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

ai. fact the proceeds of goods of his that have been sold without his author afterwards becomes aware of the fact, he is, as between himself and Oy purchaser of such goods, primd facie bound to elect whether he will affie Tsancs JJ. disaffirm the sale, and the obligation to elect continues until the happet

of some new fact which would alter his position to his prejudice if he 1

If a man, whose servant has stolen his goods and has also stolen his n afterwards receives from the police money found upon the thief, he is

stolen goods, so as to exclude the obligation to elect above stated. So held by Griffith C.J. and Barton J., Isaacs J. dissenting.

Decision of the Supreme Court of Victoria reversed.

Appeat from the Supreme Court of Victoria. __ An action was brought in the County Court at Melbourne by James Moore & Sons Proprietary Limited against Charles William Creak claiming by the plaint £32 16s. for money owing by the defendant to the plaintiffs for the value of two tons of gal- _ yanized iron belonging to them and converted by him to his own use. At the close of the plaintiffs' case, by consent leave was _ given to the defendant to counterclaim against the plaintiffs. for _ £31 money had and received by them to his use, and leave was _ given to the plaintiffs to amend their particulars of claim by sub- _ stituting for it a claim for damages for conversion of their goods. The County Court Judge gave judgment for the plaintiffs on their claim for £32 16s. without costs, and for the appellant on his counterclaim for £31 with costs. __. From this judgment, so far as it directed that the plaintiffs _ should be allowed no costs of their claim and that there should be judgment for the defendant on the counterclaim with costs,

• the plaintiffs appealed to the Supreme Court, and the defendant eross-appealed against the judgment except so far as it dealt with the counterclaim.

_ The Full Court allowed the appeal of the plaintiffs with costs and dismissed the cross-appeal of the defendant with costs, and "directed that so much of the order of the County Court Judge as directed that the plaintiffs should be allowed no costs of their claim should be varied by ordering the defendant to pay the

• plaintiffs' taxed costs of their claim, and that the order on the counterclaim should be set aside and that judgment for the plaintiffs on the counterclaim with costs should be substituted _ therefor. From this judgment the defendant, by special leave, now ap- _ pealed to the High Court. The facts of the case are fully stated in the judgments here- _ under,

• Jacobs and Reginald" Hayes, for the appellant. When the _ respondents got actual knowledge that the £46 received by them z - from Lonsdale included the proceeds of the sale of the stolen goods, they were bound to elect whether they would waive the

H. ©. or A. conversion or not. By retaining the money at that time, they

must be taken to have elected to waive the conversion: Brewer vy. Sparrow (1). When the respondents received the £46 they knew that Quine and Watson had stolen their goods and had sold them to the appellant, and they must be taken to have had constructive notice that the £46 included the proceeds of that sale, for they had the means of knowledge of that latter fact and they wilfully shut their eyes: Jones v. Gordon (2); Thomson vy. Clydesdale Bank Ltd. (3); Clough v. London and North Western Railway Co. (4); Black v. S. Freedman & Co. (5); Moses y. Macferlan (6); Phillips v. London School Board (7); Marsh WA Keating (8); Reid vy. Rigby & Co. (9); Bannatyne v. MacIver (10). [Isaacs J. referred to Jacobs v. Morris (11). GrirrirH C.J. referred to McLaughlin v. City Bank ote Sydney (12).] The property in the cheque for £31 or the proceeds of it never _ passed from the appellant but Quine was a trustee of it, and, as the proceeds can be identified, the appellant is entitled to follow them: Underhill on Trusts, 6th ed., p. 143; In re Hallett's Estate; Knatchbull vy. Hallett (13). There was no debt due by - Watson or Quine to the respondents, but, at most, an implied obligation to repay the value of the goods he had stolen. The £46 was not paid by Watson to the respondents for valuable consideration. 'The doctrine of appropriation does not apply here because there were not two debts owing by Watson to the respondents. (Grirrira C.J. referred to Deeley v. Lloyds Bank (14).] If it does there is no evidence of appropriation, nor was notice of appropriation communicated to the debtor: Cory Brothers & - Co. v. Owners of Turkish Stewmship " Mecca" (15). [They also referred to Burn v. Morris (16); Rice v. Reed (17); Zeeb v. Bank

(2) 2 App. Cas., 616, at p, 625. (11) (1901) 1 Ch., 261 ; (1902) 1 Ch., {3) (1893) A.C, 282, at p. 287. 816,

(6) 2 Burr., 1005, at Pe 1012, (14) (1910) 1 Ch., 648.

