Commercial Law Exam Notes 1x522h

Commercial Law Exam Notes Summary: Bailment (1) (2) -

Definition giving possession (not ownership) of a thing to someone else by bailor (giver) to bailee (receiver) Is there a bailment? Possession or mere licence? Matt Short v Riverina: must have knowledge that you have possession to be a bailee Licence = purely a payment to enter onto land: Ashby v Tolhurst – no transfer of possession, just left car on land - Sydney CC v West; Walton Stores v SCC – transfer of possession – card must be shown to get car released, they were specialists at holding cars for ppl etc - Choosing to receive goods - It will be bailment the moment you do some act to control the goods: Elvin v Plummer (3) What type of bailment is it? - bailment for reward = making money from it eg video shop renting movie to you - gratuitous = eg loaning Ipod to friend - bailment at will = give someone goods and can take them back at any time eg lending car to someone and saying “I want it back when I ask for it” (4) What duties does the bailee (receiver) have? - most important obligation is duty of care (DoC) - think of it as a continuum – zero DoC to full - the extent to which a bailee owes a duty of care depends on the circ of each case: WGH Nominees v Tomblin - gratuitous bailment = only guilty if gross negligence - TNT v May & Baker - the standard of care for bailment for reward is reasonable care of the goods in the circ - Pitt Son v Prouletco – failed in its DoC to look after the wool - Hobbs v Petersham – no breach of DoC b/c axel snapping was unlikely occurrence (5) Has there been a sub-bailment? - someone lends goods to another under a bailment, then the bailee gives those goods to a 3 rd party (called the sub-bailee) - Can you sue 3rd party? There’s two lines of authority a) Can go directly against sub-bailee because the direction the bailee is under moves through to the sub-bailee (more common approach): Morris v Martin b) Restrictive approach – it’s only a bailment r’ship when the sub-bailee knows of the bailment btw the other parties (less used approach) - Pioneer Container Case – looked at privity of contract, whether DoC is diff btw sub-bailee and bailor (held no in this case) (6) What are the rights of bailor/bailee against 3rd parties? - tres = interference with possession of goods - conversion = dealing with goods inconsistent with another’s rights and/or ownership eg if intending to sell goods, but haven’t - detinue = failure to give back goods to person with right to possession of them NB: in some cases, bailor might be able to sue 3 rd party – can sometimes use more than one of those grounds (7) Do the bailees fit into a specially recognised category? (a) common carrier - eg Aus post, carry goods for ppl and don’t discriminate - Common Carriers Act 1902 (NSW) – they can only exclude liability for (i) acts of God (ii) inherent defect in the goods

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Blower v Great Western Railway – bull went crazy while common carrier taking it – it was one of the exceptions under the Act – there was no negligence - S 3 Act – if giver of goods doesn’t state value, goods are over $20 and it includes eg gold or silver coins, clocks, maps, paintings, china, silk or certain animals – then carrier won’t be liable - For animals – liability capped: (a) horses $100 per head (b) cattle per head $30 (c) sheep/pigs $4 per head (b) Innkeepers - an innkeeper is one who provides accommodation, but only for travellers - a traveller is defined as one who’s booked accommodation for that actual night - if traveller’s stuff is lost, innkeeper is an insurer like a common carrier - for damage, if reasonable care was taken, then not liable o Innkeepers Act 1968 (NSW), innkeeper not liable for certain things of certain kinds – if haven’t really done anything wrong, then you won’t be liable - S 7: liability of innkeeper limited to $100 provided put up a sign (but there’s exceptions to this if you were negligent or it was a deliberate act when someone has entrusted goods to you for safe keeping: s 7(3)) - See Theeman v Forte Properties – a. T used to travel there every year – however, just because go there every year doesn’t make you a lodger – must be more permanent than that b. Hotel had sign up and said liability limited to $100 c. T said s 7(3) exception applies – negligent/deliberate act = loss of jewellery – and it did apply – hotel liable d. Do not have to tell the hotel the value of the goods, just give to them and say put it in safe keeping for me (8) What can you do with uncollected goods? - there’s 3 categories thereof 1. ready for delivery, bailor fails to deliver eg buy something from Myers and bailor never turns up to get it 2. bailee needs to give notice, but cannot get hold of bailor eg gets something fixed, don’t get person’s correct phone number, so never collect the goods 3. cannot get hold of person who’s goods they are – and a reasonable time has ed - Uncollected Goods Act – disposal w/o being liable -> o If it’s $5000 worth of stuff, have to get court order to dispose o If there was a dispute over the cost, no matter what good or reason, have to get court to determine the price before disposal o Have to give 28 days notice of disposal for goods less than $5000 o For goods worth $500-5000 – 6 months’ notice – then can sell or take the goods Bailment   -

history much of bailment comes from Roman times What is bailment it’s its own area of the law don’t need contracts for it to operate it’s about what happens when you give someone possession of a thing When you hand it over, the question is: who bears the risk? Bailment merely covers possession, and NOT ownership The most important thing is transfer of possession from one person to another Because of its nature, the law in this area is most unstructured – needs to be flexible to cope, comes from such an old history – it’s a bit all over the place for these reasons It really covers goods that must be handed back at a later date eg a loan, or hiring something -> transfer the possession when loaning it to someone Bailor = person who parts w/ possession Bailee = person who receives that possession

