National Commercial Banking Corporation of Australia Ltd v Batty

(1986) 160 CLR 251

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(Judgment by: Dawson J)

Between: National Commercial Banking Corporation of Australia Ltd
And: Batty

Court:

Judges: Gibbs CJ
Wilson J
Brennan J
Deane J

Dawson J

Subject References:
Partnership
Banker and Customer

Hearing date: 19 April 1985
Judgment date: 13 May 1986

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Judgment by:
Dawson J

The first of two questions for determination in this appeal is whether the respondent, Mr Batty, is liable for the fraud of his former partner, Mr Davis. The fraud consisted of Mr Davis' depositing cheques with the Bank in circumstances which gave rise to a false representation that he was the owner of the cheques or was acting with the authority of the true owners. The answer to that question depends entirely upon whether in committing that fraud Mr Davis was acting in the ordinary course of the business of the firm. If he was, then Mr Batty is liable under s.10 of the Partnership Act 1892 (N.S.W.) for Mr Davis' wrongful acts as his former partner. I agree with the Chief Justice, for the reasons which he gives, that Mr Davis was not acting in the ordinary course of the business of the partnership in depositing the cheques and it follows that Mr Batty is not liable for his fraud. I would emphasize that Mr Davis was acting outside the ordinary course of the firm's business, not because his acts were fraudulent, but because they were of a kind which did not ordinarily form any part of that business. I wish only to add the following observations.

2. Section 10 of the Partnership Act, which deals with wrongs, speaks of liability for acts or omissions in the ordinary course of the business of the firm and may be contrasted with s.5, which deals with the power of a partner to bind the firm by acts done for the carrying on in the usual way business of the kind carried on by the firm. The ordinary course of the actual business of a firm may be narrower than the course of business of the kind carried on by a firm and requires an examination of the actual practices of the particular firm. Cf. Mercantile Credit Co., Ltd. v. Garrod (1962) 3 All ER 1103. Whilst it may nevertheless be relevant to refer to practice generally - in this case the practice of the accountancy profession - in considering the application of s.10, it will only be as a guide to the determination of the course of business of the particular firm which, in the absence of evidence to the contrary, may ordinarily be assumed to follow the usual course. See Polkinghorne v. Holland (1934) 51 CLR 143 . With matters, such as banking practice, which will vary considerably from firm to firm, little assistance may be gained for the purposes of s.10 from an examination extending beyond the firm in question.

3. Whether the wrongful acts of Mr Davis in this case were done in the ordinary course of the business of the partnership is a question of fact which was determined in the negative by both the trial judge and the Court of Appeal so that there are concurrent findings of fact in the courts below. Some assistance is to be gained from this when, as I think to be the case here, the evidence is finely balanced. As was pointed out in Baffsky v. Brewis (1976) 51 ALJR 170, at p 172; 12 ALR 435 , at p 438, this Court must give weight to such concurrent findings and an appellant has a difficult task in persuading it to set them aside. See also The Commonwealth v. Introvigne (1982) 150 CLR 258 , at pp 260-262 and 274.

4. The second question is whether Mr Batty is liable to the Bank for money had and received to the use of the Bank. The basis upon which that claim is made is that the proceeds of the cheques were moneys paid by the Bank to the partnership under a mistake of fact induced by the fraudulent misrepresentation of Mr Davis. The pursuit of this claim to a successful conclusion may have involved the question whether the Bank was required to waive the tort of fraud in order to recover upon a count of money had and received: United Australia, Ld. v. Barclays Bank, Ld. [1941] AC 1 . It does not seem to me to matter for the purposes of this claim whether or not Mr Davis' fraud was in the ordinary course of the partnership business; what matters is whether the Bank by reason of the fraud paid money to the firm under a mistake of fact. Of course, as the Chief Justice recognizes in his reasons for judgment, it may be necessary for the Bank to succeed on this count for the money paid to have been the money of the Bank. That was not established, but, even upon the assumption that it was, the Bank was not entitled to recover it from Mr Batty for the reasons given by the Chief Justice and Wilson J. The credit entry in the partnership bank account was, for the purposes of the claim for money had and received, sufficient to establish that the money was paid, but the question remained whether it was paid to the firm having regard to the circumstance that it was not in fact used in, and did not otherwise enter into, the course of the partnership business. If that had been the case, then whether Mr Batty knew of it or not, he would have been liable as a partner, but as it was not, the question was whether, as explained by Dixon J. in James v. Oxley (1939) 61 CLR 433 , at p 456, the receipt by the partnership of the money in its bank account was a mere technical receipt involving no de facto control on the part of Mr Batty as a partner or whether he knew or ought to have known of its presence before it was withdrawn so that the firm, and he as a partner, might properly have been regarded as holding it to the use of the Bank. There is no basis upon which it might be properly said that Mr Batty knew or ought to have known of the presence of the money.

5. The appeal should be dismissed.