COMBINED FORMWORK PTY LIMITED v HAMILTON SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL Hope AP, SAMUELS JA and CLARKE JA 28 June 1989 [1989] NSWCA 11 TROVER & DETINUE — conversion by taking bill of sale in circumstances amounting to denial of plaintiff's title — Spackman vy Foster [1883] 11 QBD 99 distinguished. Samuels JA. By an amended statement of claim the Liquidator of a company called Malfen and Saruman Pty Limited sought certain declarations and orders in respect of a quantity of chattels which were formwork and ancillary equipment, the property of the company or to which the company was entitled, or to immediate possession of which the company was entitled. The defendants, to whom I will turn in a little more detail in a moment, were two companies and two individuals who, it was asserted, had some connection with the chattels. In the event, Kearney J made an order for delivery up of the chattels, directed an enquiry into damages and made other declarations and orders which it is unnecessary to note. The facts have been dealt with very fully in the judgment under appeal and it is unnecessary to recapitulate them. The only appellant still in the field is a gentleman called Italiano Olivieri, whose participation, as the respondents allege, I will shortly describe in a moment. The critical facts may be stated in this way. In June 1985 Mr Olivieri, whom I will call the appellant, and a Mr Bruno Nesci, now dead, entered into an arrangement which involved their becoming directors of two companies; Combined Formwork Pty Limited which was the first defendant and Itsel Pty Limited which was the third defendant. The basis of the arrangement was that Mr Bruno Nesci, who had access to a quantity of formwork and ancillary equipment, should bring that into the enterprise which Mr Olivieri would fund. The mechanics chosen were that Itsel should hire the formwork to Combined Formwork which would then let it to builders for use on building sites in construction operations. The arrangement was well documented and it is helpful to refer briefly to part of the minutes of the meetings during which the agreement was recorded. It is common ground that the appellant signed these minutes and has thus accepted what they say as correct. The minutes of both Combined Formwork and Itsel of meetings of 25 June 1985, record that it was resolved that all equipment comprising building equipment and formwork equipment owned and under the control of Mr Nesci and associated companies be transferred to Itsel on the basis to which I have shortly referred. Accordingly, it is evident that in June 1985 Mr Olivieri was aware that Mr Nesci had at his command a quantity of building and formwork equipment which was not only owned or under his control, but owned or under the control of 'associated companies'. There are other documents which indicate that the equipment was fairly extensive. 2 UNREPORTED JUDGMENTS In order to secure the advances amounting to something of the order of $90,000, which Mr Olivieri subsequently made, he took a bill of sale at this time which was, however, never registered. The business commenced and, unfortunately, in January 1986, Mr Bruno Nesci died, and I think I can say, was replaced by Mr Anthony Nesci. I turn now to the original plaintiff, Malfen and Saruman. That company had had constructed for it a quantity of formwork and this it hired out. It went into liquidation in January 1985 and Mr W J Hamilton was appointed Liquidator. In circumstances which it is unnecessary to note, Mr Hamilton or those associated with him ascertained facts which suggested that a quantity of formwork which had been manufactured for Malfen and Saruman was in the possession of Combined Formwork and had been hired out by that company to various construction companies on building sites. The Liquidator then, on 5 February 1986, wrote to Mr Olivieri, amongst others, claiming that there was scaffolding and formwork which could possibly be identified as the property of Malfen and Saruman, and indicating where several hundred of the units were to be found, at a building site, where, it was said, they had been deposited on hire from Combined Formwork. The letter was written to Mr Olivieri as a director of Combined Formwork and asked for an explanation about the ownership of the formwork and how it was purchased from Malfen and Saruman, that is to say, on the assumptionwhich might or might not have been truly held by the author of the letter, that it might be that possession had passed in consequence of a valid sale. There was no answer made to that letter, but on 14 February 1986 Mr Olivieri instructed his solicitor to prepare a Bill of Sale over the formwork. That document was prepared and ultimately executed in early March and stamped and lodged later on in that same month. On 27 February 1986 a formal demand for delivery of the formwork was made upon Combined Formwork by the Liquidator and on 18 March 1986 Mr Olivieri's solicitors replied to that document. I should interpolate that the evidence as to whether and when the letter of 5 February was received by Mr Olivieri is inconclusive. By that I mean there is no express evidence which establishes receipt or identifies the date. However, I