New South Wales Court of Appeal CITATION : Orbit Travel Services v Travel Compensation Fund [1999] NSWCA 63 FILE NUMBER(S) : CA 40239/98 HEARING DATE(S) : 30 June 1998 1 July 1998 JUDGMENT DATE : 26 March 1999 Orbit Travel Services Pty Ltd Bassilios Abdul-Karim PARTIES : Katia Abdul-Karim v Travel Compensation Fund Minister for Fair Trading JUDGMENT OF : Sheller JA; Powell JA; Sheppard AJA LOWER COURT JURISDICTION : Supreme Court - Equity Division LOWER COURT FILE NUMBER(S) : ED 3647/96 LOWER COURT JUDICIAL OFFICER : Hodgson CJ in Eq A - D Jackson QC; V Gray COUNSEL : 1R - N Francey 2R - C Needham A - Denes Ebner, Sydney SOLICITORS : 1R - Minter Ellison, Sydney 2R - The Crown Solicitor, Sydney CATCHWORDS : PRINCIPAL & AGENT - Authority of agent to receive money on behalf of principal - Liability of principal in circumstances of case for misapplication of moneys held by principal without knowledge that moneys were being misapplied. Evidence Act 1995 ACTS CITED : Travel Agents Act 1986 Fair Trading Act 1987 Trade Practices Act 1974 Lysaght Bros & Co Ltd v Falk (1905) 2 CLR 421 Barclay's Bank Ltd v Quistclose Investments Ltd [1970] AC 567 Hyde v Sullivan (1956) 56 SR (NSW) 113 CASES CITED: Hope v Bathurst City Council (1980) 144 CLR 1 Jones v Dunkel (1959) 101 CLR 298 Joyce v The Insurance Commissioner (1948) 77 CLR 39 Federal Commissioner of Taxation v Whitfords Beach Pty Ltd (1982) 150 CLR 355 Australian Health Insurance Association Ltd v Esso Australia Ltd (1993) 41 FCR 450 DECISION : Appeal dismissed with costs IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40239/98 ED 3647/96 SHELLER JA POWELL JA SHEPPARD AJA Friday, 26 March 1999 ORBIT TRAVEL SERVICES PTY LIMITED & Ors v TRAVEL COMPENSATION FUND & Anor HEADNOTE Orbit Travel Services Pty Limited (Orbit) was a licensed travel agent with offices in George Street Sydney and Double Bay. Its directors were Mr and Mrs Abdul-Karim. From 1984 to 1996 Mrs Vera Nemes was associated with Orbit and was noted as a member of its "selling staff" in the Traveltrade yearbooks during the relevant period. Mrs Nemes was not a licensed travel agent. Between March 1995 and May 1996, a number of people made payments in respect of travel and accommodation arrangements which they made with Orbit through Mrs Nemes. During this period, Mrs Nemes offered tickets for travel and sometimes accommodation at half their usual price. She was able to do this though the following practise. Mrs Nemes would quote ticket prices at half their real cost. She would then receive payment for this amount. Through Orbit she arranged for the relevant travel and accommodation to be booked. Orbit then issued the tickets at full cost. Mrs Nemes was able to pay Orbit for the full amount of the tickets, making up for the shortfall by applying money she had received from other customers in prepayment for travel which they intended to take later. Many of these customers paid in bank cheque or cash so that their payments were not readily identifiable. All dealings took place at either Mrs Nemes' home or at the home of the customer. Inevitably, Mrs Nemes was unable to procure, for all the persons from which she had taken money, either the travel arrangements for which they had paid or a refund. Mrs Nemes did not secure any financial benefit or advantage from this activity. Her conduct was explicable only by reference to her medical condition. This discount ticketing activity came to the attention of the Australian Federation of Travel Agents (AFTA) which had received complaints from eleven of its members. An initial investigation by Mr Dart, AFTA's chief executive, in April 1996, showed that Orbit had received and issued the relevant tickets at the full price. However, in a letter dated 10 April, Mr Dart wrote to Mr Abdul-Karim requesting him to investigate how Mrs Nemes could offer customers a 50 per cent discount on tickets. The scheme only came to light following an investigation into the accounting practises at Orbit conducted by the Travel Compensation Fund in May 1996. One hundred and twenty one people who had made payments for travel and accommodation arranged through Mrs Nemes and Orbit, which they had not received, made claims totalling $832433 for compensation from the Travel Compensation Fund (the Fund). The Fund is the statutory name for the trustees of the trust established to compensate persons who suffer pecuniary loss by reason of an act or omission by a person who carries on business as a travel agent in New South Wales. The Travel Agents Act 1986 relevantly provided: s11 Conditions of, and restrictions on, licence (1) …. (2) A licence is subject to: (a) a condition that the licensee shall, at all times during the currency of the licence, be a participant in the compensation scheme; …. s40 Compensation scheme trustees to have certain rights by subrogation and otherwise (1) In this section: "unlisted person" means a person (other than an exempted person or the holder of a licence) who carries on business as a travel agent under a name or names that is not included in a list in force under subsection (2). (2) …. (3) Where a payment is made to a claimant under the compensation scheme by reason of an act or omission by a person carrying on business as a travel agent, the compensation scheme trustees are subrogated to the rights of the claimant in relation to the act or omission. (4) Where the rights conferred by subsection (3) on the compensation scheme trustees are exercisable against a body corporate, those rights are enforceable jointly against the body corporate and the persons who were its directors at the time of the act or omission and severally against the body corporate and each of those directors. (5) Where it is proved that an act or omission by a body corporate occurred without the knowledge or consent of a director of the body corporate, rights are not enforceable as provided by subsection (4) against the director in relation to the act or omission. (6) Where an act or omission referred to in subsection (3) was the act or omission of a person who, at the time of the act or omission, was an unlisted person, any other person who, in the course of carrying on a business, provided the unlisted person with goods or services in relation to which the act or omission occurred shall, for the purposes of subsections (3), (4) and (5) but in relation only to the act or omission in so far as it involved those goods or services, be deemed to have, at the time of the act or omission, carried on business as a travel agent in partnership with the unlisted person. Proceedings were commenced by Orbit and Mr and Mrs Abdul-Karim in the Equity Division of the Supreme Court before Hodgson CJ in Eq, in which they sought an injunction restraining the Trustees of the Fund from making a call against a bank guarantee provided by the National Australia Bank. This guarantee was the most recent in a series of bank guarantees granted in order that Orbit could participate in the compensation scheme provided by the Travel Compensation Fund, pursuant to s11 of the Act. In a cross-claim by the Fund, declarations were sought relating to the liability of Orbit and Mr and Mrs Abdul-Karim to certain claimants and to the Fund under the general law, the Travel Agents Act, the Fair Trading Act 1987 and the Trade Practices Act 1974 (Cth). The issues relating to the Fair Trading Act and the Trade Practices Act were not considered by his Honour as the result of an order made by Windeyer J. The Minister for Fair Trading was joined as a defendant in the proceedings. His Honour dismissed Orbit's and Mr and Mrs Abdul-Karim's claim for an injunction and in the course of his judgment made the following findings: 1) Mrs Nemes had no actual or ostensible authority to bind Orbit by contract to the respective claimants in the terms in which she purported to make travel arrangements. 2) Mrs Nemes had actual authority from Orbit to receive money. 3) Orbit did in fact receive moneys paid by the claimants to Mrs Nemes and was therefore liable to account for that money. 4) Mrs Nemes carried on business as an unlicensed travel agent and Orbit provided goods or services in connection with Mrs Nemes' failure to account to the claimants. 5) Various acts and omissions by Orbit constituted acts or omissions by reason of which the claimants suffered pecuniary loss (clause 15.5 of the Fund Trust Deed) which the fund was liable to make good to the claimants and in relation to which the Fund was subrogated to the rights of the claimant in relation to such acts or omissions by Orbit, pursuant to s40(3) of the Travel Agents Act. 6) Mr and Mrs Abdul-Karim did not prove that they did not know or consent to the giving by Orbit of consideration or accounting to some person other than the person from whom the money was received and were therefore personally liable for the failure of Orbit to account to the claimants pursuant to s40(4) of the Travel Agents Act. Consequently his Honour made four declarations: 1) That Orbit had a liability at general law to certain claimants for amounts paid by them to Mrs Nemes in respect of which they had received no consideration or accounting. 2) That the claimants were beneficiaries within the meaning of the trust deed. 3) That if the Fund paid out the claimants, it would be subrogated to their rights against Orbit. 4) That such rights were enforceable by the Fund against Mr and Mrs Abdul-Karim and Mrs Nemes. Orbit and Mr and Mrs Abdul-Karim appealed against this decision in the Court of Appeal. All of his Honour's findings were challenged on appeal, bar those regarding actual and ostensible authority. Held: per Sheppard AJA, Sheller and Powell JJA agreeing: (1) An authority to receive money is generally an authority to receive money in particular circumstances or for particular purposes, however, Orbit, in the way it carried on its business, denied itself the opportunity of ascertaining the purposes for, or the circumstances under, which the money was obtained. Therefore, Orbit is liable, under the general law, to the persons whose money was paid to it who have not received any benefit from their payment or a proper accounting of it. (2) The trustees are subrogated to the rights of the various claimants who paid money but have not received any benefit from their payment or a proper accounting of it, pursuant to s40(3). The act or omission referred to in s40(3) was, in the circumstances of this case, the relevant act or omission of Orbit, not Mrs Nemes. The relevant act or omission of Orbit in this case was its failure to account for the moneys paid to it through the agency of Mrs Nemes. (3) The phrase "carrying on a business" has to be construed in its context within a statute and against the background of its purpose, that is, the mischief with which it was designed to deal. (4) In order to be carrying on a business as a travel agent for the purpose of s4 of the Travel Agents Act there must be a business activity and the activity must be one of those specified in the paragraphs of s4(1). It does not matter if the activities have been carried out irrationally, as to hold otherwise would run contrary to the intention of Parliament. Therefore, Mrs Nemes was carrying on a business as a travel agent for the purposes of s40(6) of the Travel Agents Act. (5) However, it was not necessary to decide the question of subrogation on the basis of s40(6), as such a right was established under s40(3). (6) Mr and Mrs Abdul-Karim are personally liable under s40(4), as this section provides that where a right conferred by s40(3) on the Trustees is exercisable against a body corporate, the right is jointly enforceable against the body corporate and the persons who were its directors at the time of the act or omission. Mr and Mrs Abdul-Karim cannot rely on s40(5), which provides that where it is proved that the act or omission occurred without the knowledge or consent of a director of a body corporate, the rights conferred on it by s40(4) are not enforceable against that director. The director(s) seeking to rely on this section bear the onus of proving that they had no knowledge or did not consent to the act or omission, and as Mr and Mrs Abdul-Karim did not give evidence and the evidence in relation to the company's affairs indicates otherwise, the onus of proof in s40(5) has not been discharged. per Powell JA: (7) His Honour was correct in finding that each of the claimants suffered a loss arising from a failure to account on the part of Orbit, which failure to account arose from an act or omission by Orbit. By reason of that failure the Fund trustees became liable pursuant to cl 15.1 of the trust deed to pay compensation to the claimants, and became entitled to the rights of the claimants against Orbit, pursuant to s40(3) of the Act. (8) If it were necessary to resort to the provisions of s40(1) and s40(6) of the Act, then Mrs Nemes ought to be regarded as having carried on business as a travel agent; Australian Health Insurance Association Ltd v Esso Australia Ltd (1993) 41 FCR 450 referred to. ORDER Appeal dismissed with costs IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40239/98 ED 3647/96 SHELLER JA POWELL JA SHEPPARD AJA Friday, 26 March 1999 ORBIT TRAVEL SERVICES PTY LIMITED & Ors v TRAVEL COMPENSATION FUND & Anor JUDGMENT 1 SHELLER JA: I agree with Sheppard AJA. 2 POWELL JA: I have read, in draft, the Judgment which has been prepared by Sheppard AJA, in which Judgment his Honour has set out the facts which gave rise to these proceedings and which have given rise to this appeal. 3 I agree with Sheppard AJA's conclusion that Hodgson CJ in Eq was correct in holding that each of the several claimants suffered loss arising from a failure to account on the part of Orbit, which failure to account arose from an oct or omission on the part of Orbit. By reason of that failure, the Fund trustees became liable pursuant to cl. 15.1 of the trust deed to pay compensation to each of the several claimants, and became entitled, pursuant to the provisions of s.40(3) of the Act, to enforce the rights of the claimants against Orbit and, pursuant to s.40(4) of the Act, in the absence of proof - and there was none - that they were unaware of that act or omission, against Mr. and Mrs. Abdul-Karim. 4 I also agree with Sheppard AJA's conclusion that if it were necessary, in order to support Hodgson CJ in Eq's Judgment, to have resort to the provisions of s.40(1), (6) of the Act, then Mrs. Nemes ought to be regarded as having carried on business as a travel agent (see, for example, Australian Health Insurance Association Limited v. Esso Australia Pty. Limited (1993) 116 ALR 253, 261 per Black CJ, 296-297 per Sheppard J). 5 I agree with the Orders proposed by Sheppard AJA. 6 SHEPPARD AJA: This is an appeal from a judgment of Hodgson CJ in Eq sitting in the Equity Division. The proceedings before him were proceedings brought by Orbit Travel Services Pty Limited ("Orbit") in which it sought an order restraining the Trustees of the Travel Compensation Fund ("the trustees" or "the Fund") from calling upon the National Australia Bank ("the bank") to make any payment under a bond in the sum of $173,500 given by the bank to the Fund in August 1995 in connection with any liability due to the Fund from Orbit. Orbit also sought various declarations concerning the activities of one Vera Nemes who was joined as a cross-defendant in the proceedings below. She is not a party to this appeal. Orbit's claim was resisted by the Fund and also by the Minister for Fair Trading ("the Minister") who was joined as a defendant in the proceedings below. The Fund and the Minister are the respondents to this appeal. In addition to Orbit, the appellants include Mr and Mrs Abdul-Karim who are its directors. 7 In the proceedings at first instance the Fund brought a cross-claim against Orbit, Mr and Mrs Abdul-Karim and Mrs Nemes seeking declarations relating to the liability of the cross-defendants to certain claimants and to the Fund under the general law and also under the Travel Agents Act 1986, the Fair Trading Act 1987 and the Trade Practices Act 1974 (Cwth). 8 As the result of an order made by Windeyer J on 4 April 1997, the issues arising under the Fair Trading Act and the Trade Practices Act were not considered by his Honour in the proceedings decided by him. Furthermore, he said that he was dealing only with the Fund's claims for certain of the declarations sought in the cross-claim. 9 His Honour dismissed Orbit's claim for an injunction and made four declarations. By the first of these he declared that Orbit had a liability at general law to the claimants in the schedule annexed to the judgment dated 24 March 1998 for so much of the amounts in the first schedule as was paid by them to Mrs Nemes in respect of which they had received no consideration or accounting. Two schedules are annexed to the judgment. The first of these is a schedule of the names of a number of persons each of whom had apparently dealt with Mrs Nemes. The schedule shows that various amounts were paid by those persons to Mrs Nemes mostly for air travel but sometimes for air travel and accommodation. It also shows the amounts of the various claims. The second schedule is a schedule of claims for sums other than the amounts of moneys paid to Mrs Nemes. This schedule shows a variety of matters. I do not refer to the detail of it. A number of persons listed in it apparently paid both for air tickets and also for other services such as car hire, tour vouchers and cruise tickets. The statements in the schedule suggest that it was usually the air travel which was not provided. In most cases the other items appear to have been accounted for. 10 By the second declaration his Honour declared that the claimants referred to in the first schedule were beneficiaries within the meaning of the trust deed (to the terms of which I shall come in a moment). By the third declaration his Honour declared that, if the Fund made payment of the amounts to those claimants, it would be subrogated to their rights against Orbit; and by the fourth declaration, that such rights were enforceable by the Fund against Mr and Mrs Abdul -Karim and Mrs Nemes. 11 His Honour dealt with costs and ordered that the determination of the quantum of the amounts paid by the claimants to Mrs Nemes in respect of which they had received no consideration or accounting be stood over generally with liberty to restore to the list on 48 hours' notice. 