Pioneer Mortgage Services Pty Ltd v Columbus Capital Pty Ltd

Introduction 1 These two appeals involve three identical grounds of appeal. The grounds are cumulative in the sense that, as the appellants accepted, the appeals must be dismissed unless the appellants succeed on all three grounds. All the grounds of appeal concern the finding by the primary judge that the appellant, Pioneer Mortgage Services Pty Ltd (Pioneer), in each appeal is liable to Columbus Capital Pty Ltd (Columbus), arising from fraudulent acts by Pioneer's employee. 2 It is common ground between the parties that one of Pioneer's employees used her position as a manager, and her authority to use Pioneer's computer system, to redraw funds from three customer accounts without the consent of those customers. Over more than six years she transferred funds by redrawing from those accounts and transferring them to her husband's account. Each transaction was for less than $10,000. None of those redraws was checked by Pioneer until 2014 when the fraud was discovered. The primary judge found, and the three grounds of appeal concern, Pioneer's liability based upon (i) its contract with Columbus, (ii) vicarious liability for the acts of its employee, and (iii) liability under s 84(2) of the Trade Practices Act 1974 (Cth) and Competition and Consumer Act 2010 (Cth) for misleading or deceptive representations made by its employee "on its behalf". 3 The trial before the primary judge involved numerous other claims including claims in one application by Pioneer for damages and injunctions arising from an annual facility fee imposed by Columbus. There were also cross-claims by Columbus relating to Pioneer's management fees, and to the fraud by Pioneer's employee. Pioneer also made claims in another application for numerous declarations and orders. Other than the three grounds of appeal mentioned in the paragraph above, none of these other issues arise on this appeal. 4 The first appeal (NSD 1407 of 2015) is brought by Pioneer. The second appeal (NSD 1394 of 2015) is brought by Pioneer and Mr Stefanowicz. Mr Stefanowicz is a director of Pioneer and was liable as a guarantor of Pioneer's obligations. After one ground of Mr Stefanowicz's appeal grounds was abandoned, his appeal grounds became identical to those brought by Pioneer. Senior counsel for the appellants accepted that the success of Mr Stefanowicz's appeal was entirely dependent upon the success of Pioneer's appeal. In these reasons we therefore focus only upon Pioneer. 5 For the reasons below, none of the grounds of appeal can succeed. The primary judge correctly concluded that Pioneer was liable in contract, it was vicariously liable, and it was liable under s 84(2) of the Trade Practices Act 1974 (Cth) and Competition and Consumer Act 2010 (Cth).

The facts as found by the primary judge 6 Apart from one contested inference, none of the primary judge's findings of fact were in dispute. The following is a summary of her Honour's findings of fact. 7 Pioneer is a mortgage originator and manager. Columbus is a provider of financial services including lending services. Pioneer and Columbus are parties to two deeds described as "mortgage origination and management deed" dated 27 July 1994 and 20 December 1995. The primary judge referred to these deeds as the 1994 and 1995 deeds. Columbus became a party to the 1994 and 1995 deeds as a successor to the Australian and New Zealand Banking Group Limited (ANZ). In turn ANZ was a successor to the original party, Rabobank Australia Limited or Rabo. 8 Pioneer and its counter party (Rabo, then ANZ, then Columbus) used a special purpose vehicle as the lender of record for mortgages that were originated by Pioneer and funded by the counter party. That special purpose vehicle was Pioneer First. When Columbus entered a deed of novation on 14 August 2013, it took control of Pioneer First. Columbus thus acquired the business and loan book which were associated with mortgages that Pioneer had originated. The business was referred to in the evidence as the loan portfolio or the Origin business. 9 Ms Tupeia Dando was an employee of Pioneer. She did not appear at the trial. It is not in dispute that between 2006 and 2014, Ms Dando used her position as an employee of Pioneer to commit acts of fraud. She arranged redraws from loan accounts of three borrowers who had not requested nor authorised the redraws. Ms Dando arranged for funds to be transferred from Pioneer First into her husband's account. The funds fraudulently obtained by Ms Dando were not able to be recovered. 10 The manner in which Ms Dando committed her frauds was as follows. 11 Pioneer had access to a software system designed by ANZ which was described as the Origin CAP BUREAU system. The software system was a special means of electronic communication available only for staff authorised by Pioneer. ANZ had provided Pioneer with access to the Origin CAP BUREAU system in part to allow Pioneer to make redraws. 12 Authorised Pioneer employees were trained in the use of the Origin CAP BUREAU system and provided with a manual which explained how to process redraws and advances. Ms Dando was an employee of Pioneer who was authorised to make customer redraws. After Ms Dando was promoted to a managerial role as Client Services Manager, employees who reported to her routinely effected redraws on loans as part of their responsibilities. However, Ms Dando continued to perform redraws as a training exercise for staff or if required to fill in due to staff shortages. 