Tonkin Thompson & Assoc P/L & Anor v Mayr & Anor No. Scgrg-98-7 Judgment No. S6804
[1998] SASC 6804
•21 August 1998
TONKIN THOMPSON & ASSOC PTY LTD & ANOR
v MAYR & ANOR
[1998] SASC 6804
Full Court: Doyle CJ, Millhouse & Nyland JJ
DOYLE CJ
This is an appeal against a judgment of the District Court.
The plaintiff, Mr Mayr, claimed the repayment of $57,000 paid by him to the defendant Tonkin Thompson & Associates Pty Ltd. The defendant company carries on the practice of an accountant. I will refer to it as “the company”. The defendant Mr Tonkin is an accountant, and a director of the company. The money in question was paid by Mr Mayr to the company, in two instalments. It was paid into the company’s Trust Account. It was paid with a view to it being paid to another defendant Mr Peterson, against whom judgment has been entered by default. Mr Tonkin caused the company to pay the money to Mr Peterson, but Mr Mayr contends that that was done without authority to do so. The judge found for Mr Mayr on that basis. There were other bases upon which Mr Mayr claimed repayment of the money. Unfortunately, the judge did not deal with any of them, nor did he make any findings relevant to them.
Facts
The judge disposed of the case on the construction of an authority that Mr Mayr signed when he made the first payment to the company. What follows is drawn mainly from the evidence before the judge, and from the limited factual findings that the judge made.
Mr Mayr is a businessman. He flies aircraft, and has an interest in aircraft. The company conducts its accounting practice at Christies Beach, a southern suburb of Adelaide. Mr Peterson had an interest in aircraft also.
In about early 1994 Mr Mayr met Mr Peterson. Mr Mayr was inspecting a YAK52 aircraft, and he understood that Mr Peterson had obtained this aircraft, for its owner, in Russia. Mr Peterson told Mr Mayr that he would be travelling to Russia, and might be able to obtain a YAK52 for Mr Mayr.
Between January and May of 1994 there were a number of discussions between Mr Mayr and Mr Peterson. Mr Mayr had imported equipment for his business into Australia. He had an understanding of what was involved in importing goods into Australia. He had a working knowledge of letters of credit.
In these discussions, which related to the possibility of Mr Peterson locating a suitable aircraft in Russia, various matters were discussed. Mr Mayr and Mr Peterson were not able to fix a price. Obviously, that would depend on Mr Peterson’s ability to locate an aircraft and on its condition. They could only discuss estimated prices.
Mr Mayr knew that Mr Peterson would be looking for aircraft for a number of people. He knew that Mr Peterson was hoping to send a container of aircraft to Australia.
Mr Peterson told Mr Mayr that he was short of money. Mr Mayr accepts that he was told that Mr Peterson would incur “ground costs”. An informal written agreement between the two of them, to which I will refer shortly, provided for payment of a “deposit” of $12,000. It stated that this was to enable a “cash payment” to Russian authorities, to cover the cost of dismantling the aircraft, packaging and things like that. With reference to “ground costs”, when questioned about the first payment of $12,000 that Mr Mayr made, Mr Mayr was asked if he understood that the payment was for travel expenses. He said (T54):
“No, that was pretty vaguely handled. No, not really, but I would assume he meant the $12,000 would also pay some of his costs and possibly the other people who also contributed to it, would have been taken out of our funds and someone else’s, but he wasn’t particularly set, that is to purchase a ticket for you to travel to Russia.”
A little later, with reference to the same payment, he said (T54):
“I think it was mentioned that these were the expenses to cover all the expenses incurred to procure the aircraft, and this may well have included his travelling ticket and his hotel accommodation and the organisation in Russia.”
Apart from talk of a “deposit” of $12,000, Mr Mayr and Mr Peterson seem to have agreed on an estimate of $50,000 as the likely total cost of a suitable aircraft.
