Stanberg Pty Ltd v Tabibi
[2012] SASC 187
•18 October 2012
SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master: Civil)
STANBERG PTY LTD v TABIBI
[2012] SASC 187
Judgment of The Honourable Justice Peek
18 October 2012
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - JURISDICTION AND GENERALLY
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - MASTERS
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - RIGHT OF APPEAL - WHEN APPEAL LIES - FROM INTERLOCUTORY DECISIONS - LEAVE TO APPEAL
PROCEDURE - JUDGMENTS AND ORDERS - IN GENERAL - CLASSIFICATION - FINAL AND INTERLOCUTORY
Appeal from a Master of the Supreme Court - the plaintiff/appellant operated a restaurant with the defendant/respondent under a written partnership agreement - after the breakdown of the partnership, the appellant surcharged the draft accounts to claim a debit against the respondent of $45,848.00 - it was alleged that the respondent had misappropriated this amount from the takings of the partnership - the defendant disputed this surcharge - the Master rejected the appellant's claim after hearing detailed evidence from the parties.
Whether the reasons and orders of the Master constituted an interlocutory judgment against which the appellant had a right of appeal - whether a single Judge of the Supreme Court was the correct forum for hearing the appeal - whether leave to appeal was required.
Held: The reasons and orders of the Master constituted an interlocutory "judgment" within the meaning of ss 50(1) and (2), Supreme Court Act 1935 (SA) - the Master in delivering the orders and reasons had performed a judicial act which decided a question raised for decision in the proceedings - the matter of the surcharge was only one aspect of the proceedings before the Master, the principal cause being the overall partnership dispute, and therefore the judgment was interlocutory in nature - leave to appeal to the single Judge is not required.
EVIDENCE - BURDEN OF PROOF, PRESUMPTIONS, AND WEIGHT AND SUFFICIENCY OF EVIDENCE - GENERALLY - SUFFICIENCY
EVIDENCE - BURDEN OF PROOF, PRESUMPTIONS, AND WEIGHT AND SUFFICIENCY OF EVIDENCE - GENERALLY - ONUS OF PROOF - GENERAL RULE
Whether the decision of the Master rejecting the appellant’s claim was contrary to the evidence and/or the Master failed to properly consider relevant matters - whether the Master should have found that the respondent had misappropriated particular amounts of money and awarded the appellant the total of those amounts - whether the Master failed to properly approach, or apply, the correct onus or standard of proof - whether the Master should have found that the respondent had misappropriated some amounts of money and made a general award of damages in favour of the appellant.
Held: Appeal dismissed - the Master's finding that it was not established that the respondent had misappropriated the amount of the surcharge was correct - it was not established that the Master failed to appreciate, understand or have proper regard to the matters referred to by the appellant - the Master did not err in finding that it was not established that the defendant had misappropriated any particular amount of money which comprised a part of the amount of the surcharge - by requiring that proof of any misappropriation by the respondent should be clear and cogent rather than disclosing a mere likelihood of such a fraud occurring the Master did not fail to apply the correct onus or standard of proof - the Master did not err in declining to award any damages to the appellant.
Rejfek v McElroy (1965) 112 CLR 517; Briginshaw v Briginshaw (1938) 60 CLR 336; Legal Practitioners Complaints Committee v A Practitioner (1987) 46 SASR 126; Bienstein v Bienstein (2003) 195 ALR 225; Hall v Nominal Defendant (1966) 117 CLR 423, applied.
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449, distinguished.
Licul v Corney (1976) 180 CLR 423; Sheen v Fields Pty Ltd (1984) 51 ALR 345; Commissioner of Police v Channel Seven Adelaide Pty Ltd [2008] SASC 164; Boughey v The Queen (1986) 161 CLR 10; Donoghue v Stevenson [1932] AC 562; Re B [2009] 1 AC 11; Helton v Allen (1940) 63 CLR 691; West v Government Insurance Office of New South Wales (1981) 148 CLR 62; G v H (1994) 181 CLR 387; Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161; Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 57 ALR 167; Commonwealth v Amman Aviation Pty Ltd (1991) 174 CLR 64; Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (in liq) (2007) 157 FCR 564; General Tire & Rubber Co v Firestone Tyre & Rubber Co Ltd [1976] RPC 197, discussed.
Barwick v NSW Law Society (2000) 169 ALR 236; Chaplin v Hicks (1911) 2 KB 786; Biggin & Co Limited v Permanite Limited (1951) 1 KB 422; Callaghan v William C Lynch Pty Limited (1962) NSWR 871, considered.
STANBERG PTY LTD v TABIBI
[2012] SASC 187Civil
PEEK J. Appeal against interlocutory judgment of a Master of the Supreme Court.
PART A: JURISDICTIONAL ISSUES
The plaintiff, Stanberg Pty Ltd (Stanberg), is a company controlled by Mr Joseph Carbone (“Mr Carbone”) who has had interests in a number of businesses and also practises as a qualified accountant. Mr Sam Tabibi, the defendant, is a chef with no previous experience of running a business; he had previously worked as a chef in another café owned by Mr Carbone where the two had originally met.
On 20 June 2006, Stanberg and Mr Tabibi entered into a written partnership agreement (Stanberg with a 51 per cent interest and Mr Tabibi with a 49 per cent interest) to run a café in North Adelaide trading as “Line Bait Fish Café North Adelaide”. It opened for business on 4 December 2006 and traded until the end of March 2009 when the partnership ceased.
On 9 April 2009 the plaintiff instituted an action in respect of various disputes about the partnership affairs. This led to a declaration by consent that the partnership had terminated on 30 March 2009 and an order for the taking of partnership accounts. Mr Matthews, an accountant, was appointed to prepare draft accounts; these showed a substantial deficiency of assets over liabilities. The plaintiff surcharged these draft accounts to claim a debit against the defendant of $45,848.00 by reason of the alleged misappropriation of takings by him. The defendant disputed this surcharge and Supreme Court Master Lunn directed that the issue be determined by a hearing on oral evidence.
On 20 April 2011, Master Lunn heard detailed evidence from witnesses, including Mr Carbone and Mr Tabibi themselves. His Honour was not satisfied that the plaintiff had established the misappropriation of the claimed amount of $45,848.00, or any lesser quantifiable amount, and accordingly dismissed the surcharge by orders and reasons published on 25 May 2011.
On 25 May 2011, Master Lunn delivered an eight page document (seven single spaced typed pages plus cover sheet) setting out his decision, reasons, and orders. The cover sheet is in the form of a judgment (but entitled “Reasons” rather than “Judgment”) and has two stamps, one being “Received (by the) Higher Courts Registry on 25 May 2011” and the other “Delivered by mail on 25 May 2011”. The seven substantive pages have the same layout as a higher court judgment with paragraph numbers and headings throughout. The seven pages include detailed recitation and analysis of the facts and submissions together with formal findings and conclusions in usual judgment format. The final paragraph [29] recites:
[29] I have today made the following orders:
The plaintiff’s application to surcharge the draft accounts with a debit of $45,848 to the defendant is refused.
Costs reserved.
Fit for counsel.
Further directions hearing on the taking of the accounts set for Tuesday 7 June 2011 at 9.45am.
On 21 June 2011, a few days after the time limit had expired, the appellant purported to initiate an appeal against the judgment of the Master by lodging a Notice of Appeal at the Registry.
This delay in itself was relatively brief, is explained by the appellant and, by itself, would not have prejudiced the respondent. However, things soon deteriorated further. Those representing the appellant wrongly took the view that their appeal against the Master’s decision was to the Full Court rather than to a single Judge and the Notice of Appeal was so styled. There then arose an inordinate delay by the appellant in prosecuting the appeal, including delay in the preparation of the appeal books and in setting down the appeal.
The matter first came before me on 8 June 2012 by way of an interlocutory application by the appellant for an extension of time within which to set the appeal down for hearing by the Full Court. A number of difficult issues quickly emerged and the matter was adjourned for full argument on these issues.
After a further adjournment, this argument occurred on 27 July 2012 when the issues were narrowed somewhat. I understood the ultimate position of counsel for the appellant to be that the Master had delivered a “judgment” which was not a final judgment (there being various other issues between the parties) but was what he called “an interim judgment” rather than an interlocutory judgment. No authority was cited for the latter contention. His position was that if I was against him on that contention and it was in fact an interlocutory judgment, then he agreed that the appeal should be heard by a single Judge and he applied for the Notice of Appeal to be amended so as to reflect that fact.
Counsel for the respondent took a helpful and reasonable stance. It was that her client had been put to delay and expense by the appellant’s conduct and that the appeal had no reasonable prospect of success. However, she wished to minimise further delay and expense and agreed that the Master had delivered an interlocutory judgment, an appeal from which should be heard by a single Judge. She did not oppose the Notice of Appeal being amended so as to reflect that fact and, while she maintained that the appeal had no reasonable prospect of success, she agreed that a separate hearing on such a preliminary issue would be pointless and that the matter should be expeditiously dealt with by the appeal being heard in full in the normal way.
I now briefly set forth why I consider that the Master delivered an interlocutory judgment, an appeal from which is to be heard by a single Judge.
Sections 50(1) and (2), Supreme Court Act 1935
Section 50, Supreme Court Act 1935 provides:
50—Appeals
(1) Subject to this section—
(a)an appeal lies to the Full Court against a judgment of the court constituted of a single judge; and
(b) an appeal lies against a judgment of the court constituted of a master.
(2) An appeal against a judgment of a master lies, if the rules so provide, to the Full Court and otherwise to the court constituted of a single judge.
Did the Master deliver a judgment?
The application of s 50 gives rise to several questions in the present case. The first question that arises is as to whether the Master delivered a “judgment” within the meaning of ss 50(1) and (2), Supreme Court Act 1935.
The provisions in the Act referring to the nature of a “judgment” are clearly inclusionary statements adding to the purview of a “judgment” at common law, rather than exhaustive definitions. Thus, s 5 simply provides that “judgment” includes “decree”, but a judgment obviously has a much greater ambit of meaning at common law than simply a decree. Similarly, s 50(6) provides that “judgment” includes “an order or direction”, and “a decision not to make an order or direction”, but again a judgment will here have a greater ambit of meaning than simply the meanings referred to in paragraphs (a) and (b).
In a passage which is of great assistance as to the common law meaning of “judgment”, King CJ stated in Legal Practitioners Complaints Committee v A Practitioner:[1]
A judgment or order is a judicial act which decides the question or one of the questions which is raised for decision in the particular proceedings then before the court or judge. The question decided may be the substantive question or one of the substantive questions raised in the action; or it may be the question or one of the questions raised in interlocutory proceedings taken in the course of the progress of the action. Judgments and orders on the one hand are to be distinguished from incidental rulings given in the course of hearing and determining such questions. Examples of such incidental rulings are those which relate to adjournments, the time and place of hearing, admissibility of evidence and the exclusion or otherwise of witnesses from the hearing, as well as decisions upon submissions as to matters of fact law or procedure made during the course of a hearing. Such incidental rulings are not judgments or orders and are therefore not appealable even by leave.
