New South Wales Supreme Court CITATION : Heperu Pty Ltd & Ors v Morgan Brooks Pty Ltd & Ors (No 2) [2007] NSWSC 1438 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 10 to 19 and 23 April 2007 JUDGMENT DATE : 12 December 2007 JURISDICTION : Equity Division JUDGMENT OF : Palmer J DECISION : See paragraphs [175]-[178] CATCHWORDS : PRINCIPAL AND AGENT – AUTHORITY – Whether fraudster had actual or apparent authority to enter contract for First Defendant. - TRUSTS – FIDUCIARY DUTY – Whether wife of fraudster knew of fraudulent activity – whether wife was knowing recipient of misappropriated funds. - BANKING – CHEQUES – CONVERSION – Whether cheques obtained by fraud converted by Fifth Defendant. Civil Procedure Act 2005 (NSW) – s 100 LEGISLATION CITED : Contracts Review Act 1980 (NSW) – s 7 Fair Trading Act 1987 (NSW) – s 42 - Barnes v Addy (1874) LR 9 Ch App 244 - Black v S Freeman & Co (1910) 12 CLR 105 - Bute (Marquess) v Barclays Bank Ltd [1955] 1 QB 202 - Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22, (2007) 236 ALR 209 - Gurtner v Beaton [1993] 2 Lloyd's Rep 369 - Hungerfords v Walker (1989) 171 CLR 125 - Karak Rubber Co Ltd v Burden (No 2) [1972] 1 WLR 602; [1972] 1 All ER 1210 CASES CITED : - Lloyds Bank Ltd v Chartered Bank of India, Australia and China [1929] 1 KB 40 - National Commercial Banking Corporation of Australia Ltd v Batty (1986) 160 CLR 251 - NIML Ltd v MAN Financial Australia Ltd [2006] 15 VR 156 - Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204 - Petersen v Moloney (1951) 84 CLR 91 - Sunray Irrigation Services Pty Ltd v Hortulan Pty Ltd (in liq) [1993] 2 VR 40 - Voss v Davidson [2003] QCA 252 - Bowstead & Reynolds on Agency (18th Ed) paras 8-013, 8-014, 8-114 Heperu Pty Ltd – First Plaintiff Kirisi Holdings Pty Ltd – Second Plaintiff Barry Samuel Landa – Third Plaintiff / Cross Defendant Drummoyne Administrative Services Pty Ltd – Fourth Plaintiff PARTIES : Morgan Brooks Pty Ltd – First Defendant Dominic Cincotta – Second Defendant ACN 067 567 702 Pty Ltd (In liq) – Third Defendant – Dismissed Patrice Ann Cincotta (now Patrice Belle) – Fourth Defendant Perpetual Trustees Australia Ltd – Fifth Defendant / Cross Claimant FILE NUMBER(S) : SC 6165/03 G.K. Burton SC, Ms C.L. Cochrane – Plaintiffs / Cross Defendant COUNSEL : R. Aulsebrook – In person – Director of First Defendant J.S. van Aalst – Fourth Defendant R.E. Dubler SC – Fifth Defendant / Cross Claimant Thomas Bray – Plaintiffs / Cross Defendant SOLICITORS : R. Aulsebrook – Director of First Defendant Hardings Lawyers – Fourth Defendant Phillips Fox – Fifth Defendant / Cross Claimant 6165/03 Heperu Pty Ltd & Ors v Morgan Brooks Pty Ltd & Ors (No 2) JUDGMENT 12 December, 2007 INTRODUCTION The nature of the case 1 The First Plaintiff ("Heperu"), the Second Plaintiff ("Kirisi") and the Fourth Plaintiff ("DAS") are companies controlled by the Third Plaintiff, Dr Barry Landa. For the sake of convenient reference, I will refer generally to the Plaintiffs as "Dr Landa", because it was Dr Landa who made all relevant decisions affecting their interests. 2 Between August 2001 and November 2003, Dr Landa paid over $4M to Mr Dominic Cincotta for investment. Mr Cincotta fraudulently misapplied the money. Only $1M has been recovered. Mr Cincotta is now bankrupt. 3 In these proceedings, Dr Landa seeks to recover the balance of his investment from those who are, he says, liable for the loss, although they were not direct participants in Mr Cincotta's fraud. Morgan Brooks 4 The First Defendant ("Morgan Brooks") carried on business as a mortgage originator and mortgage manager. It found non-bank lenders for people wishing to borrow on the security of a mortgage. Mr Richard Aulsebrook was the founder and Managing Director of Morgan Brooks. He has conducted this case on behalf of Morgan Brooks, although he is not a lawyer. 5 In 1994, Morgan Brooks entered into a written agreement with Mr Cincotta and his then-wife, now Ms Belle, the Fourth Defendant. Under this agreement Mr and Mrs Cincotta were appointed as Morgan Brooks' "Coffs Harbour Agent" upon certain terms ("the Coffs Harbour Licence Agreement"). 6 In 1995, Morgan Brooks entered into a written agreement with Mr Cincotta's company, the Third Defendant ("ACN 067"). Mr Cincotta, Ms Belle and another director of ACN 067 were also parties to the agreement. Pursuant to the agreement, ACN 067 was appointed as Morgan Brooks' "Double Bay Agent" upon certain terms ("the Double Bay Licence Agreement"). 7 The legal effect and consequences of these two Licence Agreements are much in dispute. Ms Belle 8 Ms Belle and Mr Cincotta were married in 1981 and separated in about May 2004. Since August 2004, Ms Belle has been living in Fiji. 9 Ms Belle is made a defendant in the proceedings because money misappropriated by Mr Cincotta was placed in a cash management account in her name with the Fifth Defendant ("Perpetual"). The account had been opened by Mr Cincotta in 1995. Money from this account was withdrawn by Mr Cincotta and placed in a Westpac cash management account which had also been opened by Mr Cincotta in the name of Ms Belle in 1993. 10 Ms Belle asserts that she had no knowledge of Mr Cincotta's frauds and, in particular, of the use which Mr Cincotta had made of accounts in her name, until these proceedings were commenced. Perpetual 11 Dr Landa borrowed substantial sums from Perpetual Trustees Victoria Ltd ("PTV") in order to invest the borrowed funds with Perpetual pursuant to an investment scheme, called an "offset mortgage account", which was to result in a profit to Dr Landa. The "offset mortgage account" scheme did not exist: it was an illusion fraudulently created by Mr Cincotta. PTV is a related company of Perpetual but is not a party to these proceedings. 12 Dr Landa does not assert that Perpetual was aware that the money which it received into Ms Belle's cash management account was the proceeds of a fraud by Mr Cincotta. Dr Landa's claims against Perpetual are for conversion of cheques, money had and received, negligence causing economic loss, and misleading or deceptive conduct in the information it published as to its administrative procedures in accepting deposits from investors. THE CASE AGAINST MORGAN BROOKS The claim in contract 13 I repeat that, for convenience, I include all corporate Plaintiffs within the term "Dr Landa", since Dr Landa was their controller. 14 The Second Further Statement of Claim alleges that: – Mr Cincotta was, at all material times, Morgan Brooks' "Coffs Harbour and Double Bay Mortgage Manager" and was an employee or agent of Morgan Brooks with actual or ostensible authority to enter into contracts on behalf of Morgan Brooks; – in about August 2001 Morgan Brooks, by Mr Cincotta as its agent, entered into a contract with Dr Landa whereunder Dr Landa agreed to invest money with Morgan Brooks, via the agency of Mr Cincotta or ACN 067, for the purpose of Morgan Brooks investing that money with Perpetual on Dr Landa's behalf, and Morgan Brooks agreed to repay the sums invested together with interest at 8% per annum and to cause shares in Perpetual to be allotted or transferred to Dr Landa at the rate of 1,000 for each $1M invested for each year of the investment ("the Contract"); – pursuant to the Contract, Dr Landa invested the following money with Morgan Brooks: $351,000 on 23 August 2001; $342,857 on 28 September 2001; $302,875 also on 28 September 2001; $1,198 on 28 November 2001; $502,070 also on 28 November 2001; $250,000 on 13 August 2002; $995,452.50 on 20 December 2002; $100,000 on each of 20 March, 22 (or 23) April, 20 (or 21) May, 20 June, 25 July, 27 August and 25 September 2003; $550,000 on 6 June 2003; $50,000 on 31 October (or 3 November) 2003; $19,449.84 on 6 (or 7) November 2003; – on 17 October 2001, Morgan Brooks represented to Dr Landa that 1,000 shares in Perpetual for every $1M invested for each year of the investment would be allocated to Dr Landa as consideration for Dr Landa's investment with Morgan Brooks; – commencing on 18 and 20 November 2003, Dr Landa instructed Morgan Brooks to repay the funds invested with it and to apply the repayments in the discharge of certain mortgages granted by Dr Landa in favour of PTV; – in breach of the Contract, Morgan Brooks failed to repay all the sums invested, together with interest at the agreed rate, and failed to cause shares in Perpetual to be allotted as agreed, whereby Dr Landa has suffered damage. The claim in fiduciary duty 15 Dr Landa further alleges: – by reason of the Contract, Morgan Brooks owed him fiduciary duties in relation to the money invested with Morgan Brooks: to act in good faith and in Dr Landa's best interests; to deal with the money provided by him only for the purposes of investing in accordance with the Contract; not to place itself in a position of conflict of interest and duty; – by reason of the Contract, Morgan Brooks was a trustee of the funds invested with it by Dr Landa; – in breach of fiduciary duty and in breach of trust, Morgan Brooks withdrew money standing to the account of Dr Landa with Morgan Brooks and deposited the money in the account of Ms Belle with Perpetual, whereby the money was lost and Dr Landa has suffered loss. Morgan Brooks' defences 16 By its Defence, Morgan Brooks: – denies that Mr Cincotta and ACN 067 were at any material time its manager, employee or agent and that they were authorised, actually or ostensibly, to enter into any contract on behalf of Morgan Brooks; – says that Mr Cincotta and ACN 067 carried on their own businesses at Coffs Harbour and Double Bay respectively and used only the name "Morgan Brooks" pursuant to a licence; – says that Mr Cincotta and ACN 067 were only licensed to accept applications for loans for forwarding to Morgan Brooks for processing and to advise applicants for those loans whether Morgan Brooks had approved or declined their applications; – says that Mr Cincotta and ACN 067 were not authorised, actually or ostensibly, to provide any other services on behalf of Morgan Brooks; – denies that it made any transfer of Dr Landa's money into any account at Perpetual; – denies the facts said to constitute it a fiduciary; – says that on 19 March 2004 Heperu and Kirisi obtained judgment against Mr Cincotta and ACN 067 for payment of the money claimed in these proceedings whereby they are estopped from, or have irrevocably elected against, claiming in respect of the same monies against Morgan Brooks. The issues 17 The issues may be summarised thus: – is Dr Landa barred by estoppel or election from pursuing his claim against Morgan Brooks; – if not, did Morgan Brooks, by its agent Mr Cincotta or ACN 067, enter into a contract with Dr Landa in the terms alleged. The sub-issues are: – what authority, if any, was actually conferred on Mr Cincotta and ACN 067, expressly or by implication, so as to bind Morgan Brooks; – did Morgan Brooks hold out Mr Cincotta and ACN 067 to Dr Landa as having authority to bind Morgan Brooks to the alleged Contract; – if the Contract between Morgan Brooks and Dr Landa is found proved, what is the quantum of Dr Landa's damages. 18 If the Contract is found proved, the fiduciary duties on the part of Morgan Brooks will follow, as the Contract required Morgan Brooks to act as agent for Dr Landa in making certain investments. If the Contract is not found proved, no fiduciary duties can arise. Estoppel or election 19 Morgan Brooks submits that: – on 19 March 2004 Mr Cincotta and ACN 067 consented to judgment against them in these proceedings; – inherent in that judgment was a finding that they were liable to Dr Landa as the principal obligors; – Dr Landa contends that Mr Cincotta and ACN 067 were the agents of Morgan Brooks; – where an agent has contracted liabilities and a third party chooses to sue the agent rather than the principal, the third party is bound by that election so that judgment against the agent precludes a claim against the principal. 