Mr Peterson did not disclose to Mr Mayr that he was an undischarged bankrupt. Mr Tonkin knew that he was. The trip to Russia was being undertaken with the consent of Mr Peterson’s Trustee in Bankruptcy. The Trustee understood that all expenses were to be met by Mr Peterson’s client, and that Mr Peterson would retain surplus funds after deducting the cost of acquiring whatever aircraft he did acquire. Mr Tonkin was aware of the arrangements between Mr Peterson and his Trustee.
On 18 May 1994 Mr Peterson sent a fax from the company’s office. Apparently, by arrangement with Mr Tonkin, he had limited use of the company’s office facilities. The fax set out a handwritten proposal for the purchase of a YAK52 aircraft in Russia. It provided for payment to be made in stages, including a deposit of $12,000. There does not appear to be any suggestion that Mr Tonkin ever saw this letter. The judge made no finding on the point. The letter provided that once the aircraft was disassembled, Mr Peterson would communicate identification numbers and the like, and then a further payment would be made to the company to enable a letter of credit to be opened, presumably by Mr Tonkin or by the company. The further payment would be $25,000. The letter envisaged a further payment of $8,000 “upon arrival”, which I take to mean upon arrival in Australia. Then there would be a “final balance”, which was stated at $5,000, but which would presumably depend upon the cost of the aircraft actually purchased. It is not clear whether these latter payments were to be made to the company or directly to Mr Peterson.
Clearly enough, the proposed arrangement was a fairly loose one, and would have to be adjusted according to the circumstances. Mr Mayr’s subsequent conduct indicates that the arrangement was acceptable to him.
On 6 June 1994, apparently as a result of a request by Mr Tonkin, or by someone in his office, Mr Mayr sent $12,000 by electronic transfer to the company. The next day he received a fax from Mr Tonkin, on the company letterhead. It read:
“We acknowledge receipt of your deposit of $12,000 into our Trust Account. As you are aware Mr Peterson requires those funds for all ground costs in securing your aircraft. Before we make a withdrawal to Mr Peterson we require your authority. Would you please therefore fax back as a matter of urgency your approval for us to transfer funds from our Trust Account to Mr Peterson. By return fax if possible.”
The next day Mr Mayr faxed back the signed authority. The cover sheet to the signed authority said:
“Please find herewith signed documents for funds to be made available to Mr Peterson.”
The authority said:
“I hereby authorise Tonkin Thompson and Associates Pty. Ltd. of 23 Gulfview Road, Christies Beach to pay any funds received by them into their Trust Account on my behalf and thereafter, at the request of Mr. Peterson transfer those funds all or in part to Mr Peterson to deal with as necessary in the procurement of aircraft as instructed by me.
G. Mayr
7/6/1994”
At this time, Mr Peterson was still in Australia. Over the next day or two Mr Tonkin drew cheques in favour of Mr Peterson, drawing against the deposit. One cheque was for $1,000, which Mr Tonkin said was to enable Mr Peterson to pay a telephone account, the account being for phone calls made to Russia. One cheque was for $6,500, “for searching around the Russian region for aircraft” (T163). One was for $2,000 “for his accommodation and living expenses whilst he was living in Russia” (T164). One was for $2,500, and was payable to a travel agent to pay for Mr Peterson’s airfare. Mr Peterson was due to leave Australia within a day or so of these payments.
Mr Mayr said in evidence that he was unaware of these payments having been made.
There were then some telephone conversations from Mr Peterson in Russia to Mr Mayr in Australia. In early July, Mr Peterson told Mr Mayr that he had found a YAK52, and that it was a good aircraft. He told Mr Mayr that it would cost him about $65,000 in all. Mr Mayr does not suggest that he objected to this.
The judge found that on 18 July, Mr Tonkin telephoned Mr Mayr, and told him that a further $45,000 was to be paid in to the company Trust Account. The fact that Mr Mayr paid $45,000, and not the originally agreed $25,000, confirms the loose nature of the agreement between Mr Mayr and Mr Peterson. Mr Mayr must have needed details of the account to which the money was to be transferred. By fax dated 19 July 1994, Mr Tonkin sent these details to Mr Mayr. The fax concluded:
“I will be transferring money when Keith [Peterson] confirms position.”
