Wong v Citibank Ltd

[2004] NSWCA 396

Reported Decision: (2004) ATPR 42-037
(2005) NSW ConvR 56-103

Court of Appeal

CITATION:	DANIEL WONG as Executor of the Estate of the Late CASEY WONG (aka KAI CHEE WONG) v. Citibank Limited (ACN 004 325 080) & Ors. DANIEL WONG as Executor of the Estate of the Late CASEY WONG (aka) KAI CHEE WONG v. ABN AMRO BANK MV (ABRN 079 478 612) [2004] NSWCA 396
HEARING DATE(S):	9-10 September 2004
JUDGMENT DATE:	3 November 2004
JUDGMENT OF:	Sheller JA at 1; Beazley JA at 2; Bryson JA at 27
DECISION:	Appeal dismissed with costs
CATCHWORDS:	TRADE PRACTICES - Fair Trading Act 1987 (NSW), s.42 - Trade Practices Act 1974 (Cth), s.52 - Contravention of either section does not require an intent to mislead or deceive - A corporation or individual that merely passes on false information supplied by another does not necessarily contravene s.42 or s.52 - Whether one who conveys a false representation makes that representation or acts as a mere conduit is a question of fact in each case - The question to be determined in each case is whether the conveyer of the false representation would be regarded by the relevant section of the public as adopting it - An employee acting within the scope of his or her employment may be liable for breach of s.42 of the Fair Trading Act and of s.52 of the Trade Practices Act.
LEGISLATION CITED:	Fair Trading Act 1987 (NSW) Trade Practices Act 1974 (Cth).
CASES CITED:	Amalgamated Television Services Pty. Limited v. Marsden [2002] NSWCA 419 Australian Competition and Consumer Commissioner v. McCaskey (2000) 104 FCR 8 Gardam v. George Wills & Co. Limited (1988) 82 ALR 415 John G. Glass Real Estate Pty. Limited v. Karawi Constructions Pty. Limited (1993) ATPR 41-249 Yorke v. Lucas (1985) 158 CLR 661
PARTIES :	CA 41159/2003 Daniel Wong As Executor of the Estate of the Late Casey Wong (Appellant) Citibank Limited (ACN 004 325 080) Respondent CA 41160/2003 Daniel Wong as Executor of the Estate of the Late Casey Wong (Appellant) ABN AMRO Bank MV (ABRN 079 478 612) (Respondent)
FILE NUMBER(S):	CA 41159/2003; 41160/2003
COUNSEL:	S. Bell (Appellant) M.A. Pembroke SC/T. Faulkner (Respondents)
SOLICITORS:	Ian Burnham Mitchell (Appellant) Mallesons Stephen Jaques (Respondents)

LOWER COURTJURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	ED 4660/99 ED 4662/99
LOWER COURT JUDICIAL OFFICER :	Hamilton J

CA 41159/03
CA 41160/03
ED 4660/99
ED 4662/99

SHELLER JA
BEAZLEY JA
BRYSON JA

3 November 2004

WONG (as executor estate late Casey Wong) v. CITIBANK LIMITED

(ACN 004 325 080)

WONG (as executor estate late Casey Wong) v. ABN AMRO BANK NV

(ABN 079 478 612)

HEADNOTE

The appellant was the general manager of an export company, Pacific Asia Merchandise Pty Limited (PAM). PAM had trade loan agreement facilities with the respondents in order to conduct its business. However, the underlying transactions that related to many of these facilities were false.

The respondents brought an action against the appellant for contravention of s.42 of the Fair Trading Act 1987 (NSW), s.52 of the Trade Practices Act 1974 (Cth) and in deceit. The trial judge upheld the respondents’ claim under the Fair Trading Act but rejected the other two claims.

The appellant appealed against the finding that he contravened s.42 of the Fair Trading Act. The respondents filed a cross-appeal against the findings of the trial judge in relation to their remaining claims. The Court heard argument on the appeal only.

