Linfox v Ellul & Ors

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

10540/01 LINFOX TRANSPORT (AUSTRALIA) PTY LIMITED v PHILIP ELLUL & ORS

JUDGMENT 1 HIS HONOUR: Linfox Transport (Australia) Pty Limited sues Philip Ellul, William Cassar and Diana Ellul on a number of bases. The plaintiff is in the transport industry and undertook contractual obligations for Carlton and United Breweries Limited (CUB). Those obligations involved, inter alia, the transporting of supplies of liquor from warehouses leased by CUB at Clyde and at Mascot. The plaintiff had operational responsibilities at those warehouses. The case concerns quantities of liquor which went missing, attracting an obligation in the plaintiff to reimburse CUB for the value of this liquor. 2 The procedure was that CUB products were collected by carriers and transported to the Clyde warehouse and to the Mascot warehouse where they were transferred to the custody of the plaintiff. It checked all the stock in, using a computer system to which CUB and the plaintiff had access. Then the stock was, in due course, transported from the warehouse for distribution elsewhere. The plaintiff did not move all the CUB liquor itself. It emerges from the evidence of Ms Wild, who is employed by the plaintiff as an inventory manager, that the plaintiff directly employs fifty-two drivers but a number of lorry owner drivers were also involved in the transportation. These drivers were engaged under contracts with the plaintiff. 3 It is the plaintiff's case that the losses for which it had to account to CUB were due to theft. 4 The first and the third defendants have been sued upon the basis that it is alleged that they were engaged under a contract to transport goods from the warehouses and it is alleged that they were responsible for the losses. They have been sued in breach of contract, for bailment and conversion and, finally, for breaches of fiduciary duty. I am satisfied that those defendants were transporting liquor for the plaintiff under contract over the period to which the plaintiff's claim relates. 5 The second defendant is also a carrier who, it is alleged, was employed by, or was the agent for, the first and the third defendants, and it is claimed he was involved in the cartage and the losses. 6 The first defendant and the third defendant have been separately represented. The second defendant has appeared in person. It will, of course, be necessary to consider the case against each of these defendants discretely. 7 The first of the witnesses called by the plaintiff was Mr Michael Byrne. He has a managerial position with the plaintiff and at times relevant to this claim he was the general manager of the Freight Forwarding Group. He swore two affidavits, the first on 13 March 2001 and the second on 3 January 2002. He gave some oral evidence, including evidence under cross examination. I accept Mr Byrne as being an honest and a reliable witness and, indeed, his evidence is not really controversial. He gave evidence of the agreement between the plaintiff and CUB concerning the warehouse of CUB stock and its movement from the relevant warehouses at Clyde and Mascot. He gave evidence of the detection of stock losses at the Clyde warehouse. There were substantial trading losses during 1999. Mr Byrne identified three causes of the financial problems that arose: "(a) lack of adherence to process; (b) poor processes; (c) poor management"

(See para 15 of his affidavit sworn 8 January 2002) 8 He introduced changes, including changes of personnel. However, later in 1999 he received information that stock was being stolen and had meetings with an informant about this. These meetings in turn prompted meetings with the New South Wales Police, and he agreed with police officers to have a police undercover agent, "Max", introduced as an employee at Linfox. 9 What followed was an undercover police operation. In consequence of that operation the first defendant and the second defendant were arrested on 2 December 1999. Three days later the first defendant pleaded guilty to three charges of the theft of beer products between 30 November 1999 and 2 December 1999. Those thefts involved beer products to a total value of $9900. 10 The second defendant also pleaded guilty to three charges concerning those same thefts in that same period. 11 The damages which the plaintiff here seeks to recover, apart from exemplary damages, exceed $400,000, so that the relatively modest quantities of liquor the subject of the police charges against the first and the second defendants represent but a very small proportion of the thefts for which the plaintiff here seeks to make the defendants responsible. 12 The second witness called in the plaintiff's case was Mr Mark Carroll, who holds a managerial position with CUB. He swore an affidavit on 5 March 2002 and he also gave oral evidence, including evidence in cross examination. His evidence was uncontroversial and I considered him to be an honest and reliable witness. It is not necessary to review his evidence in any detail. He gave evidence of the warehousing arrangements for CUB's liquor and the plaintiff's involvement in that warehousing and subsequent transportation. He gave evidence of the use of CUB's computer system to record movements of stock and he gave evidence concerning stock losses to the following effect:

(i) the plaintiff accepted liability to CUB for stock losses between May 1997 and May 1999 to the value of $697,000;

(ii) the plaintiff accepted liability for stock losses to the value of $137,305 for June 1999 and paid that amount to CUB;

