\B j. THE COMMONWEALTH OF AUSTRALIA AQ) v JUDGMENT. RICH J This is an action by the Commonwealth of Australia aginst William Milne, Andrew Milne and Martin Luther Milne trading un- der the name of Milne Bros. The plaintiff's claim as endorsed on the writ is:- "for the sum of twenty-nine thousand six hundred and sixty-two pounds "eleven shillings and five pence (£29,662:11:5) being money payable by "the defendints to the plaintiff.for money received by the defendants "for the use of the plaintiff, particulars whereof are as follows:- "To amount paid by the plaintiff to the defendants for cer- "tain goods falsely and fraudulently represent ed by the ""defendints to have been aupplied by the defendants to the "Commonwealth Naval Dockyard, Cockatoo Islend, Sydney, in "the State of New South Wales between the first day of Nov- "ember in the year one thousand nine hundred ani seventeen, "and the first day of August one thousand nine hundred and "nineteen which s8id goods were not supplied by the defendant "to the said Dockyard", Be . No pleadings were filed in the action. By an inter locutory order made cn the 27th. July last the Chief justice directed that the issue (2) of payment of money to the defendant William Milne ani (b) of non-delivery of goods in respect of which such money is al- leged to have been paid be tried by a jury of four the form in which these issues are left to the jury to be settled by the yustice before whom the action is tried. At the trial before me I settled the issues as follows:- (1). Whether the sums mentioned in the particulars or any of them were paid by the pleintiff to the defendnt William Milne, (2). whether any part of such money was paid for goods not delivered to the On the 6th. day of trial connsel consented to the plaintiff. discharge of the jury and to the determination of the issued by me. No evidence was given on behalf of the defendants and thes counsel did not address me on the facts. I found that the sum of £29,662:11:5 were peid by the plaintiff to the #&fend@nt, William Milne, and that this sum was paid for goods not @ligwred to the plaintiff. I.entered juge ment against William Milne for this amount, with costs. 3. The question of the liability of the other defendants was then argued and I reserved judgment. The relevant facts from which this question emerges are shortly as fol- lows :- From November 1917 to August 1919 - the period covered by the payments mentioned - the Naval Dockyard at Sockatoo Island was en- gaged in building refitting and repairing ships. For these purpowes & variety of articles are required such as are supplied by engineers machinery and metal merchants. The defendants at this time were carry~ ing on in co-partnership such business, and were contractors to the Dock~ yard for the supply of such requisites 4s are used in the construction andi repair of ships. The course of business adépted at the relevant times by the dockyard authorities in connecticn with the supply 'of goods by contractors was as follows:- A written order for goods was gent to the firm signed by the stores officer. In due course these goods came to the Dockyard by lighter as a rule and were either accompanied by a contractor's invoice form in triplbcate, or that form followed very . 4, shortly sfterwards. The storeman give the lighterman a receipt for @ number of packages, the goods were taken into the receiving room and in the stores, where they were checked by the receiving storehouseman and the staff and the receiving storehouseman then signed the original and duplicate C.I. form. The triplicate C.I. faxm ia the form of receipt to the contractor and is signed only by the store officer, While in the possession of the receiving storehouseman the scods were examined by the ihapecting officer, whe signed the CI's as to quality. Next, the goods together with the C.I's were taken to the section of the store where they are stored away. The sectional stor houseman, after checking the goods and putting them into 'proper bins signed the original and duplicate C.I to the effect that the. goods men- tioned.hed been taken on charge. The goods remsined:'in the etore and the G15 an triplicate were sent to the stock ledger clerk and by him posted into the stock ledger. Thence they went to the store officer who signed all three. The triplicate was in form a receipt addressed to the contrector, to whom it wag returned, The duplicate Office, and the original was sent to the costing office in the Accounts Branch. Then the contractor renders his voucher in duplicate - & Commonwealth Gontingency Voucher in common form - for the goods which he had delivered, ices he prepareg himself, signs it as claimant and sends it to the dockyard. There it went first to the exaininémg branch for registration and thereafter was sent by the examiner to the Store officer in order that the Gertificate a as to correct delivery of the goods &c. might be given. At the Store the duplicate C.I. was attached to the voucher; the ledger clerk certified on the voucher that the goods enumerated thereon. had been received sna taken on thareey The documents then went to the Store Officer who affixed