(i) Contravention of s.42 of the Fair Trading Act 1987 (NSW) (and s.52 of the Trade Practices Act 1974 (Cth) ) does not require an intent to mislead or deceive. That does not mean, however, that a person or entity who does no more than pass on information provided by another engages in misleading or deceptive conduct if such information turns out to be false: Yorke v Lucas 158 CLR 661.

(ii) Whether a person who conveys a false representation makes that representation or acts as a mere conduit is a question of fact in each case. Where a representation is conveyed in circumstances in which the carrier would be regarded by the relevant section of the public as adopting it, then the carrier makes that representation: Gardam v George Wills & Co. Limited (1988) 82 ALR 415.

(iii) An employee acting within the scope of his or her employment who passes on false information may be liable for breach of s.42 of the Fair Trading Act (and, if it applies, s.52 of the Trade Practices Act ): Australian Competition and Consumer Commission v McCaskey (2000) 104 FCR 8.

(iv) In this case, the bank officers would not have considered the appellant to be a mere conduit. He was one of a limited number of people entitled to sign his company’s banking documents, those documents contained clear representations by the signatories and one of the appellant’s principal responsibilities as general manager was to provide instructions, information or clarification to the respondents.

(v) The respondents had established reliance on the appellant’s conduct given his role in the company and his history of dealings with the officers of the respondents.

(vi) It was not open to the appellant, on appeal, to assert that damages had not been a matter in issue during the proceedings and should have been referred to the Master or that he was denied natural justice in circumstances where he had cross-examined on the issue and failed to raise any matter on the question with the trial judge when damages issues were being discussed.

ORDERS

Appeal dismissed with costs.

CA 41159/03
CA 41160/03
ED 4660/99
ED 4662/99

SHELLER JA
BEAZLEY JA
BRYSON JA

3 November 2004

WONG (as executor estate late Casey Wong) v. CITIBANK LIMITED

(ACN 004 325 080)

WONG (as executor estate late Casey Wong) v. ABN AMRO BANK NV

(ABN 079 478 612)

Judgment

1 SHELLER JA: I agree with Beazley JA

2 BEAZLEY JA: Casey Wong, whom I shall call the appellant, was the general manager of Pacific Asia Merchandise Pty. Limited (PAM). The principal behind PAM was Chiu Wah Liu (known as Tina Liu). If PAM had a legitimate business it was the buying of goods for the purposes of export sale (the export transactions).

3 In order to facilitate its business operations, PAM negotiated trade loan facilities from the respondent merchant banks. A new loan facility was taken out in respect of each export transaction. The appellant signed the relevant documentation required by the respondents in respect of each loan.

4 The trial judge found that 54 transactions in respect of which loan facilities were obtained by PAM related to fictitious transactions. The total amount advanced by the respondents to PAM in respect of these facilities was approximately $96 million dollars. Of this amount, $61,545,749.78 was advanced by ABN AMRO and $34,615,682.14 was advanced by Citibank.

5 The respondents alleged that they were induced to enter into the loan facilities by the fraudulent or misleading and deceptive conduct of the appellant. Essentially, the respondents claimed that by signing the draw-down authorities and by providing invoices and bills of lading in respect of the fictitious transactions to the respondents, the appellant falsely represented that the transactions for which the loan facilities were provided were genuine transactions. The respondents each brought proceedings against the appellant claiming damages for breach of s.42 of the Fair Trading Act 1987 (NSW), for breach of s.52 of the Trade Practices Act 1974 (Cth) and in deceit. The proceedings were heard together. The appellant was too ill to give oral evidence in the proceedings and he was excused from attending for cross-examination on his affidavit. He has since died and the proceedings have been continued by his son as executor of the appellant’s estate.

6 The trial judge, Hamilton J, upheld the respondents’ claim under the Fair Trading Act. However, he rejected that the appellant had acted in contravention of s.52 of the Trade Practices Act and also rejected the claim in deceit.