(7) (1898) 2.Q.B. (15) (1897) A.C., 286, at p. 204.

'ke (with him Cussen), for the respondents. 'This case falls hin the principle laid down in Thomson v. Clydesdale Bank , (3), that a person who receives money in payment of an ing debt is not bound to inquire into the source whence the ney comes, and is entitled to retain it, although he afterwards liscovers the money has been fraudulently acquired by the btor: Collins v. Stimson (4) ; Foster v. Green (5); Robertson & yffatt v. Belson (6); Redgrave v. Hurd (7). [Isaacs J. referred to Bx purte Dewhurst ; In re Vanlohe (8); Roe v. Mutual Loan Fund Ltd. (9).] Once it is established that the money was received in good h, there is an end of the case. he doctrine of constructive 1otice has never been applied to negotiable instruments or money. e Rule in Clayton's Case (10) does not apply except where there current account. There cannot be a trust in favour of the ellant here. See Underhill on Trusts, 7th ed.,p.4. If the 1 was trust money, and the appellant were seeking to follow it, he would have to plead that distinctly in the County Court. e money could only be recovered by the appellant from on on rescinding the contract, and no trust arose in respect : Oundy v. Lindsay (11). Aacs J. referred to Lichholz v. Bannister (12).] The principle of In re Hallett's Estate; Knatchbull v. Hallett }) assumes an affirmance of the transaction, and therefore does apply here. A trust arises out of some contidence, but there none here. If there was a trust, the respondents took the mey without knowledge of the trust. The evidence for the lant does not show that the respondents did not take the oney in the manner most favourable to them. 'he respondents

had an election at any time to apply the money to their debt,

18.R. (N.S.W.), 167. (7) 20Ch. D., 1, at p. 24. '4 V.LR., 694; 20 A.L.T., 200. (8) LR. 7 Ch., 185. .C., 282, at p. 287. (9) 19 Q.B.D., 347. (10) 1 Mer., 572, at_p. 608. (11) 3 App. Cas., 459. (12) 17 C.B.N.S., 708. (13) 13 Ch. D., 696.

(i) (5) 7H. & N., 881. (6) (1905) V.L.R., 555; 27 A.L.T.,

if New South Wales (1); Healey v. Bank of New South Wales H.C. or A.

H.C. or A. and it has been applied to a particular debt. [He referred

GrirritH C.J. This case raises a singular question, which, far as I know, is free from direct authority, and must be de mined by the application of general principles of law. respondents had in their employ a salesman named Watson, who in August 1911 stole from them, amongst other things, 21 cases of galvanized iron, of which 15 cases were afterwards recoveret The total value of the goods stolen was apparently about He also early in August embezzled from them about £47. 3rd August one Quine, who was Watson's accomplice, sold 4 of stolen cases of galvanized iron to the defendant for £31, giving his name as Johnson. The defendant paid the money by chequi which was paid into Watson's account at the Melbourne Savi Bank, where he had a eredit balance of 2s. 3d. Shortly after wards the balance of £31 2s. 3d. was transferred to Watson's credit at a Government Savings Bank at Sydney. Early in A Watson and Quine absconded from Melbourne to Sydney, w they were apprehended by Detective Lonsdale of the Victoria Police. After the apprehension Watson gave him an order on th Savings Bank for the £31 2s, 3d, together with a sum of £7 ii cash. Quine gave him an order on the Savings Bank for £5, and

plaintiffs. At this time Watson and Quine had been brough before justices in Melbourne, but their examination had not concluded. They were afterwards committed for trial indicted for larceny, and pleaded guilty.

On these facts there is no difficulty in identifying the £31 p by defendant as part of the money received by plaintiffs fro Lonsdale.

Plaintiffs became aware on 14th August that defendant bought the iron at the price of £31, and defendant was exam

s a witness for the prosecution. It does not appear, however, whether they then knew the precise sources from which the sum _of £46 which they received from Lonsdale, had been derived.

On 15th December 1911 the plaintiffs brought this action in e County Court, claiming £32 16s. for "money owing by the defendant to plaintiff" for the value of goods converted by the fendant to his own use, namely, four cases of iron. The plaint afterwards amended to a claim for conversion of plaintiffs' goods, namely, &c. On 20th December defendant's solicitors _ wrote to plaintiffs' solicitors informing them of the fact that defendant had paid Quine the £31 by cheque, which was paid into n's account, and that the amount so paid in was afterwards ied over by Watson to Lonsdale, and by the latter to plaintiffs. they then became aware, if they did not already know, that the 'money which they had received from Lonsdale included the £31 paid by defendant to Quine.

