State of New South Wales v Commonwealth Bank of Australia

[2001] NSWSC 1067

CITATION:	State of New South Wales v Commonwealth Bank of Australia [2001] NSWSC 1067
CURRENT JURISDICTION:	Equity Division Commercial List
FILE NUMBER(S):	SC 50019/01
HEARING DATE(S):	22 & 23 October 2001
JUDGMENT DATE:	24 October 2001
PARTIES :	State of New South Wales (P) Commonwealth Bank of Australia (D1) Star City Pty Limited (D2)
JUDGMENT OF:	Young CJ in Eq

COUNSEL :	Dr C Birch SC and J-J Loofs (P) J E Marshall (D1) B Rayment QC (D2)
SOLICITORS:	I V Knight (Crown Solicitor) (P) L E Taylor (D1) Coudert Brothers (D2)
CATCHWORDS:	CONSTITUTIONAL LAW [32][68]- Statutory corporation- Agent of Crown- Corporation dissolved- Action does not devolve on Crown. GAMING & WAGERING [4]- Casinos- How far gaming laws are relaxed- Whether casino gives consideration in respect of wager. WORDS & PHRASES- "Consideration"- "Subrogation".
LEGISLATION CITED:	Casino Control Act 1992 Crown Proceedings Act 1988, ss 3, 4, 5, 8 Energy Services Corporations Act 1995, s 15; Schedule 3, clause 3 Energy Services Corporations Amendment (TransGrid Corporatisation) Act 1998; Schedule 1, clause 13A Fair Trading Legislation Amendment Act 1997, ss 7, 9 Gaming and Betting Act 1912, ss 14, 16 Hire Purchase Agreements Act (NSW) 1941, s 3(5) Interpretation Act 1987, ss 13, 30, 50 Legal Profession Act 1987, s 90A Luna Park Site Act 1990, s 9(3) Moratorium Act 1932, s 6 Property Services Council Act 1990, ss 4, 24, 65 Property Stock and Business Agents Act, 1941, ss 79, 81(1); Part 6 Real Estate Services Council Act 1990, ss 4, 18 Tow Truck Industry Act 1978, s 6(1)
CASES CITED:	Attorney-General (NSW) v Brewery Employees Union of NSW (1908) 6 CLR 469 Attorney-General (NSW) v Perpetual Trustee Company Ltd (1952) 85 CLR 237 Attorney-General v Smith (1892) 13 LR NSW (L) 293 Bank of NSW v The Commonwealth (1948) 76 CLR 1 Barnes v Addy (1874) LR 9 Ch App 244 Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 Beaton v McDivitt (1985) 13 NSWLR 134 Black v S Freedman & Co (1910) 12 CLR 105 Bropho v Western Australia (1990) 171 CLR 1 Bradken Consolidated Ltd v The Broken Hill Pty Co Ltd (1979) 145 CLR 107 Candlewood Navigation Corporation Ltd v Mitsui OSK Lines Ltd [1986] 1 AC 1 Clarke v Shee (1774) 1 Cowp 197; 98 ER 1041 Commercial Oil Refiners Pty Ltd v South Australia (1974) 9 SASR 88 Commonwealth v O'Donohue [1979] VR 441 David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 Eastwood v Kenyon (1840) 11 Ad & E 438; 113 ER 482 Electricity Commission of NSW v Australian United Press Ltd (1954) 55 SR (NSW) 118 Ellis v Commissioner of Main Roads (1991) 74 LGRA 96 Equiticorp Industries Group Ltd v The Crown (No 47) [1996] 3 NZLR 586 Esso Petroleum Co Ltd v Hall Russell & Co Ltd [1989] 1 AC 643 Galibal Pty Ltd v Chief Commissioner of Land Tax (1994) 96 ATC 4143 Gersch v Atsas (1999) 10 BPR 18431 Gill v Registrar-General (1991) 5 BPR 11587 International Railway Ltd v Nigara Parks Commission [1941] AC 328 King v Phoenix Assurance Co [1910] 2 KB 666 Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 Martin v Pont [1993] 3 NZLR 25 Moses v Macferlan (1760) 2 Burr 1005; 97 ER 676 Muschinski v Dodds (1985) 160 CLR 583 Newham v Diamond Leisure Pty Ltd [1994] NTSC 83 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 Petersen v Moloney (1951) 84 CLR 91 Reg v Slator (1881) 8 QBD 267 Rover International Ltd v Cannon Film Sales Ltd [1989] 1 WLR 912 Rowland v Divall [1923] 2 KB 500 Rural Bank of NSW v Hayes (1951) 84 CLR 140 Saunders v Railway Commissioners for NSW (1920) 21 SR (NSW) 7 Simpson & Co v Thomson (1877) 3 App Cas 279 Slade's Case (1594) 4 Co Rep 92b; 76 ER 1074 State Authorities Superannuation Board v Commissioner of State Taxation (WA) (1996) 189 CLR 253 Sydney Harbour Trust Commissioners v Wailes (1908) 5 CLR 879 Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 Wynyard Investments Pty Ltd v Commissioner for Railways (NSW) (1955) 93 CLR 376
DECISION:	See para 164.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

50019 of 2001

YOUNG CJ in EQ

Wednesday 24 October 2001

STATE OF NEW SOUTH WALES v COMMONWEALTH BANK OF AUSTRALIA

Judgment

: On 6 April, the Commercial List Judge decided to agree to the parties’ joint proposal that two questions be separated out and answered before any other question in this dispute. He also directed that the second defendant’s notice of motion of 2 February 2001, which sought that the suit be dismissed as against it, be heard at the same time.

2 Since that date, the parties have slightly amended question A.

3 The questions in their amended form are as follows:

A. In circumstances where, prior to the commencement of these proceedings, the Property Services Council was abolished and the Property Services Council Act, 1990 was repealed, can:
(1) the matters asserted in paragraphs A1-A7 and C1-C6 of the summons, and/or
(2) the operation of s 4(2) of the Property Services Council Act, 1990 (now repealed) in conjunction with s 79 of the Property Stock and Business Agents Act, 1941 (prior to its amendment on 1 August 1997), s 30 of the Interpretation Act, 1987 and ss 3 and 4 of the Crown Proceedings Act 1988
vest in the Crown the right or rights of subrogation asserted by the Crown as the foundation of these proceedings?
B. If Question A is answered “Yes”, can the subrogation right or rights be enforced by a suit brought in the name of the “State of New South Wales”?

4 The two questions do not by themselves indicate the dispute between the parties. It is thus necessary, before dealing with the questions, to set out some background facts and then refer to the plaintiff’s summons.

5 The plaintiff is the State of New South Wales which is suing in a restitutionary action to recover moneys which were lost by reason of the Property Services Council paying compensation to persons who suffered loss through the failure to account for rents and other monies due to them by a licensed real estate agent. The agent banked with the first defendant, the Commonwealth Bank of Australia (the Bank) and lost most of the monies in gambling with the second defendant, Star City Pty Ltd at its casino (the Casino). In respect of a number of the losses, the estate agent used a trust account cheque which he exchanged for gambling chips.

6 The basal claim is under the principle laid down in Barnes v Addy (1874) LR 9 Ch App 244. However, the plaintiff relies upon all or any restitutionary principles available to it at law or in equity. It is not necessary to delve further into this for the purpose of the preliminary questions.

7 The Commercial List Judge ordered that each party file written submissions commencing with the Bank. I have found great assistance in these and compliment all counsel for their diligence and learning.

8 I have coded the various summons and submissions and will refer to them as follows:

Document A The summons;
Document B Bank’s submissions filed 5 March 2001;
Document C Plaintiff’s submissions filed 20 March 2001;
Document D Casino’s submissions on notice of motion;
Document E Plaintiff’s submissions in reply;
Document F Bank’s reply;
Document G Casino’s submissions in reply;
Document H Casino’s submission on standing;
Document J Bank’s final reply;
Thus a reference to “H9” is to paragraph 9 of Document H.

9 The hearing of the separate questions and the notice of motion took place before me on 22 and 23 October 2001. At the hearing, Dr Birch SC and Mr Loofs appeared for the plaintiff, Mr J E Marshall for the Bank and Mr B Rayment QC for the Casino. I am indebted to all counsel for the skilful and expeditious manner in which the hearing was conducted which has enabled me to give judgment today after consideration of the matter overnight.