12 Before coming to the terms of the trust deed, it is necessary to refer briefly to some of the provisions of the Travel Agents Act. Part 2 provides for licences. Section 6 provides that a person shall not carry on business as a travel agent otherwise than in accordance with the authority conferred on that person by a travel agent's licence or carry on business as a travel agent in partnership with a person who is not the holder of such a licence. By s.7 the holder of a licence is not to transfer or lend, or attempt to transfer or lend, the licence to another person or allow another person to use the licence. Division 2 of Part 2 provides for the issue of licences. It is unnecessary to refer to the detail of the provisions about that matter except to mention s.11 which deals with the conditions of and the restrictions on licences. Subsections (1) and (2) of s.11 are as follows: "11(1) The Commissioner [for Consumer Affairs] may: (a) upon the granting of an application for a licence, and at any other time, impose conditions or restrictions subject to which the licence is to be held; and (b) upon application or of the Commissioner's own motion, at any time vary or revoke any of those conditions or restrictions or any other conditions or restrictions that the Commissioner may impose in relation to the holding of the licence. (2) A licence is subject to: (a) a condition that the licensee shall, at all times during the currency of the licence, be a participant in the compensation scheme; (b) a condition that each place at which the licensee carries on business as a travel agent shall at all times comply with such standards, and with such other requirements, as may be prescribed; (c) any prescribed conditions and restrictions; and (d) any conditions and restrictions imposed under subsection (1) or any other provision of this Act, of which written notice has been served on the licensee." 13 The compensation scheme referred to in s.11(2)(a) is identified in s.3 of the Act as the scheme prescribed under s.57. Also defined in s.3 is the expression "compensation scheme trustees" which means the trustees by whom the compensation scheme is administered. Power to make regulations is conferred on the Governor pursuant to s.57 of the Act. It is there provided that the regulations may prescribe a scheme for compensating persons who suffer a pecuniary loss by reason of an act or omission by a person who carries on or carried on business as a travel agent. They may also prescribe the scheme by reference to a schedule comprising a copy of the trust deed by which the scheme is established and, from time to time, amend that schedule to incorporate amendments of the trust deed of which the Commissioner is notified by the compensation scheme trustees. Regulation 20 of the Regulations made under the Act provides that, for the purposes of s.57(2)(a) of the Act, the compensation scheme for compensating persons who suffer a pecuniary loss by reason of an act or omission by a person who carries on, or carried on, business as a travel agent is the compensation scheme established by the trust deed made on 12 December 1986 by four persons who were the Ministers for Consumer Affairs in New South Wales, Victoria, South Australia and Western Australia. 14 The trust deed is a deed whereby those Ministers as settlors under the deed appointed the persons named in the deed to act as trustees of the trust to be created upon the terms set out in the deed in respect of a fund to be known as the Travel Compensation Fund (ie the Fund). The trustees were to be responsible for the administration of the scheme provided for in the deed with a view to the Fund becoming the fund referred to in an agreement known as the "Participation Agreement". 15 Clause 1 of the deed declared that the trust was to be established on the terms and conditions set out in the schedule to it. Trustees were appointed. The essential provisions of the trust are comprised in the 31 clauses of the schedule. By clause 2 the trust established by the deed is known as the "Travel Compensation Fund". The trustees hold the Fund on trust for the Crown in right of the States and for every person who entrusts money or other valuable consideration to another person who carries on business as a travel agent (or an employee or agent of the other person) in connection with travel arrangements or travel-related arrangements or both in a State if either that other person or any third or subsequent person who carries on business as a travel agent who in turn receives directly or indirectly through an employee or agent of the third or subsequent person all or part of that money or consideration other than as a principal fails to account for the relevant money or consideration whether due to an act or an omission of that person. 16 By clause 3, the purposes of the trust are to further the intention expressed by the settlors in the participation agreement to establish a co-operative scheme for the regulation of travel agents in Australia and for the protection of certain people who deal with those agents; to establish and provide for the operation of a fund in terms of and within the limits prescribed by the deed to compensate persons who have suffered or may suffer a pecuniary loss by reason of a failure to account in respect of travel arrangements or travel-related arrangements by a person who carries on, or carried on, business as a travel agent, and to make emergency payments for the benefit of persons who may suffer such a pecuniary loss; and to ensure that only those persons who have sufficient financial resources to enable them to carry on business as a travel agent are participants. 17 Clause 15.1 of the trust deed provides that, subject to the deed, the trustees shall pay compensation out of the Fund to a beneficiary who is a client and who has suffered or may suffer pecuniary loss arising directly from a failure to account for money or other valuable consideration by a participant where the failure to account arises from an act or omission by the participant or an employee or agent of the participant and the client is not protected against the loss by a policy of insurance. In their absolute discretion the trustees may pay compensation to a beneficiary in relation to any consequential pecuniary loss suffered by reason of a failure to account and pay compensation including compensation in relation to any consequential pecuniary loss suffered by reason of a failure to account to a person to whom they are not required to pay compensation under clause 15.1. Also to be noted is clause 18 which provides for the payment of emergency compensation. 18 It is next appropriate to refer to s.40 of the Travel Agents Act. It provides as follows: 40(1) In this section: "unlisted person" means a person (other than an exempted person or the holder of a licence) who carries on business as a travel agent under a name or names that is not included in a list in force under subsection (2). (2) The Commissioner shall as soon as practicable after the commencement of this section and from time to time thereafter, publish in the Gazette a list in which is specified: (a) the name or names under which each holder of a licence at the time of preparation of the list was authorised to carry on business as a travel agent; (b) the date on which the list comes into force, being a date that is not earlier than the date of publication of the list in the Gazette; and (c) the date on which the list ceases to be in force. (3) Where a payment is made to a claimant under the compensation scheme by reason of an act or omission by a person carrying on business as a travel agent, the compensation scheme trustees are subrogated to the rights of the claimant in relation to the act or omission. (4) Where the rights conferred by subsection (3) on the compensation scheme trustees are exerciseable against a body corporate, those rights are enforceable jointly against the body corporate and the persons who were its directors at the time of the act or omission and severally against the body corporate and each of those directors. (5) Where it is proved that an act or omission by a body corporate occurred without the knowledge or consent of a director of the body corporate, rights are not enforceable as provided by subsection (4) against the director in relation to the act or omission. (6) Where an act or omission referred to in subsection (3) was the act or omission of a person who, at the time of the act or omission, was an unlisted person, any other person who, in the course of carrying on a business, provided the unlisted person with goods or services in relation to which the act or omission occurred shall, for the purposes of subsections (3), (4) and (5) but in relation only to the act or omission in so far as it involved those goods or services, be deemed to have, at the time of the act or omission, carried on business as a travel agent in partnership with the unlisted person. (7) A person who, in the course of carrying on a business, provides an unlisted person with goods or services for disposal in a manner that would constitute the carrying on by the unlisted person of business as a travel agent shall be deemed to have aided, abetted, counselled and procured the carrying on by the unlisted person of business as a travel agent. (8) Subsection (6) does not have effect in relation to an act or omission that occurs in relation to goods or services, and subsection (7) does not have effect in relation to goods or services, that are provided at a time when there is no list in force under subsection (2)." 19 The expression "carries on business as a travel agent" in s.40(1) of the Act and the closely similar expressions used in s.40(3), s.40(6) and s.40(7) are defined in s.4. So far as relevant it is as follows: "4(1) For the purposes of this Act but subject to this section, a person carries on business as a travel agent if the person carries on a business (whether or not in the course of, or as incidental to, or in connection with, any other business) of: (a) selling tickets entitling another person to travel, or otherwise arranging for another person a right of passage, on a conveyance other than a prescribed conveyance; (b) selling to, or arranging or making available for, another person rights of passage to, and hotel or other accommodation at, one or more places: (i) which are within or outside New South Wales; or (ii) some of which are within, and others of which are outside, New South Wales; (c) purchasing for resale the right of passage on a conveyance other than a prescribed conveyance; or (d) carrying on an activity prescribed for the purposes of this paragraph, or if the person holds out or advertises that the person is willing to carry on any activity referred to in paragraph (a), (b), (c) or (d). …" 20 As his Honour said, when Orbit applied for participation in the compensation scheme, the Fund required it to take steps to meet its financial viability criteria. Orbit elected to take one of the alternatives suggested, namely the giving of a bank guarantee in the sum of $18,500. The guarantee was provided by Westpac on 23 January 1992. It provided that it could be applied by the Fund in such circumstances, for such purposes and in such manner as the Fund in its absolute discretion might determine. From time to time further guarantees were required and provided. Eventually all existing guarantees provided by Orbit were replaced by a bank guarantee dated 3 August 1995 given by the National Australia Bank according to which the bank was holding at the disposal of the Fund $173,500 in connection with any liability due to the Fund from Orbit. That is the guarantee which the trustees endeavoured to call up and which was the subject of the appellants' unsuccessful claim for an injunction. 21 His Honour said that between March 1995 and May 1996, it appeared that about 121 persons had made payments totalling $855,000 in respect of travel arrangements which they made with Mrs Nemes. These persons claimed losses totalling that amount through failure to account. During the period in question Mrs Nemes had an association with Orbit. His Honour said that the Traveltrade Year Book in various editions between 1986 and June 1996 recorded Mrs Nemes as a member of the Orbit "selling staff". In evidence was a service agreement made between Orbit and Mrs Nemes dated 8 May 1996. From time to time Orbit paid Mrs Nemes a commission. 22 The Fund contends that Orbit is liable for the alleged failure to account. It also contends that the 121 persons shown in schedule 1 to the judgment were entitled to payment of their losses under clause 15.1 of the trust deed or else were proper subjects of a discretionary payment under clause 15.2 thereof. The Fund contends that it is entitled to be indemnified in relation to such payments by Orbit. In October 1996 the Fund gave Orbit notice that it proposed to call up the guarantee given by the bank giving rise to these proceedings. 23 His Honour said that three issues had been debated before him. These were (1) whether Orbit was liable to account to the claimants under the general law; (2) whether the Fund was entitled under the Travel Agents Act and the compensation scheme to recover from Orbit the amount paid by the Fund to the various persons who had dealt with Mrs Nemes; and (3) whether Mr and Mrs Abdul-Karim had any personal liability pursuant to s.40(4) of the Travel Agents Act. Broadly speaking those are the issues to be determined on this appeal. The Facts: 24 Before coming to the submissions of the parties and dealing with the various matters which arise for decision in the appeal, it is necessary to make some more detailed reference to the facts of the matter. His Honour said that on 5 September 1997 he told the parties that he would make an order under s.68(3) of the Evidence Act 1995 to the effect that evidence of certain matters could be given by statements by the 121 claimants. His Honour set out the gist of his order at pp 5-6 of his judgment. I do not refer to the entirety of it, but it provided that the claimants might establish the following amongst other matters by statements signed by them and provided to the parties: (a) The claimants entrusted money to Mrs Nemes. (b) The money was in the amount listed in schedule 1 to which reference has been made. (c) The money was entrusted for the purchase of the travel arrangements or travel-related arrangements listed in the appropriate columns of the schedule. (d) The claimants did not receive the travel except where otherwise noted in schedule 2. In other words, the claimants received no benefit for the moneys which they provided to Mrs Nemes except insofar as schedule 2 suggests otherwise. (e) Neither Mrs Nemes nor Orbit supplied the travel except as noted in schedule 2. (f) Neither Mrs Nemes nor Orbit had accounted to the claimants for their money. (g) The claimants had lodged claims with the Fund. 25 His Honour's order was made subject to the condition that Orbit be permitted to cross-examine any of the claimants. Nevertheless, the precise quantum of any recovery by the trust was left to a separate hearing. It was hoped that cross-examination would not be required in the initial hearing on liability. However, a number of the claimants were cross-examined over a period of some two days. 26 The more detailed account of the facts of the matter which I am about to give is largely taken from his Honour's judgment. His Honour began his discussion of the evidence by reference to editions of the Traveltrade Year Book which is published each January and July. It lists most travel agents in Australia. The July 1984 issue showed that Orbit had four "selling staff" including Mr Abdul-Karim who was also described as an associate director. Additionally, it had sixteen sales representatives including Mrs Nemes. The same position was disclosed in the issues of the publication for January and July 1985. When the January 1986 issue was published it was revealed that there were 26 selling staff including both Mr Abdul-Karim and Mrs Nemes. The position remained the same in the publications that were issued for the years 1986, 1987, 1988, 1989, 1990, 1991 and 1992. The issue for January 1993 showed a head office and a new city address and branches at the previous city address and at Double Bay. Mr Abdul-Karim was described as managing director and Mrs Abdul-Karim as a director. Under the heading "Office Listing" there were thirteen "selling staff" including Mr and Mrs Abdul-Karim and Mrs Nemes. The issues for July 1993, 1994 and 1995 and the issue for January 1996 were in similar terms. 27 His Honour then referred to the evidence of Ms Stamoulos who said that she was employed in the Double Bay office of Orbit from 1990 to May 1995. Between late 1994 and May 1995 she saw Mrs Nemes come to the office sporadically, sometimes about twice a week and sometimes only once a month. On each occasion she spoke to Anna Karim, who is to be distinguished from Mrs Abdul-Karim, and who was noted in some of the later publications to which I have referred as an associate director. 28 Nine witnesses who gave evidence before his Honour spoke of dealings with Mrs Nemes which occurred between May 1994 and May 1996. These people were claimants whose names appear in the schedule earlier referred to. 29 His Honour found that between 1 July 1995 and May 1996, Orbit provided travel arrangements through Mrs Nemes to the value of approximately $1.47 million. It also issued receipts in respect of payments totalling $1.47 million. These comprised 165 receipts in the name of individual travellers and three in the name of Mrs Nemes. His Honour said that it seemed clear that over a period of a year or more, Mrs Nemes was offering to provide travel arrangements at about half price. He said that it was common ground that he could infer that the persons to whom the $1.47 million worth of travel arrangements were provided only paid about half that amount for those arrangements. The other half of the amounts paid came from a sum in excess of $800,000 paid by the claimants in these proceedings (ie those named in the schedule). His Honour found that the ordinary value of the travel arrangements promised to those claimants was approximately twice the amount that those claimants had paid. In fact they received no benefit at all because their money was used to supplement the amounts due for the fares of those who were fortunate to have received the tickets which they were promised. 