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Once you become a bailee, many issues/responsibilities arise

Question One: Is there a bailment ie has possession been transferred? Compare to mere licence… Case Analysis: Matt Short v Riverina Facts: - someone built a boat and waned to send it - loaded it onto another boat to send it o boat loaded on semi-trailer and taken to the dock o put on law-loader to take it to the boat o crane lifted it from the low-loader to the ship - person who made the boat, R, was to send the boat overseas, had a contract and all – arranged with MS to do all the loading and shipping – so he’s there directing the stevedoring - the low-loader was driven under a bridge and half the boat was knocked off - $120K worth of damage - the manufacturer sued MS and said he was in possession when it was damaged – therefore he would owe the manufacturer the $120K - MS argued that he had no possession of the boat – he was merely in charge of directing the stevedores to get the boat on the ship to fulfil the contract Held: - MS did not have possession - One must have knowledge of possession to be a bailee  -

Mere licence v Bailment Bailment = having possession/dominion/control Licence = purely a payment to enter onto the land whether or not someone is bailor or licensor is important in cases eg where you park a car on someone else’s land - if you’re a bailee, have many obligations to the owner of the car as you have possession of it Case Analysis: Ashby v Tolhurst Facts: - A lad parked car on paddock, paid for it, and then it was stolen! - The lad tried to sue the owner of the land under bailment principles – ie pay me for my stolen car ya bastard Held: - there was no transfer of possession as all the lad did was leave the car on the land - the owner of the land had no control over the car at all - therefore, no bailment, no damages Case Analysis: Sydney CC v West Facts: - W drove car into car park & had to give ticket to get back out - Car was stolen by a thief who said he’d lost his ticket and asked to get out – the car park managers said “sure can mate” - W sued saying he transferred possession of the car to the car park and letting someone else take it was a breach of their obligation Held: - this case was a bailment and possession was transferred to the owners of the car park Per Barwick CJ & Taylor J: - there was a contract – and a bailment because possession had to be transferred to park the car there - the ticket said on it – this card must be shown in order for the car to be released - on this ticket was an exemption clause about damage, but “it has no application to negligence in relation to acts done with respect to a bailor’s goods which are neither authorized nor permitted by the contract. For instance, if, in the present case, one of the attendants at the parking station has been allowed by the management to use the respondent’s car for his own purposes and, in the

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course of driving it, had caused damage to it by his negligent driving, the clause would afford no protection” - if the appellants handed possession of the car to the thief then West is entitled to recover – not a mere act of negligence - Ashby v Tolhurst can be distinguished because the D’s default was mere negligence or inadvertence and the facts are completely different Case Analysis: Walton Stores v SCC Facts: - someone parked car – came back and it was stolen - W sued council saying it had possession of the car – so had to pay for it - Because of the last case, they’d changed the of the ticket – saying that they didn’t take possession of the car upon entry into the car park - SCC tried to rely on Ashby case Held: - Council guilty - Wasn’t like Ashby’s case at all - The car park was for a specific purpose, ie for parking - Ticket made clear that had to pay before you could get your car back - Possession therefore was transferred and Ashby not relevant 

Choosing to receive goods

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Must one choose to receive goods in order to be a bailee, or can they merely be given? Eg someone leaves you something on your doorstep & then say it’s bailment and you have to look after the good - It will be bailment the moment you do some act to control the goods: Elvin v Plummer Case Analysis: Elvin v Plummer Facts: - thief pretended to be the D and said “I’d like to get some goods off you dude” - P said “super, I’ll send ‘em round” and sent them to the D - D then held the goods - Then the thief called the D and said “we’re here to pick the goods up you’ve got waiting for us” - The D assumed it was theirs and gave them away - The supplier (P) then sued the D for giving them away as bailee Held: - Thief was rather cunning! - D accepted the goods and held them in their possession - They therefore became bailees and had to look after the goods - Unfortunately they fell for the trick and must be liable  Case Analysis: HD & HO Wills v SRA (State Rail Authority) Facts: - there was a manufacturer of cigarettes (W) - TNT owned warehouses which companies used – used the rail-line of SRA to move goods etc - there was lots of theft going on in the area - one night a pallet of 300K smokes stolen - W said TNT responsible, but no - W then said SRA responsible b/c it owned the land around the factory – which the thieves drove the drunks on – so SRA had possession of that truck - Curious argument! Held: - merely driving on one’s land doesn’t mean you acquire possession if you’re the owner of the land on which someone is driving - this is an absurd argument you fools

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“Wills…claimed the SRA was liable, saying that the theft was contributed to by the SRA’s not giving proper security in the fail terminal yard…..[but the problem] was due primarily to the practice of TNT of leaving its shed unstaffed at night.”