10 The facts as taken from the submissions of the second defendant are as follows.

11 Fendross Pty Limited (Fendross) was a real estate agent, and conducted (inter alia) a trust account with the Bank. Money belonging to a large number of clients was paid into that trust account.

12 Mr Bojan was the effective controller of Fendross, and a signatory of the trust account.

13 On numerous occasions Bojan, without authority from any client, drew a trust cheque payable to the Bank or signed a cash withdrawal from the trust account, in exchange for which the Bank issued him with a bank cheque, and Bojan subsequently endorsed the bank cheque to the Casino. There are nine such cheques identified in para 38 (a) of the summons, over a period from 28 November 1995 to 31 January 1995 totalling $308,875, and a further seven such cheques identified in para 49(a) over a period 16 February 1996 to 5 March 1996 totalling $214,000. Thus it is alleged there were a total of 16 bank cheques purchased with money derived from the trust account which were endorsed to the Casino, totalling $522,875. In addition there is a claim in para 45 that the Casino received one cheque for $28,000 which was drawn on the trust account itself. (There is no allegation about who was the payee of this cheque, or by what means the Casino came to receive it). This brings the total claim against the Casino to $550,875.

14 Bojan made other unauthorised withdrawals from the trust account over a period from 9 October 1995 to 5 March 1996. In total he withdrew $1,013,767.37 in 31 transactions.

15 The Property Services Council Act 1990, s 4 established a corporation with the corporate name of the Property Services Council (the Council), and said it was, for the purposes of any Act, a statutory body representing the Crown. The Council administered a fund established under s 65 of the Act called the Real Estate Services Council Compensation Fund.

16 In consequence of Bojan's various misappropriations from the trust account, Fendross was unable to pay a large number of clients whose money had been deposited in the trust account. The Council received claims from certain of those clients, and paid certain of those claims from the Fund. However, it is not clear whether all of the claims were paid in full.

17 I will first deal with Question A

18 The directions provided that the Bank should file the first submission. In hindsight, this led to some slight misunderstandings of other parties’ positions. The submissions took a while to settle down before all the parties were on the same wavelength. However, when that occurred, the issues between the parties on Question A clearly appeared.

19 Plaintiff’s counsel gave an outline of the concept of the Crown and Crown agency that have been generally applied both in Australia and England. The Bank’s counsel agreed with this outline.

20 (i) The Crown in the narrowest sense is the Sovereign and in regard to New South Wales is usually referred to as the "Crown in Right of New South Wales"; see Interpretation Act 1987, s 13 and Crown Proceedings Act 1988 ("CPA"), s 8.

(ii) The term "Crown" is sometimes used in an extended sense to refer to the body politic which includes the members, servants and agents of the executive government: see Bass v Permanent Trustee Co Limited (1999) 198 CLR 334 at 347. This sense has never been fully developed in English or Australian law. English law, for example, has never developed the concept of the State; see Owen Hood Phillips, Constitutional and Administrative Law , 7th ed (Sweet & Maxwell, London, 1987) p 702. The Crown Proceedings Act 1988 adopts, in part, this extended notion.

(iii) The issue of whether an agent is entitled to the immunity of the Crown is sometimes sought to be determined by asking whether the agent is part of or to be equated with the Crown in the extended sense; see the Bass case at p 345 and Seddon, Government Contracts, 1st ed (Federation Press, Sydney, 1995) p 98.

(iv) Not all agents of the Crown are equated with the Crown in the extended sense of the term. The tendency to confuse these concepts is criticised by Hogg and Monahan in their Liability of the Crown 3rd ed (Carswell, Toronto, 2000) page 332.

(v) Further, persons or entities which are not the Crown in even the extended sense may yet enjoy the immunities of the Crown to at least a limited extent; see Bradken Consolidated Limited v The Broken Hill Pty Co Ltd (1979) 145 CLR 107 at 124, 129 and 137.

21 The propositions just listed do not resolve the present matter which is concerned with whether the Council was an agent of the Crown and whether rights acquired by it were exercisable by the Crown directly.

22 Plaintiff’s counsel say that their basal proposition is very simple. Did rights accrue by virtue of s 79 of the Property Stock and Business Agents Act? If they did, and they accrued to the Crown, they have never been lost. The Crown Proceedings Act is not just about labels attached to writs, but provides for an appropriate repository of causes of action.

23 Mr Marshall, for the Bank, put that the Crown does not have standing to bring any of the claims in this summons. In essence, the difficulty for the Crown is that even if the Property Services Council did have rights of subrogation, that body was abolished before the commencement of these proceedings.

24 Mr Marshall’s basic answer to the central proposition of the plaintiff is simple. The rights never did accrue to the Crown. They accrued to the Council. They were property rights which no legislation ever vested in the Crown or any other statutory corporation. There was speculation as to where those property rights might be hiding. A brief examination of the Corporations Law as it existed in 1997, suggests that the Council was not such a body as when it passed out of existence ASIC would act as a repository for its property. The suggestion that they passed to the Crown as bona vacantia was raised but not argued.

25 He submits that, at the time of commencement of these proceedings there was no statutory corporation or body representing the Crown in right of New South Wales in which any subrogation right could have been vested. There was no transitional provision continuing the legal entity previously known as the Property Services Council nor vesting the former rights of that body in the Crown or any other body.

26 He says that the summons discloses the issue via identification of the mechanism by which the "State of New South Wales" brings the proceedings. The summons proceeds upon the following (necessary) allegations:

(1) The beneficiaries of the funds held in the management trust account could sue the Bank directly.

(2) As a consequence of the fact that the (now abolished) Property Services Council made payments out of a (now abolished) fund to various of the beneficiaries, the Property Services Council acquired a right of subrogation to any potential claim against the Bank which the beneficiary might have.

(3) That cause of action survives somehow in the Crown despite the abolition of the Property Services Council.

(4) The Crown can bring proceedings in the name, State of New South Wales, ie in its own name notwithstanding that it is a subrogation claim.

27 The Bank does not accept that any of the above steps can be made out, however steps (1) and (2) do not arise on the separate question. It is steps (3) and (4) which are involved in separate questions (A) and (B) respectively.

28 Section 4 of the Real Estate Services Council Act 1990 (RESCA) (now repealed) provided as follows:

"4(1) There is constituted by this Act a corporation with the corporate name of the Real Estate Services Council;

(2) The Council is, for the purposes of any Act, a statutory body representing the Crown."

29 Mr Marshall submits that provisions such as s 4(2) of RESCA are very common in the statutes of New South Wales. The formula has been in use for many years, perhaps even predating Federation. He puts that the function and/or purpose of such a provision has been considered in many cases and is twofold.

30 First, it serves as a linking or cross-referencing provision. Many statutes use the expression “the Crown or a statutory body representing the Crown” and the use of the present formula ensures that they are all caught up by the later statute. Mr Marshall instanced s 6 of the Moratorium Act 1932, s 6(1) of the Tow Truck Industry Act 1978 and s 9(3) of the Luna Park Site Act 1990.

31 The optimum example is s 3 of the Crown Proceedings Act 1988 which catches up all bodies representing the Crown in the right of NSW.

32 The second function is to attract Crown immunity: see Wynyard Investments Pty Ltd v Commissioner for Railways (NSW) (1955) 93 CLR 376. In Wynyard Investments, Williams, Webb and Taylor JJ said at page 388:

The only way a statutory body could represent the Crown would be to act as the agent or servant of the Crown and this must be the meaning of the word `represent' in this special provision. The representation is `for the purpose of any Act', so that for the purpose of any Act the Commissioner of Railways must be deemed to represent the Crown."

33 The Bank’s counsel calls attention to the fact that in State Authorities Superannuation Board v Commissioner of State Taxation (WA) (1996) 189 CLR 253, 280, the High court noted the distinction between a representative of the Crown and the Crown itself.

34 Mr Marshall says that the provision does not have a wider operation. In particular, when property is vested in a statutory corporation, the cases say that the corporation alone may sue.

35 Thus, in Sydney Harbour Trust Commissioners v Wailes (1908) 5 CLR 879, the High Court proceeded on the basis that the proper plaintiff in ejectment was the representative of the Crown in whom the property was vested: see particularly, O’Connor J at 885 and Isaacs J at 887). The problem before the High Court in that case would not have arisen had the plaintiff’s submissions been the law.