13 One weakness of the Origin CAP BUREAU system, about which Pioneer was aware, was that it was possible for an authorised person to go online and to direct payments to a third party account. The only possible guard against that possibility of fraud would be for LR10104 daily records produced by ANZ to be validated by cross referencing to the documentary record held by Pioneer. 14 Ms Dando used her access to the Origin CAP BUREAU system to make transfers of funds from three loan accounts which had been paid down to a nominal amount. She did not complete any documentary records for these redraws. 15 Ms Dando's fraud was not discovered until 8 July 2014 when she went on leave and one of the borrowers whose account had been redrawn contacted another employee of Pioneer to challenge the amounts that the borrower was said to owe under the loan. 16 There were not a large number of redraws from the accounts that comprised the loan portfolio. Ms Dando's frauds were described as the (i) Lam and Lim redraw, (ii) Roberts redraw, and (iii) Angus redraw. Those redraws comprised the following: (1) in 2006 there were 3 Lam and Lim redraws; (2) in 2007 there were 5 Lam and Lim redraws; (3) in 2008 there were 14 Lam and Lim redraws; (4) in 2009 there were 20 Lam and Lim redraws; (5) in 2011 there were 25 Roberts redraws, which comprised of 40% of the redraws from the loan portfolio for that year; (6) in 2012 there were 15 Roberts redraws, which comprised 24.6% of the redraws for that year; and (7) in 2013 there were 11 Angus redraws, which comprised 24.5% of the redraws for that year. 17 ANZ (and later Columbus) produced a report from the Origin CAP BUREAU system on a daily basis. That report listed all transactions for the day in respect of the Pioneer loan portfolio. The report identified transactions by reference to an applicable transaction code. Redraws had a specific code. The format in which the report could be provided was electronic and could be searched electronically. If Pioneer had wished to do so, it could have checked that the procedures for redraws had been satisfied by performing a search of the electronic file. The primary judge found that if it had done so, it would have discovered Ms Dando's fraud almost immediately in 2006. 18 Ms Dando's supervisor was Ms Pryde. Ms Pryde conducted some checks but the checks did not reveal Ms Dando's fraud. The parties referred in submissions, in some detail, to the checks that Ms Pryde conducted. In summary, she gave evidence that there were three types of checks: (i) a monthly client services review, (ii) a quarterly client services review, and (iii) a quarterly review that she conducted. 19 Ms Pryde's evidence of these reviews was described by the primary judge and was the subject of submissions by the parties on appeal. The relevant part of her oral evidence is as follows: Yes. The questions I'm asking you are about the checks or reviews after the fact, and you've identified that there were three types of checks or reviews after the fact, being the monthly client services review, the quarterly client services review and the quarterly reviews by you. Correct? Correct. Yes. And the - those three sets of checks or reviews were there, amongst other reasons, to make sure that there wasn't any fraud in relation to redraws. Isn't that correct? Correct. Yes. And the monthly and quarterly client services reviews, they wouldn't pick up any fraud of less than $10,000. Isn't that correct? Correct. So the quarterly reviews you were conducting were very important because they were the only after-the-event review that could potentially pick up a fraud of less than $10,000 in relation to a redraw. Isn't that correct? Correct. Now, you agree, don't you, that in relation to all of Ms Dando's fraudulent redraws, that there was no written borrower request. Isn't that right? Correct. And in relation to all those fraudulent redraws, there was no document with supporting identity material. Do you agree? Agree. 20 Ms Pryde therefore accepted that it was only the third type of check (ie the quarterly reviews that she conducted) that could potentially pick up any fraud of less than $10,000. She then gave evidence that the only way in which her checks could potentially have identified a fraud involving less than $10,000 was if she cross-checked the documentary materials on Pioneer's file with the electronic daily transaction record produced by ANZ (described as the LR10104 daily records). Her evidence was as follows: You knew that it was only your checks that could pick up frauds in relation to less than 10,000. Isn't that right? I won't say I knew that at the time. On reflection now, yes. And you knew that only by yourself checking what redraws had occurred over the quarter and then cross-checking them against the borrower requests and supporting identity material could you check whether redraw frauds had occurred in relation to amounts of $10,000 or less. Isn't that right? Yes. But you failed to do that. Isn't that correct? Yes.

The primary judge's conclusions 21 All of the grounds of appeal concern the primary judge's conclusion that Pioneer was liable for Ms Dando's frauds. The primary judge concluded that Pioneer was liable in three ways. First, for a breach of the 1994 Deed between Pioneer and Columbus. Secondly, on the basis of vicarious liability. Thirdly, on the basis that false representations made by Ms Dando to ANZ and Columbus that customers had requested redraws were misleading or deceptive conduct for which Pioneer was liable because they involved conduct "on behalf of" Pioneer within the meaning of s 84(2) of the Trade Practices Act 1974 (Cth) and its successor s 84(2) of the Competition and Consumer Act 2010 (Cth). 22 We consider below the reasons of the primary judge in relation to each of these matters.