Into which category does the learned judge’s decision as to the competency of the appeal, fall? In the generality of cases, a ruling that an appeal is competent or that the court or judge has jurisdiction to entertain the particular appeal or application before it, is an incidental ruling on a submission made in the course of the hearing and is not made the subject of a judgment or order. It is therefore not appealable. But it may be made the subject of a judgment or order. Whether that has occurred depends upon the treatment of the matter by the court or judge. In the present case, the learned judge expressly determined the question of competency as a preliminary point separate and distinct from the other issues which fell for determination on the appeal. His intention was to decide competency as a separate issue and to make his decision upon that issue the subject of a judgment or order. He emphasised that by giving leave to appeal and indicating that he was not seized of the appeal generally. The drawing up and sealing of the order on the basis of a certificate of the judge’s associate is not, of course, decisive, but it tends to confirm the status of the judge’s decision.
(Emphasis added)
[1] (1987) 46 SASR 126, 127-128.
In my view, the Master here determined the matter of the surcharge as a preliminary or separate point in much the same way as occurred in Legal Practitioners Complaints Committee v A Practitioner.[2] The present matter involved:
·the examination and cross-examination of a number of witnesses;
·the receipt and consideration of a number of exhibits;
·detailed consideration of opposing cases for the parties;
·detailed findings of fact;
·findings of credibility;
·the making of a decision in favour of the case for one party;
·formulation of detailed reasons for that decision; and
·the making of orders arising from the decision.
[2] (1987) 46 SASR 126.
It is clear that the Master has here performed “a judicial act which decides the question or one of the questions which is raised for decision in the particular proceedings”, that is to say the question of whether this particular exception is to be allowed to the partnership accounts. The process leading to, and including, the publication of the eight page document referred to above was much more than an “incidental ruling” given in the course of hearing and determining such a question.
I conclude that his Honour on 25 May 2011 did deliver a “judgment” within the meaning of ss 50(1) and (2), Supreme Court Act 1935.
The appropriate forum for the hearing of an appeal – was the judgment an interlocutory judgment of a Master?
The second question that arises is whether the appropriate forum for the hearing of the appeal is the Full Court or a single Judge. This raises the further question as to whether the judgment is “interlocutory” or “final” within the meaning of Rule 280 of the Supreme Court Civil Rules 2006, which provides:
280—Forum for hearing appellate proceedings
(1) Subject to any statute or rule to the contrary:
(a)an appellate proceeding arising from a judgment of a Judge or Master of the Court is to be heard and determined by the Full Court; and
Exception—
An appellate proceeding arising from an interlocutory judgment of a Master is (subject to subrule (2)) to be heard and determined by the Court constituted of a single Judge. …
…
(2) The Court (constituted of a Judge) may, on application by a party or on its own initiative, refer an appellate proceeding for hearing and determination by the Full Court if the difficulty or importance of the questions raised justify the reference.
(Emphasis added)
It is now generally recognised in Australia that the test of whether a judgment is interlocutory or final is that formulated by the High Court in cases such as Licul v Corney[3] (Licul), Carr v Finance Corporation of Australia Ltd (No 1)[4] (Carr) and Bienstein v Bienstein,[5] the essential question being whether the judgment finally disposes of the rights of the parties in the action.[6]
[3] (1976) 180 CLR 213.
[4] (1981) 147 CLR 246 (This is an anthology volume – the decision in Licul predates Carr).
[5] (2003) 195 ALR 225.
[6] Prior to those decisions the position was perhaps aptly described by Buckley LJ when he said in Re Page; Hill v Fladgate [1910] 1 Ch 489, 493-494: “the decisions are so conflicting that I confess I am unable to arrive at any conclusion satisfactory to my own mind as to whether this is an interlocutory or a final order”.
It is appropriate to first turn to the forerunner to those decisions, the analysis of Windeyer J in Hall v Nominal Defendant.[7]His Honour there stated:[8]
In most cases the test that seems to be most satisfactory, and the one that accords most nearly with what has been said on the subject in this Court, is it seems to me to look at the consequences of the order itself and to ask does it finally determine the rights of the parties in a principal cause pending between them. … The effect of such decisions as there are of this Court on the point seems to me to be that when an action has been commenced between parties then whether an order in that action is interlocutory depends on whether or not it results in a final determination of that action. I say of “that action” because it appears that the question depends more upon the action actually brought by a writ than upon the cause of action upon which the writ was founded. For example, it has been held that a judgment of non-suit is a final judgment, notwithstanding that it leaves the plaintiff at liberty to bring another action for the same cause: Coroneo v Kurri and South Maitland Amusement Co Ltd [(1934) 51 CLR 328, at p 334]. A judgment on a demurrer may thus be either final or interlocutory depending upon circumstances: Hope v R C A Photophone of Australia Pty Ltd [(1937) 59 CLR 348]; John Grant & Sons Ltd v Trocadero Building and Investment Co Ltd [(1938) 60 CLR 1, at p 35]. These cases are all illustrative of the general proposition that a final order is one which finally disposes (subject only to appeal) of an action or an existing dispute between parties.
(Citations appearing in footnotes added)
[7] (1966) 117 CLR 423.
[8] Ibid 443–444.
In the later decision, Licul v Corney,[9] Barwick CJ stated:[10]
The first question arising from the objection to the competency of the appeal to this Court is whether the order of the Supreme Court was a final order within the meaning and operation of s 35(1)(a) of the Judiciary Act1903(Cth) (as amended). To be final for this purpose, the order, in my opinion, must of its own force put an end to the action or proceeding between the parties. It is not enough, in my opinion, that by reason of circumstances unconnected with and uncontrolled by the order itself, it may be or become impossible or impracticable to proceed with this action.
Here, all the proceedings between the parties are interlocutory. The orders which the Supreme Court set aside were all interlocutory orders. The action between the parties could not proceed because the original summonses had not been served. The time for that service had expired but it remained capable of extension if, consent to such extension being refused, notice of an application to extend that time were given to the respondent. Whether or not such an extension was or is to be granted rests on the discretion of a judge of the County Court. But nothing appears in the record before this Court which would preclude a judge of that Court from granting the extension of time if he were persuaded in point of discretion to do so. In particular, no time limitation for the commencement of an action of the present kind would stand in the way of the grant of such an extension. The proceedings had been commenced in due time. Further, in point of discretion, the respondent had become aware in 1973 of the pendency of the proceedings.
I am clearly of opinion that the order of the Supreme Court was not a final order disposing of the action between the parties and settling their substantive rights. Their actions remain on foot and are capable of being pursued if a judge of the County Court is minded upon an application duly made to extend the time for service of the original summonses.
[9] (1976) 180 CLR 213.
[10] Ibid 219–220.
In Licul, Gibbs J stated:[11]
The distinction between final and interlocutory judgments is not always easy to draw and there has been disagreement as to the test by which the question whether a judgment is final or interlocutory is to be determined. One view – which was preferred by the Court of Appeal in Salter Rex and Co v Ghosh [[1971] 2 QB 597] – is that the test depends on the nature of the application made to the Court. The other view which, since Hall v Nominal Defendant [(1966) 117 CLR 423], should, I think, be regarded as established in Australia, depends on the nature of the order made; the test is: Does the judgment or order, as made, finally dispose of the rights of the parties?
(Citations appearing in footnotes added)
[11] Ibid 225. Mason J agreed in a separate judgment.
In Licul, Stephen and Jacobs JJ agreed with Barwick CJ that it was critical that the proceedings were capable of revival. Their Honours stated:[12]
…that summons, although it was not served within the twelve months allowed by O. 3, r. 1(a) of the County Court Rules 1964 is still on foot even though it cannot now be served; the time for service cannot be extended under O. 3, r. 1(b) because application for extension of the time was not made before the expiration of that period of twelve months; but the parties under O. 50, r. 1 may by consent enlarge that time and, if the consent of a party cannot be obtained, the plaintiff may apply on notice to the non-consenting party for an order to effect the object sought to have been obtained by consent, namely, the extension of the time within which the summons may be served. By O. 50, r. 1 such an order may be made although the application for that order will not have been made until after the expiration of the twelve months allowed by O. 3, r. 1(b).
Thus the proceedings commenced on 26 July 1972, have not come to an end. Whether or not a County Court judge will exercise his power under O. 50, r. 1 if appropriate steps are taken by the plaintiff is a matter of discretion. We agree with the Chief Justice that nothing appears in the record before this Court which would preclude a County Court judge from granting the extension of time if he be persuaded in point of discretion to do so.
[12] Ibid 230–231.
In Carr v Finance Corporation of Australia (No 1),[13] Gibbs CJ referred to Licul and stated:[14]
The test now applied in this Court for determining whether a judgment is final or not is whether the judgment or order appealed from, as made, finally determines the rights of the parties …
[13] (1981) 147 CLR 246.
[14] (1981) 147 CLR 246, 248.
In Carr, Mason J also referred to Licul thus:[15]
This approach to the question was adopted and applied by this Court in Port of Melbourne Authority v Anshun Pty Ltd [(1980) 147 CLR 35] where it was held that an order perpetually staying an action finally disposed of the case.
The issue then is whether the refusal of the appellants’ application finally disposed of the action.
(Citation appearing in footnote added; page reference added)
[15] (1981) 147 CLR 246, 254.
In the still later decision of the High Court in Bienstein v Bienstein,[16] the Court consisting of McHugh, Kirby and Callinan JJ stated (in words harking back to Hall v Nominal Defendant[17]):[18]
[25]The usual test for determining whether an order is final or interlocutory is whether the order, as made, finally determines the rights of the parties. The test requires the appellate court to look at the consequences of the order itself and to ask whether it finally determines the rights of the parties in a principal cause pending between them.
(Emphasis added)
[16] (2003) 195 ALR 225.
[17] (1966) 117 CLR 423.
[18] Bienstein v Bienstein (2003) 195 ALR 225, 230.
Similarly, in Rouse v IOOF Australia (No 2),[19] Lander J stated:
[46]All orders are final in the sense that they dispose of the particular matter before them. There are many examples of orders which dispose of the particular matter before the court at the particular time. Indeed the particular matter now before me will finally decide the party’s rights as to the competency or otherwise of this appeal. Such an order, however, is not a final order; Legal Practitioners Complaints Committee v A Practitioner (1987) 46 SASR 126.
[47]It is not a question of whether the order disposes of the party’s rights in respect of the application but as Mason J said in Carr v Finance Corporation of Australia Ltd (No 1) (1981) 147 CLR 246 at 254:
The issue then is whether the refusal of the appellant’s application finally disposed of the action.
[19] [1999] SASC 205.