36 In Rural Bank v Hayes (1951) 84 CLR 140, 153, Fullagar J in a separate judgment which agreed with and supplemented the judgment of the other Justices in a case concerning whether the Rural Bank had to comply with the Landlord and Tenant (Amendment) Act 1948, said:

“It cannot, to my mind, matter whether the statutory corporation “holds” the “real property”, which it has “leased” to the defendants, for and on behalf of the Government of NSW or for and on behalf of anybody else. It is the legal owner of the property leased. It, and it, alone, has the rights of a legal owner of that property. It alone could maintain an action for rent, or an action for breach of covenant, or exercise a right of re-entry. The Crown could maintain no such action, or exercise any such right.”

37 Mr Marshall says that that passage was ratio rather than dicta and means that Question A must be answered in his client’s favour.

38 In Electricity Commission of New South Wales v Australian United Press Ltd (1954) 55 SR (NSW) 118, 142, Brereton J, as a member of a Full Court after citing Sydney Harbour Trust v Wailes and the Rural Bank case, said, of an ejectment case in which a State instrumentality was the plaintiff landlord, “It is indeed difficult to see how the Crown, the alleged principal, could have featured as claimant in the present action.”

39 The decision of Windeyer J in Galibal Pty Ltd v Chief Commissioner of Land Tax (1994) 96 ATC 4143, 4144 reinforces this line of reasoning.

40 I should note that, clearly, in addition to the two functions specified by Mr Marshall, provisions such as the present operate to show that the body in question, if sued, has an indemnity from the Crown unless the relevant legislation otherwise specifies; see eg Saunders v Railway Commissioners for NSW (1920) 21 SR (NSW) 7. I merely note this for the sake of completeness. As the relevant legislation virtually excluded the indemnity, the proposition does not assist in the instant case.

41 Dr Birch SC and Mr Loofs say that, additionally, the provision has the effect of making the relevant body the agent of the Crown so that the Crown can, in the name of the State of NSW enforce the agent’s property rights.

42 This result, they say, may be reached by two interlocking methods: (i) by realizing that the Council was a Crown Agent; and (ii) by operation of s 30(1) of the Interpretation Act 1987 (NSW) the Crown is entitled to bring the proceedings.

43 It is at this stage necessary to set out the terms of the relevant portions of ss 3, 4 and 5 of the Crown Proceedings Act 1988:

“3. In this Act -
…
“Crown” means the Crown in the right of New South Wales, and includes:-
(a) the Government of New South Wales; and
(b) a Minister of the Crown in right of New South Wales; and
(c) a statutory corporation, or other body, representing the Crown in right of New South Wales;
…
Crown may sue
4. The Crown may bring civil proceedings under the title “State of New South Wales” against any person in any competent court.
Crown may be sued
5. (1) Any person, having or deeming himself, herself or itself to have any just claim or demand whatever (not being a claim or demand against a statutory corporation representing the Crown) may bring civil proceedings against the Crown under the title ‘State of New South Wales’ in any competent court.
(2) Civil proceedings against the Crown shall be commenced in the same way, and the proceedings and rights of the parties in the case shall as nearly as possible be the same, and judgment and costs shall follow or may be awarded on either side, and shall bear interest, as in an ordinary case between subject and subject.”

44 The Act is broadly modelled on the English Crown Proceedings Act 1947 though there are very material differences between the two pieces of legislation. As can be gleaned from Glanville Williams on Crown Proceedings (Stevens & Sons Ltd, London, 1948) pp 1-19, the prime thrust of this type of legislation was to abolish the time honoured methods of suing the Crown by Petition of Right etc and permit the Crown to be sued directly.

45 The Crown Proceedings Act was enacted after a thorough report of the NSW Law Reform Commission (LRC 24, 1976). The report recommended that where the Crown brings an action, it should do so as “The State of New South Wales” and that this reform would also operate to simplify matters where the Crown wished to file a cross-claim in litigation. This reform was adopted.

46 Traditionally, actions by the Crown were commenced in the name of the Attorney-General or other appropriate Minister unless legislation otherwise provided. A good example is Attorney-General v Smith (1892) 13 LR NSW (L) 293 where the Full Court held that it was proper for the Attorney-General for the Queen to sue by information for a statutory penalty. Another example is Attorney-General (NSW) v Perpetual Trustee Company Ltd (1952) 85 CLR 237 where Dixon J discusses the law at page 249.

47 After the enactment of the Crown Proceedings Act, it would appear that, ordinarily, a statutory authority may sue either in its own name or in the name of the State of New South Wales: State Authorities Superannuation Board v Commissioner of State Taxation (WA) (1996) 189 CLR 253, 281.

48 I also need to set out the provisions of s 79 of the Property, Stock and Business Agents Act 1941 immediately before 1 August 1997. It was as follows:

"79. On payment out of the fund of moneys in settlement in whole or in part of any claim under this Act, the Council shall be subrogated, to the extent of such payment, to all the rights and remedies of the claimant against the licensee, or the former licensee ... in relation to whom the claim arose, or any other person."

49 I should also note that the Fair Trading Legislation Amendment Act 1997 (No 82 of 1997) came into effect on a day to be appointed by proclamation (s 2). The date of commencement was 1 August 1997 - GG No 83 dated 25 July 1997 page 5680. Section 7 amended the Property Stock and Business Agents Act 1941 by omitting the whole of Part 6 Division 1 of the Property, Stock and Business Agents Act 1941 and replacing it with other provisions. (Part 6 Division 1 ran from section 65 to section 83 inclusive). Section 9 repealed the Property Services Council Act 1990. As the Crown concedes, there were no savings or transitional provisions which stated expressly what was to become of any rights or liabilities that had previously been vested in the Council.

50 Section 18 of the RESCA provides:

"Recovery of charges etc by Council

18. Any charge, fee or money due to the Council, or to the Crown in respect of the activities of the Council, may be recovered by the Council as a debt in a court of competent jurisdiction."

51 There appear to be no other sections in that Act dealing with the bringing of proceedings by the Council in its name.

52 The Crown’s argument may be summarized as follows:

(1) Upon payment out of the now non-existent fund the Property Services Council acquired a right being the subrogation right.
(2) That subrogation right was an accrued right for the purposes of s 30 of the Interpretation Act 1987: in particular sub-section (1)(c).
(3) The Property Services Council was, when it existed, a statutory body representing the Crown pursuant to s 4(2) of the Property Services Council Act 1990 now repealed.
(4) Given that the Property Services Council was a statutory body representing the Crown it was within the definition of "Crown" for the purposes of s 3 of the Crown Proceedings Act 1988. Hence the Crown could bring the proceedings under the title "State of New South Wales."

53 The plaintiff in paragraph A7 of the summons relies on s 30 of the Interpretation Act 1987 (NSW) as preserving the rights which had accrued to the Council prior to the repeal of Part 6 Division 1 of the Property, Stock and Business Agents Act 1941. Summons para C2 relies on the Crown Proceedings Act 1988 as entitling the plaintiff to bring the proceedings notwithstanding that the repeal of the Property Services Council Act meant that the Council has ceased to exist.

54 In developing this argument, Dr Birch SC and Mr Loofs submitted that it follows that when rights are conferred by s 79 of the Property Stock and Business Agents Act upon the Council they are conferred upon the Council as an agent of the Crown. As with any principal and agent relationship the rights are for the benefit of the principal, although it may be possible, depending upon the nature of the agency, for the agent to bring an action in its own name. Only in exceptional circumstances would the principal not be entitled at its option to commence proceedings for enforcement in its name.

55 Counsel put that the matter is put beyond doubt by the effect of s 30 of the Interpretation Act 1987. The rights conferred under s 79 were accrued not only by the Council but by its principal the Crown in the right of New South Wales. The only effect of the abolition of the Council was to remove the possibility that the rights could be enforced by the Council as agent of the Crown but as s 30 makes clear, the rights already accrued to the Crown were not affected.

56 Thus, it is put, by virtue of s 4 of the Crown Proceedings Act 1988, it follows that the Crown may bring these proceedings under the title “State of New South Wales”. This is so by virtue of the definition of “Crown” in s 3 that the rights were exercisable by the Crown's agent under the same title prior to the abolition of the Council. While s 3 may not itself be sufficient to vest such rights in the Crown separately from its statutory corporation, s 3 reflects the principle that where a statutory corporation represents the Crown in the right of New South Wales, the rights held by that corporation will be exercisable by the Crown in any event.

57 Mr Marshall submits that it is just impermissible to make the broad statement that the Council was a Crown agent and then to deduce the proposition, which is essential to the plaintiff’s case, that the Crown was the Council’s disclosed principal so that what was vested in the agent becomes the property of the principal.