30 His Honour said that there was evidence that Mrs Nemes received from Orbit "in one way or another" substantial commission from Orbit in respect of the travel arrangements totalling about $1.47 million. She received about $25,000 in cheques paid by Orbit. She also received some cash and some remuneration by way of a difference between the price which Orbit received for tickets and the face value of the tickets. 31 His Honour then referred to the detail of the evidence of the claimants who gave evidence. It is useful to refer to some of this evidence, although I do not refer to it all, to indicate the way in which Mrs Nemes operated. A Mr Keri gave evidence that in May 1994 he telephoned Mrs Nemes. She agreed to sell him two business class round-the-world air tickets for $3,600. On 21 August 1994, he went to Mrs Nemes' apartment at Bondi where she told him that for $3,900 she would provide two business class round-the-world tickets and six nights' accommodation. He would need to pay the full amount then and could take the trip any time within the following twelve months. Mr Keri gave Mrs Nemes a cheque made payable to cash for $3,900. In February 1995 he received an itinerary printed out by Orbit. The trip was successfully taken between August and October 1995. 32 Mr Keri travelled again in 1996. This time he acquired three round-the-world tickets. Originally they were business class tickets but he upgraded them to first class tickets by paying a further $5,000 in addition to the $5,900 he had already paid. The $5,000 was for an upgrade on Mr Keri's three tickets and for two further tickets acquired by another customer. 33 During February to April 1996, Mr Keri was in contact with Mr Abdul-Karim in relation to various travel arrangements for his proposed trip. On 26 April 1996 Mr Keri went to Mrs Nemes' apartment and gave her a cash cheque for $5,500 for accommodation. Subsequently, on 16 May 1996, Mrs Nemes asked him to provide an American Express authorisation for $11,576.30 to enable tickets to issue on the basis that this would be cancelled once the tickets had issued. Shortly after this, Mr Keri cancelled all travel arrangements made with or through Mrs Nemes. He claims in all $14,400 being the total of all amounts paid in respect of the 1996 arrangements. Nothing turns on it, but I am not able to reconcile these amounts with those shown beside the names of Dr I Keri or Mr and Mrs Z Keri where they appear in schedule 1. 34 Dr Roland gave evidence that between about November 1995 and January 1996, he had a number of conversations with Mrs Nemes at her apartment. On 22 November 1995, he gave his father $2,000 to give to Mrs Nemes for which he received a receipt signed by Mrs Nemes stating that the $2,000 was a deposit for two business class round-the-world tickets. On 23 January 1996 he gave his father a further $2,000 to give to Mrs Nemes. For this he received a receipt signed by Mrs Nemes to the effect that this was the balance for two business class round-the-world tickets which were then fully paid. On 18 April 1996 he received by facsimile a revised itinerary for the proposed travel. This came from Orbit. In May 1996 he advised Mrs Nemes that he wanted to cancel the arrangements. No consideration was received for his payments and he claims $4,000. This time the schedule and the evidence reconcile. 35 Mr Sachs gave evidence that between about late 1994 and January 1996 he and his wife purchased tickets from Mrs Nemes on six occasions. These tickets were very cheap. Mrs Nemes told Mr Sachs that they had been booked through Orbit. When questions were raised about the travel, Mrs Nemes said she would have to go to the office at Orbit and check. In each case, payment was made well in advance by cash or by bank cheque in favour of Orbit. Itineraries were received from Orbit in a plastic sleeve bearing the Orbit name. In November 1995 Mr Sachs agreed with Mrs Nemes to pay $4,400 for two business class tickets to Canada and the USA. On 31 January 1996 he went to her apartment and gave her $4,400 in cash. He was given a receipt by Mrs Nemes recording that the payment was for two business class tickets to San Francisco, Toronto and Vancouver. In January 1996 he agreed with Mrs Nemes to pay $4,400 for two business class tickets to South Africa for travel in October 1996. On 24 April 1996, he went to Mrs Nemes' apartment, and gave her $4,400 in cash. He was given a receipt recording the payment for the two business class tickets to Johannesburg. On 21 May 1996 he saw Mrs Nemes at her apartment and asked for his money back. He did not receive the money back and received no consideration for the payments made in January and April 1996. He claims $8,800. Mr Sachs' name does not appear in schedule 1. 36 In addition to the evidence of Mr Keri, Dr Roland and Mr Sachs, his Honour referred to the detail of the evidence of Mr Schey, Mr Forrester, Mr and Mrs Fischer, Mrs Landa and Dr Vince. Their evidence is similar in effect to that of the witnesses to whose evidence I have referred. There was no challenge to any of this evidence and it is unnecessary to refer further to it. 37 On 10 April 1996 Mr Dart, who was then the chief executive of the Australian Federation of Travel Agents Limited ("AFTA"), went to the George Street premises of Orbit and met Mr Abdul-Karim. Mr Dart said that he was aware that someone had been offering for sale greatly discounted airline tickets in the eastern suburbs of Sydney. This had been going on since about October 1995. On 11 March 1996 he lodged a "suspect transaction report" with the Australian Transactions Report and Analysis Centre asserting that it had been reported to him by one of their members that Mrs Nemes was obtaining batches of international airline tickets issued by Orbit with the correct value but was selling them directly to customers with a fifty per cent discount. He also reported that he had ascertained that the airlines and the "IATA Billing Settlement Plan were receiving full value". Mr Dart asked Mr Abdul-Karim to show him files relating to customers referred to Orbit by Mrs Nemes. He also asked to see records of payment to the relevant airline or consolidator for a number of the relevant tickets. On examining the documents produced by Mr Abdul-Karim, Mr Dart said that he was satisfied that, in relation to the tickets selected, Orbit had received full payment and accounted for the funds. Following the meeting, Mr Dart wrote to Mr Abdul-Karim a letter dated 10 April 1996. Amongst other things the letter said that whilst he understood that Orbit and also the consolidators and airlines had been receiving the correct value for the tickets which were issued, the fact that customers could receive discounts in excess of fifty per cent of the printed value of the ticket was of concern to AFTA members. He said that he had received complaints from eleven travel agents that they were losing business. He told him of the lodgment of the suspect transaction report and said that it had been reported to AFTA that the person responsible for these transactions was Mrs Nemes. Mr Dart asked Mr Abdul-Karim to investigate the matter so that Orbit's reputation was maintained. 38 On or about 8 May 1996 the earlier mentioned service agreement was signed by Mrs Nemes and Mr Abdul-Karim on behalf of Orbit. In the agreement, Mrs Nemes is described as "the Representative". The agreement recites that Mrs Nemes had been appointed a representative by Orbit from the date of the agreement, 8 May 1996. The date appears only in the top right-hand corner of the third page of the agreement but there is apparently no issue that that was the date upon which it was executed. The agreement contained a number of conditions. I do not set it out in full but conditions 1, 4, 7, 9 and 13 are relevant to the issues in the case. They are as follows: "1 The Representative shall seek out and refer customers to the Company and arrange the sale of travel on behalf of the Company. … 4 No special discounts shall be arranged or promised on behalf of the Company without prior approval of Company Management. … 7 All monies received by the Representative on behalf of the Company shall be receipted and accounted for daily. … 9 The Company shall a Xagreed commission of XXXXX% [sic] of the net proceeds received by the Company as a result of any sale made by the Representative. … 13 This appointment is an independent contractor and no employer/employee relationship exists." 39 The service agreement is annexed to the affidavit of Mr JJ Masselos who is an accountant. He has a long experience as an accountant and an auditor in the travel industry. At the time his affidavit was sworn he had been the auditor of AFTA, as I understand the affidavit, since 1976, and of the Fund since 1989. He was asked to express certain opinions. In order to qualify himself he was requested to make certain assumptions. One of these was that Mrs Nemes and Orbit had entered into the service agreement above referred to. One of the difficulties I have about its relevance is that it post dates each of the transactions in question except insofar as travel wholly or partly paid for and booked prior to its execution was to be taken at some later time. Whether it reflects the basis on which the parties did business before it was signed is not disclosed by the evidence. The agreement is referred to in more detail in the evidence of Mr Masselos' partner, Mr Grahame, to which I shall later refer. 40 His Honour said that on 14 May 1996, Mr Whittaker, the Fund's Manager, Special Investigations, and Mr Grahame attended the offices of Orbit. Mr Abdul-Karim and Mrs Nemes were present. They were asked whether or not they were aware of allegations that first class air tickets were being sold to the value of approximately fifty per cent of the face value of tickets. Mr Abdul-Karim answered to the effect that Orbit only issued tickets upon full payment for full value. Mrs Nemes said that she was unaware how this could happen. She said that many people initially paid, say $7,000, for two first class air tickets, but that was only a deposit or part-payment and the balance would be finally payable at a later time closer to travel. 41 Mr Whittaker and Mr Grahame made an inspection of Orbit's books. This disclosed that between July 1995 and April 1996, Orbit had paid Mrs Nemes by cheque a total of $24,856 in commission. His Honour said that it appeared that Mrs Nemes had been paid about one-third of the ten per cent commission earned by Orbit on travel arrangements introduced by her. 42 Another accountant, Mr Rene White, gave evidence on behalf of Orbit and Mr and Mrs Abdul-Karim. The evidence was to the effect that, with some minor exceptions, none of the accounting records of Orbit indicated that Orbit ever received from any of the claimants any moneys in respect of any of the travel arrangements identified in the schedule annexed to the judgment as being the travel arrangements in relation to which the claimants claimed to have paid moneys to Orbit. His Honour found that it was common ground that the role played by Mrs Nemes did not conform to any recognised role in the travel agents' industry. 43 Before proceeding to his Honour's reasons, I should make this comment. It would appear to be clear on the face of his Honour's findings that Mrs Nemes did in fact procure travel, and in some cases accommodation, for a number of people at a fraction of its usual cost. Nevertheless, she paid moneys to Orbit sufficient to cover the full value of the travel and accommodation in question. She made up the shortfall by causing Orbit to draw against moneys deposited by her with Orbit which had been paid by other customers who had prepaid for travel which they intended to take later. Many of these people paid by bank cheque or in cash so that their payments were not readily identifiable. There was thus a fund available from which Orbit could pay the correct value of the travel and accommodation which was secured. Mrs Nemes' way of carrying on business could only have one end. Ultimately, she could not finance the travel for the prices she had charged. Yet, it does not seem to be a case where she herself secured any financial benefit or advantage from what she did. 44 The explanation for her method of doing business is provided by a medical report made by Dr David Bell. I do not wish to say any more about it than necessary, but Mrs Nemes' state of health is mentioned in some places in his Honour's reasons and in counsel's submissions. I preface my account of her medical condition by saying that it reveals a very sad situation for which Mrs Nemes is deserving of great sympathy. 45 Dr Bell said that Mrs Nemes had been receiving medical attention for about twenty-five years. She had survived the Auschwitz concentration camp. She had become very anxious and depressed whenever she had had to cope with significant changes in her life or with stress. I do not need to say any more although Dr Bell's report contains a great deal of detail. Her conduct is explicable because of the medical condition from which she suffers. The Primary Judge's Reasons for Judgment: 46 In the account of his Honour's reasons which follows, the references to the various submissions of the parties are to the submissions made to his Honour and recorded by him in his reasons. Not all the submissions referred to were made on appeal. 47 Before his Honour it was submitted on behalf of Orbit that it dealt with Mrs Nemes "as a member of the public" in a way analogous to a case where the secretary of a club arranged travel for club members. His Honour said that it was plain that Orbit did not deal with Mrs Nemes as a customer or client of Orbit. She was for many years listed in the trade journal as one of Orbit's sales staff. Travel arrangements were provided by Orbit to people who dealt through Mrs Nemes rather than to Mrs Nemes herself. Orbit issued receipts addressed to those people. It would have been illegal for Orbit to supply tickets to Mrs Nemes and for these to be on-sold by her because she was not licensed under the Travel Agents Act. Orbit paid commission to Mrs Nemes. His Honour said that all these matters, in his opinion, showed that, in one way or another, Orbit was dealing through Mrs Nemes with the people with whom Mrs Nemes dealt. 48 Nevertheless, his Honour accepted a submission made on behalf of Orbit that it had not been shown that Mrs Nemes had actual authority from Orbit to make contracts on behalf of Orbit on the terms which Mrs Nemes arranged with the claimants. His Honour said the evidence indicated that, when Orbit issued tickets or other travel arrangements to customers dealing with them through Mrs Nemes, it did so for the full price. In fact, the customers were receiving the tickets for approximately half the usual price. His Honour went on to say that, from the customer's viewpoint, the customer had a contract with Mrs Nemes or with Orbit for travel arrangements for about one-half the usual price, whereas from Orbit's viewpoint, it had a contract with the customer to supply those travel arrangements for the usual price. In those cases where the tickets or other travel arrangements were provided, the customer received them having paid only fifty per cent of the full price, whereas Orbit parted with the tickets or other travel arrangements for the full price, the other half being contributed by some other person with whom Mrs Nemes dealt. His Honour continued: "But just as Mrs Nemes did not have Orbit's actual authority to make a contract to provide the travel arrangements at half price, she did not have the customer's actual authority to make a contract for the supply of the travel arrangements for full price. In those circumstances, it is not clear what, if any, contracts were in fact made between the customers and Orbit. Perhaps there was no contract, just the transfer of travel arrangements from Orbit to the customer, and the receipt of a sum of money by Orbit." 49 His Honour said that counsel for the Fund had submitted that it would be enough if the Court were to find that Mrs Nemes had authority to make contracts at the usual prices in the ordinary course of business and that this limitation on her authority was not brought home to the claimants. Counsel submitted that this was not a reliance on ostensible authority, but rather was "a kind of actual authority". His Honour said that, in his opinion, cases where an agent is given actual authority to make contracts of a limited type and the principal is held to be bound because the limitation was not brought to the notice of the person dealing with the agent were "a particular example of ostensible authority". His Honour continued: "Although some passages in Lysaght [Lysaght Bros & Co Ltd v Falk (1905) 2 CLR 421] may suggest otherwise, in my opinion those are cases where reliance on a holding out by the principal has to be shown; although of course that reliance may readily be shown in cases where there is actual authority and also failure to disclose a limitation on that authority. Accordingly, having regard to the basis on which this case was conducted, that submission would only be open in relation to the claimants who actually gave evidence. Even in relation to those claimants, in my opinion no case of ostensible authority to make contracts for the provision of tickets at half price is made out. I do not think the matters pointed to by [counsel for the Fund] overcome the points made by [counsel for Orbit], as regards both the paucity of holding-out by Orbit and the notice of irregularity to the claimants." 50 (The emphasis is added.) 51 His Honour said that that led to the question of what, if any, authority Mrs Nemes had either to receive money on behalf of Orbit or to pay money to Orbit on behalf of the claimants. He said that it was clear that Mrs Nemes received money from claimants and it was clear also that she paid that money, or most of it, to Orbit. His Honour said that, in order that she be Orbit's agent with actual authority to receive money, it would need to be the case that Orbit and Mrs Nemes consented that she should act on Orbit's behalf to receive money. Alternatively, it could be the case that each claimant and Mrs Nemes consented that Mrs Nemes should act on the claimant's behalf to convey money to Orbit. 