National Commercial Banking Corporation of Australia Ltd v Batty [1986] HCA 21

High Court of Australia Gibbs C.J. Wilson, Brennan, Deane and Dawson JJ. National Commercial Banking Corporation of Australia Ltd v Batty [1986] HCA 21

ORDER Appeal dismissed with costs.

Cur. adv. vult.

The following written judgments were delivered:—

1986, May 5 Gibbs C.J.

This is an appeal from a judgment of the Court of Appeal of the Supreme Court of New South Wales affirming a judgment of Yeldham J. The appellant, National Australia Bank Ltd., was the defendant in an action brought by Robert Bushby Pty. Ltd. to recover damages for the conversion of two cheques, the total amount of which was $29,690.61, or alternatively payment of that amount as money had and received. The Bank delivered a cross-claim against Anthony Alan Davis and Michael Ashton Batty (the present respondent), claiming an order indemnifying the Bank against any amount found to be payable by it to the plaintiff including interest and costs. Yeldham J. gave judgment for Robert Bushby Pty. Ltd. against the Bank in the sum of $52,796.61 (which included interest) and costs, and on the cross-claim gave judgment for Mr. Batty against the Bank. Mr. Davis had died shortly after the commencement of the proceedings and the cross-claim against him was stood over generally. The Bank now appeals against the judgment given in favour of Mr. Batty.

Robert Bushby Pty. Ltd. was a private company formed in 1969 to take over the interest of Mr. Robert Bushby in a general store at Boorowa, a country town in New South Wales. The governing directors of the company were Mr. Robert Bushby and his wife. Mr. Davis, who was a partner in A.A. Davis Herniman & Co., a firm of accountants which carried on business at Katoomba, was a friend of Mr. Bushby; he assisted in the formation of the company and later became its auditor. Mr. Batty was at that time employed by the firm of accountants as a clerk, and had been so employed since 1960. On 1 January 1975, after the retirement of Mr. Herniman from the firm, Mr. Batty became the partner of Mr. Davis, and the name of the firm became Davis Batty & Co. During January 1975 a current account for the firm was opened at the Katoomba Branch of the Bank and on 1 March 1975 an account under the name "Davis Batty & Co. Trust Account" was opened at that Branch. On 26 November 1975 Mr. Bushby died. Mr. Davis was named as one of the executors in his will. Soon after the death, Mrs Bushby, as the sole governing director of Robert Bushby Pty. Ltd., appointed Mr. Davis to be a director of that company. Mrs Bushby gave to Mr. Davis a key to a strongbox kept in a safe at the business premises and Mr. Davis took various documents from the box to his office at Katoomba. The documents included some personal papers of Mr. Bushby and, in addition, two sets of documents relating to loans made by the company to Esanda Ltd. ("Esanda") and Industrial Acceptance Corporation Ltd. ("I.A.C.") respectively. Mr. Davis secured the repayment of these loans — prematurely in the case of the I.A.C. loan. He did so, in the case of the Esanda loan, by making a request signed "For Robert Bushby Pty. Ltd. — A.A. Davis, Director" and, although the evidence is silent, it may be inferred that he obtained repayment from I.A.C. as the result of a similar request. In January 1976 he received from Esanda a bank cheque for $10,000 drawn in favour of "Robert Bushby Pty. Limited or Bearer" and crossed "Not Negotiable" and from I.A.C. a cheque for $19,690.61 drawn by that company in favour of "Robert Bushby Pty. Limited or order" and crossed "Not Negotiable Account Payee". Mr. Davis indorsed the cheque drawn by I.A.C., "Robert Bushby Pty. Ltd., A.A. Davis (Director)". On 21 January 1976 he deposited both cheques to the credit of the Davis Batty & Co. Trust Account at the Katoomba Branch of the Bank and the Bank collected the proceeds of the two cheques. Mr. Davis subsequently used the proceeds for his own purposes. He had no authority to obtain repayment of the loans or to receive the proceeds of the cheques. As an executor of Robert Bushby deceased, he had no right to the property of Robert Bushby Pty. Ltd., and as a director of the company he had no right to take it on himself to redeem the loans and receive the proceeds without the consent of the governing director, Mrs Bushby, who learned nothing of these happenings until long afterwards. It is plain that his conduct was fraudulent. The learned trial judge found that he was "quite satisfied that Mr. Batty had no knowledge whatever of any fraudulent conduct on the part of his partner and was in no way a beneficiary from what occurred". This finding cannot be challenged. Later in 1976, Mr. Batty discovered the irregularities in the trust account and the partnership was dissolved.