58 Mr Marshall reinforces his submission with the passage at [4.5] in Seddon, Government Contracts 2nd ed (Federation Press, Sydney, 1999) the essence of which, omitting footnotes, is as follows:

“A phrase commonly used when discussing the question of Crown immunities is ‘Crown agent’. It is said that when a person or body is carrying out a Crown function it is acting as the Crown’s agent, or as a Crown agent, and that therefore it should benefit from any relevant Crown immunity. The use of this language can be misleading and confusion may arise from different meanings of the word ‘agent’ in private and public law. It is possible … for a body which is contracting on its own behalf, for example, a statutory corporation, to enjoy a Crown immunity. Agency, in its private law sense, which presupposes that the government is the principal, simply does not arise. The relevant inquiry is not whether the body is acting as an agent so much as whether the body should enjoy Crown immunity.”

59 The passage notes that the use of the term “Crown agent” by Hogg and Monahan “may lead to the erroneous conclusion that the true contracting party -the principal - is not the particular statutory body but the Crown in right of the relevant polity”. Seddon refers in a footnote to the fact that Menhennit J in Commonwealth v O’Donohue [1979] VR 441, 455-6 makes the distinction between the Commonwealth and its Departments of State and says that the latter are not to be regarded as agencies of the Commonwealth for the purposes of the proceedings before him.

60 Messrs Birch and Loofs submit that the suggestion by the defendants that the application of doctrines from the general law of agency are not apposite to the position of Crown agents is not correct. They say that the only express statement in support of the defendants' contention is that passage from Seddon.

61 They further submit that [4.5] of Seddon, properly understood, merely explains that the doctrine of agency or the term ‘agent' cannot be used to determine whether or not an entity is within the shield of the Crown. Indeed, that question is best viewed as a matter of statutory construction: Bropho v Western Australia (1990) 171 CLR 1. They put, however, that if Seddon intended by the final sentence of the passage quoted to suggest that where a public authority enters a contract as an agent of the Crown, no rights are conferred upon the Crown directly, then the statement is plainly wrong.

62 In support of this submission, they note that Hogg and Monahan observe (3rd ed p.341) that:

"Generally speaking, the case law assimilates a Crown agent to an individual Crown servant, and holds the Crown agent directly liable in those circumstances where a Crown servant would be personally liable. On this basis, a public corporation may be liable in tort or contract (or other head of liability) despite its status as an agent of the Crown."

63 They also rely on the observation of Hogg and Monahan at p 237 that the common law principles of agency apply wherever a Crown servant or Crown agent enters into a contract.

"If the agent contracts personally, as well as on behalf of the principal, then the agent is liable as well as the principal. There is no doubt that this rule would apply to an individual Crown servant who was sufficiently imprudent to bind himself or herself as well as the Crown to perform the terms of the Crown contract. However, there are no illustrative reported cases involving individual Crown servants. The rule of personal liability also applies to public bodies that are agents of the Crown, and there are several cases in which a Crown corporation or other public body has been held to be liable in contract in its own right, despite the Crown-agent status of the public body."

64 Plaintiff’s counsel submit that the cases discussed by Hogg and Monahan involving public authorities at p 345 are all instances where it was attempted to sue directly the public authority. The findings in those cases that the public authority was liable reflected applications of the agency principle already referred to, and do not support the conclusion that the principal would have been exculpated.

65 Seddon criticises any attempt to argue that a public authority entering into a contractual relationship can confer rights upon the Crown directly, but acknowledges there is at least dicta to the contrary in International Railway Limited v Nigara Parks Commission [1941] AC 328. Seddon commends the Queensland Full Court in Ellis v Commissioner of Main Roads (1991) 74 LGRA 96 for having avoided the confusion by finding the State of Queensland not vicariously responsible for the acts of the Commissioner of Main Roads or local council. The Court in Ellis merely rejected the proposition that a statutory authority will in all circumstances render the Crown itself liable in tort for wrongs committed by the statutory authority. The decision was decided on a pleading point. Hogg and Monahan argue at p 343 for the opposite conclusion although without reference to Ellis.

66 Plaintiff’s counsel say that it is important to recognise that the principle of agency does not result in property acquired by an agent simultaneously being held by the principal, at least so far as the legal title is concerned. The Sydney Harbour Trust Commissioners v Wailes decision; Rural Bank of New South Wales v Hayes decision and Galibal Pty Ltd v Chief Commissioner of Land Tax decision, all referred to in the first defendant's submissions, all merely make the point that where the agent is a separate entity from the Crown and the legal holder of property, the property is not at that time legally owned by the Crown. This is a different issue from whether the statutory authority is an agent of the Crown and whether rights it acquires can later be exercised by the Crown as principal.

67 Plaintiff’s counsel submit that the relevant legislation in this instance gives effect to the principles of agency described above, however, the issue of this case is capable of resolution solely by reference to the relevant statutory provisions. The combined operation of ss 3 and 4 of the Crown Proceedings Act have the effect that where a statutory corporation representing the Crown brings proceedings under the title "State of New South Wales", it brings them as the Crown in the right of New South Wales.

68 They say it must also be kept in mind that the right of subrogation being exercised in the present case is not a purely common law right acquired through contract or tort, but is a statutory right granted by s 79 of the Property Stock and Business Agents Act (PSBAA). The provision of s 4(2) of the RESCA deeming the Council a statutory body representing the Crown will therefore apply to s 79 of the PSBAA. Reading those two sections together it thus follows that in being subrogated to rights granted by s 79 of the PSBAA the Council is a statutory body representing the Crown in regard to those rights.

69 Counsel say that the submissions of the defendants have the wholly anomalous effect that at the time that the payments were made, the rights of subrogation were entitled to be exercised in the name of the State of New South Wales and that by virtue of s 4 of the CPA such an action would be by the Crown in the right of New South Wales. The term "State of New South Wales" denotes a body politic which has at all times been continuing, and yet, the defendants argue that on the date that the Council ceased to exist, the action then being brought in the name of the State of New South Wales denoting the Crown in the right of New South Wales ceased to be maintainable. Even if this might have otherwise been correct, the remedy in this instance, pursuant to s 79, has in any event been saved by the provisions contained in the final words of s 30(1) of the Interpretation Act 1987.

70 The Bank says that it is not necessary to traverse each of the steps in the plaintiff’s submissions. Even assuming that the subrogation right in s 79 was an accrued right and that the subrogation right could be enforced in the name of the Council (not the claimants) and therefore in the name of the State of New South Wales pursuant to the Crown Proceedings Act 1988, the real difficulty is that when these proceedings were commenced there was no statutory corporation or body representing the Crown in right of New South Wales within the meaning of "Crown" in the Crown Proceedings Act. So although the right may have accrued, it accrued in a body which was subsequently abolished. It is impossible at the date of commencement of these proceedings to identify any body who holds this accrued right (again assuming that the right was an accrued right under section 30(1)(c)).

71 Mr Marshall puts that there is a major gap in the standing of the Crown in these proceedings. This is a particular gap which NSW Parliamentary drafting almost invariably cures by one form or another of transitional provision. For example prior to the Property Services Council being created by the Property Services Council Act 1990 the functions of the Property Services Council were held by different boards and councils all of which were abolished by the Property Services Council Act 1990. There was, however, a transitional provision being clause 2 of schedule 2 of the savings and transitional provisions enacted by section 24 of the Act. Clause 2 provided:

"The Council is a continuation of, and the same legal entity as, the abolished Council and the abolished Board".

72 It is submitted that the effect of that transitional provision was that the rights and obligations of the board and council previously abolished were automatically the same rights and obligations as the Property Services Council because it was stated by Act of Parliament to be the same legal entity. This did not require a vesting order because it was the same legal entity by virtue of the Act.

73 The submission continues that in other situations where there is not a continuation of the same legal entity, transitional provisions are invariably enacted to vest rights and obligations in the new body. An example is in the transitional provisions for the Energy Services Corporations Act 1995. Section 15 of that Act provided that the Minister could specify staff, assets, rights and liabilities of an energy services corporation that has been dissolved by the Act be transferred to such other energy services corporation or to such other person or body acting on behalf of the Crown as is specified in the order; see also schedule 3 clause 3. A further example is the Energy Services Corporations Amendment (TransGrid Corporatisation) Act 1998 schedule 1 clause 13A.