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Types of Bailment there’s many types eg repair, loan, reward, pledge etc: Coggs v Bernard bailment for reward = hand over goods to make money from that lending eg hiring a movie; repairing a car = bailment for reward – to work out whether it’s a bailment for reward have to work out if the supposed bailor is making money from it (standard = reasonable care of goods: TNT v May) gratuitous = not making money, but eg loaning something to a friend bailment at will = give someone goods and can take them back at any time eg lending car to someone and saying “I want it back when I ask for it” NB: all gratuitous bailments are bailments at will – need no for consideration to enforce them

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Duties of the bailee bailee has many obligations eg return goods on demand and in accordance with the bailment most important = duty to take care of the goods Extent of duty of care? if bailee is an insurer – if anything goes wrong with the goods whilst in possession of the bailee, they have to pay for them on other hand, a bailee could have zero risk it’s a continuum the extent to which a bailee owes a duty of care depends on the circ of each case: WGH Nominees v Tomblin

Case Analysis: WGH Nominees v Tomblin Facts: - T bought wife a ring - Mrs T didn’t like it, and made visits to store while Mr T was away - Owners of store knew Mrs T wanted a certain type of ring and pressured Mr T into buying it - They went into Mr T’s office and said here’s the ring, hold on to it while you think about it - He kept it in his pocket then later on realised he’d lost it - Jewellers tried to sue Mr T saying he had possession of it as bailee and needed to take reasonable care of it Question: Was it a bailment for reward or a gratuitous bailment? Held: - the court looked at the benefit and who it would be for - if the benefit was only for the bailor, then only gross negligence would mean Mr T was responsible for it - If it was a gratuitous bailment (the opposite of a bailment for reward), then it’s a completely different standard – Justinian in his book “the ways in which a real obligation is contracted” – “A person…is only answerable if he is guilty of fraud and NOT for non-intentional fault such as carelessness or negligence. He cannot therefore be called to if the thing deposited, being carelessly kept, is stolen.” – so the owner has to bear the risk - However, if there’s connivance or gross negligence, then he might be entitled to relief, but he bears the onus of proof and evidence must be forthcoming: O’Day v O’Hara - the loaner of something must be ware of it – jewellers had to take care - Mr T took reasonable care of it Ration: per Zelling J “…the defendant…was put in an embarrassing position, where he had no opportunity to make proper arrangements for the safe custody of the ring and that the ring was stolen as a result of it being foisted on him in the circ which I have detailed….I am not prepared to find him negligent in those circ” Case Analysis: TNT v May & Baker

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Facts: Held: -

TNT running delivery route – picked goods up from M Sub-contractor pick them up and take them to TNT depot, then TNT deliver them with its own trucks Sub-contractor picked goods up, took them to TNT depot, but was shut, so took goods home overnight The tuck was burnt down over-night and the goods were lost M sued saying it was a bailment for reward (making money from it)

the standard of care for bailment for reward is reasonable care of the goods in the circ Onus on bailee to disprove negligence (although this is an uncertain point of law) Rather than looking at what the bailee ought to have done in the circ, the court focuses on what was actually done and whether it was reasonable in those circ - It was implied in the contract the goods would be taken to the depot at the end of the collection round – and there was a departure from the contract - TNT was liable for damages for breach of the contract whether or not the loss was caused directly by departure of the of the contract - In this cases, TNT was liable - Barwick CJ held: “What in fact occurred was, in my opinion, such a departure from the promised carriage that TNT was not entitled to rely upon the exemptions of the written contract” - (Windeyer J dissented – nothing in contract that TNT had obligation, the goods were at the risk of the owner of the goods) NB: if you deviate from the contract, you cannot rely on the exclusion clauses therein; and you could sue under s 74 TPA if they do deviate – assuming they’re a corporation in business – which implies due care and skill and fitness for purpose Case Analysis: Pitt Son v Prouletco Facts: - D sold wool to P under contract - D kept the wool at its store for the P to pick up - D was a seller in possession (or bailee in possession) - And it was a bailee for reward - A store house was 40 yrs old and made of wood, no fire sprinklers, holes in the surrounding fence - Someone burnt it down – who was responsible for the goods? - Seller said it was innocent of any wrongdoing Held: HCA - reasonable care includes costs of a 3rd party’s loses - could’ve done a lot more to protect the wool, but failed to - bailee (person in possession of goods of another, as they’d already sold the goods to the bailor) had the onus of disproving liability, but it didn’t and it didn’t take reasonable care of the goods, thus liable - the damage that resulted was from the bailor’s negligence and was not too remote in the circ - Gibbs CJ: “…[it was] a bailee, with duties analogous to those of a bailee for reward, and that the relevant duty was to take such care of the goods as was reasonable in the circ” - D relied on authority about 3rd parties damaging goods and it not being the 1 st party’s fault – both those cases were not relevant b/c the 3 rd party’s act was unrelated to the original tortious act: “here, however the negligence of the appellant lay in its failure to take reasonable care to keep the wool secure by providing an adequate fence” - “The appellant has failed to show that it took reasonable precautions to keep the wool safe, and the damage that resulted from its breach of duty was not too remote.” Case Analysis: Hobbs v Petersham Facts: - H was driving goods (bailment for reward) - The axle snapped and the goods were damaged Qu: was the axel snapping the fault of H and its failure to provide reasonable care of the goods?

