Johnson Matthey (Aust) Pty Ltd v Dascorp Pty Ltd [2003] VSC 291

2. The plaintiff is a large refiner of gold and other precious metals. Between 1994 and 1997 Mr Gaffney, a customer melter employed by the plaintiff at its refinery at Settlement Road, Thomastown, regularly stole small quantities of gold from the plaintiff's premises and through an accomplice, Mr Knight, sold this gold to the first named defendant trading under the business name Australian Gold Exchange (hereafter "AGE"). The second and thirdnamed defendants, David and Juliette Secchi, were at all material times the only Directors of AGE. The plaintiff seeks damages from each of the defendants for conversion of its gold. It sues each of the first, second and third named defendants jointly and severally as primary tortfeasors and, in the alternative, on a secondary or accessorial basis sues the second and thirdnamed defendants as Directors whom it contends are liable for AGE's conversion of the plaintiff's gold.

5. The plaintiff also sued the fourth named defendant for its negligence in providing security services to the plaintiff's business during the period that the gold was stolen. Interlocutory judgment for damages in default of appearance by the fourth named defendant was entered prior to the trial of the action and it played no part in this trial.

8. The plaintiff pleaded 65 separate conversions of its gold by each of the first, second and third named defendants between 30 August 1995 and 31 January 1997. At the trial, it was admitted that on each of the 65 occasions pleaded, the plaintiff was the owner of each of the quantities of gold as alleged, that such gold had been stolen by Mr Gaffney and that each parcel of such gold had subsequently been sold by Mr Gaffney's accomplice, Mr Knight, to AGE for the amount specified in the pleadings. On the final day of the trial, there being no objection by the defendants, I permitted the plaintiff to amend the form in which each of the conversions was pleaded. The amended form of each of the 65 conversions pleaded was the same. I have set out the way in which the first conversion was pleaded with the amendment underlined.

"5. The First Conversion 5.1 The plaintiff is and was at all material times the owner of and entitled to 472.40 grams of gold stolen by Ty Gaffney and which AGE and/or the third defendant or the second defendant purchased for $5,196.00 and/or took physical control of on 30 August 1995.

Particulars

The sale is evidenced by a receipt numbered D03981 and dated 30 August 1995. The sum of $5,196.00 was paid as to $4,196.00 by cheque No 001138 and as to $1,000.00 in cash. A copy of the receipt will be provided after discovery. 5.2 On a date which the plaintiff cannot specify save that it was subsequent to 30 August 1995, AGE and/or the third defendant and/or the second defendant sold the gold referred to in the preceding paragraph.

Particulars

Particulars of the sale are known to AGE and the third and second defendants and will be provided after discovery. 5.3 In the premises AGE and/or the third defendant and/or the second defendant converted the said 472.40 grams of gold to their own use and wrongfully deprived the plaintiff thereof by reason whereof the plaintiff has suffered loss and damage.

Particulars

Value of the said 472.40 grams of gold $6,564.47"

The amendment was made by the plaintiff to support its submission that a finding should be made that the second and third named defendants were primary tortfeasors.

14. The plaintiff's principal activity is the refining and fabrication of precious metals including gold. During the period 1995 to 1997, the only other gold refineries in Australia were in Perth, they being the Perth Mint and the Golden West Refinery Group. The plaintiff occupied a refinery plant and administration offices at 339 Settlement Road, Thomastown, Victoria and its annual production of 99.99% gold known as "Four 9's Gold" was in excess of 100 tonnes. The main source of the plaintiff's unrefined gold was the Australian goldmining industry, whilst secondary sources included industrial recovery, jewellery and scraps. The unrefined gold received by the plaintiff came from most Australian States although the majority came from Western Australia.

17. In November 1994, the plaintiff commenced to change the refinery process from one of Aqua Regia Dissolution to one of Miller Chlorine. The Aqua Regia process was a batch process whereas the Miller Chlorine process was a continuous one. The change was completed in June 1995.

20. Ty Gaffney commenced employment as a customer melter with the plaintiff in April 1993. He commenced to steal small quantities of gold from the plaintiff in July 1994 by concealing it on his body when he left the plaintiff's premises at the completion of an afternoon shift. These thefts continued on a relatively regular basis without detection until early 1997. Following investigations and analysis, the plaintiff was able to identify over 100 occasions on which Mr Gaffney stole gold which varied in amounts on each occasion from between 150 net grams to in excess of 600 net grams of gold. In total, Mr Gaffney provided Mr Knight with in excess of 48 kgs of gold which was sold by Mr Knight to AGE.

23. During the period 1995 to 1997 the plaintiff was producing in excess of 110,000 kgs of refined gold per annum. The amount of gold stolen by Mr Gaffney represented less than 0.1% of the total pure gold refined in one year.

26. Mr Gaffney was responsible for melting and refining small pieces of gold received either directly from the customer or from the plaintiff's interstate offices. He worked independently within the melt room. A reconciliation of gold records revealed that none of the gold which he stole was from the area of operation in which he worked. It appeared that Mr Gaffney was able to steal cathode gold which was taken out of the cathode vault each day by others for the purpose of melting. Mr Gaffney would then melt some of this gold with silver and other base metals into the form of a button, wedge or blob prior to concealing the gold on his body at the end of his shift.

29. It was fortuitous that following a police investigation into Mr Knight, who was by late February 1997 seriously addicted to heroin, the police learned of Mr Knight's involvement in the sale of gold to AGE and his connection with Mr Gaffney. It was as a result of the police investigation that the plaintiff became aware of the theft of its gold by Mr Gaffney.

32. At all material times the plaintiff had a comprehensive inventory tracking system for its gold which recorded gold movements throughout the production process from receipt of the gold until its return to the customer. The plaintiff's capacity to efficiently maintain an inventory tracking system was made more difficult by the change in its refinery process.

The defendants' reliance upon s. 27 Sale of Goods Act 1958

36. AGE, having admitted that the plaintiff was the owner of each of the quantities of gold which it purchased from Mr Knight for the amounts alleged, contended that the plaintiff's conduct by virtue of s. 27 Sale of Goods Act 1958 precluded it from denying Mr Knight's authority to sell the stolen gold to AGE. That conduct as pleaded in the first named defendant's defence, although refined in submissions, was said to be:

(i) The failure by the plaintiff to take adequate measures to prevent or detect the thefts or to ensure that such measures were taken.

(ii) The failure by the plaintiff to implement adequate stock control procedures to enable detection of gold theft.

(iii) Failure by the plaintiff to alert buyers of alluvial gold in Melbourne to the fact that gold was disappearing from the plaintiff's premises and that such buyers, which would include the first named defendant, should take precautions.

AGE also denied that it sold the gold as alleged in each conversion pleaded in the statement of claim and in its defence pleaded that it exchanged the gold which it had purchased from Mr Knight for an equivalent value of gold processed by the Golden West Refinery, a large Western Australian refinery.

(a) Contributory negligence by the plaintiff

42. AGE claimed that the plaintiff had itself negligently caused or contributed to any loss or damage that it had suffered. Initially, AGE submitted that any liability of AGE for conversion was extinguished or reduced as a result of the plaintiff's contributory negligence. They relied upon in Lumsden & Co v London Trustee Savings Bank[1] and Souhrada v Bank of New South Wales.[2] Prior to the conclusion of the hearing, Mr Horgan properly conceded that he could not maintain the argument that contributory negligence was a defence to an action for conversion having regard to the decision of Ormiston J. (as he was then) in Australian Guarantee Corporation Ltd v Commissioners of the State Bank of Victoria.[3]

46. In January 1996, the plaintiff conducted the first physical stock-take after the commission of a new processing plant. This stock-take was witnessed by an experienced gold stock-taker from the United States. The stock-take revealed a serious gold loss situation and the plaintiff became concerned about the adequacy of the stock-taking procedures, record-keeping and the accuracy of assays. The stock-take reconciliation, which took a number of months to complete, disclosed a gold loss of 240 kgs, significantly more than the processing losses that were anticipated with the introduction of the new process. As a result, the plaintiff undertook a further full stock-take in August 1996 which was again overseen by an experienced gold stock-taker from the United States. This reconciliation disclosed an unexplained gold loss of 310 kgs, an increase of 70 kgs from the stocktake reconciliation commenced at the beginning of the year.

49. In order to find the missing gold, the plaintiff commenced a re-melt of an inventory of 50 tonnes of silver. It thought that all or a proportion of the missing gold may have been left in the silver during the refining process. Between August 1996 and January 1997, the silver was re-melted and refined but the process resulted in a gold recovery of only 9 kgs, leaving unexplained a gold loss of 301 kgs. A further stock-take was then undertaken in January 1997 after the plaintiff had conducted an extensive re-evaluation of its inventories and its processes. This stock-take confirmed a total loss of gold in the period November 1994 to January 1997 of 256 kgs. It will be apparent from the aforementioned that the thefts by Mr Gaffney would account for less than one-fifth of that loss.

52. Following the commencement of the police investigation in early 1997, the plaintiff discovered that Mr Gaffney had been taking the refined cathode gold after it had been taken out of the vault and transferred each day to the foundry for melting down into gold grain. The plaintiff's gold inventory tracking system included weighing and checking the refined cathode gold before transferral to the foundry for melting and after melting. Mr Shepherd, a general manager of finance and administration of the plaintiff, examined these records following the receipt of information arising from the police investigation as to the source of the stolen gold. These records tended to support the information that Mr Gaffney had stolen the cathode gold at this point in the gold refining process. I accept however that the discrepancy between the weight of refined cathode gold before and after melting was of such a small order that it would only be with the benefit of additional information not discovered until the police investigation was under way that one would conclude that theft, rather than production losses, was occurring at this point in the refining process.

55. Following the January 1996 stock-take identifying a substantial gold and silver loss, the plaintiff undertook an examination of each stage of the refining process to eliminate each stage as a possible cause of the losses. This examination took in excess of 12 months and was nearing completion at the time the plaintiff received information regarding the police investigation into Mr Knight and Mr Gaffney.

60. Between 1994 and 1997, the plaintiff had a security system in operation at the plant covering both the building and the movement of staff within the building. The plaintiff had a security manual which was a generic guide to the Company's standards at all operational sites. The manual was supplied to the security manager employed by the plaintiff at the Thomastown plant, who was responsible for establishing site security procedures and for liaising with the security contractors. At all material times the security contractor was the fourth named defendant. It supplied the security staff who were trained and supervised by the security manager with respect to security procedures that operated within the Thomastown plant.

63. The Thomastown refinery was not a metal-free environment and employees could enter the refinery wearing their own personal clothing and items that contained metal such as trouser belts, rings, medallions and zips. Although refinery employees were issued with standard working clothing, the staff room in which the staff changed into such clothing was situated immediately adjacent to the melt room. At the completion of a shift, the melt room staff would change into their personal clothing in the staff room and would then be required to walk through the plant to a security area where they were subjected to a security screening check. This check required workers to remove their shoes and empty their pockets. Only a hand-held metal detector was used to examine them. Although the security manual prescribed that employees should be asked to pass through an archway detector, such a device was not in operation during the relevant period.

66. It appears that Mr Gaffney would tape the wedge of gold onto his body underneath his belt near his groin. Following the commencement of the police investigation, Mr Gaffney was videoed on occasions passing through the security process. It appears that when the detector was activated Mr Gaffney would turn down the front of his jeans to reveal a metal stud on the inside of his pants which was accepted by the security guard as the explanation for the activation of the detector. The detector was neither further used nor was there any physical search or examination undertaken of Mr Gaffney's person. Mr Shepherd acknowledged that the procedure followed by the security guards was less than satisfactory and was not in conformity with the security manual.

69. There were other aspects of the security system which were inadequate although the search area was monitored by video-tape. The security manager, who was required to view the videos, did not do so and it may be that the procedure which enabled Mr Gaffney to avoid detection was something of which the security manager was therefore unaware. The security manual also required that employees only be permitted onto the site during work hours, yet Mr Gaffney was given access to the melting room prior to the time at which he was required to commence work. It appears that it was during this period of time that he obtained access to the cathode gold which had been brought from the cathode vault for melting by other employees.

72. Mr Shepherd, the principal witness for the plaintiff, acknowledged that the security staff had not taken appropriate steps to ascertain why the detector was activated. They ought to have asked Mr Gaffney to remove his belt and, upon discovery of the metal stud, should have asked him to remove his pants and should have searched his body and the area of his waist again with the metal detector. Mr Gaffney's contract of employment included a term which required him to submit to a search if required.

75. The plaintiff, upon receipt of information following the police investigation, became concerned about the adequacy of the security process and as a consequence has introduced new security procedures following a thorough review. Metal clothing is now banned in the secured area and metal-free clothing is supplied to staff who are required to change into it before entering into the secured area. Staff are now subjected to both a metal detector search and walk through x-ray arch and all baggage is x-rayed.

78. It is unnecessary to further consider the evidence relating to the conduct of the security staff employed by the fourth named defendant. They adopted a security procedure which permitted Mr Gaffney to conceal gold on his body and leave the plaintiff's premises without detection on over 100 occasions. The plaintiff employed a security manager who was required to develop security procedures appropriate for the plaintiff's premises at Settlement Road, Thomastown. The plaintiff's security manager was responsible for all aspects of security at the plaintiff's premises and in particular was required to develop operating procedures and standing orders that were to be followed by the fourth named defendant's security staff. The security manager had available to him a number of monitoring screens which he could observe as the security guards were searching employees. The procedures that were prescribed were inadequate to properly detect employees who might attempt to remove gold from the premises and the procedures that were in place were not adequately enforced. The plaintiff did not have an adequate and properly monitored security system in place at its premises and in submissions, the plaintiff only faintly sought to resist such a conclusion.

(d) Extent to which public had access to gold lost in the plaintiff's processing

82. As a result of the stock-take reconciliations conducted by the plaintiff during 1996, it was ascertained that there had been a loss of some 240 kgs of gold which it believed was the result of processing problems. In cross-examination of Mr Shepherd who was, at the material time, the general manager of the finance and administration of the plaintiff, it was suggested that substantial amounts of gold must have been contained within the waste of the refining process and that persons outside the refinery could have come into possession of the gold. Mr Shepherd, whose evidence I generally accept, explained that the waste was discharged and used for landfill. The waste was in either liquid or sludge form. Any gold that was contained within the waste would be in small amounts within tonnes of sludge and leftover chemical materials from the process. The plaintiff during 1996 had gone through an extensive sampling of the waste and rigorous steps were taken within the refinery process to ensure a minimal loss of gold within the waste. The plaintiff did not regard it as a realistic possibility that gold lost through the waste process could get into public circulation. The plaintiff had reviewed all aspects of the process to ensure that there were no large losses of gold occurring at any particular stage of the process. Despite the magnitude of the gold lost the plaintiff had no reason to think that such gold might find its way into public circulation by being recovered within the waste discharged by the plaintiff. Furthermore, no evidence was placed before me to suggest that anyone could have recovered gold from the waste discharged by the plaintiff. I do not think that the plaintiff can be criticised for having failed to act upon a hypothesis which the evidence establishes to be remote.

(e) Failure of the plaintiff to notify AGE of the lost gold

86. In the course of his cross-examination, Mr Shepherd agreed that although the plaintiff did not deal extensively with alluvial or miner's gold, the plaintiff would have been aware that there were a small number of commercial traders in Victoria who would deal in gold of this description. In particular, he acknowledged that the plaintiff would have known how to notify such persons who trade in such gold and that once the plaintiff had discovered that there was a large amount of gold which was unaccounted for those persons could fairly easily have been notified that such gold might have been circulating in the market place. The plaintiff had not notified any dealers in the market place.

89. The second named defendant gave evidence that during the period 1995-1997 there were approximately 12 to 13 gold dealers listed in the Yellow Pages and there may have been a number of other dealers whose names were not so listed. In addition, there are a number of other persons who bought and sold gold such as prospectors who would come into the office of AGE from time to time. The second named defendant stated in evidence that it was very rare for information to be circulated between various gold traders and he had no experience of information being circulated amongst traders with respect to gold that was stolen despite the fact that the sale of stolen gold was an industry-wide problem. Cathode gold was not something that would normally be traded. Rather it would be used as part of the process of converting the gold into gold bars or granulated gold which would then be traded. The bullion traders were amongst the small number of dealers listed as gold dealers.

92. By contrast to her husband, the third named defendant swore that she did not think the gold was stolen because she would have expected the owner to have circulated the disappearance of the gold within the traders in the industry. The third named defendant gave evidence that the Australian Bullion Company, after it was robbed in 1997, circulated a notice to gold traders advising them to be on the lookout for bars and granules that had been stolen. She also said that from time to time people who had had jewellery stolen would send a letter to second-hand dealers advising them of that fact. She was not aware of any warning or notification being given by the plaintiff in relation to its stolen gold.

97. The defendants allege that the plaintiff failed to properly monitor its stock during the production process. It is contended that inadequate stock control procedures resulted in the plaintiff being unable to determine how it was losing such substantial amounts of gold during the refinery process. Although, the evidence does not demonstrate any failing by the plaintiff in this respect, I shall assume for the purpose of the present argument that the defendants have established the plaintiff's failing as pleaded. Does such conduct support an estoppel?

(b) Failure to take adequate measures to prevent theft

101. According to the defendants, the plaintiff's procedure for searching its employees at the completion of a shift was inadequate to prevent the unlawful removal of gold from the secure area by its employees. This conduct is characterised as negligence by the defendants. The employment of the term "negligence" is apt to be misleading as estoppel by omission does not readily accommodate an unqualified transposition of principles of the tort of negligence.[4]

104. The defendants in support of their claim that the plaintiff was negligent point to the absence of restrictions as to the clothing which employees could wear during the course of their shift; that the employees' change room was located within the secure area of the premises; that no x-ray arch or baggage search x-ray was in place despite the safety manual requiring such equipment be utilised; that the use of the hand-held metal detectors by the security guards was wholly inadequate that the security guards readily accepted Mr Gaffney's explanation of why the detector was activated and the failure by the plaintiff's security manager to oversee the safety procedures and ensure proper compliance by the staff and employees with such procedures. The plaintiff while denying such deficiencies did not seriously challenge such conclusions. I have concluded that the plaintiff did not maintain an adequate security system. Does such conduct support an estoppel?

107. It has been suggested that it is questionable whether the courts would characterise an employer's failure to adequately monitor employees as negligent for the purpose of estoppel despite the fact that forms of employee monitoring are becoming increasingly common.[5]

(c) Failure to notify gold dealers that its gold may be offered for sale

111. The defendants also submit that the plaintiff knew that if large amounts of gold were lost or stolen from its premises the likelihood was high that the gold would be sold in the market place to a limited number of persons who dealt in such gold. The defendants submitted that it was a simple matter for the plaintiff to notify such dealers in the market place that large amounts of its gold were unaccounted for and might be offered to them for sale. It was not disputed that the first named defendant, AGE, was a dealer in the market place which could be expected to deal in such gold. As I have already noted there were occasions when the plaintiff had followed such a course following a known theft of its gold. The defendants submit that as at January 1996 when the plaintiff could not account for 240 kgs of its gold or in August 1996 when a further reconciliation showed that 310 kgs could not be accounted for, the plaintiff ought to have notified those persons in the market place who were likely to deal in such gold. Does a failure to notify the first named defendant give rise to an estoppel?

Ambit of the estoppel in s. 27 Goods Act 1958

115. The defendants contend that the estoppel contained in s. 27 Goods Act 1958 arises on two discrete bases. The first is that the plaintiff, upon becoming aware of the quantity of gold that was lost, stolen or unaccounted for, had a duty to notify the small number of dealers that existed in the market place (and which included the first named defendant) that such gold belonged to the plaintiff. Having failed to notify AGE, the defendants argue that the plaintiff was precluded from denying Mr Knight's authority to sell its gold. The defendants accepted that the estoppel on this basis could not arise until the middle of 1996 when the plaintiff confirmed that a substantial amount of its gold was unaccounted for. It was conceded that no obligation to notify dealers in the market place could have arisen before this time because the plaintiff did not know its gold could not be accounted for. The second contended basis for the estoppel is that the plaintiff by its negligence in the manner in which it controlled and safeguarded its gold, breached its duty of care to the small number of dealers in the market place and permitted the seller (Mr Knight) to create an appearance of ownership in the gold. The defendant submitted AGE was thereby precluded from denying Mr Knight's authority to sell. It was said that the principles supporting these propositions could be derived from a line of authority commencing with the judgment of Lord Wilberforce in Moorgate Mercantile Co Ltd v Twitchings and which was followed in Thomas Australia Wholesale Vehicle Trading v Marac Finance Australia and Leonard v Ielasi.[6]

118. Section 27 Goods Act 1958 enshrines the aphorism, nemo dat quod non habet which continues to apply "unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell". This section and its counterpart in other States is recognised as doing no more than preserving common law principles of estoppel.[7] Section 4(2) Goods Act 1958 provides that the rules of the common law shall continue to apply unless they are inconsistent with an express provision of the Act.

121. At common law one may be precluded by either words or conduct from denying a particular state of affairs when such words or conduct cause or encourage another person to believe in that state of affairs with the result that such person alters their previous position.[8] The present case is not concerned with estoppel arising where an owner, by reason of representations made that the seller is the owner of the goods, is estopped from denying the apparent ownership of the seller. The defendants rely upon estoppel by conduct. Where there is an obligation on the owner to disclose the true position, an omission to do so may have the same legal consequences as a representation.[9]

124. The two bases for the estoppel upon which the defendant's rely (see paragraph 33) appear to be drawn from a passage in Sutton's Sales and consumer law.[10] The author refers to two manifestations of estoppel by conduct:

"When a party upon whom is cast a duty to speak or act fails to do so, and estoppel by negligence where the true owner of goods is precluded from denying the seller's authority to sell because of his or her negligence in allowing the seller to create an appearance of ownership of the goods."[11]

The defendants submitted that these propositions are to be derived from Associated Midland Corporation v Sanderson Motors Pty Ltd[12] and Thomas Australia.[13]

129. Despite the defendants' claim that the estoppel could be founded on two discrete bases, it was acknowledged in the course of the defendants' oral submissions that the only conduct of the plaintiff which could support the estoppel, was the alleged failure of the plaintiff to notify AGE that its gold could not be accounted for. The plaintiff's inadequate stock or security procedures, properly viewed, could only provide a factual basis for the requirement that the plaintiff act or speak to prevent AGE from being misled.