74 The Property Services Council was abolished by the Fair Trading Legislation Amendment Act 1997. There was no transitional provision enacted at that time or subsequently which either:

(1) provided for some new body (eg the Director General) to be a continuation of the old Property Services Council; or
(2) provided for a vesting of rights and liabilities of the Property Services Council in the Director General or some other person or body representing the Crown.

75 Mr Marshall says that the plaintiff’s submission is really an attempt to have the words “the Council” appearing in s 79 read as “the Crown”. He says that if Parliament had intended that, it would have done so.

76 Mr Marshall took me through Part 6 of the Property Stock and Business Agents Act 1941 in the form it took prior to 1 August 1987. This analysis clearly showed that a deliberate scheme had been laid down by the legislation in which the Council alone was liable under the compensation scheme set up by the Act. Particularly significant is s 81(1) which provided that only monies from the compensation fund would be available to meet claims against the Council. The usual principle of Crown indemnity of a Crown agent was thus abrogated.

77 Mr Marshall also noted that the regime which replaced this scheme has a significantly different operation (see F41).

78 Mr Marshall thus puts that there is no body or person in whom any subrogation right (which may have accrued under s 79 before that section was repealed) could be held. The body which, ex hypothesi, held any subrogation right was abolished without a transfer of that right to someone else. This means that these proceedings commenced, relying upon s 4 of the Crown Proceedings Act and upon the definition of "Crown" in s 3, cannot be sustained.

79 The conclusion from these submissions must be that the Crown cannot ever bring proceedings and the summons cannot be reformulated or repleaded to cure this defect. For this reason the Bank says the summons should be dismissed, not merely struck out.

80 I should note the Casino’s submission on this point (H9) which was adopted by counsel for the Bank.

81 The Casino’s counsel put that, as a matter of statutory construction, it well may be that, before it was abolished, the Property Services Council was able to sue in the name of "The State of New South Wales", or in its own name (under the power conferred by s 50, Interpretation Act 1987), as it chose. However, now that the Property Services Council has been abolished, the Property Services Council cannot sue by the name of State of New South Wales - or, indeed, at all. When the State of New South Wales brings the present proceedings, it must be seeking to do so in some other right than as the Property Services Council. However, whatever manifestation of the State it is that is bringing the present proceedings, it does not have vested in it the rights of the Property Services Council.

82 There was considerable discussion during oral submissions as to the position of an agent under a contractual regime and the role of an agent of the Crown. There was also discussion as to whether it was appropriate to differentiate between the case where the agent held property in its own name and where no property was registered in an agent’s name. There was also discussion as to when an agent may sue where there is a disclosed principal.

83 I do not consider that there is anything to be gained by resolving the matters so discussed. In my view, the submissions of the defendants and the writing of Seddon correctly state the law. One must be careful whenever one is dealing with the concept of agency. As the High Court made clear in Petersen v Moloney (1951) 84 CLR 91, the tag “agent” is apt to mislead. One must always ask “Agent for what purpose and with what authority”? The term Crown agent does not usually denote someone with authority from the Crown to do something, but merely that that person has Crown immunity and Crown indemnity. This is consistent with the judgment of Menhennit J cited above, with the judgment of Dixon J in Bank of NSW v The Commonwealth (1948) 76 CLR 1, 358 and what was said by the South Australian Full Court in Commercial Oil Refiners Pty Ltd v South Australia (1974) 9 SASR 88, 93.

84 Thus, the answer to Question A is, “No.”

85 I consider that the Bank’s submissions as to the consequences of that answer are correct. However, as Dr Birch SC has asked for time to consider these reasons in case he may wish to seek some amendment to protect the interests whom he represents against the operation of the Limitation Act 1969, I will merely publish my reasons at this stage.

86 Strictly speaking, there is no necessity for me to proceed further. However, as there may be some amendment to the initiating process, there may be an appeal and because counsel have all requested it, I will proceed now to consider Question B and the notice of motion.

87 As to Question B, I believe the essential matter to consider is the meaning of the word “Subrogation” in s 79 of PSBAA. Does it mean “subrogation” in the sense in which one reads the words in the standard textbooks of equity or insurance law, or does it have a special meaning?

88 Mr Marshall puts that where one sees a word in a statute which has acquired a well perceived legal meaning then, at least prima facie, the legislature intended to employ that word with that meaning: see Reg v Slator (1881) 8 QBD 267, 272 and Attorney-General (NSW) v Brewery Employees Union of NSW (1908) 6 CLR 469, 531.

89 Mr Marshall took me through a series of insurance cases which illustrated the operation of principles of subrogation particularly the rule that the insurer sues in the name of the insured.

90 Mr Marshall puts that it is to the core of subrogation rights that actions must be brought in the names of the individual claimants.

91 He says that the position is well covered by authority. Absent an express statutory right to sue in its own name, the common law provides that a right of subrogation must be exercised in the name of the underlying claimant. The question arose expressly for determination in Esso Petroleum Co Limited v Hall Russell & Co Ltd [1989] 1 AC 643 (refer headnote at 645B-C, Lord Goff at 662-663 and Lord Jauncey of Tullichettle at 671-674B).

92 The authorities relied upon by Lords Goff and Jauncey are well established cases including earlier House of Lords authority and, in particular Simpson & Co v Thomson (1877) 3 App Cas 279.

93 In that case, two ships involved in a collision were owned by the same entity. The insurance underwriters paid out in respect of the “innocent” ship and then sought to claim against the owners of the “guilty” ship (ie the same person). They were held to be unable to do so. Lord Cairns said at page 284:

"But this right of action for damages they must assert, not in their own name but in the name of the person insured, and if the person insured be the person who has caused the damage, I am unable to see how the right can be asserted at all".

94 Lord Penzance at 290 and Lord Blackburn at 293 agreed that the action must be in the name of the ship owner, not of the underwriters.

95 The insurance texts are to the same effect, for example Derrington, The Law of Liability Insurance (Butterworths, Sydney, 1990) at p 754 footnote 777 and page 760 footnote 823 and also Sutton, Insurance Law in Australia, 3rd ed (Law Book Co, Sydney, 1999) p 1246, para 16:30.

96 Mr Marshall submits that not only is there persuasive authority at high level, this Court is probably bound by the decision in Simpson & Co v Thomson, at least the narrow basis of that case (which is all the defendants need to rely upon). That is because the Privy Council in a case on appeal from the Supreme Court of NSW, Candlewood Navigation Corporation Limited v Mitsui OSK Lines Limited [1986] 1 AC 1 applied it, see p 16D-E. I need not stay to discuss whether this is strictly speaking correct as there is nothing that has been said which would suggest that I should not follow Simpson & Co v Thomson.

97 Mr Marshall contrasts s 79 of the Property Stock and Business Agents Act 1941 with s 90A of the Legal Profession Act 1987 which by sub-section (4) provided the Law Society could exercise its rights in its own name or in the name of the claimant. There is no such analogous provision in the Property Stock and Business Agents Act 1941.

98 Mr Marshall says that the point is not just a technical one. The schedule to the summons shows that not all the claimants against the estate agent were paid and those that were paid were not necessarily paid in full.

99 Dr Birch SC and Mr Loofs say that all the submissions made about the meaning of subrogation under the general law by counsel for the Bank are indubitably correct. However, the real exercise is to see what the legislature meant by the word in s 79. They say that, properly construed, the section is not referring to subrogation in the strict sense.

100 Despite cases such as Reg v Slator, the cases do provide illustrations where the term “subrogation” is used in the sense of a transfer of rights from one person to another. King v Phoenix Assurance Co [1910] 2 KB 666 is one such case, the significance of which is enhanced by Farwell LJ’s comment that that is what subrogation really means.

101 I considered the present point at some length in Gill v Registrar-General (1991) 5 BPR 11587. After discussing the principal authorities, I reached the view that there was a strong presumption that when a statute employed the word “subrogation” it meant to deploy it in its technical sense. I see no reason to depart from what I there said. Nor do I consider that the present context is strong enough to reach a contrary view.

102 Thus, I uphold the Bank’s submissions and answer Question B, “No.”

103 I now pass to the Casino’s notice of motion. Again I note that it is really unnecessary to consider this motion in view of my answer to Question A. Indeed, the utility in doing so is even further diminished as, if the plaintiff reformulates its case, the whole or a substantial part of the argument that was presented in writing and at the hearing may become otiose.

104 However, by request, and as the probabilities are that the point is still a live one, I will consider the submissions made on the motion and rule on them.

