Perpetual Trustees Australia Ltd v Heperu Pty Ltd [2009] NSWCA 84

Court of Appeal (NSW)|2009-04-23|Before: Allsop P, Campbell JA, Palmer J

Australian Securities and Investments Commission Act 1989 (Cth)

Associated Midland Corporation Ltd v Bank of New South Wales [1983] 1 NSWLR 533

Associated Midland Corporation Ltd v Bank of New South Wales (1984) 51 ALR 641

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Bristol and West of England Bank v Midland Railway Company [1891] 2 QB 653

Citibank NA v Brown Shipley & Co Ltd; Midland Bank plc v Brown Shipley & Co Ltd [1991] 2 All ER 690

Citibank v Papandony [2002] NSWCA 375

Clutton v Attenborough & Son [1987] AC 90

David Securities Pty Limited v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353

Dextra Bank and Trust Co Ltd v Bank of Jamaica [2001] UKPC 50; [2002] 1 All ER (Comm) 193

Evans v European Bank Limited [2004] NSWCA 82; 61 NSWLR 75

Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; 230 CLR 89

Hasan v Willson [1977] Lloyd's Rep 431

Hunter BNZ Finance Ltd v CG Maloney Pty Ltd (1988) 18 NSWLR 420

Hunter BNZ Finance Ltd v Australia and New Zealand Banking Group Ltd [1990] VicRp 4; [1990] VR 41

Janssen Gilag Pty Limited v Pfizer Pty Limited [1992] FCA 437; (1992) 37 FCR 526

Jones v Commerzbank AG [2005] EWCA Civ 1663

Leigh and Sillavan Ltd v Aliakmon Shipping Co Ltd ('The Aliakmon') [1985] UKHL 10; [1986] AC 785

London Joint Stock Bank Ltd v British Amsterdam Maritime Agency Ltd (1910) 16 Com Cas 103

MBF Australia Ltd v Malouf [2008] NSWCA 214

Lipkin Gorman v Karpnale Ltd [1988] UKHL 12; [1991] 2 AC 548

London Joint Stock Bank v Simmons [1892] AC 201

Lloyd's Bank Limited v The Chartered Bank of India, Australia and China [1929] 1 KB 40

Margarine Union G.m.b.H. v Cambay Prince Steamship Co (The 'Wear Breeze') [1969] 1 QB 219

Morison v London County and Westminster Bank Limited [1914] 3 KB 356

NIML Ltd v MAN Financial Australia Ltd [2006] VSCA 128; 15 VR 156

Orix Australia Corporation Ltd v M Wright Hotel Refrigeration [2000] SASC 57; 155 FLR 267

Panton v Bailey [2004] NSWCA 12

Papandony v Citibank [2002] NSWSC 388

Pavey and Matthews Pty Limited v Paul [1987] HCA 5; (1987) 162 CLR 221

Perel v Australian Bank of Commerce [1923] NSWStRp 61; (1924) 24 SR (NSW) 62

Precision Products (NSW) Pty Ltd v Hawkesbury City Council [2008] NSWCA 278

Port of Brisbane Corporation v ANZ Securities Limited [2002] QCA 158

RE Jones Ltd v Waring & Gillow [1926] AC 670

Raphael v The Bank of England [1855] EngR 744; (1855) 17 CB 161; 139 ER 1030

Royal Brunei Airlines Sdn Bhd v Tan [1995] UKPC 4; [1995] 2 AC 378

Rural Municipality of Storthoaks v Mobil Oil Canada Ltd (1975) 55 DLR (3d)

Sanwa Australia Finance Ltd v Finchill Pty Ltd [2001] NSWCA 466

Scottish Equitable plc v Derby [2001] EWCA Civ 369; [2001] 3 All ER 818

Smith v Prosser [1907] 2 KB 735

State Bank of New South Wales v Swiss Bank Corporation (1995) 39 NSWLR 350

Talbot v Van Boris [1911] 1 KB 854

Tasmanian Primary Distributors Pty Ltd (in liq) v RC and MB Steinhardt Pty Ltd [1994] TASSC 20; (1994) 13 ACSR 92

Tatam v Haslar (1889) 23 QBD 345

The Great Western Railway Company v The London and County Banking Company Limited [1901] AC 414

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F Reynolds, Bowstead and Reynolds on Agency, (18th ed) (2006)

K Mason and J Carter, Restitution Law in Australia (2nd ed) (2008)

2. The orders 5, 6 and 7 made by the Court below on 12 February 2008 against the fifth defendant be set aside and in lieu thereof:

a) there be judgment for the fifth defendant against the plaintiffs; and

b) the plaintiffs to pay the fifth defendant's costs.