52 The judgment continued: "There are a number of matters supporting the view that Mrs Nemes was acting as Orbit's agent to receive money rather than as the claimant's agent to pay it. Over a considerable period, Orbit was dealing with people who were its customers through Mrs Nemes, who was described by Orbit as one of its "sales staff". Through Mrs Nemes, Orbit received around $1.5 million, much of it in cash, over a twelve month period, for which Orbit issued 165 receipts. In those circumstances, in my opinion, the conveyance of the money from the customer to Orbit was part of Orbit's business activity. In my opinion, it was reasonable for the customer to regard payment to Mrs Nemes as payment to Orbit. This is confirmed by the agreement of 8 May 1996, which provided among other things that "moneys received … on behalf of the company shall be receipted and accounted for daily": in my opinion, this supports the view that the previous arrangement was that Mrs Nemes received money on behalf of Orbit." 53 It may be observed that the last sentence of the passage I have quoted suggests that his Honour treated the service agreement as an indication of the way the parties had done business before it came into effect. 54 His Honour added that there was weight in the submission of counsel for Orbit that the money was received by Mrs Nemes in connection with arrangements which she was not authorised to make and also that Mrs Nemes did not give receipts in the name of Orbit but only in her own name. He said that, on balance, however, he did not think that those considerations were sufficient to outweigh the other considerations to which he had referred. He concluded that Orbit and Mrs Nemes did expressly or impliedly consent that Mrs Nemes should act on Orbit's behalf in receiving money paid by prospective customers who proposed to make travel arrangements with Orbit so that she was Orbit's agent for this purpose. 55 His Honour also said: "In any event, whether or not Mrs Nemes was authorised by Orbit to receive on its behalf the money paid by the claimants, I am satisfied on the evidence that, at least in relation to most of the claimants, the money which they paid was actually received by Orbit - apart possibly from the commission paid or credited to Orbit by Mrs Nemes. Since Orbit has received the money paid by the claimants, both by its agent Mrs Nemes and in its own bank account, the question arises whether Orbit has failed to account for this money which it actually received. The money received by Orbit was the claimant's money until it was received by Orbit, and in my opinion it was received by Orbit from the claimant in each case. That the money remained each claimant's money until received by Orbit is clear in the case of bank cheques: it could not conceivably be suggested that there was any transfer of title in the bank cheque to Mrs Nemes prior to the bank cheque being received by Orbit. As regards cash, Mrs Nemes did not purport to act as principal; and even if she were, contrary to my earlier finding, agent for the claimant, she had no actual authority to pay this money to Orbit on someone else's behalf. In my opinion, the legal ownership of the cash, or if the cash had been negotiated and other cash substituted, at least the equitable ownership of the cash, remained with the claimant until payment to Orbit. Orbit did not plead or give any evidence of any ostensible authority in Mrs Nemes on behalf of any claimant to pay money on behalf of anyone else." 56 His Honour then expressed the opinion that Orbit would be liable to each claimant for money had and received unless Orbit could say that it had accounted to that claimant or unless Orbit could rely as against that claimant on consideration which Orbit gave to someone else. His Honour added, "Again, there was in my opinion no actual or ostensible authority in Mrs Nemes to nominate anyone else to whom consideration could be given". 57 The passage which follows that statement is of critical importance. It is follows: "Accordingly, in my opinion, it is not necessary to find in favour of the claimants that Mrs Nemes had actual authority from Orbit to allocate money which she paid to Orbit as being paid on behalf of particular customers. However, if it were necessary to make such a finding, I would make it. Allocation of money paid on behalf of a customer to Orbit by a member of Orbit sales staff is plainly in my opinion part of Orbit's business, which it left in these cases to be performed by Mrs Nemes. Mrs Nemes carried out this task incorrectly; whereas it cannot be said that she carried out any task on behalf of the claimant when she allocated money, paid by that claimant, to other persons. Furthermore, it was Orbit's responsibility to have procedures to ensure that money which it received was correctly allocated to the persons paying it. This is also, in my opinion, confirmed by the agreement of 8 May 1996." 58 (The emphasis is added.) 59 His Honour concluded by saying that for all the reasons he had given, Orbit was liable under the general law to account to each of the claimants in respect of moneys actually received from those claimants. In relation to those claimants who received no consideration whatsoever from Orbit this involved Orbit in a liability to repay the whole amount. 60 It is next necessary to mention another matter discussed by his Honour in connection with his findings. The relevant passage of the judgment is as follows: "Before considering the implications of this approach for the claims of the claimants who gave evidence before me, I should refer to an argument advanced by [counsel for Orbit] on another issue, which has some bearing on this one. [Counsel for Orbit] supposed the case of A paying money to Mrs Nemes for his own travel arrangements, but Mrs Nemes paying the money to Orbit with instructions to apply it to the cost of B's travel arrangements. If Orbit misappropriated the money, would Orbit be liable to A or to B? [Counsel for Orbit] submitted that in equity, Orbit would have received the money under a Quistclose trust for B, and would be accountable to B, who would then be held accountable to A for money had and received by B to A's use. In my opinion, consistently with what I have said above, there would in that case be no Quistclose trust for B. Mrs Nemes never had A's authority to use the money for B's purposes, nor indeed did she have B's authority to do so. Neither Mrs Nemes nor B would have any claim against Orbit. The money would have remained A's money until payment to Orbit, at least in equity, and A could claim for it directly against Orbit." 61 The reference to a Quistclose trust is a reference to the trust found to exist in Barclay's Bank Ltd v Quistclose Investments Ltd [1970] AC 567. 62 His Honour next turned to the application of his conclusions to the claims of the particular claimants who had given evidence. He decided that Mr Keri had a claim against Orbit for $8,500, Mr Schey a claim for $2,800, Dr Roland a claim for $4,000, Mr Sachs a claim for $8,800, Mr Forrester a claim for $7,000, and Dr Vince a claim for $7,500. He did not mention the cases of the other claimants who gave evidence. 63 His Honour then came to the Fund's entitlement against Orbit. Counsel for Orbit submitted that Mrs Nemes was not an "unlisted person" within the meaning of s.40 of the Travel Agents Act. That was because she did not carry on business. It will be recalled that the definition of "unlisted person" in s.40(1) is that it means a person who carries on business as a travel agent under a name or names that is not included in a list in force under s.40(2). Counsel said in order that she might be said to be carrying on a business, there would have to be a commercial enterprise considered as a going concern. A number of authorities were referred to including Hyde v Sullivan (1956) 56 SR (NSW) 113 at 119 and Hope v Bathurst City Council (1980) 144 CLR 1. The Court was there concerned with the expression "carrying on the business of grazing". In the course of his judgment, Mason J said (at 8-9): "I accept, then, that "business" in the sub-section has the ordinary or popular meaning which it would be given in the expression "carrying on the business of grazing". It denotes grazing activities undertaken as a commercial enterprise in the nature of a going concern, that is, activities engaged in for the purpose of profit on a continuous and repetitive basis. Putting aside the question whether the activities have a "grazing" character, the critical issue for decision is whether the material before the Court reasonably admits of different conclusions on the question whether the appellant's activities constitute a "business". On the facts as found, I conclude that the appellant's activities amounted to a business and that no other conclusion was reasonably open. In this respect I agree with what Reynolds JA said in his dissenting judgment. Transactions were entered into on a continuous and repetitive basis for the purpose of making a profit. The activity had a permanent character in that it had been carried on without interruption since 1965. The appellant sought customers by advertising and kept appropriate financial records. The land, though small in area, was put to its best potential use and the pastures were improved and facilities including fences were provided for that use. There is nothing in the findings to suggest that the activities were other than genuine and real." 64 Counsel said that Mrs Nemes was not conducting a commercial enterprise, much less one conducted systematically and/or with a view to profit. Her activities were doomed to financial catastrophe, could not give to her financial benefit, and could only be explained by her medical condition. The definition of carrying on business in s.4 of the Act did not help. Someone like Mrs Nemes merely responded to people who approached her at home and did not hold herself out as selling tickets. Section 40 was not intended to impose on a travel agent such as Orbit liability for the irrational activities of a mentally disturbed person such as Mrs Nemes. 65 Counsel for Orbit also submitted that the application of clause 15.1 of the trust deed was dependent on whether Orbit was liable to claimants under the general law. So far as clause 15.2 was concerned, it conferred wide discretionary powers on the trust so that it could not be asserted that payment to a claimant would be "ultra vires the trustees" under this clause. That would be so even if Orbit were not answerable for Mrs Nemes' actions and defaults. For the purposes of s.40(3), any payment by the trustees under clause 15.2 would not be in respect of an act or omission by Orbit so that the trust would not have a claim against it. Section 40(3) provides for the subrogation to the rights of the claimant who has received a payment under the compensation scheme by reason of an act or omission by a person carrying on business as a travel agent. 66 Counsel then made reference to s.40(6). It was submitted that, assuming Mrs Nemes received money from a claimant, Mrs Nemes failed to account for that money, and, at the time she failed to account, she was carrying on business as a travel agent, then any payment by the trustees of the Fund to the claimant under clause 15.1 of the trust deed would be a payment to which s.40(3) applied. That gave rise to the question under s.40(6) whether Orbit provided Mrs Nemes with goods or services in relation to which Mrs Nemes' failure to account to the claimant occurred. It was submitted that, in those circumstances, there were no goods or services provided to Mrs Nemes by Orbit in relation to the failure to account. The receipt of moneys from her on behalf of one traveller could not amount to the provision of goods or services to Mrs Nemes in relation to money paid by another traveller. 67 Counsel for the Fund submitted that it was subrogated to the rights of claimants in relation to any failure to account to them by Orbit. He submitted that if it were held that Mrs Nemes was not the agent of Orbit, then the Fund still had a discretion to pay compensation under clause 15.2 of the trust deed. In that event, the trustees would be subrogated to the rights of the claimants against Mrs Nemes in respect of her failure to account and Orbit was jointly and severally liable in respect of that act or omission pursuant to s.40(6). Counsel submitted that the receipt of money from Mrs Nemes for the purpose of buying tickets was a service to Mrs Nemes and was closely connected to her failure to account to the customer actually providing the money. 68 Counsel for the Minister submitted that the definition of carrying on business as a travel agent contained in s.4 of the Act plainly applied to Mrs Nemes. The statute was intended to protect the public by the regulation of persons selling travel arrangements to the public by way of a licensing system and a compensation scheme. It would be contrary to that purpose to give a narrow interpretation to carrying on business. It was sufficient that there be repeated activity of selling tickets and the like. In any event it was plain that Mrs Nemes did hold herself out as willing to sell tickets, among other things. 69 Having considered these submissions, his Honour concluded that each claimant did, albeit indirectly, entrust his or her money to Orbit. He continued: "As to whether Mrs Nemes carried on business as a travel agent, clause 1.2 of the deed makes that depend upon the application of s.4 of the Travel Agents Act. Despite the irrationality of Mrs Nemes' conduct, in my opinion it would tend to defeat the purpose of the Act if the irrationality of a sustained activity were to prevent it being regarded as carrying on the business of selling tickets. In any event, in my opinion, Mrs Nemes clearly did hold herself out as willing to sell tickets. Accordingly, in my opinion, Mrs Nemes did carry on business as a travel agent within the meaning of the Travel Agents Act; and therefore did carry on business as a travel agent within the meaning of the Trust Deed. Since both Mrs Nemes and Orbit have failed to account to the claimants, in the way I have already indicated, it follows that the claimants are beneficiaries as defined in clause 2.2." 70 So far as relevant, clause 2.2 of the deed provides that the trustees shall hold the Fund on trust for, inter alia, every person who entrusts money or other valuable consideration to another person who carries on business as a travel agent in connection with travel arrangements or travel-related arrangements or both fails to account for the relevant money or consideration, whether due to an act or to an omission of that person or of an employee or agent of that person. His Honour went on to refer to the definition of "client" in clause 1.1 of the deed. It means a person who enters into travel arrangements or travel-related arrangements directly or indirectly with a participant. His Honour then said: "Accordingly, in relation to each claimant the question is whether that claimant entered directly or indirectly into travel arrangements or travel-related arrangements with Orbit. I do not think that the making of arrangements with Mrs Nemes, and the payment of the claimant's money by Mrs Nemes to Orbit, without more, would amount to entry into travel arrangements or travel-related arrangements with Orbit. It would appear therefore that some claimants are clients, and others are not." 71 His Honour concluded that the claimants had each suffered loss arising directly from a failure to account. That failure arose from an act or omission by Orbit. In his opinion, the loss arose directly from a failure to account. The failure to account in turn arose from an act or omission of Orbit. Orbit's receipt of money from a claimant and Orbit's failure to give consideration or to account to that claimant was itself an act or omission by it. Furthermore, the incorrect allocation of the money to another person through the agency of Mrs Nemes was another act or omission of Orbit. Finally, his Honour thought that there was a combination of facts which could fairly be regarded as acts and/or omissions by Orbit. He instanced the receipt of over $1.4 million in cash or bank cheques for which 165 receipts were given. That provided consideration for that money only to persons identified by Mrs Nemes in circumstances where there were no relevant account documents, no relevant receipts, no relationship between the payments made and services provided, no system to ensure correct allocation of funds and no safeguards to protect against incorrect allocation of funds. At least as from 10 April 1996, the circumstance that Orbit had information asserting that customers were only paying fifty per cent of the value of air tickets was a further factor to be taken into account. Of course, if the allocation made by Mrs Nemes had been correct, there would not have been a failure to account. In his Honour's opinion, however, failure to account could be considered as arising from a combination of facts he had identified because those facts involved a serious risk of failure to account and actually caused the failure in this case. But for those facts, there would not have been failure to account to all or any of the claimants. 72 It followed, in his Honour's conclusion, that the Fund was obliged to pay compensation to those claimants who directly or indirectly entered into travel arrangements or travel-related arrangements with Orbit. As regards those who did not, clause 15.2 permitted the trustees, in their discretion, to pay compensation. 73 His Honour made further reference to s.40(3) of the Act saying that, even in relation to payments made pursuant to the discretion conferred by clause 15.2, it was clear that such payments would have been by reason of an act or omission of Orbit. 74 His Honour said that on the view he had taken, it was not necessary to apply s.40(6) of the Act. That question would arise if he were wrong in finding that Orbit was liable under the general law to account to the claimants, presumably on the basis that he had erred in finding that Mrs Nemes did not have authority from the claimants to apply their payments to the cost of travel by other persons. His Honour thought that if his judgment were incorrect in this respect s.40(6) would apply. In his opinion, Mrs Nemes was an unlisted person as defined in s.40(1). He also thought that Orbit did provide services in relation to which the omission of Mrs Nemes in failing to account to the claimants occurred and that the receipt by Orbit of money paid by the claimants, albeit applied by Mrs Nemes for the benefit of some other person, was a service provided by Orbit in relation to which her failure to account to the respective claimants occurred. 