Creak v James Moore and Sons Pty Ltd [1912] HCA 67

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_ fact came into possession of a sum of money to which they were _ already entitled, although they did not then know it. In my opinion the following proposition is good law : - If a man, having received a sum of money which is identified as being in fact the proceeds of property of his that has been sold _ without his authority, afterwards becomes aware of the fact, he is prima fucie bound to elect whether he will affirm or disaffirm the sale. That is to say, he cannot keep the money and recover the full value of the goods.

How long then does the obligation to elect continue? If it __ ever exists, the only limit that can be set is the happening of some new fact which would alter his position to his prejudice if he were still called upon to elect. Merely spending the money would not be such a fact. Possibly the same principle would be _ applied that is applicable in the case of an agent who has received _ money which he may under certain circumstances be personally liable to return, and who before notice of any such circumstance has paid it over to his principal. In this case the plaintiffs are in no better position than the principal in the case supposed, for an agent acting without autho- rity is a wrongdoer, and it is immaterial whether the wrong does fF or does not include criminal intent. aya proceed to apply this rnle to the present case. _ The suggested change in the plaintiffs' position is that they _ had, before discovering the truth, appropriated the £46, including _ the £31, in discharge of Watson's liability for the money em- _bezzled. The real nature of the transaction was that they received the £46 by way of restitution of stolen property, includ- ing both goods and money, or including goods stolen by both Watson and Quine. It would be absurd to regard it as a mercan- tile transaction to which mercantile rules apply. In my judg- ment, the doctrine of appropriation, commonly referred to as the Rule in Clayton's Case (1), does not apply in such a case, but, if _ it did, the foundation of its application would be a presumption of the creditor's intention. (Deeley v. Lloyds Bank (2)). In this case any intention on the part of the plaintiffs to appropriate the

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any intimation that it had come from Creak, and was not applied to make good any deficiency relative to the iron. The only evi- dence as to its source is contained in the officer's statement to Lawson that he " got some money back," part of which was 'on the culprits and some in the Savings Bank. It might all have been Moore's. Watson had absconded on 8th August 1911, having on that day embezzled £47 odd, which was more than sufficient of itself to cover the £46. Up to the end of August the deficiency known was £54. After that, and by a date not - fixed - the appellant has the onus of that - but, in view of the respondents' evidence as to application already quoted, before the - money was received, other amounts were discovered, which in : any event totalled more than £46, independently of the iron transaction, and against which the money could be, and was, received without adopting the sale to Creak. The obligations of Watson and of Quine to restore moneys of which they had de- - frauded respondents, were debts, and on receipt of their sottn were pro tanto cancelled. And, as the appellant has not sus- - tained the burden of proving that at the time the moneys were received there had been an election to affirm the sale of the iron, - and as the contrary appears, there was then no debt and no money obligation in respect of that, and so, ex necessitate, the debts cancelled must have been other items, and it is immaterial 5 whether, as between them, appropriation can be said to have been - made or not. And so Moore & Sons held the £31 by a right - entirely independent of and distinct from the Creak-Quine con- tract, and had given valuable consideration by cancelling indebted- ; ness pro tanto. Thomson v. Clydesdale Bank Ltd. (1) establishes, inter alia, that creditors receiving money rightfully in the first instance in discharge of an existing debt - which distinguishes the matter from the agency case suggested by the learned Chief Justice - are entitled to retain it, even after discovering their debtor's fraud on another whose money has gone to pay the debt. The contrary doctrine would unsettle all business relations. But morally there is no difference between that and the present case, - because in each, the creditor retains money, after he learns that 3 it is the product of his debtor's fraud on the original owner. (1) (1893) A.C., 282, at p. 287.

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at all events, when in December 1911 his solicitor informed ondents the £31 had come from him, they were bound to whether they would have the money or the goods - and that could not have both. But why? If the iron was still irs, the title never having passed ; and if the money was theirs 7th September for the reasons above mentioned, where was necessity of election? The principle of what is called " appro- and reprobate" was stated by Honyman J. in Smith v, (1) in these terms - that a man "cannot say at one time the transaction is invalid, and thereby obtain some advan- to which he could only be entitled on the footing that it is alid, and at another time say it is void for the purpose of secur- some further advantage." The word "thereby" is all ortant. This was accepted as the true principle by the Court f Appeal in Roe v. Mutual Loan Fund (2). The present case is untouched by that. The sum of £31 was not obtained by Moore saying the sale was valid, but in respect another legal right; and so there is nothing inconsistent in aining that sum, and at the same time in still insisting, as they ws have insisted, on maintaining their title to their own rty - the iron. A man is not called on to elect between two f his own property. And so far as forming and announc- an actual intention to apply the money to liabilities of m other than the iron is concerned, that was done in the st unmistakable manner before any notification was received the respondents that the money represented Creak's payment 'the iron. In respondents' letters to Creak of 25th October d 13th November they claimed from him the value of the s. This could only be consistent with the appropriation of e whole £46 to other delinquencies than the theft of the iron. of itself it destroys all otherwise possible basis for the ent that, after the receipt of the letter of 20th December, it too late to so appropriate the money. Lord Macnaghten said 'ory Brothers & Co. v. Owners of Turkish Steamship Mecca" ; The " Mecca" (3): - * Where the election is with the

Creak v James Moore and Sons Pty Ltd [1912] HCA 67 - HCA 1912 case summary — Zoe

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Judgment (100 paragraphs)