132. Implicit in the defence submission is the claim that AGE is an innocent bona fide purchaser. The dictum of Ashurst J. in Lickbarrow v Mason[14] that:

"Wherever one of two innocent persons must suffer by the acts of a third, he who has enabled such third person to occasion the loss must sustain it."[15]

is well recognised by authority and text writers as being too broad. Something more than mere imprudent conduct on the part of the owner is required before inaction or omission can give rise to an estoppel.[16]

137. There is much controversy about the propriety of the term `estoppel by negligence'. Some writers have argued that there is no such thing as estoppel by negligence.[17] Lord Pearson in Saunders v Anglia Building Society[18] expressed such a view. There appears to be consensus amongst the text writers that this estoppel, like all others, rests in the last resort on a representation, estoppel by negligence really being a representation through omission.[19] Where the estoppel is by negligence, the representation is deemed by the courts to have occurred. This was expressed in unequivocal terms by Collins MR in Bell v Marsh:[20]

"A man may act so negligently that he must be deemed to have made a representation which in fact he did not make, but because he has acted negligently he is deemed to have made it."[21]

Silence or acquiescence may in some circumstances have the same consequences as an expressed representation.[22] The representation must mislead another.[23] In addition, the relationship of the owner to the party misled must be such that the owner has a duty to correct the misunderstanding and was negligent in not doing so.[24]

142. In both Australia and England, negligence on the part of the true owner can only be raised as an estoppel in limited circumstances. It is generally recognised, that a true owner will not be precluded from denying the seller's authority to sell by virtue of his or her omissions to act unless it is established that the owner has a duty of care to the purchaser, and in breach of that duty was negligent. Such negligence must be the proximate or real cause of the buyer being induced to purchase the goods.[25]

145. In Big Rock Pty Ltd v Esanda Finance Corporation Ltd,[26] Pidgeon J. referred to the different judicial approaches adopted in Australia relating to the question of duty discussed by the House of Lords' in Moorgate Mercantile Co. One such differing approach is to be found in the dissenting judgment of Kirby P. (as he then was) in Thomas Australia where His Honour observed that there was nothing contained within the section that demanded that a duty relationship be established. In the President's view the imposition of a duty of care constituted an unwarranted diminution in the beneficial protection provided by the section. His Honour construed the section free from what his Honour regarded as unnecessary encrustation by common law principles of estoppel. By contrast, both Glass and McHugh JJA. (as he was then) reinforced the requirement that the owner must owe a duty to the buyer or the class of persons to which the buyer belonged, a requirement long recognised in common law countries. The dissenting judgment of Kirby P. however was viewed as persuasive and would have been followed if it were necessary to do so in the judgment of Millhouse J. in Leonard v Ielasi.[27]

148. For almost one and a half centuries the common law has recognised a duty of care as an essential requirement of estoppel by omission.[28] It has been acted upon by courts of the highest authority.[29] It need not be a pre-existing legal duty.[30] As Glass JA. observed in Thomas Australia the owner's failure -

"....must be in breach of the duty to speak out. Unless the conduct of the taciturn owner is subjected to the litmus test of duty, I know of no way to discriminate between conduct which precludes and that which does not."[31]

152. The generality of the words in s. 27 Sale of Goods Act 1958 does not facilitate the Court's task in determining the nature of the relationship which must exist between owner and buyer, nor do the decided cases provide clear guidance as to the circumstances in which a relationship will give rise to the duty.[32] This case, counsel for the defendants contends, requires the application of a developing law to a novel set of circumstances.

155. In Mercantile Credit Co., the Court of Appeal held that a duty of care will exist where the owner furnishes the thief with documentation which enables the thief to give the appearance of having the power or authority to dispose of the goods where the owner knows the documents will be shown to third parties who will rely upon them.[33] This particular case assumes some importance for the defendant as it treated the nature of the duty of care as being the same as that which arises in the ordinary law of negligence.

158. The defendants accept that whilst a duty of care to the innocent converter is required, the wholesale importation of principles applicable to the tort of negligence is not appropriate.[34] Yet the defendants' second basis for supporting the estoppel depends upon conduct of the owner which is more reminiscent of a claim in negligence. The transportation of principles relating to the tort of negligence into the area of estoppel by omission would substantially broaden the scope of the estoppel. It would enable the contributory negligence of an owner to be raised by a buyer as a defence to a cause of action in conversion.[35]

161. In cases where the duty of care that was found to exist bore a similarity to that of the tort of negligence, the owner had, by positive acts, placed the rogue in a position where he was able to give the appearance of being the owner or person authorised to dispose of the property so that the consequences were reasonably foreseeable.[36] Such circumstances are not present in this case. The most favourable view of the facts permit the defendants to say that the plaintiff's inadequate procedures resulted in Mr Gaffney being able to obtain and sell the plaintiff's gold without the plaintiff's knowledge.

164. By contrast with positive conduct or statement, inaction or silence is colourless. As Lord Wilberforce in Moorgate Mercantile Co predicated of conduct sufficient to found an estoppel:

"It cannot influence a person to act to his detriment unless it acquires a positive content such that that person is entitled to rely on it. In order that silence or inaction may acquire a positive content it is usually said that there must be a duty to speak or to act in a particular way, owed to the person prejudiced or to the public or to a class of the public of which he in the event turns out to be one."[37]

168. The decision of the House of Lords in Moorgate Mercantile Co is generally regarded as correctly enunciating the requirements of a duty and breach.[38] Their Lordships were concerned with the activities of a hire purchase organisation of which most finance companies and many motor dealers were members. It was a private body which kept a register of vehicles which were the subject of hire purchase agreements and any finance company which let a vehicle pursuant to such agreement could register the agreement with the organisation enabling a dealer to search the register when considering whether to purchase a vehicle. There was no obligation on finance companies to register agreements with the organisation, although, in practice, they generally did so and dealers in practice relied upon the information available. The plaintiffs had failed to register the hire purchase agreement and the defendants received a negative response when they enquired from the organisation whether any agreement had been registered. The plaintiffs sued the defendants for conversion and the defendants argued that the plaintiffs were estopped from asserting their title. The defendants claimed an estoppel by actual representation arose. The House of Lords rejected this on the basis that the body had merely said that no agreement had been registered, but they had not said that there was no such agreement in existence. The defendants also asserted an estoppel by failure to register. The majority of the House of Lords held that there was no such duty as membership of the body did not require members to register agreements.

171. Much subsequent judicial and academic opinion is to the effect that the dissenting judgments of Lord Salmon and Lord Wilberforce are more persuasive but the dissenting judgments do not differ from the other members of the Court as to the principles of law that should be applied. Lord Wilberforce's judgment is often cited as declaratory of the principles for which the case stands. Lord Wilberforce and Lord Salmon considered that, as the general practice in the industry was to depend heavily on registration of the hire purchase agreements, it was not unreasonable to hold that a duty to register arose. The defendants rely by analogy, upon Lord Wilberforce's and Lord Salmon's analysis of the facts as demonstrating AGE had an obligation to act. Atiyah says of the decision in Moorgate Mercantile Co that:

"If the case had been approached as though it were a simple negligence action in tort (rather as the Hamblin case was approached) it seems likely that a duty would have been imposed since the consequences were readily foreseeable."[39]

Having put forward this contention, the learned author identified difficulties which would arise if common law negligence principles were applied.

176. Both the plaintiff and defendants have referred to the passage in the judgment of Lord Wilberforce in Moorgate's case where his Lordship said:

"I think that the test of duty is one which can safely be applied so long as it is understood what we mean. I have no wish to denigrate a word which, to modern lawyers, has become so talismanic, so much a universal solvent of all problems, as the word "duty" but I think that there is a danger in some context of which this may be one, of bringing in with it some of the accretions which it has gained - proximity, propinquity, foreseeability - which may be useful, or at least unavoidable in other contexts. What I think we are looking for here is an answer to the question whether, having regard to the situation in which the relevant transaction occurred, as known to both parties, a reasonable man in the position of the acquirer of the property would expect the owner acting honestly and responsibly, if he claimed any title in the property, to take steps to make that claim known to, and discoverable by the acquirer and whether in the face of an omission to do so, the acquirer could reasonably assume that no such title was claimed."[40] (emphasis mine)

His Lordship also observed, referring to the English section, the equivalent of s. 27 Sale of Goods Act 1958, that the right of an owner to recover property from innocent persons remains, notwithstanding a greater willingness by the law to find a duty of care on the part of owners towards persons into whose hands their property comes. His Lordship observed that:

"The duty of care should not be stretched so widely as to make it a universal duty on the part of property owners to safeguard others against loss."[41]

182. McHugh JA. (as he then was) in Thomas Australia considered as critical this requirement propounded by Lord Wilberforce that the buyer, having the same information about the transaction as the owner, would expect the owner to ensure that his title to the goods was made clear. It is the "situation in which the transaction occurred" and not the existence or interests of the parties which must be known to both parties.[42] McHugh JA. whilst stating that it was open to the courts to develop the law in the area of duty reiterated the warning of Lord Wilberforce that the duty of care should be confined.[43]

185. It has been suggested by Johnson J. in Leonard v Ielasi that the test is too narrowly stated by Lord Wilberforce because it would preclude a duty arising in cases where there were special facts known to the true owner which related to the fraudulent seller, but which could not be within the knowledge of the buyer.[44] Lord Wilberforce's test does not, in my opinion, require that the knowledge or understanding of the transaction by the owner and buyer must be identical. The cases referred to by Johnson J.[45] in his comprehensive analysis were all cases in which an estoppel arose on the basis of a knowledge special to the owner. Johnson J. thought a restatement necessary of Lord Wilberforce's test, to provide for matters peculiarly within the knowledge of the owner. Based on the special knowledge of the owner, Johnson J. propounded the following test:

"In my view the owner of goods of some substantial value who permits possession of those goods to remain with a person whom the owner knows to have acted dishonestly in relation to those goods will, except in special circumstances, owe a duty of care to others who might be minded to deal with that person in relation to the goods. The duty arises on the basis of the known dishonesty of the person in relation to those goods. The duty is not negligently to mislead others into acting to their detriment in relation to the goods."[46]

189. Where the principal is aware of their agent's misconduct, action is called for as part of their duty to speak out. A failure to act when possessed of knowledge of the agent's wrongdoing deprives the innocent party of the opportunity of avoiding the detriment.[47] An estoppel founded on silence or acquiescence will be sufficiently based, if the person against whom the estoppel is raised, if acting reasonably, honestly and responsibly would bring the true facts to the attention of the person known by them to be operating under the mistaken view of the facts or of their respective rights.[48]

192. Carelessness without more has not been regarded as a sufficient basis to found a duty by the owner to the buyer although, where a duty otherwise exists, it may provide the basis for establishing a breach of that duty. Even where the true owner could reasonably foresee that their carelessness could lead the buyer to believe that the seller was the owner of the goods, in the absence of knowledge of the actual circumstances which affect their property, a duty will not arise. A knowledge of facts which would lead a reasonable owner to conclude that a reasonable buyer may be misled accords with the principle as expressed by Lord Wilberforce in Moorgate Mercantile Co Such knowledge would generally be necessary.

195. The owner of goods is under no duty to ensure the safety of their own belongings. Hence possession of goods is not regarded as a basis of ostensible authority.[49] The judgments of their Lordships in Moorgate Mercantile Co are to the effect that an owner does not owe a duty to the world to keep his goods safe. In the words of Lord Fraser:

"The owner of property is entitled to be careless with it if he likes, and even extreme carelessness with his own property will not preclude him from recovering it from a person who has bought it from someone who dishonestly purported to sell it."[50]

199. Similarly, Lord Wilberforce observed that English law does not require that a man who owns property is under any general duty to safeguard it and he may sue for recovery any person into whose hands it comes.[51] Farquharson Brothers v J King & Co Ltd[52] is frequently cited to support this proposition. It makes plain that carelessness in the conduct of one's business will not preclude an owner from recovering property stolen from them.[53] Farquharson Brothers was referred to at length in the judgment of Pidgeon J. in Big Rock Pty Ltd.[54]

202. In Farquharson Brothers' case, the plaintiffs had given their clerk express authority to send delivery orders for the timber to a dock company which was instructed to act on the clerk's delivery orders. The clerk had no authority to sell the timber himself, but he fraudulently transferred some of the timber by executing a delivery order to a fictitious person and the dock company, acting upon the delivery order, transferred the goods in accordance with the order. The clerk then sold the timber to the defendants under his assumed name and the plaintiffs having discovered the clerk's fraud brought an action for conversion. Each of the judgments in the House of Lords rejected the notion that an employer can be estopped from asserting title to goods stolen by their employee where they gave the employee no authority to dispose of the goods and the buyer had not acted on any representation by the owner concerning the authority of the clerk. As Lord Macnaghten stated:

"Nothing is better settled than this, that if a person buys a chattel and it turns out that the chattel was found by the person who professed to sell it, the true owner can recover his property unless there has been a sale in market overt. The right of the true owner is not prejudiced or affected by his carelessness in losing the chattel, however gross it may have been. If I lose a valuable dog and find it afterwards in the possession of a gentleman who bought it from somebody whom he believed to be the owner, it is no answer to me to say that he would never have been cheated into buying the dog if I had chained it up or put a collar on it or kept it under proper control. If a person leaves a watch or a ring on a seat in the park or on a table at a café and it ultimately gets into the hands of a bona fide purchaser, it is no answer to the true owner to say that it was his carelessness and nothing else that enabled the finder to pass it off as his own. If that be so, how can carelessness, however extreme, in the conduct of a man's own business preclude him from recovering his own property which has been stolen from him."[55]

206. Since Farquharson Brothers,[56] the distinction between the circumstances of an owner who unwittingly assists in a fraudulent scheme and an owner who represents another as though the owner or as someone who has power to dispose of the goods has been maintained.

Was the plaintiff's conduct such as to preclude it from denying Mr Knight's authority to sell?

210. It follows from the authorities to which I have referred that the plaintiff was under no obligation to safeguard its gold. The evidence establishes that the plaintiff, at no material time, appreciated that its gold was stolen or accessible in the market place. Even if the plaintiff had been so aware, the evidence does not establish a custom, usage or trade amongst gold dealers that someone in the plaintiff's position would take steps to notify gold dealers when its gold had been unaccounted for or stolen or that there was an expectation that it would do so. The plaintiff cannot be penalised for failing to follow a course that did not approach being one upon which dealers relied. I do not find that the plaintiff owed AGE a duty or that any omission by the plaintiff involved a breach of duty. Even if the nature of the duty was that for the tort of negligence and accommodating the view of Kirby P. (as he then was), in Thomas Australia that the rights of careless owners must be balanced against considerations of "conduct" within s. 27 Sale of Goods Act 1958, the relationship between the plaintiff and the first named defendant was not one which gave rise to a duty or created an obligation requiring the plaintiff to notify AGE that its gold was stolen or unaccounted for.

213. The evidence tendered in this case fell far short of establishing that there was a trade custom or practice within the market which gave rise to any expectation that an owner such as the plaintiff would notify gold dealers in the event that it discovered that its gold was stolen or unaccounted for. Even if, contrary to my view of the evidence, such an expectation did exist, the plaintiff did not become aware of the fact that its gold had been stolen until some time in 1997 following the last conversion claimed by the plaintiff. While the plaintiff was aware during 1996 that it was suffering substantial gold losses, it attributed those losses to its production process and did not regard it as likely that gold contained within production waste could be recovered and find its way into the market place. No facts were known to the plaintiff that should have led it to conclude that it should notify those in the market place. The defendants have failed to establish a factual foundation for an estoppel based upon the plaintiff's failure to notify AGE of its gold loss.

216. The defendants in the second way that they raise an estoppel, relied upon the plaintiff's negligence in relation to the monitoring and security of its gold. This they submitted formed a separate basis for founding an estoppel as distinct from its failure to notify gold dealers in the market place. Such conduct without more, as the authorities show, does not in law give rise to an estoppel which would preclude the plaintiff from asserting its title. The omission to act or speak by the plaintiff must be in breach of some duty owed to AGE, or at least the small number of gold dealers of which AGE was one.

219. The burden imposed upon the defendants to show that the plaintiff owed AGE a duty or was in breach thereof has not been discharged. The defendants have failed to show that there was any relevant conduct by omission by the plaintiff which enabled Mr Knight to hold himself out as entitled to deal with the goods. The buyer relying upon estoppel by negligence must establish a representation arising from a failure to act in circumstances where the owner had a duty to do so to ensure that the buyer was not misled. I am satisfied no representation arises from any negligent conduct on the plaintiff's part. It took no step to clothe anyone with the appearance of a right to sell its gold. It neither knew nor could it be said should have known that a large amount of its gold was likely to be offered for sale in the market place. As I observed earlier, I do not think the second basis for the estoppel relied upon by the defendants is a different one to the first. The plaintiff's omission upon which the defendants rely is the same, namely, its failure to notify AGE that its gold could not be accounted for. There is no injustice that I can detect in allowing the plaintiff to deny Mr Knight's authority to sell the gold.[57]

222. I leave open the question whether it must be established that the buyer has acted to his detriment upon the basis of the mistaken belief. Clarke J. in Associated Midland thought this was required as did Finkelstein J. in Matthews v Doctrieve Corporation.[58] Whilst reliance on a representation to one's detriment is necessary in order to plead estoppel by representation, I find it unnecessary to determine whether authority or principle necessitates the importation of such a requirement for estoppel by negligence. Where there is an absence of compelling evidence establishing that the buyer has relied upon the owner's failure to act and has thereby suffered detriment, the buyer will in most circumstances, and this is one of them, fail to establish that the owner's conduct was the proximate cause of the buyer's loss. What the defendants have failed to establish is that there was any duty, that the plaintiff breached its duty or that the plaintiff's conduct was the effective, proximate and real cause of AGE being persuaded to purchase the gold thereby causing its loss.[59]

225. For all of the foregoing reasons I conclude that the defendants have failed to establish any conduct by the plaintiff which would preclude it from denying Mr Knight's right to sell AGE the gold.

229. The first named defendant trading as AGE bought and sold gold bullion, gold scrap, jewellery, diamonds and precious metals. Mr and Mrs Secchi have at all material times been the only Directors and during that period David Secchi has also been Secretary. The paid up capital of the Company is $2.00, one share being owned by David Secchi and the other share by his mother, Josephine Secchi. Both Mr and Mrs Secchi were paid a salary by AGE during the period 1994 to 1997 and the second named defendant's brother, Eddie Secchi, was also employed on a full time basis during this period. There were other employees who worked in the office of AGE at various times.

232. Mr Secchi had been involved in the trade of gold and other precious metals and jewellery since 1985. After her marriage in 1992, Mrs Secchi commenced to work for AGE. The Company frequently bought unrefined ingots or pieces of gold from the public. Such gold was often known as "prospector's gold", "alluvial gold" or "miner's dump". Prospectors often melted down and removed most of the significant impurities before presenting the gold in the form of alluvial blobs for sale. On average, AGE would purchase approximately 2 kgs of such gold material from the public each year.

235. Between July 1994 and January 1997, AGE regularly purchased small quantities of alluvial gold from Mr Knight including the 65 transactions each pleaded as separate conversions in the statement of claim.

238. Mr Knight first came to AGE's business premises on 27 June 1994 offering to sell it alluvial gold. He provided Mr Secchi with a piece of gold and Mr Secchi conducted an acid test to ascertain the approximate purity of the gold. This test involved taking a scrape onto a touchstone and applying various solutions of nitric acid to the scrape. The test indicated that the gold was of high purity. This was consistent with the gold's appearance as alluvial gold or miner's dump. Mr Knight told Mr Secchi that a number of alluvial nuggets had been melted down into a rough-looking wedge. The weight of the gold was approximately 100 grams. A price was agreed upon and according to Mr Secchi, he requested identification which was produced by Mr Knight in the form of a driver's licence. Mr Knight said in evidence that he was asked for identification but much later in his dealings with AGE. The question of when identification was requested from Mr Knight was one of the few matters in dispute between him and Mr Secchi. Mr Knight became seriously addicted to heroin during the period that he dealt with AGE, so his recollections must be viewed with some caution. Mr Secchi conceded during the course of his evidence that identification may have been produced by Mr Knight on a number of occasions. I can draw no conclusion about this issue save that I am satisfied that identification was produced on at least one occasion.

241. At one of Mr Knight's earliest visits to AGE he told Mr Secchi that he was involved almost on a full time basis prospecting for gold and was also purchasing gold from other prospectors so that he was acting as their agent. He told Mr Secchi of the areas in which he was looking for gold and that when he had collected sufficient to sell he would melt the gold down in his kiln.

244. On the first and most other occasions Mr Knight was paid by cheque and was also provided with some cash. A cheque, drawn on the account of AGE and generally signed by either Mr or Mrs Secchi as the two authorised signatories to the first named defendant's account, would be made out either to Mr Knight or to cash.

247. For each sale of gold to AGE, a receipt in its name was prepared in the name of Mr Knight and specifying the amount and the sale price of the gold purchased by AGE. The receipt would also specify the method of payment to Mr Knight and would contain the initials of the AGE employee who had conducted the transaction with Mr Knight.

