'Where a person, by words or conduct, represents or permits it to be [represented] that another person has authority to act on his behalf, he is bound by the acts of that other person with respect to anyone dealing with him as an agent on the face of any such representation, to the same extent as if such other person had the authority that he was represented to have, even though he had no such actual authority'. "
90 Mr Beard and Mr Ralph complain that the plaintiffs never pleaded this issue but that if they are permitted to rely upon it, that proposition is a complete answer. First they submit that a representation must have been made by the putative principal, not by the putative agent, that the agent is authorised to bind the principal. In the present case, there is no evidence of any such representation. The signage that said "Gould Ralph" at the premises where Mr Seeto was permitted to remain after the partnership had been dissolved did not satisfy the requirement of such a representation. If it were otherwise, then there would be a representation that all employees of the partnership were authorised to bind it. Furthermore, there was in any event no evidence from the plaintiffs that Mr Azuma was unaware that Mr Seeto had ceased to be a partner and there should be no finding that the plaintiffs were unaware of it in the absence of such evidence.
91 Secondly, the plaintiffs must demonstrate reliance on such a representation. There was no evidence given by Mr Azuma or anyone as to any such reliance. This was said to be fatal to the argument based on ostensible authority. Even if there were such evidence, Mr Beard and Mr Ralph re-emphasised the extraordinary and bizarre nature of the impugned transactions that were contemplated. Those transactions could realistically have had no apparent connection with the partnership and any suggestion that the plaintiffs did rely on some representation would fall to be considered, and rejected, in that light.
92 I consider these submissions to be correct. Mr Azuma gave a lot of evidence to the effect that he thought "Gould Ralph" was Mr Seeto or the Seeto Group, and Mr Seeto or the Seeto Group was "Gould Ralph". However, the source of Mr Azuma's understanding was always Mr Seeto and neither Mr Beard nor Mr Ralph was said to have contributed to it in any way. Mr Beard and Mr Ralph submitted that there was no foundation for Mr Azuma's assertions to this effect and described them as "irrational". There was said to be a complete lack of any connection between the activities of one and the activities of the other, the only common denominator being Mr Seeto.
The breach of trust allegations
93 The plaintiffs alleged that it was impliedly agreed between them and the partnership and the first and second defendants that the partnership and the first and/or second defendants would be trustees of the invested funds and that as trustees the partnership and those defendants are liable to account to the various plaintiffs. Mr Young put his argument in the following way:
"By the same arguments as to who the contract was made with, by those same arguments, the trust was with the partnership, although the company may also be a trustee since its account was the one that the monies were actually going into. But it was really the partnership that was being entrusted with the money, with the partnership to nominate its nominee company to hold the bank account. The money was held on trust, it's been misapplied, and all of the partners are liable for that breach of trust."
94 Mr Beard and Mr Ralph responded with the following propositions. First, an essential element in the creation of a trust is that there must be proper evidence of the intention to create it: see Aras v Schmutz (Court of Appeal, 9 December, 1997 per Powell JA, unreported); Jacobs' Law of Trusts in Australia, 7th ed (2006) at [306]. There is no indication at all in the evidence that the payment of the US$3 million involved any intention to create a trust. The language of the conversation between Mr Azuma and Mr Seeto shortly after 7 May 1998 (referred to above at par [15]) is to the effect that the money was paid to the second defendant initially, with a view to it only subsequently being paid into the so-called custodian account of the first defendant. Other than the references to that account, which was to be a subsequent step, there is nothing indicating any intention to create a trust.
95 Secondly, with respect to all of the transactions, and on the assumption that the creation of a trust was intended, the trust property was transferred to the first defendant and to no one else. If anyone became a trustee of the funds, it was the first defendant. There was here neither a vesting of trust property in the partnership as trustee by a transfer to it or by a declaration of trust by it; nor was there a direction that the partnership hold the funds as trustee: see Aras v Schmutz (supra). The partnership never became a trustee because it is the essence of a trust that property be vested in it as trustee and it never was.
96 Thirdly, there was no breach of trust. The alleged breach is pleaded as a failure to account. However, the partnership was never in a position to account because the express arrangements were that the first defendant was to have the "sole control" of the funds: see the letter dated forming part of annexure "F" to Mr Azuma's affidavit at par [13] above.