3. The respondents to pay the appellant's costs of the appeal.

4. The respondents to have certificates under the Suitors' Fund Act 1951 (NSW), if qualified.

PERPETUAL TRUSTEES AUSTRALIA LTD v HEPERU PTY LTD

Between August 2001 and November 2003 an agent of the respondents (Mr C) practised a fraud on the respondents involving the drawing and purchasing of cheques by the respondents, their delivery to Mr C for investment on the respondents' behalf and the use by Mr C of the cheques for his own purposes. The appellant was a trustee company managing a common fund into which the cheques were deposited by Mr C. The appellant was entirely innocent of the fraud.

The primary judge found that title to the cheques did not pass to the appellant and that the appellant had converted the cheques and was liable in damages to the respondents.

i) whether the appellant was liable for the conversion of the cheques;

ii) whether the appellant was liable in restitution;

iii) whether the appellant was liable in negligence;

iv) whether the appellant engaged in misleading or deceptive conduct for which it was liable.

i) The custody of the cheques by Mr C in the circumstances and the form of the cheques gave him authority to deal with the cheques by delivering them to the payee intended by the drawers/true owners to receive them, in this case the appellant: [55].

Title to the cheques passed to the appellant on their taking of possession of the cheques:

a. Mr C had apparent authority to deliver the cheques to pass title: [59];

b. the circumscribing condition attaching to Mr C's delivery of the cheques to the appellant did not have to be complied with for title to pass: [65];

c. the respondents intended the appellant to take title to the cheques: [66];

d. there was no requirement of a pre-existing contractual relationship between true owner and payee other than that of the drawing and endorsement of the cheque for title to pass: [69].

There was no conversion of the cheques by the appellant, Mr C having apparent authority to pass title to cheques to the appellant who gave value, took bona fide and without notice: [50], [80], [93], [98].

ii) The respondents could not succeed in restitution as there was no unjust enrichment, the appellant having changed its position in full on the faith of the receipt: [50], [131], [133], [140]

iii) The claim based on negligence failed because, in the circumstances, there was no duty of care owed by a trustee company managing a common fund to avoid economic loss to potential investors in the fund who suffer from the dishonesty of their agents: [50], [143], [147]-[150].

iv) The claim based on misleading and deceptive conduct failed because there was no relevant misrepresentation and no relevant reliance: [50], [156]-[159].

PERPETUAL TRUSTEES AUSTRALIA LTD v HEPERU PTY LTD

1 ALLSOP P and HANDLEY AJA: This is an appeal from orders of a judge of the Court (Palmer J) that judgment be entered against the appellant in favour of the respondents for damages based on the conversion of six cheques. (See Heperu Pty Ltd v Morgan Brooks Pty Ltd (No 2) [2007] NSWSC 1438.)

2 Between August 2001 and November 2003, Mr Dominic Cincotta practised a fraud upon the respondents which involved the drawing and purchasing of cheques by the respondents. The appellant was entirely innocent of the fraud, but was found by the primary judge to have converted the cheques in question and thus to be liable to the respondents in damages.

3 The four respondents are Heperu Pty Limited ("Heperu"), the first respondent (and first plaintiff below), Kirisi Holdings Pty Limited ("Kirisi"), the second respondent (and second plaintiff below) and Drummoyne Administrative Services Pty Limited ("DAS"), the fourth respondent (and fourth plaintiff below) all being controlled by Dr Barry Landa, the third respondent (and third plaintiff below).

4 During the above period, Dr Landa paid over $4 million to Mr Cincotta for investment on his behalf. Mr Cincotta misapplied the moneys. Approximately $1 million has been recovered. Mr Cincotta is bankrupt. Dr Landa and his companies sought to recover their losses by suing a number of people. They took proceedings in the Equity Division against:

(a) Morgan Brooks Pty Limited ("Morgan Brooks") (as first defendant) being a mortgage originator or broker from and for which Mr Cincotta held a franchise;

(c) a company, ACN 067 567 702 Pty Limited ("ACN 067") (as third defendant) being a creature of Mr Cincotta;

(d) Patrice Cincotta, Mr Cincotta's then wife who was referred to by the primary judge by her current name of Belle (as fourth defendant);

(e) the appellant, Perpetual Trustees Australia Ltd ("Perpetual") (as fifth defendant);

(g) National Australia Bank Limited (as seventh defendant); and

(h) Westpac Banking Corporation Limited (as eighth defendant).

5 The claims against the sixth, seventh and eighth defendants were settled. The primary judge found in favour of the plaintiffs against Morgan Brooks and the appellant, but dismissed the claim against Ms Belle. It should also be noted that Ms Belle was also found to be entirely innocent and in no way a party to her husband's fraud. An appeal against the primary judge's dismissal of the claim against Ms Belle is also before the Court. It has been listed separately because the parties failed to bring to the attention of the Registrar the fact that the two appeals were related. The delivery of judgment in this appeal has been delayed so that the related appeal could be heard by the same bench in order to avoid the risk of any inconsistency in approach. The argument in that appeal having been heard, it is now appropriate to deliver these reasons, no inconsistency being likely.