(iii) for the period July 1999 to December 1999, the plaintiff made further payments to CUB for stock losses in the sum of $259,110. Of that sum, $224,140 was attributed to losses due to theft at Clyde and Mascot. 13 I referred earlier to the evidence of Ms Wild, the third of the witnesses called in the plaintiff's case. Her affidavit, sworn 19 April 2002, has annexed to it a report concerning the misappropriation of liquor stocks at Clyde and Mascot warehouses between January 1997 and June 1999. The affidavit also has exhibited to it a very detailed report which Ms Wild wrote concerning the "misappropriation" of CUB liquor between July 1999 and 21 May 2000. Whilst I was impressed by Ms Wild as being a careful and intelligent witness, I do not propose to refer closely to her evidence, because I do not find that it assists me in determining whether thefts were effected by any of the defendants, other than those which attracted the pleas of guilty to which I have referred. 14 On this critical issue the evidence of the police undercover officer is of central importance. "Max" gave evidence which, in material respects, was not challenged, and I accept the evidence that he gave, supported as it was by the content of conversations recorded pursuant to the authorised use of listening devices. I propose to refer now to salient features of the evidence given by this witness. "Max" attended an arranged meeting with the first defendant at the Wentworthville Leagues Club on 15 November 1999. I shall refer presently to the evidence of Mr Graham Stevens who introduced "Max" to the first defendant at the leagues club. Earlier Mr Stevens had told the first defendant, according to Mr Stevens, that as a checker "Max" had assisted in the theft of a pallet of liquor for the first defendant and had to be paid for his services. "Max" said that following the introduction to the first defendant, the first defendant paid him $200 in cash and then prepared a diagram showing him how pallets of beer could be loaded on the first and the third defendants' truck so as not to be detected by relevant members of the plaintiff's staff. The conversation at the Wentworthville Leagues Club was recorded, and I am satisfied from the transcript, unchallenged as to its accuracy, that in the course of the meeting the first defendant promised to give "Max" $300 per pallet in the theft of which he assisted. If the load on the pallet was cans of beer, the first defendant said he would pay "Max" $400 per pallet. 15 A transcript of this meeting is generally incriminatory of the first defendant but he did say that he hadn't "done anything in there" for the last five months, and I take that to be a statement that he had done no thieving from the plaintiff over that period. The explanation the first defendant gave for this was that in the past he had been assisted by another employee of the plaintiff with whose help he said he had taken "a fair bit" but that person was no longer helping him. The first defendant was asked these questions and gave these answers: "Q. What's the most you've taken out in one go? A. We turn over 25,000 in one week" Q. How many pallets is that? It's got to be 20 at least? A. Yeah, a bit over 20. (See transcript of tape of 15 November 1999, p 23) 16 The first defendant went on to inform "Max" that there was "a chance you can make $1000 - around about $1000 a week" (transcript of same conversation, p 26). 17 On 30 November 1999 "Max" met the second defendant, who I am satisfied was an employee of the first and the third defendants. The second defendant worked as an offsider on the first and the third defendants' truck. "Max" was aware that the first and the second defendants took away one pallet of Victoria Bitter stubbies too many from the plaintiff's premises on that day and "Max" was paid $300 for his assistance in that theft. The theft of this pallet of liquor resulted in one of the three guilty pleas entered by the first defendant and, indeed, by the second defendant to which I made earlier reference. 18 On 1 December 1999 "Max" evidenced a further theft in which both the first and the second defendants were involved. This time a pallet carrying sixty cartons of Crown lager was stolen, and the first defendant paid "Max" $300 for his help. This theft was the subject of the second of the pleas of guilty entered by both defendants to which earlier reference has been made. 19 There was a further conversation recorded on 1 December 1999. The transcript of this conversation became Exhibit H3, and in the course of the conversation recorded the first defendant incriminated himself in much of what he said:

(i) he told "Max" that tomorrow they were going to try to "pull a pallet of cans" and that there would be "400" in it for "Max" (see transcript p 1);

(ii) he told "Max" he would make $1000 per week (pp 1-2);

(iii) the first defendant told "Max" this had been going on for years (p 2);

(iv) then, at p 8, the first defendant nominated a day shift manager who was involved with him;

(v) then, at pp 11-12, the first defendant told "Max" that "with Steve I've done it over twelve months" and that "we were doing…three loads a day in there";

(vi) later, at p 17, the first defendant said "We were knocking off about - oh - between twenty and thirty pallets a week", that is "me and Steve and that other…driver"

(vii) then, at p 18, "Cans out tomorrow so I'll make sure you get $1000 this week"

(viii) at p 26 the first defendant made a very significant admission in the context of telling "Max" about his prior activity with the man named Steve. The first defendant said he had "probably about 150,000…last year". Max then asked "Steve got 150,000 out of last - so you gave 150,000 to Steve last year? How much have you got out of this, you're doin' alright." To that the first defendant responded: "I got about 170". Q. Last year? A. Last year.

And the first defendant went on to promise Max (at p 27): "I'll make sure I get you about 40,000 a year. Because I'm on every two weeks."

(ix) Then, later at p 40 of the transcript, the first defendant told "Max": "We were knocking off about 15…20 and…40 pallets a week." He explained that "we" meant "me and the other bloke". The first defendant explained he had not been doing it for five months because of the cameras (presumably a reference to surveillance cameras), and because his friend Steve was not involved any more. 20 "Max" gave evidence then that on 2 December 1999 the first and the second defendants stole a pallet of Victoria Bitter cans. This theft prompted the third of the charges previously mentioned to which the first defendant and the second defendant entered pleas of guilty. 21 Mr Graham Stevens is employed by the plaintiff as a driver. He has been so employed since March 1995. He swore an affidavit on 14 March 2003 and he gave evidence. According to Mr Stevens he became aware of thefts occurring from 1996 onwards. He named in his affidavit a number of people who were involved in acts of theft from the warehouses at Clyde and Kent Brewery. He named a number of owner drivers as well as drivers employed by the plaintiff. He also named forklift operators, who were presumably employees of the plaintiff, as being involved in the criminal activity. 22 Amongst those implicated by Mr Stevens was the first defendant. Mr Stevens said that the first defendant was involved in the theft of kegs on a number of occasions. There were several short periods during which Mr Stevens drove the first defendant's truck. The last of these periods was in November 1999 when, in response to a request by the first defendant, Mr Stevens took leave from the plaintiff. Shortly before this Mr Stevens said he had been approached by Mr Byrne to see if he could "do something about the thefts". Mr Stevens said that he then contacted the first defendant and it was then that Mr Stevens agreed to drive for the first defendant. 23 Mr Stevens said that he and his wife dined with the first defendant and the third defendant at the Pendle Hill Leagues Club on the night following the making of the arrangement to drive the first defendant's truck. According to Mr Stevens, in the course of the evening the first defendant said (in a conversation referred to in para 35 of his affidavit): "I paid Steve Boyd around $150,000 and he does not want to help me get any more beer out. When he told me I put a pistol in his mouth. Steve Boyd doesn't want to do any more because Steve Burns has come back to security work on the gate and Steve Burns is a mate of Steve Boyd's. I have got Steve Burns' address from Steve Boyd and I am going to kill his children and his wife and burn his house down. Nobody is going to stop me from taking anything. He is standing in my way. You know how much money I have made in the last 12 months? I have paid Steve Boyd $150,000. How much do you think that I have made? I pay Alfie thousands of dollars." 24 Mr Stevens said that the third defendant was present and said "You should not knock any more beer off. You don't need to knock it off anymore." 25 Mr Stevens said that following this meeting, because of his concern for the welfare of Steve Burns, he reported what had been said to Mr Byrne. He then had meetings with police officers, including "Max". He arranged for "Max" to meet the first defendant and was present when the first payment was made by the first defendant to "Max". This accords with the evidence "Max" gave (see para 14 above) 26 During the period of two weeks when Mr Stevens was driving the first defendant's truck, Mr Stevens said there was an incident when a pallet of beer was taken by himself and the second defendant to the Lalor Park bottle shop. There were 113 cartons of beer on the pallet with twenty-four stubbies of beer per carton. All but fourteen cartons of beer were left at the bottle shop and the remaining fourteen cartons were taken to the first defendant's home and unloaded there. 27 Shortly afterwards, when the first defendant returned from leave, Mr Stevens said he went to collect his pay from the first defendant and was paid. His payment included $300 for his part in taking the beer to Lalor Park. That delivery was, of course, the subject of one of the charges subsequently laid against the first defendant and the second defendant, to which each person pleaded guilty. 28 The evidence which Mr Stevens gave was the subject of challenge and I am mindful that there were a number of occasions in the course of his evidence during which Mr Stevens declined to answer questions on the grounds that the answers might incriminate him. However, to the extent that his evidence directly incriminated the first defendant, that evidence has not been challenged by the first defendant. The first defendant did not enter the witness box, although he was present during the first few days of the hearing and, indeed, he returned to the courtroom in the closing stages of the hearing. The evidence that Mr Stevens gave was consistent with the evidence that the undercover officer "Max" gave in many respects, and, to the extent that in the evidence I have reviewed Mr Stevens' evidence incriminated the first defendant, I accept that evidence. Moreover, to the extent that the evidence of Mr Stevens incriminated the second defendant in criminal activity involving the delivery of liquor to the Lalor Park bottle shop and to the first defendant's premises, I accept that evidence. 29 Mr Stevens also gave evidence which, to some extent, incriminated the third defendant. In his affidavit (at para 31), Mr Stevens said that the third defendant helped him in the unloading of beer off the truck at her house when he was driving the first defendant's truck in 1996, 1997 and 1999. However, in cross examination (T 161) Mr Stevens was asked this question and gave this answer: "Q. Mrs Ellul certainly didn't help you unload beer during the four times you drove for Mr Ellul, did she? A. No." 30 Having regard to that answer in cross examination, I do not accept the content of para 31 of his affidavit. 31 Whilst Mr Stevens maintained that the third defendant was present when the first defendant spoke about what he had paid Stephen Boyd on the occasion at Pendle Hill Leagues Club and whilst Mr Stevens maintained, indeed, that the third defendant had spoken the words attributed to her at that meeting, the third defendant denied being present. Her evidence was that she was in Melbourne on the day in question and arrived at the club late. The third defendant denied that she heard what Mr Stevens claimed her husband had said. 32 The evidence given by Mr Stevens attributing to the third defendant knowledge of the first defendant's criminal activity was denied by the third defendant in the course of her evidence. In short, the third defendant denied any involvement in or knowledge of what her husband was doing concerning the theft of liquor from the plaintiff. The third defendant admitted to an awareness of cartons of liquor being in the laundry in the family home. She said she was not aware that it had not been paid for. The third defendant was subjected to testing cross examination but was not shaken in her relevant denials. 33 Faced as I am with a direct conflict between Mr Stevens' evidence implicating the third defendant and the third defendant's denials, I am not persuaded that Mr Stevens' evidence is to be preferred in this area of conflict. The plaintiff's case against the third defendant requires, as does the plaintiff's case against the other defendants, a very careful weighing of the evidence having regard to the serious nature of the allegations contained in it: Briginshaw v Briginshaw (1938) 60 CLR 336. I am not satisfied that the third defendant did know of her husband's criminal activity before the occasion on which the police attended her home following the arrest of her husband in early December 1999 for the purpose of executing a search warrant.