105 The Casino argues that the restitution claim is unsustainable.

106 Mr Rayment QC, for the Casino, submitted that the type of restitution pleaded is a common law claim, analogous to the one which succeeded in Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548. In Lipkin Gorman the claim to recover was brought by the solicitors whose trust account had been depleted. The case was pleaded in restitution because the solicitors had legal title to the money in the trust account, even though they did not have the beneficial title. In the present case, the person who is the analogue of the solicitors in Lipkin Gorman is Fendross. Section 79 does not allow the Council to exercise the rights of Fendross against anyone. Rather, it allows the Council to exercise the rights of the beneficiaries. The rights of the beneficiaries are not in restitution, but (presumably) the right of a beneficial owner of property to trace. The summons does not even try to make the sort of allegations that would be needed for there to be a tracing claim.

107 However, the basal attack goes deeper than this.

108 All parties rely on the Lipkin Gorman case. All counsel submit it was rightly decided, though they emphasize different aspects of the decision.

109 Although they deal with fairly similar fact situations, there are actually, some very significant points of distinction between the Lipkin Gorman case and the present. One factor is that, in England, as a result of the Theft Act 1968, the act of Bojan passed no property to him, whereas in NSW, his offence was fraudulent misappropriation and property probably did pass. Another factor is that the gambling laws in NSW are very different as will appear from the following analysis. Further, at least by the time the Lipkin Gorman case reached the House of Lords, significant concessions had been made by the Casino which are not necessarily present in the instant case.

110 The facts of the Lipkin Gorman case are basically that a solicitor stole money from his firm. He used 561,014 pounds to stake his gambling at the Playboy Club. He won back 378,294 pounds. Of the money lost, it was conceded that 20,050 pounds was the solicitor’s own money. His partners thus sued for the balance of 154,695 pounds on the indebitatus count for money had and received.

111 The House of Lords unanimously upheld the partners’ claim. The House consisted of Lords Bridge, Templeman, Griffiths, Ackner and Goff. The leading judgments were delivered by Lords Templeman and Goff. The other three Law Lords agreed with both of the leading judgments. Although there was some suggestion in argument before me that there was some tension between the two leading judgments, this fact tends to show that this is not so.

112 The House accepted as a starting point the proposition from Clarke v Shee (1774) 1 Cowp 197; 98 ER 1041 that, if X steals money from Y and purports to give the money to Z, X can recover the money from Z on the indebitatus count for money had and received. The principle was applied by the High Court in Black v S Freedman & Co (1910) 12 CLR 105, 110.

113 The House basically reasoned that the solicitor stole the 154,695 pounds from the partners, gaming was illegal in Britain so that the losing bets must be considered as a gift made to the casino and these could be recovered by the partners under the principle in Clarke v Shee.

114 If their Lordships had stopped there, the ratio for the decision would be clear. Unfortunately, in some ways, both Lord Templeman and Lord Goff spent considerable time in going into detail and both cast their speeches in terms of unjust enrichment and restitution. In this respect, I share the concern of Smellie J in Equiticorp Industries Group Ltd v The Crown (No 47) [1996] 3 NZLR 586, 611, “While the principle of unjust enrichment was clearly recognised by the House of Lords in Lipkin Gorman …, it does not yet have the status of a cause of action … .”

115 I need to consider the case that the parties have presented and argued before me. Both sides have presented cases based on restitutionary principles. I will deal with that case. However, I need to make it clear that, in my view, the law in NSW has not yet reached the stage where this can be done. It seems to me that the courts still need to consider first whether the plaintiff’s claim is really an indebitatus count at law for money had and received, and, if it is not, whether it is an appropriate case for the intervention of a court of equity for relief by way of the imposition of a constructive trust or for equitable compensation because the facts show that the defendant’s conscience has been so affected that such order should be made.

116 I am fully conscious that there has been a great debate on this issue recently, particularly in England and that judges and academics have taken sides as the Restitutionary School or the Equity School. However, I consider that, after, Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, the law is as I have stated it.

117 The classic law is that money may be recovered after a voidable transaction by an action at law using the indebitatus count of money had and received.

118 The history of the indebitatus counts is fascinating, at least to legal historians. The count seems to have come to prominence as a result of the decision of an ancient form of the Court of Exchequer Chamber in Slade’s Case (1594) 4 Co Rep 92b; 76 ER 1074 where it was held that indebitatus assumpsit, a writ based on trespass, was a true alternative to the old actions of debt or covenant which were tried in the Common Pleas.

119 “Indebitatus Assumpsit” means “He who is indebted, promises”.

120 As the King’s Bench tried cases by jury and the Common Pleas by compurgation or wager of law, the count became very popular. As time progressed, the action was made even easier for plaintiffs because the court would imply a promise from the fact of indebtedness.

121 The next step was taken by Lord Mansfield in the third quarter of the 18th century where he held that the conscience of the thing mandated the obligation to repay; see eg Moses v Macferlan (1760) 2 Burr 1005; 97 ER 676.

122 As time went by, the situations which raised this mandate became standardized.

123 The remedy was never contractual, but, because the word “assumpsit” was used and some judges descended into terminology such as “implied contract” it came to be thought of a remedy quasi ex contractu or a matter of quasi contract.

124 The distinction between indebitatus counts and contractual counts was made starkly to appear by the High Court in its seminal judgment in Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221. However, not only did that judgment reveal the real nature of the indebitatus count, it also paved the way for consideration of this sort of issue in a restitutionary context.

125 The restitutionists have taken aboard most of the aspects of the indebitatus count, though, in their search for some unifying principle, there is an admixture of some equitable principles. They have also revived some of the ancient law. Thus, the defence of alteration of position has really been derived from Lord Mansfield’s thinking in Moses v Macferlan (see the Lipkin Gorman case at page 578 per Lord Goff).

126 There are also equitable remedies available in appropriate cases. The equitable remedies are imposed in cases where the defendant's conscience is affected.

127 There are basal differences between the two types of remedy. At common law there is no need for the plaintiff to have clean hands or to offer to do equity. There is no need for the defendant's conscience to be affected. If the situation is within the standard, the plaintiff succeeds.

128 In equity, the relevant act must be against the defendant's conscience. This means that one needs to assess the defendant's action against the standards laid down by equity over the centuries: see Muschinski v Dodds (1985) 160 CLR 583, 615-6 where Deane J says that it is not a case of each individual judge subjectively applying some idiosyncratic standard of fairness but rather an objective standard found in cases over the years.

129 That has led to the restitutionalists saying that the Court is still applying 14th century ethical principles of Catholicism but the answer to that is that adjustments were necessary to update the standard and each generation has done so. Thus today we have the standard for our age.

130 With common law, all one needs to say is whether the defendant has received the money in circumstances which mandate its return. One examines neither the conscience of the plaintiff nor the defendant. In equity, one looks at the conscience of the defendant, but one also looks at the conscience of the plaintiff to see whether there are clean hands and whether the plaintiff has offered to do equity. In unjust enrichment, similar concepts are applied but they are slightly different. First of all, one has to see whether there is an enrichment and then whether the enrichment is unjust. The standards that one applies are either the common law or equitable standard, though there is a tendency to mix the two in an attempt to find some unifying principle. However, the search for a unifying principle also runs into some real problems, as was exposed in Martin v Pont [1993] 3 NZLR 25 where the New Zealand Court of Appeal allowed a claim in money had and received even though they said there was no unjust enrichment.

131 Having said all this, let me go then back and analyse the judgments in the Lipkin Gorman case.

132 Mr Rayment QC says an analysis of the leading judgments is simple. There were two points in the case as revealed in Lord Goff's judgment at p 571. The two points were:

1. Did the Casino give valuable considerable for the money left with it in good faith; and

2. Was there an equitable defence of alteration of position or the like in all the circumstances of the case?

133 Mr Rayment QC says if one reads the judgments carefully one can see that Lord Templeman concentrated on the first point and Lord Goff on the second, so there is no tension between the judgments.

134 Mr Rayment QC then goes on to say that Lord Goff's judgment at p 577C to F "sinks the State of New South Wales". That is the passage in which his Lordship says that the analysis in England is that each time a bet is placed by a gambler the agreement is null and void; therefore there is really a gift by the gambler to the casino. The gambler himself may not be able to recover the money, but, if someone else is the true owner of the money and the person who has the title to the money, then the money is recoverable by that person.

