for this part of his Honour's reasons at [567]. It should not be read as indicating that the judge had overlooked the express terms of a provision - s 917D - that he had just set out.

   [417] See Primary reasons [415].

10. There was no challenge to the adequacy of the primary judge's reasons. Nor, as previously mentioned, is it suggested by ground 4(b) that if, properly construed, the primary judge upheld the s 917D exception on the basis that Mr King's lack of authority was disclosed, the finding was in error. The result on ground 4(b) in this appeal cannot be understood as expressing any view on either of those matters - they are not in issue on the appeal. The sole matter in issue on ground 4(b) as drafted and presented is whether there was a finding for the purposes of s 917D at all. We accept that, properly understood in context, that was the effect of [567] of the primary reasons.

11. It follows that ground 4(b) should be dismissed.  That is an additional reason for the dismissal of Mr Smith's appeal in relation to ASASL.

Conclusion and orders

1. Mr Smith's appeal against the dismissal of his action against Leveraged Equities should be allowed in part.  The appeal should be allowed to the extent that the primary judge dismissed Mr Smith's unjust enrichment claim in relation to the Wesfarmers shares the subject of the second and third share transfers.  While we mention both the second and third share transfers, any ultimate relief in respect of the claim must be limited to the value of 15,000 shares only insofar as 25,000 shares were returned to Mr Smith on 7 May 2008.  This aspect of Mr Smith's action against Leveraged Equities should be remitted to the primary judge for determination of defences and quantification.  Mr Smith fails in his appeal in relation to the dismissal of his action against ASASL.

2. Subject to hearing from counsel, we propose orders that:

   1.The appeal against the order of the court made 29 March 2018 in action CIV/3124/2009 dismissing the appellant's claim against the first respondent is allowed in part.

   2.Paragraph 2 of the order of the court made 29 March 2018 in action CIV/3124/2009 is set aside and the following orders are substituted:

   2A.The plaintiff's claim against the first defendant is dismissed other than insofar as the plaintiff makes claim for unjust enrichment in relation to the Wesfarmers Ltd shares the subject of the second and third share transfers effected on or about 25 January 2008 and 10 March 2008 (remaining claim).

   2B.The parties have liberty to apply on 7 days' notice for directions in relation to a hearing to determine:

   (1)the first defendant's defences in relation to the remaining claim; and

   (2)quantification aspects in relation to the remaining claim.

   2C.The plaintiff's claim against the fourth defendant is dismissed.

   3.Action CIV/3124/2009 is remitted to the primary judge for determination of the remaining claim as contemplated by par 2 above.

   4.The appeal against the order of the court made 29 March 2018 in action CIV/3124/2009 dismissing the appellant's claim against the fourth respondent is dismissed.

3. The parties should be heard on the costs of the appeal.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

DT
Associate to the Honourable Justice Vaughan

5 AUGUST 2020