At the trial defendant, with other defences, alleged that the plaintiffs had adopted the transaction, i.¢., the sale of the iron by _ Watson, and were estopped from receiving the amount claimed, and alternatively that the plaintiffs had received £31 of the _ defendant's money which was paid in respect of the purchase of the goods, and that he was entitled to have that amount deducted from the claim.

__ By consent the defendant was also allowed to counterclaim for the £31 as money had and received for his use. In answer to e he counterclaim the plaintiffs, with a denial of the debt, said at they took the money bond fide and for valuable consideration. Under these circumstances the question arises whether the intiffs are entitled to recover the value of the goods and also to keep a sum of money which was in fact the actual proceeds of the goods when sold by the thief.

_ During the argument, I put the case of an agent employed to 'sell goods and collect money, who remits to his principal a sum of £100, being in fact indebted to him to a larger amount, and on the following day informs the principal that £50 of the £100 represents the price of property of the principal which he had d without authority, and I asked whether in such a case the ipal would be bound to elect to affirm or disaffirm the sale,

that is to say, whether he could keep the £50 and also recover the property sold or its value. To my mind the answer seems plain enough. Although the receipt of the £100, including the £50, was right and proper at the time, the retention of it would not be consistent with common honesty unless the principal - intended to affirm the sale, or unless in the meantime some new fact had occurred which had altered his position with regard to the debtor.

Cases in which, although the receipt of money is innocent, its - retention may become unjustified are not unknown to the law. Reid v. Rigby & Co. (1) is a somewhat remarkable instance. In that case money which had been borrowed in the defendant's name without his knowledge or authority and applied for his benefit, was held to be recoverable as money had and received to the use of the plaintiff. Possibly the decision might have been put on the ground of ratification of the borrowing, but it was not so put by the learned Judges who decided it. See also Western Bank of Scotland v. Addie (2).

In my opinion the owner of stolen goods which have been sold by the thief may follow the fund representing the proceeds, if they can be identified, into the hands of a third person who - cannot set up a better title, as was done apparently without objection in the case of Rice v. Reed (3), and as this Court did in the case of Black v. S. Freedman & Co. (4). If, in this case, the money had not been handed over to Lonsdale and by him to the plaintiffs, the Court before which Watson was con- victed would have ordered it to be paid to them, (See sec. 496 of the Victorian Orimes Act, corresponding to sec, 100 of the English Larceny Act, the provisions of which have been adopted in all the Australian States).

In the present case the proceeds of the stolen goods are suffici- ently "earmarked," so it is said, and are identified in the hands of the plaintifis, who were also the owners of the goods. The question is whether they can set up a better title to the money than as such owners. The title set up is that they received the money as part payment of a debt and in ignorance of their in-

(1) (1894) 2 Q.B., 40. (3) (1900) 1 Q.B., 54, (2) LR. 1 ALL., Se, 145, (4) PCL.R., 105.

_ 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

dependent equitable title to it. If they so received it, they in H.C. or A.

£31 to satisfaction of the embezzled money, as distinguished from _ the stolen goods, is excluded by the facts. But I must not be
supposed to say that I think that even if a rule, not the same as, - but analogous to, the Rule in Clayton's Case (1), were app : it would be an answer.

Tam of opinion that if a man whose servant has stolen att sold his goods, and has also stolen his money, afterwards receives from the police money found upon the thief (which is practically this case), he is not entitled, without inquiry as to the source of the money, to appropriate it in satisfaction of the stolen money - to the prejudice of the purchaser of the stolen goods, so as to exclude the obligation to elect already stated; but he is not, of - course, bound to account for any greater sum than he has actually received out of the earmarked proceeds: Rice v. Reed (2),

The plaintiffs knew the actual facts not later than 20th - December. They certainly knew them at the trial. Under these circumstances I am of opinion that, if they then elected to dis- affirm the sale, they were bound to give eredit for the earmarked proceeds. On the whole I think that they must be taken to have so elected. 'This view seems to have commended itself to "Beckett J. tts

The principles which I have stated are not new, although the application of them may be novel. i

I said at the outset that I do not know of any authority directly in point. Perhaps the nearest is the Eighth Command- . ment. ;