6 This appeal only concerns the found liability of the appellant, Perpetual. Nevertheless, it is important to understand the claim against Morgan Brooks in order to understand and resolve the dispute about the appellant's asserted liability to the respondents.

7 Morgan Brooks carried on business as a mortgage originator and mortgage manager, finding non-bank lenders for people wishing to borrow on the security of a mortgage.

8 In 1994, Morgan Brooks entered into a written agreement with Mr Cincotta and his then wife, under which Mr and Mrs Cincotta were appointed as the "Coffs Harbour Agent" of Morgan Brooks.

9 In 1995, Morgan Brooks entered into an agreement with ACN 067, to which Mr Cincotta, Mrs Cincotta and another officer of ACN 067 were parties and pursuant to which ACN 067 was appointed as the "Double Bay Agent" of Morgan Brooks.

10 The primary judge concluded that these agreements were not wide enough in their terms to encompass the conduct of Mr Cincotta and ACN 067 of which complaint was made by Dr Landa and his companies. Therefore, his Honour concluded that there was no actual authority (express or implied) in Mr Cincotta or ACN 067 to act on behalf of Morgan Brooks in the way that they did, and as we shall describe.

11 Nevertheless, the primary judge concluded that a contract was formed between Morgan Brooks and Dr Landa and his companies because Morgan Brooks held out Mr Cincotta as having apparent authority on its behalf to enter into the contract for the investment of funds represented by Mr Cincotta to be available and because Dr Landa relied on that holding out in deciding to enter into the contract with an entity he believed to be Morgan Brooks. No appeal was brought by Morgan Brooks.

12 It is now necessary to return to the events in question. These events are set out in somewhat more detail than the primary judge's findings. There is little dispute about the primary facts, though an important factual dispute must be resolved as to the proper conclusion and characterisation of the primary facts.

13 The primary judge found at [25] of his reasons that in about June 2001, Dr Landa met Mr Cincotta and his wife at a social occasion, being introduced by Dr Landa's sister-in-law and her brother who told Dr Landa that they had invested money at call with Perpetual through Morgan Brooks. Dr Landa's evidence was that Mr Cincotta said to him:

"I'll invest it for you at Perpetual as I am doing with Anna and Clara's [sic]. The investment would be 8% plus 1,000 shares per million dollars invested. That would equate to about 12% per annum."

14 There was an evident lack of precision in this conversation. Some clarity was brought to the arrangement after Dr Landa began to invest under it. Various documentation was issued by Mr Cincotta under the logo of Morgan Brooks. The first was styled a "statement of account" which identified Morgan Brooks as the "Account Manager", Interstar Securities (Australia) Pty Limited as the "Fund Manager" and Perpetual Trustees Victoria Limited ("Perpetual Victoria") as the "Credit Provider". The account was in Dr Landa's name. These statements identified a balance of moneys borrowed by Dr Landa from Perpetual Victoria, a debiting of interest on these loans and a crediting of regular payments from the investment of the borrowed funds roughly equivalent to the interest amounts.

15 The second type of document was a "direct debit confirmation" under the letter head:

The address and details of Mr Cincotta's Double Bay office of ACN 067 were given, as well as a list of licensed offices, impliedly, of Morgan Brooks. The document identified a loan number, the security, the loan amount, the interest rate and the account of Dr Landa from which interest on the loans would be deducted.

16 The third type of document, issued under the same letterhead and with the same details of licensed offices as the second type, was a letter issued from time to time to Dr Landa or Heperu or Kirisi which referred to "your mortgage offset account" and then set out details under the following headings: "Property at" (these were the real property securities for the borrowings from Perpetual Victoria), "Credits" (these were the sums invested), "Interest Rate" (this was 8%, being the return Mr Cincotta had said Dr Landa would receive), "Interest Frequency" (being monthly), and various headings against which Dr Landa's bank details were identified into which the monthly interest from the investments would be credited.

17 The fourth type of document, issued under the same letterhead and with the same details of licensed offices as the second type, was a "statement of account" of Heperu and Kirisi. In this document, the account was described as "Mortgage Offset - Perpetual Trustees Ltd". The interest rate was stated as 8% per annum. Credits of interest (that is in favour of Heperu or Kirisi) were recorded. "Offsets" were recorded in sums representing payments to a bank account of Dr Landa.

18 Dr Landa did not receive, nor did he ask for, any document from Perpetual stating that he had any account at Perpetual in his name. All the above documentation was issued under the logo and letterhead of "Morgan Brooks" by Mr Cincotta and ACN 067.