250. Although the conversions, the subject of the plaintiff's claim, commenced on 30 August 1995 because, as I was told at the commencement of the trial, the earlier transactions were statute-barred, all of the available documentation pertaining to all of the transactions between AGE and Mr Knight prior to 30 August 1995 was also produced. Each of the parties produced various schedules which summarised the content of this documentation. The content of the documentation as summarised in the schedules was relied upon by each party to demonstrate the level of involvement of Mr and Mrs Secchi and Eddie Secchi in the transactions with Mr Knight.

253. The normal procedure followed was that upon Mr Knight bringing a wedge or button of alluvial gold into the AGE office, either the second or third named defendant or the second named defendant's brother, Eddie, would deal with Mr Knight. That person would test the gold for its content, weigh the same and advise Mr Knight as to the amount that would be offered by AGE for the gold. A cheque or cash or both would be used to pay Mr Knight. The receipt issued for each gold purchase recorded the name of Mr Knight, the date of the transaction, whether Mr Knight was paid by cheque or cash, the amount of alluvial gold purchased and the purchase price, and the receipt was initialled by the person recording the transaction.

256. In some cases the same person dealt with Mr Knight, tested the gold, completed the receipt, completed the cheque and cheque butt and signed the cheque. On numerous occasions, it is evident that more than one of those persons performed some role in the transaction. The AGE office was a small one and Mr Secchi was generally present and Mrs Secchi often present when Mr Knight attended. This was also the case when Eddie Secchi dealt with Mr Knight.

259. Throughout the 2½ years that Mr Knight dealt with AGE, the gold was always presented in a melted form with a purity of between 60% and 90% with some silver and base metals present. It was in a form consistent with alluvial gold found by prospectors. Mr Knight was generally paid approximately 20% less than the prevailing market price for the gold estimated to be present following the test conducted by one of the Secchis. Mr and Mrs Secchi did not attach any significance to the quantity of alluvial gold Mr Knight was producing as he consistently presented the explanation that it was obtained from prospecting by him and other prospectors for whom he was acting.

262. The gold which AGE purchased from Mr Knight between July 1994 and November 1994 was sent by AGE to the plaintiff's refinery where it was exchanged for refined gold. The defendants naturally point to the fact that the plaintiff, upon receiving the gold which AGE had purchased from Mr Knight, never queried the origins of the gold or the circumstances in which AGE had come into its possession. By 30 August 1995 however, being the date of the first conversion pleaded by the plaintiff, AGE was sending the alluvial gold purchased from Mr Knight to the Golden West Refinery and continued to do so for the balance of the period during which it purchased gold from Mr Knight.

265. On average Mr Knight attended at the AGE office and sold it gold on a fortnightly basis. During this time, each of the Secchis dealt with Mr Knight who would provide them with small amounts of information about where he or other prospectors were obtaining the alluvial gold and accepted the explanations which he proffered about the source of the gold.

268. Mr and Mrs Secchi maintained in evidence that it had never occurred to them that the alluvial gold being sold to AGE by Mr Knight was stolen and they accepted his account of how he had come into its possession.

272. The evidence called at the trial conclusively established that it was AGE which purchased the gold and that the acts performed by Mr and Mrs Secchi resulted in the purchase of the plaintiff's gold by AGE. Each purchase was conducted at AGE's premises between Mr Knight and an employee of AGE. The receipt identifying the quantity of gold purchased and showing the purchase price was a document bearing the name of AGE. The funds used to acquire the gold were those of AGE. Each cheque used to pay Mr Knight was drawn on the operating account of the first named defendant. The gold purchased from Mr Knight, sometimes mixed with gold purchased by AGE from other customers, was exchanged with a refinery for refined granulated gold which was returned to AGE to the credit of AGE. Furthermore, Mr and Mrs Secchi's evidence was not challenged that throughout the entire period that they dealt with Mr Knight they were employees of AGE who were paid a modest salary, that they received no directors' fees, distribution of profits or other benefit from AGE and had no legal interest in the gold which AGE purchased from Mr Knight.

275. A necessary corollary of the nemo dat quod habet rule is that a buyer must give up the goods or pay damages to a true owner however innocently he came by them, conversion being an idiosyncratic tort both as to liability and the measure of the owner's loss.[60]

278. As I have concluded that the plaintiff is not, by its conduct, precluded from denying Mr Knight's authority to sell the gold, I am satisfied that the first named defendant converted the plaintiff's gold on each of the occasions pleaded. The date on which AGE converted the plaintiff's gold was also put in issue and I shall subsequently deal with this question.

Second and third named defendants sued as joint or primary tortfeasors or as Directors liable for the tortious wrong of the company

282. As the final form of the amended pleadings reveals, the plaintiff puts its case against the defendants as joint or several primary tortfeasors on the basis that each of the defendants "purchased and/or took physical control" of each of the quantities of the plaintiff's gold the subject of each conversion pleaded. The evidence does not support the plaintiff's contention that the second or third named defendants were liable as primary tortfeasors for having "purchased" the plaintiff's gold. The plaintiff has failed to establish its case against the second and third named defendants on this basis, as AGE was the purchaser.

285. The plaintiff's case is also that the second and third named defendants were liable as primary tortfeasors on the basis that they took possession or control of the gold. In the alternative, the plaintiff submits that the directors procured and directed each of the conversions and knew the gold was not lawfully in Mr Knight's possession or were recklessly indifferent as to whether the gold was stolen or had been converted. The plaintiff contends they are on this basis liable for AGE's conversions. To establish these matters the plaintiff relied upon the close involvement of each of the Directors in the conversions pleaded.

289. It was submitted on behalf of Mr and Mrs Secchi that at all material times they acted only as the employees and in their capacity as Directors, as agents of AGE. Their conduct, it was said, could not make them liable for any conversion committed by the company, nor could it attract personal liability, their acts being those of a mere employee or if the acts were those of a director, the acts being those of the company and not their acts. In the alternative, it was submitted that as the date of conversion by AGE was not the date of the purchase of the gold from Mr Knight but the date on which the gold was transferred into the possession of a refinery, the directors' involvement in any acts associated with the conversion at that time had not been established, their role in purchasing the gold from Mr Knight being irrelevant to the conversion. It was submitted that directors of a corporation are not generally liable for procuring the corporation's unlawful interference with another's rights and that for directors to be held liable for a conversion innocently committed by the corporation would be an overreach of the policy considerations behind the nemo dat quod non habet principle. It was further submitted that merely directing or procuring a conversion without knowledge of wrong-doing could not subject them to liability. It was submitted that absent a knowledge that the gold being sold to AGE had been unlawfully obtained or reckless indifference to that fact, the defendants would not be personally liable.

Concurrent liability of company and director where the director performs the tortious acts

293. During the course of the nineteenth century, courts recognised that directors were liable for their tortious acts as the agents of corporations.[61] During the following century this approach continued to be applied by the courts. In Yuille v B&B Fisheries (Leigh) Ltd,[62] the captain of a ship sued the ship-owning company and the managing director for personal injuries caused by negligence when his ship ran aground alleging, inter alia, that the ship was unseaworthy. Wilmer LJ. held that where a director expressly directs or is party to the commission of the tort, the director will be liable and cannot in such circumstances rely upon the doctrine enunciated in Salomon v A Salomon & Co Limited.[63] In reaching this conclusion, Wilmer LJ. referred to the judgment of Lord Buckmaster in Rainham Chemical Works Ltd (in liq) v Belvedere Fish Guano Co Ltd[64] and observations in The Koursk [65] by Scrutton LJ.

296. Fairline Shipping Co v Adamson[66] was a similar case where the company by contract had stored meat products belonging to the plaintiffs. The plaintiff's meat was damaged when the refrigeration machinery became inoperative and, based on evidence that the managing director had become personally concerned with the storage of the goods as evidenced by a letter from him to the agents of the plaintiffs concerning the goods, the managing director was held personally liable, he having assumed a duty of care as a bailee.[67]

299. If the director performs the acts which constitute the tort, the director will be personally liable for the tortious act they have committed whether alone or in conjunction with others.[68]

302. In C. Evans & Sons Ltd v Spritebrand Ltd[69] Slade LJ. reaffirmed the liability of a director who commits the tortious act in the following terms:

"Mr Watson, as I understood his argument on behalf of the director, did not attempt to submit that a director of a company will escape personal liability to third parties for torts which he has personally committed by his own hand (or mouth) merely because he committed the tort in the course of carrying out his duties as director of his company. He can escape personal liability for such torts no more than can an employee acting in the course of his employment for a company, or an agent acting in the course of his agency for a company. I think it is important to emphasise these points lest it be thought that the argument in this case has cast doubts on these particular principles of the law of tort."[70]

306. In the case of O'Brien v Dawson,[71] Jordan CJ. at first instance observed that:

"Directors of a company are however personally responsible for any torts committed by their company in the procuring of which they are personally implicated".[72]

On appeal to the High Court, Stark J. stated to similar effect:

"that it does not follow that a director of a company would escape personal liability under cover of the company's responsibility if he himself became an actor and invaded the plaintiff's rights, as by trespassing on his land or seizing his goods and so forth."[73]

312. The plaintiff's counsel, in support of his contention that a company director may be liable as a primary tortfeasor, placed particular reliance upon the case of International Factors Ltd v Rodriguez.[74] The defendant was a director of a company which had assigned its book debts to the plaintiff. A term of the factoring agreement provided that any payment in respect of an assigned debt which was made directly to the company should be held in trust for the plaintiffs and immediately handed to them. In breach of that term, four cheques in respect of debts assigned to the plaintiffs were sent to the company and paid into the company's bank account on the instructions of the defendant. The plaintiff successfully sued the defendant for conversion and obtained judgment to the value of the cheques. The appeal was conducted on the basis that it is correct in law "that a director is liable for torts committed by him in connection with the affairs of a company".[75] The appeal was concerned with the terms of the contract and whether the payment of the cheques into the company's bank account constituted a conversion of the cheques. In the course of their judgments, the Court of Appeal approved the trial judge's treatment of the defendant as a primary tortfeasor as the cheques were physically in the possession of or under the control of the defendant who applied them in a manner in conflict with the rights of the plaintiff. It was no defence that he was acting on behalf of the company.[76]

315. Counsel for the defendants sought to distinguish Rodriguez' case and submitted that that the directors should not be regarded as primary tortfeasors as there was no evidence that either the second or third named defendant had taken possession of the plaintiff's gold or exercised physical control over it. The evidence relating to the degree of participation by each of the directors in the transaction in which the gold was purchased by AGE fell far short, counsel submitted, of establishing that either the second or third named defendant committed the tort of conversion in relation to any of the conversions pleaded.

Conclusion as to primary liability of Directors

319. The plaintiff claimed the second and third named defendants were liable as the primary tortfeasors pleading that they "purchased or took control" of the plaintiff's gold and thereby committed the acts constituting the tort of conversion. The focus of the evidence was on the level of involvement by Mr and Mrs Secchi in each of the transactions in which the gold was purchased by AGE. They did not purchase the gold. AGE was the purchaser. I am quite unable to say on the evidence what level of control either Mr or Mrs Secchi exercised in relation to each quantity of gold, the subject of a pleaded conversion. The question of control of the gold after AGE took it into its possession was not an issue in the trial until the plaintiff amended its pleading without objection, in the course of final submissions. The individuals who performed the act of conversion are unknown. In some instances, only Mr Secchi performed all of the steps required prior to the purchase of the gold from Mr Knight. On other occasions Mrs Secchi performed all of those acts and in many instances a number of persons participated in the steps prior to purchase of the gold. By virtue of the way in which the plaintiff pleaded its case and conducted the trial, I would be required to speculate to make any finding about who took possession or had "control" of the gold upon its purchase. It was not a matter that was explored during the course of evidence. I am therefore not satisfied that the directors are liable as primary tortfeasors.

The state of mind of the Directors prior to October 1996

323. Despite Mr and Mrs Secchi's denial that they entertained any suspicion that the gold being sold by Mr Knight came from any illegal source, Mr Clarke, who appeared for the plaintiff submits that I should find that Mr and Mrs Secchi knew that the gold they were purchasing came from an illegal source or at least suspected as much and were recklessly indifferent as to who the true owner of the gold might be.

326. Mr Clarke identified a number of pieces of circumstantial evidence which he submitted support the conclusion that the Secchis must have doubted that the gold came from a lawful source. The plaintiff relied upon the following matters. The volume of alluvial gold being purchased from the public by AGE increased by more than 16 kgs in 1995 and 18 kgs in 1996 as a result of the gold sold to it by Mr Knight. Each transaction with Mr Knight involved the purchase of a quantity of gold significantly larger than the usual quantities of gold which AGE purchased from other customers. Mr Knight rarely disputed the price at which AGE was prepared to purchase the gold notwithstanding that it involved a considerable discount from the market price and that a prospector was likely to obtain a better price if the gold was sold directly to a refinery. Frequently the cheque for payment of the purchase price was made out to cash rather than to Mr Knight. Mr Knight may have shown either Mrs or Mr Secchi his pensioner card as a form of identification during mid 1995. Although Mrs Secchi denied sighting such identification and Mr Secchi accepted that he might have seen it, each Director in substance said that had they discovered that Mr Knight was a pensioner their suspicion would not have been aroused. The second and third named defendants failed to write out the cheque for Mr Knight in his name so as to ensure that part of the purchase price was paid by way of a traceable cheque. This, Mr Secchi had acknowledged, would provide a deterrent to those who might otherwise seek to sell stolen property.

329. Mr Horgan submitted that much of the evidence relied upon by the plaintiff supported the defendants' claim that they saw nothing to arouse their suspicions. Mr Horgan points to the fact that Mr Knight was viewed as a regular customer and that AGE held personal details of Mr Knight including an address and phone numbers and a receipt for each transaction was written out in his name. In this sense, the transactions involving Mr Knight were traceable in contrast to the large volume of cash purchases of alluvial gold made by AGE from other members of the public where no record was held which would enable the Company to trace the identity of the seller. AGE also traded in a very substantial volume of trade bullion with the public much of which was transacted as cash business with no records enabling tracing to take place. During the same period that it purchased gold from Mr Knight, it purchased in excess of $10 million worth of gold bullion.

332. The evidence clearly established that the melted form of alluvial gold, mixed as it was with silver and base metal, was entirely consistent with melted prospector's gold or miner's dump and neither its form nor content warranted suspicion. Before Mr Knight would attend at the premises of AGE to sell further gold, he would often be instructed by Mr Gaffney as to what he should tell the person he dealt with. Consequently in the course of these transactions, Mr Knight would tell Mr or Mrs Secchi about such things as the procedures he adopted to melt the gold, the prospecting methods that he used to locate gold, the equipment that he had available to him, the gold he had for sale including gold of other prospectors who were content to have him sell their gold because he was able to obtain a fair price and save them a trip to the city and that at various times he prospected for and obtained gold in other States as well as Victoria. He made considerable efforts, with the assistance of Mr Gaffney, to present a convincing account to those he dealt with at AGE.

336. Mr Knight testified that he first became addicted to heroin in mid 1995 but sought to conceal this from those at AGE. It was only on a few occasions when he was suffering from withdrawal symptoms that his condition may have been obvious.

339. In October 1996 Mr Secchi noticed a change in the demeanour and appearance of Mr Knight who gave the impression of being affected by drugs. Although he explained to Mr Secchi that he was having personal problems, Mr Secchi in cross-examination conceded that it may have occurred to him at this time that the gold had been obtained from an unlawful source and that Mr Knight's account of how he came into its possession was untrue. This is what he appears to have told the police. He nevertheless continued to deal with Mr Knight and did not raise his suspicions with his wife or brother who continued to deal with him. In her testimony, Mrs Secchi acknowledged that there was one occasion when she observed a change in Mr Knight's demeanour in the latter part of 1996 which did not cause her to reflect upon the legality of the source of the gold which he was selling.

Failure to comply with the rule in Browne v Dunn in attacking the directors' credit

343. Complaint is made on behalf of the second and third named defendants that the attack by the plaintiff on their credit is unsupportable on the evidence and is in contravention of the rule in Browne v Dunn[77] as explained in Bulstrode v Trimble.[78] In particular counsel for the second and third named defendants submitted that it was not evident from the manner in which the plaintiff's case had been conducted whether the second and third named defendants were being challenged as to their belief that they did not know that the gold was stolen and their evidence that their conduct in the purchase transactions was in their capacity as employees and on behalf of AGE. Counsel for the plaintiff in his written submissions in reply submitted that the rule in Browne v Dunn does not apply where the witness is on notice that the witness' version is in contest. He submitted that the notice may come from the pleadings or the other side's evidence or the other side's opening or witness statements. To support this submission, counsel relied upon Seymour v Australian Broadcasting Commission,[79] Trade Practices Commission v Mobil Oil Australia Ltd,[80] and Dolan v Australian and Overseas Telecommunications Corporation.[81] In addition to those cases cited on behalf of the plaintiff, there are a number of recent decisions[82] to the effect that where the pleadings or the pre-trial documentation or the substance of the way in which the other side conducts the case clearly identifies the issue, the rule need not be complied with.

346. Great care should be taken before case management considerations or procedural orders are utilised to deprive the witnesses of a real opportunity to explain their position. Credit issues need to be identified when the witness is cross-examined and the trial unfolds. The judge's capacity to assess the credibility of witnesses ought not to be impeded. Any relaxation of the obligation to comply with the rule in Browne v Dunn has the potential to do so, thereby increasing the risk of injustice to a witness or party.[83]

349. In the circumstances of the present case, it is unnecessary to say anything further in relation to this issue as I am satisfied that counsel for the plaintiff, not only in his opening of the case but in the cross-examination of the second and third named defendants made it clear that each of the matters complained of was in dispute and would be the subject of challenge. The capacity in which the second and third named defendants participated in the transactions with Mr Knight and their belief as to the source of the gold were the subject of attention by counsel for all parties during the course of the trial. While non-compliance with the rule in Browne v Dunn may in some circumstances influence the Tribunal's approach to findings of fact, there is nothing about the manner in which this trial was conducted which would require such a course.

When are Directors liable for the corporation's tortious acts?

353. The plaintiff claims that even if AGE purchased and took control of the gold, its directors were liable as joint tortfeasors. Where two or more people are responsible in law for the commission of a tort they are joint tortfeasors, each jointly and severally liable for the loss and damage thereby caused.[84] Where two or more people act together in furtherance of a common design to commit a tort they will be responsible as joint tortfeasors.[85] Principal and agent may be joint tortfeasors. Master and servant may be where they are responsible for the same tort. Directors may be held liable as joint tortfeasors with their company.[86] At least since The Koursk, it appears to have been accepted that a director who is the mind and will of the company and the company may be joint tortfeasors because, as Scrutton LJ. says, there is "one tort committed by one of them on behalf of, or in concert with another."[87] Different persons who separately instruct and commit the tort may also be joint tortfeasors.[88]

356. In CBS Songs Ltd v Amstrad Consumer Electronics plc,[89] the House of Lords considered whether the defendants were liable for copyright infringement as joint tortfeasors. Lord Templeman, delivering the judgment of the House, applied the dictum of Scrutton LJ. in The Koursk. His Lordship referred to the following passage of Scrutton LJ.'s judgment:

"Persons are said to be joint tortfeasors when their respective shares in the commission of the tort are done in furtherance of a common design."[90] Later his Lordship said: "My Lords I accept that a defendant who procures a breach of copyright is liable jointly and severally with the infringer for the damages suffered by the plaintiff as a result of the infringement. The defendant is a joint infringer; he intends and procures and shares a common design that infringement shall take place.......Facilitating the doing of an act is obviously different from procuring the doing of the act. Sales and advertisements to the public generally of the machine which may be used for lawful or unlawful purpose, including infringement of copyright, cannot be said to 'procure' all breaches of copyright thereafter by members of the public who use the machine. Generally speaking inducement, incitement or persuasion to infringe must be by a defendant to an individual infringer and must identifiably procure a particular infringement in order to make the defendant liable as a joint infringer."[91]

360. Although Lord Templeman's judgment concerned the infringement of copyright, these wrongs being tortious, common law principles as to liability of joint tortfeasors were applicable.

363. Notions of joint wrong are dependent upon the commonality of purpose or intent to commit the wrong. In W.E.A. International Inc v Hanimex Corporation Ltd,[9]2 the infringer was a corporation and questions arose as to the degree of involvement on the part of directors necessary for them to be rendered personally liable. Gummow J. (as he was then) said:

"Those questions are not immediately answered by principles dealing with 'authorisation' or joint tortfeasance. Rather recourse is to be had to the body of authority which explains the circumstances in which an officer of a corporation is personally liable for the torts of the corporation."[9]3

367. Where the primary tortfeasor is a corporation, questions as to the liability of its directors for the tort attract principles which impose personal liability on directors which are dependant on the degree of their involvement.[9]4 The liability of a director is probably a form of accessorial or civil secondary liability.[9]5

370. The level of involvement of each defendant in each particular transaction is critical in determining whether their conduct renders them liable as joint tortfeasors for the conversion by their company. Such an approach accords with that suggested by Gummow J. in W E A International.[9]6 I turn now to consider the second and third named defendants' liability for AGE's conversion of the plaintiff's gold.

373. Plaintiff's counsel submitted that Mr and Mrs Secchi's liability for the company's tort fell to be determined by an assessment of whether they had directed or procured the tortious conduct of AGE. The defendants submitted that I should not apply the "direct and procure" test and argued that the Australian cases which had adopted this approach were either distinguishable as being cases concerned with copyright or patent infringement or were cases which failed to give proper recognition to limited corporate liability or had misconceived the scope of a director's liability.