Barron J. Watson, after his arrest, handed to Detective - Lonsdale, as part of the £46 disgorged by him and his accomplice, an order on the Savings Bank in Sydney for the amount of his deposit there, £31 2s. 3d., which included the £31 paid by the appel- lant to Quine for the iron and deposited by Quine to Watson's . credit. It is not shown that Lonsdale told the respondents, and he may not have known, that the proceeds of the appellant's cheque were part of the £46. Lonsdale, accompanied by another detective, handed the respondents the £46 in cash during seg

(1) 1 Mer., 572, at p. 608, (2) (1900) 1 Q.B.,54. °

ember. Their position at that time was that they knew of Watson's embezzlement, committed early in that month; they also ew from the appellant's evidence before the magistrates, if not jously, that Watson and Quine had sold four cases of iron, ig two tons, to the appellant, who had paid them £31 for the on. At this time they also knew that there was other loss, but its amount was not known to them when Lonsdale handed over the £46. "Lewis Moore, a director of the respondent company, seems to have beenin control. As to the £46 he said in the County Court : has been applied to the genera] defaleation " - meaning, I ink, in partial recoupment of the respondents' whole shortage

e handed over to the respondents the money extracted from the eves, there was a conversation. He or detective Coonan (who with him) said: "We have got £46 which the prisoners have

then there was handed to the detectives a receipt for the

Lawson, the respondents' accountant and assistant manager, ys it was he who received the money from Lonsdale. He does say that the detectives said anything about the deficiency. Lonsdale told him, as he relates, was that the prisoners, vhen arrested in Sydney, had some money in cash and some in e Savings Bank, and that the total recovered from them was 6, which sum was handed to Lawson in gold and notes.

'his is all the evidence that I can gather from the notes of the ned County Court Judge as to the state of the respondents' vledge when they received the £46 and as to the disposal of

Apart from the question whether the Rule in Clayton's Case ) applies, it is clear that this evidence does not show any c priation by the respondents, or any intention to make any appropriation, of the £46 either to the loss by embezzle- (1) 1 Mer., 572, at p. 608.

ination before the magistrates, late in August or early in H.C. or A.

H.C. or A. ment or to the loss by theft; though they knew that portion of

the iron had been converted into money and that the appel had paid one of the confederates £31 for it. For aught they knew, the money might have partly represented embezzlement and partly the proceeds of stolen goods, or it might have been, all of it, embezzled money.

After they had become aware that the proceeds of the stolen iron were included in the sum they had received, the respondents brought this action. It is plain that the £31 is a sum identified as part of the £46 disgorged by the thieves, and that before bringing this action the respondents had made no specific appropriation of any of that £46.

Under these circumstances I cannot but think that it was incumbent on the respondents to affirm or disaffirm the sale by Quine to the appellant. It would, I think, be monstrous to hold that they are entitled to keep both the money and the goods. By actions that speak louder than words, a person who insists on such a claim is allegans contraria. The effect of upholding such a position would be to give a judicial sanction, not hitherto bestowed upon it, to a course of action which is quite repugnant _ to the moral sense. I am convinced that the Court which decided the case of Reid v. Rigby & Co. (1) would have sustained this appeal. The £31 here was, I think, as the money in that case was held to be, money received by the respondents for the use of the appellant. Either the respondents have adopted the sale to the appellant and accepted the proceeds pro tanto, or, if they have disaffirmed that sale, the sum of £31 is not their money, In either case the decision of the learned County Court Judge should be restored.

Isaacs J. In my opinion the judgment of the Supreme Court of Victoria was correct and should be affirmed. The appellant's contention in the main was an appeal to a sug- gested sense of unfairness in permitting the respondent to retain £31 originally coming from Creak, and yet to insist on taking from him the iron for which he had given the money. Undoubt- edly it is hard on Creak, but so it is on any man defrauded, and

hardship on him is not the test of Moore & Sons' responsibilities. H.C. oF A. ok Judge is neither an Eastern Cadi nor an arbitrator. He ae expounds the law which fixes the standard of right, and to that, - Crrax _ whatever it may be, the Judge adheres. Whenamanclaimsa 0... ' - right or sets up a defence in a Court of justice he must, apart Moore &

_ from statutory provisions, be able to point to some definite prin- a aaa iple of the common law which creates the right or permits the /™?-

: defence. Otherwise, rights and liabilities, unless rigidly defined tases 3. by Statute, would vary with the moral intensities of the Judges.