Conclusions as to the involvement of the first and the second defendants in the theft of liquor

The first defendant 34 The evidence satisfies me that the first defendant stole a considerable quantity of liquor for the value of which the plaintiff became liable to reimburse CUB. I refer in particular to the evidence of Max and of Mr Stevens which I have earlier reviewed, together with the evidence of the recorded conversations. What is the extent of the criminal activity which has been proved? 35 On 2 December 1999 the first defendant was interviewed by police and the transcript of that interview forms part of Exhibit N. In that interview the first defendant admitted to having been arrested earlier that day outside premises in Dunhaven Circuit and that there were twenty cartons of VB beer on the back of the truck at the time. He told the police he had given 100 cartons of VB beer to a person inside the premises where he was arrested. He also admitted that he had two stolen boxes of VB stubbies at his home "left over on the truck from yesterday's delivery". Later he said that Max had encouraged him "to take a pallet of VB and/or a pallet of Crownie and I did. I was sucker enough to do it." He said he was not paid for what he took, although he paid Max $300 for the pallet. 36 Much of what the first defendant said in the interview was manifestly false and I do not propose to record further detail of it. What is important is that following his arrest the first defendant pleaded guilty to the charges I referred to earlier and the details of which I now record: "That on the 30th day of November 1999 at Auburn in the State of New South Wales [he] did steal certain property to the value of $3300, to wit, 110 cartons of VB stubbies of beer the property of Linfox Transport Pty Limited. That on the 1st day of December 1999 at Auburn in the State of New south Wales [he] did steal certain property, to the value of $3000, to wit, 60 cartons of Crown Lager beer, the property of Linfox Transport Pty Limited. That on the 2nd day of December 1999 at Auburn in the State of New South Wales [he] did steal certain property to the value of $3600, to wit, 120 cartons of BV canned beer, the property of Linfox Transport Pty Limited." 37 In his defence filed in these proceedings, the first defendant admitted his liability to account for the value of the liquor the subject of the above charges, namely $9900. 38 Then there are the admissions which the first defendant made to Max in the many recorded conversations that I reviewed earlier. The most significant of these admissions in the present context was made in the later conversation recorded on 1 December 1999 (see Exhibit H3) that he "got about 170" last year (see para 19 (viii) above). In context I am satisfied that the first defendant there admitted to stealing $170,000 worth of liquor in the course of the cartage contract. I find that the plaintiff became liable to account to CUB for that liquor. 39 I am satisfied therefore that the first defendant was responsible for stealing from the plaintiff liquor to the value of no less than $179,900. I am also satisfied that the plaintiff became accountable to CUB for the value of that liquor. 40 Mr Moses submitted that I should find that the first defendant participated in stealing liquor to a total value in excess of $179,900. He submitted that the admissions made to Max pointed to his involvement in criminal activity for an extended period, and the evidence of Miss Wild, Mr Byrne and Mr Carroll establishes that much more liquor was stolen from the plaintiff than that which has been the subject of the admissions that the first defendant made to Max. Mr Moses submitted that even though the plaintiff was unable to quantify the precise amount that the first defendant stole, this did not prevent the Court from endeavouring to make some appropriate assessment. 41 Of course Mr Stevens gave evidence as to the first defendant's involvement in stealing several leaking kegs but their value may well have been included in the liquor that the first defendant referred to in his admission that he "got" about $170,000 worth last year. Mr Moses very properly acknowledged this to be so in the course of his submissions. 42 The plaintiff has not proved on the balance of probabilities that the first defendant stole more than $179,900 worth of liquor. It is trite to remark that suspicion is no substitute for proof, however strong that suspicion may be, and the evidence overall in this case satisfies me that dishonest activity at the premises of Linfox was widespread, and that there were other persons not acting in conjunction with the first defendant who were stealing liquor from the plaintiff. 43 Hence I find that the plaintiff is accountable to CUB for liquor stolen by the first defendant to a total value of $179,900.