The grounds of appeal 23 The three grounds of appeal are as follows: 1. Her Honour erred in finding that the First Appellant breached clause 5.1 of the "Mortgage Origination and Management Deed" dated 27 July 1994 (1994 Deed) between the First Appellant and the First Respondent in circumstances where: … d. the learned primary judge erred in finding that the First Appellant failed to take such steps and maintain such procedures as would be taken and maintained by a reasonably prudent mortgagee in connection with each of the loans; e. there was no sufficient evidence or any other basis to infer that the software system and associated procedures which were conducted by the First Appellant were not reasonable or that the First Appellant failed to manage all participating loans in an efficient and businesslike manner by use of that system and those procedures. 2. Her Honour erred in finding that the First Appellant was vicariously liable for the fraud of Ms Dando and thus breached clause 5.1 of the 1994 Deed in that it failed to manage the relevant loans in an efficient and businesslike manner and in accordance with sound business practices in circumstances where: a. the First Respondent had provided Ms Dando with the means and ability to perform the fraud; b. the First Appellant had no control over the software system of the First Respondent sufficient to enable it to prevent the fraudulent actions of Ms Dando; c. Ms Dando's fraudulent activity was not within the scope of her employment; d. Ms Dando's fraudulent activity was contrary to her express instructions from the First Appellant; e. Ms Dando's fraudulent activity was insufficiently closely connected with her employment to make the First Appellant liable for her criminal conduct; f. the learned primary judge found that Ms Dando used her access to the software system to effect redraws on funds on customers' accounts, without their knowledge or authority, and in so doing acted contrary to her employer's requirement that redraw requirements be in writing. 3. Her Honour erred in finding that Ms Dando's committed her fraudulent acts as a representative of the First Appellant and in the course of the First Appellant's business and that by reason of those matters the First Appellant engaged in misleading or deceptive conduct in circumstances where: a. the First Respondent had provided Ms Dando with the means and ability to perform the fraud; b. the First Appellant had no control over the software system of the First Respondent sufficient to enable it to prevent the fraudulent actions of Ms Dando; c. Ms Dando's fraudulent activity was not within the scope of her employment; d. Ms Dando's fraudulent activity was contrary to her express instructions from the First Appellant. 24 Senior counsel for the appellants properly accepted that in order to succeed on the appeal the appellants needed to succeed on all three grounds (ts 3).

Ground 1: breach of contract 25 This ground of appeal concerned the appellants' submission that the primary judge erred by finding that cl 5.1 of the 1994 Deed had been breached by Pioneer. Clause 5.1 provided as follows (emphasis added): 5. MANAGEMENT OF PARTICIPATING LOANS 5.1 Management The Manager must manage all Participating Loans in an efficient and business like manner and in accordance with sound business practices, irrespective of any alleged or actual default of the Bank or the Trustee. The Manager must take such steps and maintain such procedures as would be taken and maintained by a reasonably prudent mortgagee in connection with each Participating Loan including action consequent upon any default of any Participating Loan. The Manager must comply with all laws relating to the conduct of its business including the Privacy Act. In enforcing any Participating Loan, the Manager must retain only an Approved Solicitor for legal work and must ensure that neither the Bank or the Trustee is liable for any fee, cost or expense of any kind to which they have not given prior written consent. 26 The words which we have emphasised in bold were the focus of this ground of appeal. However, those words must also be read together with the obligation for the Manager to manage all Participating Loans "in an efficient and business like manner and in accordance with sound business practices". The primary judge found that Pioneer was in breach of cl 5.1 for a number of reasons which we summarise in broad terms below. 27 First, Pioneer was aware of the weakness of the Origin CAP BUREAU system that it was possible to go online and to direct payments to a third party account. This weakness could be ameliorated by the LR10104 daily records produced by ANZ being validated by cross referencing the documentary record held by Pioneer. 28 Secondly, as we have explained, Ms Pryde's quarterly review of redraws was limited to checking the paperwork that Pioneer held in a folder. It did not involve any correlation of the paperwork to the actual redraws recorded in the software system which were able to be checked by the LR10104 reports (primary judgment at [61]). 29 Thirdly, the LR10104 reports showing every transaction were available electronically and could have been searched by Pioneer using the two relevant transaction codes for redraws. It would have been relatively easy to click through each report quickly and efficiently to locate all redraws for the quarter and cross-check a representative sample of redraws against the paperwork. If this had been done it is inconceivable that Ms Dando's frauds would not have been discovered almost immediately ([66]-[67]). 30 Fourthly, there were only a limited number of redraws on the Pioneer loans, and a high proportion of the redraws were acts of fraud committed by Ms Dando ([67]). 31 Fifthly, although Pioneer had a requirement of validation for redraws over $10,000 this did not carry much weight because there was also a requirement that ([29],[50],[69]): Daily reports have been reviewed and all redraw transactions (CAP codes 61067 and 60101) have been checked for correctness. (Emphasis added). 32 The primary judge said that Pioneer had not explained why this additional requirement should be ignored. However, it was ignored by Pioneer because the quarterly review that Ms Pryde carried out did not check all redraw transactions for correctness by reference to the daily reports (the LR10104 reports) ([69]-[70]). 33 The first four of these points are, by themselves more than adequate to establish a breach of cl 5.1. Contrary to the appellants' particulars of appeal, the Origin CAP BUREAU system with the very limited checks conducted by Ms Pryde, were not procedures as would be taken and maintained by a reasonably prudent mortgagee in connection with each Participating Loan. They did not involve management "in an efficient and business like manner and in accordance with sound business practices". 34 Ultimately, senior counsel for the appellants accepted that Pioneer needed to establish that a reasonably prudent mortgagee would have acted in a way in which involved no possible detection of fraudulent redraws of less than $10,000 (ts 11). This was in the context where the redraws to be checked were not voluminous and Pioneer was aware of this weakness of the Origin CAP BUREAU system. 35 Although this would be sufficient to dispose of this ground of appeal (and, indeed, the appeal) for completeness we address the focus of counsel's submissions which was the fifth factor relied upon by the primary judge. 