75 His Honour then turned to the question of the liability of the directors. Counsel for the Fund submitted that, in circumstances where no evidence was given by Mr or Mrs Abdul-Karim, they could not make out the defence provided for in s.40(5). The directors had been put on enquiry by a number of matters and it was impossible to say what other material might have come out had they given evidence. Counsel for Orbit submitted that the relevant act or omission was essentially the failure to record the correct payer as the source of funds and it was inconceivable that Mr and Mrs Abdul-Karim would have known and consented to this having regard to the disastrous implications for their business. Mrs Nemes' conduct was explained by the medical evidence. No such explanation was available to Mr and Mrs Abdul-Karim. 76 His Honour said that, in order that Mr and Mrs Abdul-Karim might escape the liability placed on them by s.40(4) of the Act, it was necessary for each of them to prove that he or she did not know or did not consent to the act or omission by reason of which the payment was made to the claimant in each case. His Honour said that that essentially meant the act or omission from which the failure to account arose as contemplated by clause 15.1 of the trust deed. He said that Orbit's failure to account arose from its receipt of money from each claimant and from there being no consideration and no accounting provided to that claimant. His Honour continued: "It seems clear that the directors knew of these matters, except to the extent that they may not have known that a person to whom consideration or accounting was given in respect of these payments was not the person from whom the money was received. Accordingly, it seems to me that to escape liability, Mr and/or Mrs Abdul-Karim must at least prove that he or she did not know or consent to the giving of consideration or accounting to some person other than the person from whom the money was received. I accept that the word "know" in this subsection means more than suspect, and probably means something like "believe with reasonable assurance something that is in fact true". Neither Mr nor Mrs Abdul-Karim gave evidence, so the proof in question depends essentially on the argument that it defies belief that they would have allowed Mrs Nemes to carry on as she did, applying large sums paid by various persons towards travel arrangements provided to other persons." 77 His Honour said that he was unable to accept the submissions made on behalf of Mr and Mrs Abdul-Karim. He said that he had to be satisfied on the balance of probabilities in relation to each individual claimant, rather than satisfied on a balance of probabilities as to a lack of knowledge and approval of Mrs Nemes' overall practice. His Honour referred to the case of Mrs Landa. He asked himself the question whether, without any evidence from Mr or Mrs Abdul-Karim, he could be satisfied that they did not know and consent to her money being applied towards someone else's travel arrangements. He said that he could not be satisfied about that bearing in mind the circumstances which were that a personal cheque drawn by Mrs Landa and signed by her was deposited towards payment on behalf of other persons to whom receipts were given on 21 March 1996. His Honour also said that he was not satisfied in relation to Mr Forrester. He gave evidence that he saw a copy of the cheque he provided in a folder held at Orbit's premises. His Honour said that he could not be absolutely certain that this is what Mr Forrester saw. But no evidence to the contrary was led. His Honour said that in those circumstances it was therefore a matter he could take into account together with the lack of evidence from Mr and Mrs Abdul-Karim. He said that he was not satisfied in relation to the Forrester transaction that they did not know what was being done. 78 He then asked himself the more general question whether he could be affirmatively satisfied in relation to any other particular case. He said that, even if it defied belief that the directors could have known and consented to the misapplication of over $800,000 paid by the claimants, the directors, who could have given evidence supporting a finding that they did not know or consent in relation to any of those cases, or given evidence as to which of those cases they knew and consented to and which they did not, gave no evidence at all. 79 His Honour said that one further matter which tended to confirm his lack of satisfaction was the evasive answer given by Mr Abdul-Karim on 14 May 1996 when he was asked by Mr Whittaker or Mr Grahame whether he was aware of allegations that tickets were being supplied at half price. Mr Abdul-Karim answered to the effect that Orbit only issued tickets upon full payment of full value. His Honour pointed out that Mr Abdul-Karim had been told of the allegations by Mr Dart on 10 April 1996. 80 His Honour said that a further ground for his not being satisfied of the matters set out in s.40(5) (which needs to considered along with s.40(4)) was that the directors had certainly not excluded knowledge and consent in relation to acts or omissions from which the failure to account arose in the sense that those acts or omissions involved a serious risk of failure to account and actually caused such a failure in the present case. His Honour added that it seemed clear that the directors did know and consent to the acts and omissions to which he had referred. He relied on a number of matters in combination, namely the circumstance that over $1.4 million was received in cash or bank cheques in transactions for which as many as 165 receipts were given; the circumstance that the only consideration or accounting for those receipts was to persons identified by Mrs Nemes without the support of any receipts or accounts or any relationship of payments to travel arrangements being supplied by Orbit all in the absence of any system of ensuring coincidence of payments and supply of travel arrangements, and of any safeguards against abuse; and the circumstance that at least from 10 April 1996 (the date of Mr Dart's visit), the directors had information that customers were receiving air tickets in return for payment of only fifty per cent of their value. 81 Accordingly, his Honour concluded that Mr and Mrs Abdul-Karim were liable, along with Orbit, to reimburse the trust for payments properly made to claimants. His Honour thereupon indicated that he would dismiss the claim made by Orbit for an injunction and foreshadowed the declarations to which reference was earlier made. The Submissions on Appeal: 82 In the submission of counsel for the appellants, Hodgson CJ in Eq was in error in finding that Mrs Nemes had authority from Orbit to receive money from the claimants. It was pointed out that no act done by an agent in excess of his actual authority is binding on the principal with respect to persons having notice that in doing the act the agent was exceeding his authority. Reference was made to Bowstead on Agency 16th ed (1995), Art 75 at 403. There, the author of the 16th edition says that it is a well known proposition that the mere fact that the principal by appointing an agent gives that agent the opportunity to steal or otherwise to behave fraudulently does not without more make him liable. 83 Counsel for the appellants said that his Honour had asked himself the wrong question. He posed the issue as being whether Mrs Nemes had authority to receive money on behalf of Orbit. In counsel's submission, he should have asked whether Mrs Nemes had authority to receive money on behalf of Orbit from each particular claimant in the circumstances in which it was paid to her. Counsel said that the approach taken by his Honour failed to recognise the importance of the findings that Mrs Nemes had no actual or ostensible authority to enter into contracts with the claimants on behalf of Orbit because of the extraordinary circumstances in which she dealt with each of them. In other words, counsel is saying that she lacked authority because she was providing tickets, although at full price, for only approximately fifty per cent of the cost to the person provided with the ticket. The balance of the cost was provided by other intending travellers without their knowledge. That was something never authorised by Orbit. 84 Counsel said that, on his Honour's approach, whilst those circumstances precluded her having actual or ostensible authority to enter into contractual relations with those claimants on behalf of Orbit, it did not affect her authority to receive money for Orbit in relation to the travel arrangements contemplated by the proposed contract. Counsel stressed that authority to receive money is not an authority "in the air". It is an authority to receive money in particular circumstances or for particular purposes. The only authority which Mrs Nemes could have had was authority to receive money in the ordinary course of Orbit's business, that is for travel services provided at full price. It was submitted that his Honour's approach was incorrect in separating out one element of the transaction and treating it differently from the remainder. 85 Counsel said that his Honour had held that Mrs Nemes had no authority to enter into contracts on Orbit's behalf in the circumstances in which she dealt with the claimants because of the extraordinary nature of the transactions but that Mrs Nemes did have authority to receive on Orbit's behalf (so as to bind Orbit) money paid in relation to those extraordinary transactions. His Honour relied on the fact that Orbit had accepted the money from Mrs Nemes and had paid her commissions and issued tickets. But, in counsel's submission, it did not take into account that the tickets were all issued, so far as Orbit was concerned, for the full price and in the ordinary course of business. It was submitted that an agent's authority, even express authority, to act in a particular way (eg to receive money) was always subject to the express or implied condition that the authority be exercised in the ordinary course within the parameters contemplated when the authority was given. Once the agent went outside that condition, the authority was gone. Reference was made to Lysaght. Lysaght's case is authority for the proposition that it is not within the scope of an agent's authority to bind his principals by a contract which, although made ostensibly on their behalf, is, to the knowledge of the other party, really made for his own benefit even though the contract is of a kind which the agent has a general authority to make. So, where an agent makes such a contract and the party with whom he is dealing is aware of the circumstances, the principals are not bound. See at 430-1. The difficulty I have with the application of Lysaght's case to the present circumstances arises because it is not clear to me that those who dealt with Mrs Nemes knew that she did not have authority to deal with them on any basis other than the payment of the full amount of the fare in each case. That is something to which I shall return. 86 Counsel sought to meet this objection by submitting that the claimants had notice of irregularities in Mrs Nemes' dealings which precluded her having any ostensible authority to bind Orbit by contract to the claimants. For the same reasons the claimants had notice of irregularities in Mrs Nemes' dealings with them which precluded her having ostensible authority to bind Orbit in relation to cash or cheques paid by the claimants to her in relation to the travel arrangements into which she had no ostensible authority to enter. Counsel said that the position was no different from that which would obtain if A promised B to provide a ticket to London for half price if B gave A a cheque for the half price in favour Qantas. If B gave A the cheque, that would not make Qantas liable to A and, if A paid the cheque to Qantas, that would not make Qantas liable to B if A told Qantas to apply the cheque for some other purpose. 87 Counsel referred to the fact that his Honour had also held that, because Mrs Nemes had no authority from the claimants to use their money for anybody else's travel, and because she had paid the claimants' money to Orbit, Orbit was liable to account to the claimants. It was submitted that the finding did not take into account a number of relevant matters, namely: (a) the claimants had authorised Mrs Nemes to pay the money to Orbit; (b) the claimants had given their money to Mrs Nemes in a form (cash or cheque drawn in favour of Orbit) which bore no limitation on the purpose for which the money might be used by Orbit once it was received by Orbit so as to confine its use to purposes beneficial to the person who had paid the money; (c) the claimants had clothed Mrs Nemes with apparent authority to specify to Orbit the purpose for which the money was to be used; and (d) as between Orbit and the claimant, it was the claimant who had notice of the irregularity not Orbit. The irregularities in the transaction were in Mrs Nemes' dealings with the claimants. 88 Counsel submitted that if claimant A dealt with Mrs Nemes in circumstances which negated any actual or ostensible authority in Mrs Nemes to act on behalf of Orbit in the contemplated transaction, in relation to that contemplated transaction claimant A gave to Mrs Nemes money to be paid to Orbit for A, but, when paying the money to Orbit Mrs Nemes identified B as the person on whose account the money be paid to Orbit, Orbit was entitled to act on the basis that, if Orbit accounted to B for that money, it had no further liability to account again to A. 89 Counsel said that his Honour held "probably correctly" that the cash and cheques given by each claimant to Mrs Nemes remained the property of the claimant and that Mrs Nemes had no actual authority to pay this money to Orbit on somebody else's behalf. His Honour dismissed the possibility of ostensible authority by saying, "Orbit did not plead or give any evidence of ostensible authority in Mrs Nemes on behalf of any claimant to pay money on behalf of anyone else". 90 Counsel said the facts spoke for themselves. It was the claimant who clothed Mrs Nemes with the power and ostensible authority, not merely to convey the money to Orbit, but specify on whose behalf it was paid. It was the claimant who created the situation in which, so far as Orbit was concerned, Mrs Nemes had authority to specify the person on whose account the money was paid. Mrs Nemes exercised that authority. Orbit acted in accordance with that specification to credit the money to the person Mrs Nemes specified. If the specification were incorrect, Orbit acted to its detriment in relying upon an incorrect specification by crediting the money to an incorrect person. The claimants would be estopped from denying Mrs Nemes' authority to specify to Orbit the person on whose account she was paying the money to it in each case. 91 It followed in counsel's submission that Orbit was not liable to the claimants for the moneys under the general law. 92 Counsel then referred to s.40(6) of the Travel Agents Act which deals with unlisted persons carrying on the business of a travel agent. As counsel said, the subsection will have no application unless the act or omission by reason of which the payment was made under the compensation scheme was that of an "unlisted person" as defined in s.40(1). To satisfy that test Mrs Nemes, at the relevant time, must have been a person who carried on business as a travel agent, an expression which is defined in s.4(1) of the Act earlier set out. 93 Counsel submitted that to carry on business required a rational pursuit of economic activity, that is the conducting of an undertaking which was intended, if not to achieve a profit, then to cover expenses. To give away money or money's worth was not to carry on a business and to trade with no intention of ever making a net financial gain or at least of avoiding a net financial loss was not to carry on a business. Mrs Nemes was not carrying on a business. The explanation for her activities was medical, not economic. Furthermore, Mrs Nemes did not ever hold out or advertise that she was willing to carry out an activity referred to in one of the paragraphs of s.4(1). At all times she held herself out as acting on behalf of Orbit. 94 Counsel said that the second aspect of this finding was that Orbit provided services to Mrs Nemes in relation to acts or omissions by her which resulted in the failure to account. It was submitted that Orbit had provided no such services. Orbit provided Mrs Nemes with nothing in relation to which the act or omission by her occurred. All that could be regarded as having been done by Orbit was to provide persons, other than Mrs Nemes, with arrangements to travel. 95 It was also submitted in relation to s.40(6) that it should be interpreted as requiring the "other person" referred to therein to know of the act or omission of the unlisted person which attracts liability, namely the fact that the person was carrying on business as an unlicensed travel agent. To do otherwise would give rise to a potential liability in entirely innocent persons, a matter which Parliament was unlikely to have intended. I should say at this point, however, that one needs to read s.40 as a whole. In the context of this submission one needs to take into account the provisions of s.40(3) which provides that, where a payment is made to a claimant under the scheme by reason of an act or omission by a person carrying on business as a travel agent, the scheme trustees are subrogated to the rights of the claimant in relation to the act or omission. I shall in due course deal with the relationship between s.40(3) and s.40(6). 96 Counsel finally submitted that the findings against Mr and Mrs Abdul-Karim were not justified. The findings were significant only if Orbit was liable to the claimants. The fact that Mr and Mrs Abdul-Karim did not give evidence was a factor but, in the end, the issue was to be resolved on the basis of the evidence which was before his Honour. Counsel said that the findings of absence of actual and ostensible authority were against the view that Mr and Mrs Abdul-Karim knew of or consented to the misapplication of the moneys. Counsel added that it was the application without authority from the claimant which was ultimately the relevant act or omission. On the evidence, the better view in relation to all the claimants was that the directors did not know of, or consent to, Mrs Nemes' actions. 