SSS Holdings Pty Ltd trading as MobileCorp ABN 22003702725 v WILH Wilhelmsen Investments Pty Limited CAN 076859151

District Court of NSW|2018-03-08

Judgment

By Statement of Claim filed on 13 February 2017, the plaintiff claims the sum of $189,103.00, together with costs and interest, for goods sold and delivered to the defendant between 29 August 2016 and 23 September 2016.
The goods sold were either Apple i-phones, Samsung and HTC phones, and the goods delivered comprised 14 separate lots as follows:

Date Goods Dollar value Total products (cumulative) Total value (cumulative) 1 29 August Apple iPhone6S 64GB x 8 $9,832 8 $9,832 2 30 August Apple iPhone6S 64GB x 2 Apple iPhone 6S 16GB x 10 $13,248 20 $23,080 3 31 August Apple iPhone 6S 64GB x 7 $8,603 27 $31,683 4 2 September Apple iPhone6S 64GB x 5 Apple iPhone 6S 16GB x 10 $16,935 42 $48,618 5 7 September Apple iPhone 6S 64GB x 11 $13,519 53 $62,137 6 8 September Apple iPhone SE 64GB x 10 $8,290 63 $70,427 7 9 September Samsung Galaxy S7 4GX x 1 HTC 4GX x 4 $25,827 96 $96,254 Apple iPhone SE 16GB x 19 Apple iPhone SE 64GB x 9 8 13 September Apple iPhone SE 16GB x 2 Apple iPhone SE 64GB x 18 $16,280 116 $112,534 9 15 September Apple iPhone SE 16GB x 15 $10,185 131 $122,719 10 16 September Apple iPhone 6 64GB xl Apple iPhone 6S 64GB x 2 Apple iPhone SE 64GB x 8 $10,169 142 $132,888 11 19 September Samsung Galaxy S7 4GX x 11 Apple iPhone SE 16GB x 4 $15,355 157 $148,243 12 20 September Samsung Galaxy S7 4GX x 10 Apple iPhone SE 64GB x 5 Apple iPhone 7 128GB x 5 Apple iPhone 7 256GB x 5 $28,675 182 $176,918 13 22 September Apple iPhone 7 32GB x 5 $5,395 187 $182,313 14 23 September Apple iPhone SE 16GB x 10 $6,790 197 $189,103

Background to the dispute

The plaintiff began selling goods to the defendant in March 2012. Initially, those orders were placed by an employee of the defendant, Mr Robert Scifleet, whose role was that of IT Administrator. In October 2012, his role was taken over by Mr Andrew Longhurst, who was described as "Group IT Manager".
In May 2014, Mr Graham Lott was introduced to the plaintiff as the new Group IT Manager employed by the defendant.
In that role, Mr Lott would regularly place orders for mobile phones and various other products and services. Some of those orders were placed by email.
From 2012, Mr Gavin Lo had been employed by the plaintiff as Sales Manager. He had had dealings with first, Mr Scifleet, then Mr Longhurst, and from May 2014, Mr Lott. On 24 November 2014, he received an email from Mr Lott with the subject "New IT staff at WWI". It read: "Hi Gavin, I'd like to introduce my new colleague, Tony Toomalatai, who joined me at WWI a little over two weeks ago. Please accept all orders and service requests from Tony as you would from me. Graham Lott Group IT Manager"
The email was Cc'd to Sheng Fan and Tony Toomalatai.
In or about March 2016, Mr Lo was advised by Mr Toomalatai that Mr Lott had ceased employment with the defendant.
The 14 orders for mobile phones referred to above, between 29 August 2016 and 23 September 2016, were placed by Mr Toomalatai.
The defendant's business premises were relatively close to those of the plaintiff. In respect of a number of the orders, delivery was made by Mr Toomalatai picking the orders from the plaintiff's premises.
Invoices were issued by the plaintiff and forwarded to the defendant by email. None of those emails were received by the appropriate employees of the defendant, because Mr Toomalatai had manipulated the defendant's email system so that such emails would be redirected to an address that would be accessed only by him. Similarly, he manipulated the system to ensure that emails generated from other employees, including the CEO of the defendant, would be redirected to Mr Toomalatai. This was done without the other employees' consent, and to ensure that those employees were unaware of the orders he placed for the mobile phones, and delivery of them.
Mr Toomalatai forwarded emails to the plaintiff's employees under the names of those employees of the defendant responsible for payment of invoices, purporting to be those persons. Those emails concerned payment of the plaintiff's invoices and ultimately Mr Toomalatai forwarded a document purporting to be a transactional history created by the Commonwealth Bank of a payment by the defendant, authorised by Mr Toomalatai, to the plaintiff of the sum outstanding, namely, $189,103.00. It was common ground in the proceedings that that document was a forgery, and that the conduct outlined above by Mr Toomalatai was fraudulent conduct, which resulted in the delivery of the goods. Those goods have never been recovered by the plaintiff and it has not been paid for them.