376. In Pioneer Electronics Australia v Lee,[9]7 Sundberg J. whilst preferring the "direct and procure" test, referred to three other lines of authority in the following terms:

"2. A director will be liable only if he has made the wrongful act his own as distinct from it being an act of the company_: Mentmore Manufacturing Co Ltd v National Merchandising Manufacturing Co_ (1978) 89 DLR (3d) 195; White Horse Distillers Ltd v Gregson Associates Ltd [1984] RPC 61 at 91; R v Milpurrurru (1996) 66 FCR 474 at 495-501; 136 ALR 327 at 346-351. 3. A director will be liable if he has assumed responsibility for the company's acts: Trevor Ivory Ltd v Anderson [1992] 2 NZLR 517. 4. A director is not liable for procuring the company to infringe the rights of others: Said v Butt [1920] 3 KB 497; O'Brien v Dawson [1942] HCA 8; (1942) 66 CLR 18 at 32, 34; Rutherford v Poole [1953] VicLawRp 23; [1953] VLR 130; Root Quality Pty Ltd v Root Control Technologies Pty Ltd [2000] FCA 980; (2000) 177 ALR 231."[9]8

380. Counsel for the defendants contended that the correct test was to be found within one or more of the other three approaches identified by Sundberg J. It was said on behalf of the two directors that, applying the second or third approaches, the plaintiff had failed to establish that a liability as joint tortfeasors resided with the directors and that the fourth approach applied so that the directors were not liable.

383. Each party acknowledged in their submissions that the courts had not adopted a consistent approach to the question of a director's liability for torts committed by their company. Both parties submitted that there was no binding authority on this court and sought to rely on what each contended was the preponderance of authority, the extension of existing principles and policy considerations. The law is undoubtedly in a less than satisfactory state as there have been differing approaches adopted by the courts to the resolution of this issue. Generally a judge sitting at first instance need not undertake a review of earlier authorities from the standpoint of principle if there is a substantial body of persuasive authority it would clearly be in error not to apply. Having regard to the various lines of authority identified in the judgment of Sundberg J. in Pioneer Electronics and the clear division of opinion between judges of the Federal Court, those differing opinions being acknowledged but unresolved in a number of decisions by Federal appellate courts, and in deference to the full submissions that have been advanced, I have examined the state of the authorities in relation to the personal liability of directors arising from the commission of a corporate tort. It has been described as a "complex and burgeoning field of the law,"[9]9 resulting in a "confusing picture on an issue that has persistently vexed the common law,"[1]00 the controversy surrounding it having serious implications for small companies.[1]01

Where a Director induces breach of their companies contract

387. The second and third named defendants rely upon the line of authority referred to in Pioneer Electronics (the fourth approach) which it is said establishes that a director is not liable for procuring the company to infringe the rights of others. Such a statement of principle is too broad and does not accurately reflect the limitation on liability expressed in the cases cited. The limitation, as Waller J. observed in Ridgeway Maritime Inc v Beulah Wings Ltd & Anor[1]02 is designed to ensure that a director who repudiates a contract of his company will not be liable for inducing the company to break its contract. His Honour distinguished cases which supported such a principle from those which provided that an employee was personally liable for a tort committed by the company where the employee was personally involved.

"It is relatively easy to see that some complicity in the commission of the tort may and should render an individual liable, but it is certainly not right that simple complicity in a breach of contract by the company should render the individual liable."[1]03

391. O'Brien v Dawson, Rutherford v Poole and Root Quality[1]04 do not support the proposition that a director is not liable for their tortious acts which they are authorised to perform on behalf of their company. Each was concerned with the question whether a director could be liable for the tort of inducing their own company to breach a contract. It is an actionable wrong for one to procure the violation of the legal rights of another[1]05 but the exception to this principle results in a denial of liability where the director, within the scope of their authority, procures or causes the breach of a contract between their company and a third person. This exception is to be found in cases such as Said v Butt, DC Thomson & Co. LD v Deakin and Others,[1]06 Tsaprazis v Gold Crest Properties Pty Ltd[1]07 and the cases to which counsel for the defendants referred, all of which were carefully considered by Finkelstein J. in Root Quality. Recent confirmation of the confines of this principle can be found in Idoport Pty Ltd v National Australia Bank Ltd,[1]08 Australian Development Corp Pty Ltd v White Constructions Ltd[1]09 and LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd.[1]10 Directors of a company do not, when acting as directors, commit the tort of inducing a breach of contract when they cause their company to commit a breach of its contract with a third party. This line of authority furnishes no support for the proposition advanced by the defendants. The general principle that a director will be liable for a tort committed by the company where the director has procured or directed the tortious act is expressly recognised in some of these cases.

394. The High Court in O'Brien v Dawson[1]11 was concerned with conspiracy rather than procurement of breach of contract but, as Einstein J. noted in Idoport, since that time courts in Australia have "clearly correctly treated what was said in O'Brien on the subject of procurement of breach of contract as binding in terms of principle".[1]12 His Honour drew the distinction between the tort of inducing breach of contract, concerned as it is with intentional interference with economic relationships, and other torts such as conversion, trespass or the statutory tort of infringement of copyright, the latter being situations in which there were no dealings between the plaintiffs and the corporate wrongdoer. Einstein J. observed that:

"Where the dealings are contractual it is elementary that the outsider's rights are against the company, not the director who has represented it."[1]13

398. It is in general no defence to an action against a tortfeasor for the tortfeasor to prove that he acted under the authority, instructions or orders of another.[1]14 Some argue that the Said v Butt exception is contrary to principle. It may be that the exception is based on the notion that the company has not been induced to breach the contract because its own decision-making mechanisms have produced the breach.[1]15 I need not stay to consider these questions. Whatever the foundation for the principle be, this line of authority establishes that there is no tortious conduct involved when the authorised directors of a corporation resolve that the company will not perform a particular contractual commitment.

401. While McCardie J. in Said v Butt concluded that a servant acting bona fide and with authority commits no tort in procuring a breach of contract between his employer and a third person, he declared without equivocation:

"Nothing that I have said today is I hope inconsistent with the rule that a director or servant who actually takes part in or actually authorises such torts as assault, trespass to property, nuisance or the like may be liable in damages as a joint participant in one of such recognised heads of tortious wrong. This point was incidentally dealt with by the Court of Appeal in the recent case of Belvedere Fish Guano Company v Rainham Chemical Works."[1]16

405. In the very recent decision of Multinail Australia Pty Ltd v Pryda (Aust) Pty Ltd[1]17 Chesterman J. was concerned with a director whom it was alleged had "authorised, procured, directed and knowingly acquiesced" in his company's wrongful inducement of another company to breach the plaintiff's contract. The director was the driving force behind the activities of his company and he intended to bring about the breach of the plaintiff's contract knowing at all relevant times of the existence of the plaintiff's contract. His Honour distinguished Said v Butt and O'Brien v Dawson describing them as cases in which the company was a party to the contract which was broken and where their the directors were sought to be made personally liable for the corporation's act. In Multinail, the director could not rely upon the defence in Said v Butt as he had directed his company to act in such a way as to procure another company to break its contract with the plaintiff. Chesterman J. said:

"In this case the second defendant is not alleged to have induced the company of which he was managing director, the first defendant, to break a contract it had with the plaintiff, or anyone else. It is said that the second defendant commanded the first defendant to induce Campbells to break the plaintiff's contract. The limitation found in the line of cases following Said v Butt has no application. Rather a more general principle is found in the cases which follow Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd."[1]18 (emphasis mine)

409. Said v Butt and the authorities which follow it, establish that the officers of the company which breaks a contract cannot be liable for inducing it to break the contract or conspiring with it to break the contract. They are of no assistance to the defendants in this case save for the manner in which the doctrine of limited liability has been applied to restrict a director's exposure to liability.

413. The second and third named defendants rely upon a line of authority including White Horse Distillers Ltd v Gregson Associates Ltd[1]19 which suggests that directing or procuring the commission of a tort is not sufficient to make a director liable unless by their conduct they have made the wrongful act their own as distinct from it being an act of the company (the second approach referred to in Pioneer Electronics.) Nourse J. in White Horse Distillers Ltd drew heavily upon the judgment of the Canadian Federal Court of Appeal in Mentmore Manufacturing Co Ltd v National Merchandising Co Inc.[1]20 Le Dain J. considered that a director's liability for the torts of the corporation produces a tension between tort law and corporate law:

"What is involved here is a very difficult question of policy. On the one hand there is the principle that an incorporated company is separate and distinct in law from its shareholders, directors and officers, and it is in the interests of the commercial purposes served by the incorporated enterprise that they should as a general rule enjoy the benefit of the limited liability afforded by incorporation. On the other hand there is the principle that everyone should answer for his tortious acts. The balancing of these two considerations in the field of patent infringement is particularly difficult."[1]21

417. The question of whether the doctrine of limited liability restricts the extent of directors' liability is central to the defendants' argument. What may be of particular relevance to the facts of this case is the view expressed by the Canadian Federal Court of Appeal that this principle should apply, not only to large corporations but to small, closely-held corporations as well:

"There is no reason why the small one-man or two-man corporation should not have the benefit of the same approach to personal liability merely because there is generally and necessarily a greater degree of direct and personal involvement in management on the part of its shareholders and directors. This view finds support I believe in the cases. It has been held that the mere fact that individual defendants were the two sole shareholders and directors of the company was not by itself enough to support an inference the company was their agent or instrument in the commission of the acts which constituted infringement or that they so authorised such acts as to make themselves personally liable: see British Thompson-Houston Co Ltd v Sterling Accessories Ltd (1924) 41 RPC 311; Pritchard and Constance (Wholesale) Ltd v Amata Ltd (1924) 42 RPC 63. It is the necessary implication of this approach, I think, that not only will the particular direction or authorisation required for personal liability not be inferred merely from the fact of close control of a corporation but it will not be inferred from the general direction which those in such control must necessarily impart to its affairs."[1]22

421. His Lordship, having referred to the conflicting policy considerations of limited liability arising from incorporation for directors and shareholders and the principle that everyone should be answerable for his own tortious acts concluded that there were circumstances in which a director should be held accountable:

"It would appear to be that degree and kind of personal involvement by which the director or officer makes the tortious act his own. It is obviously a question of fact to be decided on the circumstances of each case. I have not found much assistance in the particular case in which courts have concluded that the facts were such as to warrant personal liability. But there would appear to have been in these cases a knowing, deliberate, wilful quality to the participation: see for example Reitzman v Graham-Chapman and Derustit Ltd (1950) 67 RPC 178; Oertli Ag v EJ Bowman (London) Ltd [1956] RPC 341; Yuille v B&B Fisheries (Leigh) Ltd and Bates [1958] 2 LR 596; Wahtat Bank Ltd v Chan Cheng Kum [1975] AC 507 (PC)."[1]23 (Emphasis mine)

425. The cases to which his Lordship referred do not expound a principle that liability depends upon a "knowing, deliberate, wilful" quality although as his Lordship observed, the facts of each case shows that quality to be present. I agree with the view expressed by Lindgren J. in Microsoft Corporation v Auschina Polaris Lty Ltd[1]24 that the formula "makes the tortious act his own" is not particularly illuminating.

428. In Root Quality Finkelstein J. appears to approve the Mentmore test. If this test were to be applied, I could not hold the second and third named defendants liable by virtue only of their involvement in the purchase by AGE of the plaintiff's gold. Absent knowledge by each defendant that Mr Knight had no right in law to sell the gold or a reckless indifference as to whether he did, the defendants, applying the Mentmore test, would not be liable for AGE's conversion as they had not made AGE `s tortious acts their own.

432. In Rainham Chemical Works Ltd (in liq) v Belvedere Fish Guano Co Ltd, the directors were found by Lord Buckmaster to be personally liable where the tortious acts were "expressly directed by them".[1]25 The decision most frequently relied upon as establishing that directors are liable for tortious acts which they commit, initiate, direct or procure is Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd where Lord Atkin confirms that:

"Prima facie a managing director is not liable for tortious acts done by servants of the company unless he himself is privy to the acts, that is to say unless he ordered or procured the acts to be done."[1]26

436. According to Lord Atkin, an express direction is unnecessary so long as the directors themselves directed or procured the commission of the act whether expressly or impliedly. In Wah Tat Bank Ltd v Chan Cheng Kum, Lord Salmon when delivering the judgment of the Privy Council referred with approval to this passage observing:

"A tort may be committed through an officer or servant of the company without the chairman or managing director being in any way implicated. There are many such cases reported in the books. If however the chairman or managing director procures or directs the commission of the tort he may be personally liable for the tort and the damage flowing from it; Performing Rights Society Ltd v Cyril Theatrical Syndicate Ltd (1924) 1 KB 1 at 14 per Atkin LJ. Each case depends upon its own particular facts. In the instant case the uncontradicted evidence proves that early in 1961 the respondent as chairman and managing director of HSC agreed with the directors of TSC the terms upon which ASHSC would continue wrongfully to convert goods consigned to the banks just as they had done in the past. Their Lordships consider that in all the circumstances, there is no answer to the appellant's contention that the respondent was personally liable for the conversion in respect of which judgment had been entered against HSC."[1]27

440. Most of the authorities which have employed the direct and procure test refer to the decision of the English Court of Appeal in C. Evans & Sons. Like the Performing Right Society case this was also a copyright infringement case in which it was sought to make the director liable for having personally authorised, directed or procured the company to infringe the plaintiff's copyright.

443. Slade LJ. who delivered the judgment of the Court of Appeal said:

"The authorities as I have already indicated clearly show that a director of a company is not automatically to be identified with his company for the purpose of the law of tort however small a company may be and however powerful his control over its affairs. Commercial enterprise and adventure is not to be discouraged by subjecting a director to such onerous potential liabilities. In every case where it is sought to make him liable for his company's torts, it is necessary to examine with care what part he played personally in regard to the act or acts complained of."[1]28

447. His Lordship then made reference to the judgment of Nourse J. in White Horse Distillers who, applying Mentmore held that a director's liability for the tort committed by their company required not only that they commit or direct the tortious act or conduct, but do so deliberately or recklessly and so make the tort their own as distinct from the act or conduct of their company. Slade LJ. in C. Evans & Sons made the following observations about the judgment of Nourse J.:

"Nevertheless in my judgment, with great respect to Nourse J (and to Whitford J who has since followed him), in expressing a principle in the Whitehorse case said to be applicable to all torts, he expressed it in terms which were not sufficiently qualified. I readily accept that the statements of Lord Buckmaster and Atkin LJ to which I have referred, themselves cannot be regarded as a precise and unqualified statement of the principles governing a director's personal liability for his company's torts; I do not think they were so intended. In particular I would accept that if the plaintiff has to prove a particular state of mind or knowledge on the part of the defendant as a necessary element of the particular tort alleged, the state of mind or knowledge of the director who authorised or directed it must be relevant if it is sought to impose personal liability on the director merely on account of such authorisation or procurement; the personal liability of the director in such circumstances cannot be more extensive than that of the individual who personally did the tortious act. If, however, the tort alleged is not one in respect of which it is incumbent on the plaintiff to prove a particular state of mind or knowledge (eg infringement of copyright) different considerations may well apply."[1]29

451. The Court of Appeal rejected the submission that a director of a company who has authorised, directed and procured the commission by the company of the tort can only be personally liable to the injured party where he has directed or procured the acts in the knowledge that they were tortious or recklessly without caring whether they were tortious or not.

454. The direct and procure test has been adopted in a significant number of Australian cases although in many of them the Mentmore test does not appear to have been drawn to their attention. In Kalamazoo Australia Pty Ltd v Compact Business Systems Pty Ltd[1]30 Thomas J., after referring to the discussion in C. Evans & Sons concluded that in the usual course a director who procures or directs his company to perform a tortious act will be liable along with the company.[1]31 Davies J. in Australian Performing Right Association Ltd v Valarmo and Others[1]32 applying the reasoning in C. Evans & Sons found that the defendant director had not directly authorised, directed, procured or instructed the company to infringe the plaintiff's copyright.[1]33 In Martin Engineering Co v Nicaro Holdings Pty Ltd (No.2)[1]34 Burchett J. applied the principles expressed in C. Evans & Sons finding that the defendant director had authorised, directed, promoted and been personally involved in his company's infringement of the plaintiff's patent and was personally liable.[1]35 In Microsoft Corporation[1]36 Lindgren J., after reviewing the authorities and referring to C. Evans & Sons concluded that the "directed or procured" test was more satisfactory than the test advanced by Nourse J. in White Horse. His Honour was also of the view that the preponderance of Australian authority which he had considered required him to follow the "direct or procure" test as he was not convinced that the direct or procured test was wrong.

457. In King v Milpurrurru,[1]37 the Federal Court of Appeal considered this question. Jenkinson J. in his judgment followed the decision of C. Evans & Sons and Wah Tat Bank. His Honour found that though one of the directors, by virtue of his conduct, was personally liable for the copyright infringement committed by the corporation, the evidence was insufficient to support a similar conclusion with respect to the second and third directors.[1]38 Lee J. differed in his conclusion as to the sufficiency of the evidence against the second and third named defendants finding that each had acquiesced in the conduct of the first named defendant (who had clearly directed or procured the corporate tortious acts) and that each had thereby impliedly directed or procured the commission of the tort. I do not however discern any difference between Lee J. and Jenkinson J. as to the principles which should be applied, at least where the directions or procurement is express.

460. Beazley J. did not consider that the acts or omissions of the two directors were sufficient to make them liable for the tortious role of the company. Having reviewed the authorities, her Honour observed that the test for directors' liability which has been applied in Australia in intellectual property cases is that stated in Performing Right Society.

463. The court was dealing in Milpurrurru with a tort which required a specific mental element, section 37 Copyright Act 1968 requiring that the person alleged to be infringing the copyright must know that the article would have constituted an infringement. Beazley J. concluded that if the tort does not involve any mental element "there is no reason in principle that some mental element should be imported into the test".[1]39 Although the directors did have the requisite knowledge for the purposes of s. 37 Copyright Act 1968, her Honour was not satisfied that the directors' conduct was sufficient to make the tortious conduct of the company their own, her Honour expressing a preference for the reasoning of Nourse J. in White Horse and the Mentmore line of authority.

466. The separate reasons of each of the members of the court in King v Milpurrurru were viewed in a similar light by Chesterman J. in Multinail Australia. Chesterman J. concluded that the principle more restrictive of a director's liability which had been discussed in the Canadian decisions and which had been disapproved of by the Court of Appeal in C. Evans & Sons, should not be followed as "the weight of authority is firmly in favour of the principle found in the English cases applied in Kalamazoo."[1]40

469. In Autocaps (Aust) Pty Ltd v Pro-kit Pty Ltd[1]41 Finkelstein J. found the defendant director liable for having authorised the breach of copyright by his company[1]42 on the basis of the dicta of Atkin LJ. in Performing Rights Society.[1]43

472. Woodward J. in G M (North Melbourne) v Young Kelly[1]44 referred to the approach adopted in C. Evans & Sons and the contrasting approach of White Horse Distillers and Mentmore. His Honour found it unnecessary to determine the correct position in Australia as his Honour was satisfied that the applicant had made out its case against the director regardless of the test to be applied.

475. In Tsaprazis and Others v Goldcrest Properties Pty Ltd Hodgson CJ. was concerned with the validity of a pleading alleging that a director of the lessor could be held personally liable for breach of a duty of care owed by the lessor to the lessee that the landlord not breach its lease. His Honour referred to the principles expressed in Performing Right Society noting the liability of directors in recognised areas of tort such as trespass, fraud and conversion for acts done by them on behalf of the company.[1]45 Hodgson CJ. was not satisfied that a claim could be sustained for breach of a duty of care, applying the principle in Said v Butt.

478. In another breach of copyright case Merkel J. in Henley Arch Pty Ltd v Clarendon Homes (Aust) Pty Ltd[1]46 held that a director may be primarily liable as a joint or concurrent tortfeasor in relation to a copyright infringement by involvement in the tortious acts which constitute the infringement. His Honour followed the decision of Lindgren J. in Microsoft Corporation preferring also the "direct or procure" test.

481. In Polaroid Corporation v Sole N Pty Ltd,[1]47 a case which concerned an infringement of the plaintiff's trademark, Kearney J. held that the second defendant in his capacity as managing director of the first defendant had been privy to the commission of infringing acts in the use of the defendant's mark. His Honour said:

"It is apparent that he is a managing director of a small private company in which the only other director is his wife. It is also apparent that he actively participates in the day-to-day conduct of the first defendant's business activities. I consider that accordingly he is to be treated as being privy to and authorising the infringing acts on the parts of the first defendant. Therefore, I conclude that relief ought to be given against both defendants: Reitzman v Graham-Chapman and Derustit Ltd (1950) 67 RPC 178 at p 185."[1]48

485. The defendants draw heavily upon the differing approaches summarised by Sundberg J. in Pioneer Electronics. His Honour was concerned with the personal liability of a director for his corporations' tort of passing off and infringement of copyright. Sundberg J. it appears, considered that there was clear judicial support for each of the four different approaches to the personal liability of a director. The first, the "procured or directed" test, was one for which his Honour observed there was a clear preponderance of authority.[1]49 Second, his Honour referred to the test in Mentmore and White Horse Distillers. His Honour cited King v Milpurrurru as having applied this test, but in my respectful opinion only one member of the Court did so and that was in respect to wrongful conduct which required mens rea. The third test was that articulated in the decision of Trevor Ivory Ltd v Anderson,[1]50 also relied upon by the second and third named defendants, that a director will be liable if he has assumed responsibility for the company's acts. This approach developed in relation to the liability of a director for negligent conduct of their corporation arises where the victim has placed reliance upon the director's conduct. Finally Sundberg J. referred to the test in Said v Butt that a director is not liable for procuring the company to infringe the rights of others. As I have shown this approach is limited to a director's conduct in procuring a breach of their company's contract with a third party.