20 I accept the submissions of Dr Landa that this argument cannot succeed. The proposition of law upon which Morgan Brooks relies is not stated accurately in its submissions. The principle is as stated in Bowstead & Reynolds on Agency (18th Ed) para 8-114: "Where an agent enters into a contract on which he is personally liable, and judgment is obtained against him on it, the judgment, though unsatisfied is, so long as it subsists, a bar to any proceedings against the principal, undisclosed or (perhaps) disclosed, on the contract." See also Petersen v Moloney (1951) 84 CLR 91, at 102-103; Sunray Irrigation Services Pty Ltd v Hortulan Pty Ltd (in liq) [1993] 2 VR 40, at 41. 21 In the present case, Dr Landa has never sued Mr Cincotta and ACN 067 on a contract allegedly entered into between either of them and Dr Landa. The only contract upon which suit was brought was a contract alleged between Morgan Brooks and Dr Landa. The claims against Mr Cincotta and ACN 067 were founded upon breach of a fiduciary duty said to arise from the circumstances in which they undertook to arrange the Contract with Morgan Brooks, and undertook to carry out certain activities under that Contract for the benefit of Dr Landa. 22 Accordingly, the consent judgments are not judgments against Mr Cincotta and ACN 067 on the Contract, or upon any contract, and the doctrine relied upon does not apply. Dr Landa's investments 23 The evidence of Dr Landa as to what Mr Cincotta said to him to induce him to make the investments has not been contradicted by Mr Cincotta, who has not given evidence in the trial. Dr Landa's evidence is not inherently improbable nor is it in conflict with contemporaneous documents. Although Dr Landa made a number of corrections to the dates which he had given in his affidavits as to when certain discussions took place and otherwise amplified the evidence in earlier affidavits, I do not regard these corrections and amplifications as providing any reason to doubt the reliability of Dr Landa's evidence generally, and I accept it. 24 I make this finding notwithstanding a general attack on Dr Landa's credit by Mr Aulsebrook, who took Dr Landa to various statements of his income and assets and liabilities in an endeavour to show that Dr Landa's evidence was not reliable. I did not find that these criticisms indicated any general want of commercial integrity. 25 Dr Landa met Mr Cincotta and Mrs Cincotta, as Ms Belle was then known, in June 2001. They were introduced by Dr Landa's sister-in-law and her brother, Mr Sendro, at a social engagement. Dr Landa's sister-in-law and her brother told Dr Landa that they had invested money on call with Perpetual through Morgan Brooks. 26 At the conclusion of the social event, Mr Cincotta went with Dr Landa to a nearby coffee shop to discuss the proposed investments. Mr Sendro was also present. A Mr Neil Wright later joined them. Mr Cincotta and Mr Wright gave Dr Landa their business cards. Relevantly, they showed as follows: " morgan brooks group The Professional Non Bank Lenders Morgan Brooks Coffs Harbour Dominic Cincotta Tel: xx xxxx xx54 Director Fax: xx xxxx xx70 Mobile: xxxx xxx x33 xx xx Street Coffs Harbour NSW 2450 Email: xxxxxxxxx.net.au" " morgan brooks group The Professional Non Bank Lenders Morgan Brooks Double Bay Neil Wright Tel: xx xxxx xx20 Manager Fax: xx xxxx xx89 Mobile: xxxx xxx x11 xx xx Street Double Bay NSW 2028 Email: xxxxxxxxxx.com.au" 27 The proposal which Mr Cincotta put to Dr Landa was that he could arrange an investment, a cash deposit, with Perpetual at the rate of 8% per annum and, in addition, Dr Landa would be allocated 1,000 shares in Perpetual for every $1M invested, giving an effective return of about 12% per annum. Dr Landa would borrow the money to be invested from a related company of Perpetual, PTV, on the security of a mortgage over Dr Landa's various properties. The amount of interest which Dr Landa would receive from Perpetual on his investment with that company would be offset against, and would exceed, the interest which he would have to pay on his loan from PTV, so that the difference would be profit to Dr Landa. 28 Before deciding to invest, Dr Landa searched Morgan Brooks' website. The copy of the website pages, although made later by Dr Landa in December 2003, contains much the same material as appeared in June 2001, according to Dr Landa. 29 The web page shows prominently the name "Morgan Brooks", under that "Direct", under that "Wholesale Non Bank Lenders". Under the heading "Who are we", appears the following: "Morgan Brooks DIRECT is a Wholesale Non Bank lending institution providing residential & commercial mortgage loans at competitive WHOLESALE rates. The Morgan Brooks Group is an established Fund Manager within the Banking & Finance Industry; and is a full member of the Mortgage Industry Association of Australasia [MIAA], Australian Securitisation Forum and Commerce Queensland." 30 The website shows the addresses of "Mortgage Process Centres" in Sydney and Melbourne and a "Head Office Mortgage Process Centre" in Queensland. Then follows under the heading "All Capital Cities and Select Regional" addresses and contact details of various offices. Under the heading "Coffs Harbour" appeared the address of Mr Cincotta's office and the following: "Manager: Dominic Cincotta", underneath that "Email: info@morganbrooks.com.au". 31 Nowhere on the website is there a statement that the "offices" listed are independent businesses or companies, rather than merely offices of whatever corporation is trading under the name "Morgan Brooks DIRECT". 32 In August 2001, Dr Landa took his cheque for the first investment to Mr Cincotta's office in Double Bay. He observed that the Double Bay office had the name "Morgan Brooks Group" on the signboard in the foyer of the building and on the entry to the office. Photographs tendered in evidence show that the name Morgan Brooks is prominently displayed. 33 On two occasions after he made his first investment, Dr Landa visited Mr Cincotta at Coffs Harbour and observed the name "Morgan Brooks Home Loans" on the awning and on the windows of Mr Cincotta's office. Inside the Coffs Harbour office Dr Landa observed brochures, office letterhead and business cards bearing the name "Morgan Brooks Group". There can be no doubt that as at 2001 and thereafter Mr Cincotta and ACN 067 were using in the conduct of the businesses at the Coffs Harbour and Double Bay offices, stationery, signage and logos which prominently bore the words "Morgan Brooks Group". 34 Mr Aulsebrook agreed that although Morgan Brooks had not registered the business name "Morgan Brooks Group" until May 2004, Morgan Brooks had been using that name in trade and commerce in connection with its business since before 2000. Since May 2000, Morgan Brooks had also been using the name "Morgan Brooks DIRECT" in connection with its business. Mr Aulsebrook agreed that since May 2000 Morgan Brooks had permitted its licensees' offices, including the Coffs Harbour and Double Bay offices, to use stationery and signage with "Morgan Brooks DIRECT" on them. Mr Aulsebrook said that the stationery had to be approved by Morgan Brooks: it could either be created and printed by the licensee and approved by Morgan Brooks, or printed by Morgan Brooks itself at the cost of the licensee. However, Mr Aulsebrook said that the stationery of each licensee was required to show the ACN or ABN of the licensee's own company or business, not that of Morgan Brooks itself. 35 Mr Aulsebrook agreed that he probably saw the signage on the Coffs Harbour office five or six times between 1995 and 2003, and the signage on the Double Bay office two or three times during that period. He had had no complaints with the way that the Morgan Brooks' signage was used on Mr Cincotta's offices. 36 Mr Aulsebrook also agreed that there was no signage on the Coffs Harbour office or the Double Bay office to the effect "this is an independent business operating under the Morgan Brooks' banner". He said that there could have been a laminated certificate displayed in the Double Bay office and Coffs Harbour office containing words to that effect, but he could not produce a copy of such a certificate nor could he say that he had seen the certificate displayed in the Coffs Harbour office or the Double Bay office. 37 On 17 October 2001, Mr Cincotta sent Dr Landa a letter confirming the investments which he had made to that date. They totalled $996,732 and some of the money had been provided by mortgages over Dr Landa's properties. The letterhead on which the letter was written shows "morgan brooks group", and under that "The Professional Non Bank Lenders". The address is shown as follows on the right hand side: "DOUBLE BAY OFFICE xx xx Street DOUBLE BAY NSW 2028" The letter states: "Dear Dr Landa, RE: Account Name: HEPERU Pty Ltd Account Number: xxx Account Type: Mortgage Offset – Perpetual Trustees Ltd" I refer to your mortgage offset account: Property at: xx BONDI JUNCTION xx PYRMONT $351,000 on 23rd August 2001 Credits: $342,857 on 28th September 2001 $301,875 on 28th September 2001 Interest Rate: 8.00% per annum Interest Frequency: 15th of each month Bank: Westpac Account: xx Share Allocation: 1000 Fully paid – Perpetual Trustees Closing Balance: $996,732.00 If you have any queries about this please contact me. Regards [signature] Dominic Cincotta Manager MORGAN BROOKS GROUP Visit Our Web Site: www.morganbrooks.com.au" 38 Down the right hand margin of the letter, printed as part of the letterhead, are numerous locations under the heading "LICENSED OFFICES". Included amongst them are "Coffs Harbour" and "Double Bay". At the foot of the list appears "HEAD OFFICE", beneath that "Level 8, The Lexington, 300 Adelaide Street, BRISBANE QLD 4000". At the very foot of the column on the right hand side and printed in very small letters is: "Licensee Number 5418, ABN 31 067 567 702". 39 There is nothing on the letterhead to explain what sort of licence the "licensee" holds nor is there anything which reveals that the "licensee" is some entity other than the corporation trading under the name "Morgan Brooks Group", i.e. Morgan Brooks. There is nothing which reveals that the ABN number is not that of Morgan Brooks. There is no statement, as part of the printed letterhead, which is to the effect "This office is an independently-owned business operating under a licence from Morgan Brooks". 40 Mr Aulsebrook gave no evidence that this letterhead was not in a form approved by Morgan Brooks and that Mr Cincotta's description on the letter "Manager, Morgan Brooks Group" was not authorised by Morgan Brooks. The fact that Morgan Brooks knew and approved both of the form of the letterhead and of Mr Cincotta's manner of describing himself on that letterhead may be readily inferred from what appeared on Morgan Brooks' website: see par 31. 41 A letter dated 3 December 2001 to Heperu from Mr Cincotta appears on the same letterhead, signed by Mr Cincotta as "Manager". It shows that the closing balance of Heperu's "Mortgage Offset" account is $1,500,000 and that 1,500 fully paid shares in Perpetual Trustees Ltd have been allocated. Actual authority 42 Dr Landa contends that Mr Cincotta and ACN 067 were acting with the actual authority of Morgan Brooks in entering into the Contract with Dr Landa. They rely on the terms of the Coffs Harbour and Double Bay Licence Agreements and say that the Contract was within, or was ordinarily incidental to, the express authority conferred by those agreements. 43 Morgan Brooks denies that the Licence Agreements conferred express authority to enter into any agreement on behalf of Morgan Brooks of a type comprised in the Contract. Mr Aulsebrook has given evidence, which I accept, that it was not in the ordinary course of business for Morgan Brooks to provide advice on the investment of borrowed funds nor was it part of its business to arrange deposits on behalf of investors with Perpetual or any other institution. Mr Aulsebrook says that Morgan Brooks never gave authority to Mr Cincotta or ACN 067 to make any arrangements or agreements with Dr Landa for the investment of his money. He says, and I accept, that Morgan Brooks knew nothing about Dr Landa's supposed investments with Perpetual. Morgan Brooks never received Dr Landa's money. I accept that the use which Mr Cincotta made of Morgan Brooks' name in order to solicit funds from Dr Landa was just as much a fraud on Morgan Brooks as it was on Dr Landa. 