7 The appellant has appealed against the finding that he breached s.42 of the Fair Trading Act. The respondents have filed a protective cross-appeal against the findings of the trial judge in rejecting the claims under the Trade Practices Act and in deceit. The Court heard argument on the appeal only, on the basis that if the appeal is successful the cross-appeal will need to be determined.

Issues on the appeal

8 Three issues were argued on the appeal. First, it was contended that the appellant had not engaged in conduct that was deceptive and misleading but had merely been a conduit for the passing on of information in respect of the transactions. Secondly, he contended that any damage suffered by the respondent was not causally related to any breach by him of s.42 of the Fair Trading Act. Thirdly, he claimed that the respondents were not entitled to an order for damages as damage had not been proved.

First Issue

9 The appellant did not challenge the findings of the trial judge that the transactions to which the loan facilities related were fictitious. However, the appellant denied that he knew this was the case. Rather, he said that his instructions came from Ms. Liu, who was mostly overseas. Upon receipt of instructions from Ms. Liu for each new transaction, the appellant prepared the necessary documentation, calculated the price, collated the documents such as the bills of lading and sales contracts necessary to obtain the loan facility and completed the drawdown authority. He said that the impugned transactions appeared to him to be “usual” transactions and he had no reason to be suspicious of them. He had no knowledge that the information was false and he received no moneys from them.

10 The appellant had considerable experience in export transactions. Prior to coming to Australia he worked in a number of banks in Singapore in the export/import division. He was, at some stage, in charge of several sections in the Trade Division of one of the banks. When he first came to Australia he worked for two different companies both of which were engaged in export trade. In one company he was the supervisor of the export operations of the business.

11 In addition to his extensive experience with export transactions, the evidence revealed that the appellant was the person at PAM with whom the respondents dealt for all purposes, including the restructuring of PAM’s credit facilities. He said that in relation to his work with PAM, he did not have contact with shipping companies, except for one occasion. However, he had a working knowledge of all transactions. He agreed that from time to time he would have to answer enquiries from the respondents about a particular transaction. He did not deny that he responded to such enquiries in terms such as “I will make enquiries of the purchaser” or “I will speak to the client” as was alleged in the affidavits of different officers of the respondents. He said however that on such occasions he would always speak to Ms. Liu to ascertain the necessary information.

12 In about January 1999, new arrangements were entered into with Citibank that minimised the paperwork involved in relation to the loan facilities. One of the conditions of the new arrangement was that a Drawdown Notice be provided in the following terms:

“
DRAWDOWN NOTICE
To: Citibank Limited
We refer to the Uncommitted Export Bills Discounted Facility (the ‘Facility’) extended by Citibank Limited (the ’Bank’) to Pacific Asia Merchandise International Pty. Ltd (the ‘Customer’).
We hereby give you irrevocable notice that we wish to draw advances under the above referenced Facility as follows:
[Details of amount and date of drawdown]
We attach copies of the invoice(s) drawn on the buyer showing the currency amount, terms of trade and payment terms together with a copy of the related Bill of Lading evidencing despatch of goods as per the invoice.
…
We certify that the buyer is credit insured through QBE Trade Indemnity Limited and confirm that the total amount owing to us by this buyer is within the approved credit limit of A$7,000,000.00 and that all terms and conditions of the credit insurance have been and will be complied with.
…


Authorised Signatory Authorised Signatory”

Mr. Wong always signed the Drawdown Notice. It appears that the accounts manager, Lisa Law, was the other usual signatory.

Section 42:
Liability for passing on information

13 The liability of a person for misleading or deceptive conduct in circumstances where that person passes information to another is not controversial. It was considered by the High Court in Yorke v. Lucas (1985) 158 CLR 661 where the Court said at p.666:

“It is, of course, established that contravention of [s.52] does not require an intent to mislead or deceive and even though a corporation acts honestly and reasonably, it may nonetheless engage in conduct that is misleading or deceptive or is likely to mislead or deceive. … That does not, however, mean that a corporation which purports to do no more than pass on information supplied by another must nevertheless be engaging in misleading or deceptive conduct if the information turns out to be false. If the circumstances are such as to make it apparent that the corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for what it is worth, we very much doubt that the corporation can properly be said to be itself engaging in conduct that is misleading or deceptive.”