135 I am not at all sure that that result follows as I hope will appear from what follows.

136 Further, Mr Rayment QC truly says that the facts of this case, compared with the facts in the Lipkin Gorman case and the law of New South Wales as opposed to the law in England are so different that one cannot just apply the Lipkin Gorman case to the present fact situation.

137 I might note that the point that in New South Wales, Bojan may never have had legal property in the property exchanged for the chips was not relied on by anybody during argument.

138 In comparing the situation between the Lipkin Gorman case and the present both as to fact and law, one starts with s 16 of the Gaming and Betting Act 1912 as in force at the relevant time. Essentially, the section says:

"All contracts or agreements, whether by parole or in writing, by way of gaming or wagering shall be null and void, and no suit shall be brought or maintained in any court of law or equity for recovering any sum of money or valuable thing alleged to be won upon any wager or which has been deposited in the hands of any person to abide the event on which any wager has been made: ..."

139 The section is very similar to the English Gaming Act 1845, s 18 which is set out at the foot of p 560 of Lord Templeman's judgment in the Lipkin Gorman case. It also should be noted that s 14 of the Gaming and Betting Act makes any money that is stolen or embezzled by certain persons able to be recovered.

140 Mr Rayment QC put in extensive submissions on this point:

"7. The following propositions summarise how s 16 Gaming and Betting Act operated
7.1. A wagering contract is one made between the two participants in the bet ( Carlill v Carbolic Smoke Ball Co [1892] 2 QB 484 at 490 per Hawkins J (affirmed [1893] 1 QB 256); Thacker v Hardy (1878) 4 QBD 685; Earl of Ellesmere v Wallace (1929) 2 Ch 1; Petranker v Brown [1984] 2 NSWLR 177 at 181A-182E per Samuels JA: 194E - 195D per Priestley JA). A gaming contract is a contract to take part in gaming ( Chitty on Contracts 28th edition 1999 para 40-013); 'gaming' is the playing of any game for money or money's worth ( Chitty on Contracts 28th ed para 40-013; Earl of Ellesmere v Wallace [1929] 2 Ch 1).
7.2. The effect of the contract being void was that 'the legality of wagering contracts was not affected, but the law was no longer available for their enforcement and the parties to them were left to pay wagers or not as their sense of honour might dictate' (per Rich J Delfina v Kenny (1946) 72 CLR 164 at 170).
7.3. Under the Gaming and Betting Act there were various types of contracts that were not themselves gaming or betting contracts which were rendered void. The prohibition in the first limb of s 16 is not on contracts of gaming and wagering, but contracts by way of gaming and wagering (per Manisty J Cohen v Kittell (1889) 22 QBD 680 at 683).
7.3.1. If A engages an agent to place bets for him, with the agent to take a commission on bets placed, and the agent fails to place the bets, A cannot sue the agent for damages ( Cohen v Kittell (1889) 22 QBD 680; Thomas Cheshire & Company v Vaughan Brothers & Company [1920] 3 KB 240).
7.3.2. If X has lost a bet, and makes a fresh agreement that he will pay if the winner does not report him as a defaulter, that fresh agreement is void under the second limb of the English s 18 ( Hill v William Hill (Parklan) Ltd [1949] AC 530).
7.3.3. If X has lost a bet, and X's father enters an agreement with the opposite party to the bet to pay the bet in consideration of the opposite party not reporting X as a defaulter, the agreement is unenforceable ( Coral v Kleyman [1951] 1 All ER 518).
8. Section 4 of the Casino Control Act 1992 (in the form it had in 1995 and 1996) provided
4 Gaming in licensed casino declared lawful
(1) Despite the provisions of any other Act or law, the conduct and playing of a game and the use of gaming equipment is lawful when the game is conducted and the gaming equipment is provided in a casino by or on behalf of the casino operator (that is, the holder of the licence for that casino under this Act).
(2) The Gaming and Betting Act 1912 and the Lotteries and Art Unions Act 1901 do not apply to the conduct and playing of a game and the use of gaming equipment when the game is conducted and the gaming equipment is provided in a casino by or on behalf of the casino operator, except to the extent (if any) that the regulations otherwise provide.
(3) This section does not operate to validate or render enforceable a contract relating to gaming that would, apart from this section, be invalid or unenforceable.
(4) Despite subsection (3), a contract to which that subsection refers and to which a casino operator is a party is enforceable against the casino operator.
(5) The conduct of operations in a casino in accordance with this Act and the conditions of the casino licence is not of itself a public or private nuisance.
9. Section 4 operates as follows:
9.1. Section 4(1) had the effect of removing all previous statutory controls over the playing of games and the use of gaming equipment, when the game was conducted by, and the gaming equipment provided by, the casino operator.
9.2. Section 4(2) had a wholesale exemption from the Gaming and Betting Act of the conduct and playing of a game in a licensed casino, where the game is conducted by the casino operator. If section 4 had stopped at s 4(2), the effect would have been that the invalidity of contracts imposed by s 16 Gaming and Betting Act would have been removed, and contracts of gaming with the casino operator would have been (as they were at common law) enforceable by both parties.
9.3. It is the combined effect of s 4(3) and 4(4) that there is 'one way enforceability' (against the casino operator) of contracts which relate to gaming, where those are contracts to which the casino operator is a party. However, there are 'contracts relating to gaming' which are not themselves contracts of gaming to which the casino operator is a party, which remain unenforceable. If A bets B $100 that A will have net winnings more than $100 at the casino on some particular day, the bet between A and B is a 'contract relating to gaming' that would, apart from Section 4 of the Casino Control Act , be invalid or unenforceable. It remains unenforceable after the enactment of Section 4. If A lends money to B for the express purpose of B using the money for gaming, that is a 'contract relating to gaming' that is (both before and after the enactment of section 4) then unenforceable.
9.4 On the proper construction of section 4, it is the effect of section 4(4) that when there is any contract relating to gaming, to which the casino operator is a party, that contract is enforceable against the casino operator. If the contract in question is the contract involved in playing a game, the promise of the casino operator to pay if the 'house' loses can be enforced against the casino operator. Unlike the situation in England, it is not open (as a matter of contract law) to the casino operator to say 'We are not paying winning bets today'. Thus, when a member of the public puts up money as a stake for such a game, consideration passes from the casino operator for that money.
10. Section 4 needs to be construed against the historical background that, when the Lotto Act 1979 was enacted, it did not expressly state that a player who submitted a form with the winning numbers had a legal right to receive the prize. It took a decision of the Court of Appeal ( Petranker v Brown [1984] 2 NSWLR 177) to make clear that a player whose numbers were drawn really did have a legal right to receive the prize. Section 4(4) makes clear that a player at the casino who has a winning bet has a legal right to be paid that bet.
11. It is consistent with the overall structure of the Act that a contract relating to gaming should be enforceable against the casino operator, but not by the casino operator. The purpose of the Act is to legalise gaming in one licensed casino in the State, on the basis that there are stringent controls on the activity of the operator concerning all aspects of its operations. Section 74 Casino Control Act prohibits the casino operator from extending credit in any way in connection with gaming in the casino, and requires all betting by members of the public to be done with (in effect) cash. Thus no question will ever arise of the casino operator needing to sue a member of the public for a losing bet.
12. Section 75 Casino Control Act (in the form it had in 1995 and the relevant part of 1996) says
75 Cheques and deposit accounts
(1) In this section:
‘ cheque ’ means a cheque (other than a traveller's cheque) that
(a) is drawn on a bank for a specific amount payable on demand; and
(b) is dated but not post-dated.
(2) A casino operator may establish for a person a deposit account to which is to be credited the amount of any deposit to the account comprising:
(a) money, or
(b) a cheque payable to the operator; or
(c) a traveller's cheque.
(3) A casino operator may issue to a person who establishes a deposit account and debit to the account chip purchase vouchers, money or a cheque made payable to the person, not exceeding in total value the amount standing to the credit of the account at the time of issue of the vouchers, money or cheque.
(4) A casino operator may, in exchange for a cheque payable to the operator or a traveller's cheque, issue to a person chip purchase vouchers of a value equivalent to the amount of the cheque or traveller's cheque.
(5) A cheque accepted by a casino operator may, be agreement with the operator, be redeemed in exchange for the equivalent in value to the amount of the cheque of any one or more of the following:
(a) money,
(b) a cheque payable to the operator,
(c) chip purchase vouchers,
(d) chips.
(6) It is a condition of a casino licence that the casino operator:
(a) must not accept a cheque from a person if a cheque previously accepted by the operator from the person has not been met on presentation (unless the amount of the cheque not met was subsequently paid to the operator), and
(b) must bank a cheque accepted by the operator under this section within 1 working day after it is accepted, and
(c) must not agree to the redemption of a cheque accepted by the operator for the purpose of avoiding compliance with paragraph (b).
(7) Section 16 of the Gaming and Betting Act 1912 does not apply to prevent an action being brought to recover money on a cheque or other instrument given in payment for chip purchase vouchers, or a credit to a deposit account, under this section.
Under the Gaming and Betting Act , section 16 had had the effect that a cheque paid to be the stake in gaming, or that was in payment of a gambling debt where the gambling had been done on credit, could not be sued on by a party to the gambling transaction. Section 75(7) Casino Control Act has the effect that a cheque cashed or given credit for under s 75 can be sued on by the casino. While the present is not a case where the Casino sues on a cheque, s 75(7) is consistent with the overall structure of the Act under which the Casino does give consideration when it enters contracts relating to gambling.
13. It follows that, even if the State is able to make out at the trial that the whole of the money which was the proceeds of the endorsed bank cheques was gambled at the casino and lost there, a restitution claim will fail, because the casino gave consideration for the gambling."