36 The "procedures manual" to which the primary judge referred was the Origin "Operations Manual for Mortgage Managers". It is dated June 2004. The respondents did not dispute that the procedures manual could provide some context for the obligation in cl 5.1 of the 1994 Deed. 37 The opening pages of the procedures manual provided as follows: 1.2 Roles and Responsibilities As a Mortgage Manager, you are responsible for all customer service contact and for servicing the customer's loan. As the contact point for your customer, you have the ability to create a positive customer experience that exceeds expectations and can cement your relationship with your customer. This experience can be directly linked to how responsive, effective and efficient you are in all your contacts with your customers. Origin's role is to provide the funding, the loan system (CAP BUREAU), systems support and to share the data entry requirements - our intention is to assist you in providing excellent service to your customers and to also be responsive to your needs. This Operations Manual provides information and guidelines to assist you in each stage of the end to end business process. It is also designed to help you pursue "operational excellence" - excellence in management of your operations and excellence in management of your customers. Some areas to consider in regards to developing your operational management areas are: • Culture - development of a culture with a focus on communication, training and management of processes and procedures which are customer focused and help to minimise risk; • Process - development of a continuous and integrated approach to identify, assess and manage operational policies and procedures; and • Strategy - development and implementation of operational strategies incorporating a focus on ensuring staff are encouraged to develop innovative ways to manage different situations. To assist you in reviewing operational procedures we have implemented some additional checks and balances and made suggestions of processes which may require more stringent review. The Operations Manual is designed to be read in conjunction with: Origin CAP BUREAU Staff Guide for Mortgage Managers (including Control D P/C), which details the step by step instructions for using CAP BUREAU Origin Mortgage Managers Lending Guidelines which details Origin's legislative and procedural requirements Origin Consumer Credit Code Documents & Procedures Manual for Housing Loans 38 The procedures manual provided in cl 1.4 for procedural reporting returns as follows: 1.4 Procedural Reporting Returns Procedural Reporting Returns are to be submitted by each Mortgage Manger to Origin as outlined in 1.3 Reporting Quick Reference Guide. Copies of the Procedural Reporting Returns can be located at the Origin website 39 An exhibit at trial was a Procedural Reporting Statement. That statement provided for the following "certification" with a box to be completed to answer "yes/no" to whether the certification had been checked. The certification required was as follows: LR10104 Posted Monetary Transactions Daily reports have been reviewed and actioned in accordance with Origin Operations Manual 10.3 Redraws. Daily reports have been reviewed and all redraw transactions (CAP codes 61607 and 60101) have been checked for correctness. Daily reports have been checked for redraws greater than $10,000. Customer authorisations are to be held by Mortgage Managers for all redraws. 40 The meaning of this certification is plain. There was supposed to be a review and check for correctness of all daily reports as well as an extra check for redraws greater than $10,000. 41 The procedures manual contained the following provision concerning redraw transactions: 10.3 Validating and Checking Redraw Transactions The Mortgage Manager can validate that the redraw transaction has been made successfully the following day by checking the Rejected Monetary Transactions Report (LR10106) on Control D P/C for any items that may have been rejected. The Mortgage Manager is required to check the Posted Monetary Transactions Report (LR10104) report daily for redraws processed. Search on the transaction codes 61067 (redraw of Flexible Choice loans) and 60101 (redraw on Cashpower Line of Credit loans) and validate all redraws greater than $10,000. Copies of customer authorisations are to be attached to the report for transactions greater than $50,000. A monthly Procedural Reporting Statement is to be submitted to Origin - refer 1.4 Procedural Reporting Statements. 42 The appellants placed considerable emphasis on the matter, which they described as the "epicentre" of their case on the first ground of appeal (ts 5), of the difference between a "check" of the LR10104 daily report and a "validation" of reports greater than $10,000. We do not consider that this difference assists the appellants. In context, the reference to "validation" is to a validation of a redraw greater than $10,000 by confirming that the redraw has customer authorisation (for a redraw more than $50,000 the customer authorisation must also be seen). A "check" of redraws posted (or in the language of the Procedural Reporting Statement, a "review" or "check for completeness") might involve something less than this such as sampling or an electronic search. But, as Ms Pryde accepted, without a cross-check with the LR10104 daily records, there was no check at all of amounts below $10,000. 43 In any event, even if the appellants' construction of cl 10.3 were correct, there are two additional reasons why their construction would not assist them. 44 First, the test in cl 5.1 of the 1994 Deed is an objective test. If the procedures manual, on its proper construction, suggested an approach which permitted any fraud below $10,000 to go undetected then this would not be sufficient to show that, objectively, Pioneer had procedures that would be taken and maintained by a reasonably prudent mortgagee in connection with each Participating Loan. Entrenching this defect in their own procedures manual could not overcome the four matters relied upon by the primary judge as reasons why Pioneer had breached cl 5.1. 45 Secondly, and in any event, the procedures manual has limited weight as a circumstance informing the construction of cl 5.1. During oral submissions, senior counsel for the appellants, in response to a question from Gleeson J, properly accepted that the manual was "primarily driven towards customer service" rather than to risk management or prudential requirements (ts 9). The opening passages of the manual which we have set out above support that conclusion. 46 The final matter relied upon by the appellants was the weaknesses in Columbus' lending procedures and systems. For instance, the respondent referred to Columbus' failure to require a copy of the borrower's confirmation and identification before authorising redraws, allowing payment by direction to third party accounts without further verification, and its policy of not discharging paid out loans. In oral submissions, senior counsel for the appellants said that this submission "boils down to saying you wouldn't give Rolls Royce treatment, in terms of management, to a loan that originates in less than prudential circumstances" (ts 13). In other words, the requirement of "procedures as would be taken and maintained by a reasonably prudent mortgagee" is a requirement "in connection with each Participating Loan" and is coloured by the circumstances in which those loans are entered. This submission is somewhat counterintuitive. If anything, a participating loan which is known to have been originated in less than prudential circumstances might reasonably require more checks, not fewer. Ultimately, senior counsel properly confined his submission to the point that the circumstances of the loan should not enhance the obligation which was to be measured by reference to a reasonably prudent mortgagee. He accepted that the primary judge had not reasoned in this way (ts 13-14). 47 For these reasons, the primary judge was correct to conclude that Pioneer was in breach of cl 5.1.