In my view, it is clear that in the present case the principal cause pending between the parties was the overall partnership dispute and the matter of the surcharge was only one aspect of the proceedings between the parties before the Master. Equally clearly, his Honour’s judgment did not finally determine the rights of the parties in the principal cause pending between them.
I therefore conclude that the judgment of the Master is an interlocutory judgment. It would seem quite plain that the stated “exception” in Rule 280 of the Supreme Court Civil Rules 2006 applies here and therefore the appropriate forum for the appeal is a single Judge of the Supreme Court (unless and until a discretion to refer the matter were to be exercised under Rule 280(2)).
Is leave to appeal to the single Judge required?
The third question that arises is whether leave to appeal to the single Judge is required. Rule 17 of the Supreme Court Civil Rules 2006 provides:
17—Appeal to Full Court
(1) An appeal lies, as of right, from a final judgment of a Master to the Full Court.
“exceptions”—appeals from orders:
(a) made under the Real Property Act 1886;
(b) made under Rule 32;
(c)in respect of which all parties consent to proceeding under sub-rule (2).
(2) Subject to Rule 288(1)(b) an appeal lies, as of right, from any other judgment of a Master to a single Judge of the Court.
It seems clear from Rule 17(2) that leave to appeal to the single Judge is not required. I also note that no requirement for leave is imposed by Rule 288 or by the Supreme Court Act 1935.
Conclusion as to jurisdictional issues
I conclude that, subject to the matter of time limitation, the defendant has an appeal as of right to a single Judge of the Supreme Court against the interlocutory judgment of Supreme Court Master Lunn herein.
Extension of time and amendment of the proceedings
I accordingly ordered that the notice of appeal be amended so as to reflect the fact that the appeal was to a single Judge rather than to the Full Court. I allowed an extension of time until the original date of filing the notice of appeal because the delay in filing the original notice of appeal was minimal and the other matters surrounding the dissolution of the partnership have been able to be attended to in the mean time such that there is little prejudice to the respondent. Expense to the respondent caused by the appellant’s jurisdictional mistake and his tardiness in progressing what he thought was an appeal to the Full Court can be dealt with by an appropriate order as to costs.
The argument of the substantive appeal was heard by myself on 7 September 2012 and judgment was reserved.
PART B: THE SUBSTANTIVE APPEAL
I now turn to consider the substantive appeal.
The nature and scope of the present appeal
The nature and scope of the present appeal is regulated by Rule 286 of the Supreme Court Civil Rules 2006 which states:
286—Hearing of Appeal
(1)An appeal is to be by way of rehearing (unless the law under which the appeal is brought provides to the contrary).
(2)Subject to any limitation on its powers arising apart from these rules, the Court may determine an appeal as the justice of the case requires despite the failure of parties to the appeal to raise relevant grounds of appeal, or to state grounds of appeal appropriately, in the notice of appeal.
(3)Subject to any limitation on its powers arising apart from these rules, the Court may—
(a) draw inferences of fact from evidence taken at the original hearing and, in its discretion, hear further evidence on a question of fact;
(b) amend or set aside the judgment subject to the appeal and give any judgment that the justice of the case requires;
(c) remit the case or part of the case for rehearing or reconsideration;
(d) make orders for the costs of the appeal.
Despite the breadth of these provisions, the hearing is not a hearing de novo. It is a rehearing and it remains the case that the appellate court is to pay appropriate regard to the advantage the trial court had of seeing and hearing the witnesses. The position is summed up by White J in Commissioner of Police v Channel Seven Adelaide Pty Ltd thus:[20]
[12]… By r 292(1) the appeal is to be by way of re-hearing. The court is to determine the appeal as the justice of the case requires (rr 292(2), 292(3)(b)), and the court has power, in its discretion, to hear further evidence on questions of fact (r 292(3)(a)). In my opinion, the Rules contemplate the second kind of appeal considered by Cox J in Wigg v Architects Board of South Australia.[21] That is to say, the appeal is a re-hearing on the documents considered at first instance but with the court having power to receive further evidence. The court is to consider whether the decision at first instance ought to be affirmed or overturned in the light of the material before the court at the time it hears the appeal.
Findings of fact made by the Master which are not in dispute
[20] [2008] SASC 164. The rule was previously styled Rule 292 but the contents are the same as the present Rule 286.
[21] (1994) 36 SASR 111.
His Honour made a number of findings which are not in dispute and may be summarised for present purposes as follows.
Mr Tabibi was the main chef for the café and worked long hours running the business on a daily basis. Initially, he was regularly supplying financial information to Mr Carbone’s accounting practice where Ms Augimeri worked as a bookkeeper and maintained the accounts. Ms Augimeri was in a personal relationship with Mr Carbone. As time went on, Mr Tabibi complained of the effect of the increasing burden of his responsibility for financial matters coupled with the continuing pressures of running the business by himself.
The point of sale system at the café
Mr David Kenyon, a technician from the firm Possum IT, gave evidence in relation to the point of sale system at the café (“the POS”) which his Honour accepted and was as follows.
At the commencement of the partnership business, Possum IT installed a “Redcat” point of sale computer system at the café which included a screen on the bar in the front of the café on which staff entered the items of food and drink ordered for each table. The screen could be operated to print out an account for a table recording the purchases made by the customers at that table, with the prices of each item and the total payable.[22] The payment of the account was recorded on the POS.
[22] This account was on payment treated as a receipt and was generally so referred to in evidence.
Any of the staff members could perform the above functions but there were some further functions (“the special functions”) which could only be performed by a person entering a special code; these included the deleting of purchased items which had already been entered into the POS.
At the end of a day’s trading, a staff member would perform the following tasks. First, a “Z-read” on the POS which would give a total of all of the sales which had been entered into the POS that day (excluding any deleted entries).[23] Second, a reconciliation between the total of the Z-read and the total of the cash and the credit card dockets actually in the till.
[23] Once the Z-read for the day had been done, it was not possible thereafter to delete entries for that day.
It is important to note that if during the course of the day’s trading a person dishonestly deleted a sale in a particular amount and appropriated that same amount, the Z-read at the end of the day would indicate that the remaining cash in fact reconciled with the record of transactions for the day because the Z-read ignored any deleted transactions.
The staff at the café and the system as it actually operated[24]
[24] Like Judge Lunn, I will not refer to the names of any of the staff. Serious allegations of misappropriation have been made against at least some unidentified members of the staff but none were called as witnesses or have had an opportunity to refute such allegations.
His Honour found that a fairly large number of different staff members were employed (on a part time basis) by the café over the relevant period. There were a number of chefs/cooks and kitchen hands who were employed in the kitchen but, more importantly, a significant number of persons were employed at various times as bar staff and waiters/waitresses working in the front of the café and it was these persons who made the bulk of the entries on the POS.
His Honour found that the defendant did, on at least some occasions, operate the POS but this was usually when there was little trade in the café and minimal staff were on duty. At busy times, and generally during the evenings, the defendant was usually busy cooking in the kitchen.
At the beginning of the enterprise Mr Kenyon gave some minimal training to a few of the staff in the operation of the POS but thereafter this training was passed on from one employee to another. There was no formal training or induction into the POS system for the new staff (who were continually replacing other staff as they left).
Initially, the concept was that each staff member had his or her own named button on the screen through which they individually would access the POS and Mr Carbone apparently had some role in allocating the codes enabling access to special functions to particular staff members. However, his Honour found that as time went on, and staff changed, this aspect of the system fell into disuse; buttons were not updated and the POS in practice was accessed by staff using buttons in the names of other staff or former staff. The defendant had given his code number to several other staff members and it was likely that those staff members, and another who had an allocated code, also gave it to other staff who had no formal authorisation to perform the special functions, but whose allocated duties required them to perform those functions. Indeed, Mr Carbone agreed in evidence that from 1 July 2008 until 30 March 2009 all of the staff were using the pin code of either the defendant or the staff worker named Fay.
Thus, his Honour concluded that although in theory special functions such as deleting sales or producing the Z-read required the persons performing the function to have their own code (thus ensuring traceability), in practice many, if not all, staff members were able to use other persons’ codes (with no or little traceability). Thus, the use of the POS to record the sales and ensure that all monies received were properly accounted for was largely ineffective.
Disconnection of the modem by the defendant
There was a modem installed at the café at the commencement of the partnership which linked the POS to a computer in Mr Carbone’s office at Gilles Plains and enabled him to access all the data on the POS and thus to monitor the sales at the café. On about 25 October 2008 the defendant disconnected the modem on the POS and Mr Carbone was thence unable to access information from the POS. From February 2009 onwards Mr Carbone made a number of requests for the modem to be reconnected, which were ignored by the defendant.
On 30 March 2009 Mr Carbone terminated the partnership for alleged breaches of the partnership agreement by the defendant and re-entered the premises, closing the café. Mr Kenyon reconnected the modem at the café premises and, later that day, caused an “Exceptions Report” to be printed out at Mr Carbone’s office from the data kept in the POS. This report gave details of the dates and amounts of each of the deletions of sales made between 1 July 2008 and 30 March 2009.[25] The several hundred items which totalled $45,848.00[26] constitute the surcharge contended for, the plaintiff accusing the defendant of having embezzled $45,848.00[27] from the café’s takings between 1 July 2008 and 30 March 2009.
[25] The defendant did not challenge the accuracy of this report.
[26] The Exceptions Report was in two parts, with deletions of $5,024.00 between 1 July and 25 October 2008 and $40,824.00 between 26 October 2008 and 30 March 2009.
[27] Figures are rounded down to whole dollars.
The Master’s decision
His Honour formulated the essential issues for determination as follows:
[20]The issue for my determination is whether the defendant between 1 July 2008 and 30 March 2009 appropriated from the takings of the café $45,848 for his own purposes and without authority to do so. The plaintiff maintained that he had done so fraudulently, but there was no suggestion that if the money in question had been taken by the defendant he had any right to do so. The onus is on the plaintiff to prove its assertion for the surcharge on the balance of probabilities. As the assertion involved a criminal offence, the Briginshaw principle applied in deciding whether that onus has been discharged. The plaintiff’s case was not one of mismanagement of the partnership business by the defendant whereby he had negligently allowed staff to take this money from the takings. In these reasons I concentrate upon the relevant period of 1 July 2008 to 30 March 2009.
At the end of his reasons, his Honour concluded thus:
[26]Up until its supplementary written submissions, the plaintiff had prosecuted its surcharge on the basis that it was in effect the theft by the defendant of a single amount of $45,848. However, in reality it would have been multiple misappropriations involving hundreds of separate deletions of sales from the POS which in theory could have had many different explanations. If I am not satisfied that the plaintiff has shown that the whole $45,848 was misappropriated by the defendant for his own purposes, it is necessary to make a finding about some lesser amount for which that finding can be made. On the evidence this is impossible. There is no evidence which satisfies me to the requisite degree that the defendant misappropriated any particular amount of money which comprises a part of the $45,848. While the plaintiff’s case based on circumstantial evidence of motive and opportunity goes to the total of $45,848, it does not satisfy me to the requisite degree of proof about any particular deletions of sales.