infer, there being no express evidence on the point at all, that the letter was delivered in the ordinary course of post despite evidence from Mr Olivieri which might tend to the contrary. There is no doubt that the formal demand was received because Mr Ollivieri's solicitors refer to it. In the letter which responds to it this is said: Our clients have no knowledge of the subject company and we are instructed that all the equipment which was used by our client is lease equipment and has nothing to do with your company. They are unable to understand the basis on which any entitlement flows to the company in liquidation. Under the circumstances they are certainly in no position and further have no intention of meeting your demand."""If I may pause there, the facts up to this point are capable of establishing the following propositions and of supporting the following inferences. It is plain that Mr Olivieri knew in June 1985 that Mr Nesci had brought to their joint enterprise a quantity of framework some of which he owned or controlled and some of which associated companies owned or controlled. Then Mr Olivieri, as was intended, advanced money to the operation upon the security of an enforceable bill of sale which, however, he took no steps to register; nor did he endeavour to obtain a further instrument when the time during which the original one might have been registered had expired. URJ COMBINED FORMWORK PTY LIMITED v HAMILTON (Hope AP) 3 A letter was written in early February about the formwork asserting that it "belongs to the company in liquidation'. I would have thought at that point that Mr Olivieri, knowing the history as he did, would at once have sought enlightenment and, since Mr Bruno Nesci was dead, that might well have been supplied by the author of the letter. However, Mr Olivieri did nothing, save to do what he might have done much earlier, and that is, in effect, to perfect the Bill of Sale. Then there is the demand to which I have referred, and an answer to it which is a terse denial; and, at the same time, as before, Mr Olivieri took no steps to enquire as to what might be the true position in respect of the materials claimed. In my view, at that point, there is evidence whicheither establishes, or sustains an inference to the effect, that this amounted to a denial of the Liquidator's title and thus to conversion. There followed other incidents of which two were relied upon as most important. First of all, there was the refusal of inspection of a building site made on behalf of the Liquidator to check the source of formwork there. I agree with the learned judge that the explanation given by Mr Olivieri in explanation of the steps taken is unconvincing. Finally, there is the meeting at which Mr Olivieri and Mr Nesci had sought to obtain the manufacture of equipment, for the purpose it is alleged of confusing identification at the trial, of the source of the formwork in contention. There is some question there as to whether Mr Olivieri was present throughout the critical conversation but, it is plain from his own evidence that the purpose of the visit to the company called Formquip was to obtain materials for use at the trial. In substance, therefore, I think that the respondents" argument upon this point is made out. The learned Judge's findings and his reasoning to those conclusions are set out, if I may respectfully say so, clearly in the judgment and I am persuaded that they are entirely correct. Kearney J concluded that Mr Olivieri had failed to make any enquiries of a fellow director who might have been assumed to know the truth, and had deliberately abstained from enquiry and had himself directly acted in attempted negation of the Liquidator's rights. With all ofthis I agree. I do not think it necessary to refer to the authorities which counsel quoted, except, briefly, to one of them, namely Spackman v Foster (1883) 11 QBD 99. That was put to us as authority for the proposition that the law will make an exception in favour of a pledgee or mortgagee, that is to say, it will except such a person from the consequences which would otherwise follow from accepting goods in circumstances which would amount to adverse possession. I would think that that principle is a narrow one. I do not think it can be said that in no circumstances will the act of taking a pledge amount to evidence of conversion. In the present case, as in most cases, it is necessary of course to look at acts and circumstances in their context and when there is a chain of events, as there is here, to examine not only each link but the whole of the connection. If that is done, then the conclusions of the learned judge are, in my judgment, clearly correct. I would therefore propose that the appeal be dismissed with costs. Hope AP. I agree. Clarke JA. I also agree. Hope AP. The orders of the Court are then that the appeal will be dismissed. The Court is of the opinion that no special order for costs will be made, and the appeal is dismissed with costs. UNREPORTED JUDGMENTS Appeal dismissed with costs. Counsel for the appellant: P MENZIES QC/D B McGOVERN Solicitors for the appellant: GALLUZZO and GOLOTTA Counsel for the respondent: B COLES Solicitors for the respondent: BARKER GOSLING