The judge made no finding about when the $45,000 was paid by Mr Mayr to the company. It appears that he did so on 19 July or 20 July.
Within a few days, Mr Tonkin transferred all of the money, plus $5,000 from another interested purchaser, to a bank account in Russia, to which Mr Peterson had access.
The aircraft were never delivered. When, quite some time later, Mr Mayr called for the return of his money, it emerged that all of the money had been paid to Mr Peterson. Mr Tonkin said that the initial authority signed by Mr Mayr authorised the making of both payments. There seems to be no prospect of recovering anything from Mr Peterson.
The judge decided that the signed authority did not authorise the making of either payment to Mr Peterson. He disposed of the case on that sole ground. He inclined to the view that the authority meant that
“...prior to any payment being made to the first defendant [Mr Peterson], it was incumbent on the second and third defendants [the company and Mr Tonkin] to ascertain from the plaintiff whether the request from the first defendant for payment met that requirement.”
The “requirement” referred to is that the payment was “necessary in the procurement of aircraft”.
There was no suggestion that Mr Tonkin had enquired from Mr Mayr whether the request for payment was required for the procurement of aircraft as instructed by Mr Mayr. The judge ordered the repayment of the full amount.
As I said earlier, the judge did not make a finding about whether Mr Tonkin was aware of the terms of the written arrangement between Mr Peterson and Mr Tonkin. My impression is that the judge accepted that he was not aware of it. However, it is clear that Mr Tonkin was aware that Mr Peterson was looking for an aircraft that Mr Mayr might acquire, and for aircraft for other persons, and that Mr Peterson was an undischarged bankrupt. Mr Tonkin said that he believed that Mr Peterson had disclosed his bankruptcy to those for whom he was acting.
Interpretation of authority
I am unable to agree with the interpretation placed on the authority by the judge.
In my opinion, the authority that Mr Mayr signed authorised the payment to Mr Peterson of the deposit of $12,000. It is necessary to consider the authority in its context. The signing of the authority was preceded by the fax, set out above, referring to Mr Peterson’s need for funds for “all ground costs”. In the light of the loose meaning of that term, there can be no doubt in my opinion that it embraced the costs of travelling to Russia and costs incurred in Russia. There was the reference to urgency, which would not make much sense if the money was to remain in the Trust Account until Mr Mayr gave a further authorisation. Mr Mayr’s covering fax speaks of making the funds available to Mr Peterson. The authority itself is not well expressed. However, in the setting in which it was given, in my opinion it is to be read as meaning that the money could be paid to Mr Peterson upon demand by him, as long as the purpose of the payment had an apparent relationship with the obtaining of aircraft in Russia. In my opinion the payments described by Mr Tonkin had the necessary relationship.
I therefore conclude that the making of the first payment to Mr Peterson was authorised by the authority that Mr Mayr signed. The signing of the authority authorised the making of the payment without further reference to Mr Mayr, and authorised payments for the purposes for which they were made.
The status of the second payment is a more difficult question. Considered in isolation, the authority that Mr Mayr signed is worded in a manner that makes it capable of application to the later payment of $45,000 by Mr Mayr to the company. However, having regard to the context in which it was signed and delivered, I consider that the authority is to be treated as applicable only to the first payment of $12,000. I consider that it is to be read as authorising withdrawals from the deposit of $12,000, and not as dealing with later amounts that might be paid by Mr Mayr. It was given with reference to the deposit of $12,000, and to the payment of ground costs. Its generality of expression is restricted by that context.
Do the concluding words of the fax of 19 July 1994 authorise the second payment that Mr Tonkin made? As to that, Mr Mayr said (T105):
“Well, what I understand here when he says he confirms the position, that Mr Peterson would make available all the information required on the aircraft packaging details, shipping details, loading and so on and he could issue the funds to him.”