The defendant's defence

By an Amended Defence, the defendant denied ordering the goods and stated that the goods were never supplied to it. Further, the defendant pleaded that Mr Toomalatai had no authority to order products from the plaintiff on the defendant's behalf. It pleaded that a document-styled purchase order, WI18428PO, was not a genuine purchase order.
The defendant further pleaded that Mr Toomalatai did not collect any of the goods at the request of the defendant, on behalf of the defendant, with the authority of the defendant, or with the knowledge of the defendant. Further, the defendant pleaded that the plaintiff had failed in its duty to mitigate its damages "by taking no steps, or alternatively no sufficient steps, to try to retrieve its property from Mr Toomalatai at any time in circumstances where the defendant remained in direct contact with Mr Toomalatai until 21 October 2016".

The plaintiff's reply

By Reply filed on 2 March 2018, the plaintiff pleaded that Mr Toomalatai had actual authority, or in the alternative, had ostensible authority to place the purchase orders referred to in the plaintiff's Statement of Claim. Further, the plaintiff pleaded: "2 Pursuant to sections 128 and 129 of the Corporations Act 2001 (Cth), the plaintiff is entitled to assume Tony Toomalatai had authority to place the purchase orders set out in the pleadings of the plaintiff's Statement of Claim. Particulars Email dated 24 November 2014 from Graham Lott, Group IT Manager with Wilh Wilhelmsen Investments Pty Limited, introducing Tony Toomalatai and inviting the plaintiff to accept orders from Tony Toomalatai as a new employee of the defendant."

The plaintiff's evidence

The plaintiff relied on the two affidavits sworn by Mr Gavin Lo, dated 26 June 2017 and 13 December 2017. In his first affidavit, Mr Lo set out the history of his dealings with employees of the defendant corporation being Mr Scifleet, Mr Longhurst and Mr Lott. He also gave evidence of the process for orders from the defendant corporation, many of which were placed by email. An example was Annexure C to his affidavit, which was an email from Mr Lott to the plaintiff, placing an order on 9 September 2014.
After the email he received from Mr Lott on 24 November 2014 introducing Mr Toomalatai, Mr Lo deposed to orders placed on 21 May 2015, 11 August 2015, and 18 August 2015 by Mr Lott (Annexure F, G & H to his affidavit). Each order was placed by email from Mr Lott, followed by a purchase order, which in each case, contained the following entry: "CONTACT: ttoomalatai"
Mr Lo deposed that all of the orders placed Mr Toomalatai between 29 August 2016 and 23 September 2016 were placed by email. A number were received by a former employee of the plaintiff, Ms Kim Pattrick. A large part of Mr Lo's evidence referred to the email exchanges in respect of each of the orders placed by Mr Toomalatai with Ms Pattrick.
Mr Lo also deposed to a genuine order placed by Mr Toomalatai on behalf of a corporation, Kubis Rosebery Pty Limited, which was part of the defendant's group of companies. The order was placed on 23 August 2016 by Mr Toomalatai for the supply and installation of "12 core single mode fibre into existing conduit". The invoice for $8,250.00 was paid by the defendant and confirmed as being a genuine order.
Mr Lo deposed that the collection of orders by Mr Toomalatai from the plaintiff's premises was not unusual or inappropriate. He also deposed as to the assurances provided by Mr Toomalatai in October 2016, that the outstanding monies had been paid.
The second affidavit of Mr Lo dated 13 December 2017 was an affidavit in reply, and is referred to below.
Mr Lo was required for cross-examination. He was cross-examined about his role as Sales Manager employed by the plaintiff in August and September 2016. He confirmed that he was in Cairns for a conference on 29 August 2016 and exchanged text messages with Mr Toomalatai on that day. He returned to Sydney on 5 September 2016. He confirmed his evidence deposed to in his affidavit concerning the transactions Ms Pattrick dealt with, and confirmed that all of the orders were processed by Ms Pattrick. Further, he confirmed that emails were exchanged between Mr Toomalatai and Ms Pattrick in respect of whether stock was available prior to orders being placed.
Mr Lo confirmed the belief he held that Tony Toomalatai had authority to place such orders was based on the email he had received from Mr Lott on 24 November 2014, a number of conversations, which he had not documented in his affidavit, and the dealings that the plaintiff had with Mr Toomalatai during 2015 (referring to Annexures F, G and H to his affidavit), as referred to above. He conceded, in relation to each of those orders, that Mr Lott had placed the order and Mr Toomalatai was referred to in the order as the "contact".
In re-examination, Mr Lo was asked about the email dated 29 November 2014 introducing Mr Toomalatai, and gave evidence that his reliance was not based solely on that email. He had had meetings with Mr Lott and Mr Toomalatai to discuss Telstra billing concerns.
The plaintiff also relied on an affidavit of Ms Patricia De Gois sworn on 26 June 2017. Ms De Gois was the finance and administration manager of the plaintiff and set out the actions she took to obtain payment for the goods the subject of the claim. Annexed to her affidavit was an email sent by Mr Toomalatai, but under the name of "Maureene", referring to Ms Maureene Rabanes, whose evidence is referred to below. It referred to a remittance advice for payment made "today", and was dated 7 October 2017. Also, annexed to her affidavit was the receipt issued by the Commonwealth Bank purporting to record the payment by the defendant to the plaintiff of the sum of $189,103.00, which was a forgery.
Ms De Gois deposed that no payment had ever been received by the plaintiff. She was not required for cross-examination.