[27]On the balance of probabilities I am satisfied that a substantial part of the $45,848 was misappropriated by someone, although it is likely that some unquantifiable part of it was attributable to innocent mistakes. It is also likely that the defendant, possibly in concert with some employees, did misappropriate unidentified parts of the $45,848. However, there is also at least an equal reasonable possibility that some unidentified part of the $45,848 was misappropriated by a staff member without the involvement of the defendant. Accordingly, as I cannot on the balance of probabilities quantify what part of the alleged surcharge is justified, the whole of it must be disallowed.
[28]In his written submissions after judgment was reserved, counsel for the plaintiff attempted to show there were some items of deletions which had to be made by the defendant and some which were most likely to be made by him. I do not accept these submissions. As stated above, I do not accept that the only staff members who had the necessary code to delete sales were the three to who the defendant said he gave his code number. I also consider it to be unlikely that all the deletions which were made using the defendant’s code during the mid-evening periods were made by him. If staff were stealing takings without being in concert with the defendant in doing so, the defendant is not to be held liable for this for not bringing them to account. There is still a reasonable possibility that any of the deletions were innocent mistakes.
As stated at [27], his Honour therefore concluded that as he could not on the balance of probabilities quantify what part of the alleged surcharge was justified, the whole of it must be disallowed.
The grounds of appeal
The amended grounds of appeal are as follows:
1The learned Master erred in refusing to surcharge the draft accounts in the partnership (“the partnership”) between the plaintiff and the defendant with a debit of $45,848.00 (“the cash”) or part thereof.
2The learned Master erred in failing to find for the surcharge on the balance of probabilities and having sufficient and proper regard to inter alia:
(1) the defendant’s block of the sale of the restaurant business constituting the partnership asset (“the partnership business”);
(2) the steps taken by the defendant to alienate and isolate the plaintiff from the conduct of the partnership business;
(3) the control of the partnership business by the defendant and his staff;
(4) the defendant’s act of disconnecting the partnership business point of sale (“POS”) computer system which linked it to a computer in the office of a director (being Mr Carbone) of the plaintiff;
(5) the capacity of the defendant to delete entries from the POS records;
(6) the reconciliation done or known to the defendant of the takings of the partnership business;
(7) the contents of an Exceptions Report which showed the deleted transactions and the access code used to do the deletions;
(8) the defendant being an unimpressive and evasive witness;
(9) the failure of the defendant to call his accountant, Mr Birdseye who (the defendant said) gave him advice to disconnect the modem;
(10) the defendant’s registration of a new business name for the partnership restaurant in his name alone;
(11) the defendant’s failure to continue to supply financial information for the partnership restaurant to Mr Carbone’s staff and office; and
(12) the defendant had a strategy to get the whole partnership restaurant for himself (“the defendant’s conduct”).
(13) The defendant who disconnected the modem on the Point of Sale (“POS” on 25 October 2008 to 3 March 2009 was in control of the partnership business and was responsible for the account of day to day takings and banking.
3The learned Master erred by failing to find on the balance of probabilities that the defendant took the cash or part of it for himself, notwithstanding that that was not the only explanation for the defendant’s conduct.
4The learned Master was overly influenced by the possibility that staff had stolen the cash or some of it and erred that way.
5The learned Master erred in finding that it was impossible to say on the balance of probabilities which of the cash was taken by the defendant.
6The learned Master erred in concluding that material deletion transactions on the POS cash register were probably caused by innocent mistakes.
7The learned Master erred in failing to conclude on the balance of probabilities that at least that the cash characterised by the plaintiff as “likely” to have been misappropriated by the defendant was misappropriated by him.
8 The learned Master erred by failing to quantify at least part of the surcharge.
9 The learned Master should have allowed the surcharge at least in part.
I consider that the grounds and sub-grounds of appeal may be conveniently grouped as the following contentions.
First, the Master’s decision that the plaintiff had not established that the defendant had knowingly misappropriated[28] $45,848.00 was contrary to the evidence and/or, in coming to his decision, the Master failed to have sufficient and proper regard to the matters referred to in the grounds of appeal.
[28] Whether alone or in conjunction with another person.
Second, that in the alternative to the first contention (but relying upon the same matters), the Master should have found that the defendant had misappropriated some particular amounts of money (corresponding to particular deletions) and should have awarded the plaintiff the total of those amounts.
Third (and closely allied to the first two contentions), that the Master had in some way failed to take the proper approach to, or failed properly to apply, the correct onus or standard of proof.
There was a fourth contention advanced by the plaintiff on appeal which is difficult to articulate, does not explicitly appear in the grounds and does not appear to have been put to the Master. It was to the effect that his Honour should have found that there was “some” misappropriation by the defendant and that, although no precise amount could be demonstrated, his Honour should have proceeded to make a general award of damages in favour of the plaintiff.[29]
[29] I will treat this contention as if it were raised by grounds 8 and 9.
I will consider the appellant’s contentions in that order.
Contention one: the Master’s decision that the plaintiff had not established that the defendant had knowingly misappropriated $45,848.00 was contrary to the evidence and/or, in coming to his decision, the Master failed to have sufficient and proper regard to the matters referred to in the grounds of appeal
It is convenient to mention as a preliminary matter that there are two aspects of contention one to be considered. The first aspect involves an independent examination of the evidence and an ultimate assessment of whether the decision of the Master was in accordance with the whole of the evidence. The second aspect involves an assessment of the Master’s approach to the evidence and may involve errors of factual or legal analysis or both. Very little, if any, attention was given by the parties to the differences in approach to the two aspects. The parties largely examined the various matters of evidence under consideration and made their submissions as to the effect and weight of such evidence at the same time as their submissions as to the Master’s approach to, or treatment of, such evidence. In the circumstances of this case, that was a permissible approach and I will largely deal with the two aspects of the contention together, although I will bear in mind the relevant differences between them.
The plaintiff’s case at trial
It is to be noted that the plaintiff’s case was never that the defendant was liable for misappropriations by others acting independently from himself (say, through a failure to properly supervise the staff) but rather that the defendant deliberately misappropriated partnership monies. Further, his case during the course of the hearing was that the defendant had personally misappropriated the whole of the amount of $45,848.00; it was in written submissions to the Master after the reservation of judgment that the plaintiff belatedly suggested that if his Honour was not persuaded as to the whole amount, a lesser sum should be awarded comprising the total of the particular amounts of which his Honour was satisfied were misappropriated by the defendant.
Thus, the plaintiff primarily submitted that, in the light of all of the evidence, the Master should find that the defendant personally (or possibly with the assistance of an unnamed accomplice) had misappropriated the $45,848.00 by performing all of the deletions in the “Exceptions Report”.
However, it is to be noted that the present is not a “general deficiency” case in the sense in which that term is usually used; namely a case where it is separately proven that misappropriation of monies by only one identified person has occurred, thus enabling reliance to be placed upon a total general deficiency even though the precise times of the various acts of theft cannot be ascertained.
By contrast, in the present case, it is not conceded or proven how many of the alleged deletions in the “Exceptions Report” were incidents of misappropriation (if any) and, in relation to any such incidents that did constitute misappropriation, it is not conceded or proven how many (if any) of them are attributable to the defendant as distinct to other people in the café.
I have read and considered the transcript, exhibits and grounds of appeal. I do not intend to deal expressly with each feature of the evidence, or the treatment of it by his Honour, but I will refer to some representative examples of the approach taken by his Honour.
A good example is the submission by the appellant that a number of Mr Tabibi’s actions, including the disconnection of the modem, supported the allegations of misappropriation of partnership monies. The Master carefully had regard to this submission. At the same time, his Honour correctly took into account Mr Tabibi’s position which was that his actions were to be viewed in the wider context of an ongoing bitter partnership dispute; Mr Tabibi submitted that he felt he was being unfairly treated and was simply seeking to protect his own interests and that his actions, although misguided and unfortunate, did not establish the very serious conduct alleged of deliberately “stealing” partnership monies. Thus, his Honour stated in relation to these matters:
[21]By the second half of 2008 the partnership business was facing significant financial difficulties. The defendant was concerned that Mr Carbone, as the accountant and the experienced businessman, was not addressing the issues facing the business, as the defendant thought that he should. He was upset that the plaintiff was still continuing to draw $300 per week from the business for accounting and management services when he was not drawing his full wage and was paying some of the partnership debts personally.[30] When in October 2008 Mr Carbone proposed that the business should be sold, the defendant was shocked and devastated. He regarded himself as having put his life and soul into building up this business in the previous two years and he would not countenance any suggestion that he should lose it. His strategy thereafter, albeit not very well thought out, was to isolate the plaintiff from the conduct of the business and to attempt to get the whole of the business for himself. However, he had no realistic means of being able to finance the purchase of the plaintiff’s interest in the business, but it would appear that he did not personally accept this. His actions in disconnecting the modem, changing the insurance for the business, registering a new business name in his name alone and in not continuing to give all the financial information to Ms Augimeri were primarily directed to a misguided stratagem to get the whole business for himself. These matters were also consistent with him seeking to deprive the plaintiff of financial benefit from the business by taking much of the cash takings for himself, but that is not the only possible explanation for them.
(Emphasis added)
[30] Whether this was entirely factually correct was not established on the evidence, but it was the defendant’s perception of the situation.
As should go without saying, his Honour was correct in recognising that to show that some matters were “consistent” with “stealing” partnership money is a long way from proving that such misappropriation occurred, be it in the civil or the criminal courts.
Other examples of the Master’s approach to, and consideration of, matters relied upon by the plaintiff are furnished in the following passages in which his Honour carefully balanced those matters with opposing contentions in favour of the defendant:
[22]Most, but not all, of the deletions of sales making up the $45,848 were made using the defendant’s code for accessing that function on the POS. However, the fact that it was the defendant’s code is of little weight, as it is likely that this code was used by many of the staff. If the defendant took all of this money for himself, it does not explain why some of the entries were made under the code of another staff member.
[23]Most of the deletions of sales seem to have been made in a piecemeal and ad-hoc fashion at various times during the day. A significant number were made during the middle of the evening when the café was apparently at its busiest and when it was likely that the defendant would have been substantially occupied in the kitchen. It is significant that the deletions were not all made immediately before the Z read was produced, which might have been expected if at the end of the day deletions were made to cover exactly for misappropriations from the cash takings during the day. There was no suggestion on the evidence that there was ever a discrepancy in the reconciliations between the Z reads and the totals of the till. The staff member doing the Z read, who was usually not the defendant, may well have been involved in any misappropriation. It is possible such a staff member may have been acting in concert with the defendant, but there is no direct evidence of it. While the pattern of the deleted sales is not inconsistent with the defendant having been a party to most of them, it also does not point particularly strongly to him having been involved in many of them.