44 The Coffs Harbour Licence Agreement relevantly provides: "WHEREAS: A: Morgan Brooks Pty Ltd is the holder of certain Origination Agreements with amongst others, Interstar Management Pty Ltd of Level 31, 367 Collins Street, Melbourne and State Bank of South Australia Trading as Beneficial Finance of Spring Street, Melbourne. B: The Company is presently using the Origination Agreements to carry on the business of the operation of a mortgage finance originator and manager under the name "Morgan Brooks Interstar" and "Morgan Brooks". C: Cincotta is experienced in the areas of real estate finance and mortgage maintenance. E: [sic] Cincotta has requested the Company to enter into this deed to appoint him as agent to market nationally certain loan products of Morgan Brooks Interstar and Morgan Brooks and he undertakes to carry out the duties herein described to the best of his ability upon and subject to the terms and conditions of this agreement. … 2. Appointment Subject to the payment of the licence fee by Cincotta as referred to in Clause (3) and the terms and conditions as herein stated, the Company hereby appoints Cincotta its Coffs Harbour NSW agent and otherwise undertakes subject to (clause 12 & 14 and Item 2 of the Schedule); not to appoint an other agent/s within the 2450 Australian Post Code. 3. Licence Fee In consideration of the appointment of Cincotta contained in this Agreement Cincotta must pay to the Company the sum of fifteen thousand dollars ($15,000) immediately upon the execution of this Agreement; the receipt and sufficiency of which is hereby acknowledged. 4. Duties Cincotta shall perform those duties referred to in Item 1 in the Schedule in a proper an efficient manner to the satisfaction of the Company." Schedule 1 relevantly provides: "(i) Cincotta shall market and promote the products and services of the Company to the best of his ability. (ii) Cincotta shall ensure that all potential mortgagors introduced to the Company by Cincotta are personally interviewed by him or his servants, agents or employees and that the identity of the potential mortgagors has been confirmed to the best of their abilities inclusive of sighting and retaining a copy of their drivers licence where appropriate. … (iv) Cincotta shall report fortnightly to the Company in writing of the person or persons that have been approached by or have approached Cincotta for the purposes of fulfilling his obligations under this deed. (v) Cincotta is to keep the Company regularly informed in writing of the progress of each approach made pursuant to Item (iv) above." "5. Remuneration The company agrees to pay Cincotta an amount calculated in that manner specified in Item 3 of the Schedule." The Schedule provides that, in consideration of Mr Cincotta originating Approved Mortgages, Mr Cincotta is to receive a remuneration calculated as a percentage of interest payable under those mortgages. "Approved Mortgages" are defined as mortgages approved and funded by specified lenders and introduced to Morgan Brooks by Mr Cincotta. "6. Indemnity Cincotta agrees to indemnify and keep indemnified the Company from and against any and all loss, damage or liability whether criminal or civil suffered and any legal fees and costs incurred by the Company because of any negligence or default of Cincotta or his servants, agents or employees in connection with this Agreement. 7. Code of Ethics Cincotta agrees to comply in all respects with the Company Policy and "Code of Ethics" as may be issued from time to time by the Company to Cincotta. 8. Behaviour Cincotta agrees that he shall not at any time be guilty of any act or conduct causing or calculated to cause damage to the Company, its property or reputation but will in all respects and at all times conduct himself with propriety. … 10. No pledge of credit Cincotta agrees not to pledge the credit of the Company at any time. 11. No Description as Principal That he will not describe himself as being in any relationship of employment, partnership, trust or representative of the Company, except as expressly authorised by this deed. … 15. Company's right to the method Cincotta acknowledges the company's exclusive right: (a) To use the products and services made available to it and any necessary know how, trade secrets, methods of operating, insignia, identifying material, methods of advertising, marketing, style and character ("the method") including any amendments and modifications to it and all advertising matters, slogans and like which may from time to time be used to promote the business. (b) To make such additions or modifications to the method including the addition, renewal or substitution of products and services as may from time to time be necessary to promote and improve the method. (c) To use and licence others to use the method outside and beyond the scope of this Agreement." 45 The terms of the Coffs Harbour Licence Agreement make it clear that the business of Morgan Brooks is providing loans to borrowers from specified lenders and that the "agent" or licensee is to be remunerated only for finding and introducing to Morgan Brooks borrowers for the "loan products of Morgan Brooks Interstar and Morgan Brooks". There is nothing in the Licence Agreement which could authorise Mr Cincotta to enter, on behalf of Morgan Brooks, any contract with a borrower of a Morgan Brooks' "loan product" as to how the borrowed funds are to be invested and what return is to be paid on that investment. 46 I am unable to accept that it is ordinarily incidental to the business of a mortgage provider, such as Morgan Brooks, or to the business of a "mortgage finder" or "mortgage introducer" such as Mr Cincotta, to advise prospective borrowers on how to invest borrowed funds or to arrange investment of borrowed funds on their behalf. There was no evidence from anyone in the financial services industry that such activities are usually incidental to the business of a mortgage provider or a mortgage finder. 47 I conclude that the Coffs Harbour Licence Agreement does not confer, either expressly or implicitly, actual authority on Mr Cincotta to enter into the Contract on Morgan Brooks' behalf. 48 There was some vacillation by Mr Aulsebrook during the course of the trial as to whether Morgan Brooks had duly executed the Double Bay Licence Agreement. The copy in evidence was undated and was apparently executed only by ACN 067. In the end, Mr Aulsebrook did not dispute that the terms of the Double Bay Licence Agreement governed the relationship between Morgan Brooks and ACN 067. 49 The terms of the Double Bay Licence Agreement are substantially the same as those of the Coffs Harbour Licence Agreement. For the reasons I have given above, I do not accept that the Double Bay Licence Agreement conferred, either expressly or implicitly, actual authority on ACN 067 to enter into the Contract on Morgan Brooks' behalf. 50 Mr Burton SC, who appears with Ms C. Cochrane of Counsel for Dr Landa, submits that Mr Aulsebrook knew and approved of the fact that Mr Cincotta was, in the course of his businesses at Coffs Harbour and Double Bay, offering services other than just finding loans for borrowers from Morgan Brooks' approved lenders, so that Mr Aulsebrook, on behalf of Morgan Brooks, either expressly or implicitly authorised Mr Cincotta to offer, on behalf of Morgan Brooks, general investment services. 51 Mr Burton relies for this submission on the text of a speech which Mr Cincotta gave to an unidentified audience in or about September 1997. Mr Cincotta sent the text to Mr Aulsebrook for prior approval. Mr Aulsebrook approved the text but said that Mr Cincotta had to refer to himself, not as "the Director of the Morgan Brooks Group Coffs Harbour Office" but, rather, as "the Manager" of that office. 52 In the speech, Mr Cincotta said that the mortgage industry was highly competitive and that lenders had "to deliver unsurpassed value-added services". The speech did not specify what "value-added services" Morgan Brooks or Mr Cincotta offered or proposed to offer. 53 The speech is merely a general solicitation for business, with unparticularised assurances of quality of service to be provided by the Morgan Brooks Group. The "value-added services" seem to relate only to services provided in the course of finding the best loans for borrowers, in the quickest time, coupled with some sort of "loyalty programmes to keep the customer coming back". I cannot take the speech, approved by Mr Aulsebrook, as providing carte blanche authority to Mr Cincotta or ACN 067 to enter into the Contract with Dr Landa. 54 In summary, I conclude that Mr Cincotta and ACN 067 had no actual authority to enter into the Contract on Morgan Brooks' behalf. Apparent authority 55 The doctrine of apparent authority may be stated thus: "Where a person, by words or conduct, represents or permits it to be represented that another person has authority to act on his behalf, he is bound by the acts of that other person with respect to anyone dealing with him as an agent on the faith of any such representation, to the same extent as if such other person had the authority that he was represented to have, even though he had no such actual authority." : Bowstead & Reynolds on Agency (18th Ed) para 8-013. 56 Under the doctrine of apparent authority, a person may become bound by the acts of another as apparent agent, even where he has forbidden the acts of the apparent agent or where the activity of the apparent agent is unlawful: ibid par 8-014. 57 The difficulty in this case is not the identification of the relevant legal principle but rather the application of the principle to particular facts. Minds often differ as to whether particular facts are sufficient to fasten liability on an innocent person who neither knew nor approved of the wrongful act of another who purported to act in his or her name. 58 I have found a case decided by the English Court of Appeal of particular assistance. The facts have close analogies in many respects to those of the present case. In Gurtner v Beaton [1993] 2 Lloyd's Rep 369, the plaintiffs were passengers in a light aircraft which crashed, injuring them seriously. They sued Cleanacres Ltd which, they claimed, had entered into a contract of carriage with them for the journey. They claimed that the contract of carriage had been entered into on behalf of Cleanacres Ltd by its agent, Mr Beaton. Mr Beaton was not, in fact, authorised by Cleanacres Ltd to enter into any contract of carriage. Cleanacres Ltd did not own or have any interest in the light aircraft involved in the crash. The contract of carriage was unlawful, as the aircraft was not licensed for such a journey. Cleanacres Ltd knew nothing about the plaintiffs, or the contract, or what Mr Beaton had arranged with the plaintiffs. If Cleanacres Ltd had known about the arrangement, it would not have allowed it to proceed. 59 Nevertheless, Cleanacres Ltd was held to be bound by the contract of carriage because Mr Beaton had their apparent authority to enter into it. 60 The facts upon which the decision rests – which have parallels in the present case – were as follows. 61 Mr Beaton was a pilot and flying instructor. He was employed on a casual basis by Cleanacres Ltd, which then owned two or three aircraft which were used in its agricultural business for the transport of its agronomists. Mr Beaton's duties were to teach some of the company's employees to fly and to supervise the maintenance of the aircraft. 62 Mr Beaton wished to conduct his own flying club, part time. Cleanacres Ltd was willing to permit him to "enjoy the prestige of the name 'Cleanacres'" for his flying club. Cleanacres Ltd provided a portable office for Mr Beaton's flying club at a local airport. Above the entrance to the office appeared the words "Cleanacres Aviation". Mr Beaton, in his role as aircraft maintenance supervisor employed by Cleanacres Ltd, used letterhead on which was printed "Cleanacres Aviation"; he submitted invoices in the name of Cleanacres Ltd. There was no written statement by Cleanacres Ltd of the limits of Mr Beaton's authority. 63 It was not possible for Mr Beaton, or Cleanacres Ltd, lawfully to carry passengers by air for reward as neither had the appropriate licence. To have done so would have been a criminal offence. 