The second defendant 44 The second defendant ultimately declined to give evidence in these proceedings. Whilst I suspect that his criminal activity was not limited to those quantities of liquor the subject of the charges laid against him, it does not seem to me that the plaintiff has proved any more extensive criminal activity. Indeed, Mr Moses did not seek to argue that he could recover more than $9900 from the second defendant.

The liability of the first defendant 45 As I recorded earlier, the plaintiff has pleaded its case against the first and third defendants in a number of ways:

(See the plaintiff's further amended statement of claim.) 46 The evidence establishes that the first and the third defendants commenced their cartage operation for the plaintiff in 1995, when the plaintiff approved the assignment of an existing contract from a Mr Taylor to the first and the third defendants (see the affidavit of the third defendant sworn 29 September 2003). A fresh contract was entered into on 23 September 1998, and I find it to be probable that the liquor which I have found the first defendant stole was stolen when that later contract was in force. I will state my reasons for that conclusion shortly. 47 However, firstly I refer to two provisions of that contract of 23 September 1998 upon which the plaintiff relies in this action: "7.4 Indemnity for non performance The Contractors must indemnify and keep indemnified Linfox against any claim, loss, damage, legal costs or other expenses whatsoever arising from the failure of the Contractors properly to perform their obligations under this Cartage Contract. 13.3 Responsibility for CUB Products The Contractors are responsible for all CUB Products carried, and will reimburse Linfox for all CUB Products that are not accounted for…" 48 I find that the obligations imposed upon the first and the third defendants to "indemnify" under cl 7.4, and to "reimburse" under cl 13.3, have been enlivened by reason of the stealing of the liquor by the first defendant and that the plaintiff has not been indemnified or reimbursed for the payments it has been obliged to make to CUB. 49 I have concluded that it was the contract made on 23 September 1998 which was in force when the first defendant stole the liquor the subject of the admissions made by him. I have come to that conclusion after reading all that was said in the later conversation on 1 December 1999. At p 11 of the transcript, Exhibit H3, Max asked the first defendant how long had the stealing been going on, to which the first defendant replied: "A. With Steve, I've done it over 12 months. Q. What, 12 months just gone? A. Yeah." 50 It seems to me in context that what was later said and what I have previously recorded in para 19 (viii) is to be treated as referring to the twelve months that had just elapsed. If this conclusion be wrong, then, of course, some of the stealing would have occurred prior to 23 September 1998 and hence would have been during the period that the earlier contract under which the first and third defendants were operating was in force. I note that there was no indemnity provision in that earlier contract but cl 8(v) of the earlier contract was in terms similar to cl 13.3 of the later one. The earlier clause read: "Contract Carriers are responsible for all Product carried, and will reimburse the Principal Contractor for all Product that is not accounted for." 51 If, contrary to the finding I have made, some of the liquor that the first defendant admits to having stolen was stolen before 23 September 1998, then cl 8(v) of the earlier contract was enlivened by the failure to reimburse the plaintiff for the value of that liquor, and any obligation of reimbursement under that clause was an obligation imposed upon both the first defendant and the third defendant. 52 Mr Moses has submitted that there are, in addition to the express terms to which I have referred, implied terms which arise both in the context of the earlier contract and the later one. Those terms have been pleaded in the further amended statement of claim upon which the plaintiff here relies: "8. It was an implied term of the First and Second Contracts that, in the performance of the First and Second Contracts, the First and Third Defendants would not steal or be a party to the stealing of CUB Products. 9. It was an implied term of the First and Second Contract that, in the performance of the First and Second Contracts, the First and Third Defendants would act in good faith and honestly." 53 The principles upon which a term will be implied into a contract otherwise expressed was stated by the Privy Council in BP Refinery (Western Port) Pty Limited v Shire of Hastings (1977) 180 CLR 266 in the following passage (at 282-283): "Their Lordships do not think it necessary to review exhaustively the authorities on the implication of a term in a contract which the parties have not thought fit to express. In their view, for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract." 54 The implication of the terms pleaded in paras 8 and 9 in my opinion satisfies those five conditions. Honesty in behaviour in the discharge of the contractor's responsibilities under the contract of carriage may, in my opinion, readily be implied. Mr Moses referred me to the decision of Einstein J in Biscayne Partners Pty Limited v Valance Corporation Pty Limited [2003] NSWSC 874 in which his Honour undertook a comprehensive review of the authorities governing the implication of terms. In the course of that review his Honour said (in para 134): "…as a general proposition, the current state of the law in New South Wales is that there will usually be implied by law into commercial contracts made between parties at arm's length a term requiring the exercise of good faith in the performance of such contracts." 55 The exercise of good faith necessarily imports the requirement of adherence to a standard of honest behaviour by a contractor in the discharge of his contractual obligations. 56 I find that the terms as pleaded were to be implied into both the earlier and the later contracts of carriage, and plainly, whichever contract was in force at the time any liquor was stolen, there has been a breach of those implied terms by reason of the stealing which occurred. 57 I find for the reasons stated that the obligation to indemnify the plaintiff in the sum of $179,900 arises under cl 7.4 of the later agreement. I also find the obligation under cl 13.3 to reimburse the plaintiff in that amount has been enlivened. Further, I find that there has been a breach of duty of the implied terms pleaded in paras 8 and 9 of the further amended statement of claim. 58 It follows that I conclude that the plaintiff is entitled to recover for the breaches identified the sum of $179,900. I indicate that I would have made a like finding as to the plaintiff's entitlement had the earlier contract been found to be in place when the liquor or any part of it was stolen. 59 The plaintiff is entitled to interest on that sum of $179,900. Counsel are agreed that it would be appropriate to award interest at the rate of ten percent, and I intend to do so as from 2 December 1999. I propose therefore to award interest in the sum of $77,956 (omitting cents). 60 It is unnecessary to consider the plaintiff's claim as advanced on the alternative basis of breach of fiduciary duty. As I understand it, Mr Moses advanced the claim on this alternative basis in recognition of the position that exemplary damages are not recoverable for breach of contract (see Gray v Motor Accidents Commission (1998) 196 CLR 1), and he submitted that such damages are recoverable in an action for breach of fiduciary duty. I must reject that submission and follow the decision of the Court of Appeal to the contrary effect in Harris v Digital Pulse Pty Limited (2003) 56 NSWLR 298. 61 The plaintiff has pleaded its case on a third basis, this time in conversion. The claim is pleaded as conversion in breach of implied terms of the contract of carriage. Mr Little submitted that there was no breach of bailment because the theft had already occurred when a pallet was placed on the first and third defendant's vehicle. He argued that in such circumstances those defendants never held possession of the stolen liquor for the plaintiff. I do not accept that submission. Whoever loaded any pallet subsequently stolen did so pursuant to an arrangement with the first defendant under which such person was to be rewarded by the first defendant, and in placing any pallet on the first and third defendant's truck in contemplation of it being stolen, such person acted as the first defendant's agent. I am satisfied that there was both bailment and conversion. 62 However, the plaintiff can, of course, recover no more on this basis than on the basis of other breaches of contract which I have earlier considered.