[24]There is a reasonable possibility that at least some of the deleted sales were the result of innocent mistakes by staff in having put incorrect data into the POS for various sales. The lack of general efficiency in the conduct of the POS as mentioned above raises the distinct possibility that there would have been likely to have been a number of instances of errors in the data put into the POS which would have had to have been corrected. In that event there would have been no cash deficiency attributable to those deletions. The difficulty for the plaintiff is that once it is probable that there were some such instances of innocent mistakes, it is impossible on the evidence to say to which corrections they related and to calculate the amount by which they would reduce the surcharge of $45,848.
[25]I accept the defendant’s assertion that to some extent he was not particularly conversant with the operations of the POS. He had been given little training in its operations. He was not an educated or a sophisticated person. While he could manage the basic data entries for sales, there is some doubt whether he could successfully perform the necessary functions for multiple deletions of sales so that there was no apparent cash discrepancy on the reconciliations between the daily Z reads and the till. It may be that he had assistance from other staff members who were more conversant with the computer functions, but there is no evidence directly pointing to this.
Conclusions as to the Master’s approach and findings
The appellant does not suggest that his Honour misstated the evidence in relation to any relevant matters; indeed the significance of the matters as urged by the plaintiff has always been obvious.
I consider that the Master was correct in finding that:
·many permutations and combinations of possibilities as to the various “deletions” were open on the evidence;
·it was likely that: a significant number of different individuals performed the various deletions, that some deletions may be correct, that some deletions may be incorrect but bona fide and that some deletions may be deliberate misappropriations;
·there is a superimposed problem for the plaintiff in that it is impossible to say which deletions fall into which category or who performed any particular deletion on any particular occasion; and
·there is an absence of any evidence that the defendant took money on any particular occasion coupled with the presence of very real possibilities that one or more other persons may have independently done so.
On independent review of the evidence, I conclude that his Honour’s findings that it is not established that the defendant misappropriated the amount of $45,848.00 were correct and that it is not established that his Honour failed to appreciate, understand or have proper regard to any of the matters referred to in ground 2 of appeal.
Contention two: that in the alternative to the first contention (but relying upon the same matters), the Master should have found that the defendant had misappropriated some particular amounts of money (corresponding to particular deletions) and should have awarded the plaintiff the total of those amounts
In the alternative to the first contention above, the plaintiff submitted that the Master should have found that the defendant had misappropriated some particular amounts of money. The plaintiff suggested that the deletions on the “Exceptions Report” could be broken down into three “bins” to which he laconically referred as:[31]
·“Got to be Tabibi” (being a total of $14,512.00);
·“Most likely Tabibi” (being a total of $20,363.00); and
·“Hard to say” (being a total of $9,973.00).
[31] The total of these three sums put forward by the appellant is actually $44,848.00 rather than $45,848. It is pointless attempting to determine the source of his arithmetical error.
I have considered the particular matters relevant to the contents of each of these “bins” at the same time as the submissions in relation to the main contention that his Honour should have found that all deletions were to be attributed to the defendant.
His Honour concluded as to the alternate second contention at [26] and [27] respectively:
[26] … There is no evidence which satisfies me to the requisite degree that the defendant misappropriated any particular amount of money which comprises a part of the $45,848 …
[27] … [A]s I cannot on the balance of probabilities quantify what part of the alleged surcharge is justified, the whole of it must be disallowed.
Again, on independent review I conclude that his Honour’s finding that it is not established that the defendant misappropriated any particular amount of money which comprised a part of the $45,848.00 was correct and again that it is not established that his Honour failed to appreciate, understand or have proper regard to each of the matters referred to in ground 2 of appeal.
Contention three: that the Master failed properly to approach, or apply, the correct onus or standard of proof
The appellant contended that the Master’s decision referred to above was vitiated through his Honour failing to properly approach, or apply, the correct onus or standard of proof. The Master directed himself as follows:
[20]… The onus is on the plaintiff to prove its assertion for the surcharge on the balance of probabilities. As the assertion involved a criminal offence, the Briginshaw principle applied in deciding whether that onus has been discharged.
[Footnote omitted]
Counsel for the appellant did not (and could not) submit that there was express misdirection at this point, or at any other point, in his Honour’s reasons. Instead, he formulated a series of propositions which sufficiently appear from his summary of argument thus:
9.The learned Master found that it was likely that the respondent had misappropriated funds from the appellant. He then appears to have counter-weighted this conclusion against the possibility that some part of the funds were misappropriated by an unknown employee. His Honour seems to have misapplied Briginshaw to somehow modify the standard of proof.
10.The learned Master adopted a similar approach with respect to the course of conduct engaged in by the respondent (and was wrong to do so). The appellant was deprived of access to and information about the partnership business. His Honour (correctly) found that the relevant conduct was consistent with the respondent seeking to deprive the plaintiff of financial benefit from the business by taking much of the cash takings for himself; but also that this was “not the only possible explanation” for it. His Honour also found that there was a possibility or reasonable possibility of an innocent explanation.
11.Upon the finding that there was a likelihood that the respondent misappropriated funds (which derives in this instance from the course of conduct finding), the possibility of some other person also misappropriating funds does not sustain a finding against the misappropriation claim on the balance of probabilities.
12.The learned Master having found that it was likely that the respondent misappropriated some funds from the business, he ought to have concluded, on the balance of probabilities, that the respondent (and not some unknown third party) was responsible for all or the majority of the missing funds.
13.The learned Master having found that some amount was likely to have been misappropriated by the respondent, he ought to have then fixed the amount of the misappropriation.
(Emphasis in original)
The only passage in the Master’s reasons to which the appellant pointed to advance the proposition that his Honour “found that it was likely that the respondent had misappropriated funds from the appellant” is at [27] and it is convenient to again reproduce that paragraph here:
[27]On the balance of probabilities I am satisfied that a substantial part of the $45,848 was misappropriated by someone, although it is likely that some unquantifiable part of it was attributable to innocent mistakes. It is also likely that the defendant, possibly in concert with some employees, did misappropriate unidentified parts of the $45,848. However, there is also at least an equal reasonable possibility that some unidentified part of the $45,848 was misappropriated by a staff member without the involvement of the defendant. Accordingly, as I cannot on the balance of probabilities quantify what part of the alleged surcharge is justified, the whole of it must be disallowed.
In considering paragraph [27], it is important to bear in mind that, as stated above, his Honour had clearly found in the preceding paragraph [26] that:
[26]… There is no evidence which satisfies me to the requisite degree that the defendant misappropriated any particular amount of money which comprises a part of the $45,848. …
Coming then to the first sentence of paragraph [27], his Honour here made a clear and definite finding of fact that someone misappropriated a substantial part of the $45,848.00:
[27]On the balance of probabilities I am satisfied that a substantial part of the $45,848 was misappropriated by someone, although it is likely that some unquantifiable part of it was attributable to innocent mistakes. …
(Emphasis added)
The extent of his Honour’s positive finding is delineated by the words up to the comma, namely “I am satisfied” (a critical hallmark of a judicial finding) that “a substantial part of the $45,848 was misappropriated by someone”. Thus, his Honour here positively found that he was satisfied that someone misappropriated “a substantial part of the $45,848” but the use of both the comma and the word “although” immediately after the comma, together signify a turning away from that definite finding and the commencement of an observation as to the existence of a likelihood of the occurrence of innocent mistakes having occurred in relation to “the balance” of the $45,848.00.
As to this other portion of the $45,848.00, his Honour expresses no concluded view and obviously makes no finding. This is confirmed by the fact that in the immediately following second and third sentences of paragraph [27] his Honour continues to allude to a number of possibilities but again expresses no satisfaction as to their actual occurrence. Thus, he states:
[27]… It is also likely that the defendant, possibly in concert with some employees, did misappropriate unidentified parts of the $45,848. However, there is also at least an equal reasonable possibility that some unidentified part of the $45,848 was misappropriated by a staff member without the involvement of the defendant. …
In short, his Honour here speaks of matters that are likely or possible – but his Honour does not find that it is more likely than not that they actually occurred. This process culminates in the last sentence of paragraph [27]: “I cannot on the balance of probabilities quantify what part of the alleged surcharge is justified …”.
It is therefore plain that his Honour was not satisfied that it was more likely than not that the defendant misappropriated funds from the appellant. Indeed, that is confirmed in the following paragraph [28] where his Honour considers the plaintiff’s submissions that a distinction could be drawn between groups of deletions in the “Exceptions Report” (the “bins” submission) and that the evidence established that the defendant must have misappropriated some particular amounts of money while only establishing that the defendant most likely misappropriated other sums. When his Honour states at paragraph [28] that “I do not accept these submissions”, his Honour clearly rejects both alternative submissions that the plaintiff had established either that the defendant “must have misappropriated them” or that he “most likely misappropriated them”.
A consideration of authorities relevant to the appellant’s third contention
As I understood counsel for the appellant, it was submitted that his Honour’s use of the word “likely” in paragraph [27][32] constituted a finding of “likelihood” which was in itself, or should have led to, a finding on the balance of probabilities that the defendant did in fact misappropriate unidentified parts of the $45,848.00.
[32] Particularly in the passage, “[i]t is also likely that the defendant, possibly in concert with some employees, did misappropriate unidentified parts of the $45,848. However, there is also at least an equal reasonable possibility that some unidentified part of the $45,848 was misappropriated by a staff member without the involvement of the defendant”.
I have endeavoured to explain why this is an incorrect construction of his Honour’s reasons taken as a whole and perhaps that is all that really needs to be said. However, the appellant’s assertion, vague as it is, that the Master “seems to have misapplied Briginshaw to somehow modify the standard of proof” makes some reference to the authorities appropriate.
“Likely” and “more likely than not”
The first rather obvious point to be taken from the authorities is that in normal parlance, and in the sense in which his Honour spoke in the present case, the word “likely” does not mean “more likely than not”. Rather, it simply means “a real or not remote chance or possibility”; any additional question of whether it is a likelihood of more or less than 50 per cent is a matter for further judgment in a particular case.
Thus, in Sheen v Fields Pty Ltd,[33] legislation required that eye protection be provided where there was a “likelihood of injury” to the eyes of an employee and a question arose on the facts as to whether there was a “likelihood” of injury to the eyes of the appellant. Gibbs CJ stated:[34]
In the Full Court it was held that “likelihood” in cl 21 means “something less than probability but more than a remote possibility”. I would accept that view. In other words, a likelihood is “a real or not remote chance or possibility regardless of whether it is less or more than 50 per cent”…
[33] (1984) 51 ALR 345.
[34] Ibid 348.