64 However, Mr Beaton illegally used the aircraft under his control for air taxi services for reward on a number of occasions. In doing so, he used the name "Cleanacres Ltd". 65 In 1983 Mr Beaton agreed to carry passengers for reward to Scotland in a light aircraft. He confirmed the agreement in writing on paper headed "Cleanacres Aviation". Mr Beaton arranged to use two light aircraft which did not belong to Cleanacres Ltd. Cleanacres Ltd knew nothing about this agreement. 66 The Court of Appeal identified the essential question as: "whether, by the act of putting Mr Beaton into the position of aviation manager of Cleanacres Aviation, it was represented by Cleanacres Ltd that he had the authority to use an aircraft under his control for air taxi work", although Cleanacres Ltd did not itself perform air taxi work as part of its business and did not authorise Cleanacres Aviation to perform air taxi work as part of the business of Cleanacres Aviation: at 380. 67 The Court of Appeal unanimously held that Cleanacres Ltd had held out Mr Beaton as having authority to enter into a contract for air taxi work on its behalf. The Court relied on the following facts and circumstances, which find parallels in the present case. 68 At 379, the Court said: "The representation by Cleanacres Ltd that Mr Beaton had authority to enter into a contract for air taxi work was made by causing or permitting Mr Beaton to act as aviation manager of Cleanacres Aviation at Staverton Airport where he had suitable aircraft under his control and by permitting him so to act without any express limitation on his apparent authority. The placing of the name Cleanacres Aviation over the door of the office was plainly done within actual implied authority as was the use and control of the aircraft for all lawful purposes. Within the conduct of the business of Cleanacres Aviation the making of a contract was clearly within the apparent authority of Mr Beaton as aviation manager." 69 In the present case, Morgan Brooks caused or permitted Mr Cincotta to act as manager, and to represent himself as manager, of a business which Morgan Brooks authorised to trade using prominently the name "Morgan Brooks Group" and the logos and livery of the "Morgan Brooks Group". On its web site, which Dr Landa saw before making his investments, Morgan Brooks showed the address of Mr Cincotta's offices as its offices, showed Mr Cincotta as "Manager", and gave the e-mail contact address for Mr Cincotta's offices as its own e-mail address. The website contained no statement to the effect that the "offices" were, in fact, independently owned business entities and thus the "managers" were not managers of Morgan Brooks' own business. 70 Morgan Brooks permitted – indeed it required – Mr Cincotta to use letterhead and business cards showing Morgan Brooks Group prominently, without containing any express limitation on Mr Cincotta's authority, such as could easily have been done by including a statement to the effect: "This is an independently-owned business conducted under franchise" and showing clearly the identity of Mr Cincotta or ACN 067 as the owner of the business. 71 The placing of the signage and livery of "Morgan Brooks Group" on Mr Cincotta's offices at Coffs Harbour and Double Bay was done with the express authority of Morgan Brooks. 72 The letterhead which Morgan Brooks required Mr Cincotta to use showed the Coffs Harbour and Double Bay offices as amongst a list of "licensed offices". There was no explanation of what "licensed" meant. It did not necessarily imply that the "offices" were not branch offices of Morgan Brooks but were, in fact, independent businesses which were licensed to use the Morgan Brooks' name livery, within certain limitations. "Office" does not normally mean "independent business". 73 Morgan Brooks required that the stationery of a licensee show the ACN or ABN of the licensee's own business. However, the letterhead which Mr Cincotta was required to use did not identify to the ordinary reader that the ACN or ABN quoted was not that of "the Morgan Brooks Group" (or the entity which owned that name), but was that of a separate business entity. There was no way that the uninformed reader of the letterhead would know whose ACN or ABN was quoted, if not Morgan Brooks'. 74 Within the context of Mr Cincotta's business the making of a contract was clearly within his apparent authority. The Morgan Brooks' web site showed Mr Cincotta as the manager of the Coffs Harbour and Double Bay offices. The letter confirming the Contract sent by Mr Cincotta to Dr Landa on 17 October 2001 was signed by Mr Cincotta as "Manager, Morgan Brooks Group". 75 The Court of Appeal in Gurtner v Beaton (supra) said at 379: "… there was no evidence from any witness to the effect that a reasonable person would regard the doing of air taxi work as within the usual authority of the aviation manager of an enterprise called Cleanacres Aviation who had an office at Staverton Airport and aircraft under his control. There is, however, no rule of law that such evidence is necessary for a case based on apparent authority of this nature. … the correct approach is to consider the whole of the conduct of Cleanacres Ltd in the light of all the circumstances in order to determine whether that conduct amounted to a holding out by them of Mr Beaton as having the necessary authority. … It is not right to concentrate on the use of the word 'usually' … and to treat it as decisive … on the ground that an aviation manager cannot be regarded as 'usually' having authority to make a contract for air taxi work when the aviation business of which he is manager does not include such work." 76 In the present case, the description which Morgan Brooks itself gave of the business which it conducted under the name "Morgan Brooks Group" was not clearly limited to the provision of mortgages and nothing else. Its web site also referred to it as "an established Fund Manager within the Banking and Finance industry" and as "a full member of … Australian Securitisation Forum and Commerce, Queensland". That was a very broad and indefinite description and could include a variety of activities within the financial services industry. 77 There was no evidence from any expert witness called by Dr Landa that a reasonable person would regard arranging a mortgage or advising on the investment of the proceeds of a mortgage as within the actual authority of the manager of a business describing itself in the terms in which Morgan Brooks described its business on its website. However, as held in Gurtner (supra), such evidence is not necessary as a matter of law. I must have regard to the conduct of Morgan Brooks in the light of all of the circumstances. 78 In Gurtner (supra) the Court said, at 380: "To any person, without inside knowledge, who might deal with Mr Beaton as aviation manager of Cleanacres Aviation the fact that Mr Beaton could not lawfully engage in air taxi work would be unknown." 79 In the present case, an outsider such as Dr Landa would not know that Mr Cincotta, as "Manager, Morgan Brooks Group Coffs Harbour" or "Manager, Morgan Brooks Group Double Bay" had no authority under the relevant licence agreements with Morgan Brooks to engage in the provision of investment advice. 80 In Gurtner (supra) the Court said, at 380: "It may, therefore, be inferred that there was nothing in the circumstances of Mr Beaton as manager at Staverton Airport which rendered the doing by him of air taxi work inappropriate by reference to his other aviation activities." 81 In the present case, there was nothing in the circumstances of Mr Cincotta as manager of a business engaged in providing what may be generically described as financial services and calling itself amongst other things "an established Fund Manager" which rendered the arrangement of a mortgage and the investment of the proceeds, or arranging the investment of funds not being the proceeds of a mortgage, as inappropriate by reference to his other activities of simply finding mortgages for borrowers. 82 I appreciate that it is easy to dismiss the decision in Gurtner as irrelevant because it is founded on different facts. No two cases present identical facts; the reasoning of the law proceeds upon similarities in factual situations. In my opinion, the facts of Gurtner and the decision in that case are persuasive in the present case. 83 I accept that Dr Landa decided to place his investments through Mr Cincotta because he trusted Mr Cincotta and because other members of his family had recommended Mr Cincotta. However, I accept also that Dr Landa was not without any interest in the substance and commercial reputation of the entity he might be dealing with in making his investments. I accept that he had regard to the business cards given to him by Mr Cincotta and Mr Wright and that he searched the web site of Morgan Brooks to find out more about the company which Mr Cincotta said he was representing. I accept that what Dr Landa saw on the Morgan Brooks' web site persuaded him that he would be dealing with a substantial commercial enterprise with offices all over Australia. I accept that Dr Landa was reassured further when he saw that Mr Cincotta was working from an office which bore the name and livery of Morgan Brooks. I am satisfied that these perceptions played a material part in Dr Landa's decision to proceed with Mr Cincotta's investment proposal. 84 I conclude that Morgan Brooks held out Mr Cincotta as having apparent authority on its behalf to enter into a contract for the investment of funds, whether or not those funds were derived from the proceeds of a mortgage which Mr Cincotta had also arranged. I find that Dr Landa relied upon that holding out in determining to enter into a contract with an entity which he believed to be Morgan Brooks, not Mr Cincotta or ACN 067. 85 It follows that Morgan Brooks was bound by the Contract. Damages 86 There is no doubt that the Contract was breached: the funds provided to Mr Cincotta by Dr Landa for investment with Perpetual for Dr Landa's benefit were not so invested; the principal (apart from $1M) was not repaid with the promised interest of 8% per annum and the requisite number of shares in Perpetual were not allotted. 87 Further, it was clearly a term of the Contract that the interest to be derived from the deposit of funds with Perpetual would be sufficient to allow Dr Landa to offset those funds against the interest which he was required to pay on the funds which he had borrowed from PTV: the interest which he would receive was to exceed the interest which he would have to pay, giving him a profit margin on interest as well as the profit from the Perpetual shares. Dr Landa did not receive the interest payments promised under the Contract and he has had to meet interest payments due to PTV out of his own resources. The interest payments are an expense which he would not have had to bear if the Contract had been performed. He is entitled to the amount which he has had to pay in interest, not as interest per se, but as damages for breach of contract: Hungerfords v Walker (1989) 171 CLR 125. 88 Dr Landa is entitled to be placed, by an award of damages, in the position he would have been in had the Contract been performed according to its terms. He is entitled to repayment of the outstanding principal, he is entitled to repayment of the interest paid to PTV which he would not otherwise have had to pay from his own pocket, and he is entitled to the interest profit which he would have made, being the difference between the interest which he would have earned from the investments and the interest which he would have had to pay to PTV. 89 Dr Landa is also entitled to the value of the Perpetual shares which should have been allotted to him. 90 I accept the uncontradicted evidence of Dr Landa that he would have repaid the PTV loans in December 2003 by selling-down the investments supposedly in his name with Perpetual. No specified term for the investments was fixed in the Contract. I accept Dr Landa's submission that the investments were realisable on demand. I accept that Dr Landa gave a letter of demand for repayment of the investments dated 4 December 2003 to Mr Cincotta. I find that, as Mr Cincotta had apparent authority to enter into the Contract as Morgan Brooks' agent, so also he had apparent authority to receive a notice of demand for repayment under the Contract. I accept that, had the Contract been performed, the loans from PTV would have been discharged out of the proceeds of the investment on 4 December 2003 and Dr Landa would have incurred no further interest under those mortgages. He may have had to pay an early discharge fee. No submissions have been made in that regard. 