_ Some recent references to this subject by the highest tribunals

. In Blackburn, Low & Co. v. Vigors (1) Lord Macnaghten said :

_ - "L apprehend that it is not the function of a Court of justice i

_to enforce or give effect to moral obligations which do not carry with them legal or equitable rights." In the Ruabon Steamship Co. Lid. v. London Assurance (2) Lord Halsbury L.C. observed :

• It seems to me a very formidable proposition indeed to say

_ that any Court has a right to enforce what may seem to them to be just, apart from common law or Statute." In Ram Tuhul Singh v. Biseswar Lall Sahoo (3), the Privy Council said : - *It is

_ 'not in every case in which a man has benefited by the money of another, that an obligation to repay that money arises. The

"question is not to be determined by nice considerations of what

may be fair or proper according to the highest morality. To

"support such a suit there must be an obligation, express or im- plied." Lastly, in Dewar v. Goodman (4), Lord Loreburn LC. said : - " It may be a hard case on the plaintiff, but like Jelf J., 'I do not feel at liberty to decide the case upon the ground of expe-

Now, on what principle of law can the appellant succeed? In the County Court he obtained judgment on a distinct and

intelligible' ground. The learned Judge thought that the "property in the cheque or its proceeds never passed from Creak.

-* This fundamental error was expressly corrected by 'Hood J. It is still insisted on before us, and must be dealt with.

By the contract between Quine and Creak the former agreed

(1) 12 App. Cas., 531, at p. 543. (3) LR. 2 Ind. App., 131, at p. 143. _ (2) (1900) A.C.. 6, at pp. 9, 10. (4) (1909) A.C., 72, at p. 76.

to transfer the iron, and the latter the money. Want of Quine's - title to the iron prevented it from passing, but, as Creak could - give a good title to the money, that passed, The contract was - what Lord Cairns in Cundy y. Lindsay (1) calls "a de facto contract," Creak could, if he rescinded the contract (Towers y. Barrett (2) ) for breach of condition (see. 17 (1) of the Sale of Goods Act 1896), recover back from Quine or from Watson, for they were one, the price he paid - that is, the amount of it as a debt - as upon a failure of consideration: Hichholz vy. Bannister (3) and sec. 58 of the Act. But the £31, nevertheless, was not stolen, and so the property in it, when it was given with the intention to transfer it, passed from him - notwithstanding any false pretence. The distinction between the two - theft and false pretence - is definitely marked by the Court of Appeal in Whitehorn Brothers v. Davison (4). Vaughan Williams LJ,, after referring to larceny, then, in speaking of the case before him, says: - "It may be treated as obtained by false pretences, but that is a very different thing, because in that case, if the goods are transferred to a third person, he takes under a contract which, though voidable, is not void, and is valid till avoided."

Buckley LJ. (5) defines larceny by a trick, and then false pretences. He says, further (6), that a man " cannot steal a con- tract ; he can only steal a chattel." So, too, per Kennedy LJ. (7).

The Creak-Quine contract was therefore good till avoided, and Creak could have recovered damages for breach of warranty of title to the iron.

The second position put for the appellant is really dependent on the first. It was that the £31 was trust money in Watson's hands for Creak, and Creak can follow it because traceable. For this In re Hallett's Estate; Knatchbull y, Hallett (8) was cited. But that case has its limitations. It is not a panacea for every instance of unfair dealing. It has no application unless you satisfy the basis on which it rests by first establishing a fiduciary position. Sir George Jessel M.R himself, when it was cited to him

(1) 3 App. Cas., 459, at p. 464. (5) (1911) 1 K.B., 463, at p. 479. 2) 1 133. (6) (1911) 1 K-B., 463, at p. 480. (3) 17 C.B.N.S., 708. (7) (1911) 1 K.B., 463, at p. 485. (4) (1911) 1 K.B., 463, at p. 474, (8) 13 Ch, D., 696.