Legal principles concerning vicarious liability 48 The concept of "vicarious liability" has caused great difficulty in the law since it was first coined by Sir Frederick Pollock in 1877. Shortly after that, Lord Bramwell remarked to the Parliamentary Committee of 1876 (Cd 285, 46) that he had "never been able to see why the law should be so - why a man should be liable for the negligence of his servant, there being no relation constituted between him and the party complaining". Part of the difficulty may have arisen because the manner in which Pollock used the term was a misnomer. Pollock intended to use the term "vicarious liability" in the sense of liability for the act of another not for the wrong (or liability) of another: Darling Island Stevedoring and Lighterage Company v Long [1957] HCA 26; (1957) 97 CLR 36, 60 (Kitto J) citing the Holmes-Pollock Letters, vol 1, 233 and Williams G, "Vicarious Liability: Tort of the Master or of the Servant?" (1956) 72 LQR 522, 524. 49 If "vicarious liability" had been confined to Pollock's intended meaning as a liability for the attributed acts of another then the rules might simply have been based upon those of the law of agency which are concerned with attribution of one person's conduct to another. The attribution of acts of one person to another by the rules of agency is well known. Indeed, those rules are indispensable for companies because a company "cannot act in its own person for it has no person ... So it must of necessity act by directors, managers, or other agents": O'Brien v Dawson [1942] HCA 8; (1942) 66 CLR 18, 32 (Starke J); see also Ferguson v Wilson (1866) LR 2 Ch App 77, 89 (Sir H M Cairns LJ). 50 The early history of vicarious liability involved a variety of different principles, associated with different forms of pleading, and a series of changes, both unintended and intended: see Wigmore J, "Responsibility for Tortious Acts: Its History" (1894) 7 Harv L Rev 315-337, 383-405, 441-463. During the 19th century, the misnomer meaning of vicarious liability, as liability based upon the attribution of the acts of another, built upon 18th century cases to become the dominant meaning. In Morgans v Launchbury [1973] AC 127, 135, Lord Wilberforce said that agency is "merely a concept, the meaning and purpose of which is to say 'is vicariously liable'" and Viscount Dilhorne (at 140) explained that it was probably the intended meaning of the Latin maxim qui facit per alium facit per se. The older cases also spoke in this way of the act of one person being the act of another: Middleton v Fowler (1698) 1 Salk 282, 282; 91 ER 247, 248 (Holt CJ); Ackworth v Kempe (1778) 1 Doug 40, 42; 99 ER 30, 31 (Lord Mansfield); Woodgate v Knatchbull (1787) 2 TR 148, 154; 100 ER 80, 83 (Ashurst J); Laugher v Pointer (1826) 2 B & C 547, 553; 108 ER 204, 207 (Littledale J); Chandler v Broughton (1832) 1 Cr & M 29, 30; 149 ER 301, 301 (Bayley B); Hutchinson v The York, Newcastle and Berwick Railway Co (1850) 5 Exch 343, 350; 155 ER 150, 153 (Alderson B). 51 In contrast with these 19th century cases vicarious liability began to acquire its literal meaning in the 20th century. In Scott v Davis [2000] HCA 52; (2000) 204 CLR 333, 369 [106], McHugh J said that the liability of an employer for the wrongful acts of the employee has "evolved in the last 150 years to a vicarious liability". Lord Denning played a large part in this evolution: see Young v Edward Box & Co Ltd [1951] 1 TLR 789, 793; Rose v Plenty [1976] 1 WLR 141, 144. It is now undeniable that in England it is possible to attribute either acts or liability. In England, the former is now confined to agency and vicarious liability refers to the latter. 52 The modern English test for this vicarious liability that has emerged in a series of decisions in the House of Lords and United Kingdom Supreme Court is that an employment relationship, or even one outside employment, is capable of giving rise to vicarious liability where there is a sufficient connection between the relationship (in this case, employment) and the tort committed: see Cox v Ministry of Justice [2016] UKSC 10; [2016] 2 WLR 806, 812 [17] (Lord Reed with whom Lord Neuberger, Lady Hale, Lord Dyson, and Lord Toulson agreed). The early English cases from which this approach was developed borrowed from a similar approach in Canada, although without expressing concluded views on the policy considerations involved in the Canadian decisions: see Lister v Hesley Hall Ltd [2002] 1 AC 215, borrowing from Bazley v Curry [1999] 2 SCR 534 and Jacobi v Griffiths [1999] 2 SCR 570. 53 The rationale for this approach is said to be based on the following (see Cox v Ministry of Justice 814 [24]): …a relationship other than one of employment is in principle capable of giving rise to vicarious liability where harm is wrongfully done by an individual who carries on activities as an integral part of the business activities carried on by a defendant and for its benefit (rather than his activities being entirely attributable to the conduct of a recognisably independent business of his own or of a third party), and where the commission of the wrongful act is a risk created by the defendant by assigning those activities to the individual in question. See also Majrowski v Guy's & St Thomas's NHS Trust [2006] UKHL 34; [2007] 1 AC 224; Various Claimants v Catholic Child Welfare Society [2012] UKSC 56; [2013] 2 AC 1. 