488. For the same reasons as those expressed by Lindgren J. in Microsoft Corporation and Merkel J. in Henley Arch Pty Ltd, Sundberg J. did not think the procure or direct test was wrong and found that the weight of authority required that he should apply it. His Honour also referred to the decision of Mulligan J. in Lott v JVW & Friends Pty Ltd[1]51 where a similar view of the authorities was adopted.

491. Root Quality is a case upon which the defendants place great reliance. Early in his review of the authorities Finkelstein J. said:

"It is not surprising then to find, both in England and Australia, cases that have held that a director or officer renders himself personally liable if, having control of a corporation, he directs the corporation to commit an unlawful act. Here I refer to authorities which appear to be based upon the principles established by Lumley v Gye. I leave out of account those cases where the director or officer has so conducted himself that it may be fairly said that he is the actual perpetrator of the wrong."[1]52

"The general rule is that a director who actually participates in a tort such as assault, trespass to property, nuisance, negligence and the like, will be liable in damages. The point which troubled the court in Trevor Ivory may be confined to the case of a one-man company, that is to say a case where, unless some limitation were placed on the liability of a director, there would almost always be concurrent liability in both the corporation and the director. Such a situation may be undesirable. Whether this is so however is a very difficult question."[1]53

497. In a passage which was obiter dicta, Finkelstein J. identified a range of circumstances in which the Mentmore line of cases, if adopted, would make a director's act his own. His Honour said:

"The director's conduct must be such that it can be said of him that he was so personally involved in the commission of the lawful act it is just that he should be rendered liable. If a director deliberately takes steps to procure the commission of an act which the director knows is unlawful and procures that act for the purpose of causing injury to a third party, then plainly it is just that liability should be imposed upon him. Lesser conduct may suffice. For example, if the director is recklessly indifferent as regards whether his company's act was unlawful and would cause harm, that may also suffice. In the end it will depend upon the facts of each particular case. Where the boundary lies between the non-tortious conduct of a director who acts bona fide within the course of his authority and the tortious conduct of a director who acts deliberately and maliciously to cause harm cannot be stated with any precision."[1]54

501. Besanko J. in Polyaire Pty Ltd v K-Aire Pty Ltd[1]55 regarded Finkelstein J. in Root Quality as formulating a new test that a director will not have made the tort his own unless he was so involved in the unlawful conduct that it is just to render them liable. Besanko J. viewed the direct and procure test as more satisfactory and in accordance with the weight of authority in this country.

504. In Oakley Inc v Oslu,[1]56 Finn J., applying principles of comity, followed the approach of Sundberg J. in Pioneer Electronics and found the director liable on an accessorial or secondary basis for having directed or procured the wrongful conduct of the corporation reckless as to whether such acts were wrongful.

507. The personal liability of a director for his company's infringement of a registered design was considered by the Full Court of the Federal Court in Allen Manufacturing Co Pty Ltd v McCallum & Co Pty Ltd[1]57. The Judge at first instance, Gyles J. noted a divergence of judicial opinion in relation to the correct test which had not been authoritatively settled. The trial judge referred to the direct and procure test and the decisions of Microsoft Corporation, Henley Arch Pty Ltd v Clarendon Homes (Aust) Pty Ltd and a decision of Branson J. in Microsoft Corp v Goodview Electronics Pty Ltd[1]58. The trial judge was also referred to Root Quality concluding that, according to that case, a somewhat higher standard was required. The learned trial judge did not find it necessary to determine which test he should apply as the conduct of the director was sufficient to meet whichever was the correct test. On appeal the Full Court expressed the following conclusion:

"The difference between the two tests may be more apparent than real. We are not aware of any case in which it has been held that a director or officer of a company directed or procured the company's infringing act yet that person escaped liability because he or she did not deliberately, wilfully or knowingly pursue a course of conduct that was likely to constitute infringement or that reflected indifference to the risk of infringement. This may be because in practice an act of direction or procurement will generally meet the Mentmore test. It is notable that in Mentmore itself, the Canadian Federal Court of Appeal declined (at 204) to 'go so far as to hold that the director or officer must know or have reason to know that the acts which he directs or procures constitute infringement'. The Court declined to do this because that would be to impose a condition of liability that does not exist for patent infringement generally. To the extent there is a real difference between the tests, each has eloquent supporters. One day it may be necessary, in a practical sense, to choose between them. But it is not necessary to do so in this case. We share the view of Gyles J that on either test, Mr Harper must be held liable."[1]59

511. The Court of Appeal in Allen Manufacturing Co Pty Ltd with some reservation described Finkelstein J.'s judgment in Root Quality as adopting the Mentmore test. The Federal Court of Appeal again in Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd[1]60 referred to the two conflicting tests for determining circumstances in which the director of a corporation will be held liable for its tort. The Court of Appeal observed that there had been substantial debate in the Federal Court concerning the appropriateness or otherwise of both tests. As in the decision of Allen Manufacturing Co Pty Ltd, the Court of Appeal did not find it necessary to consider which test should be preferred as there had been no pleaded allegation that the director had procured or directed the tortious conduct of the company or any request that the trial judge reach such a conclusion.[1]61

514. Having considered the authorities referred to by the parties, my further research revealed a decision of this Court in Private Parking Services (Vic) Pty Ltd v Huggard.[1]62 The case involved a claim against the appellant company for damages for conversion, detention or trespass or negligence in wrongfully seizing and detaining the respondent's motor vehicle. A claim was also made against the director of the appellant company as a joint tortfeasor. Batt J, (as he then was) referred to the test of liability of directors for torts such as conversion as being the "direct or procure" test as propounded by Atkin LJ. in Performing Right Society. His Honour regarded it as significant that the evidence revealed there was a strong case of personal involvement on the part of the director. Referring to the different approach adopted in White Horse Distillers and Mentmore, his Honour concluded that he ought not follow that test noting that it had been rejected as a universal test in C. Evans & Sons. Batt J.'s researches revealed that Whitford J. who had in Hoover P.L.C. v George Hulme Stockport Limited &Hulme[1]63 adopted the test in Mentmore had subsequently declined to follow it in Wilden Pump & Engineering Co v Fusfeld[1]64 following the decision of the Court of Appeal in C. Evans & Sons. His Honour also referred to the New Zealand Court of Appeal in Trevor Ivory and referred to passages from the judgment of the Court of Appeal in which they approved the dicta in C. Evans & Sons. Batt J. was referred to some of the Australian cases to which I have referred and to some later New Zealand cases following Trevor Ivory which applied Atkin LJ.'s test. Based upon this examination of the state of the authorities his Honour adopted the test as propounded by Atkin LJ. recognising that "the question of a director's involvement is one of fact and degree in each case".[1]65 I would be bound to follow this decision unless I were persuaded that it was clearly wrong. The defendants submit that the recent Federal Court decisions require the adoption of a different approach.

517. Whilst there is a clear line of Australian and English authority that has re-affirmed the views expressed by Slade LJ. in C. Evans & Sons, the Canadian courts at least in the area of patent infringement have adopted the Mentmore "wilful participation" threshold for liability.[1]66

521. Where the tort involves an intentional element requiring a form of mens rea, it is clear that a director cannot be liable for the tort of the corporation unless, in addition to directing or procuring such acts, the director also possessed the necessary intention. This was recognised by Slade LJ. in the passage from C. Evans & Sons to which I have already referred. In the case of intentional torts whose origins are to be found in Lumley v Gye, the director must have directed or procured conduct which he knew would amount to wrongdoing.[1]67

525. Conversion is a tort of strict liability in the sense that a person may commit a conversion without any fault on their part.[1]68 A person may be liable in conversion without either a knowledge that the act is likely to cause injury, loss or damage or a lack of reasonable care to avoid injury, loss or damage.[1]69 It matters not that the act of usurpation is performed without knowledge of the owner's interest in the goods. In Batt JA.'s judgment in National Australia Bank Ltd v Nemur Varity Pty Ltd his Honour described conversion as a tort:

"... to be found at the lower or less culpable end of what Lord Steyn in Smith Newcourt called 'the sliding scale from strict liability to intentional wrongdoing'. Negligence of course is to be found midway along the sliding scale, for it requires fault in the sense of the failure to measure up to the standard of reasonable care."[1]70

529. In the passage of the judgment of Lord Steyn in Smith Newcourt Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd[1]71 to which Batt JA. referred, his Lordship found as a matter of policy that it was justifiable to differentiate between the extent of liability for civil wrongs depending on where the particular civil wrong fits in the sliding scale from strict liability to intentional wrongdoing. Their Lordships favoured the view that it was a rational and defensible strategy to impose a wider liability on an intentional wrongdoing. A policy of imposing stringent remedies on an intentional wrongdoer served two purposes:

"First it serves a deterrent purpose in discouraging fraud. Counsel for Citibank argued that the sole purpose of the law of tort generally and the tort of deceit in particular, should be to compensate the victims of civil wrongs. That is far too narrow a view. Professor Glanville Williams identified four possible purposes of an action for damages in tort: appeasement, justice, deterrence and compensation (see 'The Aims of the Law of Torts' (1951) 4 CLP 137). He concluded (p 172): 'Where possible the law seems to like to ride two or three horses at once; but occasionally a situation occurs where one must be selected. The tendency is then to choose the deterrent purpose for tort of intention, and the compensatory purpose for other torts.' And in the battle against fraud civil remedies can play a useful and beneficial role. Secondly, as between the fraudster and the innocent party, moral considerations militate in favour of requiring the fraudster to bear the risk of misfortunes directly caused by his fraud. I make no apology for referring to moral considerations. The law and morality are inextricably interwoven. To a large extent the law is simply formulated and declared morality."[1]72

The limits of tortious liability would need to be unsettled before resort to such questions of policy become necessary. It is submitted by the defendants that this case requires recourse to underlying policy considerations.

535. The second and third named defendants invoke the line of authority described by Sundberg J. in Pioneer Electronics (the third approach) as postulating that there must be "an assumption of liability" before a director will be found personally liable for the tort of their company. Beazley J. in the course of her judgment in King v Milpurrurru referred to both the case of Trevor Ivory and the subsequent decision of Doogue J. in Livingstone v Bonifant.[1]73 Those decisions led Beazley J. to regard it as necessary "to find conduct over and above that engaged in as part of the management of the company to find a director personally liable for the tortious conduct of the company".[1]74 Some academic writing is to the same effect.

538. A number of commentators have expressed the view that not only does Trevor Ivory correctly state the basis upon which a director's liability should be determined for negligent misstatements made by his company, but that the test enunciated there applies also to other tortious conduct of the company.[1]75 It is said that the recent decision of the House of Lords in Williams v Natural Life Health Foods Ltd[1]76 further supports the application of this principle to other torts.

541. In Trevor Ivory the company which provided negligent advice was described as a "one man" company. Cooke P., said:

"In this field I agree with Nourse J. (as he then was) in the White Horse case that it behoves the courts to avoid imposing on the owner of a one man company a personal duty of care which would erode the limited liability and separate identity principles associated with the names of Salomon and Lee. Viewing the issue as one of the assumption of a duty of care, ... I cannot think it reasonable to say that Mr Ivory assumed a duty of care to the plaintiffs as if he were carrying on business on his own account and not through a company."[1]77

545. The President considered that had the negligence of the company been in the personal injuries field he might have been disposed to align himself with the view of Wilmer LJ. in Yuille v B&B Fisheries (Leigh) Ltd and found a personal duty of care on Mr Ivory on the basis of a very obvious risk to health in handling herbicides. In Yuille's case Wilmer LJ. found the managing director liable as a joint tortfeasor with his company for personal injuries suffered by the plaintiff on the ground that he had been a party to the sending of vessels to sea when he knew or ought to have known that they were not in a seaworthy condition. Some knowledge of wrongdoing was in the President's view required. This is clear from the following passage from his Honour's judgment:

"Where damage to property or other economic loss is the basis of a claim, it may well be possible to home personal responsibility for an intentional tort such as deceit or knowing conversion."[1]78 Cooke P. did not appear to regard the test that he was enunciating as being one of universal application.

549. If the director had placed himself in a fiduciary position vis-a-vis the plaintiff, he would be personally liable for breach of his fiduciary duty. It is also well established that there is no corporate immunity for a director who procures a breach of trust or other fiduciary duty by a corporation which is a trustee or fiduciary. The director is subject to such equitable remedies as would be available against the trustee or fiduciary for such breach. This is the application of the second limb of the rule in Barnes v Addy.[1]79 Participatory liability in equity may be viewed as analogous to a director's secondary liability for their corporation's tortious misconduct.[1]80

552. With great respect to those who suggest otherwise, the judgments of each of the members of the Court of Appeal in Trevor Ivory appear confined to an analysis of the elements required to establish liability by a director for economic loss dependent upon a personal duty of care by the director to the injured party.[1]81 The assumption of responsibility, actual or imputed as described by Hardieboys J. arises for consideration in the area of negligence where the existence of a duty of care must be determined. Hardieboys J. unequivocally stated the test to be applied for other civil wrongs as different:

"Where a director is said to have authorised, directed or procured the commission of a tort by his company, or indeed by an employee, the enquiry is rather different and the cases in that area such as C Evans & Sons Ltd v Spritebrand Ltd [1985] 2 All ER 415 in the English Court of Appeal and Kalamazoo (Aust) Pty Ltd v Compact Business Systems Pty Ltd (1985) 5 IPR 213 in the Supreme Court of Queensland are not really in point, save as a reminder of the need for care in fixing directors with negligence."[1]82

556. The decision in Natural Life Health Foods confirmed the application to directors of the "assumption of responsibility" test for third party economic loss claims in negligence which had previously been considered by the House of Lords in Henderson and others v Merrett Syndicates Ltd and others.[1]83

559. Similarly there is nothing in the judgment of Lord Steyn in Natural Life Health Foods suggesting that the principle stated in Hedley Byrne & Co Ltd v Heller & Partners Ltd[1]84 that there be a special relationship between the plaintiff and the tortfeasor was intended to have some application to other torts.

562. In the recent decision of the Court of Appeal in Standard Chartered Bank v Pakistan National Shipping Corporation (No 2),[1]85 a case concerning a director who had procured the fraudulent tendering of bills of lading containing false dates, it was held that as the director had made the fraudulent representation on behalf of the corporation only the corporation could be liable. The trial judge had found that the director had authorised, directed and procured the acts complained of with full knowledge that the acts complained of were tortious and found the director personally liable. Aldous LJ. was of the view that the assumption of responsibility for advice given or services rendered in the case of negligence claims of economic loss concerned in Natural Life Health Foods was equally applicable to intentional torts. Dealing with the fraudulent representations of a corporation's director, his Honour concluded that for the plaintiff to succeed it must be established that the director conveyed "directly or indirectly to the plaintiff that he assumed a personal responsibility towards the plaintiff."[1]86 These findings with which Evans LJ. agreed were subsequently the subject of restrained criticism in the case of SX Holdings Limited v Synchronet Limited and Others.[1]87 Potter LJ. delivered the judgment of the Court of Appeal referring to the decision in Standard Chartered Bank and the reliance by Aldous LJ. on the decision of the House of Lords in Natural Life Health Foods. Potter LJ. said:

"........., in cases of fraud and deceit it is by no means easy to see as a matter of policy or logic why the hegemony to be accorded to the principle of company law concerning the separate personality of companies should lead to a `let out' of this kind for an individual who knowingly defrauds another in the name of a company in which he is interested for his own financial benefit. Whereas liability for negligence is a liability imposed in respect of inadvertent damage caused to one's neighbour and/or upon the postulate that the defendant has assumed a personal responsibility towards an injured claimant, liability in deceit is imposed on the basis of harm deliberately (or recklessly) caused by a representor to a `targeted' representee. In this connection I observe that in another context, Lord Steyn has made clear the strength of the rationale, in terms of deterrence and morality, which underlies the imposition of why the personal liability upon a defendant who is an intentional wrong-doer than that which is imposed upon one less blameworthy in the sliding scale of civil damages; see the Smith Newcourt case at page 279. Thus there is much to be said for the view that there are strong countervailing reasons of policy why personal liability should not be avoided simply on the basis that the representation was purportedly made and understood to be made in the representor's capacity as a company director, particularly when he is the controlling shareholder and moving spirit in relation to that company, use of whose name is adopted as part and parcel of his own fraudulent scheme."[1]88

566. The question again arose in Daido Asia Japan Company Ltd v Rothen[1]89 as to whether a director who made a false representation on behalf of his company on company letterhead could be personally liable in deceit or whether only the company was liable. Lawrence Collins J. in referring to first principles that a director, as an agent of the company, who commits a tort on behalf of his principal will ordinarily be personally responsible[1]90 stated there was no reason to believe that those authorities were affected by the decision of the House of Lords in Natural Life Health Foods. His Honour referred to the decision of Standard Chartered Bank noting that no authority had been cited which suggested that a director who deliberately made a false statement on behalf of the company would not be liable in deceit and observing that the decision in Standard Chartered Bank had been the subject of other judicial criticism[1]91 and academically.[1]92 His Honour distinguished Standard Chartered Bank by relying upon the principle, which had not been applied because it had not been pleaded in Standard Chartered Bank, that a director who knowingly procures a company to commit a tort will be liable as joint tortfeasor. His Honour concluded:

"It may be somewhat artificial to regard a director who personally sends a false letter on behalf of a company as procuring the company to send it, but I am satisfied that in the light of the decision of the Court of Appeal that is the analysis that I can and should apply."[1]93

570. The approach adopted by Lawrence Collins J. was in my respectful opinion in accordance with well settled principles. Although Standard Chartered Bank and Daido are concerned with the tort of deceit which requires a particular mental element by contrast to torts of strict liability such as conversion, the reasoning of Lawrence Collins J. is germane to the defendants' argument that the doctrine of limited liability confines their liability.

573. Finkelstein J. in Root Quality recognised that:

"Trevor Ivory should not be regarded as authority for the proposition that it will only be in the case of 'an assumption of liability' that a director or officer will be found liable for a personal tort; Mansfield v Johnson (1994) 7 NZCLC 260 at 496. For present purposes I would observe that the issue raised by Trevor Ivory will arise in acute form whenever there is an attempt to impose secondary liability on a director."[1]94

His Honour also expressed the view that the test for a director's liability stated in Trevor Ivory may not be confined to negligence cases, but these observations appear to be obiter and in my view are not supported by any dicta in Trevor Ivory or Natural Life Health Foods. The passage from Root Quality which I have quoted was referred to with apparent approval by McDonald J. in MLC Management v J.W. Management Services Pty Ltd[1]95, a case in which it was necessary to determine whether a director had a duty of care to the plaintiff after the plaintiff appointed his company as its agent.

578. After referring to the direct and procure test, McDonald J. adopted a passage from the judgment of Lindgren J. in Microsoft Corporation in which His Honour had observed:

"...It has been said in relation to dealing cases that the director is not liable in respect of the tortious conduct of the company, unless the director has personally assumed a duty to the other party...(as a matter of language, `personal assumption of duty' by a director may be seen to be akin to his `making the tortious act his own', but the latter formulation has been confined to `dealing cases' and appears not to have been used to refer to a personal assumption of a duty at all). But reference to assumptions of duty are beside the point where there has been no relevant contract between the company and the aggrieved party."[1]96

582. If a director's assumption of responsibility is to be relevant in cases that do not involve dealings between the director and the injured third party, it is likely to arise where a director exercises particular control over an operation or activity. The assumption of responsibility might more readily be imputed where a director is so involved.[1]97 Thus Hardieboys J. in Trevor Ivory thought that if the director had undertaken the spraying of the herbicide himself he would have assumed responsibility. This test of "control" had been previously suggested by Hardieboys J. in Morton v Douglas Homes Ltd.[1]98 There his Honour expressed the view that the degree of control of the director provides a means of determining whether the director's personal carelessness may be likely to cause damage to a third party so that the director becomes subject to a duty of care. His Honour saw no difference in this respect between a director, a general manager or a more humble employee:

"Each is under a duty of care, both to those with whom he deals on the company's behalf and to those with whom the company deals in so far as that dealing is subject to his control."[1]99 Such a formulation of liability depending as it does upon the direct level of involvement and control may result in the liability being co-extensive with the direct and procure test.

Does the doctrine of limited liability provide immunity for a Director?

587. Counsel for Mr and Mrs Secchi submit that the acts of Mr and Mrs Secchi were those of AGE. It is submitted that whatever the second or thirdnamed defendant did was done in their capacity as employee or Director of AGE and they should not be made liable for such conduct. Both the "assumption of responsibility" test (Trevor Ivory Ltd) and the "make the tort their own" test (Mentmore) draw upon such reasoning and depend significantly upon the company law doctrine of limited liability.

590. Since at least the decision of the House of Lords in Salomon v Salomon the separate legal identity of a corporation has remained unchallenged in Australia. It has continued to exist as a "new legal entity, a person in the eye of the law".[2]00 Shareholders have no liability for the company's debts nor any proprietary interest in its assets. There is no general right to proceed beyond the company to its directors or shareholders when seeking a civil remedy. Creditors have no general law right against former directors for the recovery of losses suffered by those creditors.[2]01 The High Court in Spies v The Queen[2]02 removed any doubt that it is contrary to principle to assert that directors owe an independent duty to, and enforceable by the creditors by reason of their position as directors.[2]03

593. The defendants draw upon the observations of the House of Lords in Tesco Supermarkets Ltd v Nattrass[2]04 as supporting the proposition that when a director acts or speaks for the company "he is acting as the company and his mind which directs his acts is the mind of the company".[2]05 Therefore it is said that the person doing such things is to be regarded as the company and not the company's servant or agent. The second and third named defendants also submitted that they were no more than employees or agents of AGE acting ministerially in the course of their employment and could not be liable for conversion by AGE.[2]06 Specific reliance was placed by the defendants on Speed Gantry Hire Pty Ltd v Preston Erection Pty Ltd.[2]07 In Speed Gantry, the applicant relied upon the statutory provisions of the Patents Act 1990, and unsuccessfully contended that because the director had authorised the company to engage in the conduct which constituted the infringement, he was himself infringing.