97 Counsel for the Fund submitted that his Honour was correct in finding that Mrs Nemes had actual authority to receive money on Orbit's behalf and that Orbit had a liability under the general law to account to the claimants for the moneys they entrusted to Mrs Nemes. That was so at least in respect of moneys actually received by Orbit from claimants who received no consideration for their payments. 98 Counsel referred to a number of facts. These were that Mrs Nemes was listed as a sales representative of Orbit as early as 1984 and as a member of the selling staff from 1986. She remained listed as a member of the selling staff until mid 1996. Her employment was formalised by the service agreement entered into on 8 May 1996. But before then, Orbit had paid Mrs Nemes commission for arranging travel for customers. It followed that she had authority from Orbit to receive money on its behalf from the general public who paid her for the cost of travel. It was not to the point that Mrs Nemes was not authorised to enter into travel arrangements of the kind which she did. It was sufficient that she had authority to receive money on behalf of Orbit for travel arrangements. Members of the public entrusted their money to her in this capacity. She had no authority from them to misapply the money which they entrusted. Her misapplication of the moneys was a failure for which Orbit was responsible in the same way in which a retailer would be liable to customers for money entrusted to a sales assistant for goods to be delivered where the assistant misapplied or misappropriated the money and no goods were delivered. It was irrelevant that the sales assistant induced the customer to part with the money on the faith of a representation that the goods were on sale at half price when they were not. This, so counsel submitted, was a liability of a principal for the actions of an agent by reason of the holding out of the agent as a person with authority to receive money in exchange for orders for goods even though in the particular case, or in particular cases, the agent did not have authority to sell goods at half price in the particular instance or instances. Counsel said that the law imposed a liability on the principal in situations such as this because it was the responsibility of the principal to ensure that appropriate procedures were in place to guard against the agent misapplying or misappropriating money received from customers. Counsel said the situation would be different if the person receiving the money had no authority to receive it on someone else's behalf. In that case, the individual may in fact be carrying on business on his own behalf on an entirely different basis. 99 Counsel then dealt with s.40(6) of the Act. Counsel emphasised that, whilst all dealings with the claimants were away from Orbit's office at Mrs Nemes' home or the claimant's home, Mrs Nemes frequently attended Orbit's office and occasionally representatives of Orbit attended her home, sometimes in the presence of claimants. One could add that Mrs Nemes was supplied with a large number of blank ticket forms by Orbit and used these to issue tickets for the travel which was booked with her. 100 Counsel also emphasised that his Honour had not found that Mrs Nemes carried on business as an unlicensed travel agent. Rather, he found that Mrs Nemes entered into transactions which could constitute carrying on business as a travel agent. "Carrying on business as a travel agent" is the phrase used in s.40(3) and s.40(6). Counsel said that this did not mean that Mrs Nemes carried on business as an unlicensed travel agent. The reality was that she entered into travel arrangements as her capacity as a member of the selling staff of Orbit. The fact that the arrangements into which she entered were "of a specific kind" not authorised by Orbit was not to the point. 101 I do not refer to all the submissions which were made but a further submission to which reference should be made is that, Mrs Nemes having been given authority to accept money in respect of travel arrangements, Orbit should have had in place procedures to require her to account for that money in a proper way. Orbit's failure to do so is what caused it to attract the liability which the Fund contended it had. In due course I shall refer to some of the accounting evidence which supports the findings made by his Honour that, not only Mrs Nemes, but also Orbit itself, did not have a proper accounting system in place. 102 Counsel for the Fund also said that this was a case of holding a principal liable for money had and received through the conduit of an agent who had authority to receive money for certain purposes where the third party entrusting the money had no notice of the limitations on that authority to receive the money and in circumstances in which no consideration was given even though the money was ultimately received by the principal. That submission is in line with the way his Honour approached the case. The point to be emphasised is that Mrs Nemes had not misappropriated the money for her benefit but had paid the money to Orbit although causing it to be misapplied for the benefit of other customers of Orbit without the authority of the claimants and at the same time with the actual or apparent authority of Orbit to allocate the money as she considered fit. One of the circumstances of this case which suggests that one should question that proposition is the fact that a great deal of the money which Mrs Nemes paid to Orbit was not paid by an ordinary cheque signed by a potential traveller but was provided either in cash or by bank cheque. But I would have thought that Orbit would have been required to keep a set of accounts in which there were proper entries showing the names of the persons on whose behalf the moneys had been received. I shall say more of this a little later. 103 A further point made by counsel was that Mrs Nemes had no authority from the claimants to use their money for anybody else's travel. Mrs Nemes received money from claimants but more often than not applied it for the benefit of other customers. Plainly she had no authority to do this but how all this was done by Orbit I have found difficult to ascertain as is disclosed by the short analysis of the accounting evidence later to be given. Counsel said that the more likely conclusion was that it was Orbit which conferred on Mrs Nemes actual authority to apply money she received in whatever way she chose. This gave rise to a responsibility in Orbit to ensure that, if money were not applied for the benefit of a customer who gave Mrs Nemes money, there was an accounting procedure in place which ensured that sufficient funds were available to account to the claimant whose money was applied for the benefit of another customer. As counsel said, it was a classical "robbing Peter to pay Paul" exercise which the Travel Agents Act was designed to prevent or at least to confine. 104 Counsel then went on to make some further submissions about the failure of Mr and Mrs Abdul-Karim to give evidence. I shall say more of this in due course. 105 The submissions made on behalf of the Minister were supportive of those made on behalf of the Fund but it is appropriate to refer to some of the detail of them. Counsel submitted that the service agreement of 8 May 1996 showed (if it were a reflection of the arrangement previously in place) that Orbit paid Mrs Nemes' commissions based on the amounts received by Mrs Nemes on behalf of Orbit. Counsel submitted that this showed the actual authority to receive the moneys found by his Honour. He added that the fact that the cheques and other payments were paid by the customer to Orbit and not paid into an account in the name of Mrs Nemes supported the fact that Mrs Nemes received the money as agent for Orbit. 106 Counsel then made submissions about the application of s.40(3) of the Act which subrogates the Fund to the rights of a claimant in relation to an act or omission by a person carrying on business as a travel agent where the Fund makes a payment to the claimant under the compensation scheme. Counsel said that s.40(3) applied because of the act or omission of Orbit. There were three relevant acts or omissions, each of them found by his Honour. There was first Orbit's failure to give consideration for the moneys or to return them, secondly, Orbit's incorrect allocation of the moneys, and thirdly, Orbit's failure to have a system which ensured correct allocation. Counsel submitted that s.40(3) was satisfied because the payment either was or would be made under the compensation scheme. The payment could be made under the scheme as a matter of obligation under clause 15.1 of the deed or as a discretionary payment under clause 15.2. In either case the payment was made under the scheme. Whilst it was true that clauses 15.1 and 15.2 required the payment to be made in respect of a loss arising from or suffered by reason of a "failure to account", that expression did not mean a failure to account in breach of a principal's general law obligation to account for moneys received by an agent. The phrase was used to mean a failure to return money or other valuable consideration which had been paid in respect of travel arrangements. The compensation scheme was not administered by a Court or by lawyers and the trustees were not required to form a legal opinion on the law of principal and agent before making a payment under the scheme. It followed that a payment made under either clause 15.1 or clause 15.2 for loss arising from such a failure was one made under the compensation scheme to which s.40(3) applied unless there was a finding that Orbit had an obligation under the general law to account to the claimants. 107 Counsel then came to s.40(6) of the Act. She said that it was common ground that the subsection applied in respect of the authority of Mrs Nemes to receive money for Orbit. The subsection did not in terms require any knowledge or notice by the licensed travel agent. The elements of the provision (as applied to this case) were: (a) Mrs Nemes was an unlisted person in that she carried on business as a travel agent and was not on the list of licensed travel agents; (b) she committed an act or omission by reason of which a payment was made under the compensation scheme; (c) Orbit in the course of its business provided Mrs Nemes with goods or services; (d) the act or omission occurred in relation to or involved those goods or services. 108 The subsection did not require that Orbit have notice of the act or omission of Mrs Nemes or of Mrs Nemes' carrying on business as an unlicensed travel agent although the evidence clearly established that Mrs Nemes was in fact carrying on business as an unlicensed travel agent. 109 Counsel said that Orbit knew that Mrs Nemes was unlicensed; otherwise there would have been no need for her to have Orbit issue the various tickets and vouchers - she would do this herself if she were licensed. I would comment at this point that a prospective traveller who made some enquiries would have ascertained either from the travel trade publications or from other sources that Mrs Nemes was a member of the selling staff of Orbit. Such a person would justifiably have thought that he or she was dealing with a person who was some kind of a representative of Orbit. Counsel also said that, in any event, notice was not required before s.40(6) operated. 110 Counsel referred to the second reading speech which, so she submitted, made it clear that the policy of the legislature was to deter unlicensed agents and to impose sanctions on those licensed agents which chose to facilitate them. This was done by imposing liability on any licensed agent who facilitated an unlisted agent to carry on business by providing the unlisted agent with tickets. The Fund was to be liable for the activities of unlisted agents "to the detriment of the licensed agents who were the contributors". It followed that a licensed agent who assisted an unlicensed agent was not innocent since the licensed agent was deliberately participating in a scheme to defeat the legislature's intent that all agents be licensed and contribute to the Fund. Whether this submission was necessary in the light of the fact that counsel had submitted that the acts and omissions were the acts and omissions of Orbit is a matter that perhaps need not be dealt with. 111 Counsel said that Mrs Nemes was carrying on business with a view to profit by the earning of commission. The commissions were substantial amounting to approximately $25,000. Her modus operandi worked well enough for a year and may have continued had Mrs Nemes' customers travelled twice as frequently or introduced sufficient new travellers. Furthermore, even if she had a collateral purpose in carrying on the business, this did not mean that she was not in business as a travel agent. 112 The act or omission of Mrs Nemes was the misallocation of funds. Orbit provided her with goods in relation to the act or omission in that Mrs Nemes provided the tickets to enable those who did travel to travel by applying moneys which should have been earmarked for other persons to the cost of travel of others. The least to be said about Orbit was that it facilitated Mrs Nemes' way of doing business by failing to have in place a system which would have revealed the irregularities which were occurring. 113 Counsel also made submissions about knowledge emphasising that the onus was upon the directors to prove that they had no knowledge. She discussed the difficulties of this in the light of the fact that neither of the directors gave evidence. 114 Counsel for the Fund stressed that his Honour had found that it was not necessary, on the view he took of the liability of Orbit under the general law, to apply s.40(6). He found that Mrs Nemes carried on business as a travel agent but did not find that she carried on business as an unlicensed travel agent. Rather, he merely expressed the view that, if he was wrong in the view that he had taken of the liability of Orbit under the general law, Mrs Nemes would be an "unlisted person" within the meaning of s.40(1) and the directors of Orbit would have a liability under s.40(6). Consideration: 115 A starting point for the consideration of the matter is provided by his Honour's findings that this was not a case in which Mrs Nemes had actual or ostensible authority to provide travellers with tickets at half the usual price. She had no actual or ostensible authority from Orbit to do this. In fact, those who made successful journeys, although they did not themselves contribute more than approximately half the cost of what was involved, did not travel otherwise than at the usual cost. The shortfall was made up by recourse to moneys paid in advance by other potential travellers, many of whom were eventually disappointed. His Honour's findings make it clear that Orbit did not issue tickets at half price. But the evidence establishes that the tickets were not issued at half price because moneys in Orbit's account were used by it, whether wittingly or not (a question to which I shall in due course come), to finance the full cost notwithstanding that the moneys so used had in many cases come from travellers or potential travellers who would eventually be disappointed. 116 There was no challenge to his Honour's findings in relation to actual or ostensible authority to issue tickets at less then the usual price. Nevertheless, his Honour found that Mrs Nemes was Orbit's agent to receive moneys from travellers. The authority he found appears to have been a general one. Her usual practice was to pay to Orbit the moneys which she had received. In many cases Orbit issued receipts in the names of the persons who had paid the money. It also acted in other ways in relation to their needs particularly by providing them with itineraries and, of course, with the tickets and vouchers which they required for accommodation and so on. But Orbit's case is that it did not know of the reality of what was occurring. Until complaints were received, it had assumed that everything was being done according to proper business practice. The great difficulty about its position is that neither of its directors gave evidence. One can understand what its case is. There are statements of its response to representatives of the Fund and others in the evidence which are all consistent with its innocence. But Orbit cannot escape the fact that its directors were not called to give evidence to make good the case upon which it relied. 117 It will be recalled that, in the course of his judgment, his Honour referred to evidence which established that, between 1 July 1995 and May 1996, Orbit provided travel arrangements for travel arranged through Mrs Nemes to the value of approximately $1.47 million. Orbit issued receipts in respect of payments totalling about $1.47 million comprising 165 receipts in the name of individual travellers and three in the name of Mrs Nemes. His Honour concluded that it was clear that over a period of over a year or more, Mrs Nemes was offering to provide travel arrangements at about half price. He said it was common ground that he could infer that the persons to whom the $1.47 million worth of travel arrangements paid only about half that amount for those arrangements. The other half of the amount paid for those arrangements came from a sum in excess of $800,000 paid by the claimants in the proceedings. The important point of all this is that the whole of the $1.47 million came from Orbit's bank account, Orbit having received it in various payments made by Mrs Nemes during the period in question. Moneys were disbursed as required to provide travel for those who were fortunate enough to make their journeys apparently on instructions or at the request of Mrs Nemes. 118 In order that the nature of Mrs Nemes' and Orbit's activities may be fully understood, I think it would be helpful if I refer in a little detail to the accounting evidence upon which his Honour's findings are based. It will be recalled that I referred earlier to a visit made to Orbit's premises by Mr Whittaker and Mr Grahame on 14 May 1996. Mr Whittaker is the Fund's manager, special investigations. At the time he swore his affidavit he had access to Orbit's books and records. Mr Whittaker carries out special investigations on behalf of the Fund into the financial affairs of travel agents participating in the Fund and into those of any "related entities". 