54 The English approach to vicarious liability has not been without criticism, sometimes strident criticism: Stevens R, "Vicarious Liability or Vicarious Action?" (2007) 123 LQR 30. It is heavily based upon a theory that a defendant should be liable for wrongdoing that can be regarded as part of the risks of its business activities, whether or not the wrongdoing is committed for the purpose of furthering those activities. In other words, the enterprise that obtains the benefit should pay the cost of the risks that are fairly part of those activities. As evidenced by the numerous cases in this area which have been heard by England's highest court, the application of this theory is far from simple. Most recently, the Supreme Court has emphasised that words like "business", "benefit", and "enterprise" need not be understood literally and criteria are not to be applied mechanically or slavishly: Cox v Ministry of Justice 816 [30], 819 [42]. 55 For some time it might have been thought that the English approach could not be adopted in Australia. In Darling Island Stevedoring and Lighterage Company v Long, Kitto J (61) and Taylor J (66) took the traditional approach to vicarious liability as meaning only the attribution of acts to create a direct liability as Pollock had originally intended: see also Barwick CJ in Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271, 278. 56 However, in Darling Island Stevedoring, Fullagar J spoke of the "liability [as] a true vicarious liability: that is to say, the master is liable not for a breach of a duty resting on him and broken by him but for a breach of duty resting on another and broken by another" (57). In Kable v State of New South Wales [2012] NSWCA 243; (2012) 268 FLR 1, 18-19 [52]-[53], after a careful consideration of many of the recent authorities, Allsop P suggested that the view of Fullagar J appears to have prevailed. Of course, when a submission is made in the language of agency then it remains the case that it is an act that is being attributed. 57 Senior counsel on this appeal focused heavily upon the decision of the High Court of Australia in New South Wales v Lepore [2003] HCA 4; (2003) 212 CLR 511. Even apart from the many other authorities to which Allsop P referred, two of the judgments in that case provide support for the approach of Fullagar J: see 541-546 [55]-[74] (Gleeson CJ); 618-619 [320] (Kirby J). However, that view was not unanimous. As we explain below, the other judgments have a strong resonance with the approach of attribution of acts. 58 With the panache of an experienced advocate, senior counsel for the respondents adopted both approaches. He submitted that whether liability was to arise directly, as a result of attribution of Ms Dando's acts to Pioneer, or indirectly as a result of imposition of Ms Dando's liability upon Pioneer, the result would be the same. Indeed, the various verbal formulations used in relation to both theories of vicarious liability place emphasis on the same notion of a "course of employment". In the paragraphs which follow we consider the possibility of vicarious liability on each basis, namely on the basis that it is the acts of Ms Dando which are attributed to Pioneer and on the basis that it is the liability of Ms Dando that is attributed to Pioneer. As we conclude that liability can arise on either basis, it is not necessary for us to decide whether the true source of attribution in cases of "vicarious liability" is the attribution of (i) acts, (ii) liability, or (iii) either acts or liability.

Attribution to Pioneer of the acts of Ms Dando 59 As we have explained, the first characterisation of vicarious liability is as a liability based on the attribution of the acts of another which are in the course of employment. Those acts need not be expressly or impliedly authorised. As Gleeson CJ observed in New South Wales v Lepore 536 [42], the classic formulation of this test from Salmond J, Law of Torts (1st ed, Stevens and Haynes, 1907) 83, is that an employer is liable for authorised acts or for unauthorised acts which involve improper modes of performing authorised acts. Although this test has been criticised, it is clear that it has never been a bar to the attribution of acts to an employer solely because they were not expressly or impliedly authorised. In the law of agency, for example, ostensible authority can sometimes permit attribution of acts which a principal had forbidden. As Gummow and Hayne JJ said in New South Wales v Lepore 589-590 [225]: Contrary to what the phrase "course of employment" might be thought to mean, it may include within its reach some acts done by an employee in direct contravention of explicit and binding directions given to that employee by the employer. It may also include within its reach some acts that are contrary to law. Thus no one doubts that the employer who instructs an employee driver to drive within the road rules will be vicariously responsible if, contrary to that instruction, the employee speeds and causes injury to a third party. 60 The lack of a need for express or implied authority before an act can be attributed was illustrated by their Honours' contrast of the two decisions in Deatons Pty Ltd v Flew [1949] HCA 60; (1949) 79 CLR 370 and Lloyd v Grace, Smith & Co [1912] AC 716. 61 In Deatons, a barmaid was employed by the defendant company in an hotel. She threw a glass of beer in Mr Flew's face. He lost sight in one eye. Mr Flew said that the barmaid's actions were unprovoked. The barmaid's evidence was that Mr Flew had been intoxicated, he had struck her, and he made an abusive and insulting observation to her. She said that she threw the beer in his face in anger but the glass accidentally slipped out of her hand. The jury found that the employer was liable. In the High Court of Australia the various judgments emphasised that the barmaid's duty was to serve drinks, not to keep order. On either version of the evidence, the Court concluded that the verdict should be overturned and the employer be given a directed verdict in its favour. 