91 Mr Aulsebrook disputes many of the amounts which Dr Landa has claimed in his calculation of damages and says that certain payments received by Dr Landa have not been properly deducted from the damages claimed. Mr Aulsebrook has not been able to be very precise about those issues. 92 It is impossible for me in the state of the evidence as it now is to make a final assessment of the damages to which Dr Landa is entitled for breach of the Contract. I will refer assessment of damages to a referee appointed under UCPR 20.14. THE CASE AGAINST MS BELLE The claim against Ms Belle as principal 93 Dr Landa alleges that: – Ms Belle gave general authority to Mr Cincotta to operate her accounts so that she is liable for what he did as her agent; – between August 2001 and 20 December 2002, a nett of $1,744,254.50, being Dr Landa's money, was used by Mr Cincotta to purchase units in the Perpetual Cash Management Trust in Ms Belle's name; – that amount was subsequently withdrawn from the Perpetual account and transferred to the Westpac cash management account in Ms Belle's name; – the monies in the Westpac account were used for the benefit of Ms Belle and Mr Cincotta; – Ms Belle is liable for the fraudulent acts of Mr Cincotta as her agent because those acts were done within the scope of the authority which she had conferred on him. The claim against Ms Belle as knowing recipient of trust property 94 Dr Landa alleges that Ms Belle is liable to account to him for the nett proceeds of $1,744,254.50 because: – she knowingly received trust property, being the money of Dr Landa fraudulently misappropriated by Mr Cincotta; – she applied that property for her own use, with actual notice that such application was a breach of trust; – she is therefore liable to account as an accessory within the second limb of Barnes v Addy (1874) LR 9 Ch App 244. Claim against Ms Belle as volunteer 95 Dr Landa alleges that: – Ms Belle gave no consideration for the transfer into her Perpetual account of the monies misappropriated by Mr Cincotta; – as a volunteer Ms Belle holds the money on behalf of Dr Landa, whose superior legal title prevails against her; – Ms Belle has been unjustly enriched at the expense of Dr Landa and is liable to account for money had and received. Defences and issues 96 Ms Belle says that, prior to these proceedings, she had no knowledge of the fraudulent misappropriations of Mr Cincotta and that the proceeds of the fraud had been paid into her accounts. 97 Ms Belle denies that: – she withdrew any of Dr Landa's funds from the Perpetual account in her name; either alone or jointly with Mr Cincotta; – she caused any of Dr Landa's money to be transferred into the Westpac account in her name; – she had any knowledge, actual or constructive, of Mr Cincotta's breach of fiduciary duty and breach of trust; – she received any funds of Dr Landa; – Mr Cincotta transferred funds of Dr Landa into and out of the Perpetual account and the Westpac account with her actual authority and within the scope of any authority conferred on him by her under the Coffs Harbour Licence Agreement. Mr Cincotta's dealing with Ms Belle's accounts 98 I commence by observing that although Ms Belle's recollection of some events was understandably uncertain, I conclude that she was doing her best to give her evidence truthfully and accurately. I accept her as a witness of credit. 99 Ms Belle married Mr Cincotta in 1981. She had previously been employed as a secretary and then as a manager of a hair salon. In 1989, Ms Belle commenced working as a sales representative for a children's clothing company and she continued in that position until 1997. From 1997 to 2000 she worked as a casual sales representative for two other clothing retailers. 100 Ms Belle says, and I accept, that from the time of her marriage to the time of her separation, Mr Cincotta managed and controlled the family's financial affairs. He dealt with bankers and bank accounts, obtained loans on mortgage, and made investments in the family's interests. It was Mr Cincotta's responsibility to attend to payments of all accounts, including mortgage payments, rates and taxes, insurances, and all other outgoings and expenses. Ms Belle says, and I accept, that she trusted Mr Cincotta completely and had the impression that he was a good businessman. 101 In 1993, Ms Belle and Mr Cincotta moved to Coffs Harbour to live. Ms Belle opened two accounts with Westpac Banking Corporation, a cash management account and a cheque account. The cash management account was opened at Mr Cincotta's request. The cheque account was opened for the purpose of depositing commission cheques which Ms Belle received as a sales representative for the children's clothing company. Mr Cincotta was a signatory to both accounts. 102 On 1 September 1995, a cash management account was opened with Perpetual in the name of Patrice Cincotta (then Ms Belle's name). The account was opened pursuant to an application form which Ms Belle signed at Mr Cincotta's request. Ms Belle says, and I accept, that Mr Cincotta told her that he wished to open the Perpetual account in order to buy shares for her "for superannuation". Ms Belle was unfamiliar with shares and what share ownership involved. She did not ask, and was not told by Mr Cincotta, what shares, if any, were actually bought for her. She trusted Mr Cincotta to act in her interest. 103 There are two places for the signature of the applicant on the form of application for the opening of the Perpetual cash management account. One is at the foot of the second page of the document, beside the words "Applicant's Signature". Ms Belle says that the signature placed here is her signature. The other signature is further up the second page, against the words "Authorised Representative Appointment". The form here provides for the applicant to authorise another person to operate the account. A signature "P. Cincotta" is placed here, authorising Mr Cincotta to operate the account. Ms Belle says that this signature is not hers. I accept her evidence, not only because I accept her generally as a witness of credit, but also because, even to the naked eye, the signature in this place differs noticeably from the genuine signature of Ms Belle at the foot of the page. I infer that Mr Cincotta forged Ms Belle's signature on the form in this place in order to allow him to operate the Perpetual account in her name without her knowledge. 104 The application form describes Ms Belle's occupation as "Senior Branch Manager". That description was not true. The application form requested interest from the deposits to be credited to Ms Belle's Westpac cash management account. 105 I am satisfied that Ms Belle signed the application form opening the Perpetual cash management account in reliance on Mr Cincotta's assurance that it was for the purpose of acquiring unspecified shares for her benefit. I am satisfied that she had no knowledge otherwise of the content of the application form and that she did not permit Mr Cincotta to operate the account in her name. 106 Mr Cincotta's dealings with the cheques which he obtained from Dr Landa, and the manner in which he operated the Perpetual cash management account, are accurately summarised in the submissions of Mr van Aalst of Counsel, who appears for Ms Belle, as follows. 107 There were investments of two kinds firstly, by Dr Landa providing to Mr Cincotta personal cheques with his direction that those cheques be invested with Perpetual and, secondly, by Dr Landa utilising what he understood to be a "mortgage set off investment scheme", which involved borrowing from PTV and investing the proceeds of those loans with Perpetual. 108 Dr Landa delivered to Mr Cincotta at the Morgan Brooks Double Bay office on 23 August 2001 and 28 November 2001 his personal cheques for $351,000 and $502,070 respectively drawn in favour of Perpetual for investment in that company. Those cheques were invested with Perpetual. 109 The third personal cheque was drawn on the account of DAS on 13 August 2002 for the sum of $250,000 and was delivered by Dr Landa to Mr Cincotta on that day at the Double Bay office of Morgan Brooks. 110 Mr Cincotta forged the signature of Ms Belle to each of the Applications for investment of personal cheques in Ms Belle's cash management account with Perpetual. 111 On 27 September 2001 Dr Landa borrowed from PTV $305,000 secured by a mortgage of his property at Pyrmont and $345,000 secured over his property in Bondi Junction. Dr Landa directed and authorised PTV to draw the cheques for those loans in favour of Perpetual. PTV caused two bank cheques to be drawn on Westpac in favour of Perpetual each dated 28 September 2001 for the sums of $342,857 and $302,875 respectively. 112 Mr Cincotta forged the signature of Ms Belle to the Applications for investment of the bank cheques in Ms Belle's cash management account with Perpetual. Those forms were received by Perpetual on 9 October 2001. 113 On 20 December 2002 Dr Landa borrowed $1 million from PTV secured by a mortgage over his home. The same process was followed with respect to the investment of the proceeds of this loan with Perpetual as was followed with the other two "mortgage offset investments". With the authority and at the direction of Dr Landa, PTV caused a bank cheque to be issued in favour of Perpetual for the sum of $995,452.50. At the request and direction of Dr Landa, that cheque was sent to Mr Cincotta to be invested with Perpetual. Mr Cincotta forged the signature of Ms Belle on the Application for additional investment forms provided by Perpetual and that form was received by Perpetual on 20 December 2002. The transaction statement of Perpetual records that on 20 December 2002 the sum of $995,452.50 was invested with it. 114 On 17 February 2003 at the request and direction of Dr Landa, Mr Cincotta caused the sum of $1 million to be withdrawn from Ms Belle's account with Perpetual and that amount was then refunded to Dr Landa. 115 In respect of each of the loans from PTV Dr Landa instructed his solicitors to authorise and direct that company to draw the settlement cheques (for the loans of $345,000, $305,000 and $1 million) in favour of Perpetual and that Dr Landa instructed his solicitors to forward or cause those cheques to be handed to and left with Mr Cincotta. 116 I accept Ms Belle's evidence that she had no knowledge whatsoever of Mr Cincotta's dealings with Dr Landa or of the use which Mr Cincotta made of her Perpetual cash management account and her Westpac cash management account in order to facilitate his frauds. That evidence was unshaken and it was not contradicted by any other reliable evidence. Whether Mr Cincotta was Ms Belle's agent 117 Dr Landa submits that, even though Ms Belle was entirely ignorant of Mr Cincotta's frauds, she is liable as a principal for Mr Cincotta's actions in: – using the proceeds of the misappropriated cheques to purchase units in the Perpetual cash management account in her name; – redeeming the units in the cash management account and paying the proceeds into her Westpac cash management account; – withdrawing the monies from the Westpac account. 118 Dr Landa says that in authorising Mr Cincotta as a signatory to operate her Perpetual and Westpac cash management accounts, Ms Belle gave Mr Cincotta actual and general authority to deposit and withdraw funds from those accounts. It is said that Mr Cincotta was acting within the scope of that general authority when he fraudulently deposited Dr Landa's cheques into the Perpetual account, redeemed the units purchased as cash payments credited to the Westpac cash management account, and withdrew the funds from the Westpac cash management account. 