19 Dr Landa was asked about the arrangement, both in evidence in chief and in cross-examination. In chief, Dr Landa said that when he gave a cheque to Mr Cincotta, he said words to the effect "I expect these funds to be invested in the name of the drawer of the cheque". He said that Mr Cincotta replied "This won't be a problem".

20 In cross-examination, Dr Landa commented that he did not seek any documentation from Perpetual because "it was for Mr Cincotta to look after" such matters. He agreed with the following propositions which were significant qualifications to what he said to Mr Cincotta about each cheque quoted above:

(a) that he did not have any expectation that Mr Cincotta would necessarily open an account in the name of the relevant (paying) plaintiff;

(b) that he was leaving it to Mr Cincotta to do what he thought necessary; and

(c) that he understood that if the account that Mr Cincotta had with Perpetual in fact enjoyed a higher interest rate than 8%, Mr Cincotta need only account to him for 8%, that is, Mr Cincotta could keep any excess.

21 Though the above propositions were expressed in evidence as the subjective understanding of Dr Landa, they can be taken to inform the context, and reveal the effect, of his discussions with Mr Cincotta.

22 Sometimes, funds provided by Dr Landa were transferred directly into a bank account of Morgan Brooks by either cheque or electronic transfer. At other times, Dr Landa handed cheques to Mr Cincotta with instructions to the effect set out above that the cheques were to be given to Perpetual for investment.

23 The Further Amended Statement of Claim ("FASC") described the arrangement, what happened under it and the plaintiffs' complaints against Morgan Brooks in paras 8, 11, 13 and 14. By para 8 it was alleged that in about August 2001, the first to fourth plaintiffs and Morgan Brooks entered into a contract pursuant to which the plaintiffs agreed to invest money with Mr Cincotta and/or ACN 067 acting on behalf of, or purportedly on behalf of, Morgan Brooks for the purpose of investing those moneys with Perpetual on behalf of the plaintiffs. It was alleged that Morgan Brooks agreed to repay the principal sum or sums together with interest at 8% per annum and that it would cause shares in Perpetual to be allotted or transferred to the plaintiffs at a rate of 1,000 shares per $1 million for each year invested and that it would cause the principal sum or sums to be invested with Perpetual on behalf of the plaintiffs. The formation of the contract was particularised by reference to conversations between Dr Landa and Mr Cincotta and various of the documents to which we have made reference.

24 The identification of the nature of the contractual arrangement in para 8 of the FASC is notable for two elements: first, the investment was "with" Mr Cincotta and/or ACN 067 on behalf of Morgan Brooks and Morgan Brooks was obliged to repay principal and interest, thereby creating, it would appear, a form of debtor/creditor relationship; and, secondly, the investment's purpose was the "investing" of moneys with Perpetual on behalf of the plaintiffs. Thus, by the asserted contract, Morgan Brooks was obliged to repay sums "invested with" Mr Cincotta acting on its behalf, and such sums were to be "invested with" Perpetual. As to the first element, it should be noted, however, that para 11 of the FASC alleged that funds had been invested "with the first defendant", that is Morgan Brooks.

25 Paragraph 13 of the FASC recited the instruction from the plaintiffs to Morgan Brooks to "repay the funds invested with the first defendant [Morgan Brooks]".

26 Paragraph 14 of the FASC asserted the breach of contract by Morgan Brooks by the failure "to repay the amounts invested by the plaintiffs with it", together with interest and the allocation of the Perpetual shares.

27 The contract found by the primary judge to have been made between Morgan Brooks and the plaintiffs was one entered into by them "via the agency of Mr Cincotta or ACN 067" under which they agreed to invest money with Morgan Brooks for the purpose of Morgan Brooks investing the money with Perpetual on the plaintiffs' behalf, with Morgan Brooks agreeing to repay the sums with interest at 8%, and causing Perpetual shares to be transferred: see the primary judge's reasons at [14] and [85]. This can be taken as a finding of the contract pleaded in paras 8, 11, 13 and 14 of the FASC.

28 The case against the appellant concerned six cheques given to Mr Cincotta by Dr Landa. Three of the cheques were personal cheques, as follows:

(a) $351,000, dated 23 August 2001, signed by Dr Landa on behalf of Heperu;

(b) $502,070, dated 28 November 2001, signed by Dr Landa on behalf of Heperu.

(Both these cheques were drawn on Heperu's account with Westpac, payable "Perpetual Trustees or bearer" crossed with two transverse enclosing the word "bank".)

(c) $250,000, dated 9 August 2002, signed by Dr Landa on behalf of DAS.

(This cheque was drawn on DAS' account with Westpac, payable "Perpetual Trustees or bearer" and was crossed in the same manner as the first two cheques.)