62 In Lloyd, Mrs Lloyd went to a firm of solicitors for advice concerning a property that she had purchased. The managing clerk of a firm of solicitors induced her to give him the deeds to the property, and to sign two documents, so that he could sell it. He sold the property and kept the proceeds, committing both a tort and a breach of contract. The firm was held to be vicariously liable. 63 Speaking of these contrasting decisions in New South Wales v Lepore 591 [231], Gummow and Hayne JJ adopted the distinction between these decisions given by Dixon J in Deatons (381). The actions in Lloyd unlike those in Deatons, were: …one of those wrongful acts done for the servant's own benefit for which the master is liable when they are acts to which the ostensible performance of his master's work gives occasion or which are committed under cover of the authority the servant is held out as possessing or of the position in which he is placed as a representative of his master… 64 There can be little doubt that the employer or firm is liable in a case like Lloyd where acts are done under cover of the authority that the servant is held as possessing. It may also be that this liability could be characterised in a "simpler" way as direct liability without attribution of the employee's acts. This possibility was contemplated by Gummow and Hayne JJ in New South Wales v Lepore (593 [238]). And it is also a possibility recognised by McHugh J (571-572 [160]-[162], 573 [166]) and Gaudron J (552-553 [104]-[105]) who acknowledged that liability could arise where a person assumed a responsibility to ensure that care would be taken, not merely that it would take care. Whether that duty is appropriately described by the label "non-delegable", and whether it is foreclosed by a majority of the court in New South Wales v Lepore, need not be explored here: see, for instance, Stevens R, Torts and Rights (Oxford University Press, 2007) 114-115 and compare the views of New South Wales v Lepore expressed in Woodland v Swimming Teachers Association [2013] UKSC 66; [2014] AC 537, 582 [21] (Lord Sumption) and Foster N, "Convergence and Divergence: The Law of Non-Delegable Duties in Australia and the United Kingdom" in Robertson A and Tilbury M, Divergences in Private Law (Hart Publishing, 2016) 109, 131. It suffices to say that this may not require much development based on the history of the doctrine of assumption of responsibility: see also Swick Nominees Pty Ltd v Leroi International Inc (No 2) [2015] WASCA 35; (2015) 58 WAR 376, 443-444 [370]-[373] (Murphy JA and Edelman J). Indeed, Pollock himself, as editor of the Law Quarterly Review, observed the decision in Lloyd that a client of a solicitor is entitled to have his business supervised: Pollock F, "Note" (1913) 29 LQR 10. In this case, as we have explained, there was a direct duty that was assumed by Pioneer to Columbus. It was a contractual duty. And it was breached. 65 The vicarious liability of Pioneer arose in this case in the same way as it arose in Lloyd. In Lloyd, the Lord Chancellor explained that a principal would be liable if "the agent commits the fraud purporting to act in the course of business such as he was authorized, or held out as authorized, to transact on account of his principal" (725). Lord Macnaghten also applied the principle from Story on Agency, as quoted by Blackburn J in McGowan & Co v Dyer (1873) LR 8 QB 141, 145 that the general rule is that a principal is liable "for the frauds, deceits, concealments, misrepresentations, torts, negligences, and other malfeasances and misfeasances, and omissions of duty of his agent in the course of his employment". The fraud was in the course of employment because it was "so cunningly contrived as to seem to the victim of the fraud a mere matter of course" (739). Or, as the Lord Chancellor put it, the managing clerk "took advantage of the opportunity so afforded him as the defendant's representative to get her to sign away all that she possessed and put the proceeds into his own pocket" (724). 66 The appellants sought to distinguish Lloyd on the basis that Mrs Lloyd had made a request for work from the managing clerk but Ms Dando's fraud involved redraws which were not requested by any borrower (ts 16-17). If this were a sufficient ground of distinction then it would mean that the greater the authority that is conferred upon an employee, so that a fraud could be committed without the direct participation of the victim, the less likely that the fraud would be attributed to the employer. We cannot accept this proposition. 67 In this case, the scope of Ms Dando's authority was very broad. Her fraud was only possible because she was one of the employees of Pioneer who was authorised to use the Origin CAP BUREAU system. As the primary judge observed (at [109]), Ms Dando had not only the authority and access to the equipment and systems of her underlings but she also had the additional authority and access that came with her role as manager. The fraud was committed in the course of doing the very class of acts that Ms Dando had been empowered to do by Pioneer, namely the management of redraw payments to borrowers. And it was performed in the ostensible pursuit of Pioneer's business and in the apparent execution of the authority that Pioneer held Ms Dando out as having. Ms Dando's acts should be attributed to Pioneer.