119 As I have found, Ms Belle did not authorise Mr Cincotta to operate her Perpetual cash management account. Her signature apparently authorising him to operate that account was forged. So also were her signatures appearing on the application forms whereby Dr Landa's cheques were deposited into the Perpetual account. The deposits and withdrawals of Dr Landa's money into and out of the Perpetual account were, therefore, not done by Mr Cincotta with Ms Belle's authority in any sense. 120 The evidence is that, in reliance upon Ms Belle's forged signature authorising Mr Cincotta to operate her Perpetual account, Mr Cincotta obtained a PIN from Perpetual which permitted him to make withdrawals from the account by telephone. He used the PIN to make withdrawals directing the proceeds to be credited to Ms Belle's Westpac cash management account. In no sense, therefore, did Ms Belle give authority to Mr Cincotta to make the withdrawals and direct payment of the proceeds into her Westpac account. Ms Belle cannot, therefore, be liable for those acts of Mr Cincotta as Mr Cincotta's principal. 121 It may well be the case that in withdrawing the misappropriated funds from Ms Belle's Westpac cash management account, Mr Cincotta was acting with an actual authority given to him by Ms Belle to operate that account. However, the mere act of withdrawal of the funds was not in itself wrongful and caused no loss to Dr Landa. What was wrongful and what caused loss was Mr Cincotta's misapplication of the withdrawn funds to his own purposes, not to Dr Landa's purposes. Those acts of misappropriation were unknown to Ms Belle and were in no sense authorised by her. Was Ms Belle a recipient of trust property 122 Dr Landa submits that Ms Belle is liable to account to him in equity as the recipient of funds which Mr Cincotta held on trust for him, or else held upon a constructive trust by reason of breach of fiduciary duty. Dr Landa relies on what is known as "the first limb of Barnes and Addy". 123 Liability under this rule depends on the plaintiff showing that the defendant received trust property, or property acquired through breach of fiduciary duty, with notice of the trust or of the facts and circumstances constituting the breach of duty: see Karak Rubber Co Ltd v Burden (No 2) [1972] 1 WLR 602, at 632-633 ([1972] 1 All ER 1210, at 1234-1235); Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) [2007] HCA 22, (2007) 236 ALR 209, at [112]. 124 I accept that Dr Landa's funds in the hands of Mr Cincotta were impressed with a trust to apply them for the purposes designated by Dr Landa. Mr Cincotta was also under a fiduciary duty to deal with the funds as agent for Dr Landa in applying them for the purposes intended. However, Dr Landa's claim against Ms Belle on this ground of liability cannot succeed for two reasons. 125 The first reason is that, on the facts as I have found them, Ms Belle did not have notice of any of the facts and circumstances constituting Mr Cincotta's actions of breach of trust or a breach of fiduciary duty. I cannot hold that she was put upon enquiry as to what use had been made of her Perpetual cash management account from 2001 to 2003 merely because Mr Cincotta had opened the account for her in 1995 and she had heard nothing further about it. As I have observed, I accept Ms Belle's evidence that Mr Cincotta managed all of the family's affairs in an apparently trustworthy manner. 126 It is true that Ms Belle had the means of finding out what had happened with the account because she, as owner of the account, was entitled to ask Perpetual for statements. However, a person who has the means of finding out about something does not thereby have an obligation in law to find out unless there is some apparent reason to do so. There was no obvious reason why Ms Belle should have heard anything further about the Perpetual cash management account by 2001. 127 The second reason that the claim must fail is that, on the facts as I have found them, Ms Belle did not "receive" the funds for the purposes of the rule. The facts of this case have a close analogy to the facts in National Commercial Banking Corporation of Australia Ltd v Batty (1986) 160 CLR 251. 128 In that case, one of two partners of an accounting firm misappropriated cheques payable to a third party, deposited the cheques in the firm's bank account, withdrew the proceeds and applied them to his own use. One issue was whether the proceeds of the cheques had been received by the firm to the use of the bank which had paid them. The other partner of the firm was not at any time aware that the cheques had been paid into the firm's account, and there was nothing which put him on enquiry as to what transactions were being effected through the partnership account, although he had the means of finding out if he wished. 129 At p 268, Gibbs CJ, with whom Wilson and Dawson JJ agreed, said: "Where, because of the action of a servant or agent acting outside the scope of his authority, or for that matter because of the action of a complete stranger, money has been paid into the account of the defendant, who has technically received it, although he is quite unaware of that fact, and the money is then misappropriated, still without the knowledge or intervention of the defendant, there seems to be no reason in justice or equity why the defendant should be answerable for the money simply because theoretically he had the means of knowing that the money was in the account. In principle, in those circumstances, the defendant ought not to be liable unless, before the money was misappropriated, he knew or ought to have known that he had possession or control of it. In other words, where the defendant has not had the benefit of the money, has not played any part in disposing of it and was ignorant of the fact that it was theoretically under his control, he should not be liable in the absence of fault on his part." 130 Accordingly, the Court held that the innocent party had not received the funds. In accordance with this reasoning, I hold that Ms Belle did not receive Dr Landa's funds into her Perpetual cash management account or into her Westpac account. Was Ms Belle a knowing participant 131 Dr Landa submits that Ms Belle is liable to account, under the second limb in Barnes v Addy, as a knowing participant in Mr Cincotta's breach of fiduciary duty or breach of trust. For the reasons I have given, this ground fails on the facts. Liability as a volunteer 132 Dr Landa submits that Ms Belle received the payments as a volunteer, i.e. she gave no consideration for them. He relies on cases such as Black v S Freeman & Co (1910) 12 CLR 105, in which the High Court held that money stolen by a trustee and handed over to his wife as a gift could be recovered by the victim of the fraud. The wife had not participated in the fraud. 133 Black is not authority for the proposition that, if stolen money "technically" passes through the hands of a person who does not know that he or she has possession of it, let alone that it is stolen, nevertheless that person is liable to account to the true owner because he or she gave no consideration for the payment. On the contrary, the true basis for the decision in Black is that, although the wife was innocent of the fraud when it was committed, yet once she learnt that the money was in her hands and was the proceeds of fraud, equity would not permit her to keep it. 134 At 109, Griffith CJ said: "It was pointed out by Sir George Jessel, in a well-known case, that a man may at a certain stage be innocent, but that, if he knows that he has got the advantage of a fraud to which he was no party and says he will keep it, then he becomes himself a party to the fraud and is liable to the jurisdiction of the court of Equity. In the present case the wife says she holds this money for her separate use and claims it for herself, knowing now, at any rate, the circumstances under which it came to be given to her." 135 Dr Landa has not shown that Ms Belle now has property in her hands which she knows to be the proceeds of Mr Cincotta's fraudulent misappropriations from Dr Landa. It has not been shown that, after Ms Belle became aware of Mr Cincotta's fraud, she disposed of any property for her benefit which she knew had been derived from the proceeds of the fraud. Accordingly, the principle enunciated in Black has no application on the facts of the case. This claim for relief must fail. Liability as a "finder" 136 Dr Landa submits that Ms Belle is in the position of a finder who takes lost goods or money into his or her possession: she did not obtain absolute title to the stolen funds in the Perpetual account and she cannot keep the funds as against the rightful owner. Further, he submits, Ms Belle owed duties of safe keeping to Dr Landa to take reasonable steps to ascertain the identity of, and to trace, the true owner of the funds and to take care of the funds in the meantime. 137 For the reasons which I have given above, Ms Belle did not, in any sense required by the law, take Dr Landa's money into her possession. It has not been shown that, since she discovered Mr Cincotta's fraud, she has denied title to money or property in her possession which she knows, or has been proved, to be property traceable to the proceeds of Mr Cincotta's fraud against Dr Landa. The claim against Ms Belle on this ground is but a variant of the claim based on the assertion that she is a volunteer. It fails for the same reasons. Conclusions 138 All of Dr Landa's claims against Ms Belle fail. There will be judgment for the Fourth Defendant on the Plaintiff's Second Further Amended Statement of Claim. THE CASE AGAINST PERPETUAL Conversion 139 The Second Further Amended Statement of Claim alleges that: – Dr Landa's personal cheques for $351,000, $502,070 and $250,000 dated 23 August and 28 November 2001 and 9 August 2002 respectively were drawn in favour of "Perpetual Trustees or bearer" and crossed with two parallel transverse lines with the word "Bank" between the parallel lines; – Dr Landa's investments of $342,857, $302,875 and $995,452.50 were made by Westpac cheques dated respectively 27 and 27 September 2001 and 19 December 2002, drawn in favour of "Perpetual Trustees Australia Limited or bearer" , crossed with two parallel transverse lines with the words "Not negotiable" between the parallel lines, the cheques having been purchased with funds of Dr Landa; – all cheques were handed to Mr Cincotta and deposited by him with Perpetual, which arranged for the collection of the cheques for the account of Ms Belle; – at the time of collection, the personal cheques bore the additional words between two parallel transverse lines "Not negotiable Credit Perpetual Trustee Co Ltd Bank Account Only" . The cheques drawn in 2001 had a code on the back of them, and the 2002 cheque had a code on the back under the drawer's signature. 