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Held: -

it appeared, on the evidence, H constantly checked the reliability of its truck The axle snapped suddenly – very hard to detect such a problem -> the truck was near new and in good condition Onus lies on bailee to disprove fault by showing the steps it did take to prevent the event occurring In this case, H the bailee did just that

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Sub-bailment someone lends goods to another under a bailment, then the bailee gives those goods to a 3 rd party (called the sub-bailee) - r’ship btw bailor and sub-bailee causes a problem – can they be sued directly? - This is an uncertain point of law, but you probably can sue as if a normal bailment r’ship: Morris v Martin - There’s two lines of authority c) Can go directly against sub-bailee because the direction the bailee is under moves through to the sub-bailee (more common approach): Morris v Martin d) Restrictive approach – it’s only a bailment r’ship when the sub-bailee knows of the bailment btw the other parties (less used approach) Case Analysis: Pioneer Container Case Facts: - there’s 3 sets of Ps - Ps wanting to ship goods o/s - The middle man was a shipping agent who did all the planning - The goods were on the ship which sunk in fog - The bailor tried to sue against the shipping agency (as bailee) - They also tried to sue the ship owners (as sub-bailees) - In both cases they argued there was want of care for the goods Issue 1: could they go against the shopping owners directly? The court looked at the two possible approaches, but basically side-stepped the issue Issue 2: what about the agency? There were two sets of contracts btw (a) ppl sending the goods and the agent and (b) the agent and the ship owners (in that contract, it was said the ship owners could go on any they so pleased) - btw the agent and the ship owners – made agreement that if something went wrong, a dispute would be heard in a Taiwanese court (restrictive trade jurisdiction clause) - however, the contract was not with the sellers – so not binding on them – so went to court in Hong Kong - to ensure they didn’t have to go to Taiwan, the sellers waited before applying to the court in Hong Kong – because there was a time limitation on going to Taiwan court – they didn’t wanna go to that court b/c the as btw agent and ship owner were so wide Held: - the ship owners took goods knowing they belonged to the owners (sellers) - b/c it was a sub-bailment, the head contract still applied – no privity of contract - therefore the shippers could go on any they wanted – and the sellers were bound by those - “On the authority of the Gilchrist Watt case, their Lordships have no difficult in concluding that, in the present case, the shipowners became on receipt of the relevant goods the bailees of the goods of both [the bailee and the sub-bailee]. Furthermore, they are of the opinion that the shipowners of the goods became the bailees of the goods for reward” - it wouldn’t be right to insist on two different standards of care because the sub-bailee isn’t paying the bailor – so it must still be a bailment for reward  -

Duties of Bailor common law duties eg where bailor gives goods, they must warn of the dangers of the goods

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Termination

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if goods, the subject of which are under a bailment, are destroyed – then bailment ends or, if wrongful act of the bailee is committed, ie if bailee goes off and does something outside the bailment, the bailment there ends

 Rights of bailor/bailee against 3rd parties (i) tres = interference with possession of goods (ii) conversion = dealing with goods inconsistent with another’s rights and/or ownership eg if intending to sell goods, but haven’t (iii) detinue = failure to give back goods to person with right to possession of them NB: in some cases, bailor might be able to sue 3 rd party – can sometimes use more than one of those grounds  (a) -

Kinds of bailees common carriers carry goods for people they say they’ll carry for anyone, w/o discrimination – but can discriminate if eg no room for the stock: James v Cth - Aus post is an eg of common carrier - Can exclude common carriers in contracts - Common Carriers Act 1902 (NSW) – they can only exclude liability for (i) acts of God (ii) inherent defect in the goods Case Analysis: Blower v Great Western Railway Facts: - a bullock went crazy and fell off the train of a common carrier Held: - it wasn’t the fault of the carrier – it amounted to one of the two available exceptions - per Keating J: “…the escape of the bullock was wholly attributable to the efforts and exertions of the animal itself, and that its escape was not occasioned by or attributable to the negligence of the company” o -

S 3 Common Carriers Act A certain class of goods, over a certain price – then the person who’s the carrier won’t be liable The price is $20 It applies to land only And only if you don’t notify the carry of the true value of those goods Goods - it applies to include gold or silver coins, clocks, maps, paintings, china, silk Can also apply to animals if you don’t declare the value – liability capped – (a) horses $100 per head (b) cattle per head $30 (c) sheep/pigs $4 per head

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Innkeepers common law is now modified by statute, but hasn’t replaced the rules an innkeeper is one who provides accommodation, but only for travellers a traveller is defined as one who’s booked accommodation for that actual night if traveller’s stuff is lost, innkeeper is an insurer like a common carrier for damage, if reasonable care was taken, then not liable also, under the Innkeepers Act 1968 (NSW), innkeeper not liable for certain things of certain kinds – if haven’t really done anything wrong, then you won’t be liable

s7 liability of innkeeper limited to $100 provided put up a sign (but there’s exceptions to this if you were negligent or it was a deliberate act when someone has entrusted goods to you for safe keeping: s 7(3)) Case Analysis: Theeman v Forte Properties Facts: - T used to go to Blackheath for holidaying o -