Liability based upon attribution of Ms Dando's liability 68 As we have explained, the English approach to attribution of liability is based upon a test of close or sufficient connection between the relationship (here, employment) and the tort. In Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48; [2003] 2 AC 366, 377 [22], Lord Nicholls (with whom Lords Slynn and Hutton agreed) described the approach as one which gives "the concept of 'ordinary course of employment' an extended scope". 69 The English test has not yet been adopted by the majority of the High Court of Australia. However, it has been adopted and applied in a number of intermediate appellate court decisions: Davis v Williams [2003] NSWCA 371; Blake v JR Perry Nominees [2012] VSCA 122; Crouch and Lyndon (a Firm) v IPG Finance Australia Pty Ltd [2013] QCA 220; A, DC v Prince Alfred College Inc [2015] SASCFC 161. In one of these cases, A, DC v Prince Alfred College Inc, special leave was recently granted for an appeal to the High Court. 70 The English "close connection" test was applied recently in Mohamud v Wm Morrison Supermarkets plc [2016] UKSC 11; [2016] 2 WLR 821. In that case, Mr Mohamud asked an employee at the defendant company's petrol station if it would be possible to print out some documents from a USB stick that he was carrying. The employee spoke to Mr Mohamud using foul, racist, and threatening language. He ordered Mr Mohamud to leave and never come back and then followed him to his car. At the car, Mr Mohamud was seriously assaulted, including being punched and kicked in the head. The Supreme Court of the United Kingdom unanimously found that the employer was vicariously liable. 71 In the primary judgment given by Lord Toulson, his Lordship explained that although the employee's conduct was a gross abuse of his position, his actions were part of a "seamless episode" from the time he was behind the counter. It included an instruction to keep away from his employer's business. There was sufficient connection between the job that the employee was entrusted to do and the assault upon Mr Mohamud. The Master of the Rolls, Lord Dyson, added that the question in each case was one of "evaluative judgment" (836 [50]). 72 The decision in Mohamud illustrates that acts can have a close connection with employment even if they are expressly or impliedly forbidden. Indeed, one of the earliest applications of this test in England, relied upon by the respondents, involved vicarious liability of an employer for the abuse of children by the warden of a boarding house, which was the very antithesis of the acts which were authorised: Lister v Hesley Hall Ltd [2001] UKHL 22; [2002] 1 AC 215. As Gleeson CJ said in New South Wales v Lepore 546 [74] (see also Kirby J 622-623 [333]): where the teacher-student relationship is invested with a high degree of power and intimacy, the use of that power and intimacy to commit sexual abuse may provide a sufficient connection between the sexual assault and the employment to make it just to treat such contact as occurring in the course of employment. The degree of power and intimacy in a teacher-student relationship must be assessed by reference to factors such as the age of students, their particular vulnerability if any, the tasks allocated to teachers, and the number of adults concurrently responsible for the care of students. Furthermore, the nature and circumstances of the sexual misconduct will usually be a material consideration. 73 The circumstances of this case illustrate a very close connection between Ms Dando's acts and her employment. As we have explained, her fraud was only possible because of the authority she had to use the Origin CAP BUREAU system. She perpetuated the fraud through the additional authority and access that came with her role as manager and her authority to supervise the very acts that constituted her fraud. Ms Dando's liability should also be attributed to her employer. 74 For these reasons, we accept the submission by Columbus that on any conception of vicarious liability, the primary judge was correct to conclude that Pioneer is vicariously liable.

Ground 3: misleading or deceptive conduct by Ms Dando "on behalf of" Pioneer 75 The final ground of appeal concerned the finding by the primary judge that the misleading or deceptive conduct by Ms Dando was "on behalf of" Pioneer within the terms of s 84(2) of the Trade Practices Act 1974 (Cth) and (in identical terms) s 84(2) of the Competition and Consumer Act 2010 (Cth). As the attribution provisions in these two acts were in identical terms, no issue arose from the fact that the relevant acts of Ms Dando occurred between 22 December 2006 and 18 July 2013. 76 Section 84(2) of the Competition and Consumer Act in identical terms to s 84(2) of the Trade Practices Act, provides (emphasis added): (2) Any conduct engaged in on behalf of a body corporate: (a) by a director, employee or agent of the body corporate within the scope of the person's actual or apparent authority; or (b) by any other person at the direction or with the consent or agreement (whether express or implied) of a director, employee or agent of the body corporate, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, employee or agent; shall be deemed, for the purposes of this Act, to have been engaged in also by the body corporate. 77 The sole question on appeal was whether the primary judge was correct to conclude that the acts of Ms Dando were "on behalf of" Pioneer. The appellants submitted that Ms Dando's conduct was committed on her own behalf, not as a representative of Pioneer and not in the course of Pioneer's business. 78 The primary judge relied upon the reasoning of Lindgren J in NMFM Property Pty Ltd v Citibank Ltd (No 10) [2000] FCA 1558; (2000) 107 FCR 270, 550 [1244] that: It seems to me that an act is done "on behalf of" a corporation for the purpose of sub-s 84(2) if either one of two conditions is satisfied: that the actor engaged in the conduct intending to do so "as representative of" or "for" the corporation, or that the actor engaged in the conduct in the course of the corporation's business, affairs or activities. 79 As the primary judge observed, in Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 [59], Keane JA (with whom the other judges agreed) cited the above passage from the judgment of Lindgren J and said that an "act is done 'on behalf of' a corporation for the purposes of s 84(2) of the Act if the actor 'engaged in the conduct in the course of the corporation's business, affairs or activities'". 80 It was common ground on this appeal that this was the appropriate approach to s 84(2). It is unnecessary to consider whether this approach differs at all from what we have described as the traditional approach to vicarious liability. It suffices to say that the requirement of Ms Dando's representations being "on behalf of" Pioneer is satisfied for the same reasons. Those reasons establish that Ms Dando was acting in the course of Pioneer's business when Pioneer (through her) falsely represented to ANZ and then Columbus that (i) the customers had requested and required each of the redraws, (ii) the customers had authorised payment to the account into which the money was paid, and (iii) Ms Dando was authorised by the customer and Pioneer to request payment from ANZ and then Columbus (for the Angus loan redraws).

Conclusion 81 The appeals must be dismissed. I certify that the preceding eighty-one (81) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Davies, Gleeson and Edelman.