His stance was, in effect, that he expected Mr Tonkin to release the funds only in the event of Mr Peterson confirming that a particular aircraft had been located, and was packed and ready for shipping. To some extent, Mr Mayr is clearly assuming a knowledge on the part of Mr Tonkin of the terms of the written arrangement embodied in the fax of 18 May 1984.
I consider that it was incumbent upon Mr Tonkin or the company to obtain authority to make the payment to Mr Peterson. Mr Tonkin understood that the money was held by the company pursuant to an arrangement between Mr Mayr and Mr Peterson, and that that arrangement was one under which Mr Peterson was attempting to locate an aircraft in Russia suitable for Mr Mayr to purchase. He knew that Mr Mayr was providing the money for that purpose. There was no basis upon which Mr Tonkin could reasonably consider that money received from Mr Mayr could simply be paid to Mr Peterson on demand. The approach taken to the payment of the first $12,000 is consistent with that. In fairness to Mr Tonkin, his role in the matter was far from clear. But, he had accepted the obligation that went with the receipt of the money into his Trust Account, namely, to apply it for Mr Peterson’s purposes but only with Mr Mayr’s approval. I do not consider that the making of the payment in response to the fax of 19 July 1994 could be considered as authorising payment out simply upon demand by Mr Peterson. It was Mr Tonkin’s obligation to clarify the position. Accordingly, it never having been suggested that there was any basis for the payment, other than the authority of 7 June, the payment was unauthorised.
It follows that, in my opinion, the appeal should succeed as to the amount of $12,000, subject to the other bases upon which Mr Mayr claimed repayment of the money. These matters were advanced on appeal by way of a notice of alternative contention.
Alternative contentions
The alternative contentions upon which the respondent seeks to support the judgment can be summarised as follows.
The first submission is that the company held the money as trustee for Mr Mayr, or pursuant to a fiduciary relationship. It is submitted that it follows that the company was under a duty, as trustee or as fiduciary, to inform Mr Mayr that Mr Peterson was an undischarged bankrupt. It did not do so. There being a breach of that duty, the company was liable to pay equitable compensation. It was irrelevant to enquire about the course of action that Mr Mayr would have taken if the relevant disclosure had been made.
The second submission is that the company’s failure to disclose that Mr Peterson was an undischarged bankrupt amounted to engaging in misleading and deceptive conduct for the purposes of the Trade Practices Act or of the Fair Trading Act. It is submitted that had Mr Mayr known that Mr Peterson was an undischarged bankrupt, he would not have paid the money to the company. In his evidence (T84-T85) Mr Mayr said that had he known that Mr Peterson was an undischarged bankrupt, he would not have made any payments to the company. It is submitted that the amount of the payments is recoverable as loss caused by the misleading and deceptive conduct of the company or of Mr Tonkin. Alternatively, it is argued that the non-disclosure of Mr Peterson’s status amounts to misrepresentation by silence.
The third submission is that the company and Mr Tonkin owed a duty of care to Mr Mayr, and the discharge of that duty required disclosure of Mr Peterson’s status.
Duty as trustee or as fiduciary
In my opinion there is no doubt that the company held the money as trustee. It paid the money into a Trust Account. It held the money for the purpose only of making a payment to Mr Peterson and, by necessary implication, repaying it to Mr Mayr if the payment did not occur. In that respect the case is closely analogous to Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567. In my opinion the money never became the beneficial property of the company or of Mr Tonkin. This conclusion is the inevitable result of an examination of the dealings between, and mutual intention of, Mr Mayr and the company: see Re Australian Elizabethan Theatre Trust (1991) 102 ALR 681 at 692-694 Gummow J.
But did the company hold the money on trust for Mr Mayr, pending payment to Mr Peterson? Or is the position that it held the money on trust for Mr Peterson, and would hold it on trust for Mr Mayr only if the primary purpose failed? What duties were imposed upon the company as a trustee? These are difficult questions. The resolution of them probably does not depend upon the making of factual findings.