29 After two of the three personal cheques were received by Perpetual, a further crossing was put on them by stamp, "not negotiable a/c payee only".

30 The other three cheques were Westpac bank cheques, as follows:

(Each of these cheques was payable to "Perpetual Trustees Australia Limited or bearer". Each was crossed "not negotiable" between two transverse lines.)

31 Mr Cincotta was given the six cheques by Dr Landa. Mr Cincotta took them to Perpetual, as instructed. At Perpetual, Mr Cincotta controlled an account that had been opened in 1995, which was in his wife's name. Mr Cincotta had apparently forged Mrs Cincotta's signature in opening this account as to the authority to operate the account. No particular importance is to be placed on the nature of this forgery in the reliability of the primary judge's conclusion that it took place. It was an account called a "cash management fund", which paid interest at call, with variable market daily rates. No investment product was offered by Perpetual with the characteristics of that described by Mr Cincotta to Dr Landa, as a so-called mortgage offset account. Mr Cincotta instructed Perpetual to invest the cheques in the cash management fund to the credit of Mrs Cincotta's account.

32 Thereafter, the appellant arranged for the collection of the six cheques by depositing them with the National Australia Bank in an "Income Series Application Account", by way of a holding account. The proceeds of cheques of all customers to be invested in the cash management fund were then transferred to an account with the ANZ Bank. No separate bank accounts were kept by Perpetual for individual customers.

33 The primary judge recited the relevant circumstances concerning investment in Perpetual's cash management fund at [146]-[149] and [151]-[155] of his reasons:

"[146] Between about 1995 and about 1999 Perpetual application forms for investment in one of its cash management funds (both as to original investments and additional investments) stated that cheques were to be made out to 'Perpetual Trustees Australia Limited'. There was no explicit requirement that the account or name of the intended beneficiary appear in the name of the payee. The relevant prospectuses attached only forms for the making of original investments in a cash management fund.

[147] Between about 1995 and about 1999, Perpetual made available 'stand alone' forms for investment to financial advisers and investors for the purpose of making additional investments in a cash management fund. Those stand alone forms stated 'make cheque payable to 'Perpetual Trustees Australia Limited' .

[148] The prospectuses for the period 2001 to 2002 provided that an original investment had to be by an application form attached to the prospectus. Then followed the statement:

'The cheque must be made payable to:

'PIML - PCMF - [Insert name of applicant(s)]'

and crossed 'Not Negotiable'.

'If you would like to add to your investment, you will need to complete a form available from Perpetual or notify Perpetual in writing. The minimum additional investment is $200.

Perpetual will confirm your investment in writing.

[151] In directions for the completion of the application form at the back of the prospectus, the instruction was repeated as to how cheques were to be drawn. There followed the statement 'Perpetual reserves the right to limit or refuse to accept an investment'. Further on in the instruction is the statement: 'Perpetual has an absolute discretion to accept or reject any application'. Perpetual places great weight on these statements as indicating a policy that Perpetual reserved the right to accept a cheque for investment, no matter what appeared on it. I do not think that these statements go so far. I think that they say no more than that Perpetual is not obliged to accept an investment. It does not tell the reader that Perpetual will accept cheques which are not drawn in accordance with the previous instruction.

[152] The investment application made in 1995 by Mr Cincotta on behalf of Ms Belle was on a form which stated: 'Make cheque payable to Perpetual Trustees Australia Ltd'. The application for original investments was changed by Perpetual in 1999. That form stated that the investor must be named as part of the payee. Perpetual's practice was still to accept cheques for additional investments which did not specify the name of the investor as part of the name of the payee, if the cheque was made out to Perpetual Trustees and the form was otherwise substantially completed.

[153] It remained the practice of Perpetual, after changing the application forms for original investments in the prospectus, to use the previous 'stand alone' form, including the 1999 stand alone form, and more recently produced stand alone forms which required that the name of the account holder appear as part of the name of the payee of the cheques. Perpetual's practice was generally to accept cheques for additional investments in a cash management fund provided they were accompanied by sufficient written notification of the relevant account holder and the fund.

[154] Dr Landa's first cheque for $351,000, dated 23 August 2001, was accompanied by an application form in the 1999 stand alone format. The cheque was made payable to 'Perpetual Trustees or bearer' rather than 'Perpetual Trustees Australia Ltd'. It was accepted in accordance with Perpetual's practice.

[155] The following table shows, in respect of each Dr Landa's cheques, particulars of the cheque, what type of cheque, how the payee was made out, and what the then current application form required as to the particulars of the payee:

'Cheques

34 After the proceeds of each of the cheques were received into Perpetual's ANZ account, Perpetual allocated units (1 unit for each $1) to the account of Mrs Cincotta.