The defendant's evidence

The defendant relied on two affidavits sworn by Mr Robert Stratford on 16 November 2017 and 7 March 2018. Mr Stratford was the Chief Executive Officer of the defendant. Annexed to his affidavit was a document entitled "Purchased Pay Control Process", which set out the defendant's internal controls and procedures relating to the acquisition of goods and services from external suppliers. On page 19 of that document was a list of staff members, setting out the limits of their authority to purchase goods up to certain amounts (referred to as "the purchasing authorisation matrix").
Mr Stratford deposed that the defendant had only purchased 20 phones from the plaintiff since April 2016 (inferentially, prior to 29 August 2016).
Also annexed to his affidavit was a schedule listing all of the transactions between the plaintiff and defendant between 17 December 2012 and 23 August 2016. Except for the transaction on 23 August 2012 for supply and installation of cabling for $8,250.00, referred to above, a fair summary of the transaction history was that there were a limited number of transactions, the highest of which was for the sum of $2,487.00. Otherwise, the amounts were modest.
Mt Stratford deposed that Mr Toomalatai did not have any authority to acquire mobile phones from the plaintiff for the defendant or any of its related companies. The defendant had no knowledge at all of Mr Toomalatai's purported orders until 20 October 2016 when Mr Lo came to the defendant's office looking for Mr Toomalatai, who was not there at the time.
Mr Stratford deposed that the defendant had never received any of the mobile phones supplied by the plaintiff and did not know where they were.
Mr Stratford deposed that each of the transactions were fraudulent, and where supported by purchase orders, those purchase orders were fraudulent.
Mr Stratford deposed that the deliveries comprised 180 mobile phones delivered during the period 29 August to 23 September 2016. At that time, the defendant had a combined total staff of 100, of which only 11 were based in Sydney. The defendant had terminated Mr Toomalatai's employment for serious misconduct on 3 November 2016, and had reported the matter to the New South Wales Police. He did not know the present whereabouts of Mr Toomalatai.
In his affidavit sworn on 7 March 2018, Mr Stratford referred to the email relied on by the plaintiff from Mr Lott, sent to Mr Lo on 24 November 2014. As at the date of that email, he deposed that Mr Lott had authority to purchase goods and services on behalf of the defendant, up to a sum of $10,000.00. His authority was never increased as the purchasing authorisation matrix did not change between October 2014 and March 2016, when he left. Further, Mr Lott did not have the power to confer authority on Mr Toomalatai, or any other employee, to purchase goods and service on behalf of the defendant corporation.
Mr Stratford further referred to the accounts system operated by the defendant, referred to as the "Greentree System". Any purchase order was sent by the employee requiring it to another officer of the company to approve the purchase.
Mr Stratford deposed that all of the fraudulent orders placed by Mr Toomalatai were for mobile telephone handsets only. None of the orders were for sim cards or mobile telephone plans. Based on his experience, this was very unusual.
Mr Stratford also deposed to the invoices raised by the plaintiff in respect of the fraudulent orders. Each contained the following statement: "All equipment remains the property of MobileCorp until paid in full."
The first invoice dated 29 August 2016 had payment terms of 7 days. The rest contained the following statement, namely "Account 30 days".
Mr Stratford deposed that he was not aware of any action taken by the plaintiff to recover its property from Mr Toomalatai, either whilst he was an employee of the defendant, or thereafter.
Mr Stratford gave further oral evidence by leave, to the effect that Mr Toomalatai had no authority to acquire mobile phones on behalf of the defendant, and the defendant's delegated authority and purchasing policy was a document, which in his words, "pretty much everyone is aware of it".
In cross-examination, Mr Stratford stated that he was not aware of ever speaking to Mr Toomalatai about the defendant's purchasing policy, or the accounting system it implemented. He was asked whether the policy was an internal document, to which he replied, "Not exactly". He was not certain that it was on the defendant's website. When asked whether the policy was sent to suppliers, he answered, "It certainly is if requested". However, it was not automatically provided to suppliers and had not been provided to the plaintiff. Notwithstanding that the policy document stated that it was due for review in 2015, it had not been reviewed as at August 2016.
The purchasing system employed by the defendant meant that no one could authorise their own purchases. For example, if Mr Lott wished to place a purchase order, that order would go to someone in higher authority and was likely to come to Mr Stratford. This was an important part of the process for the avoidance of fraud.
Mr Stratford confirmed that Mr Lott left the defendant corporation in March 2016, at which time Mr Toomalatai took over some of his role. However, the corporation relied more heavily on external providers for that role. There was no re-examination.
The defendant relied on an affidavit Mr Cedric DeAir who swore an affidavit on 1 December 2017. He set out the change to the email system employed by the defendant which allowed Mr Toomalatai to perpetrate his fraud. In cross-examination he confirmed that he became the IT Manager for the defendant on 5 November 2016, after Mr Toomalatai's fraudulent conduct. Mr Toomalatai had tampered with the email system to ensure that emails addressed to staff were intercepted by him, and that he could answer them in the name of other staff members. There was no cross-examination.
The defendant also relied on an affidavit of Maureene Rabanes who swore an affidavit on 7 March 2018. She was employed by the defendant from 19 May 2015, and between 10 May 2016 and 9 November 2016 was the temporary financial accountant. She deposed that she did not receive various emails sent by Ms De Gois requesting payment for the good the subject of the claim because Mr Toomalatai had manipulated the email system of the defendant to ensure those emails were not received. She did not know that that had happened at the relevant time.
In cross-examination she confirmed that she did not receive any of the emails the subject of Ms De Gois' evidence, nor did she sent any of the emails attributed to her.
There was no re-examination.
The defendant also tendered a bundle of documents evidencing transactions between it and the plaintiff company for the period 17 June 2011 and 1 October 2015. It became Ex 2.