his certificate 'torte voucher as the "person incurring the expenditure". From the Store Officer the voucher was returned to the examiner of accounts, who marked it, back in his books and, with his staff, checked it arithmetically, 6. and gonerally aselnat the qiotutien for the gogda, the order, and the requia@ition; gaeing also that the rate and extensions were correct. Hla duty was alae to mark off in the offiee oopy of the rota of ordere full particulara of all acoounta so that no duplicate payment in reapect of thet order mignt be made . After examination and any necessary alterations on the arithmetical aide, the examiner and his officera inifialled the voucher as oert{fioate of the corr- detness of the caloulationa aa. and éhases sent it to the coats office where it yaa checked to see that kka the expenditure had been acoonted for under the various headings - the voucher and original G.I. were oompared and oheoked 1n ail partiquiars inoluding pastio- ulars of goods ordere.i end the amount paid. . This done, the coat- ing olerk #uxx certified on the duplicate copy of the voucher that. everything wae in order and sent the vouchers baok to the examiner, who, if there "SS several aloima by one fizn, Haxes out & summary in the form of what 4a known aa @ covering voucher and prepared the " i socount Sor the certificate of the cartifying officer and for final The #ub-vouchers, with the covering voucher or summary, werw then gent to the certifying officer who would personally sorut- inine them. His duty was to gaa that each step hed baen taken as aria the voucher, and that the initials of the officer aupporting & avoh atep apneared thereon. Providing everything was in order the account a9 certified wwii approves for paynant. thereupon drew the cheque. Towards the end of 1917 one of the defendants, William Milne, who it appeared usually represented the firm of Milne Bros. in its business with the Dockyard, discussed with one Blake, an officer of the Crown and Examiner df Accounts at the Island, the means whereby advantage could be taken of the methods employed there to defraud the Commonwealth. He learned from Blake that the stockybooks had been done away with ana C.I.e6 used in their place, end that thereby @ proper account of the stook could not te kept. Kone thereupon suggested that money might be made by adding to fbnuine C.I.5 and . quantities or Vouchers for goods actually supplied additiona]/ lines of goode which were not delivered. At that time the dockyard required an emormous amount of material form war purposes,and orders were given for very large quantities. In many cases, owing to the exigencies of war conditions, goods were delivered piecemeal, and thus many sep- wxrkx arate deliveries would be referable to the same Order Number. Blake lent his assistance, and the plan they followed was as follows De AM pight, oF #! otter times when the offices staff hac gehs, Blake woob to the ofvice of Milne Bros, and in Wiltian Milne's sresence 'pal pared the neveasary documenta. Firet he typed out 2 0.1. in triplicate and & voucher in duglisate to accord therewith showing the ordor number snd the prepar amount of gecds anphteds aupplied. q® & Yulo no extention of the cost was mada at that tima in the C,+. ond in many Gaties in the voughar tha axtention for the gomiune {ranssabion wag in oxteotly RAGO Ho ae KO andble & corruot exten= sion to be made whou tha amount of goods waa altered. Tne. voucher waa then signed by Tillis "Mline as claimant. Jhe sewuxenas docu- ments then went to the Islanf dn the unusl course of bucinegs, Blake next would appropriate the original C.I. from the costs office and the vouoher from the store. At that time they would berg the oortiticatos of the storea officer xo to the delivery of the good, the quasitity and the rate. the voucher also bore ct that tine the oertifioate ef the stores officer that the account trast oerrect ae 10. to "couputations, castings, tates of charge, and faithful perior— mance of services charged", though, by arrungumant at the qolanc all reaponsibility for the correctness of the extensions in the noney G&lum and for the additions was left to the examiner (Blake! aho ddd not handle the voucher until after the steres officer had aimed Lt. 1 in tock them back to Milnes office, ani in the l.ttera prosones elther inoressed the anount of the godds already shasn and certiffed, or adled net lines of goods, or both. In guse of the additions of neq lines « reference was always given order to @ genuine nunber.