14 Yorke v. Lucas was dealing with a claim under s.52 of the Trade Practices Act. Section 42 of the Fair Trading Act is in the same terms save that it relates to the conduct of an individual and not a corporation.

15 The principle is well established and it is not necessary to recite the myriad of cases in which the principle stated by the High Court in Yorke v. Lucas has been applied. It is sufficient to refer to Gardam v. George Wills & Co. Limited (1988) 82 ALR 415, where French J stated (at 427):

“The innocent carriage of a false representation from one person to another in circumstances where the carrier is and is seem to be a mere conduit, does not involve him in making that representation … When, however, a representation is conveyed in circumstances in which the carrier would be regarded by the relevant section of the public as adopting it, then he makes that representation. It will be a question of fact in each case …” (emphasis added)

16 In this case the appellant was an employee of PAM, which was the recipient of the fraudulently obtained money. The question that is raised for this Court’s consideration is whether the appellant breached s.42 when the conduct found to be misleading or deceptive was conduct performed in the course of the appellant’s employment and upon the instructions of his employer.

17 In the course of his reasons, the trial judge referred to John G. Glass Real Estate Pty. Limited v. Karawi Constructions Pty. Limited (1993) ATPR 41-249, where the Full Court held that an agent (in that case a real estate agent), who had transmitted a false misrepresentation to it by the owner, itself engaged in conduct that was misleading and deceptive. Here, his Honour held that it did not matter that the “agent” was an employee. In support of this proposition, he relied upon the decision of French J in Australian Competition and Consumer Commission v. McCaskey (2000) 104 FCR 8 where French J made injunctive orders against an employee who had engaged in the misleading and deceptive conduct.

18 Counsel for the appellant submitted that McCaskey was not binding on this Court and was of little persuasive authority in circumstances where the issue as to whether an employee could be liable under s.52 had not been fully argued. He submitted therefore that his Honour erred in placing reliance upon it. Although McCaskey is a first instance authority, French J is an experienced Federal Court judge who, in the Full Court system of that court, sits both at first instance and on appeal. His decision commands respect, and, if the appellant wishes this Court not to have regard to it, an attempt should have been made to establish that his Honour was wrong in some respect or that there was some reason why the case had no application or was irrelevant to the issue under consideration. No such attempt was made.

19 But in any event, his Honour’s acceptance that relief could be granted against an employee for breach, in that case of s.52 of the Trade Practices Act, is clearly correct. As a matter of law, an employee acts as agent for the employer. There is no basis in principle why different rules should apply to agents who are appointed in different circumstances. Provided that a party alleging the contravention is able to establish that the agent is liable within the principles stated in Yorke v. Lucas, then liability under the section attaches, notwithstanding that the agent in question is an employee acting within authority in the course of employment.

20 In this case, Hamilton J found that the representations were those of the appellant. In doing so, he approached the question, correctly, from the perspective of whether the relevant bank officers would have considered that the representation had been made by the appellant as opposed to being representations by PAM. He answered that question affirmatively. The matters which led him to the conclusion that the bank officers would not have considered the appellant to be merely “a cipher” were as follows. There were only a limited number of persons who were entitled to sign documents as between PAM and the respondents. The appellant was one of them and in the case of Citibank was a necessary signatory on the drawdown authorities. The drawndown authorities contained clear representations by the signatories. In his dealings with the respondents, the appellant always acted in the capacity of general manager or as the “authorised signatory”. In fact, one of the principal responsibilities of the appellant was to deal with each of the respondents and he was the person from whom, almost on all occasions, either respondent obtained instructions, information or clarification as required. As his Honour said “[the appellant’s] identity and the manner in which he routinely dealt with the bank officers was something that they relied on in their dealings with PAM”.