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Held: -

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She had expensive jewellery and asked for it to be put in the safe at the inn There was no contract When she came back a week later it had gone Was the bailee (innkeeper) responsible? hotel was an innkeeper however, there’s a difference btw a lodger (who stays on a semi-permanent basis) and a traveller at common law if you’re a lodger, it’s your own problem T used to travel there every year – however, just because go there every year doesn’t make you a lodger – must be more permanent than that But, the hotel had a sign up saying it limited its liability So, prima facie, this limits its liability to $100 However, T argued it was under exception of safe keeping and limit doesn’t apply The exception is under s 7(3): “…s 7(1) shall not have effect where, after the traveller became a guest at the inn, the property that was lost of damages was deposited by him or on his behalf expressly for safe custody with the innkeeper or his servant authorized, or appearing to be authorized, for the purpose, and, if so required by the innkeeper or that servant, in a container fastened or sealed by the depositor: or he, or some person on his behalf, was unable to deposit the property expressly for safe custody with the innkeeper or his servant by reason of the refusal of the innkeeper or of the servant to receive it or by reason of some other default of the innkeeper or servant; or where the cause of the loss or damage was some default, neglect or wilful act of the innkeeper or his servant” The innkeeper tried to argue that T didn’t say the value of the stuff, but “all the person must do… [is] express to the innkeeper what the object of the deposit is, if he would being himself within the of the statute. It does not depend on the form of the words used…” So there is no requirement for T to do so, so long as they say “here’s my stuff” Therefore, the innkeepers liable Uncollected goods there’s 3 categories thereof 4. ready for delivery, bailor fails to deliver eg buy something from Myers and bailor never turns up to get it 5. bailee needs to give notice, but cannot get hold of bailor eg gets something fixed, don’t get person’s correct phone number, so never collect the goods 6. cannot get hold of person who’s goods they are – and a reasonable time has ed Uncollected Goods Act – disposal w/o being liable -> o If it’s $5000 worth of stuff, have to get court order to dispose o If there was a dispute over the cost, no matter what good or reason, have to get court to determine the price before disposal o Have to give 28 days notice of disposal for goods less than $5000 o For goods worth $500-5000 – 6 months’ notice – then can sell or take the goods

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Summary: Principal and Agent Agent = person who’s acting on principal’s behalf; principal appoints agent to act on behalf of principal – fiduciary r’ship (1) Categories - Special = agent appointed for special powers eg limited powers to do things; special is usually a one-off thing - General = agent appointed for general purpose eg insurance broker, general purpose of acting on company’s behalf – general insofar as scope is given - Universal = agent appointed for pretty much everything eg power of attorney – appoint an agent to do everything for your business while you go overseas for a year eg bank s, bills – they acts as though they’re you (2) How’s P&A come into effect? (a) Express – “you’re my agent”; or company constitution (b) Implication – (i) necessity (wives/bailees – old laws) (ii) circ (give money to buy loaf of bread to someone, w/o saying you’re my agent) – see Hely-Hutchinson v Brayhead (c) Estoppel – rep’s made by agent; if agent has actual or apparent authority, then the principal is bound by it (i) there must be a holding out; (ii) by a person with actual authority (ie A has actual authority – cannot hold out if you have no authority at all) (iii) the 3rd party must rely on the representation - Then the principal cannot deny authority of A if those elements are satisfied: Freeman & Lockyer v Buckhurst Park Properties (d) Ratification – principal later accepts/adopts transaction of the now agent - there must be an unequivocal acceptance of the agent’s earlier act that was not at first made under authority: Bolton v Lambert (3) Liabilities of the Agent - 3 diff ways agent can go into contract on behalf of principal (a) Option 1: Principal Disclosed - ie “I’m acting on behalf of…” - Principal (P) is generally a party to the contract – bound by it: Black v Smallwood (b) Option 2: Unnamed Principal - tell 3rd P of existence of principal w/o disclosing his name - generally P bound, A not (c) Option 3: Principal Undisclosed - no mention of a P at all - A generally bound, often P bound as well - Sin Yin Kwan v Eastern Insurance: A had authority of P to give out insurance policies; therefore liable for A’s actions NB: can modify of the agreement (eg I am bound personally to the contract); and if A is acting outside authority of P, then P not liable etc

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The basics separate from tort/contract, it’s its own branch of the law, yet often is intertwined with those laws eg contract, vicarious liability agency is a legal r’ship btw two people acts of one of those persons is liable on the other ie A can do acts binding on B agent = person who’s acting on principal’s behalf; principal appoints agent to act on behalf of principal just because two people are legally connected does NOT mean they are necessarily in a r’ship of principal/agent P&A can be distinguished from bailment – just because giving one person possession of something, doesn’t mean you’re giving them a responsibility to act on your behalf P&A can be distinguished from trusts – where someone owns legal title under obligation to beneficiaries – but the trustee doesn’t stand in the shoes of the beneficiaries However, P&A invokes fiduciary duties A real estate agent in as agent in a loose sense – but they merely put two parties together, as opposed to standing in one’s shoes and acting on their behalf in totality The kinds of agencies: 3 types o Special = agent appointed for special powers eg limited powers to do things; special is usually a one-off thing o

General = agent appointed for general purpose eg insurance broker, general purpose of acting on company’s behalf – general insofar as scope is given

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Universal = agent appointed for pretty much everything eg power of attorney – appoint an agent to do everything for your business while you go overseas for a year eg bank s, bills – they acts as though they’re you

How’s P&A come into effect? many diff ways 1. expressly easiest way is to say “you’re my agent” – express words or clear conduct, or through a contract can also come about through eg company constitution – sets out powers for who can do what and sometimes for rules of agents 2.