The defendant's submissions

The defendant by its learned Counsel provided a thorough written outline of submissions. It submitted that there was insufficient evidence provided by the plaintiff in respect of some of the 14 orders, namely, items 3, 6, 7, 10 and 13 in the table above, on the basis that there was either no email in respect of the order, that each of the orders was evidenced by invoice only, and/or there was no evidence of delivery and therefore evidence that an order was fulfilled. I am satisfied on the balance of probabilities that the various orders were made, invoiced and fulfilled and that the plaintiff has established that part of its case. I am also satisfied that the goods were delivered to Mr Toomalatai, either personally or at the defendant's premises.
The real issue in the proceedings is whether Mr Toomalatai had authority, either actual or ostensible, to place the orders made so as to bind the defendant.
It is clear that Mr Toomalatai had no actual authority to act as he did. The question is whether, by reason of the matters set out above, Mr Toomalatai had ostensible authority to place the orders by which the defendant became bound legally for them. The legal principles referable to ostensible authority were not in issue and are concisely set out in the following paragraphs of the defendant's submissions: "20 The principle of ostensible authority was stated as follows in Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd (1964) 2 QB 480, at 503 per Diplock LJ: 'An 'apparent' or 'ostensible' authority … is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the 'apparent' authority, so as to render the principal liable to perform any obligations imposed upon him by such contract. To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the existence of the representation but he must not purport to make the agreement as principal himself. The representation, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract. It is irrelevant whether the agent had actual authority to enter into the contract.' This statement has been followed and applied by the High Court of Australia in Crabtree-Vickers Pty Ltd v Australian Direct Mail Avertising & Addressing Co Pty Ltd (1975) 133 CLR 72 and Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146. Fundamentally, the relevant 'representation of authority' must emanate from the principal. The third party must prove not only that they in fact relied upon the principal's representation, but also that their reliance was reasonable: see Hoare v McCarthy (1916) 22 CLR 296, at 305-306; Reckitt v Barnett, Pembroke and Slater Ltd [1929] AC 176, at 182. This requirement was discussed in Egyptian International Foreign Trade Co v Soplex Wholesale Supplies Ltd (The 'Raffaella') [1985] 2 Lloyd's Rep 36 at 41: 'It is important to bear in mind that the doctrine of holding out is a form of estoppel. As such, the starting point is that the principal must be shown to have made a representation, which the third party could and did reasonably rely on, that the agent had the necessary authority. The relevant enquiry, therefore, in all cases is whether the acts of the principal constitute a representation that the agent had a particular authority and were reasonably so understood by the third party.' Importantly, reliance on a representation cannot be reasonable where the circumstances put the third party on inquiry as to whether the purported agent has the requisite authority: Pourzand v Telstra Corporation Ltd [2014] WASCA 14, at [115]; Tipperary Developments Pty Ltd v The State of Western Australia [2009] WASCA 126; (2009) 38 WAR 488, at [110]; Northside Developments Pty Ltd v Registrar-General [1990] HCA 32; (1990) 170 CLR 146; Smith v Peter & Dianna Hubbard Pty Ltd [2006] NSWCA 109; Sydney Water Corporation v Makucha [2010] NSWSC 114. The principle was expressed as follows in Tipperary Developments Pty Ltd v The State of Western Australia [2009] WASCA 126; (2009) 38 WAR 488, at [110]: 'A principal can only be made liable on the ground of ostensible authority where the third party reasonably relied upon the representation as to authority: Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, 498. There is no reasonable reliance when the nature of a transaction or other circumstances put the third party on inquiry as to whether the purported agent has the requisite authority: Northside Developments Pty Ltd v Registrar-General [1990] HCA 32; (1990) 170 CLR 146.' In Northside Developments Pty Ltd v Registrar-General [1990] HCA 32; (1990) 170 CLR 146, Brennan J said, at 180: 'A party dealing with a company cannot assume that its officers or agents have a particular authority if the circumstances are such as to put that party on inquiry as to whether the authority exists and no inquiry is made or the company fails to satisfy the inquiry.' Similarly, in Rolled Steel Ltd v British Steel Corpn (1986) Ch 246 it was said, at 284: '… even if persons contracting with a company do not have actual knowledge that an irregularity has occurred, they will be precluded from relying on the rule if the circumstances were such as to put them on inquiry which they failed duly to make.' A person with no actual authority, only ostensible authority, to do an act cannot confer ostensible authority on someone else to do that act: Crabtree‑Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72. In that case, the High Court said: 'In other words, a person with no actual, but only ostensible, authority to do an act or to make a representation cannot make a representation which may be relied on as giving a further agent an ostensible authority. Hence the stress by Dipolock L J on the need that the person or persons making the representation must have actual authority to make the representation.'"