21 None of these findings is challenged. However, the appellant contends that properly understood, his relationship with the respondents was merely to pass on instructions from Ms. Liu. The question whether a person is merely a cipher or a conduit for information and does not adopt the information in a way that makes it that person’s own, is a question of fact. In this case, there was a substantial body of evidence to support a finding that the appellant himself made the representations. To the extent that there was evidence to the contrary, it was no more than the appellant’s assertions in his affidavit. Due to severe ill health, the appellant was not required to attend for cross-examination. Notwithstanding that the appellant’s non-attendance was understandable and excusable, his Honour was entitled to treat his evidence of little weight: see Amalgamated Television Services Pty. Limited v. Marsden [2002] NSWCA 419 and authorities reviewed therein at paras. [187]-[191]. Had the appellant been able to attend for cross-examination, he may have been able to explain the transactions which were impugned which raised significant questions that called for explanation. It is not known how the appellant would have explained these matters. But that does not advance his case. The evidence upon which the trial judge relied and was entitled to rely was such that it was open to him to find that the appellant had contravened s.42. Indeed, the evidence in that regard was probably overwhelming. Accordingly, the appellant’s first challenge to the trial judge’s decision must be rejected.

Second issue

22 The appellant next contended that even if the trial judge’s finding against him is upheld, there was no evidence that the respondents relied upon his conduct. The point, as I understood it, was simply this. There was no doubt that PAM had engaged in conduct which was misleading and deceptive. Counsel did not say so, but PAM’s conduct was also undoubtedly fraudulent. However, it was submitted that there was no evidence from the respondents that they had relied upon the appellant’s conduct as opposed to having relied upon PAM’s conduct. This submission cannot be made good. The very matters that led his Honour to conclude that the appellant had engaged in misleading and deceptive conduct were the same matters upon which the respondents relied in entering into the transactions.

Third issue

23 The last challenge related to the question of damages and to the manner in which the proceedings were conducted. Counsel for the appellant submitted that at the commencement of the hearing, the question was raised whether the trial judge, sitting in equity, would determine damages or whether the damages claim would be referred for inquiry after the determination on liability, as is the usual practice in an equity suit. The question arose again at the end of the hearing. In closing address, senior counsel for the respondents submitted to his Honour that the appropriate course was to refer damages to the Master. However, in his judgment, Hamilton J, after having found against the appellant on liability, directed the parties to bring in Short Minutes of Order in respect of the judgment amount.

24 Correspondence then passed between the parties in relation to the amount claimed and agreement was reached as to the relevant date for exchange rate purposes. Thereafter, Short Minutes of Order were drawn up by the respondents which reflected the amounts that had been the subject of the correspondence. At the time that the Short Minutes of Order were submitted to Hamilton J, counsel for the appellant informed his Honour that he neither consented to nor opposed the making of orders in the terms of the Short Minutes. He indicated that the exchange rate was agreed. Judgment was thereafter entered in the amounts specified in the Short Minutes.

25 At the time that counsel for the appellant indicated to the Court his client’s attitude to the Short Minutes, he did not advert to the statement of senior counsel for the respondents that damages should be stood over for inquiry by the Master. If he wished to rely upon that statement and contend that the question of damages was not part of the proceedings before his Honour, he should have said so. In my opinion, it is not open to the appellant now to claim that damages had not been a matter in issue during the proceedings. Nor is there any basis for finding that the appellant has in any way been denied natural justice. The documents relating to damages had been produced to the appellant during the course of the hearing and time had been allowed for inspection. The appellant’s counsel had also cross-examined on damages. It follows that this third challenge should also be rejected.

26 Accordingly, I propose that the appeal be dismissed with costs.

27 BRYSON JA: I agree with Beazley JA.

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Last Modified: 11/09/2004