implication  agent by necessity o applies to two kinds of ppl (a) wives (b) bailees o very old law o wives used to have authority to pledge credit on behalf of their husbands to buy necessities of life o bailees – someone held your goods, then there’s an emergency – then could, say, throw you goods off a ship so it didn’t sink – then might not be liable for the goods  by circ o clearly implied by the circ that you’re an agent o eg someone says – have this money and buy me a loaf of bread – you act as the agent in getting the bread w/o being told “you can act as my agent” o OR o You can act as my agent to sell my car – implied by circ might be to the car in order to sell it w/o express permission to

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estoppel

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this is based on representations made by the principal

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4. ratification agent does something for you which, at the time, they are not authorised to do later that say, “yeah that was fine” they then have adopted the transaction (ie ratified it)

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Authority of the agent if the agent has authority, then consequences flow from it if agent does something that is outside the authorised authority given by the principal, the principal will not be bound by it if the agent had authority, then the principal is bound regardless authority can come from any of the above categories – ie express, implied, estoppel, ratification authority goes into two categories (1) actual express – “I allow you to do this” implied – authority to do your job, but w/o actual acknowledgment of authority to do the jobs within that job description eg if you sell clothes to someone, you have implied authority from the company to make a contract with the buyer ratification (2) ostensible/apparent estoppel for estoppel, must look at the r’ship btw 3rd party and principal what appears to be the authority of the agent, may not be their authority – the apparent authority could be greater or lesser than it actually is importantly, if agent has actual or apparent authority, then the principal is bound by it apparent authority doesn’t look at what the 3rd party subjectively believed

 the elements of apparent authority (i) there must be a holding out; (ii) by a person with actual authority (ie A has actual authority – cannot hold out if you have no authority at all) (iii) the 3rd party must rely on the representation - then the principal cannot deny authority of A if those elements are satisfied Case Analysis: Freeman & Lockyer v Buckhurst Park Properties (BPP) Facts: - BPP company set up by K&H (directors); were property developers - H didn’t do much except invest some cash - K ran it - K had contract with architects F&L - BPP said K had acted outside his authority as agent and could not have made a contract with F&L b/c of that - and refused to pay up moneys owed Qu: does K have either actual or ostensible authority to make a contract on BPP’s behalf? Findings: - there was nothing expressly stated in BPP’s documents giving K express, actual authority - a single director does not have authority to sign under implied, actual authority (a managing director does though) - so it came down to a question of ostensible authority - F&L argued that K held out he had authority of BPP and F&L relied on it Held: - BPP allowed K to do all things he wasn’t strictly suppose to do as a director - He did have ostensible authority on which F&L so relied - Therefore, contract binding upon them and F&L is thus estopped from denying the contract Quotes: per Willmer LJ

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“The act of K in engaging the Ps was clearly one within the ordinary ambit of the authority of a managing director. The Ps accordingly do not have to inquire whether he was properly appointed. It is sufficient for them that under articles there was in fact power to appoint him as such.” (ie K basically had powers as managing director and acted like one, even though it wasn’t formally allowed)

Case Analysis: Garnac Grain v HMF Faure & Fairclough Facts: - HH director of P; P got taken over by BG, HH still director on the board - Another director was R - BG was on the verge of going broke - HH threw money at it to keep it going - HH then agreed to put even more money into the company to keep it running, so long as he was covered and guaranteed get all money back, including what he’d given before - R wrote a note and they both signed it - P ended up going under and HH wanted his money from BG - BG said R had no authority to sign the deal and therefore it was not binding upon BG Held: - R was doing a lot on behalf of the company - But his was a diff authority from the last-analysed case - In this case there was implied, actual authority - The board agreed that R could do all these things on its behalf – and it was common practice such that it was implied  -

Rules as to ratification there must be an unequivocal acceptance of the agent’s earlier act that was not at first made under authority the principal must actually exist at the time the agent acts ratification of that act must occur within a reasonable time after the agent has acted

Case Analysis: Bolton v Lambert Facts: - L writes letter of offer to B - S, employee of B, writes a letter and accepts - But at that stage, S had no authority to accept the offer - S gets a copy of the contract, but then revoke it saying its suck - Then L’s board sues for specific performance - In order to help them sue, the board es a resolution adopting the contract Qu: when was the contract ratified? L’s argument: there was never an acceptance because S didn’t have authority, so L couldn’t have possibly accepted – therefore no contract Held: - B wins - There was a clear offer and acceptance; of this there is no doubt - But, having accepted, the offer was revoked - Can an offer be revoked, if the offer was made by someone who was at the time acting outside his authority? - The retrospective action of ratification is allowed and agent for L therefore acted within his authority NB: Wayne suggests this is a bad, if not a plainly erroneous, decision. How can ratification simply wind back the clock and ignore all that has ed, including the revoking, before it? To him, at least, it did not seem possible.  -

The duties of the agent an agent must follow her instructions

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must keep things confidential must take reasonable care of property agent owes Fiduciary duties to principal (a) cannot profit from conflict of interest or (b) profit from position w/o permission to do otherwise

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rights of the agent against principal rights to paid commission lien paid for expenses etc

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Liabilities of the agent there’s three different ways to sign contract for 3rd parties 1. tell 3rd P of existence and name of principal (principal disclosed) 2. tell 3rd P of existence of principal w/o disclosing his name (principal unnamed) 3. don’t mention there’s a principal at all to 3rd P (undisclosed principal)