The defendant submitted that the plaintiff had not proved actual reliance on a relevant representation of authority. Further, and in the alternative, if the court did not accept that submission, the defendant submitted that the plaintiff had not established that its reliance was reasonable in all of the circumstances.
The defendant submitted that the following matters would put the plaintiff on notice and/or require further inquiry by it before it processed the orders: 1. The fact that Mr Toomalatai had never placed an order before. It was submitted that on all previous occasions, Mr Lott had placed orders, even where Mr Toomalatai was referred to as the "contact" for the defendant. There was no evidence to suggest that the circumstance of Mr Lott's departure from the defendant was known to the plaintiff, and the order placed on 23 August 2016 by Mr Toomalatai for cabling, was irrelevant, in that that order, which was genuine, was paid by way of invoice submitted after the relevant events. 2. The sheer size of each order and the number of phones ordered should have put the plaintiff on notice. 3. Every other order was less than each of the orders placed in August or September 2016. Previously, 55 mobile phones had been ordered for a total sum of $31,683.00. 4. The frequency of the orders was extraordinary in that all 14 orders were made within a month, which was not known in the history of dealings between the two companies. 5. The first invoice dated 29 August 2016 required payment within seven days. By 5 September 2016, no payment had been received. Notwithstanding that, between 7 September and 23 September 2016, additional orders totalling $140,485.00 were received and processed. 6. Most of the orders were accepted without a purchase order, and in respect of those purchase orders that were provided, they were fraudulent. 7. On 13 September 2016 Mr Toomalatai advised the plaintiff's representative that he had "50 techs arriving today", and that he could not wait two days for stock. He had already ordered 96 phones since 29 August 2016 and ordered a further 101 between 13 September and 23 September 2016. It was submitted that as matters progressed, it must have been more and more apparent to the plaintiff that this was unusual trading. 8. It was submitted that this should have been seen by the plaintiff as to be too good to be true, and therefore prudence would have demanded that an inquiry be made by the plaintiff's representatives as to the validity of the orders. Counsel submitted that this amounted to a "violation of good corporate governance". 9. The orders were only for phones with no SIM cards or data plans. This should have been particularly unusual to the plaintiff's representatives. Documentary evidence disclosed that on two occasions between 2011 and 2015 that a request had been made to come and collect goods personaly, either at Rosebery or elsewhere in Australia by the defendant.
It was submitted that each of the above matters listed above, either individually or combined, should have had an accumulative effect to have aroused suspicion in the plaintiff's employees as to the genuineness of the orders being placed. Further, none of the evidence disclosed any discussion about price of the goods, rather, Mr Toomalatai used expressions such as "I'll take all the stock".
Counsel highlighted the absence of any evidence from Ms Kim Pattrick from the plaintiff's case. She may or may not have had her suspicions aroused, however, there was no evidence from her, and no opportunity to test that. Further, there was no evidence that she saw the email of 29 November 2014 from Mr Lott, and there was an absence of any evidence from her of actual reliance on the representation of authority of Mr Toomalatai to deal on behalf of the defendant. It was submitted that the plaintiff's case would fail for that reason. Alternatively, if the court did not accept that submission, the question arose as to whether the reliance was reasonable. There was no explanation given for the plaintiff's failure to call evidence from Ms Pattrick and according to the principle in Jones v Dunkel (1959) 101 CLR 298, her evidence would not have assisted the plaintiff's case.
The defendant further submitted that, applying the principle in Crabtree‑Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Limited, supra, as Mr Lott had authority, according to the defendant's evidence, up to purchasing orders of $10,000.00, he could not make a representation that Mr Toomalatai had authority beyond that level.
The defendant submitted that ss 128 and 129 of the Corporations Act 2001 (Cth) do not apply here. Mr Toomalatai was not an "officer" of the defendant corporation as defined in s 9 of that act. It was submitted that no relevant assumptions in s 129 could be made under s 128 to advance the plaintiff's case.
Finally, the defendant pleaded that the plaintiff had a duty to mitigate its losses. There was no evidence that the plaintiff had done anything to recover its own property from Mr Toomalatai, who remained an employee of the defendant until 3 November 2016, whereas the plaintiff became aware of Mr Toomalatai's fraud by no later than 20 October 2016.