141 Essentially, then, the Casino Control Act 1992 binds the casino in law to pay winning bets but leaves intact the provisions of s 16 of the Gaming and Betting Act which does not permit any action by the casino to recover credit bets.

142 Mr Rayment QC says that the way in which the casino deals with that sort of problem is simply never to take bets on credit. However, the present case exposes the weakness in that situation, ie that the gambler may bet with money that he or she has stolen. That was the chink in the armour of the Playboy Club in the Lipkin Gorman matter and may be the chink in the armour in the present matter.

143 The concept of one way enforcement of contracts is an odd one but it is not unique; see eg the Hire Purchase Agreements Act (New South Wales) 1941 section 3(5). Very complex questions usually arise when the legislature endeavours to deal with a social problem in this particular way.

144 There is no need in the present judgment to go fully into those difficulties. Many of them are dealt with by the late Alan Bridge, later a judge of the Supreme Court of Northern Territory in his article in (1946) 19 ALJ 293 Statute of Frauds - Claims to Moneys paid Under Unenforceable Contracts. As Mr Bridge points out, the authorities are not easy to reconcile and in many situations a person who has paid money pursuant to a contract which is unenforceable because of the Statute of Frauds is unable to recover back that money, even though the contract is unenforceable.

145 As Dr Birch SC says, it is essential in this sort of case to analyse the concept of consideration. He made that submission in the context of a restitutionary case but the exact same point arises if one is dealing, as one needs to on the current pleadings, as one of money had and received. As I noted above, the principles are essentially the same.

146 Dr Birch refers to Lord Templeman's judgment, where he says (p 560):

"An innocent recipient of stolen money may not be enriched at all ..."

147 in certain circumstances. He then instances the case where an innocent car dealer, assuming there is such a thing in England, departed with a car for consideration before the money was stolen. Then his Lordship continues:

"But an innocent recipient of stolen money will be enriched if the recipient has not given full consideration."

The context is unjust enrichment and (p 559) his Lordship does refer to money had and received.

148 "Consideration" is a word that is used in a number of different senses and it is sometimes important to differentiate between the various senses. In Beaton v McDivitt (1985) 13 NSWLR 134 (appeal dismissed at p 162 of the same volume) I noted that the word "consideration" up until the end of the 18th century ordinarily referred to a fact situation where a person gave consideration by making someone else rely on the promise that he or she had made. Lord Mansfield endeavoured to convert that concept of consideration to meaning that promises should be enforced whenever there was a serious promise which should affect the conscience of the promisor; see eg Moses v Mcferlan (supra).

149 For the most part that point of view was overthrown by a judgment of the House of Lords led by Lord Denman in Eastwood v Kenyon (1840) 11 Ad & E 438; 113 ER 482. From then onwards the word "consideration" in contract law had a flavour of bargain. That means that the person seeking to enforce must show that he or she gave consideration by making a bargain in which he or she gave something in return for the promise.

150 Further, in cases of money had and received, full consideration or total consideration has had a slightly different connotation.

151 The difference between total failure of consideration and partial failure of consideration has been considered to be important at most stages of our law, though it is really a rather awkward concept that would best be forgotten for many reasons and, indeed, under the Sale of Goods Act 1923 it has been abrogated. Further, under the old pleading system, if one was putting on a plea which was a complete defence, that was one thing; if one could not put on a complete defence to the declaration then one had to put on a cross-claim. If one had received some value, then the matter was for a cross-claim, not a defence. In more modern days the same sort of idea has been expressed by the words "counter restitution" but essentially it is still the old pleading point.

152 The cases show that money can be recovered under an indebitatus count for money had and received where there is a total lack of consideration. The cases also show that there is a series of situations where the plaintiff has received some benefit from the transaction yet there is still a total failure of consideration. The search is to see whether the plaintiff received anything that was of the essence of the substance bargained for. Thus, in Rowland v Divall [1923] 2 KB 500 there was a total failure of consideration when a person had used a stolen car, which he thought he had bought outright, for a month or so. However, the English Court of Appeal held there was still a total failure of consideration because as the seller had no title there was no essential delivery of property in the car which was the essence of the contract. That case was followed by another judgment of the English Court of Appeal in Rover International Limited v Cannon Film Sales Limited [1989] 1 WLR 912. The High Court approved that line of authority in David Securities Pty Limited v Commonwealth Bank of Australia (1992) 175 CLR 353, 382.

153 Returning to the Lipkin Gorman case, there has been surprisingly little close analysis of it in the authorities since the judgments were delivered in 1991. There has been little discussion of it in Australia generally. Indeed, the decision of Foster AJ in Gersch v Atsas (1999) 10 BPR 18431 at 18444 is really the only serious consideration by a court in this State of which I am aware.

154 In Mason & Carter, Restitution Law in Australia (Butterworths, Sydney, 1995) at para 1635, the learned authors analyse the case but say that the real difficulty in the case lies in identifying what the defendant received with what was stolen from the plaintiff, given the principle about the currency of money. The learned authors point out that the claim in Lipkin Gorman was not by way of constructive trust, but was a common law action in money had and received.

155 There has been a recent consideration of the problem by the Court of Appeal in the Northern Territory: see Newham v Diamond Leisure Pty Limited [1994] NTSC 83, but that really does not take the matter much further.

156 Counsel put that the difference between their points of view was really one of viewing the matter from different aspects. One side said that when the gambler is making a bet, one must look at the matter immediately before the bet, the other immediately after the bet is decided.

157 With great respect, I do not really consider one can deal with the problem that simply. I consider that there are a whole host of matters which may have to be considered before one can say whether there is a liability or not on the casino. One must analyse a whole series of matters, such as who has the money or the property, or the cheque which is used to get the chips, what is the status of the chips? There is some evidence in this case in the affidavit of Mr Brown but it seems to me that one really needs to work out the effects of the matter in a trial rather than deal with it on a strike out application.

158 Particularly this is so when one looks at the passages at p 577, which were relied upon by Mr Rayment QC, and sees that the Casino in this case may very well have the very same problem as the Playboy Casino in the Lipkin Gorman case; ie the situation may be nicely analysed in its favour in the case where a gambler has used his or her own money but there is a gap in the argument where the money has been appropriated from a trust account.

159 The fact that if the case is to succeed it will have to be recast in any event is a further matter why I would be reluctant to dismiss the Casino from the claim at this stage.

160 Further, I have dealt with the matter as more or less an academic exercise as I would have done on the notice of motion had I not answered question A in the way I have.

161 Accordingly, I would decline to strike out the claim against the second defendant and would have dismissed the notice of motion had that been relevant.

162 So far as costs are concerned, it would seem to me that the plaintiff should pay the Bank's costs of this hearing. However, I think that as the Casino was only supporting the Bank on the main argument and lost on the notice of motion, the Crown and the Casino should each pay their own costs.

163 Further, I am merely noting that is my present impression and the matter can be argued in due course if anyone wants to do so. If no one does, that will be my order. As I noted earlier, I said that all I would do this morning would be to deliver these reasons and stand the matter over for a while so that they could be digested and the plaintiff, if thought appropriate, might submit some amended pleading, and that is what I will do.

164 The only order I make is I publish these reasons and stand the matter over for mention in my list at 9.50 am on 15 November 2001.

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Last Modified: 11/23/2001