In Boughey v The Queen[35] the High Court subjected the word “likely” to considerable scrutiny. Mason, Wilson and Deane JJ stated:[36]
It is unnecessary for the purposes of the present application to consider whether the knowledge of “probable” or “likely” consequences which suffices as an element of common law murder should ever be explained, in directions to a jury, as requiring knowledge of some precise degree of probability or likelihood such as “more probable or likely than not” or a minimum percentage figure or maximum gambling odds. It suffices to say that it is plain enough that, in many and perhaps most cases, any such explanation would be undesirable. In the ordinary case where an accused well knows that it is probable or likely that his acts will cause death or grievous bodily harm, he will not have had the occasion to consider, let alone attempt to calculate, the degree of mathematical probability that death or grievous bodily harm will in fact result. In such a case, it would be liable to mislead or to border on the unreal to direct the jury in terms which required them to convert the knowledge of the accused into some such degree of mathematical probability.
[35] (1986) 161 CLR 10.
[36] Ibid 19.
Later, their Honours said:[37]
In our view, the word “likely” is used in both ss 156(2)(a) and 157(1) with what we apprehend to be its ordinary meaning, namely, to convey the notion of a substantial — a “real and not remote” — chance regardless of whether it is less or more than 50 per cent: cf Sheen v Fields Pty Ltd and Waugh v Kippen. …
To bury the word “likely” in s 157(1) of the Code beneath the gloss of “more likely than not” and the explanation of “a more than 50 per cent” or an “odds on” chance would be to succumb to that danger. It would also, in our view, be to attribute to the word “likely” a requirement of a specific degree of mathematical probability which the word does not convey either as a matter of ordinary language or in its context in s 157(1) of the Code.
[37] Ibid 21, 21-22.
Their Honours concluded as to this matter:[38]
His Honour’s comments clearly and properly made the point that, whatever may be the difficulties of precise definition, the expression “likely to cause death” in s 157(1) is an ordinary expression which is meant to convey the notion of a substantial or real chance as distinct from what is a mere possibility: “a good chance that it will happen”; “something that may well happen”; something that is “likely to happen”. In our view, those comments went as far as was desirable in the circumstances of the case. His Honour was correct in not introducing an added requirement either that the applicant directed his mind to, or attempted to calculate, the degree of mathematical probability that his acts would cause death in the circumstances or that the applicant knew or ought to have known that it was “more likely than not” or an “odds on chance” that his actions would cause death in the circumstances.
[38] Ibid 22.
In a similar vein, one might confidently venture that Lord Atkin’s historic statement in Donoghue v Stevenson[39] that “You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour” was obviously not intended, and certainly has not been subsequently interpreted, to mean only foresight of a probability of, or above, 50 per cent!
[39] [1932] AC 562, 580.
In the much more recent English decision, Re B, Lord Hoffman stated: [40]
If a legal rule requires a fact to be proved (a “fact in issue”), a judge or jury must decide whether or not it happened. There is no room for a finding that it might have happened. The law operates a binary system in which the only values are zero and one. The fact either happened or it did not. If the tribunal is left in doubt, the doubt is resolved by a rule that one party or the other carries the burden of proof. If the party who bears the burden of proof fails to discharge it, a value of zero is returned and the fact is treated as not having happened. If he does discharge it, a value of one is returned and the fact is treated as having happened.
[40] [2009] 1 AC 11, 17.
In the present case, the Master made it clear that the plaintiff had failed to discharge its burden of proof such that even if it was “likely” (in the sense of “a real, rather than a remote, chance or possibility”) that the defendant did misappropriate unidentified parts of the $45,848.00, his Honour simply was not satisfied on the balance of probabilities that the defendant had done so.
In Briginshaw v Briginshaw,[41] five judgments (those of Latham CJ, Rich, Starke, Dixon and McTiernan JJ) were delivered, each with substantial differences and nuances of meaning, and with Latham CJ indeed dissenting as to the result. At the hearing of the present appeal, counsel for the appellant did not take the Court to Briginshaw or to any other authorities dealing with the “Briginshaw approach”. Counsel relied upon his summary of argument, the relevant paragraphs of which stated:
[7]The learned Master called up the Briginshaw principle.[42] Briginshaw does not vary the standard of proof in civil cases, and merely reflects the assumption that members of society do not ordinarily engage in criminal conduct. A Court in civil proceedings should not lightly make findings that criminal conduct has occurred.[43] The standard of proof remains the balance of probability.
[8]It is trite that proof on the ‘balance of probabilities’ requires something less than scientific certainty.[44] The test is often expressed as requiring satisfaction that a fact is “more likely than not”[45] or that a “more probable inference in favour of what is alleged” arises.[46] There is no requirement that the facts exclude all other reasonable hypotheses, and the mere fact that it is possible to envisage other circumstances which might explain evidence is not a basis to find that a matter is not proved on the balance of probabilities unless there is actual evidence of those other circumstances.[47] The Court must consider whether the probability of one explanation for the evidence is higher than the probability of other explanations.[48]
[9]The learned Master found that it was likely that the respondent had misappropriated funds from the appellant. He then appears to have counter-weighted this conclusion against the possibility that some part of the funds were misappropriated by an unknown employee. His Honour seems to have misapplied Briginshaw to somehow modify the standard of proof.
[41] (1938) 60 CLR 336.
[42] R, [20], CB 1517.
[43] Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449, 449-450 (Mason CJ, Brennan, Deane and Gaudron JJ) (hyperlink unavailable).
[44] TNT Management Pty Ltd v Brooks (1979) 23 ALR 345, 346-350 (Gibbs J).
[45] TNT Management, Ibid, 350 (Murphy J).
[46] Luxton v Vines (1952) 85 CLR 352, 358 (Dixon, Fullagar and Kitto JJ) quoted in TNT Management, Ibid, 346 (Gibbs J).
[47] TNT Management, supra, 346-350 (Gibbs J).
[48] TNT Management, Ibid, 350-356 (Murphy J).
These propositions were not further elaborated upon and the only case cited for the submissions made at paragraph [7] (which refers to Briginshaw) was Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd[49] (Neat Holdings). Clearly, the present is not an appropriate vehicle for detailed discussion of the case of Briginshaw or of matters of principle generally and I will simply make some observations sufficient to dispose of this appeal.
The distinction between “the standard of proof” and the process of persuasion of the mind having regard to the gravity or otherwise of the fact of whose existence the mind is to be persuaded
[49] (1992) 67 ALJR 170; (1992) 110 ALR 449.
It is important to clearly distinguish between “the standard of proof” and “the process of persuasion of the mind having regard to the gravity or otherwise of the fact of whose existence the mind is to be persuaded”.[50]
[50] This formulation comes from Rejfek v McElroy (1965) 112 CLR 517, considered below.
This distinction was made in Briginshaw (the Court holding that the common law civil standard of proof was always on the balance of probabilities). Dixon J (as he then was), speaking of cases where grave allegations are made, emphasised that, quite irrespective of the question of the standard of proof, “reasonable satisfaction” should not be produced by “inexact proofs, indefinite testimony, or indirect inferences”. The well known central passage from Dixon J’s judgment on this aspect is as follows:[51]
The truth is that, when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality. No doubt an opinion that a state of facts exists may be held according to indefinite gradations of certainty; and this has led to attempts to define exactly the certainty required by the law for various purposes. Fortunately, however, at common law no third standard of persuasion was definitely developed. Except upon criminal issues to be proved by the prosecution, it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters “reasonable satisfaction” should not be produced by inexact proofs, indefinite testimony, or indirect inferences. Everyone must feel that, when, for instance, the issue is on which of two dates an admitted occurrence took place, a satisfactory conclusion may be reached on materials of a kind that would not satisfy any sound and prudent judgment if the question was whether some act had been done involving grave moral delinquency.
(Emphasis added)
[51] (1938) 60 CLR 336, 361-362.
In the later case of Helton v Allen[52] (Helton), the Court again emphasised the importance of actual satisfaction or persuasion being felt by the tribunal of fact. Helton, the executor and major beneficiary under a will, was tried for the murder of the testatrix and acquitted by a criminal jury; one of the next of kin brought civil proceedings to establish that in fact he did kill the testatrix and was thereby disentitled to take under the will and a civil jury so found. The High Court unanimously held that the trial Judge had misdirected the civil jury as to the correct approach to be taken to the making of such a finding. Dixon J (as he still was), Evatt and McTiernan JJ stated in a joint judgment:[53]
But unfortunately the summing up read as a whole produces an impression that to discharge their duty the jury should simply estimate the probabilities and if they thought that the probabilities in favour of the opinion that Helton poisoned Mrs Roche outweighed in any degree, however slight, the probabilities against that opinion they should find against him. … [H]is charge to the jury would, we think, produce upon the jury a quite erroneous impression of the gravity of duty placed upon them. In giving reasons in Briginshaw's Case for his opinion that, at common law, there were only two standards of proof or persuasion, reasonable satisfaction and satisfaction beyond reasonable doubt, Dixon J said:—“When the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality”.
Exactly the opposite effect is produced by the judge’s charge. It would, we think, make the jury think that their task was a mere mechanical comparison of probabilities and take their minds away from the simple truth that they should not find that Helton committed a murder unless they were satisfied he did so. Moreover, as a whole the charge appears to us to be opposed also to another statement Dixon J made in the same judgment. He said:—“But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters “reasonable satisfaction” should not be produced by inexact proofs, indefinite testimony, or indirect inferences. Everyone must feel that, when, for instance, the issue is on which of two dates an admitted occurrence took place, a satisfactory conclusion may be reached on materials of a kind which would not satisfy any sound and prudent judgment if the question was whether some act had been done involving grave moral delinquency”. …
(Emphasis added; footnotes omitted)
[52] (1940) 63 CLR 691 (Rich, Starke, Dixon, Evatt and McTiernan JJ). I note that it is stated at [9010] fn 6 in the loose-leaf edition of Lexis Nexis Butterworths, Cross on Evidence: Australian Edition, Vol 1 (at service 147): “Satisfaction on the balance of probabilities calls for the court to “feel an actual persuasion of [the] occurrence or existence” of the matter in issue: Helton v Allen (1940) 63 CLR 691 at 712”.
[53] (1940) 63 CLR 691, 711–712.