35 Mr Cincotta used the funds in Mrs Cincotta's account for his own purposes and not for purposes for the benefit of Dr Landa.

36 Dr Landa claimed against Perpetual for: (a) conversion of the six cheques in question; (b) for moneys had and received based on the mistake of Dr Landa, induced by the fraud of Mr Cincotta, in believing that the money would be invested with Perpetual or based on the failed purpose of investment with Perpetual; (c) for negligence; and (d) for misleading or deceptive conduct contrary to the Fair Trading Act 1987 (NSW), s 42 and the corresponding provisions dealing with misleading or deceptive conduct in the Australian Securities and Investments Commission Act 1989 (Cth), the Corporations Law, and the Corporations Act 2001 (Cth).

37 Amongst Perpetual's various defences it pleaded that Dr Landa was estopped from denying the authority of Mr Cincotta, the essence of which was described by the primary judge at [158] of his reasons as:

"[158] ...

it acted in accordance with the mandate on the face of the cheque in collecting the cheque;

by drawing the cheque in favour of Perpetual Dr Landa intended to pass title to Perpetual, that title has passed to it and it is, at most, a voidable title subject to Perpetual's defences;

Perpetual paid away the proceeds of the cheques before it had notice of Dr Landa's title so that it has not been unjustly enriched;

Dr Landa clothed Mr Cincotta with apparent authority to deposit the cheques and to deal with them as he did so that his claims in conversion and for money had and received are estopped."

The conclusions and reasoning of the primary judge

38 The primary judge concluded that Perpetual was liable for the conversion of the six cheques. His Honour also rejected Perpetual's defences.

39 The primary judge made the following findings at [11] of his reasons in an introduction to the claims against Perpetual:

"Dr Landa borrowed substantial sums from Perpetual Trustees Victoria Ltd ('PTV') in order to invest the borrowed funds with Perpetual pursuant to an investment scheme, called an 'offset mortgage account', which was to result in a profit to Dr Landa. The 'offset mortgage account' scheme did not exist: it was an illusion fraudulently created by Mr Cincotta. PTV is a related company of Perpetual but is not a party to these proceedings."

40 It was common ground that Perpetual did not offer an account styled "offset mortgage account" or one that operated in the way described by Mr Cincotta to Dr Landa.

41 The primary judge's conclusions as to conversion were encapsulated in [165] of his reasons:

"[165] In the present case, Mr Cincotta held Dr Landa's cheques on Dr Landa's behalf. As the supposed investment scheme with Perpetual which had been proposed by Mr Cincotta was a fraudulent illusion from the very beginning, Mr Cincotta had no authority to do anything at all with the cheques which Dr Landa had given him. The title in the cheques remained in Dr Landa. Innocent though Perpetual was of any wrongdoing, it is nevertheless liable in conversion, subject to its defence of estoppel."

42 The primary judge then referred to the Queensland Court of Appeal decision in Voss v Suncorp-Metway Limited (No 2) [2003] QCA 252; [2004] 1 QdR 214 (though the primary judge referred to the case as "Voss v Davidson") and the Victorian Court of Appeal decision in NIML Ltd v MAN Financial Australia Ltd [2006] VSCA 128; 15 VR 156 in concluding that conversion had been established and that the defence of estoppel could not succeed. The primary judge relied heavily on Voss.

43 The primary judge summarised the facts in Voss at [160]-[161] of his reasons:

"[160] In Voss v Davidson ..., Mr Voss asked the advice of his accountant, Mr Ripper, about investing the proceeds of the sale of his farm. Mr Ripper advised him to invest in 'an overseas fund' and that he was able to arrange such an investment through his contacts with a large international firm of accountants. He told Mr Voss to draw a cheque in favour of 'Southern Pacific Equities Unit Trust' and to deliver the cheque to him for deposit with that Trust. Mr Voss complied with that direction.

[161] Mr Ripper immediately had a trust deed prepared constituting a trust entitled 'Southern Pacific Equities Unit Trust'. He was the sole beneficiary of that Trust. He opened a savings account with a bank in the name of 'Southern Pacific Equities Unit Trust' and deposited Mr Voss' cheque into that account. The bank collected the cheque and Mr Ripper made off with the proceeds. Mr Voss sued the bank in conversion."

44 The trial judge's approach in Voss was described by the primary judge at [162] of his reasons:

"[162] The trial judge held that, even though Mr Voss remained the true owner of the cheque because of Mr Ripper's fraud in inducing delivery of the cheque to him, nevertheless the bank did not deal with the cheque in a way which was unauthorised by Mr Voss. The bank did what Mr Voss authorised it to do, namely, it deposited the proceeds of the cheque into the account of the payee named on the face of the cheque. The judge dismissed Mr Voss' claim in conversion. Perpetual makes the same submissions in this case."