596. The circumstances in which courts will lift the "corporate veil" indicate that there is no consistent and discernible principle applied in determining when this should occur. [2]08

599. Many of the cases which restrict the liability of a director refer to the special hardship which would be caused to directors in the "one man" or husband and wife company where the shares are owned by the directors and the paid up capital is minimal.[2]09 As directors in such circumstances are inherently more likely to be connected to any tortious conduct of the company, it is not surprising that empirical studies conducted in Australia,[2]10 England[2]11 and the United States[2]12 all suggest that courts are more likely to expose the director to liability and lift the corporate veil where a single or small number of individuals control the company. An analysis of the Australian cases revealed that courts were much more likely to pierce the veil with respect to proprietary companies closely controlled with shareholders managing the company.

602. The principle in Salomon v Salomon remains unexpurgated in its application in Australian[2]13 and English courts. In JH Rayner (Mincing Lane) Ltd v Department of Trade and Industry (sub nom Maclaine Watson & Co Ltd v Dept of Trade and Industry)[2]14 the House of Lords referred to the separate legal persona of the corporation re-iterating that those who are members of or controllers of the corporation are not liable for the debts of the corporation. The decision of the High Court in Spies v The Queen is to the same effect. The Privy Council in Kuwait Asia Bank E C v National Mutual Life Nominees Ltd[2]15 again confirmed that a director does not, by reason only of their position as a director, owe any duty to those dealing with their company absent some personal agreement or representation by the director signifying the assumption of a special duty by the director to such persons.

605. The underlying considerations which support this doctrine were referred to by Tomlin J. in British Thomson-Houston Co Ltd v Sterling Accessories Ltd.[2]16 Two directors were sued on the basis that they were liable for the tort of their company for infringement of letters patent. Tomlin J. referring to commercial decisions of the corporation observed that to go behind a legal corporate entity to treat the creator or controller of it as the real contractor would be to nullify the purpose for which the creation of limited companies was authorised by the legislature. His Honour concluded that such reasoning applied equally to liability for tortious acts. His Honour then referred to a passage from the judgment of Lord Buckmaster in Rainham Chemical Works Ltd in which the purpose for the legislative scheme was identified:

"But in truth the Companies Act expressly contemplate that people may substitute the limited liability of a company for the unlimited liability of the individual, with the object that by this means enterprise and adventure may be encouraged."[2]17

609. This same passage was quoted with approval by the Privy Council in Kuwait Asia Bank E C v National Mutual Life Nominees Ltd.[2]18

612. These cases emphasise the separate and distinct status in law of a company from its shareholders, directors and officers. The principle which emerges from this line of authority commencing with Performing Right Society and including Rainham Chemical Works Ltd, British Thomson Houston and Wah Tat Bank was applied by Davies J. in Australian Performing Right Assoc Ltd.[2]19 Though a director be a controlling director, in the absence of any knowledge of the wrongful acts or any personal involvement in such acts and if the director has neither expressly or impliedly authorised, procured or instructed the performance of wrongful conduct, the director would not be liable.

615. Hirst LJ. in the Court of Appeal in Natural Life Health Foods[2]20 observed when considering whether a director should be personally liable for negligent misstatements made on behalf of the company that particular vigilance was necessary lest the protection of incorporation be virtually nullified.[2]21 Waite LJ. expressed a similar view in relation to directors of companies that the general principle as to liability must not "put at nought" the protection of limited liability. Cook P. in Trevor Ivory[2]22 adopted a similar approach. Some commentators have also advanced the argument that the directors' acts are the acts of the corporation and should not be personally liable.[2]23 This consideration was influential in the development of the line of authority in Canada since Mentmore. The test formulated by Nourse J. in White Horse Distillers rested upon this doctrine. Beazley J. in King v Milpurrurru was of the view that the principles followed in both England and Australia in relation to directors' liability had not in the past paid sufficient heed to the separate legal existence of the corporation or to the fact that the corporation acts through its directors.

618. The tension arising between the operation of corporate law and tort law was clearly a matter that troubled Finkelstein J. in Root Quality. The concern with the diminution of the protection of the limited liability in the case of one-person corporations which had been expressed in Trevor Ivory and White Horse Distillers led Finkelstein J. to observe that the imposition of the "direct or procure" test would go near to "imposing personal liability in every case". It was for this reason that his Honour concluded that before a director could be held personally liable there must be an element of "deliberateness or recklessness and knowledge or means of knowledge that the act or conduct is likely to be tortious".[2]24

621. Those decisions that postulate that the liability of a director for the tortious conduct of their company requires the director to have procured or directed the acts in the knowledge that or with reckless indifference to whether the acts were unlawful or would cause harm to another, regard such a requirement as a necessary consequence of the doctrine of limited corporate liability.

624. The line of cases which have applied the principle in Said v Butt illustrate the nature and scope of the doctrine of limited liability. Directors in the course of carrying on the company's business, may decide to terminate or not perform their company contract on the basis that it is in the best interests of the company to pay damages for failure to perform. This does not attract personal liability in them for inducing a breach of contract. These policy considerations supporting the line of cases following Said v Butt were recently referred to with approval by the Ontario Court of Appeal.[2]25

627. In the decision of Standard Chartered Bank, the Court of Appeal described the House of Lords judgment in Natural Life Health Foods as based upon "the pre-eminence given to the separate legal personality of the company" which it was thought required the Court of Appeal "to apply the principles of tortious liability strictly in accordance with this rule of company law".[2]26 I have referred to the judicial criticism which that case has already attracted. The Court in Standard Chartered Bank adopted comments from the Modern Law Review to the effect that a director is not personally liable for torts committed on behalf of the company because of the combined effect of the company's separate existence and the doctrinal process by which the company acts.[2]27

630. The requirement that the director must have assumed responsibility for the conduct complained of before they are made liable is sometimes expressed as a corollary of the limited liability conferred on those who incorporate their business activities.[2]28 Whatever be the ambit of this requirement to particular torts, the contention that it applies to all wrongful conduct of a corporation necessitates an unwarranted extension of the doctrine of limited liability. The contention that such a requirement is of universal application cannot be reconciled with the principles enunciated in the preponderance of authorities to which I have referred. Such a broad contention is, in my respectful opinion, inconsistent with the judgments of their Lordships in Natural Life Health Foods. In the course of Lord Steyn J.'s judgment the observation was made:

"What matters is not that the liability of the shareholders of a company is limited but that a company is a separate entity, distinct from its directors, servants or other agents. The trader who incorporates a company to which he transfers his business creates a legal person on whose behalf he may afterwards act as a director. For present purposes, his position is the same as if he had sold his business to another individual and agreed to act on his behalf. Thus the issue in this case is not peculiar to companies. Whether the principal is a company or a natural person, someone acting on his behalf may incur personal liability in tort as well as imposing vicarious or attributed liability upon his principal." [2]29

634. The distinct legal identity of a corporation and the differing rights, interests and duties of a corporation from those of its directors was the subject of recent consideration and re-emphasis by the High Court in Macleod v The Queen.[2]30

637. A director by using the company's money for his own purposes in breach of statute or the companies memorandum articles of association cannot be viewed as the voice or amanuensis of the company.[2]31 Even where the shares of a company are closely held the wrongful acts of the person or persons in control will generally attract its own legal consequences for the actor, quite independently of any corporation liability. In Macleod the director was treated as having acted without the corporation's authority or consent. A director's liability may arise even where the director acts pursuant to the corporation's authority.

641. The statutory regime concerning director's liability may do little to inform or confine the common law liability of the director, but I should make passing reference to those statutory provisions. As the Corporations Law was not the subject of specific submissions I propose only to identify a number of features of the Corporations Law which applied at the relevant time and which may throw some light on the scope of the operation of the doctrine of limited liability.

644. A convenient historical analysis of the liability of directors to their company is contained in the judgment of Powell JA. in Daniels (formerly practising as Deloitte, Haskins & Sells) v Anderson.[2]32 Amongst the duties owed to a company is the duty to exercise the degree of care and diligence that a reasonable person would exercise in a like position in the corporation.[2]33 The Court in Daniels' case examined the current company law legislation in considering the existence and scope of the duty. The statutory duty reflects the common law obligation.[2]34 A director owes common law, equitable and statutory duties to the company to exercise reasonable care in the management and direction of its affairs and is liable to the company if the director fails to do so.[2]35

647. The corporations law regime allows for limited circumstances in which a director can seek indemnification from a company for his or her potential liability in law. At the time of the conversions pleaded, s. 241 of the Corporations Law, now s. 199A, avoided articles which indemnified a director against any liability to the company in respect of, inter alia, negligence, default, breach of duty or breach of trust. A company could not exempt a director from liability to the company.[2]36 A company could only indemnify a director in respect of a liability to a third party where the liability arose out of conduct by the director in good faith. [2]37 It was permitted to pay the premium for an insurance policy protecting directors for liability arising out of their conduct save for conduct arising from a wilful breach of duty in relation to the company.[2]38 So long as the director's conduct was in good faith the director could be indemnified by the company and could be covered by insurance paid for by the company.

650. A director may act honestly but nonetheless fail to prove that they were acting in good faith. Failure to discharge the duty of care required of the director may be of such a nature that it could not be said that the director was acting in good faith. Good faith may require the exercise of caution and diligence expected of an honest person of ordinary prudence.[2]39 Where a director acts honestly but fails to make a real or genuine attempt to discharge their duties, they may not be regarded as acting in good faith.[2]40

653. The C_orporations Law_ provides that the court may in certain circumstances relieve a director from liability where the director has acted honestly but negligently.[2]41 This relief also appears available to a director where a third party rather than the corporation proceeds against the director for negligence.[2]42

656. In further amendments to the Corporations Law in 2000 subsequent to matters pleaded in this case, the "business judgment rule" was introduced.[2]43 A director who makes a business judgment will satisfy their statutory equitable and common law duty if they make the judgment in good faith and for a proper purpose. These most recent reforms introduce statutory derivative actions enabling shareholders and others to commence proceedings against directors where other directors refuse to do so.

659. Whether the Corporations Law display a policy with respect to the acts of directors that would be frustrated by the broader interpretation of the limited liability doctrine need not be resolved. It is sufficient for present purposes that I observe that the statutory scheme appears to be in harmony with the preponderance of Australian authority that a director will be liable for a tortious act of the corporation where the director innocently and with corporate authority directs and procures such acts. So long as the director has acted in good faith the Corporations Law permits a corporation and its directors to construct significant safeguards to indemnify a director against such liability.

Directors' breach of duty of care and implied direction or procurement

663. If the Mentmore test was not the correct measure of a director's liability the second and third named defendants further argued that I ought not find them liable in conversion unless there was some breach of duty by them as directors of AGE in addition to them directing or procuring the tortious act. During the course of submissions reliance was placed upon the dissenting judgment of Lee J. in King v Milpurrurru where his Honour said in the course of discussing the personal liability of a director for impliedly procuring or directing the commission of the tortious acts:

"It is consistent with both policy and reason that the liability of a corporation in tort to a third party should be imposed upon a director whose breach of duty to the company is materially connected with the incurring of that liability. The ground for liability is not the degree of 'control' exercised by the director or the 'assumption of responsibility' to the third party but the extent to which the breach of duty to the corporation to act with care and diligence qua director has caused the tortious conduct of the corporation."[2]44

667. The plaintiff submitted that a breach of duty is not required and would unjustifiably confine a director's liability. If the evidence failed to satisfy me that the second or third named defendant expressly directed or procured the act of conversion, the plaintiff submitted that I should be satisfied that by acquiescence or approval they did so. The plaintiff contends that the evidence in this case was much stronger than that in the case of the two directors in the case of R v Milpurrurru. It is submitted that as Mr and Mrs Secchi were closely involved with each purchase, a director must have either taken possession or expressly or impliedly directed or procured another employee of AGE to do so. The implication is said to arise because the director involved must have at the very least approved or acquiesced in AGE taking possession of the gold. By contrast to Milpurrurru's case, the plaintiff's contention is that the directors' involvement with the transactions was so intimate that it can be inferred that they must have expressly or impliedly directed or procured the taking of possession of the plaintiff's gold. The plaintiff's contention is not, it says, dependant upon a breach of their duties to found an implied direction or procurement nor was it incumbent on the plaintiff to establish a breach of duty by the director to establish liability for acts directed or procured. In each case where the plaintiff demonstrated that the director was closely involved in the purchase, the inference is a strong one, the plaintiff submitted, that if the director did not take possession, that director must either, expressly or by implication, have directed other AGE employees to do so.

670. Lee J, in considering whether a director had impliedly procured the commission of the corporation's tortious act emphasised that the duty of care and diligence owed by each director to the company was not suspended by entrusting control of it to another director.

"Such a duty of care and diligence is not delegable and applies in full force to any person holding the office of director: see Metal Manufacturers Pty Ltd v Lewis (1988) 13 NSWLR 315 per Kirby J at 318-9; Group 4 Industries Pty Ltd v Brosnan (1992) 10 ACLC 1437 per Mathieson J at 1445; AS Sievers_,_ 'Farewell to the Sleeping Director - The Modern Judicial and Legislative Approach to Directors' Duties of Care, Skill and Diligence_'_ (1993) 21 ABLR 111 whether the failure of King and Rylands to be aware of the manner in which the control entrusted to Bethune was being exercised involved the breach of the duty of care and diligence each director owed to was a question of fact. By limiting the liability of members of the corporation to the capital subscribed and by recognising the corporation as an entity at law, encouragement is given to use corporations as risk-takers in businesses operating in industry, trade and commerce. However, regard for the interests of parties who have business dealings with corporations enjoying such advantages requires the development of the duty of care and diligence owed by a director to the corporation as a counterpoise to ensure that the natural persons responsible for the control of a corporation effect due management and governance of the corporation."[2]45

674. His Honour viewed the relevance of the duty of care and diligence to the question of a personal liability of the directors for breaches of copyright committed by the company as lying in the extent to which the conduct of those directors could be said to reflect an abnegation of their duty of care and diligence. An egregious default would lead his Honour said to an inference that neither director intended to perform the duty they owed to the company and that each was content to accept the risk that the other director would continue to engage in wrongful conduct. This failure to discharge their duties could constitute an implied procurement or direction of the commission of a tort by the corporation.

677. Those observations gave rise , the defendants contend, to the proposition that absent a breach of the director's duty no liability should attach to a director. A breach of duty is not, in my view, a necessary element of a director's secondary liability for the wrongful conduct of the corporation. The judgment of Lee J. does not support the defendants' submission. A breach of the director's duty may, in some circumstances, provide a basis for the conclusion that a director impliedly procured or directed the tortious acts because as Lee J. observed the law which imposes the duty of care "is intended to secure the proper management and governance of the corporation".[2]46 Thus a director's level of involvement and departure from their duty may permit the inference to be drawn that the director has approved or acquiesced in the wrongful act, but the breach of duty would be incidental to and not a pre-condition of liability.[2]47

680. No discernible principle was advanced which requires the conclusion that a director need be in breach of their duty of care and diligence, whether its origins be statutory, common law or equity, before a director can be found liable for directing or procuring the corporation's tortious acts.

683. If a breach of such duty was necessary before liability would attach to a director Mr Clarke on behalf of the plaintiff drew upon the evidence in support of his contention that the directors knew or suspected that their dealings with Mr Knight were unlawful as demonstrating such a breach. This evidence, it was submitted, showed that neither of the directors made any real attempt to discharge their duties of diligence and care to AGE in the course of purchasing the plaintiff's gold from Mr Knight on behalf of AGE. The evidence raises the prominent hypothesis that the directors made no proper enquiries to satisfy themselves that Mr Knight's explanation for how he came by the gold was likely to be truthful. By 30 August 1995, being the date of the first transaction pleaded as conversion, there had already been 49 occasions between June 1994 and August 1995 when Mr Knight, in similar circumstances, had sold the plaintiff's gold to AGE. Mr Knight was by far the largest seller of alluvial gold to AGE. The plaintiff submitted that the frequency of those transactions, the volume of gold purchased and the explanations provided by Mr Knight required the directors to make further enquiries to satisfy themselves that such transactions were lawful. It is however unnecessary to determine whether the directors acted in breach of duty or did not act in good faith as their liability is not dependent upon such considerations.

Conclusion as to director's secondary or accessorial liability

687. Both in Australia and in England a director is in no different position to an agent who, whilst binding their principal may also be liable for their tortious acts. The defendants' submission that Mr and Mrs Secchi cannot be held liable for their conduct as director's because their acts are those of the corporation, expressed in such absolute terms must be rejected. This does not mean that directors become personally liable merely because they are directors. Unless they procure or direct the tortious conduct the law does not impose upon them liability for the acts of other agents or employees, whether they are directors of large corporations or what is described as "one man" companies.

690. There is an obvious jurisprudential distinction to be drawn between those who by choice enter into contractual arrangements with a corporate entity and should thus be taken to have accepted limited liability and those who have had no dealings with a company and whose only interest is not to be harmed by the conduct of anyone. The utilisation of limited liability as a shield against those who choose to deal with a company can be more readily accepted than in the case of strangers who are harmed by corporate activity and who naturally turn for liability to those who caused the harm. Those who are victims of a tortious act such as trespass, conversion or negligence will probably have played no role in the selection of the tortfeasor who inflicts the harm.[2]48

693. I am not persuaded that there is any soundly-principled basis for the imposition of a requirement that a director who, by virtue of their level of involvement and control is found to have procured or directed the commission of the acts should not be liable unless the director knew or was indifferent as to whether the acts were unlawful or likely to cause loss or damage to the true owner of the goods. Despite the absence of direct binding authority, and the differing views expressed in various Federal Court decisions, the preponderance of authority provides no support for a principle which would so limit a director's liability at the expense of a victim who may not have chosen to deal with the corporation tortfeasor. The line of authority which requires an assumed responsibility before a director will be liable is concerned with tortious conduct which involves an assumption of a duty of care and reliance before liability is established. This limitation upon liability arises in circumstances where the victim has dealt with a company and has chosen to accept the risks associated with the company's limited liability and torts. These cases do draw attention to the personal liability which may be imposed upon a director of a "one person company" because of the degree of control that the director has.

696. Notwithstanding those recent decisions which invite a different conclusion the "direct and procure" test has not been shown to be unsound and it remains the standard for determination of a director's liability. For a tort such as conversion that does not require a particular intention, a director is liable for the tortious acts of the corporation which he or she directed or procured regardless of the director's state of mind. The level of involvement and the degree of control which a director exercises will determine whether it can be said that the acts have been directed or procured by the director.

699. It remains to apply these principles to the circumstances of the case. The evidence established that the second named defendant played a significant role in the purchase of the plaintiff's gold from Mr Knight in relation to the conversions pleaded in the statement of claim as conversions 1, 2, 3, 6, 8, 11, 15, 17, 21, 24, 26, 41, 42, 44, 45, 46, 50, 52, 56, 57, 58, 59, 60, 62, 63, 64 and 65. The undisputed evidence supporting this conclusion was summarised in exhibit P45 entitled "Table of Conversions authorised by David Secchi" produced by the plaintiff.

702. Neither the negotiations with Mr Knight nor the steps taken by the second or third named defendant in the course of purchasing the plaintiff's gold constitutes the conversion. That occurs upon the taking of possession upon the completion of the transaction. The plaintiff during the trial did not focus upon the control or possession of the gold immediately following the completion of each transaction between the second or third named defendant and Mr Knight. The inference which I draw, and no submission was made by the second or third named defendants suggesting some other inference was open, is that the second or third named defendant by virtue of their involvement in the particular transaction must either have taken possession of the gold, or directed or procured the act of taking possession of the plaintiff's gold by other employees upon the completion of the transaction with Mr Knight.

705. It was contended by the plaintiff that I should also be satisfied that the second named defendant, notwithstanding the absence of evidence that he had a direct involvement in the conversions other than those referred to in Exhibit P45, directed or procured the acts of his wife or brother in those other conversions and was therefore also liable for those conversions. The evidence falls short of permitting me to reach such a conclusion. The plaintiff's gold was purchased during the period 12 July 1994 to 31 January 1997. Such evidence as there was concerning conversations between the second and third named defendants and the manner in which the second named defendant participated in the management of AGE's business was linked neither to any particular transaction nor to any particular period of time. Each director had a discretion whether or not to deal with Mr Knight on each occasion that gold was purchased from Mr Knight. I am not satisfied that Mr Secchi by his conduct or as a consequence of his position authorised or directed or procured the relevant acts where the evidence fails to establish any direct involvement by Mr Secchi in the purchase of the gold on any particular occasion. The plaintiff makes the concession in relation to Mrs Secchi that, in the absence of evidence of direct involvement in a particular purchase, it could not be said that she directed or procured a conversion of the plaintiff's gold.

708. The plaintiff submitted that I should find the third named defendant directed or procured the acts of conversion with respect to conversions 1, 7, 8, 9, 12, 14, 16, 18, 20, 22, 23, 25, 26, 27, 28, 29, 30, 31, 32, 33, 35, 36, 37, 38, 40, 43, 44, 48, 49, 53, 54, 55, 59 and 61 on the basis that the evidence establishes that Mrs Secchi was involved in the purchase of the gold from Mr Knight on each of these occasions. The plaintiff therefore produced a "Table of Conversions Authorised by Juliette Secchi" being exhibit P46 which identified those transactions with Mr Knight in which Mrs Secchi played a role. These facts were not disputed. I conclude that on those occasions Mrs Secchi either took possession of the gold herself, or directed or procured another AGE employee to do so. The plaintiff concedes that I could not find Mrs Secchi directed or procured the conversion of the plaintiff's gold with respect to any transactions in which she was not directly involved.