With respect, I think that the essential distinction between “the standard of proof” and the process of persuasion of the mind having regard to the gravity of an allegation was best made in the still later decision of the High Court in Rejfek v McElroy[54] (Rejfek). Rejfek involved the proof of fraud in a civil case and the defendant sought to re-agitate the question of whether such fraud was required to be proved beyond reasonable doubt. In a joint judgment the Court confirmed that the standard was on the balance of probabilities. However, of present importance, the Court again confirmed that proof in a civil case of a serious criminal allegation such as fraud “should be clear and cogent such as to induce, on a balance of probabilities, an actual persuasion of the mind as to the existence of the fraud”. The Court (in a joint judgment of Barwick CJ, Kitto, Taylor, Menzies and Windeyer JJ) stated:[55]
Before parting with this aspect of the matter, we might mention that in Slaughter v Storm and Storm Press Pty Ltd, Mansfield CJ considered himself as following both Helton v Allen and Narayanan Chettyar v Official Assignee of the High Court, Rangoon when he said that the plaintiff must prove allegations of fraud “as clearly as they would have to be proved in a criminal proceeding”, these being Lord Atkin’s words in New York v Heirs of Phillips Dec’d. If this phrase is used to mean no more than that proof of fraud should be clear and cogent such as to induce, on a balance of probabilities, an actual persuasion of the mind as to the existence of the fraud, it is in accordance with the decision of this Court in Helton v Allen, but it is, in our opinion, at variance with the proposition in the sentence in Privy Council’s judgment in Narayanan's Case. The “clarity” of the proof required, where so serious a matter as fraud is to be found, is an acknowledgment that the degree of satisfaction for which the civil standard of proof calls may vary according to the gravity of the fact to be proved: see Briginshaw v Briginshaw, per Dixon J; Helton v Allen per Starke J; Smith Bros v Madden, per Dixon J.
But the standard of proof to be applied in a case and the relationship between the degree of persuasion of the mind according to the balance of probabilities and the gravity or otherwise of the fact of whose existence the mind is to be persuaded are not to be confused. The difference between the criminal standard of proof and the civil standard of proof is no mere matter of words; it is a matter of critical substance. No matter how grave the fact which is to be found in a civil case, the mind has only to be reasonably satisfied and has not with respect to any matter in issue in such a proceeding to attain that degree of certainty which is indispensable to the support of a conviction upon a criminal charge: see Helton v Allen per Dixon, Evatt and McTiernan JJ.
(Emphasis added)
[54] (1965) 112 CLR 517.
[55] Ibid 521.
In a similar vein, in 1981 in West v Government Insurance Office of New South Wales,[56] Stephen, Mason, Murphy, Aickin and Wilson JJ stated:[57]
It is well to recall what was said by Dixon CJ in Jones v Dunkel where he said:
In an action of negligence for death or personal injuries the plaintiff must fail unless he offers evidence supporting some positive inference implying negligence and it must be an inference which arises as an affirmative conclusion from the circumstances proved in evidence and one which they establish to the reasonable satisfaction of a judicial mind.
His Honour went on to say that the law “does not authorise a court to choose between guesses, where the possibilities are not unlimited, on the ground that one guess seems more likely than another or the others. The facts proved must form a reasonable basis for a definite conclusion affirmatively drawn of the truth of which the tribunal of fact may reasonably be satisfied” and see also TNT Management Pty Ltd v Brooks per Gibbs J.[58]
[Footnotes omitted]
[56] (1981) 148 CLR 62.
[57] Ibid 66.
[58] The passage referred to was the following where Gibbs J stated in TNT Management Pty Ltd v Brooks (1979) 53 ALJR 267, 269: “The principle to be applied was stated by this Court in Bradshaw v McEwans Pty Ltd (1951; unreported) in a passage cited in Luxton v Vines (1952) 85 CLR 352 at 358: 'Of course as far as logical consistency goes many hypotheses may be put which the evidence does not exclude positively. But this is a civil and not a criminal case. We are concerned with probabilities, not with possibilities. The difference between the criminal standard of proof in its application to circumstantial evidence and the civil is that in the former the facts must be such as to exclude reasonable hypotheses consistent with innocence, while in the latter you need only circumstances raising a more probable inference in favour of what is alleged. In questions of this sort, where direct proof is not available, it is enough if the circumstances appearing in evidence give rise to a reasonable and definite inference: they must do more than give rise to conflicting inferences of equal degrees of probability so that the choice between them is mere matter of conjecture. … But if circumstances are proved in which it is reasonable to find a balance of probabilities in favour of the conclusion sought then, though the conclusion may fall short of certainty, it is not to be regarded as a mere conjecture or surmise.” This statement does not justify the drawing of inferences based only on “general considerations as to the likelihood of negligent conduct occurring in the conditions which existed at the time and place of the collision': Jones v Dunkel (1959) 101 CLR 298 at 305”.
Against the above background, the present appellant appears to rely on the decision of the High Court in Neat Holdings (although making no more than a written reference to the case with no elaborating explanation) for the proposition that the Master somehow erred in failing to make the finding sought by the appellant in the present case.
It should be obvious that Neat Holdings must be read against the background of its facts and the type of case that it was. The plaintiff and defendant there each made mirror-like allegations against each other that the other party was responsible for the fraudulent recording of the takings of a business; the parties both asserted that such serious conduct had occurred and the question was simply which of the two parties to the action had committed the act.
In Neat Holdings[59] the appellant submitted that the trial Judge had not directed himself as to the need for clear, cogent or strict proof. The tenor of the judgment is that such would usually be required but, given the unusual factual situation referred to above, such a direction would not have been of value. Their Honours stated:[60]
The judgment contains no express reference to any requirement of clear, cogent or strict proof. However, in a context where the issue in the case had effectively resolved itself into which of Karajan (acting through the personal respondents) and Neat Holdings (acting through Mr Gundill) had been guilty of deliberate falsification of its records of takings, the omission of any such reference neither involves nor indicates error on his Honour’s part. To the contrary, in the particular circumstances of the present case and for the reasons which we have given, any such reference would have been unhelpful.
[59] (1992) 110 ALR 449, 450-451. Toohey J (who would have allowed the appeal) also drew this distinction and at 456 cited Rejfek in support of it.
[60] (1992) 110 ALR 449, 451 (l40).
Thus, far from suggesting that there was no such requirement in relation to the proof of a grave matter in the confines of a civil case, the Court proceeded on the basis that such would normally be required but that such requirement had little work to do where the parties did not contest the fact that deliberate falsification of records had in fact occurred by one of the two parties. It was in that context that the Court observed:[61]
… the real issue in the case was not whether there had been deliberate falsification of the takings of the business. It was whether the deliberate falsification of takings figures had been on the part of the respondents or on the part of Neat Holdings. When an issue falls for determination on the balance of probabilities and the determination depends on a choice between competing and mutually inconsistent allegations of fraudulent conduct, generalisations about the need for clear and cogent proof are likely to be at best unhelpful and at worst misleading. If such generalisations were to affect the proof required of the party bearing the onus of proving the issue, the issue would be determined not on the balance of probabilities but by an unbalanced standard. The most that can validly be said in such a case is that the trial judge should be conscious of the gravity of the allegations made on both sides when reaching his or her conclusion. Ultimately, however, it remains incumbent upon the trial judge to determine the issue by reference to the balance of probabilities.
[61] (1992) 110 ALR 449, 451 (l15).
It is important to note that the Court in Neat Holdings did not purport to overrule the trio of High Court decisions in Briginshaw, Helton and Rejfek. Indeed, their Honours in the following passage in Neat Holdings clearly recognised the distinction so plainly drawn in Rejfek by Barwick CJ, Kitto, Taylor, Menzies and Windeyer JJ between the standard of proof and “the requirement of clear, cogent or strict proof” (as is confirmed by their Honours’ references to the authorities in their footnotes here reproduced):[62]
The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud.[63] On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear[64] or cogent[65] or strict[66] proof is necessary “where so serious a matter as fraud is to be found”.[67] Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct[68] and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct. As Dixon J commented in Briginshaw v Briginshaw:[69]
The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved …
[62] (1992) 110 ALR 449, 449–450.
[63] See, eg, Hocking v Bell (1945) 71 CLR 430, at 500; Rejfek v McElroy (1965) 112 CLR 517, at 519-21.
[64] Briginshaw v Briginshaw (1938) 60 CLR 336, at 362; Helton v Allen (1940) 63 CLR 691, at 701; Hocking v Bell (1944) 44 SR(NSW) 468, at 477 (affirmed in Hocking v Bell (1945) 71 CLR, at 464, 500); Rejfek v McElroy (1965) 112 CLR, at 521; Wentworth v Rogers (No 5) (1986) 6 NSWLR 534, at 539.
[65] Rejfek v McElroy (1965) 112 CLR, at 521.
[66] Jonesco v Beard [1930] AC 298, at 300; Briginshaw v Briginshaw (1938) 60 CLR, at 362; Helton v Allen (1940) 63 CLR, at 711; Hocking v Bell (1944) 44 SR(NSW), at 478 (affirmed in Hocking v Bell (1945) 71 CLR, at 464, 500); Wentworth v Rogers (no 5) (1986) 6 NSWLR, at 538.
[67] Rejfek v McElroy (1965) 112 CLR, at 521.
[68] See, eg, Motchall vMassaud [1926] VLR 273, at 276.
[69] (1938) 60 CLR, at 362; and see, also, Helton v Allen (1940) 63 CLR, at 711.
It is to be noted that their Honours (in the last footnote in the above passage) specifically endorse a critical passage in the judgment in Helton, namely the passage reproduced above in this present judgment at [103].
High Court decisions since Neat Holdings
There have been several High Court decisions since Neat Holdings to which reference may be made.
In G v H,[70] Deane, Dawson and Gaudron JJ again confirmed that in civil cases the standard of proof is on the balance of probabilities and also approved the passage from the judgment of Dixon J in Briginshaw which requires that the trial Judge must nevertheless be positively satisfied of a fact before it can be taken to be proven:[71]
It has been clear since the decision in Briginshaw v Briginshaw that in civil cases the standard of proof is on the balance of probabilities, with due regard being had to the nature of the issue involved so that “[t]he seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal.” Thus, if there is an issue of “importance and gravity”, to use the words of the trial judge, due regard must be had to its important and grave nature.
(Emphasis added)
[70] (1994) 181 CLR 387.
[71] Ibid 399.
In Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd[72] there are weighty statements made by Hayne J (with whom Gleeson CJ and McHugh J concurred) again specifically recognising the requirement “that the tribunal must attain actual “satisfaction or persuasion”. Hayne J initially stated:[73]
[135]What does the common law require? Where what is sought is conviction of the defendant for an offence against a law of the Commonwealth, it must be strongly arguable that nothing short of proof beyond reasonable doubt will do. If no conviction is sought, but other relief is (as, for example, a declaration that the defendant contravened identified provisions of the relevant Act coupled with orders for payment of monetary penalties), it must be strongly arguable that, in proceedings conducted according to civil procedures, proof to the civil standard will suffice. No doubt, in accordance with well-established principle, if the civil standard were to be applied, “the nature of the issue [would] necessarily [affect] the process by which reasonable satisfaction is attained” and “exactness of proof [would be] expected”.[74]
[72] (2003) 216 CLR 161, 205.
[73] (2003) 216 CLR 161, 205 [135].
[74] His Honour cited Briginshaw v Briginshaw (1938) 60 CLR 336; Helton v Allen (1940) 63 CLR 691; Hocking v Bell (1945) 71 CLR 430; Rejfek v McElroy (1965) 112 CLR 517 and Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449.