119 Mr Brattoni is the Fund's chief executive. He told Mr Whittaker that he had received a report that a customer of Orbit who had paid Mrs Nemes for his tickets but had missed his flight because the tickets were not made available at the airport. Mr Whittaker telephoned Mr Abdul-Karim on 8 May 1996 and told him that the Fund wished to carry out an investigation of Orbit's financial affairs. As mentioned, he attended Orbit's premises with Mr Grahame on 14 May. On 15 May he returned in order to interview Mrs Nemes and to examine her receipt books and the books and records of Orbit. Mr Whittaker then referred to certain correspondence and ultimately to a meeting of the trustees of the Fund and representatives of Orbit on 15 August 1996. The meeting was attended by Mr Abdul-Karim and his legal advisers. The minutes of the meeting are in evidence. The chairman of the meeting, who I gather was Mr Brattoni, advised that the Fund had before it $823,000 in claims not yet logged as part of the Fund's records. The chairman also advised that the trustees had considered the treatment of the unlogged claims and reported that the claimants were advised first of all to make attempts at recovery directly against the company. Present at the meeting on behalf of the trustees was Mr Ulman. He sought further information in relation to what was described as a consultancy agreement, that is the agreement of 8 May 1996, that "was hurriedly executed" between the company and Mrs Nemes and the length of time the relationship with her had been "supported". Mr Ulman queried the large block of Orbit travel receipts which had been provided for review purposes by officers of the Department of Fair Trading. Mr Abdul-Karim offered to reimburse any customer who had made a claim against the Fund if an Orbit travel receipt could be produced as evidence of money having passed from the prospective traveller to Orbit. He also said that the "consultancy agreement" had been done without the benefit of legal advice and in a hurry "for the purpose of making Mrs Nemes feel comfortable about the moneys she owed Orbit". Mr Abdul-Karim said that only "work in progress" was completed after the agreement was signed. There was no new business done. 120 Mr Abdul-Karim offered "total co-operation". He also said that books and records would be made available to the Fund or to its representatives. After the meeting, Mr Cass, who was acting as solicitor for Orbit, wrote a letter to Mr Whittaker in which he said that Orbit would account for all receipts that had issued and would refund money on any receipt it had issued for which it could not account. He said that Orbit wished to co-operate with the Fund "in any way" in order to complete a full investigation of the matter. 121 The next document to be referred to is a report dated 12 September 1996 prepared by Mr Whittaker of his investigation into Orbit. Mr Whittaker said that originally Mr Abdul-Karim advised that he had supplied Mrs Nemes with tickets bearing a face value of approximately $500,000 between 1 July 1995 and May 1996. Subsequently he advised that the $500,000 referred to tickets obtained through Metro Travel Pty Ltd and that Orbit had issued receipts totalling $1,470,830 in the names of customers who were provided with tickets during this period. He said that the figure of $1.47 million represented the discounted price at which Orbit said that it sold the tickets to Mrs Nemes. It did not represent the lower figure at which Mrs Nemes supplied the tickets to customers or the face value of the tickets. He also said that it was not possible "to retrieve details of the total sales to clients introduced by Vera Nemes because files are no longer accessible when travel has been completed from the agent's computer records although they could be requested from Galileo, 'the CRS company' for a fee". 122 Mr Whittaker said that when he was told by Mr Abdul-Karim that $500,000 worth of tickets had been supplied to customers of Mrs Nemes, he concluded that a large proportion of the moneys representing the $832,433 claimed from the Fund were unaccounted for because Mrs Nemes would have needed only approximately $250,000 to subsidise her acquisition of the $500,000 worth of tickets from Orbit leaving a balance of $582,000 unaccounted for. Mr Whittaker said that his original supposition was not correct because, if Mrs Nemes supplied tickets with a face value of $1.47 million but only received payment of fifty per cent of the face value from the recipients of the tickets, this required her to subsidise the balance of $735,000 out of moneys she received from claimants who were not provided with tickets. 123 Mr Kay, an employee of Orbit, told Mr Whittaker that Mrs Nemes provided Orbit with the information for bookings by facsimile, telephone or during her visits to one of its offices. Mr Whittaker found that in most instances Mrs Nemes issued receipts to customers for the actual amount of the money which they paid her for their tickets which was usually fifty per cent or less than the face value of the tickets which were supplied. The receipts she issued to customers did not bear the name of the agency or its travel agent's licence number. He again mentioned the 165 receipts which were issued in the name of individual travellers by Orbit and the three which were issued in the name of Mrs Nemes which totalled $1.47 million. 124 Mr Whittaker then dealt with the payments of commission made to Mrs Nemes between 12 July 1995 and 17 April 1996. These totalled $24,856. He said that the company's accounting records also included five statements prepared by Mr Abdul-Karim in respect of commission claimed by Mrs Nemes during the financial year ending 30 June 1996. The total amount was $16,003. Mr Whittaker said there were no records showing the basis on which commission payments were calculated and it was not possible to establish how much, if any, of the commission claimed in the statements was included in the commission payments actually received. Mrs Nemes was paid one third of the gross commission earned on the travel arranged by Orbit. But Mr Whittaker also said that Orbit did not issue group certificates to Mrs Nemes and that it could not provide a comprehensive record of how much had been paid to her or details showing how the commission payments had been calculated. This was so despite several of the cheque butts, which he listed, bearing the narration "commission as per list". Mr Abdul-Karim said that the lists referred to no longer existed. 125 Mr Whittaker said that Mrs Nemes affirmed on 14 May 1996 that all her business was placed through Orbit. The Fund was aware of only one instance where Mrs Nemes obtained tickets from another travel agent. This occurred at the end of her activities when she was experiencing difficulty obtaining tickets from Orbit. He referred again to the service agreement entered into on 8 May 1996. He said that prior to 8 May 1996 no written service contract existed between the two parties. He had seen no documentation showing how much managerial control Orbit exercised over Mrs Nemes' business activities. 126 Mr GS Grahame is a chartered accountant and a director of Masselos Grahame Masselos Pty Ltd which is the firm to which Mr Masselos belongs. On 8 May 1996 he received a letter of engagement from the Fund addressed to his firm which said that the Fund wished to carry out "a viability review" of the current financial situation of Orbit and of its operations for the past twelve months to ensure that it had and was likely to continue to have sufficient financial resources to carry on business as a travel agent. The letter said that this was because of concerns regarding the agency's trading performance over the past three financial years and reports that the company might be selling at substantial discounts. Mr Grahame was told that the review would include an inspection of the accounting records, supporting customer files and documents and computer records at Orbit's premises. The work was to be carried out by Mr Grahame and Mr Whittaker together. The visit to Orbit's premises on 14 May 1996 had already been arranged. 127 Mr Grahame referred to that visit and said that, on 17 May 1996, he produced a preliminary report of his investigations into the accounts of Orbit. The report is in evidence. Mr Grahame noted a number of matters. He referred to the service agreement suggesting that some questions be asked the Fund's solicitor including whether the nature of Mrs Nemes' activities under the service agreement were such that she was not deemed to be acting on behalf of Orbit and was therefore potentially acting as an unlicensed travel agent in which case appropriate action could be identified and initiated. Mr Grahame also noted that Mrs Nemes appeared not to possess a receipt book in the name of Orbit. He also noted that she had no right to draw cheques. Mr Grahame and Mr Whittaker interviewed Mr Abdul-Karim and Mrs Nemes together. They were asked whether Mrs Nemes acted for other travel agents. Mr Abdul-Karim said that she did. Mrs Nemes denied that this was so. She said that she did not even know any other travel agents and that all her business was placed through Orbit. Both were asked whether or not they were aware of allegations that first class air tickets were being sold at a value of approximately fifty per cent of the face value of the ticket. That is when Mr Abdul-Karim said, "Orbit only issues tickets upon full payment for full value". His Honour referred to this and described the answer as evasive. Mrs Nemes' response was that she was unaware how that could happen. She said many people did initially pay, say, $7,000 for two first class air tickets. That was only a deposit or part payment and the balance would be fully paid at a later time closer to travel. In the light of the surrounding circumstances and the background of the case to which I have referred Mrs Nemes' was simply incorrect. Mr Abdul-Karim's answer was no doubt correct as far as it went but it was the fact that it did not go further which caused his Honour to refer to the answer as evasive. 128 Mrs Nemes was asked how most of her customers paid for their travel. She said that they paid with a cheque or bank cheque. When she was asked whether they provided cash, she said that they did not and that she would be surprised if any of the persons would normally pay by cash. She was then confronted with evidence that substantial numbers of travellers had provided significant portions of their travel costs in cash. This appeared from the Orbit travel receipt book and its bank deposits book. Mrs Nemes agreed that it was possible that many customers paid in cash for a portion of their ticket. Orbit's records show that on 15 February 1996 Mrs Nemes brought $14,100 in cash to Orbit as part payment for certain travel arrangements made for a Mrs Reismann, Mrs Gold, Dr Grinburg and his family. Cheques were received from the same persons which totalled $23,400. The cash and cheques were deposited by Orbit into its account on 15 February 1996. Mr Grahame's report gave further examples of the receipt of cash by Orbit from Mrs Nemes. Two of the transactions to which he referred were said by him to appear "highly suspicious". He recommended that they should be the subject of further scrutiny. Later, he referred to as another group of "suspicious transactions" which consisted of deposits totalling $127,240 said to have been from customers of Mrs Nemes. A list of the deposits appears in the report. 129 An appendix to Mr Grahame's report contains a summary of the travel receipts which Mrs Nemes required to be issued. According to the report, the list was prepared at or about the time Mrs Nemes was in Orbit's office depositing the various cheques which made up the total of $127,240. Mr Abdul-Karim said that the list was in Mrs Nemes' handwriting. Also annexed to the report are receipts "for the majority" of the deposits together with handwritten notes regarding the "manual calculation of fares, etc for this series of transactions". The report noted, in a paragraph which is emphasised, that Orbit was paid for these services with a series of bank cheques primarily in the denomination of $3,500 or a multiple of that figure ie $7,000 or $10,500. Mr Grahame said that certain other "lesser amounts" or "larger odd amounts" were also deposited. The relevant bank deposit slips are also appended to the report. He said that the bank cheques were drawn from a wide range of banks and branches with dates between 22 February 1996 and 20 March 1996. The total of the bank cheques was $125,900 which he said represented a shortfall of $1,340. 130 When questioned Mr Abdul-Karim indicated that the shortfall was for commission due to Mrs Nemes who insisted upon receiving payment for it "in a rather loud and offensive manner at the time when she brought bank cheques to the office" on 21 March 1996. Mr Abdul-Karim, according to the report, indicated that she was paid an amount paid for commission, which was unquantified, from cash which was not banked with the funds. Mr Grahame remarked that this was an inappropriate cash accounting procedure. He said that the transaction was of considerable concern. Firstly, no reconciliation was possible between individual receipts written by Orbit and individual cheques utilised to pay for the travel by the relevant travellers. There was a possibility that bank cheques from traveller A who was booked to travel, say, in May 1996 were used to pay for the travel arrangements of traveller B who was booked to travel in, say, March 1996. Mr Grahame said that there was a possibility of "kiting" whereby one person's funds were being used to pay for another person's travel arrangements. The evidence of course discloses that this is exactly what was occurring. 131 Mr Grahame also said that it was noted that the majority of the cheques were in favour of Orbit Travel. He said that Mrs Nemes would have had trouble negotiating such cheques but he noted that one cheque, not a bank cheque, made payable to cash for $7,000 by one AV Landa was used for payment. There were two instances of cheques made payable to Mrs Nemes, one on 19 July and the other on 2 August 1995. Both were subsequently endorsed in favour of Orbit. 132 The list which is appendix C8 to Mr Grahame's report is as he described it. But it is impossible without accurate information to make anything out of it. Annexures C1-C7 inclusive are receipts issued to a variety of people for various amounts. The receipts are issued on Orbit receipt forms. They are initialled under Orbit's name by someone who is not identifiable from the evidence. 133 The subsequent appendices are not comprehensible without more information than appears to be available. Amongst these, however, is a deposit slip dated 21 March 1996 bearing the name of the State Bank. It shows the cheque by AV Landa and a number of cheques described as bank cheques sometimes in multiples of $3,500 although that is by no means universally so. It is impossible to divine the overall significance of all this without the input that, on the face of the evidence, did not come from either Mrs Nemes or Mr Abdul-Karim, who were, in any event, as some of their answers disclose, at complete odds about various matters of significance. 134 There is more material in Mr Grahame's report which calls for an explanation. I have considered it but I do not find it profitable to refer further to what he has said. Undoubtedly, Mr Grahame and Mr Whittaker were left in a state of uncertainty as to what the position was. 135 These proceedings were not commenced by the Fund or the Minister but by Orbit. Their purpose was to restrain the Fund calling up the guarantee given by the National Australia Bank. But the case was brought (and the Fund's cross-claim defended) without either Mr or Mrs Abdul-Karim or, for that matter, Mrs Nemes, being called. Her absence from the witness box is explained by her illness. There is no explanation for the failure to call the Abdul-Karims. The Court did not have the benefit of the evidence that they might have been able to give. A very deliberate decision must have been made not to call them. The principles which apply in such a case are those referred to in Jones v Dunkel (1959) 101 CLR 298. The case is often referred to and has been the subject of much judicial comment since it was decided. Nevertheless it remains authority for the proposition that in circumstances such as this, where persons who may have been expected to be called in a party's case are not called, the Court should take the view, in the absence of other factors, that nothing the witnesses not called could have said would have been of assistance to the party's case. Jones v Dunkel is also authority for the proposition that, in the absence of such witnesses from the witness box, the Court may more readily draw inferences which are open on the evidence which has been led. Rich J, in his judgment in an earlier decision of the High Court, Joyce v The Insurance Commissioner (1948) 77 CLR 39 said (at 49), "… when circumstances are proved indicating a conclusion and the only party who can give direct evidence of the matter prefers the well of the court to the witness box a court is entitled to be bold". 136 Of course, the party bringing a case must prove it. Sufficient evidence must be led in that party's case to establish the elements of the cause of action on which reliance is placed. A gap in a party's case will not be filled because of the absence of the other party from the witness box. That is so even where, as in the present case, the facts of the matter are peculiarly within the knowledge of the other party. 