45 The primary judge described the approach of the Queensland Court of Appeal (in allowing the appeal) at [163]-[164] of his reasons:

"[163] The Queensland Court of Appeal allowed an appeal by Mr Voss. The judgment of Davies JA (with whom the other judges agreed) on this point is so apt to the present case that I quote it in full ([12]-[13]):

'The central question in determining whether, leaving aside for the moment the defences raised of estoppel and absence of negligence, Suncorp converted Voss' cheque is whether the fact that it received the cheque into an account in the same name as that on the face of the cheque meant that it did not deal with the cheque in a manner repugnant to Voss' rights. The principle in this respect was comprehensively stated by Diplock LJ in Marfani & Co Ltd v Midland Bank Ltd in the following terms:

'At common law one's duty to one's neighbour who is the owner, or entitled to possession, of any goods is to refrain from doing any voluntary act in relation to his goods which is a usurpation of his proprietary or possessory rights in them. Subject to some exceptions which are irrelevant for the purposes of the present case, it matters not that the doer of the act of usurpation did not know, and could not by the exercise of any reasonable care have known, of his neighbour's interest in the goods. This duty is absolute; he acts at his peril.

A banker's business, of its very nature, exposes him daily to this peril. His contract with his customer requires him to accept possession of cheques delivered to him by his customer, to present them for payment to the banks on which the cheques are drawn, to receive payment of them and to credit the amount thereof to his own customer's account, either on receipt of the cheques themselves from the customer, or on receipt of actual payment of the cheques from the banks on which they are drawn. If the customer is not entitled to the cheque which he delivers to his banker for collection, the banker, however, innocent and careful he might have been, would at common law be liable to the true owner of the cheque for the amount of which he receives payment, either as damages for conversion or under the cognate cause of action, based historically on assumpsit, for money had and received.'

Plainly Ripper held the cheque on Voss' behalf. He was not beneficially entitled to it and had no authority to pay it into an account to which he was solely entitled beneficially. Yet that is what he did. And if he had no entitlement to it when he delivered it to Suncorp for collection, Suncorp, however innocent and careful it might have been, was, subject to the specific defences referred to later, liable in conversion to Voss as the true owner for the amount of which it received payment.'

"In this case, as the learned trial judge held (and as was conceded by counsel for the respondent on appeal) the appellants were at all material times the true owners of the cheque, there can be no doubt that in the circumstances the respondent converted the cheque in question. The learned trial judge came to a different conclusion because "Suncorp did what Mr and Mrs Voss had actually or apparently authorised: the depositing of the cheque into an account in the name of Southern Pacific Equities Unit Trust." His reasoning appears to have been that in doing what it did there was no "unauthorised assumption [by the respondent] of the powers of the true owner.

In most of the cases where it has been held that a cheque has been converted by a collecting bank, the cheque in question has been deposited into an account meeting the description of the named payee. That was certainly the position in cases such as Lloyds Bank v The Chartered Bank of India and Marfani. As Diplock LJ said in the passage referred to above, conversion is a tort "of strict liability in which the moral concept of fault in the sense of either knowledge by the doer of an act that is likely to cause injury, loss or damage to another or lack of reasonable care to avoid causing injury, loss or damage to another plays no part." It follows that in the present case the respondent converted the cheque in question according to principles of common law".

46 Then, based on the findings at [165] his Honour found Voss directly applicable at [166]-[170] of his reasons:

"[166] In Voss, the bank submitted that Mr Voss was estopped from denying that Mr Ripper was authorised to pay the cheque into the account named on the face of the cheque and was estopped from asserting that the bank had converted the cheque by paying out the proceeds to Mr Ripper. It relied solely on Mr Voss' acts of purchasing the bank cheque in the form that it was and handing it to Mr Ripper as clothing Mr Ripper with that authority and thereby creating the estoppel.

[167] In the present case, Perpetual relies on virtually the same acts of Dr Landa. He drew the private cheques, and purchased bank cheques, showing Perpetual as the payee and he gave those cheques to Mr Cincotta. Dr Landa had no dealings at all with Perpetual, although, curiously, Perpetual says that that very fact also clothed Mr Cincotta with apparent authority and created an estoppel. However, I think that this last submission is an over-refinement. What Dr Landa did was no more or less than Mr Voss did. If Perpetual had made some enquiry of Dr Landa to which he did not respond, his silence would have been of significance. However, absent an enquiry, his silence signified nothing to Perpetual.

[168] In Voss, Davies JA accepted that a defence based upon estoppel is available in a claim for conversion. His Honour continued:

'But this would be so only where the true owner has so acted as to mislead the collecting bank into the belief that the person so depositing the cheque was entitled to do so. The application of that principle to the facts of this case does not avail Suncorp.