Later in his judgment, Hayne J further addressed the requirement that the trial Judge attain actual “satisfaction” or “persuasion” of a fact to be proven. His Honour here first postulates the difficulties that can be posed by averment provisions in the context of a standard of proof beyond reasonable doubt and then, of present importance, notes that much the same difficulties arise even when the standard is on the balance of probabilities for the reason that cases such as Briginshaw, Helton and Rejfek require there to be reasonable “satisfaction” or “persuasion” by the trial Judge even when the standard of proof is on the balance of probabilities. Thus, his Honour stated:[75]
[143]Is requiring proof beyond reasonable doubt consistent with these averment provisions? If evidence is given in rebuttal of a fact averred, and that fact is an element of a contravention in respect of which conviction is sought, how is the judge to approach the task of deciding whether the Customs has proved that fact beyond reasonable doubt? How can the judge, in those circumstances, “feel an actual persuasion”[76] of the occurrence or existence of that fact?
[144]That problem is real but it is not avoided if a civil standard of proof is applied. If that were to be held to be the applicable standard of proof, it would follow from Briginshaw v Briginshaw, and like cases in that line of authority, that proof of an issue to the “reasonable satisfaction” of the tribunal of fact “should not be produced by inexact proofs, indefinite testimony, or indirect inferences”[77] and that the tribunal must feel that “actual persuasion” of which Dixon J spoke in Briginshaw.[78] No matter what standard of proof is adopted, the averment provisions may, in certain circumstances, confront a judge with the difficulty of resolving a competition between the requirement of the averment provisions that, as a matter of law, certain facts may, but need not, be taken to have been established to the requisite standard, and evidence tendered in contradiction of that conclusion. No matter what the standard of proof, the judge can resolve that competition in favour of the party making the averment only if persuaded of the existence or occurrence of the fact averred. The averment provisions, therefore, neither suggest nor require departure from the tentative answer expressed earlier in these reasons that if conviction is sought, proof beyond reasonable doubt of the elements of the relevant offence is necessary.
(Emphasis added)
[75] (2003) 216 CLR 161, 208.
[76] Briginshaw (1938) 60 CLR 336 at 361.
[77] Briginshaw (1938) 60 CLR 336 at 362.
[78] Briginshaw (1938) 60 CLR 336 at 361.
There are various other authorities that might be referred to,[79] including cases where it may be appropriate to take a more probabilistic approach, such as those involving statistical evidence.[80] However, as a distinguished commentator has emphasised, while statistical or other similar evidence may assist to a degree, one cannot sensibly apply a probabilistic approach to all aspects of the cases usually encountered:[81]
Apart from the point that judges should not base findings on inadequate material, the other main reason, I believe, for requiring adequate material and belief, rather than mere mathematical probability, is that generally considerations for and against particular findings of fact cannot be expressed in numbers, to which one can apply quantitative rules so as to arrive at a numerical probability; and associated with this, there is the point that decision-making generally involves a global assessment of a whole complex array of matters which cannot be given individual numerical expression. Such a decision depends very much more on commonsense, experience of the world, and beliefs as to how people generally behave (folk psychology), than on mathematical computations; and concentration on mathematical probabilities could prejudice this commonsense process.
For example, if a witness gives an account of events which appears to involve a number of improbabilities, and one has to decide if that witness is giving evidence honestly, one at least has to weigh, on the one hand, the probability that a witness on oath will be truthful against, on the other hand, the apparent improbabilities in the version which is given, along with the possibility that the evidence is the result of mistake rather than dishonesty (perhaps also taking into account the demeanour of the witness). What one does not do, and cannot do, in this situation, is to assign numbers to each of these various probabilities and improbabilities, treating them as a number of probabilistic premises; and then attempt to make a computation based on mathematical rules so as to reach a probabilistic conclusion.
[79] I mention the judgment of Callinan J in Barwick v NSW Law Society (2000) 169 ALR 236, 271 [159] where his Honour states: “[t]rue it may be that the rule in Briginshaw v Briginshaw whether as restated or explained in Rejfek v McElroy and Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd does not involve a different standard of proof from the civil standard in cases of fraud and other serious misconduct, and that in civil cases there may be a range of seriousness of the various issues to be decided, but because the state of satisfaction of the mind required for, say, a finding of unsatisfactory conduct, might in practice be quite different from that required for a finding of conduct tantamount to, or of perjury, it is obviously preferable that they be the subject of separate proceedings if possible”.
[80] For an interesting discussion of the various approaches see: Justice Hodgson, ‘The Scales of Justice: Probability and Proof in Legal Fact-finding’ (1995) 69 Australian Law Journal 731.
[81] Justice Hodgson, ‘The Scales of Justice: Probability and Proof in Legal Fact-finding” (1995) 69 Australian Law Journal 731, 736.
It is unnecessary to go further in the present case. No expert evidence, be it statistical or otherwise, was tendered here. If it is necessary to say so, the present case was very different from that of Neat Holdings. Here, the defendant gave evidence and denied that he had misappropriated any monies. While the Master was suspicious, considering it “likely” that he had, his Honour declined to make a finding that it was more likely than not that he had done so. In so declining, his Honour’s decision happens to be supported by the authorities referred to above which establish that proof of such misappropriation “should be clear and cogent such as to induce, on a balance of probabilities, an actual persuasion of the mind as to the existence of the fraud”.[82]
[82] Rejfek v McElroy (1965) 112 CLR 517, 521.
In my view, the approach and decision of the Master was correct. No appellable error has been established.
Contention four: that in the alternative, his Honour should have found that the defendant had misappropriated some unspecified amounts of money and should have proceeded to make a general award of damages
Although elaborated upon at the hearing of the appeal, the gist of the appellant’s arguments in support of his fourth contention is stated in his summary of argument thus:
25.It is well established that difficulty in assessing damages does not relieve a court from the responsibility of estimating them, and that once both wrongful conduct and some loss and damage have been established a Court must exercise a broad discretion to determine an award of damages, which may require a degree of “speculation and guess work”.[83] The High Court has stated that where “precise evidence is not available the court must do the best it can”[84] to assess damages.
26.Furthermore, where it is established that a defendant is a wrongdoer, damages should be “liberally assessed, in the sense that inferences will be more readily drawn against them”, accepting that the object of damages remains compensatory rather than punitive.[85]
27.Here, the appellant established, to the requisite standard, wrongful acts by the respondent and loss and damage consequent on those acts. The respondent is responsible for the whole or substantially the whole of the appellant’s loss, whether he acted alone or in concert with another.
28.The learned Master ought to have assessed damages (that is, the amount of the misappropriation) on the available material, doing the best he could and adopting a liberal assessment of damages in the context of the respondent’s wrongdoing. The appellant contends that the correct award is that the respondent be held liable for the whole of the appellant’s loss and the draft accounts be surcharged with the whole amount of $45,848 as a debit to the defendant.
29.The respondent cannot benefit from the enterprise of his misconduct, which made it harder for the appellant to connect each transaction to the respondent.
30.In summary, the learned Master ought to have made an assessment of the surcharge arising from the respondent’s misconduct; and in so doing awarded all of the surcharge claimed (or at the very least a substantial component of it, allowing for some exigencies).
[83] Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 57 ALR 167, 183 (Sheppard, Morling and Wilcox JJ); Commonwealth v Amman Aviation Pty Ltd (1991) 174 CLR 64, 83 (Mason CJ and Dawson J).
[84] Amman Aviation ibid.
[85] Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (in liq) (2007) 157 FCR 564, [34] (Black CJ and Jacobson J); General Tire & Rubber Co v Firestone Tyre & Rubber Co Ltd [1976] RPC 197, 212 (Lord Wilberforce).
The only authorities cited by the appellant for this fourth contention were Enzed Holdings Ltd v Wynthea Pty Ltd,[86] Commonwealth v Amman Aviation Pty Ltd,[87] Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (in liq)[88] and General Tire & Rubber Co v Firestone Tyre & Rubber Co Ltd.[89] The factor common to these cases is that they each deal with factual situations of a type very different to the present case. Thus, in Enzed Holdings Ltd v Wynthea Pty Ltd – upon which counsel appeared to place most reliance – the appellants brought proceedings to obtain injunctive relief and damages against the respondents for breaches of the Trade Practices Act 1974 (Cth), infringement of copyright and passing off. They established their entitlement to relief for the causes of action under the Trade Practices Act and for infringement of copyright. The trial Judge refused to award any damages on the basis that they could not be quantified. The appeal was in fact dismissed. However, as I understand the present appellant’s submission, he relies on the references in the judgment of Sheppard, Morling and Wilcox JJ to cases such as Chaplin v Hicks,[90] Biggin & Co Limited v Permanite Limited[91] and Callaghan v William C Lynch Pty Limited.[92] Those references are unremarkable in themselves and stand for no more than the proposition that when civil liability is otherwise clearly established, then a court may be required to assess damages on a broad basis and on quite slender evidence. (Similar comments may be made in relation to the other three cases relied upon by the appellant).[93]
[86] (1984) 57 ALR 167, 183.
[87] (1991) 174 CLR 64, 83.
[88] (2007) 157 FCR 564.
[89] [1976] RPC 197, 212.
[90] (1911) 2 KB 786 (Chaplin v Hicks is of course the well known case on “loss of a chance” involving the disgruntled would be finalist in a beauty contest).
[91] (1951) 1 KB 422.
[92] (1962) NSWR 871.
[93] Commonwealth v Amman Aviation Pty Ltd (1991) 174 CLR 64, 83; Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (in liq) (2007) 157 FCR 564, [34]; General Tire & Rubber Co v Firestone Tyre & Rubber Co Ltd [1976] RPC 197, 212 (Lord Wilberforce).
I fail to see what relevance such cases supposedly have to the present case where the plaintiff’s problem is liability. Here, if the trial Judge was prepared to find that the defendant had carried out all of the deletions, the appellant would be entitled to the full $45,848.00. However, his Honour was not so satisfied and I have determined that his Honour did not thereby fall into error. That being so, any claim by the plaintiff for some lesser amount must recognise the intimate connection between liability and quantum in the present circumstances. If the plaintiff were able to prove the commission of a number of particular deletions in the “Exceptions Report”, then ipso facto, quantum would be determined by adding up the value of those particular deletions. However, the co-relative of that proposition is that if no particular deletions are proven, one cannot assess any damages and I have determined above that the Master did not err in coming to the conclusion that the plaintiff had failed to prove that the defendant was responsible for any particular misappropriation(s).
As I understand the final fall back submission of counsel, it was that the Master should have made an award in the amount of $45,848.00 and then discounted it back for “contingences” or “exigencies” such as the defendant had not in fact committed all of the alleged misappropriations! I will restrict myself to saying that that interesting submission is patently wrong.
Conclusion
I conclude that the appellant has failed to make out any of his grounds of appeal considered singly or cumulatively. I therefore dismiss the appeal.
Orders
I will hear counsel as to the making of appropriate orders.
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