140 By reason of the fraud of Mr Cincotta, Dr Landa is presently entitled to possession of the cheques and is now entitled to sue for their conversion because: – Mr Cincotta received the cheques as agent for Dr Landa and Perpetual received the cheques as agent for Mr Cincotta and, therefore, as agent for Dr Landa; – alternatively, the cheques were delivered to Perpetual for a purpose which was not effectuated; – alternatively, the title to the cheques which Perpetual acquired was void or voidable as against Dr Landa by reason of Mr Cincotta's fraud and, if voidable, was voided in early December 2003 when Dr Landa demanded return of the proceeds of the cheques; – alternatively, title to the cheques never left Dr Landa because the cheques were delivered to Perpetual for a purpose which was not effectuated; – alternatively, Perpetual's title to the cheques was void for want of consideration; – by collecting the cheques Perpetual intentionally interfered with Dr Landa's right to possession of the cheques and thereby converted the cheques so that it is liable for the face value of the cheques and interest from the date of collection. Money had and received 141 The Second Further Amended Statement of Claim alleges that the proceeds of the personal cheques and the bank cheques referred to above were money had and received in Perpetual's hands for the use of Dr Landa because: – the cheques were drawn in Perpetual's favour by reason of a mistake on the part of Dr Landa in believing that the money would be invested by Perpetual for his benefit; – alternatively, the purpose for which the cheques were delivered to Perpetual was not effectuated; – alternatively, for the reasons otherwise described under the previous claim. Negligence 142 The Second Further Amended Statement of Claim alleges that: – Perpetual owed a duty to intending investors in its products, including Dr Landa, to take reasonable care in: ensuring the instructions which it issued as to how investments should be made specified that the name of the investor must be part of the name of the payee on the cheque, and that the cheque must accompany the application form; ensuring that, in fact, the cheque received by it for investment complied with that instruction, before depositing that cheque for collection; establishing and following a system which required it, prior to depositing a cheque, to enquire from the drawer if the name of the investment which was being made with that cheque did not correspond with the name of the drawer; establishing and following a system which required it, prior to depositing a cheque, to enquire from the drawer or issuing bank of a bank cheque, if a suspect transaction report had issued in relation to the account in which the cheque was to be deposited; – Perpetual breached its duty of care by not establishing and following these procedures, whereby Dr Landa's cheques were deposited in Ms Belle's account and Dr Landa suffered loss. Misleading or deceptive conduct 143 The Second Further Amended Statement of Claim alleges that: – from about June 2001 onwards Perpetual issued application forms for investment which required that the name of the investor must be included as part of the payee on a cheque, and that the cheque must be accompanied by the application form; – the requirements of Perpetual from June 2001 gave rise to a representation to, or a reasonable expectation by, intending investors that Perpetual took reasonable care to ensure that these requirements would be observed; – the representation was not fulfilled by reason that the requirements were not carried out in respect of Dr Landa's cheques and Perpetual did not have in place a system for making enquiry if the name of the payee on a cheque did not include the name of the drawer; – Perpetual thereby engaged in misleading and deceptive conduct, in contravention of s 42 Fair Trading Act 1987 (NSW) and the corresponding legislation in the Corporations Act 2001 (Cth); – Dr Landa suffered loss and damage by Perpetual's contraventions. Perpetual's defences 144 By its defence Perpetual: – admits that it received the cheques as described in the Second Further Amended Statement of Claim; – denies that it held an account in the name of Ms Belle; – denies that it arranged for collection of the cheques; – denies that it converted the cheques; – denies that the proceeds of the cheques were had and received for the use of Dr Landa; – denies that it was negligent; – says that if it was negligent, Dr Landa's loss was caused, or materially contributed to, by his own negligence in: failing to take any step to ensure that the cheques were invested in accordance with his directions; failing to obtain any confirmation from Perpetual that the cheques had been invested in accordance with his instructions to Mr Cincotta; failing to read any product disclosure statement issued by Perpetual to ascertain whether Mr Cincotta's representations about the Contract were correct; – admits that from June 2001 it issued application forms which indicated how investment cheques were to be made out but says that the instructions were not mandatory and indicated only Perpetual's preferences; – says that Perpetual reserved the right, in its discretion, to accept or refuse an investment whether or not the application complied with the investment instructions; – admits that it made no enquiry from the drawer of the cheques as to the identity of the account to be credited; – says that it changed its position in good faith on the faith of the receipt by it of the cheques in that it issued units in its cash management fund to Ms Belle and made distributions to Ms Belle upon redemption of those units so that Perpetual has not been unjustly enriched; – says that it provided good consideration for the cheques in that it issued units in its Cash Management Trust to Ms Belle; – says that Dr Landa intended that Perpetual receive and take the value of each of the cheques so that Perpetual had a right of immediate possession; – says that Dr Landa is estopped from denying the authority of Mr Cincotta, as his agent, to deposit the cheques as he did; – denies that any loss to Dr Landa was caused by any representation said to be misleading or deceptive. Undisputed facts 145 The facts necessary to decide the case are not disputed. 146 Between about 1995 and about 1999 Perpetual application forms for investment in one of its cash management funds (both as to original investments and additional investments) stated that cheques were to be made out to "Perpetual Trustees Australia Limited". There was no explicit requirement that the account or name of the intended beneficiary appear in the name of the payee. The relevant prospectuses attached only forms for the making of original investments in a cash management fund. 147 Between about 1995 and about 1999, Perpetual made available "stand alone" forms for investment to financial advisers and investors for the purpose of making additional investments in a cash management fund. Those stand alone forms stated "make cheque payable to 'Perpetual Trustees Australia Limited". 148 The prospectuses for the period 2001 to 2002 provided that an original investment had to be by an application form attached to the prospectus. Then followed the statement: "The cheque must be made payable to: 'PIML – PCMF – [Insert name of applicant(s)]' – and crossed 'Not Negotiable'." 149 Later appeared the statement: "If you would like to add to your investment, you will need to complete a form available from Perpetual or notify Perpetual in writing. The minimum additional investment is $200. Perpetual will confirm your investment in writing." 150 Perpetual submits that this prospectus made no requirement as to the way in which an investor was to draw a cheque for an additional investment, as distinct from a cheque for an original investment. I do not agree. I think that the reader would understand that all cheques for investment, whether for original or additional investments, were to be made out as had been earlier stipulated, i.e. with the name of the applicant included in the payee. 151 In directions for the completion of the application form at the back of the prospectus, the instruction was repeated as to how cheques were to be drawn. There followed the statement "Perpetual reserves the right to limit or refuse to accept an investment". Further on in the instruction is the statement: "Perpetual has an absolute discretion to accept or reject any application". Perpetual places great weight on these statements as indicating a policy that Perpetual reserved the right to accept a cheque for investment, no matter what appeared on it. I do not think that these statements go so far. I think that they say no more than that Perpetual is not obliged to accept an investment. It does not tell the reader that Perpetual will accept cheques which are not drawn in accordance with the previous instruction. 152 The investment application made in 1995 by Mr Cincotta on behalf of Ms Belle was on a form which stated: "Make cheque payable to Perpetual Trustees Australia Ltd". The application for original investments was changed by Perpetual in 1999. That form stated that the investor must be named as part of the payee. Perpetual's practice was still to accept cheques for additional investments which did not specify the name of the investor as part of the name of the payee, if the cheque was made out to Perpetual Trustees and the form was otherwise substantially completed. 153 It remained the practice of Perpetual, after changing the application forms for original investments in the prospectus, to use the previous "stand alone" form, including the 1999 stand alone form, and more recently produced stand alone forms which required that the name of the account holder appear as part of the name of the payee of the cheques. Perpetual's practice was generally to accept cheques for additional investments in a cash management fund provided they were accompanied by sufficient written notification of the relevant account holder and the fund. 154 Dr Landa's first cheque for $351,000, dated 23 August 2001, was accompanied by an application form in the 1999 stand alone format. The cheque was made payable to "Perpetual Trustees or bearer" rather than "Perpetual Trustees Australia Ltd". It was accepted in accordance with Perpetual's practice. 155 The following table shows, in respect of each Dr Landa's cheques, particulars of the cheque, what type of cheque, how the payee was made out, and what the then current application form required as to the particulars of the payee: " Cheques Amount Date cheque drawn Type Application form instruction Cheques made out to Form used $351,000.00 23 August 2001 Personal Perpetual Trustees Australia Limited Perpetual Trustees or bearer 1999 'Stand alone' form for additional investment $342,857.00 3 October 2001 Bank PIML-PIFS – [insert the name of applicant(s)] Perpetual Trustees Australia Limited or bearer 2001 Stand alone form for additional investment $302,875.00 3 October 2001 Bank PIML-PIFS – [insert the name of applicant(s)] Perpetual Trustees Australia Limited or bearer 2001 Stand alone form for additional investment $502,070.00 28 November 2001 Personal PIML-PIFS – [insert the name of applicant(s)] Perpetual Trustees or bearer 2001 Stand alone form for additional investment $250,000.00 13 August 2002 Personal PIML-PIFS – [insert the name of applicant(s)] Perpetual Trustees or bearer 2001 Stand alone form for additional investment $995,452.50 20 December 2002 Bank Perpetual Trustees Australia Limited Perpetual Trustees Australia Limited or bearer 1999 'Stand alone' form for additional investment Conversion 156 Conversion is dealing with a chattel in a manner repugnant to the immediate right of possession of another person who has the property or special property in it. The tort applies to cheques and other negotiable instruments and the value of the cheque or negotiable instrument is taken as the money received under it: Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204, at 229 per Dixon J; Lloyds Bank Ltd v Chartered Bank of India, Australia and China [1929] 1 KB 40; Voss v Davidson [2003] QCA 252, at [11]; Bute (Marquess) v Barclays Bank Ltd [1955] 1 QB 202, at 211. 157 Dr Landa submits that because the Contract and the delivery of his cheques to Mr Cincotta were induced by fraud, title to the cheques never left him, so that he had the immediate right to their possession when Perpetual credited the proceeds to Ms Belle's account. 158 The essence of Perpetual's defence to the claim in conversion and in money had and received is that: – it acted in accordance with the mandate on the face of the cheque in collecting the cheque; – by drawing the cheque in favour of Perpetual Dr Landa intended to pass title to Perpetual, that title has passed to it and it is, at most, a voidable title subject to Perpetual's defences; – Perpetual paid away the proceeds of the cheques before it had notice of Dr Landa's title so that it has not been unjustly enriched; – Dr Landa clothed Mr Cincotta with apparent authority to deposit the cheques and to deal with them as he did so that his claims in conversion and for money had and received are estopped. 