- The 'order booko covering the period during «i which these transxetionsa took placa together with oli the cuplicate vougiers and many of the original (.Is were dastroyod by plaka prior to the discovery of the frauds,-. The correct extonsious were kkem put in the money column und the voucher totalled, Blake then took tha documents back to the Island, replaced the ordsdnal C.I. dn the costa offiea and the voucher in the store. Thence the a2. latter came to him in the course of his GUty , wine dnitiadloa by fan, Oy one of hha avaietants endorsed "galoulation.s gerreot", enu pesaod on to the cose offices where 4% wee oheaked with the oriyinas ely ana by tha costa of flee paaaed ont tho qertifying offleer for poymant. In due course o covering vougher for « rmumber of those - . chaque abeyouohers waa prepared ot the Telend and the Bkamk os padd to TMALden Milne oho siyned the receipt on behalf ef the firm. It "TL customary at the Toland to pay contractors only once a month on Clet, wii puyment was usuclly made by oreated chee. Wiliien tiiine hewever represented to the paymaster that he wanted his money qukokly ani he wee paid more frequently. He represented algo that end iets v@vking on an over aad aoceunt which had deen excecied, "und that he would like his ohacques left open as he hed te pay wages and waa afraid to let the cheque go through the bank aa they vould net ollev him to day agednst ite On these reprasentations he tas padd by open cheque until, towards the end of the period of the Kaw 4, 12. a regulation was issued compelling payment of all accunts by crossed cheque to order. Three of theae latter chequss were handed to William Milne who paid them to his private amount. A certifiWed copy of Wills, Milne's account with the Commonwealth Bahk showed that it was not over drawn on any ocexsion during the relevant perioi, while examination of the firm's books and bank pasa bock showed the cheques for wages were invariably drawn on the firm'g account which was kept at the London Bank of Australia. When the cheques were opengg they were cashed acroaa the counter at the Commonwealth Bank, the amount for the genuine trans— action was then paid by William'Milne in oash to the credit of the firm! « account with the London Bank of Australia and the balance to hia own privete acount. In the case of crossed cheques they were paid to . « t William milne's private account, and supsequently the amount due for the genuine transactions was witdrawn and paid in cash into the partner— ship account, The firm's books disclosed 1p. full particulars of the genuine teanenotione- G4 nothing of the fraudulent Anuiechnw , In December 1920 the defendant William Milne was and Blake were charged &t the Central Criminal Court with conspiring together and with persons unknown to defraud the Commonwealth. Both were convicted, Milne being sentenced to two years imprisonment and Blakex to one year. On that occasion, as on this, Blake was called by the Crown and gave evidence againgt Milne. Of the cheques paid to William Milne in respect of claims by vouchers which are the subject of this action about £2000 repree— ented payment for goods actually delivered and £29,662-11-5 payment £uxxgemis fraudulently obtained for goods not delivered. re No evince was adduced by the plaintiff to prove that the defta. Andrew Milne and Martin Luther Milne were perties to or cognieant of thee frauds. I must therefore treat them as innocent parties . The clein a8 agiinet them is thst as pertnere they are, notwithstanding their innocené of the frauds, responsible by virtue of the partnership for the nanxgguem consequences of the wrong doing of the defen ant Willian yilne. vUoungel. for the defendntsa A. Milne and Martin Luther Milne adnitted that if the frauds had been comitted in the first seniing in of the contractor's notes and vouchess to the dockyard their clients would on the authority of Lloyd v Grace Smith and Co. 1913 A.C. 716 have been liable, They contend, however, that when the orime was comitted the defendant W. Milne ceased to be the agent of the firm and in support of this conten- tion cited Mintz v_ Silverton 36 TaLeR. 399. Under the N. S.W, Partner~ ship Act 1893 a partner is liable for the fraud of his co-partner. No doubt the co-partner in order to make the firm liable must have been acting in the ordinary course of business ef the firm. The question, therefore, is whether the defendnt William Milne was acting in the iN eee) ordinary course of the business of bag firm. The re ig no dispute that in welling goods to the dockyard and getting payment for them William Milne was acting for his firm in the ordinsry courze of hia' business. The distinction aought to be set up by the other defendnts is that al- tteugh William Milne was the agent of the firm for the purposs of put- ing in vouchers for payment in the first instance his work in that re- spect for the firm was completed once the voucher was lodged and that accordingly any conspiracy betweon William Milne and Blake to tamper with the vouchers in order to obtain over-peynent uaa so far ag the partner- ship was concerned to be regurded as the act of strangers to the part- nership. This contention seems to me not warranted by the facty, Wen Milne way not merely agent of the firm to put in the claims but aiso to get the claims paid. The fraudulent siaimz steps he took were taken for this purpose. I,therefore, hold that the efendnts ' contention cannot be supported on the facts. I would add that the endraement on the writ containg . GT DILG Ra Th hae PR AGE so to speak two counts - one for moncy = received and the other A for falac representations. The plaintiff's cleim can in my opinion, be (6 - supported on both counts. I give judgment for the amount claimed with Pp costs against all the defen d&ntg.