Determination

I do not accept the submissions made on behalf of the defendant, and hold that Mr Toomalatai had ostensible authority to act on behalf of the defendant for the following reasons.
First, by email dated 24 November 2014, Mr Graham Lott, described as "Group IT Manager", introduced Mr Toomalatai to Mr Lo and stated: "Please accept all orders and service requests from Tony as you would from me."
The plaintiff was never advised by the defendant of its policy contained in the "Purchase to Pay Control Process", nor was it ever advised of the limits on purchasing authorisation to the various employees of the defendant.
The dealings between the defendant and the plaintiff during 2015, as evidenced in annexures F, G and H to the affidavit of Mr Lo, clearly nominate Mr Toomalatai as being the contact on behalf of the defendant in respect of those orders.
Whilst the defendant submits there was no evidence the plaintiff knew of Mr Lott's cessation of employment with the defendant, Mr Lo must have known. He had an ongoing relationship with Mr Toomalatai, as evidenced by the text messages exchanged between them on 29 August 2016, as tendered by the defendant (Ex 1). Further, Mr Toomalatai had placed a genuine order with the plaintiff just days before the first fraudulent order on 23 August 2016.
Mr Lott did have actual authority and was able to represent authority to Mr Toomalatai in the way in which he did.
There was nothing to arouse suspicion in the plaintiff's employees about any of the orders that had been received. Orders had been received by email on previous occasions. When asked, Mr Toomalatai provided purchase order numbers, albeit fraudulently
Similarly, when the financial manager sought payment for the orders, emails were sent, again fraudulently by Mr Toomalatai, but apparently in the names of the responsible employees of the defendant, stating that payment had been, or was being made.
The fraud was not an unsophisticated one. Not only was the placing of orders and accepting delivery of those orders perpetrated by Mr Toomalatai in the manner set out above, he also manipulated the defendant's own internal email system so as to perpetrate his fraud, and to conceal it both from the plaintiff and the defendant. It was the defendant's own corporate governance, or lack of it, which allowed this to happen, not any failure of corporate governance by the plaintiff. Having placed Mr Toomalatai in a position where he could carry out this fraud, the defendant, as his employer, is vicariously liable for his conduct - see Ffrench v Sestili [2007] SASC 241 at [29] - [37], where the Full Court applied New South Wales v Lepore (2003) 212 CLR 511; and Pioneer Mortgage Services Pty Ltd v Columbus Capital Pty Ltd [2016] FCAFC 78 at [59] - [67].
I am therefore satisfied that the plea of ostensible authority is made out. There was a relevant "representation of authority" made, namely, by Mr Lott, who had actual authority to purchase on behalf of the defendant. The plaintiff, in fact, relied upon the representation in fulfilling each of the fraudulent orders, and it was reasonable for it to do so in the circumstances. Only with the benefit of hindsight, could the transactions be regarded otherwise. In the ordinary commercial world in which the plaintiff and defendant were operating, the transactions had the appearance of normal commercial transactions, albeit, perpetrated in such a way as to give the appearance of legitimacy, for example, the use by Mr Toomalatai of the reason for the order referred to above, namely, "I have 50 techs arriving today".
In no way were the circumstances such that they warranted inquiries made of the defendant, or senior employees employed by it as to the validity of those transactions. None of the matters relied on by the defendant and adumbrated above, either individually or cumulatively, could give rise to a different conclusion.