The liability of the second defendant 63 I am satisfied that the second defendant was party to wrongfully depriving the plaintiff of liquor for which it was liable to account to CUB, such being the liquor which he pleaded guilty to stealing when he appeared at the Fairfield Local Court on 9 March 2001. I find him to be jointly liable to compensate the plaintiff for the value of that liquor in the sum of $9900.

The liability of the third defendant 64 Although I have found that I am not satisfied that the third defendant knew of her husband's criminal activity before the police attended her home after he was arrested, the third defendant was a party to the contract entered into in September 1998 and, indeed, to the earlier contract. The third defendant shared the obligation to indemnify in cl 7.4 and the obligation to reimburse in cl 13.3 In the events that occurred, the third defendant is liable to the plaintiff with her former husband under those two provisions. For completion I note that had the earlier contract applied, the third defendant would have been liable to the plaintiff with her husband under cl 8(v). 65 There is a further basis for the liability of the third defendant to the plaintiff in the events that have occurred. This arises from the circumstance that the first defendant and the third defendant were, in the discharge of their contractual obligations to the plaintiff, engaged in a partnership activity. 66 Section 10(1) of the Partnership Act provides: "Subject to subsection (2), where by any wrongful act or omission of any partner acting in the ordinary course of the business of the firm, or with the authority of the partner's co-partners, loss or injury is caused to any person not being a partner of the firm, or any penalty is incurred, the firm is liable therefor to the same extent as the partner so acting or omitting to act." 67 Section 12 provides: "Every partner is liable jointly with the partner's co-partners and also severally for everything for which the firm while the partner is a partner therein becomes liable under either of the two last preceding sections." 68 Section 10 is concerned with the liability of partners towards others. As to this, Deane J said in National Commercial Banking Corporation of Australia Limited v Batty (1986) 65 ALR 385 at 410: "Section 10 of the Partnership Act is not, however, concerned with the limits of actual authority as between the partners themselves. It is concerned with the relationship between a non-partner ('any person not being a partner of the firm') and one or more of the partners. It operates to protect the non-partner who sustains loss or injury caused by the wrongful act or omission of a partner in circumstances which satisfy the requirement that the act in question was done by the partner acting in the ordinary course of the business of the partnership. The mere fact that a particular act or omission was wrongful or in fact unauthorized does not preclude it from being within the ordinary course of that business. If it did, the protection of s 10 would be illusory. What is decisive in determining whether the requirement is satisfied, is the capacity in which the errant partner was acting, viewed in the context of his relationship with the person who sustained loss or injury and from the viewpoint of that person, at the time he performed the wrongful act…" 69 Was the first defendant's criminal activity carried out at a time when he was "acting in the ordinary course of the business of the firm" within the meaning of s 10 of the Partnership Act? If so, the liability for what the first defendant did extended to the partnership irrespective of the express contractual provisions which I have earlier considered. 70 Counsel referred me in the course of submissions to a number of authorities which illustrate that often there is a fine line to be drawn between circumstances in which one partner is liable for the acts of another and circumstances in which he is not. In this case, considerable assistance is to be found in the decision in Walker & Ors v European Electronics Pty Limited (1990) 23 NSWLR 1. This case concerned the liability of a firm of accountants for the consequences of the fraudulent misappropriation by one of their number when acting as receiver and manager of a company. The misappropriated money was never paid into any bank account of the firm. In the particular circumstances of that case the firm was held liable for the wrongdoing of its member. 71 In the course of his judgment with which the other members of the court agreed, Gleeson CJ said (at pp 10-11): "To say that the liability declared by s 10 and s 11 is an aspect of the general law of principal and agent is not to say that a member of a firm cannot be acting in the ordinary course of the business of a firm when engaging in activities which, for one reason or another, that person alone amongst the members of the firm can undertake. One such reason might be that he or she holds a particular office or appointment. Another might be that he or she holds some particular qualification. There are many forms of commercial or professional activity which require individual qualifications but which (statutory prohibitions apart) may be carried on by a qualified person as part of a partnership business even though some of the partners are unqualified. Of course, depending upon the circumstances of any particular case, the consideration that a person's activities are related to a particular office, or involve the doing of something which only that person, and not his or her partners, may lawfully do, may be of factual importance: eg, Tendring Hundred Waterworks Co v Jones [1903] 2 Ch 615; Re Bell's Indenture; Bell v Hickley [1980] 1 WLR 1217 at 1230; [1980] 3 All ER 425 at 437; Douglas Reservoirs Water Users Association v Maurer and Garst 398 P 2d 74 (1965); but compare Collins v Jackson (1862) 31 Beav 645; 54 ER 1289 and Shannon v Whiting (1900) 7 ALR 49. However, the essential task remains one of identifying the nature and scope of the business of the firm and relating the wrongful act to the business so identified. There is no reason in principle why three accountants, one of whom is a registered liquidator, another of whom is a registered auditor, and another of whom is a registered tax agent, cannot carry on, in partnership, the businesses of winding up companies, auditing accounts, and preparing income tax returns. There are in practice good reasons why they might agree to do so. The nature and scope of the business of a firm will fall to be determined by reference to the agreement between the partners. In Kirkintilloch (at 156) the Lord President said that the criterion for the application of s 10 of the Partnership Act 1890 (UK) in that case was whether the auditing of accounts was one of the kinds of activities which were in contemplation of the partners when they combined together in partnership. If partners have agreed to carry on a certain kind of business and that business includes acting in a particular manner or capacity then conduct by one of them in pursuance of that agreement will attract the operation of s 10. It is their agreement to go into that kind of business which is the foundation of their joint and several liability." 72 In the present case the third defendant played no part in the transportation of the liquor. This was done by the first defendant, with the assistance of an offsider. The first defendant was a lorry driver, and the third defendant was not. However, this is not determinative of the question as the above dicta of Gleeson CJ make clear. "The essential task" defined by the Chief Justice is to identify "the nature and scope of the business" of the partnership, and to determine the relationship of the wrongful acts to the business as defined, and this is to be determined by reference to the agreement between the partners. I find that the first defendant and the third defendant agreed to carry on the business of transportation of CUB liquor for the plaintiff, and that involved the movement of liquor from the plaintiff's warehouse by lorry, a lorry acquired by the partnership for that very purpose. It seems to me that in his conduct in not delivering liquor thus transported to its proper destination, but to destinations of the first defendant's choosing and for his own reward, the first defendant's wrongdoing attracted the operation of s 10 of the Partnership Act. 73 For the various reasons stated above, the third defendant is liable with the first defendant to pay damages to the plaintiff in the sum I have assessed, together with interest in the sum earlier mentioned. 74 This brings me to the cross claims.