711. The liability of the second or third named defendants for the conversions set out in exhibits P45 and P46 is made out.

714. If the correct test to be applied in determining the directors' liability was that formulated in Mentmore requiring a knowledge or reckless indifference by the director as to whether the taking of possession was unlawful or would cause harm to the true owner, the plaintiff, having failed to establish that either the second or third named defendant had such a state of mind prior to October 1996, would until this date fail in its claim against each of them. As I am satisfied that from October 1996 the second named defendant was at least recklessly indifferent as to whether the transactions conducted with Mr Knight from that time onwards were unlawful, I would find the secondnamed defendant liable for conversions 56, 57, 58, 59, 60, 62, 63, 64 and 65 were the Mentmore test to be applied. I do not however regard this test to correctly reflect the law in Australia.

718. There is a dispute as to the date on which the plaintiff's gold was converted by AGE. The plaintiff submits that the conversions occurred at the time that the defendants purchased and took possession of the gold. The defendants submit that absent some manifestation of an intention to keep the gold in defiance of the plaintiff's rights, it is not enough to establish that the gold came into the possession of the defendants. They submit that the purchase of the gold from Mr Knight did not interfere with the plaintiff's rights which were only affected at the time that the gold was transferred by AGE to a refinery. This, counsel for the defendants submits, is the date upon which any conversion occurred and there is no evidence of the involvement of the second and third named defendants at that time. The value of the gold would also differ depending upon the date of conversion.

721. It is not disputed that there must be some act of the defendant repudiating the owner's right or some exercise of dominion inconsistent with the owner's right.[2]49 Conversion may be committed by taking possession of goods, disposing of them, destroying them or refusing to give them up.[2]50 In all such cases conversion is traced to conduct by the defendant that amounts to a denial of the plaintiff's rights or the assertion of inconsistent rights.[2]52 It is as Holt CJ. observed in Baldwin v Cole[2]52 "....assuming upon oneself the property and right of disposing of another's goods.....".[2]53

724. The intention required for the tort of conversion is to do the act or acts which involve an assertion of ownership or control over the goods in a way inconsistent with the plaintiff's ownership or control.[2]54 It does not matter that the conversion may be committed with no dishonest intention or "moral fault" on the part of the defendant.

"The defendant need not know that he or she is acting in violation of the plaintiff's rights and may be acting in the honest belief that his or her actions are lawful. It does not matter that the defendant could not by the exercise of any reasonable care have known of the plaintiff's interests in the goods: the duty is absolute and the defendant acts at his or her peril."[2]55

728. In the present case the intention by AGE was to acquire the gold by purchasing it from Mr Knight. Upon taking possession of the plaintiff's gold there was an assertion by AGE of ownership or control inconsistent with the plaintiff's ownership of the gold. In Fleming's The Law of Torts[2]56 the writer states that possession acquired by way of purchase constitutes more than a mere possession or holding of the goods. Negotiations preparatory to purchase or a contract of sale without delivery or a change of possession will not be sufficient to constitute a conversion as property in the goods has not been affected. Property handed over pursuant to a contract of sale will result in a conversion by both the seller and the purchaser even though the purchaser did not know the sale was wrongful.[2]57 Consequently, where an agent purchases goods which the vendor had no lawful right to sell and the principal subsequently ratifies the unauthorised purchase the principal is also guilty of conversion.[2]58 An auctioneer who sells goods under the direction of a person who has no right to dispose of the same and who delivers possession to the purchaser will equally be guilty of conversion.[2]59 An assignee who receives property from another who has no authority to assign the same will in general be guilty of conversion upon taking possession.[2]60 In Chubb Cash Ltd v John Crilley & Son,[2]61 the Court of Appeal in considering the measure of damages in conversion proceeded on the unchallenged assumption that the conversion of the goods had occurred at the very moment that the defendants took possession of the goods and not at the time that they sought to auction them.

731. In accordance with these principles, the act of purchasing and taking possession of the gold by AGE constituted an assertion of AGE's control or dominion over the gold in order to further its commercial interests in a manner inconsistent with the plaintiff's ownership of the gold. The conversion by AGE occurred eo instanti that it took possession following the completion of the purchase transaction.[2]62 It is at that time that the conversion occurred and not at the time that AGE transferred the gold to a refinery in exchange for granulated gold.

735. The general principle upon which the measure of damages in tort conversion is to be calculated is well established. It is the value to the owner of the thing converted at the date of the conversion.[2]63 The owner's measure of damages for conversion was extensively considered by the Victorian Full Court in Furness v Adrium Industries Pty Ltd.[2]64 The principle of restitutio in integrum is fundamental to an award of damages for the tort of conversion. The owner must be compensated for the full value of the goods converted. The general principle as to the basis for assessing compensatory damages is that the owner, so far as money can achieve this objective, must be returned to the position in which they would have been had the tort not be committed and is normally assessed by reference to the market value of the goods. These principles have been applied on many occasions but, as this case demonstrates, the "value" of the goods is not immediately discernible from the application of these unexceptionable principles.

738. There is a global market for gold and the price is determined by reference to "refined" gold. The price can be accessed through Reuters which provides a continuous record of the movement of the price of gold. During the trial this was referred to as the "floor price". A number of markets exist which deal with gold in its different forms. There is the refiners' market in which the plaintiff operates and where the price of gold in its pure and granulated form is fixed by the refinery at the floor price with minor variations depending upon whether the gold is being bought or sold. Another market is the gold traders and wholesale merchants' market in which the first named defendant traded. This market deals with gold in a variety of forms including gold scrap, miner's or alluvial gold or gold "dump". In this market the price paid for such gold is also calculated by reference to the daily floor price but with a substantial discount in the amount offered.

741. Mr Gaffney would melt together the plaintiff's cathode gold, silver and other base metals in the form of a wedge or button which was then given to Mr Knight for sale to AGE. The plaintiff sues the defendants only for conversion of its gold and not for the silver which is of lesser value but which was also stolen from it. Thus, during the period whilst the plaintiff's gold was in the possession of Mr Gaffney, its form was altered so that it no longer remained gold in pure form. It is the gold in its altered form which the first named defendant converted. The plaintiff contends that the measure of its loss is to be calculated by determining the quantity of pure gold contained within the button or wedge and applying the floor price per gram of pure gold on the day of the conversion. The defendants argue that the measure of damage is the market price for the plaintiff's gold in the form of the button or wedge purchased by AGE.

744. The defendants produced a schedule (Exhibit D13) calculating the plaintiff's loss using the floor price on the day they contended that the conversion occurred, namely on the date when the gold was exchanged by AGE with the refinery for granulated gold.

747. No evidence was tendered as to the value which the refinery placed upon the gold exchanged by AGE for granulated gold from the refinery. Furthermore, the calculations in the table Exhibit D13 are incorrect as the defendants have used the gold price on the date on which AGE exchanged the gold with the refinery which is not, in my view, the date of the conversion. On proper analysis, I could not utilise the schedules produced by agreement of the parties as a correct method of calculating the plaintiff's loss.

750. The principal witness for the plaintiff, Mr Shepherd, gave evidence that there was no market for the gold in the form in which it was sold to AGE and the only market was for the gold contained within it, if such an assertion were correct and the correct measure of damage was the floor price for granulated gold, he acknowledged that the cost associated with the assay and refining of the button or wedge had not been taken into account as part of the plaintiff's claim. I am of the opinion that there was a market for the gold in the form in which it was sold and the plaintiff's measure of damage is not appropriate.

753. The plaintiff in its statement of claim relied upon calculations made by Mr Shepherd (Exhibit P33), which included as the plaintiff's alleged damage, the value of both the gold and silver contained in the wedge or button sold by Mr Knight to AGE. For this reason alone the figures contained in the statement of claim and Exhibit P33 cannot be utilised. Similarly the conversion table (Exhibit P2) summarising each of the conversions and the loss of the plaintiff was also based upon Mr Shepherd's calculations which were not confined to the value of the gold contained in each wedge or button sold to AGE. Furthermore Mr Shepherd's calculations adopted in both Exhibit P2 and Exhibit P33 were based upon the incorrect view that there being no market for the blob the gold was to be valued by simply applying the floor price to the net weight of the gold contained in each wedge or button.

756. During the trial and in submissions, the parties focused on the question of whether there was a gold traders' market in which to value the plaintiff's gold. The evidence established that such a market clearly existed. In those circumstances should the plaintiff be entitled to recover from the defendants the original value of its gold before its transformation by Mr Gaffney or is the plaintiff confined to the value of the gold in the form in which it was converted by the defendants? Apparently the principle which underlies this particular issue has not been the subject of consideration in any reported cases in England or Australia. It may be that the principle is so obvious that it has received scant attention in those textbooks that are concerned with the issue.[2]65 As Ormiston J. found in Furness v Adrium Industries Pty Ltd "it is perhaps easier to state the conclusion which should be reached than find direct authority for it."[2]66

759. The Victorian Full Court in Ley v Lewis[2]67 held that an owner seeking damages for conversion is confined to the value of the property at the date of conversion "unless the party complaining can allege and prove further special damage arising from the wrongful act of which he complains".[2]68 This statement followed an earlier decision of the Full Court in Haddow v The Duke Co (NL).[2]69 In the absence of evidence that the defendants through their conversion of the plaintiff's gold have damaged or otherwise reduced its value, the normal rule appears to require that the goods should be valued in the form in which the defendant converted them.

762. A converter is entitled to credit for such improvements as they have made to the chattel. That this is so because the value of the chattel is to be determined as at the date of conversion.[2]70 In Nash v Barnes,[2]71 Salmond J. expressed the view that an owner is not entitled to the improved value of their goods, but was limited to their value at the date of conversion whether or not the person who had incurred expenditure on the converted goods was the original wrong-doer or some other person claiming under them. Any other rule would have worked injustice as the owner would have made a profit out of the injury inflicted on them. In Greenwood v Bennett,[2]72 the Court of Appeal attached a condition to its order that the defendants should make specific restitution to the owner to the effect that the owner should compensate the defendant for the expenditure which he had honestly and innocently incurred in improving the value of the owner's motor car. Where an owner seeks the return of goods in specie pursuant to a conversion claim, a court will not order the defendant to return the goods in specie unless an allowance is made for compensation for improvements made by an innocent converter.[2]73 Without such a condition the legal owner would obtain an unjust enrichment contrary to equitable principles. Greenwood v Bennett was subsequently followed by Young J. in McKeown v Cavalier Yachts Pty Ltd.[2]74 These cases illustrate that the assessment must be as to the worth of the goods in their condition as at the date of conversion.

765. This is not a case where the owner of goods seeks damages from a defendant who has deprived the owner of part of its unsold stock by an act of conversion. Such a claim could probably have been maintained against Mr Gaffney in which case the damages would have been calculated by reference to the cost of replacing the stock of cathodic gold converted.[2]75 By the date of the defendant's conversion of the plaintiff's goods they were in a different form to that when in the plaintiff's possession.

768. The evidence of both the second named defendant and an expert called by the plaintiff support the existence of a market amongst gold dealers for dump, miner's or alluvial gold in the form in which AGE acquired it. The plaintiff's expert, Mr Alexander, gave evidence of his experience in Western Australia. His testimony supported that of the second named defendant that dealers would offer a substantial discount from the floor price based upon the estimated weight of gold following a scratch test. According to Mr Alexander a discount of 15 per cent and up to 30 per cent would normally be made on gold purchased in this form in Western Australia. The second named defendant's viva voce evidence was that AGE generally paid on average 70 per cent of the gold's volume although the amount paid by AGE to Mr Knight varied both above and below such a percentage discount. The second named defendant also testified that other gold traders in the industry would discount the gold they acquired by up to 50 or 60 per cent depending on the nature of the buyer's trade.

771. The second named defendant testified that a calculation was made by AGE of the purity of the gold of each wedge or button at the time of each purchase including an assessment of risk that the purity of gold inside the wedge or button may not be the same as that on the outer surface. That risk would be increased where there was a variation in the purity of the gold on different parts of the surface of the wedge or button. The higher the risk of a variation in purity within the blob, the lower the rate of payment per gram. I accept that this was the basis upon which AGE calculated the value of the gold in each wedge or button produced by Mr Knight.

774. There was a ready market for precious metals in the form in which AGE acquired them from Mr Knight and I am satisfied that the amount paid per gram for the gold by AGE reflects the market value per gram that could be obtained for such gold in that form in that market.

[1] [1971] 1 Lloyd's Rep 114 at 121.

[2] [1976] 2 LR 444 per Yeldham J., at 453. See also Tettenborn, Andrew (1993) `Damages in Conversion - the exception or the anomaly', Cambridge Law Journal, 52(1), 128 at 138.

[3] [1989] VicRp 57; [1989] VR 617 per Ormiston J., at 638.

[4] Moorgate Mercantile Co Ltd v Twitchings [1977] AC 890 at 903; Thomas Australia Wholesale Vehicle Trading v Marac Finance Australia (1985) 3 NSWLR 452 at 467 and Leonard v Ielasi (1987) 46 SASR 495 at 507.

[5] McKendrick, Professor Ewan (ed.)(2000) Sale of Goods, London, LLP Publishing at 5-023.

[6] See Moorgate Mercantile Co., Thomas Australia and Leonard v Ielasi Endnote 4.

[7] Associated Midland Corp v Sanderson Motors Pty Ltd (1983) 3 NSWLR 395 per Clarke J., at 408.

[8] Pickard v Sears [1837] EngR 195; (1837) 6 Ad&El 469 at 474.

[9] Freeman v Cooke [1848] EngR 687; (1848) 18 LJ Ex 114 per Parke B., at 119; Cornish v Abington [1859] EngR 512; (1859) 4 H&N 549; Wester Moffat Colliery Co v Jeffrey & Co 1911 S.C. 346; Seton Laing & Co v Lafone (1887) 19 QBD 68 at 72.

[10] Sutton, K.T.C. (1995), Sales and consumer law (4th ed.), North Ryde, NSW, LBC Information Services.

[11] See Sutton Endnote 10 at paragraph 15.21.

[12] See Associated Midland Corp Endnote 7 at 408.

[13] See Thomas Australia Endnote 4 at 467 and 469.

[15] See Lickbarrow v Mason Endnote 14 at 63.

[16] See Sutton, Endnote 10 at paragraph 15.22; Guest, A.G. et al (eds.) Benjamin's Sale of Goods (1997) (5th ed.), London, Sweet & Maxwell, at paragraph 7-007; Atiyah, P.S. (1980) The sale of goods (6th ed.) London, Pitman, at 229; Farquharson Brothers Co v King & Co [1902] AC 325 per Lord Lindley, at 342; James v Waring & Gillow Ltd (1926) AC 670 per Lord Sumner, at 693; Wilson and Meeson v Pickering [1946] 1 KB 422 per Lord Greene, at 425.

[18] [1970] UKHL 5; [1971] AC 1004 at 1038.

[19] See Sutton, Endnote 10 at 448; see McKendrick, Endnote 5 at 5-032; see Guest et al (eds.), Benjamin Sale of Goods, Endnote 16 paragraph 7-014; see Atiyah, Endnote 16 at 224.

[20] [1903] 1 Ch 528.

[21] See Bell v Marsh Endnote 20 at 541.

[22] Thompson v Palmer [1933] HCA 61; (1938) 49 CLR 507 at 547 per Dixon J.; Matthews v Doctrieve Corporation Pty Ltd [2003] FCA 459.

[23] Gator Shipping Corp v Trans-Asiatic Oil Ltd [1978] 2 Lloyd's Rep 357 per Kerr J., at 376.

[24] Swan v North British Australasian Co Ltd [1863] EngR 560; (1863) 2 H&C 175 per Blackburn J., at 182; Mercantile Credit Co Ltd v Hamblin [1965] 2 QB 242 per Pearson LJ., at 275.

[25] Mercantile Bank of India Ltd v Central Bank of India [1938] AC 287 at 298; Mercantile Credit Co Ltd v Hamblin see Endnote 24, at 271; Moorgate Mercantile Co see Endnote 4; Gator Shipping Corporation see Endnote 23; Cadogan Finance Ltd v Lavery and Fox [1982] Com LR 248; Associated Midland Corporation see Endnote 7 per Clarke J. at 410; Thomas Australia see Endnote 4 per Glass JA. at 467 and McHugh JA. at 470; Leonard v Ielasi see Endnote 4; Big Rock Pty Ltd v Esanda Finance Corporation Ltd (1992) 10 WAR 259 per Pidgeon J., at 268; International Alpaca Management Pty Ltd v Ensor (1995) 133 ALR 561 per Beaumont and Carr JJ., at 591.

[26] See Big Rock Pty Ltd Endnote 25, at 268-9.

[27] See Leonard v Ielasi Endnote 4 at 507.

[28] See the cases referred to in Guest et al (eds.), Benjamin Sale of Goods, Endnote 16 at paragraph 7-015.

[29] See Thomas Australia, Endnote 4 per McHugh JA at 476.

[30] See Thomas Australia Endnote 4 per McHugh JA at 473; Matthews v Doctrieve Endnote 22 at paragraph 23.

[31] See Thomas Australia Endnote 4, at 469.

[32] Cook v Jenkins [1947] VicLawRp 53; [1947] VLR 369; Chomley v Union Bank of Australia Ltd [1951] SASR 152; Central Newbury Car Auctions Ltd v Unity Finance Ltd [1957] 1 QB 371; SIMU Mutual Assurance Association v Whitwell [1959] NZLR 251; Motor Credits (Hire Finance) Ltd v Pacific Motor Auctions Pty Ltd (1962) 79 WN (NSW) 684; Mercantile Credit Co Ltd v Hamblin see Endnote 24.

[33] Compare Beverley Acceptance Ltd v Oakleigh [1982] RTR 417.

[34] Moorgate Mercantile Co. see Endnote 4, per Lord Wilberforce, at 903; Thomas Australia see Endnote 4 per McHugh JA., at 473; Leonard v Ielasi, see Endnote 4, at 514.

[36] See also Coventry Shepherd & Co v Great Eastern Railway Company [1883] 11 QBD 776; Car v London and North Western Railway Company [1853] EngR 479; [1875] LR 10 CP 307; Seton Laing & Co v Lafone Endnote 9.

[37] See Moorgate Mercantile Co., Endnote 4, per Lord Wilberforce at 903.

[38] Saltoon v Lake [1978] 1 NSWLR 52; see Thomas Australia Endnote 4, Leonard v Ielasi Endnote 4,; Big Rock Pty Ltd Endnote 25; International Alpaca Management Endnote 25.

[40] See Moorgate Mercantile Endnote 4 at 903.

[41] See Moorgate Mercantile Endnote 4 at 904.

[42] See Thomas Australia Endnote 4 at 474.

[43] See Thomas Australia Endnote 4 at 473.

[44] See Leonard v Ielasi Endnote 4 at 515.

[45] See Leonard v Ielasi Endnote 4 at 516-7.

[46] See Leonard v Ielasi Endnote 4 at 517.

[47] Klement v Pencoal Limited & Ors [1999] QSC 90 per Derrington J.

[48] Pacol Limited v Trade Lines Limited (the `Henrik Sif') [1982] 1 Ll R 456, 465; Tradax (Export) v Dorada Compania Naviera SA [1982] 2 Ll R 140 at 157-8 per Bingham J.; see Matthews v Doctrieve Corporation Endnote 22 and Guest, A.G. et al (eds.) Endnote 16 para 7-001.

[49] Dyer v Pearson [1824] EngR 662; (1824) 3 B&C 38; Boyson v Coles [1817] EngR 228; (1817) 6 M&S 14; _Johnson v Credit Lyonnai_s Co (1877-8) 3 CPD 32.

[50] See Moorgate Mercantile Co. Endnote 4 at 925.

[51] See Moorgate Mercantile Co. Endnote 4 at 903.

[52] See Farquharson Brothers Endnote 16 at 325.

[53] Thomas Australia Endnote 4 per McHugh JA at 472.

[54] See Big Rock Pty Ltd Endnote 25 at 266.

[55] See Farquharson Brothers Endnote 16 at 336.

[56] See Mercantile Bank of India Ltd Endnote 25, Central Newbury Car Auctions Ltd v Unity Finance Ltd see Endnote 32 and Eastern Distributors Ltd v Goldring [1957] 2 QB 600.

[57] See Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387.

[58] See Associated Midland Corp Endnote 7 at 413 and Matthews v Doctrieve Endnote 22 at paragraph 23.

[59] See Swan v North British Australasian Co Ltd Endnote 24; Union Credit Bank Ltd v Mersey Docks and Harbour Board [1899] 2 QB 205; Bell v Marsh Endnote 21, per Collins MR., at 542-3 and per Cozens-Hardy LJ., at 545 and Moorgate Mercantile Co. Endnote 4, at 919, 921 and 928.

[60] See Tettenborn Endnote 2 at 128 and 137.

[61] See Stephens v Elwall [1815] EngR 811; (1815) 4 M&S 259, 105 ER 830; Weir v Bell (1878) 3 Ex D 238; Perkins v Smith (1752) 1 WILS 328[1799] EngR 324; , 95 ER 644.

[62] [1958] 2 Lloyd's Rep 596.

[63] [1897] AC 22.

[64] [1921] 2 AC 465.

[65] [1924] P 140.

[66] [1975] QB 180.

[67] See also Edgington v Fitzmaurice (1885) 29 Ch D 459; Weir v Bell Endnote 61; Said v Butt [1920] 3 KB 497; Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd [1924] 1 KB 1; Solloway v McLaughlin (1950) 67 RPC 178; Root Quality Pty Ltd v Root Control Pty Ltd [2000] FCA 980; (2000) 177 ALR 231 at 259.