Option 1: Principal Disclosed - ie “I’m acting on behalf of…” - agent (A) is generally NOT a party to the contract, unless they want to be, then they can sign up to it too - Principal (P) is generally a party to the contract – bound by it - These general rules are subject always to the circ of each case Option 2: Unnamed Principal - P generally bound by contract - Generally A not bound, but stronger inference they should be bound - So A could open self up to liability in this category Option 3: Principal Undisclosed - A generally bound - Often P can be bound too, occasionally not Case Analysis: Sin Yin Kwan v Eastern Insurance Facts: - this was a category 3 case; signed contract not disclosing there was a P - almost a category 2 case (even though his Honour believed it was a category 2 case, he was bound to treat it as a 3 b/c the trial judge made a poor error on a point of fact, which his Honour could not overturn) - the facts concerned a shipping company which got insurance from an agent – didn’t know anything about there being a principal - the ship got into trouble, I think, and they wanted insurance money - insurance company said they weren’t a party to the insurance policy and refused to pay Held: - in category 3 cases, can generally sue P - generally both P and A are parties on the contract - any defence a 3rd party has against A, he/she also has against the principal - such cases generally come about where A did something wrong, and 3 rd party suffers from it, and wants to go against P to get more money Held in relation to the facts: - the P is a party to the insurance policy and has to pay up - although sometimes P might not be able to be sued, this is not one such case - it was important that the A had authority of P to give out insurance policies - The Ps knew what was going on, so stop making stupid excuses for not paying up! Relevant principles: per Lord Lloyd

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“For present purposes the law can be summarised shortly. (1) An undisclosed principal may sue on a contract made by an agent on his behalf, acting within the scope of his actual authority. (2) In entering into the contract, the agent must intend to act on the principal’s behalf. (3) The agent of an undisclosed principal may also sue and be sued on the contract. (4) Any defence which the 3 rd party may have against the A is available against his P. (5) the of the contract may, expressly or by implication, exclude the principal’s right to sue, and his liability to be sued. The contract itself, or the circ surrounding the contract, may show that the agent is the true and only principal. ” o Qualifications of the 3 categories (A) of the contract: may modify the rules – , for eg, could say “liable personally” – then cannot sue anyone else: Sin Yin Kwan (B) nature of contract: certain contracts where 3 rd party might actually want A’s services, not the P’s – so nature of the contract excludes the P (C) agent must act on behalf of the principal – designed to stop people using others (D) must be acting within authority of the P – ratification is NOT possible here  -

Liability of P A does a deal with one Bob Smith, but does it w/o authority of the P If A’s not acting inside authority, there’s no connexion btw 3rd party and P But can sue A under breach of warranty of authority or deceit (deceit requires fraud) -> some say can get damages of contract (which would be for lost profits – they make promises come true in monetary ), others say equitable estoppel principles

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When Agent stuffs up if agent stuffs up in scope of authority of P, P is liable for torts committed by A (in actual or apparent authority) - like vicarious liability

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Termination to stop someone acting as an agent can: 1. could have someone appointed to do a thing, as soon as that thing is done, the r’ship ends 2. both parties can agree to end 3. principal could revoke 4. agent could access renunciation 5. insanity – go crazy 6. death (person), non-existence (company)

 I. II. -

Types of Agents Factor someone whose business is to buy and sell for another see Factors (Mercantile Agents Act) De Credere Agent agent sells to third person from P A not a party b/c said acting for P But there’s additional agreement where A agrees to pay P the money, if 3rd party cannot pay, then A bears the loss Insurance Broker buy insurance for the ppl who want to get insurance insurance agents work for insurance companies Powers of Attorney very broad see Powers of Attorney Act continues after death Corporations under Corporations Act Real Estate Agents

III. IV. V. VI.

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don’t really fit here – they just bring parties together