I have read the examination-in-chief of Mr Mayr, and the cross-examination of Mr Tonkin. That evidence suggests that the dealings between Mr Mayr on the one hand and Mr Tonkin and the company on the other hand, were minimal. Indeed, I could find reference to nothing other than the faxes to which I have referred, and some telephone conversations about the mechanics of making payments to the company. I can find no indication of any conversation between Mr Mayr and Mr Tonkin that amounted to an assumption of responsibility on the part of the company to Mr Mayr, nor of any conduct on the part of the company consistent with such an assumption. The case appears to me to turn upon the consequences that flow from the bare fact of the company having received the money from Mr Mayr, knowing that it did so for the purpose of holding the money and making a payment to Mr Peterson in connection with a proposal by Mr Peterson to locate and obtain an aircraft for purchase by Mr Mayr.
What obligations were imposed upon the company, being obligations owed to Mr Mayr, by the receipt of money under those circumstances?
Even if the company was a trustee, a fiduciary for Mr Mayr from the outset, its primary obligation to him was to hold the money and to pay it as instructed by him. The company was under no obligation, in my opinion, to concern itself with the wisdom of the arrangements that Mr Mayr had made with Mr Peterson. Indeed, its knowledge of these arrangements was very sketchy. I consider that it was entitled and obliged to deal with the money as instructed. It did not have to ensure that Mr Mayr’s interests were protected, or that what he was doing was in his interest. The company was not a trustee of the usual sort. But, knowing that Mr Peterson was an undischarged bankrupt, was the company obliged to ensure that Mr Mayr knew this? In my opinion it was not. The company’s obligation was simply to hold the money and to deal with it as instructed. That was the nature of the trust. Neither Mr Tonkin nor the company did anything to indicate that a wider obligation was accepted, nor is there any event which makes it appropriate for the court to impose a wider obligation.
In short, I consider that the obligations owed by the company to Mr Mayr, as trustee or as fiduciary, were very limited. The company had no obligation, flowing from the receipt of the money and its agreement to hold the money, to ensure that Mr Mayr was properly informed about the transaction or about Mr Peterson, or to protect Mr Mayr’s interests.
It follows that the failure to inform Mr Mayr about Mr Peterson’s status was not a breach of duty.
Assuming that these issues were resolved in Mr Mayr’s favour there remains the issue of Mr Mayr’s evidence that he would not have made the payment to the company had he known that Mr Peterson was an undischarged bankrupt. I am far from being satisfied that, as was submitted, a finding of fact on that issue is irrelevant. In my opinion the case is clearly distinguishable from the situation considered by the High Court in Maguire v Makaronis (1996) 188 CLR 449. There, the court held that if a fiduciary, in breach of fiduciary duty, enters into a transaction with the person to whom the fiduciary is owed, the breach of duty could be remedied only by setting aside the transaction. An enquiry into what the person, to whom the duty was owed, would have done if certain information had been disclosed to him, was irrelevant. But as the High Court said in that case, when the claim is for an account of profits, as a personal remedy, or for compensation for that which the plaintiff has lost as a result of the breach of duty, (at 468):
“...there directly arises a need to specify criteria for a sufficient connection (or “causation”) between breach of duty and the profit derived, the loss sustained, or the asset held.”
In my opinion the present case appears to fall under that heading. The present case also appears to me to be distinguishable from the decision in Brickenden v London Loan and Savings Co [1934] 3 DLR 465. In Maguire v Makaronis the High Court did not have to deal with the reasoning in Brickenden. However, I note that Brickenden was a case in which it was a breach of fiduciary duty for the solicitor concerned to receive the relevant benefits, and that appears to me to be a distinguishing feature. I consider that Mr Mayr can succeed only if the court finds that he would not have authorised the payment had he known that Mr Peterson was an undischarged bankrupt. A finding on that depends upon an assessment of Mr Mayr’s credit, and this Court is not in a position to do that.
Because Mr Mayr’s submission fails at an earlier stage, it is not necessary to remit the matter to the trial judge to make findings on this point.