[68] See Edgington v Fitzmaurice Endnote 67, Weir v Bell Endnote 61; Said v Butt Endnote 67; Solloway v McLaughlin Endnote 67; Reitzman v Grahame-Chapman and Derustit Ltd (1950) 67 RPC 178; Wah Tat Bank Ltd v Chan Cheng Kum [1975] AC 507 and Salomon v A Salomon & Co Endnote 63.

[69] [1985] 1 WLR 317.

[70] See C Evans & Sons Ltd Endnote 69 at 323.

[71] (1941) 41 SR (NSW) 295.

[72] See O'Brien v Dawson Endnote 71 per Jordan CJ., at 307.

[73] [1942] HCA 8; (1942) 66 CLR 18 per Stark J., at 32.

[74] [1979] 1 QB 351.

[75] See International Factors Ltd Endnote 74 at 356.

[76] See International Factors Ltd Endnote 74 per Sir David Cairns, at 356 and per Buckley LJ., at 360.

[78] [1970] VicRp 104; [1970] VR 840 per Newton J. at 846-7.

[79] (1977) 19 NLWLR 219 per Glass JA., at 224.

[80] [1984] FCA 238; (1984) 3 FCR 168 at 181.

[81] [1993] FCA 202; (1993) 42 FCR 206 at 210.

[82] Heydon, J.D. (ed.) (2000) Cross on Evidence, (Australian edition), Butterworths, Sydney Vol. 1, at para 17445.

[83] See R v Birks (1990) 19 NSWLR 677 per Gleeson CJ., at 690-1.

[84] See Dugdale, Anthony (ed.)(1989) Clerk & Linsell on torts (16th ed.) London, Maxwell & Sweet, at paragraph 2-55.

[85] See Morton-Norwich Products Inc v Intercen Ltd [1978] RPC 501 at 515-16; Thompson v Australian Capital Television Pty Ltd [1996] HCA 38; (1996) 186 CLR 574 at 580; Patrick Stevedores Operations (No. 2) v Maritime Union of Australia [1998] HCA 30; (1998) 153 ALR 643 at 657.

[86] See Yuille v B&B Fisheries Endnote 62; Fairline Shipping Corporation Endnote 66; Wah Tat Bank Ltd v Endnote 68; O'Brien v Dawson Endnote 71 and Rutherford v Poole [1953] VicLawRp 23; [1953] VLR 130.

[87] See The Koursk Endnote 65 at 155.

[88] See The Koursk Endnote 65; Brooke v Bool [1928] 2 KB 578; T Oertli AG v EJ Bowman (London) Ltd [1956] RPC 1; MCA Records Inc v Charly Records Ltd [1996] EWJ 1306 (Ch). See generally Ford, H.A.J. (1995) Ford and Austin's principles of corporation Law, Sydney, Butterworths; particularly Chapter 16, `Company's Liability for Civil and Criminal Wrongs', at paragraph 16.080.

[89] [1988] UKHL 15; [1988] AC 1013; [1988] RPC 567.

[90] See CBS Songs Ltd Endnote 89 at 607.

[91] See CBS Songs Ltd Endnote 89 at 608-9.

[92] (1987) 17 FCR 274 at 283.

[93] See W.E.A. International Inc. Endnote 92 at 283.

[94] See W.E.A. International Inc Endnote 92 at 283.

[95] Oakley Inc v Oslu Imports & Exports Pty Ltd [2000] FCA 700 per Finn J. See also Sales, Phillip, (1990) `The tort of conspiracy & civil secondary liability', Cambridge Law Journal 491.

[96] See WEA International Inc. Endnote 92 at 283.

[97] [2000] FCA 1926; (2001) 108 FCR 216.

[98] See Pioneer Electronics Endnote 97 at 233.

[99] G M (North Melbourne) Holdings Pty Ltd v Young Kelly Pty Ltd (1986) 7 IPR 149 at 158.

[100] See Root Quality Endnote 67 (2000) 177 ALR 258.

[102] [1991] 2 Lloyd's Rep 611.

[103] See Ridgeway Maritime Inc Endnote 102 at 624.

[104] See Root Quality Endnote 67, at 264, 266 and 268.

[105] Lumley v Gye (1853) 2 El and Bl 216; [1853] EngR 15; 118 ER 749; Jasperson v Dominion Tobacco Co (1923) AC 709 at 713; James v The Commonwealth [1939] HCA 9; (1939) 62 CLR 339 per Dixon J., at 370.

[106] (1952) 1 ChD 646 per Evershed MR., at 680-1.

[107] [2000] NSWSC 206; (2000) 18 ACLC 285.

[108] [2001] NSWSC 328 per Einstein J., at paragraph 22.

[109] (2001) 189 ALR 266; (2001) 54 IPR 515; [2001] NSWCA 9.

[110] (2002) 18 BCL 57; [2001] NSWSC 886.

[111] See O'Brien v Dawson Endnote 73.

[112] See Idoport Pty Ltd Endnote 108 at paragraph 28.

[113] See Idoport Pty Ltd Endnote 108 per Einstein J., at paragraph 63.

[114] Reynolds, F.M.B. (1996), Bowstead & Reynolds on agency (16th ed.) London: Sweet & Maxwell, at 635.

[115] See Robert Flannigan, (2002) `The Personal Tort Liabilities of Directors', Canadian Bar Review, Vol 81, 247 at 277.

[116] See Said v Butt Endnote 67, at 506.

[117] [2002] QSC 105.

[118] See Multinail Australia Pty Ltd Endnote 117 at paragraph 126.

[119] [1984] RPC 61 at 91.

[120] (1978) 89 DLR (3d) 195.

[121] See Mentmore Manufacturing Endnote 120 at 202.

[122] See Mentmore Manufacturing Endnote 120 at 203.

[123] See Mentmore Manufacturing Endnote 120 at 103.

[124] (1996) 71 FCR 231; (1996) 142 ALR 111; (1996) 36 IPR 225.

[125] See Rainham Chemical Works Ltd Endnote 64 at 476.

[126] See Performimg Rights Society Ltd Endnote 67 at 14.

[127] See Wah Tat Bank Endnote 68 at 514-515.

[128] See C. Evans & Sons Endnote 69 at 329.

[129] See C. Evans & Sons Endnote 69 at 329.

[130] [1990] 1 Qd R 231; (1985) 5 IPR 213.

[131] See Kalamazoo Australia Pty Ltd Endnote 130 (1985) 5 IPR 213 at 241.

[132] (1990) 18 IPR 216.

[133] See Australian Performing Right Association Ltd Endnote 132 at 220.

[134] (1991) 100 ALR 358.

[135] See Martin Engineering Co Endnote 134 at 360.

[136] See Microsoft Corporation Endnote 124 at 244.

[137] (1996) 66 FCR 474.

[138] See King v Milpurrurru Endnote 137 at 480.

[139] See King v Milpurrurru Endnote 137 at 500.

[140] See Multinail Australia Endnote 117 at paragraph 129.

[141] (1999) 46 IPR 339.

[142] See Autocaps (Aust) Pty Ltd Endnote 141 at 356.

[143] See Performing Rights Society Ltd Endnote 67 at 260.

[144] See G M (North Melbourne) Holdings Endnote 99 at 158.

[145] See Tsaprazis Endnote 107 at 288.

[146] (1998) 41 IPR 443.

[147] [1981] 1 NSWLR 491.

[148] See Polaroid Corporation Endnote 147 at 498.

[149] See Pioneer Electronics Endnote 97 at 234.

[150] [1992] 2 NZLR 517.

[151] (2000) 76 SASR 105.

[152] See Root Quality Endnote 67 at 259.

[153] See Root Quality Endnote 67 at 266.

[154] See Root Quality Endnote 67 at 268.

[156] See Oakley Inc Endnote 95 at paragraph 5.

[157] [2001] FCA 1838.

[158] (2000) 49 IPR 578.

[159] See Allen Manufacturing Co Pty Ltd Endnote 157 at paragraph 43. The differences between the two tests are in the circumstances of this case very real.

[160] [2002] FCAFC 157 at paragraphs 160-161.

[161] See Sydneywide Distributors Ltd Endnote 160 at paragraph 161.

[162] (1996) Australian Torts Reports 81-397 (SC/VIC) at 63519.

[163] [1982] 8 FSR 565.

[164] (1985) 8 IPR 250 at 265.

[165] See Private Parking Services (Vic) Pty Ltd Endnote162, paragraph 81, at 397.

[166] See the Canadian cases referred to by Flannigan, see Endnote 115 at 295-8.

[167] See Short v City Bank of Sydney [1912] HCA 54; (1912) 15 CLR 148 at 160; Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473; Northern Territory of Australia v Mengel (1995) 185 CLR 307 at 342; Root Quality Pty Ltd Endnote 67at 264.

[168] National Australia Bank Ltd v Nemur Varity Pty Ltd [2002] VSCA 18; (2002) 4 VR 252 per Batt JA., at 276.

[169] Marfani & Co Ltd v Midland Bank Ltd [1968] 1 WLR 956 per Diplock LJ., at 970-971.

[170] See National Australia Bank Ltd Endnote 168 at 277.

[171] [1996] UKHL 3; [1996] 4 All ER 769 at 790.

[172] See Smith Newcourt Securities Ltd Endnote 171 per Lord Steyn, at 790.

[174] See King v Milpurrurru Endnote 137 at 350.

[175] Borrowdale, Andrew, (1998) `Liability of Directors in Tort - Developments in New Zealand', Journal Business Law, January, 96; Grantham, Ross and Rickett, Charles, (1999), `Directors' `Tortious' Liability: Contract, Tort or Company Law?', Modern Law Review, 62(1) January, 133 at 138; Farrar, Prof. J.H. (1999), `Bypassing the Corporate Veil' Proctor, 19(2) March, 22; Griffin, S, (1999), `Company Directors Personal Liability in Tort 115 LQR 36; Borrowdale, Andrew, (1999), `Directors' Liability in Tort' New Zealand Law Journal, March, 51.

[176] [1998] NLJR 657; [1998] UKHL 17; [1998] 2 All ER 577.

[177] See Trevor Ivory Ltd Endnote 150 at 523.

[178] See Trevor Ivory Ltd Endnote 150 per Cooke P., at 524.

[179] (1874) LR9 ChApp 244; See also Young, Swinburne & FAI General Insurance Co Ltd v Murphy & Allen [1996] 1 VR 279.

[180] See Oakley Inc Endnote 95 at paragraph 35.

[181] Trevor Ivory Ltd Endnote 150 per Cooke P. at 524, per Hardieboys J., at 527 and per McGechan J., at 530.

[182] See Trevor Ivory Ltd Endnote 150 at 530.

[183] [1994] UKHL 5; (1994) 3 All ER 506. See also Burns v Shuttlehurst Ltd [1999] 2 All ER 27.

[184] [1963] UKHL 4; [1964] AC 465.

[185] [1999] EWCA Civ 3028; [2001] 1 All ER (Comm) 1; [2000] 1 Lloyd's Rep 218.

[186] See Standard Chartered Bank Endnote 185 [2000] 1 Lloyd's Rep at 235.

[187] [2000] EWCA 10 October (Case No: QBENI 2000/0064/A2).

[188] See SX Holdings Ltd Endnote 187 at paragraph 25.

[189] [2001] EWHC Ch 163 (24 July, 2001).

[190] See Edgington v Fitzmaurice Endnote 67.

[191] See reference to Noel v Poland Unreported (2001) June 14 per Toulson J at paragraph 40.

[192] See reference to Watts (2000) 116 LQR 525 at paragraph 40.

[193] See Daido Asia Japan Company Ltd Endnote 189 at paragraph 43.

[194] See Root Quality Endnote 67 at 266.

[195] [2001] VSC 241.

[196] See MLC Management Endnote 195 at 241-2.

[197] See Farrar Endnote 175 at 24; Walker, Gordon and Borrowdale, Andrew, (1995), "Directors' Liability in Tort: Recent Developments', Company &Securities Law Journal 13(6) at 400.

[198] [1984] 2 NZLR 548 at 594.

[199] See Morton v Douglas Homes Ltd Endnote 198 at 595.

[200] Peate v Federal Commissioner of Taxation (1964) 111 CLR 443 per Windeyer J.

[201] New World Alliance Pty Ltd. Re: Sycotex Pty Ltd v Baseler [1994] FCA 1117; (1994) 51 FCR 425 per Gummow J., at 445.

[202] [2000] HCA 43; (2000) 201 CLR 603.

[203] See Spies v The Queen Endnote 202 at 637.

[204] [1971] UKHL 1; [1972] AC 153.

[205] See Tesco Supermarkets Endnote 204 per Lord Reid at 170.

[206] National Mercantile Bank v Rymill (1881) 44 LT 767; Fowler v Hollins (1872) LR 7 QB 616 at 630.

[207] (1998) 40 IPR 543 at 579-80.

[208] See for example Briggs v James Hardie & Co Pty Ltd (1989) 16 NSWLR 549 at 567 per Rogers AJA; Hallam v Ryan (1990) 5 NZCLC 66 per Smellie J; at 123; Bray v F. Hoffmann-La Roche Ltd (2002) 190 ALR 1; (2002) ATPR 41-865; [2002] FCA 243; Century Medical Inc v THLD Ltd [1999] NSWSC 731; Cotic v Cuscuna Nominees Pty Ltd [1999] 22 SR (WA) 81; Hadoplane Pty Ltd v Edward Rushton Pty Ltd [1996] 1 Qd R 156; James Hardie & Co Pty Ltd v Putt (1998) 43 NSWLR 554; Linfa Pty Ltd v Citibank Ltd [1995] VicRp 40; [1995] 1 VR 643; Pope v DRP Nominees Pty Ltd (No 2) [2000] 207 LSJS 344; Commissioner of Land Tax v Theosophical Foundation Pty Ltd [1966] 67 SR(NSW) 70 per Herron CJ at 75; Farrar, Prof J. H. (1990), `Fraud_,_ Fairness and Piercing the Corporate Veil', 16 CBLJ 474 at 478; HAJ Ford, RP Austin & IM Ramsay (2001) Ford's Principles of Corporation Law (10th ed.), at para. 4.4.

[209] See for example Finkelstein J. in Root Quality Endnote 67 at 265.

[210] Ramsay & Noakes, (2001) `Piercing the Corporate Veil in Australia' 19 C&SLJ 250.

[211] Mitchell, C. (1999), `Lifting the Corporate Veil in the English Courts; An Empirical Study' 3 CFILR 15.

[212] Thompson, R. (1991) `Piercing the Corporate Veil: An Empirical Study' 76 Cornell Law Review 1036.

[213] Macleod v The Queen [2003] HCA 24.

[214] [1990] 2 AC 418.

[215] [1991] 1 AC 187.

[216] [1924] 2 Ch 33; 24 All ER 294.

[217] See Rainham Chemical Works Ltd Endnote 64 at 475.

[218] See Kuwait Asia Bank Endnote 215 at 221.

[219] See Australian Performing Right Assoc Ltd Endnote 132.

[220] [1997] 1 BCLC 131.

[221] See Natural Life Health Foods Endnote 220 at 152.

[222] See Trevor Ivory Ltd Endnote 150 at 524.

[223] Farrar, Prof. J.H. (1997) _`_Personal Liability of Directors for Corporate Torts', [1997] BondLawRw 6; 9 Bond Law Review 102; see Grantham and Rickett, Endnote 175 at 139.

[224] See Root Quality Endnote 67 at 267 referring comments on Mentmore Manufacturing in Nourse J.'s decision of White Horse Distillers, see Endnote 119 at 92.

[225] Adga Systems International Ltd v Valcon Ltd (1999) 168 DLR (4th) 351; [1998] 39 CCEL 163 at 196.

[226] See with respect to [1999] EWCA Civ 3028; [2000] 1 Lloyds Rep 218 Endnote 185 at 231.

[227] See Grantham and Rickett Endnote 175, at 133.

[228] See Trevor Ivory Endnote 150 per Cooke P at 524; see Mahon v Crockett (1999) 8 NZCLC 262 per Gallen J; see Griffin S., Endnote 175, at 36.

[229] See Natural Life Health Foods Endnote 176 [1998] 2 All ER at 581.

[230] See Macleod v The Queen Endnote 213 at paragraph 28 and 75.

[231] See Macleod v The Queen Endnote 213 per Callinan J. at paragraph 128.

[232] (1995) 37 NSWLR 438.

[233] Section 232(4) of the Corporations Law, now s. 180(1).

[234] See also Permanent Building Society v Wheeler (1994) 11 WAR 187; (1994) 14 ACSR 109.

[235] See Daniels v Anderson Endnote 232 per Clarke and Sheller JJA.

[236] Section 199A(1) Corporations Act 2001.

[237] Section 199A(2) Corporations Act 2001.

[238] Section 241A Corporations Law; now s. 199B.

[239] Barrett v State of South Australia (1994) 63 SASR 208; State of South Australia v Marcus Clarke [1996] SASC 5499; (1996) 66 SASR 199; (1996) 19 ACSR 606; Mid Density Developments Pty Ltd v Rockdale Municipal Council [1993] FCA 408; (1993) 44 FCR 290; (1993) 116 ALR 460 at 468.

[240] Kyrou, Emilios (2000) `Director's Duties Defences Indemnities `CSLJ (November) Vol. 18, 555 at 558_._

[241] Section 365 of the Companies Act 1961, now s. 1318 of the Corporations Law.

[242] See Daniels v Anderson Endnote 232 per Clarke and Sheller JJA.

[243] Section 180(2) Corporations Law.

[244] See with respect to King v Milpurrurru Endnote 137.

[245] See King v Milpurrurru Endnote 137 at 485.

[246] See King v Milpurrurru Endnote 137 per Lee J.

[247] See King v Milpurrurru Endnote 137 per Lee J.

[248] See Briggs v James Hardie & Co Pty Ltd per Rogers AJA. Endnote 208 at 578-9.

[249] Jacob, I.H. (1975) Bullen and Leake and Jacobs' Precedents of Pleadings in the Queen's Bench Division of the High Court of Justice (12th ed), London, Sweet & Maxwell, at 352.

[250] Rogers W.V.H. (1998) Winfield & Jolowicz on tort (15th ed) London, Sweet & Maxwell at 588;

Todd, Stephen (2001) The Laws of Torts in New Zealand (3rd ed) Wellington, Brookers at paragraph 11.3.1.

[251] Moorgate Mercantile Company Ltd v Finch & Read [1962] 1 KB 701; Caxton Publishing Co Ltd v Sutherland Publishing Co Ltd [1939] AC 178.

[252] (1705) 6 Mod 212; 87 ER 964.

[253] See Baldwin v Cole Endnote 252 at 964.

[255] See at Todd, Endnote 250 at 570-571 discussing Marfani & Co. Endnote 169 and Unisys Canada Inc v Imperial Optical Co (1998) 43 CCLT (2d) 286, affirmed (2000) 49 CCLT (2d) 237 (Ont CA).

[256] Fleming, John (1998), The Law of Torts (9th ed.), North Ryde NSW, LBC Information Services at 64.

[257] Martindale v Smith (1841) 1 QB 389; Fine Art Society Ltd v Union Bank of London Ltd (1886) 17 QBD 705 at 712; see Jacob, I.H. Endnote 249 at 353; See Whelan Kartaway Pty Ltd v GLC Weatherburn Pty Ltd [2002] NSWSC 677.

[258] Hillbery v Hatton [1864] EngR 205; (1864) 2 H & C 822.

[259] Consolidated Company v Curtis & Son [1892] 1 QB 495.

[260] McCombie v Davies (1805) 6 E 538; see Fine Arts Society Ltd Endnote 257 at 712; Union Credit Bank Ltd v Mersey Docks and Harbour Board [1899] 2 QB 205.

[261] [1983] 2 All ER 294.

[262] See Whelan Kartaway Pty Ltd v GLC Weatherburn Pty Ltd Endnote 257 per Spalding J. at paragraph 26.

[263] Mercer v Jones [1813] EngR 711; (1813) 3 Camp 477; France v Gaudet and Others (1871) LR V1 QB 199; The Arpad [1934] P 189; Solloway and Another v Mclaughlin [1938] AC 247; see Caxton Publishing Co v Sutherland Publishing Co Endnote 251; see Chubb Cash Ltd v John Crilley & Son (a firm) Endnote 261; Butler v Egg Pulp Marketing Board [1966] HCA 38; (1966) 114 CLR 185; Haines v Bendall [1991] HCA 15; (1991) 172 CLR 60; Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64.

[264] [1996] VicRp 49; [1996] 1 VR 668 per Marks J. at 674-6 and per Ormiston J. at 677-682.

[265] Cf McGregor, Harvey (1997), McGregor on Damages (16th ed.), London, Sweey & Maxwell, paragraphs 1384 and 1396; see Fleming Endnote 256 at 76; see Todd Endnote 250, paragraph 11.3.4; see Dugdale (ed.) Clerk & Lindsell on torts, Endnote 84, at 614; paragraph 14-99; Waddams, S.M. (1991), The Law of Damages (2nd ed.), Toronto, Canadian Law Book Inc, paragraph 1.1740.

[266] See Furness Endnote 264 at 677.

[267] [1952] VicLawRp 19; [1952] VLR 119.

[268] See Ley v Lewis Endnote 267 at 121.

[269] [1892] VicLawRp 31; (1892) 18 VLR 155 per Higginbotham CJ. at 173.

[270] Monroe v Willmott [1949] 1 KB 295; Greenwood v Bennett [1973] QB 195; Highland Leasing v Paul Field [1986] 2 CL 276.

[271] [1922] NZLR 303 at 311.

[272] See Greenwood v Bennett Endnote 270.

[273] Peruvian Guano Co v Dreyfus Bros & Co (1892) AC 166.

[274] (1988) 13 NSWLR 303 at 308.

[275] See Furness v Adriun Endnote 264 per Ormiston J. at 678.