By purchasing the cheque in the form in which it was and handing the cheque to Ripper, Voss did not represent to Suncorp, and plainly did not do so clearly and unambiguously, that Ripper was authorized to pay the cheque into a bank account which was, in effect, his own personal account; nor did he in any other way act so as to mislead Suncorp into believing that. On the contrary his representation, which was on the face of the cheque, was that Ripper had a limited authority to deposit the cheque only in the account of the trustee of a unit trust described as 'Southern Pacific Equities Unit Trust'. The account into which it was deposited was not that of a unit trust or even of a trust.

Nor did Voss in fact mislead Suncorp. Suncorp would have acted in the same way even if there had been a genuine trust of that name already in existence; and would have acted in the same way even if Ripper had stolen the cheque. Suncorp, in acting in the way in which it did, relied solely upon Ripper's fraudulent representation, by his production of a sham trust deed, that the account which Ripper opened was the trust account of the unit trust named in the cheque.'

[169] In the present case, in drawing the private cheques and procuring bank cheques in favour of 'Perpetual Trustees' or 'Perpetual Trustees Ltd' and nothing more, Dr Landa did not represent to Perpetual that Mr Cincotta was authorised to direct payment of those cheques into any particular account. It was Mr Cincotta's own act in providing a forged application by Ms Belle which induced Perpetual to deal with the cheques as it did, just as the production by Mr Ripper of a trust deed and opening of an account in the name of the non-existent investment trust procured the bank to deal with Mr Voss' cheque as it did.

[170] Perpetual's defence of estoppel cannot succeed. Perpetual is liable in damages for conversion in an amount equal to the face value of the cheques converted, less whatever has been repaid to Dr Landa by Mr Cincotta, together with interest under s 100 Civil Procedure Act 2005 (NSW) ..."

47 The primary judge did not deal with the other bases of Dr Landa's claims. Accordingly, it was unnecessary for his Honour to consider Perpetual's cross-claim against Dr Landa for contribution as a co-tortfeasor.

48 The amended notice of appeal contains eight grounds, of appeal as follows:

1. The trial judge erred in relying upon and failing to distinguish the decision of the Queensland Court of Appeal in Voss v Davidson [2003] QCA 252.

2. The trial judge erred in finding that at all material times, title to the Cheques listed in the Schedule to this Notice of Appeal ("the Cheques"), remained with the Respondents.

2A. The trial judge erred in finding that as the investment scheme was a fraudulent illusion from the very beginning, Mr Cincotta had no authority to do anything at all with cheques.

3. The trial judge erred in failing to find that title to the Cheques passed to the Appellant upon the Appellant obtaining possession of the Cheques.

4. The trial judge erred in finding that the Appellant converted the Cheques.

5. The trial judge erred in finding that the Respondents did not represent to the Appellant that Mr Dominic Cincotta was authorised to direct payment of the Cheques into any particular account.

6. The trial judge erred in failing to find that Mr Cincotta and/or Morgan Brooks had authority to deliver the cheques to the Appellant.

7. The trial judge erred in finding that the Appellant's defence of estoppel did not succeed.

49 A notice of contention sought to justify the orders on the basis of the grounds not dealt with by the primary judge: moneys had and received, negligence and misleading and deceptive conduct.

50 For the reasons that follow, we would allow the appeal. In summary, our views are that:

(a) there was no conversion of the cheques by Perpetual, Mr Cincotta having apparent authority to pass title to the bearer cheques to Perpetual who gave value, took bona fide and without notice;

(b) there was no unjust enrichment, Perpetual having changed its position in full on the faith of the receipts;

(c) the claim in negligence must fail because there was no relevant duty of care; and

(d) the claim based on misleading or deceptive conduct fails because there was no misrepresentation and no relevant reliance.

51 Essential to the respondents' success below were the findings by the primary judge at [165] of his reasons and recited at [41] above.

52 To say, as the primary judge did, that the supposed investment scheme was a "fraudulent illusion from the beginning" is a colourful way of restating that Dr Landa (and his companies) were induced by fraud to part with the cheques. It does not follow that Mr Cincotta had no authority whatsoever. Though induced by fraud to give him the cheques, Mr Cincotta was authorised to deliver, as agent, the cheques to Perpetual, with a clear condition that that delivery be for the purpose of investing on behalf of the respondents. Mr Cincotta, plainly, was not intended to take possession of the cheques as "holder" (as defined in the Cheques Act 1986 (Cth), s 3), but rather to take custody as agent for delivery. Delivery, being the transfer of possession of a cheque from one person to another (the Cheques Act, s 3), is essential for the transfer of title: the Cheques Act, ss 25 and 26 (cf Bills of Exchange Act 1909 (Cth), s 26(1) and (2)). Delivery by an agent is not excluded by the Cheques Act: see s 4(2) thereof.

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