Misleading and deceptive conduct, silence by misrepresentation and duty of care
If the company is not under a duty of disclosure as a trustee for Mr Mayr, or as a fiduciary for him, in my opinion the other bases for the claim cannot succeed.
The company acted as accountant for Mr Peterson, and not for Mr Mayr. Nothing occurred to suggest that the company would do anything for Mr Mayr except deal with the money as instructed. At best, from Mr Mayr’s point of view, the company was performing the function of an intermediary or stakeholder. Once again, there are no factual findings on this, but my reading of Mr Mayr’s evidence does not reveal any suggestion by him that he regarded the company as acting for him, or as having assumed any obligation to him. I mean, of course, subject to the effect of the receipt of the payment.
The failure to disclose Mr Peterson’s status as an undischarged bankrupt could be misleading and deceptive conduct by the company if, in the circumstances, there was a reasonable expectation on the part of Mr Mayr that such a matter would have been disclosed to him, if it existed: see Software Integrators Pty Ltd v Roadrunner Couriers Pty Ltd (1997) 69 SASR 288. Once again, the only basis that I could find for such an obligation is the receipt of the payment.
I cannot identify a basis upon which Mr Mayr could reasonably have expected the company to disclose information about its client. To the extent that the company was a stakeholder, it seems to me that there is no reason to expect it to disclose to either party information about the other party. Much the same comments apply in relation to the submission that the company owed a duty of care to Mr Mayr which was discharged only by disclosure of any information available to it which was of potential relevance to the other party. The company did nothing to create or to increase the risk of loss being suffered by Mr Mayr. It played no part in Mr Mayr coming to an arrangement with Mr Peterson. Its role was a passive one: cf Brophy v NIAA Corporation Limited (1995) ATPR 41-399. The only duty of care imposed upon the company by the arrangements related to the due application of the moneys held.
I would prefer to reach conclusions on this matter in the light of definite findings of fact by the trial judge. But my own impression is that the company and Mr Tonkin came into the picture very much as the accountants of Mr Peterson, and as a means of resolving communication problems that would exist while Mr Peterson was in Russia. Mr Mayr said that before he received the fax from Mr Peterson, containing the written arrangement, Mr Peterson had said (T56):
“... he had to have someone here in Australia to deal with and it would too awkward with myself personally because I am not as easily available and contact with the people he has been dealing with, Tonkin Tompson.”
Later in his evidence, the following passage appears (T80):
“Q.... The sum of $45,000 was forwarded from your bank to Tonkin Tompson and Associates, was there any discussion either at the time or following that money being forwarded between you or Mr Tonkin or anybody in his office.
A... Discussion regards to what.
Q... To the basis of the payment or anything to that effect.
A... No, not that I can recall. He was just requiring the $45,000 and when he confirms the position I would assume he meant by that that all the details of aircraft will be available to him to issue that letter of credit.”
The facts relating to the part played by Mr Tonkin and by the company do not suggest to me that it was misleading and deceptive for the company and Mr Tonkin to fail to disclose information about the status of Mr Peterson. Nor do they suggest a duty of care in that respect.
In my opinion, this alternative basis for the claim cannot succeed. Nothing will be achieved by remitting the matter to the trial judge.
Conclusions
For those reasons, in my opinion, the appeal should be allowed. The judgment of the District Court should be set aside. For the judgment entered in the District Court there should be substituted a judgment against the company for $45,000 and the appropriate amount of interest. The basis upon which judgment was entered against Mr Tonkin was not explored upon appeal, but nor did counsel for the appellant direct any submissions to that point. I would wish to hear the parties upon the question of whether, if a judgment is entered in the District Court for the plaintiff, it should be against Mr Tonkin as well.
MILLHOUSE J
I agree.
NYLAND J
For the reasons expressed by the Chief Justice, I would allow the appeal, set aside the judgment entered in the District Court, and in lieu thereof enter judgment against the company in the sum of $45,000, together with interest.
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