137 I have decided that the best way of dealing with the issues to which the parties' submissions give rise is to pose a number of questions and answer them. The first question is whether Mrs Nemes was carrying on business as a travel agent within the meaning of s.4 of the Travel Agents Act. Subsection 4(2) provides that a person does not carry on business as a travel agent by reason only of doing in the course of his or her employment anything referred to in s.4(1). The provisions of that subsection have been earlier set out. I think it is clear on the face of the evidence that Mrs Nemes was not an employee of Orbit at any relevant time. She was held out, particularly by reason of the reference to her in the travel trade publications, as a member of the Orbit selling staff and she was, on the face of the evidence, a representative of Orbit. Whether she acted in that capacity in relation to the transactions here in question is one of the matters to be considered notwithstanding his Honour's finding that she held herself out as doing so. The various activities which comprise carrying on business as a travel agent are specified in the four paragraphs of s.4(1). In what she did Mrs Nemes was carrying out the activities referred to in paragraphs (a) and (b). In paragraph (d) of s.4(1) there is reference to carrying on an activity prescribed for the purposes of the paragraph, but, in my opinion, it has no relevance for present purposes. The prescription provided for in Regulation 5 has no application here. 138 As I understood the submissions made on behalf of the appellants, it was not really contested that Mrs Nemes was carrying out the activities referred to in paragraphs (a) and (b) of s.4(1). What was said was that she was not carrying on a business. Reference was made to a number of authorities, as I have said. I have mentioned both Hyde v Sullivan and Hope v Bathurst City Council from which I have cited a passage from the judgment of Mason J. Subject to one matter I think it may be said that Mrs Nemes was carrying on a business. She was over a period systematically engaged in an activity which involved her in procuring travel for customers at rates which had become known as very cheap. Her activities became well known to a certain section of the community and she developed a not insubstantial clientele. It was said that she did not hold herself out as carrying on the business of a travel agent. Certainly she did not have an office, although she visited Orbit's office from time to time and members of its staff came to her. She did not advertise in any public way but she was able to carry on her activities because knowledge of them was passed by word of mouth. What she was doing had the hallmarks of a business activity. The one matter upon which counsel placed strong reliance was that she could not have been said to be carrying on this activity with a view to profit. That was one of the elements mentioned by Mason J in the passage earlier quoted from his judgment in Hope v Bathurst City Council. 139 Mrs Nemes had a reason for carrying on the activities in the way which she did. To her it was a good reason. To many, particularly those who read the medical evidence in this case, the reason was not a rational one. It is possible that she did think that she could keep what she was doing going for long enough to give her a continuing cash flow even if she did not ultimately make any profit. In the end one has to construe the statute. If a person is carrying on an activity which fits the section and which has the hallmarks of a business, I think that one would pause for a long time before deciding that it was not within the section because the party carrying on the activity was not motivated by profit or gain. The section is to be found in an Act intended to protect consumers. In those circumstances it ought not receive any narrow or confined construction. The fact that most people are in business with a view to making a profit is not to the point. It is the nature of the activity which is all important and she was, as I have endeavoured to demonstrate, engaged in activities of the kind specified in paragraphs (a) and (b) of s.4(1). Furthermore, the expression "carrying on business" has to be construed in its context in this statute. So many of the cases are concerned with the construction of similar words in a variety of statutes. Hyde v Sullivan was a case involving the construction of money lending legislation; Hope v Bathurst City Council was a case involving local government legislation. In an income tax case, Federal Commissioner of Taxation v Whitfords Beach Pty Ltd (1982) 150 CLR 355 Mason J referred (at 378-9) to expressions such as "business deal", "operation of business", "business", "commercial" and "trading". He said of them that they had about them a chameleon-like hue, readily adapting themselves to their surroundings, different though they may be. He added that, in some contexts "business deal" and "operation of business" might signify a transaction entered into by a person in the course of carrying on a business; in another context they denoted a transaction which was business or commercial in character. Each statute has to be construed in its context and against the background of its purpose, really the mischief with which it was designed to deal, cf Australian Health Insurance Association Ltd v Esso Australia Ltd (1993) 41 FCR 450 at 456-60 and 491-94 referred to in the judgment to be delivered by Powell JA. 140 Section 4 contemplates two things: there must be the carrying on of a business as a travel agent. So, there must be involved a business activity. And the activity must be one of those specified in the paragraphs of s.4(1). Mrs Nemes did carry on activities falling within the section. Objectively speaking these may have been carried on irrationally. But to hold that, for this reason, she was not carrying on the business of a travel agent, would, in my opinion, run counter to the clear intention of Parliament. I am satisfied that the activities carried on by Mrs Nemes did involve her in carrying on business as a travel agent. 141 The next question is whether Mrs Nemes was for any purpose acting as an agent or representative of Orbit. His Honour found that Mrs Nemes had actual authority from Orbit to receive money on its behalf. It received from her the moneys paid by the claimants to her. It followed that Orbit was liable to account for the money. Counsel for the appellants said that his Honour was in error in finding that Mrs Nemes had authority to receive money from the claimants on behalf of Orbit. It was submitted that his Honour had asked himself the wrong question. It was said that he should have asked whether Mrs Nemes had authority to receive money on behalf of Orbit from each particular claimant in the circumstances in which it was paid to her. Counsel's point was that, although the moneys received by Mrs Nemes were paid over to Orbit, they were not paid over with notice to Orbit that they were for the acquisition of tickets and other items for particular persons at heavily discounted prices. The evidence establishes that, in many cases, Orbit received the moneys from Mrs Nemes in the form of bank cheques or cash so that the names of the persons paying it were not readily identifiable. It acted on Mrs Nemes' instructions, or at least at her request, to issue tickets in the names of particular persons at the full price. What Orbit did not know, at least as far as the evidence disclosed, was that, when it applied the moneys for the purchase of these tickets, it was using moneys paid by potential travellers who were not necessarily the persons in whose names the tickets were issued. 142 The difficulty I have with all this is that Orbit did issue 165 receipts in the names of persons identified as having paid moneys to Mrs Nemes. The moneys were paid in the form in which the customers gave the moneys to her. She did not operate the business she carried on through a bank account. She simply passed on the cash, bank cheques and other cheques to Orbit which paid them into its account. The investigation made by Mr Whittaker and Mr Grahame established that its records were in a sorry state. One could not find out from the records which were produced on whose behalf the money had been received. Orbit thus lent itself to the activity which Mrs Nemes was carrying on albeit that it may not have known precisely what the nature of her activity was. It was not out of pocket because it was able to pay from moneys she had deposited sufficient moneys to cover the tickets and other travel arrangements at the ordinary market price. Of the $1.47 million she received, over $800,000 was from persons who did not obtain the advantage of the travel which they had been promised. Their money was received by Mrs Nemes and paid by her to Orbit. 143 It then becomes relevant to take into account the fact that Mrs Nemes for many years had been represented by Orbit in publications circulated in the travel industry and to others to be a member of the Orbit selling staff. Consistently with this she held herself out as a representative of Orbit. That is what it said she was. A customer who was concerned about arrangements, and there is evidence from some that they were, could approach Orbit directly and find out what arrangements had been made. Some did this. Furthermore, Orbit issued tickets under its name. Itineraries were prepared in Orbit's name. Orbit informed customers procured by Mrs Nemes that their travel arrangements were in place. One saw his cheque in a file in Orbit's office. 144 Orbit either itself issued Mrs Nemes with tickets, or procured the issue of tickets to Mrs Nemes, by Metro Travel, the tickets having a potential value of approximately $500,000. She had these at her disposal. As mentioned, Orbit received the moneys paid to her by the customers. Orbit had it in its power to require a proper accounting by her of the moneys which she paid over in the sense of identifying the purpose for which it was paid and the names of the person or persons for whose benefit it was paid. This does not appear to have been done. All that happened was that, as tickets were required, they were debited to the moneys available in the account. 145 I think his Honour was well justified in concluding that Mr Abdul-Karim's answer to Mr Whittaker in which he did not directly answer the question whether he knew of what was happening by saying that Orbit always issued tickets at the full price, was evasive. A consideration of the evidence of Mr Whittaker and Mr Grahame, who carried out the investigations which I have partly described, shows that, although there were repeated assurances that every assistance would be granted, all relevant documents produced and moneys paid if it could be established that Orbit had received moneys and not accounted for them, the position was quite unsatisfactory because the Abdul-Karims were quite unhelpful and their documentation was inadequate. 146 Then one comes to the problem created for them by their absence from the witness box. If there was an explanation for all this, it was only the Abdul-Karims or, perhaps, their accountant, who could give it. I have looked at the evidence of Mr White, who gave evidence on behalf of Orbit, but I do not find in his evidence any explanation of any consequence about what transpired. There is much that has not been revealed. It has not been revealed because the Abdul-Karims have not been prepared to go into the witness box and because their records are in the state which I have described. One is entitled to conclude that Orbit's case would have been no stronger if they had given evidence. 147 Counsel for the appellants submitted that an authority to receive money was not an authority "in the air". It was authority to receive money in particular circumstances or for particular purposes. Ordinarily I would agree. But, so far as the evidence discloses, Orbit, in the way that it carried on its business, denied itself the opportunity of finding out the answers to those questions. It was for it to seek information identifying the purpose for which the moneys paid to it had been received. There is nothing in the evidence which suggests that that was what it ever did. One is left with the impression that, on the totality of the evidence, it is a case where Orbit decided it would be better not to ask questions. After all, it must have been writing a significant amount of business as a consequence of Mrs Nemes' activities. Reference is made in the evidence to the amount of commission paid to her. Even that is vague and unsatisfactory. But it is said in various places that it was substantial although, so far as the figures go, it may only have been about $25,000 paid in respect of a period of over a year. But how much commission was Orbit receiving for what was going on? The evidence does not reveal it. Mr and Mrs Abdul-Karim have not told the Court about this matter. 148 I do not think that it is going too far to say that, on the face of the evidence, notwithstanding his Honour's findings about actual and ostensible authority, Orbit did either know or have strong reasons to suspect that there was some activity being carried on by Mrs Nemes which was yielding an extraordinary amount of business. In my consideration of this matter, I have wondered from time to time about the significance of the service agreement entered into on 8 May 1996. What was the reason why Mr Abdul-Karim asked Mrs Nemes to sign it. By that time he knew that there was a problem. Mr Dart had been to see him in April. He knew that Mr Whittaker and Mr Grahame were coming. Their appointment had been made. The agreement makes clear that Mrs Nemes was some kind of representative of Orbit. No legal advice was obtained. It is confirmatory of her representative status and thus tends to support the respondents' case. Perhaps that is all that need be said about it. But, in all the circumstances, it seems a very odd thing for Mr Abdul-Karim to have done, there apparently never having been an agreement in writing over the twelve years of the relationship which Mrs Nemes had had with Orbit. 149 All these factors lead me to the conclusion that his Honour was correct in the approach which he took and that the criticism made in counsel's submission is not warranted. It follows that I agree with his Honour in his view that Orbit is liable to the persons whose money was paid to it who have not received a proper accounting of it. That liability arises, not under the Travel Agents Act, but under the general law. 150 Next needs to be considered the question of subrogation provided for in s.40(3). It provides that, where a payment is made to a claimant under the compensation scheme by reason of an act or omission by a person carrying on business as a travel agent, the compensation scheme trustees are subrogated to the rights of the claimant in relation to the act or omission. I have earlier referred to the provisions of the deed and particularly to clauses 15.1 and 15.2. Here payments have been made pursuant to those clauses. Some of the payments have been made under clause 15.1 which is not discretionary and some under clause 15.2 which is. I agree with submissions made on behalf of the respondents that it matters not whether the payments were made under clause 15.1 or clause 15.2. In either case the payments are made under the compensation scheme. This case is really concerned with two persons carrying on business as a travel agent. One is Mrs Nemes who is unlisted and the other is Orbit which is licensed. The act or omission referred to in s.40(3) was, however, in the circumstances of this case, in relation to the operation of s.40(3), the relevant act or omission is that of Orbit, not Mrs Nemes. It is its failure to account for the moneys paid by potential travellers to it through the agency of Mrs Nemes which is the failure in question. Accordingly, the trustees are subrogated to the rights of the various claimants who paid money but have not received any benefit from their payment or any accounting in respect of it. The trustees are thus subrogated to the rights of those claimants. The answer to this question does not depend on Mrs Nemes being an unlisted person within s.40. 151 Then there is s.40(6). The operation of s.40(6) in the circumstances of this case may not add much to the conclusions at which I have already arrived. That was his Honour's view. Subject however, to one matter of difficulty, it is capable of operating independently of the matters I have so far relied upon to create a liability in Orbit. I have said that the act or omission referred to in s.40(3) was relevantly the act or omission of Orbit. But it is also the act or omission of Mrs Nemes who was an "unlisted person" within the meaning of s.40. The section goes on to say that, in those circumstances, any other person who, in the course of carrying on a business, provided the unlisted person with goods or services in relation to which the act or omission occurred, shall, for the purposes, inter alia, of s.40(3), but in relation only to the act or omission insofar as it involved those goods or services, be deemed to have, at the time of the act or omission, carried on business as a travel agent in partnership with the unlisted person. It may be difficult to take the view that Orbit provided Mrs Nemes with goods or services in relation to which the act or omission occurred. It certainly provided her with goods or services in the sense of supplying her with tickets in blank. But she did not use these for the benefit of those whose money was applied to the travel of others. If the section applied, Orbit and Mrs Nemes would be deemed to be in partnership and Orbit would be liable for Mrs Nemes' default as her deemed partner. But I have reservations about whether the section has any application at all to the circumstances of this case. His Honour did not decide the question and I do not find it necessary to reach a conclusion on it either. 152 It is sufficient to conclude, as I have done, that the act or omission of Orbit in failing to account to the various claimants was an act or omission within the meaning of s.40(3) thus giving rise to the rights of subrogation for which that subsection provides. 153 That leaves the personal liability of the Abdul-Karims. Section 40(4) provides that where the rights conferred by s.40(3) on the compensation scheme trustees are exercisable against a body corporate, the rights are enforceable jointly against the body corporate and the persons who were its directors at the time of the act or omission. Section 40(5) provides that, where it is proved that an act or omission by a body corporate occurred without the knowledge or consent of a director of a body corporate, the rights conferred by s.40(4) are not enforceable against that director in relation to the act or omission. The Abdul-Karims sought to rely on s.40(5). They bore the onus of proof of the matters for which the subsection provides. They did not give evidence and the evidence in relation to the company's affairs is as I have indicated. In those circumstances I think it is quite impossible to find that the onus provided for in s.40(5) has been discharged. That was his Honour's conclusion and I agree with it. 154 In the result I am in general agreement with his Honour's reasons and conclusions. The appeal should be dismissed with costs. * * * * * * * * * DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.