159 In my opinion, Dr Landa succeeds in his claim in conversion and the defences relied upon Perpetual do not avail it against that claim. There is a decision of an appellate court which assists greatly in determining the issues, in the light of its factual similarities to the present case. 160 In Voss v Davidson (supra), Mr Voss asked the advice of his accountant, Mr Ripper, about investing the proceeds of the sale of his farm. Mr Ripper advised him to invest in "an overseas fund" and that he was able to arrange such an investment through his contacts with a large international firm of accountants. He told Mr Voss to draw a cheque in favour of "Southern Pacific Equities Unit Trust" and to deliver the cheque to him for deposit with that Trust. Mr Voss complied with that direction. 161 Mr Ripper immediately had a trust deed prepared constituting a trust entitled "Southern Pacific Equities Unit Trust". He was the sole beneficiary of that Trust. He opened a savings account with a bank in the name "Southern Pacific Equities Unit Trust" and deposited Mr Voss' cheque into that account. The bank collected the cheque and Mr Ripper made off with the proceeds. Mr Voss sued the bank in conversion. 162 The trial judge held that, even though Mr Voss remained the true owner of the cheque because of Mr Ripper's fraud in inducing delivery of the cheque to him, nevertheless the bank did not deal with the cheque in a way which was unauthorised by Mr Voss. The bank did what Mr Voss authorised it to do, namely, it deposited the proceeds of the cheque into the account of the payee named on the face of the cheque. The judge dismissed Mr Voss' claim in conversion. Perpetual makes the same submissions in this case. 163 The Queensland Court of Appeal allowed an appeal by Mr Voss. The judgment of Davies JA (with whom the other judges agreed) on this point is so apt to the present case that I quote it in full ([12]-[13]): "The central question in determining whether, leaving aside for the moment the defences raised of estoppel and absence of negligence, Suncorp converted Voss' cheque is whether the fact that it received the cheque into an account in the same name as that on the face of the cheque meant that it did not deal with the cheque in a manner repugnant to Voss' rights. The principle in this respect was comprehensively stated by Diplock LJ in Marfani & Co Ltd v Midland Bank Ltd in the following terms: 'At common law one's duty to one's neighbour who is the owner, or entitled to possession, of any goods is to refrain from doing any voluntary act in relation to his goods which is a usurpation of his proprietary or possessory rights in them. Subject to some exceptions which are irrelevant for the purposes of the present case, it matters not that the doer of the act of usurpation did not know, and could not by the exercise of any reasonable care have known, of his neighbour's interest in the goods. This duty is absolute; he acts at his peril. A banker's business, of its very nature, exposes him daily to this peril. His contract with his customer requires him to accept possession of cheques delivered to him by his customer, to present them for payment to the banks on which the cheques are drawn, to receive payment of them and to credit the amount thereof to his own customer's account, either on receipt of the cheques themselves from the customer, or on receipt of actual payment of the cheques from the banks on which they are drawn. If the customer is not entitled to the cheque which he delivers to his banker for collection, the banker, however, innocent and careful he might have been, would at common law be liable to the true owner of the cheque for the amount of which he receives payment, either as damages for conversion or under the cognate cause of action, based historically on assumpsit, for money had and received.' Plainly Ripper held the cheque on Voss' behalf. He was not beneficially entitled to it and had no authority to pay it into an account to which he was solely entitled beneficially. Yet that is what he did. And if he had no entitlement to it when he delivered it to Suncorp for collection, Suncorp, however innocent and careful it might have been, was, subject to the specific defences referred to later, liable in conversion to Voss as the true owner for the amount of which it received payment." 164 At [48]-[50] Williams JA added: "In this case, as the learned trial judge held (and as was conceded by counsel for the respondent on appeal) the appellants were at all material times the true owners of the cheque, there can be no doubt that in the circumstances the respondent converted the cheque in question. The learned trial judge came to a different conclusion because 'Suncorp did what Mr and Mrs Voss had actually or apparently authorised: the depositing of the cheque into an account in the name of Southern Pacific Equities Unit Trust' . His reasoning appears to have been that in doing what it did there was no 'unauthorised assumption [by the respondent] of the powers of the true owner'. In most of the cases where it has been held that a cheque has been converted by a collecting bank, the cheque in question has been deposited into an account meeting the description of the named payee. That was certainly the position in cases such as Lloyds Bank v The Chartered Bank of India and Marfani . As Diplock LJ said in the passage referred to above, conversion is a tort 'of strict liability in which the moral concept of fault in the sense of either knowledge by the doer of an act that is likely to cause injury, loss or damage to another or lack of reasonable care to avoid causing injury, loss or damage to another plays no part'. It follows that in the present case the respondent converted the cheque in question according to principles of common law." See also NIML Ltd v MAN Financial Australia Ltd [2006] VSCA 128; (2006) 15 VR 156, where the same defence to conversion as has been argued by Perpetual failed on appeal. 165 In the present case, Mr Cincotta held Dr Landa's cheques on Dr Landa's behalf. As the supposed investment scheme with Perpetual which had been proposed by Mr Cincotta was a fraudulent illusion from the very beginning, Mr Cincotta had no authority to do anything at all with the cheques which Dr Landa had given him. The title in the cheques remained in Dr Landa. Innocent though Perpetual was of any wrongdoing, it is nevertheless liable in conversion, subject to its defence of estoppel. 166 In Voss, the bank submitted that Mr Voss was estopped from denying that Mr Ripper was authorised to pay the cheque into the account named on the face of the cheque and was estopped from asserting that the bank had converted the cheque by paying out the proceeds to Mr Ripper. It relied solely on Mr Voss' acts of purchasing the bank cheque in the form that it was and handing it to Mr Ripper as clothing Mr Ripper with that authority and thereby creating the estoppel. 167 In the present case, Perpetual relies on virtually the same acts of Dr Landa. He drew the private cheques, and purchased bank cheques, showing Perpetual as the payee and he gave those cheques to Mr Cincotta. Dr Landa had no dealings at all with Perpetual, although, curiously, Perpetual says that that very fact also clothed Mr Cincotta with apparent authority and created an estoppel. However, I think that this last submission is an over-refinement. What Dr Landa did was no more or less than Mr Voss did. If Perpetual had made some enquiry of Dr Landa to which he did not respond, his silence would have been of significance. However, absent an enquiry, his silence signified nothing to Perpetual. 168 In Voss, Davies JA accepted that a defence based upon estoppel is available in a claim for conversion. His Honour continued: "But this would be so only where the true owner has so acted as to mislead the collecting bank into the belief that the person so depositing the cheque was entitled to do so. The application of that principle to the facts of this case does not avail Suncorp. By purchasing the cheque in the form in which it was and handing the cheque to Ripper, Voss did not represent to Suncorp, and plainly did not do so clearly and unambiguously, that Ripper was authorized to pay the cheque into a bank account which was, in effect, his own personal account; nor did he in any other way act so as to mislead Suncorp into believing that. On the contrary his representation, which was on the face of the cheque, was that Ripper had a limited authority to deposit the cheque only in the account of the trustee of a unit trust described as 'Southern Pacific Equities Unit Trust'. The account into which it was deposited was not that of a unit trust or even of a trust. Nor did Voss in fact mislead Suncorp. Suncorp would have acted in the same way even if there had been a genuine trust of that name already in existence; and would have acted in the same way even if Ripper had stolen the cheque. Suncorp, in acting in the way in which it did, relied solely upon Ripper's fraudulent representation, by his production of a sham trust deed, that the account which Ripper opened was the trust account of the unit trust named in the cheque." 169 In the present case, in drawing the private cheques and procuring bank cheques in favour of "Perpetual Trustees" or "Perpetual Trustees Ltd" and nothing more, Dr Landa did not represent to Perpetual that Mr Cincotta was authorised to direct payment of those cheques into any particular account. It was Mr Cincotta's own act in providing a forged application by Ms Belle which induced Perpetual to deal with the cheques as it did, just as the production by Mr Ripper of a trust deed and opening of an account in the name of the non-existent investment trust procured the bank to deal with Mr Voss' cheque as it did. 170 Perpetual's defence of estoppel cannot succeed. Perpetual is liable in damages for conversion in an amount equal to the face value of the cheques converted, less whatever has been repaid to Dr Landa by Mr Cincotta, together with interest under s 100 Civil Procedure Act 2005 (NSW) ("CPA"). Dr Landa's other claims 171 The claims for money had and received, negligence and misleading and deceptive conduct arise out of the same facts. Because Dr Landa has succeeded in his claim for conversion, it is unnecessary to deal with these additional causes of action. 172 The claim in negligence propounds a tortious duty of care owed by a financial institution to people who might deal with it which, if upheld, could extend the law. Likewise, the claim based on misleading and deceptive conduct gives rise to difficult questions. If Perpetual was guilty of misleading conduct by publishing prospectuses which could lead the potential investor to believe that Perpetual took reasonable care in processing cheques for investment, when in fact it did not, did Dr Landa suffer loss "by" that conduct when he never read any of the prospectuses? 173 When Dr Landa has a straightforward and commonplace cause of action in conversion which succeeds and gives him all the relief to which he is entitled against Perpetual, it is unwise to explore the possible extension of the law in what must be obiter dicta. Perpetual's Cross Claim 174 By a Second Cross Claim, Perpetual sues Dr Landa as a co-tortfeasor as a defence to Dr Landa's alternative claim in negligence for economic loss. As it is not necessary to deal with Dr Landa's claim in negligence and as contributory negligence is no defence to a claim in conversion, it is not necessary to deal with Perpetual's Cross Claim. I will formally dismiss it. ORDERS 175 The First Defendant, Morgan Brooks, is liable in damages to the Plaintiffs for breach of contract in an amount to be assessed. I will give directions for the assessment by a court appointed referee, if the parties cannot otherwise agree on the assessment. 176 There will be judgment for the Fourth Defendant, Ms Belle, on the Second Further Amended Statement of Claim. 177 There will be judgment for the Plaintiffs against the Fifth Defendant, Perpetual, for conversion, in accordance with these reasons for judgment. 178 The Second Cross Claim is dismissed. 179 I will stand the proceedings over to enable Short Minutes of Order to be brought in reflecting these reasons for judgment and to permit calculation of the amount for which judgment must be entered against Perpetual. 180 I will hear the parties as to costs. – oOo – 12/12/2007 - Judgment contains tables. - Paragraph(s) Not applicable 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.