The cross claims against the plaintiff 75 Both the first defendant and the third defendant are seeking to recover what they claim to be their entitlements by reason of the termination by the plaintiff of the cartage contract of 23 September 1998. 76 Following the arrest of the first defendant in early December 1998, a meeting was arranged by the plaintiff and held on 10 December 1999. The first and the third defendants were amongst those who attended, as was Mr Byrne. A delegate from the Transport Workers' Union, Mr Scully, also attended. The purpose of the meeting was to discuss whether, having regard to the result of the police investigations, the contract of carriage with the first and third defendants should be terminated. This topic is dealt with in the affidavit of Mr Byrne of 3 January 2002 and a transcript of the discussion is annexed to that affidavit. 77 Then, on 4 January 2000, the plaintiff wrote to the first and third defendants a letter which became Exhibit A and which reads as follows: "We refer to your meeting with Glenn Scully, Michael Byrne, John Doig and James Dickson on 10 December 1999. On or about 23 September 1998, you entered into a cartage contract (' contract ') with Linfox Transport (Aust.) Pty Limited (' Linfox '). Relevant provisions of the contract include the following: 1. by clause 7.1, you are required to ensure that the cartage services are performed in a careful, skilful, diligent and efficient manner and in accordance with the operating procedures; 2. by clause 7.4, you are obliged to indemnify Linfox against any claim, loss, damage, legal costs or other expenses arising from your failure to properly perform your obligations under the contract; 3. by clause 13.3, you are responsible for all CUB products carried and are required to reimburse Linfox for all such products which are not accounted for; 4. there is a term implied into the contract that, in the performance of the contract, you will not steal or be a party to the stealing of CUB product; 5. there is a term implied into the contract that, in the performance of the contract, you will act in good faith and honestly; 6. by clause 17.1, Linfox is entitled to terminate the contract by giving written notice to you if you commit a serious breach of any of the terms of the contract which is incapable of being remedied to the reasonable satisfaction of Linfox; 7. the relationship between you, CUB and Linfox is such as to impose upon you fiduciary obligations as a bailee of CUB product. Against the background of the above, Linfox has reasonable grounds to believe that you have stolen, been responsible for or been a party to the theft of a substantial quantity of CUB product. It is our understanding that criminal charges have been laid against you. By this letter, Linfox terminates, with immediate effect, the contract. Once the loss and damage which has been suffered by Linfox as a result of your activities has been precisely quantified, proceedings will be commenced against you by Linfox pursuant to clauses 7.4 and 13.3 of the contract (and otherwise)." 78 The first and third defendants contend that the contract having been terminated they are entitled to payments pursuant to cl 18. What that clause provides is as follows: "18.1 Termination Fee On the expiration or early termination of this Cartage Contract pursuant to the provisions of this Cartage Contract, Linfox agrees to pay to the Contractors on the date of termination the following termination fee (' Termination Fee '): (a) if this Cartage Contract is terminated on or before 31 December 1999, the Termination Fee is $265,000; (b) if this Cartage Contract is terminated after 31 December 1999 or expires, the Termination Fee is the sum of $265,000 less the sum of $1,667 for each completed month between 1 January 2000 and the date of termination. For the purposes of this clause, where this Cartage Contract terminates during a month, the date of termination shall be deemed to be the last day of that month; (c) for the avoidance of doubt the Termination Fee payable in accordance with paragraphs (a) and (b) of this clause is as set out in Annexure C. " 79 The other provision in the contract that deals with termination is cl 17. It addresses circumstances in which the contract may be summarily terminated by Linfox and the circumstances in which contractors may exercise a right of summary termination. Clause 17 also provides for circumstances in which the contract may be terminated by notice. Clause 17 reads in full: " 17.1 Summary Termination by Linfox Linfox may terminate this Cartage Contract by giving written notice to the Contractors: a) if the Contractors fail to provide the services of the Nominated Driver for a period of 14 consecutive business days or for an aggregate of 28 business days in any 12 month period (whether consecutive or otherwise) other than on days on which the Nominated Driver is on annual leave, long service leave, sick leave or compassionate leave which is approved by Linfox; b) if the Contractors commit a serious or persistent breach of any of the terms of this Cartage Contract which is incapable of being remedied to the reasonable satisfaction of Linfox; or c) if the Contractors fail to remedy to the reasonable satisfaction of Linfox, a serious or persistent breach of the terms of this Cartage Contract which is, in the opinion of Linfox, capable of being remedied, within 14 days of receiving notice from Linfox of that breach. 17.2 Summary Termination by Linfox Linfox may terminate this Cartage Contract by giving written notice to the Contractors if: a) ( receiver appointed ) a receiver, receiver and manager, administrator, trustee or similar official is appointed over the whole or a substantial part of the assets or undertaking of the any of the Contractors and is not removed within 30 days; b) ( payments suspended ) any of the Contractors suspend payment of his debts generally; c) ( unable to pay ) any of the Contractors is or states that he is unable to pay from his own money his debts when they fall due for payment; d) ( arrangements with creditors ) any of the Contractors enters into or resolves to enter into any arrangement, composition or compromise with, or assignment for the benefit of his creditors or any class of them; e) ( bankruptcy ) a petition for the making of a sequestration order against the estate of any of the Contractors is presented or any of the Contractors presents a petition against himself or a declaration of intention under section 54A of the Bankruptcy Act, 1966. 