Nor does the application of the principle in Jones v Dunkel, supra, assist the defendant here. Although there was no explanation for Ms Pattrick's absence from the witness box, other than she had left the employment of the plaintiff, the fact that she, on each occasion, processed the orders, is evidence enough that her suspicions were not aroused. In Manly Shire Council v Byrne [2004] NSWCA 123, where Campbell J said at [54] and [55]: "54 The inferences licensed by Jones v Dunkel are ones which are drawn, if at all, once all the evidence in the case is in. This has significance in two ways. The first is that, though Jones v Dunkel licenses drawing more confidently, an inference available against the party who has failed to call the evidence, before that can happen there must first be available to be drawn, on the evidence which has been admitted, an inference against that party. As Spigelman CJ said in State Bank of NSW v Brown (2001) NSWCA 22; (2001) 38 ACSR 715 at [17] - [18]: 'As expressed in Cross on Evidence, above, at [1215]: … the rule in Jones v Dunkel permits an inference that the untendered evidence would not have helped the party who failed to tender it, and entitles the trier of fact to take that into account in deciding whether to accept any particular evidence which relates to a matter on which the absent witness could have spoken, and the more readily to draw an inference fairly to be drawn from the other evidence by reason of the opponent being able to prove the contrary had the party chosen to give or call evidence … The formulation 'fairly to be drawn from the other evidence' reflects the terminology of Windeyer J in Jones v Dunkel at 312, (most recently quoted with approval by the joint judgment in RPS, above at [26]): … where an inference is open from facts proved by direct evidence and the question is whether is should be drawn, the circumstance that the defendant disputing it might have proved the contrary had he chosen to give evidence is properly to be taken into account as a circumstance in favour of drawing the inference. (See also Insurance Commissioner v Joyce (1948) 77 CLR 39 at 49; 55 ALR 356)' That reasoning of Spigelman CJ was adopted by Hodgson JA at [104] (with whose reasons Handley JA agreed). 55 The second matter of significance is that if the evidence which has been admitted is enough to prove the case of the party who has not called the witness, the tribunal of fact could be justified in not counting the failure of that party to call that witness as something that reduces the strength of that case.'"
Thus, the inference to be drawn pursuant to the principle in Jones v Dunkel, supra, is that the absent witnesses' evidence would not have been adverse to the plaintiff, but simply that it would not have assisted the plaintiff's case - see Kuhl v Zurich Financial Services [2011] HCA 11; (2011) 243 CLR 361 at [64]. For the inference to be drawn, there must be evidence that the party against whom it is to be drawn is required to explain or contradict - see Schellenberg v Tunnel Holdings Pty Limited [2000] HCA 18; (2000) CLR 121 at [51]. See also MSPR Pty Limited v Advanced Braking Technology Limited [2013] NSWCA 416 at [53]. Here, the most that could be said for the absence of Ms Pattrick is that, applying the principle, her evidence would not have assisted the plaintiff's case. However, the drawing of any such inference would not have the effect that her evidence was positively adverse to the plaintiff's case. In any event, as outlined above, there is ample evidence upon which to establish the plaintiff's entitlement here.
Sections 128 and 129 of the Corporations Act 2001 (Cth) provide as follows: "128 Entitlement to make assumptions (1) A person is entitled to make the assumptions in section 129 in relation to dealings with a company. The company is not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect. (2) A person is entitled to make the assumptions in section 129 in relation to dealings with another person who has, or purports to have, directly or indirectly acquired title to property from a company. The company and the other person are not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect. (3) The assumptions may be made even if an officer or agent of the company acts fraudulently, or forges a document, in connection with the dealings. (4) A person is not entitled to make an assumption in section 129 if at the time of the dealings they knew or suspected that the assumption was incorrect. 129 Assumptions that can be made under section 128 Constitution and replaceable rules complied with (1) A person may assume that the company's constitution (if any), and any provisions of this Act that apply to the company as replaceable rules, have been complied with. Director or company secretary (2) A person may assume that anyone who appears, from informationprovided by the company that is available to the public from ASIC,to be a director or a company secretary of the company: (a) has been duly appointed; and (b) has authority to exercise the powers and perform the duties customarily exercised or performed by a director or company secretary of a similar company. Officer or agent (3) A person may assume that anyone