who sold his principal's goods, but who, by the course of trade, entitled to treat the proceeds received as his own, and to count merely as debtor for the amount to his principal. Now, on 7th September, when the £46 was paid over to ondents, Creak's contract with Quine still stood. Creak still ned the goods, and therefore held to his contract ; this neces- ly involved the position that he did not even assert any claim othe £31. That was Watson's property, and so it passed into Moore's possession free from any trust or fiduciary obligation. 'Tf, then, the appellant has any case, some other principle must und to rest it on. _ It was next said that Mcore & Sons were put to their election, her to waive the tort, and so adopt the sale to Creak, or else y treat the £31 as still Creak's money, and return it to him as ey received to his use, or, what is the same thing, suffer the for conversion to be reduced by that sum. This is an e the affirmative of which lies on the appellant. If Moore & were put to election, the question is when and how? Take, the moment when the money was received - 7th September. far as it is necessary for the appellant to rely on the respon- knowledge or belief at that stage that the money was nally Creak's, or on any actual appropriation of the money o the iron transaction, or non-application to other defaults, he s, because at the trial he deliberately shut out evidence on points which the respondents offered. On elementary prin- of justice he cannot now insist on any such position. This, of course, does not debar the latter from relying on the distinct uncontroverted evidence the other way. I will refer to it

ive Lonsdale said that all he told the respondents - and learned County Court Judge adopted his statement - was that the money was handed over " as part of the deficiency." wis Moore, respondents' director, says: "It has been applied to general defalcations - none appropriated to Creak's account." that when the money became Moore's, it was received without

in Kirkham v. Peel (1), refused to apply it to the case of an agent H.-C. or A.

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.

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

(I) LR, 8C.P., 350, at p. 357. (2) 19 Q.B.D., 347, at 350. : (3) (1897) A.C., 286, at p. 294.

'The appellant then passes on to another argument. He says H.C. or A.

creditor, it is always his intention expressed or implied or pre- - sumed, and not ay rigid rule of law that governs the application ¥ of the money." As no appropriation had been made by the debtor, the election was with the creditor, and, even if no prior 4 appropriation or definite application of the £46 had been made, yet in the face of the letters of October and November, no ques- tion can arise as to whether or how it was exercised. Lord - Maecnaghten in The " Mecca" (1) said, the creditor "is not bound to declare his election in express terms. He may declare it by bringing an action or in any other way that makes his meaning and intention plain." This principle of giving effect to the actual intention of the creditor was acted on in Deeley v. Lloyds Bank (2), referred to by the learned Chief Justice. The result is, then, the respondents have a double position with respect to appropriation. First, by carrying the moneys originally to a credit of general defalcations which at that time did not include the iron, they satisfied Lord Selborne's words in In re Sherry (3) on the subject of appropriations; and next, by the letters of October and November, they satisfied the first quoted words of Lord Maenaghten in The " Mecca" (4).

These last two observations, though decisive as to the unsub- stantiality of the appellant's contention, are by no means neces- sary to the respondents' case. That rests on the broad fact that the money, when received, was so received in good faith and not in respect of the iron transaction, but of other delinquencies ; and in my opinion that ends the matter. It ends it for this, among other reasons, that once honestly received from- Watson as his money by Moore & Sons in payment for something other than the iron, its identity was lost because it became instantly an undistinguishable part of Moore's possessions. The only thing that could prevent this result would be the old heresy of "trust fund," so as to retain its original and identifiable character in Moore's hands.

The letter of 20th December consequently becomes immaterial ; there was nothing to prevent the claim for the iron, irrespective

(1) (1897) A.C., 286, at p. 294. (3) 25 Ch. D., 692, at p. 702. (2) (1910) 1 Ch., 648, (4) (1897) A.C., 286.

o. charged. Appeal from County Court . James Ske I Moore & dismissed with costs. Judgment of Sons Pro- County Court restored. ae

Solicitor, for the appellant, P. J. Ridgway. Solicitors, for the respondents, Gillott & Moir.

og Wl (ACT eS (HIGH COURT OF AUSTRALIA.] THE CROWN . 7 3 2 : 4 . APPELLANT;

ON APPEAL FROM 'THE SUPREME COURT OF WESTERN AUSTRALIA.

Stamp duty - Transfer upon sale - Contract for sale of gold mine - Consideration, ©, or A. partly in shares and partly in cash - Value of consideration - Stamp Act 1882 1919 (W.A.) (46 Vict. No. 6), 83. 46, 49. ~

Where the consideration for the sale of certain gold mining leases was P=®TH, expressed in the agreement of sale to be £400,000, to be paid by the issue of O/ober 29. 300,000 shares of £1 each, fully paid up, and £100,000 cash, which in the grimnos., agreement of sale the vendor agreed to immediately expend in the purchase of Harton and! 100,000 shares, and the value of the shares had increased between the date of the sale and that of the actual transfer :

Held, that for the purpose of assessing stamp duty under sec. 46 of the 'Stamp Act 1882 (W.A.) in respect of the transfer, the consideration was to be taken to be £400,000.

Decision of the Supreme Court of Western Australia affirmed.