17.3 Summary Termination by the Contractors The Contractors may terminate this Cartage Contract by giving written notice to Linfox if: a) ( receiver appointed ) a receiver, receiver and manager, administrator, trustee or similar official is appointed over the whole or a substantial part of the assets or undertaking of Linfox and is not removed within 30 days; b) ( payments suspended ) Linfox suspends payment of its debts generally; c) ( unable to pay ) Linfox is insolvent within the meaning of the Corporations Law; d) ( arrangements with creditors ) Linfox enters into or resolves to enter into any arrangement, composition or compromise with, or assignment for the benefit of its creditors or any class of them; e) ( winding up ) an application (other than a vexatious application) or order is made for the winding up or dissolution of, or the appointment of a provisional liquidator to, Linfox, or a resolution is passed or steps are taken to pass a resolution for the winding up or dissolution of Linfox otherwise than for the purpose of an amalgamation or reconstruction which has the prior written consent of the Contractors and, in the case of an application, the application is not withdrawn or dismissed within 30 days; or f) ( administrator ) an administrator is appointed under Division 2 of Part 5.3 of the Corporations Law in respect of Linfox and, except in the case of an appointment by Linfox or its directors, is not withdrawn or removed within 14 days. 17.4 Termination by notice The Contractors may terminate this Cartage Contract by giving not less than 4 weeks written notice to Linfox." 80 It is to be noted that the payment of a termination fee under cl 18.1 leads to a measure of protection from other claims by reason of cl 19: "19.1 No other compensation Other than in accordance with clause 18 Linfox shall not be liable to pay to the Contractors or any other person any amount by way of compensation or damages or otherwise for any loss of profits or any premium or fee paid by the Contractors to any previous carrier in connection with the entry into of this Cartage Contract or any previous cartage contract relating to the delivery of CUB Products or any other loss, damage or injury arising out of the expiration or termination of this Cartage Contract in accordance with its terms. 19.2 Release In consideration of the payment by Linfox of the Termination Fee and the Contractors entering into this Cartage Contract, the Contractors: a) to the fullest extent permitted by law releases absolutely and forever discharges the Linfox Group and the CUB Group from all claims, actions, suits, causes of action, demands, liabilities, damages and costs whatsoever (whether at common law, in equity or under any statute), past, present and future and howsoever arising which the Contractors may have had, may now have or but for this clause may have had at any future time against the Linfox Group or the CUB Group arising out of, either directly or indirectly, the expiration or termination of this Cartage Contract in accordance with its terms; and b) agrees not to bring or commence or seek to enforce any claim, action, suit, cause of action, demand or right or any proceeding whatsoever, in any court, commission, tribunal or body against the Linfox Group or the CUB Group arising out of, either directly or indirectly, the termination of this Cartage Contract in accordance with its terms." 81 In terminating the contract the plaintiff acted under cl 17.1 (b). There can be no question but that it was entitled to do so. In circumstances where the plaintiff was aware that widespread theft of liquor was occurring, the first defendant had made admissions of very significant theft to "Max", of which the plaintiff had become aware, and which evidenced a fundamental disregard by the first defendant of his contractual obligations. 82 The termination fee payable under cl 18.1 becomes payable "on the expiration or early termination" of the contract. This contract had not expired, and, indeed, it was not due to do so until 31 December 2006 (see cl 2). There is no definition of "early termination" in cl 18 but cl 2 addresses the duration of the contract and provides: "This Cartage Contract shall commence or be deemed to have commenced on the Commencement Date and, subject to early termination in accordance with clause 17 , shall remain in force during the period of the Head Contract but in any event not later than 31 December 2006." (Emphasis added) 83 The real issue here is whether the summary termination effected by the plaintiff enlivens the obligation to pay a termination fee under cl 18.1. 84 It is the task of the Court to endeavour to ascertain the intention of the parties from the language they have used, striving at the same time to give the document a commercial and rational operation: see Biscayne Partners (supra); Australian Broadcasting Commission v Australian Performing Right Association (1972) 129 CLR 99, in particular per Gibbs J at 109; and Hide and Skin Trading Pty Limited v Oceanic Meat Traders Limited (1990) 20 NSWLR 310. In this case, Kirby P expressed the position thus at pp 313-314: "Whoever may be the parties to the agreement, it is the fundamental rule, that a court should give the words of a written agreement the natural meaning that they bear. Subject to that rule, in giving meaning to the words of an agreement between commercial parties, courts will endeavour to avoid a construction which makes commercial nonsense or is shown to be commercially inconvenient. This is because courts will infer that commercial parties would not themselves normally agree in such a way." 85 It would indeed be surprising if the parties intended that should the carrier use the opportunities the contract presented to steal from the plaintiff, nevertheless the plaintiff was to make itself liable to pay a termination fee calculated in accordance with cl 18. For reasons stated (at paras 53-56), I have found that the contract between the plaintiff and the first and the third defendants contained the implied terms set out in para 52. Indeed, I do not understand either Mr Tyndall or Mr Little to have contended otherwise. Absence of good faith and dishonesty have been proved by the plaintiff. What I perceive to be serious criminal activity has occurred, warranting the termination of the contract in a summary way. This is not the setting in which the Court would readily conclude that the parties would have agreed on an entitlement to a substantial termination fee payable to the wrongdoer. Such a consequence would deprive the contract of a commercial and rational operation in the events that have occurred. Neither Mr Little nor Mr Tyndall has made any submissions concerning cl 19. 86 In the circumstances, I have concluded that the termination effected by the plaintiff does not attract a liability to pay a termination fee pursuant to cl 18.1. In order to give a commercial and rational operation to the contract it is essential that account be taken of the underlying obligations upon the carrier not to steal, and to act in good faith and honestly. Section 18.1 is to be read as subject to the discharge of those obligations by the carrier. That the carrier has breached those obligations and that those breaches ground the summary termination effected by the carrier would seem to me to take this case outside the circumstances contemplated by cl 18.1 as attracting entitlement to a termination fee. Hence, I conclude that the claims brought by the first defendant and the third defendant for a termination fee fail. 87 In the cross claims, a claim is also made for a "non competition fee". 88 This claim is prompted by the wording of cl 18.2: "On the expiration or early termination of this Cartage Contract pursuant to the provisions of this Cartage Contract, Linfox agrees to pay to the Contractors on the date of termination the further sum of $5000 ('non competition fee')." 89 It seems to me that this claim must fail for the same reasons that I have concluded that the claim for the termination fee ought not to succeed. 90 Each of the cross claims brought against the plaintiff fails.