97 Finally, if the trust money or other property does not come into the hands of the partnership "but simply into the hands of one of the partners then the other partners are not liable to account unless they have notice of the breach of trust or other circumstance which renders the offending partner liable as a constructive trustee": Estate Realties Ltd v Wignall [1992] 2 NZLR 615 at 634. Mr Beard and Mr Ralph submitted that the evidence fell short of establishing that the alleged trust money came into the hands of the partnership or that either of them had notice of any alleged breach of trust.
98 In my opinion, these arguments are unassailable. In particular, there is no evidence that either Mr Beard or Mr Ralph had any knowledge at all of what Mr Seeto was doing in his various dealings with Mr Azuma and the other plaintiffs. Indeed, it was ironically part of the plaintiffs' case that they knew nothing: see par [25] above and Mr Seeto's warning to Mr Azuma that "if the other partners of my firm get to know about this, I will lose all control over it".
99 I am not satisfied that the remaining partners are liable to the plaintiffs for any breach of trust.
The restitutionary claim
100 Although only faintly put, this part of the plaintiffs' case requires at least a demonstration of the fact that the funds in question were actually paid to or received by the partners for their benefit. For reasons already expressed, this did not occur and this part of the plaintiffs' case fails.
Limitations defences
101 Mr Beard and Mr Ralph also relied upon defences under the Limitation Act 1969. They submitted that Mr Azuma did not become a plaintiff until 19 July 2006 although the relevant amendments to the pleadings became effective on 30 June 2006. Accordingly, any cause of action brought by Mr Azuma must have accrued within six years prior to that date, or by 30 June 2000.
102 Mr Azuma's cause of action in contract accrued on the date of the alleged breach of contract. The breach of contract claims have been pleaded as a failure to repay the funds. Mr Beard and Mr Ralph contend that this failure first occurred on the date when the plaintiffs first demanded repayment which according to them was on or about 21 December 1999. To the extent that Mr Azuma had any claim himself for the return of the monies, his cause of action expired on this analysis on or about 21 December 2005.
103 Necessarily coupled with this submission is the contention that the other plaintiffs have no cause of action in contract for the return of the money for the reason that the money was not theirs: it was Mr Azuma's money, and his joinder to the proceedings was a tacit recognition of that fact. Mr Beard and Mr Ralph point to the evidence given by Mr Azuma that the money was originally sourced in rental income to which the first plaintiff was entitled so that there must have been a loan by that company to Mr Azuma and that he used the borrowed monies for purposes of the first impugned transaction. In such circumstances Mr Azuma has suffered the loss and he is liable to the first plaintiff as a borrower from it. With respect to the later transactions, neither is recorded in the financial statements or accounts of the first or second plaintiffs in the 1999 financial year. If any loss was suffered it was a loss incurred by Mr Azuma whose claim is time barred.
104 The plaintiffs' response was as follows. The evidence is that the first instance where money was asked for and not repaid was at the earliest in late 2000 or early 2001. Mr Nishiura asked for his money in late 2000, and Mr Azuma asked for his money in 2001, and those were the first refusals. Mr Young submitted that the court should simply go to the evidence, which was that there was no demand made before late 2000, being a date after the six-year period prior to the commencement of joining Mr Azuma. Accordingly, the breach of contract alleging a failure to repay money on demand occurred late in 2000 at the earliest, and is within the limitation period in any event.
105 Mr Young responded to the title or true ownership issue with the following submissions:
"The money was from the first and second plaintiffs. The letters that Mr Azuma wrote in relation to arranging the payment of the US $3 million were all on the letterhead of Seiwa Australia. Seiwa Australia and Australia Seiwa were the existing clients of Gould Ralph. Although the money was passed through Mr Azuma's personal US dollar account and it seems that there was also a term deposit in his name that held the money at some stage, he gave the evidence that the money came from Seiwa Australia and it came from its properties. In all likelihood, as I submit is the case, Seiwa Australia was the company contracting at that stage, if not both companies, although it was the only one that advanced money at that stage. And it was from Australia Seiwa that the second tranche of money came.