who is held out by the company to be an officer or agent of the company: (a) has been duly appointed; and (b) has authority to exercise the powers and perform the duties customarily exercised or performed by that kind of officer or agent of a similar company. Proper performance of duties (4) A person may assume that the officers and agents of the companyproperly perform their duties to the company. Document duly executed without seal (5) A person may assume that a document has been duly executed bythe company if the document appears to have been signed inaccordance with subsection 127(1). For the purposes of making theassumption, a person may also assume that anyone who signs thedocument and states next to their signature that they are the soledirector and sole company secretary of the company occupies bothoffices. Document duly executed with seal (6) A person may assume that a document has been duly executed by the company if: (a) the company's common seal appears to have been fixed to the document in accordance with subsection 127(2); and (b) the fixing of the common seal appears to have been witnessed in accordance with that subsection. For the purposes of making the assumption, a person may also assume that anyone who witnesses the fixing of the common seal and states next to their signature that they are the sole director and sole company secretary of the company occupies both offices. Officer or agent with authority to warrant that document is genuine or true copy (7) A person may assume that an officer or agent of the company who has authority to issue a document or a certified copy of a document on its behalf also has authority to warrant that the document is genuine or is a true copy. (8) Without limiting the generality of this section, the assumptions that may be made under this section apply for the purposes of this section."
The plaintiff relies upon s 129(3)(b) as an assumption that Mr Toomalatai had authority to exercise the power, namely, ordering goods "customarily exercised and performed by that kind of officer or agent of a similar company".
I accept the defendant's submission that the sections have no application here. It is clear that Mr Toomalatai is not an officer of the plaintiff corporation. Nor is there any evidence of the powers and duties "customarily exercised or performed by that kind of officer or agent in a similar company". Thus, there is no evidence upon which to make an assessment of what those powers and duties are, and no relevant assumptions arise pursuant to s 129 - see Dr Andrew Roberts-Szudzinsky Pty Limited v .a.u Domain Administration Ltd [2006] NSWSC 950 per Barrett J.
Finally, I do not accept the defendant's submission that the plaintiff was under a duty to mitigate its losses here. Notwithstanding that the invoices contained a statement to the effect that the goods remained the property of the plaintiff until paid for in full, in a claim such as this for goods sold and delivered, it is difficult to see what reasonable steps the plaintiff could have taken to mitigate its damages once the fraud of Mr Toomalatai was discovered. His employment was terminated by the defendant, his whereabouts are unknown, as is the whereabouts of the goods in question. It is one thing for the defendant to submit that there is no evidence of those matters, nor any evidence of attempts to retrieve the mobile phones from Mr Toomalatai either prior to or after the termination of his employment by the defendant, however, the defendant has called no evidence that either Mr Toomalatai or the goods could have been recoverable. In those circumstances, there is no failure to mitigate that can be found against the plaintiff.
For all of the above reasons, the plaintiff's claim is made out.

Orders

I make the following orders: 1. There will be a verdict for the plaintiff in the sum of $189,103.00. 2. I award interest on the judgment sum pursuant to s 100 of the Civil Procedure Act 2005 from 14 February 2017 to 29 March 2018, calculated at 5.50% in the sum of $11,600.00. 3. The total verdict and judgment in favour of the plaintiff will be $200,703.00. 4. Defendant to pay the plaintiff's costs on an ordinary basis from 27/10/16 to 12/2/18 in accordance with Rule 42.14(2)(a) of the UCPR. 5. Defendant to pay the plaintiff's costs on an indemnity basis from 13/2/18 to date in accordance with Rule 42.14(2)(b)(i) of the UCPR. 6. Defendant to pay the costs of this application.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 April 2018

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