The cross claim by the third defendant against the first defendant 91 Three claims have been pleaded as arising from the partnership relationship between the first defendant and the third defendant. Before considering those claims, I will refer to the evidence concerning the partnership. That evidence is extremely meagre. Of course, the cartage contract evidences the provisions of the first and the third defendants' contract with the plaintiff, but it does not appear that there was any written agreement defining the terms of the partnership relationship between the third defendant and her former husband. 92 The evidence of Mrs Ellul was that the partnership income from the cartage contract with the plaintiff went into a joint account with the ANZ Bank, described as the joint account of Philip and Diana Ellul. Other sources of income deposited to that account comprised rental from an investment property and income from a home cladding business. According to Mrs Ellul (T 188), sometimes that home cladding work was conducted through the partnership, and sometimes by her husband through "AP Home Improvements Pty Limited". 93 The evidence is very unclear as to how the partnership income was to be shared. According to Mrs Ellul (para 8 of her affidavit sworn 29 September 2003), she provided fifty percent of the security by way of her interest in the then matrimonial home in order to obtain the necessary finance for the cartage contract, and that would tend to support a conclusion that she and her then husband were equal partners. However, the partnership tax returns for the years ended 30 June 1997 and 30 June 1998 (the only partnership returns in evidence, as part of Exhibit M) indicate that the income distribution in those years was of the order of ninety percent to the first defendant and ten percent to the third defendant. 94 Mrs Ellul gave evidence (T 208) that her marriage to the first defendant was dissolved by the Family Court by order made on 13 March 2002, and that the partnership was dissolved "approximately the year before", in "2000 or 2001". 95 The first of the three claims pleaded in the cross claim by the third defendant against the first defendant is a claim for a "fifty percent share of the operating profit of the partnership (with the plaintiff) for the period 2 December 1999 to 31 December 2006". 96 No attempt was made to develop that claim. Doubtless, Mr Tyndall recognized there was no evidence upon which a conclusion could be reached as to what operating profit (if any) the cartage partnership may have earned had the contract run its course to 31 December 2006. 97 The second claim, which Mr Tyndall did pursue, was a claim for "fifty percent of the termination fee and non competition fee payable pursuant to cl 18.1 and 18.2 respectively" (see para 37 of the amended third and fourth cross claim). 98 I have determined that no termination fee or non competition fee became payable by the plaintiff in the circumstances in which the plaintiff summarily terminated the contract it had with the first and the third defendants. 99 Nevertheless, the third defendant pursues a claim (as expressed in para 47 of the amended third and fourth cross claim) for fifty percent of the fees provided for in cl 18.1 and 18.2 of the cartage contract so as to recover "what [the third defendant] would have otherwise received had the larceny not taken place and the termination had been effected in another way" (see Mr Tyndall's submissions at T 321.25). 100 I do not consider that claim is maintainable. Had the contract not been terminated by the plaintiff in the circumstances in which it was, it cannot be assumed that the contract would otherwise have been terminated at a time at which or in circumstances in which any termination fee would have become payable. The third defendant has failed to prove any lost entitlement to fees under cl 18. 101 Finally, the third defendant claims to be entitled to be indemnified by the first defendant in respect of any liability incurred by her to the plaintiff. 102 Whilst I have determined that the third defendant is liable with the first defendant to pay damages and interest to the plaintiff, I do not find that the third defendant was actively involved in the stealing of the liquor. 103 When I was earlier considering the conflict of evidence between Mr Stevens and the third defendant, I was not persuaded that the evidence of Mr Stevens was to be preferred to the evidence of the third defendant. However, on this cross claim, where the third defendant bears the onus of proof, there is the added consideration that the third defendant's evidence that she was unaware of her former husband's criminal activity before the arrival of the police at her home has not been challenged by the first defendant. He gave no evidence. Hence, for the purposes of the cross claim, I accept the evidence that the third defendant gave that she was not involved in, or aware of, the criminal activity of the first defendant. 104 I consider it to be well settled that a partner who commits an act of wilful dishonesty, without the knowledge or approval of his partners, is liable to indemnify his partner for the consequences. I do not understand Mr Little to contend to the contrary. The following statement of principle in Lindley & Banks on Partnership, 18th ed. at 20-13 is in point: "…where one partner, without the authority of his co-partners, wilfully commits an illegal act, he will be required to indemnify them against the consequences": see Campbell v Campbell (1839-40) 7 Clark & Finnelly's Reports 166. 105 I have found the third defendant liable with the first defendant to the plaintiff, and that liability is joint and several: s 12 of the Partnership Act. If the plaintiff executes its judgment against the third defendant, then the third defendant would be entitled to be indemnified by the first defendant for money thus recovered by the plaintiff. If the plaintiff first seeks and obtains satisfaction of the judgment from the first defendant, the first defendant would not be entitled to any recovery from the third defendant having regard to the findings I have made. 106 In her pleading, the third defendant has not expressed her claim for relief other than in terms of seeking "an indemnity from [the first defendant] in respect of any award made in favour of [the plaintiff] as against [the third defendant]." No declaration has been sought, and, as yet of course, no payment has been made by the third defendant to the plaintiff. In the circumstances, I propose to publish these findings and reasons on the third defendant's cross claim and to invite the parties to this cross claim to agree upon appropriate short minutes of orders. The matter will be relisted on a date to be arranged with my associate, either to make orders pursuant to such minutes or, in the absence of agreement, to hear the submissions as to orders then sought by the third defendant.

Formal orders 107 1. Verdict and judgment for the plaintiff against the first and third defendants, in the sum of $257,856, inclusive of interest.

2. Verdict and judgment for the plaintiff against the second defendant, in the sum of $9900.

Verdict and judgment for the plaintiff on each of the cross claims brought against it by the first defendant and the third defendant.

On the cross claim by the third defendant against the first defendant, I publish my findings and the reasons for them, and invite the parties to this cross claim to agree upon appropriate short minutes of orders. The matter will be relisted on a date to be arranged with my associate either to make orders pursuant to such minutes or, in the absence of agreement, to hear submissions as to orders then sought by the third defendant.

At the request of the parties, costs are reserved, and the matter may be relisted on a date to be arranged with my associate, either to make orders pursuant to short minutes then consented to, or, in the absence of agreement, to hear submissions as to appropriate orders as to costs. **********

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