Summary: Guarantee (1) What is guarantee? - contract in which surety guarantees creditor/obligee an obligation of the debtor/obligator o guarantor/surety = they make an insurance (eg parents for bank loan) o debtor/obligator = has to do something (eg kid paying off loan) o obligee/creditor = person to whom obligation is owed (eg bank) - the guarantor has to promise to do something (either pay money or do some act) if the debtor fails in his/her duty: Sunbird Plaza v Maloney - surety’s obligations only kick in on default by debtor: Century 21st Real Estate - consideration (there must be under contract principles) o granting credit or supply of goods by the creditor to the debtor at the request of the surety: Morely v Boothby o creditor giving debtor extra time for payment of the creditor acts to defer suing the debtor at the request of the surety: The Colonial Bank of Aus v Kerr (2) Liabilities and rights of guarantors? - once default occurred, creditor entitled to call upon surety to pay debt; even w/o 1 st pursuing debtor: Sunbird Plaza; don’t even need to make a demand on surety to pay before come collecting: Century 21 - once surety pays up, they have rights: o recover from debtor all moneys the surety paid debtor o have all securities in hands of creditor assigned to surety so can enforce same recover from debtor the money paid to creditor o recover contribution from any co-surety - surety also rights to set aside guarantee where it: o is result of misrep, duress, undue influence: Lloyd’s Bank v Bundy o is result of unconscionable conduct: Amadio o is unjust within Contracts Review Act 1980 (NSW) - is given by married woman for husband’s debt where guarantee has been gained from husband w/o wife properly understanding its effect and where creditor has stood by w/o taking steps to see wife properly informed of her rights: Yerkey v Jones – approved in Amadio (3) Continuing guarantees and “all moneys” clauses? - “all moneys” = surety having to pay all debts in case of default problem: when surety isn’t told of the full extent of its guarantee to debtor: a. Is the consideration broad enough to such a clause? b. If it is, clause must be construed following objective intentions of the parties - Re Piccolo: ‘all moneys’ cl = see 4 things to consider in interpretation (4) Subrogation? - where debtor defaults, surety pays up creditor, then rights of creditor are ‘subrogated’ to surety against debtor: Sunbird Plaza - The right to any such property (ie security) will only be available if creditor has been paid in full and has no other use for the security – if creditor still needs more, then it won’t be subrogated: Austin v Royal - Equity creates fiction where surety replaces creditor: Banque Financere De Le Cite v Parc (5) Contribution btw co-guarantors? - right to contribution comes in when 2/more sureties – one pays creditor upon default by debtor – one who makes payments may seek contribution by others - in contract, one can determine what share he or she is to pay: Hong Kong Bank: o co-sureties can agree to modify right among themselves o co-sureties cannot agree with creditor to restrict right of contribution among co-sureties o co-sureties agree with creditor to suspend right to seek contribution - where one co-surety gets all benefits of transaction, so the parties may not be said in equity to be co-sureties and right of contribution will not be permitted: Official Trustee Bankruptcy (6) Discharge?

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debtor pays off money, surety discharged; (unique) if debtor/creditor change underlying obligations, w/o guarantor’s consent, then G is discharged; creditor breaches condition or intermediate term – guarantor can terminate contract

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Guarantee 

The nature of guarantee

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definition = contract in which surety guarantees creditor/obligee an obligation of the debtor/obligator so, this r’ship necessarily involves 3 parties guarantor/surety = they make an insurance (eg parents for bank loan) debtor/obligator = has to do something (eg kid paying off loan) obligee/creditor = person to whom obligation is owed (eg bank) it applies to more things than just paying money the guarantor has to promise to do something (either pay money or do some act) if the debtor fails in his/her duty eg home-loan – if debtor fails, parents have to pay bank out: Sunbird Plaza v Maloney the guarantor and obligator must be two separate ppl eg 2 – get someone to build you a house – term says “you’ll use reasonable care and skill in working” – get someone else to guarantee that – then can sue both if it doesn’t happen surety’s (a person who makes himself liable for the actions of another) obligations only kick in on default by debtor: Re Taylor; Ex parte Century 21st Real Estate if a contract is void, a surety will be discharged (in marked contract with indemnity): Total Oil Products v Robinson

o o o -

Case Analysis: Re Taylor; Ex parte Century 21st Real Estate Facts: - applicant (21st) claimed to be creditor entitled to seek to set aside deed executed by debtors under Bankruptcy Act - two doc’s in qu related to loan made by applicant to debtors (guarantors) to company (South Pacific) – done by promissory notes - it was guaranteed that the guarantors would make payment, when demanded any sum to 21st and that if South Pacific failed, the debtors (guarantors) would pay 21st - the question before the court was whether or not 21st was a creditor; and whether or not a demand needed to be made so as to become a creditor Held: - cl 2 – concerning the obligation on South Pacific to pay up – did amount to a guarantee, rather than an indemnity Per Burchett J: - surety’s obligations only kick in on default by debtor: see eg Baber v Mackrell - a liability came into effect without any demand for payment – the moment South Pacific failed to honour its obligations under the guarantee - “It follows that the applicant was, at the date of the deed of arrangement, a creditor of the guarantors who executed it as debtors” - His Honour avoided the issue of whether it has to come after demand, and just said demand really wasn’t relevant to this case  -

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Consideration a contract of guarantee needs consideration: can be -> o granting credit or supply of goods by the creditor to the debtor at the request of the surety: Morely v Boothby o creditor giving debtor extra time for payment of the creditor acts to defer suing the debtor at the request of the surety: The Colonial Bank of Aus v Kerr o a payment by creditor to the surety in return for the guarantee so it’s giving consideration in return for what the surety promises, in order that the surety will be bound by the agreement consideration can be enough if the surety gets some benefit or the creditor suffers some detriment: Morely v Boothby

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consideration also important for working out extent of liability of the surety – so guarantee given in consideration of bank continuing an existing didn’t cover opening by the bank of a new : National Bank of Nigeria v Alolesi most modern guarantees are widely drawn – consideration is for ‘all moneys’ owed by debtor to creditor if guarantee is expressed to cover particular consideration, won’t prevent guarantee from being set aside if consideration is misrepresented: Vadasz v Pioneer Concrete b/c guarantee is a contract, must satisfy all requirements necessary to bring contract into existence eg capacity

Case Analysis: Vadasz v Pioneer Concrete Facts: - director of company guaranteed supplier of goods to company the company’s past and future indebtedness - company was in financial trouble and indebted to supplier for past supplies - supplier told director it would continue supplies only if a guarantee was given - director produced a doc which said only future guarantees – supplier didn’t read contract and signed - now takes action to say was induced in the contract by director’s rep and therefore avoid liability for past indebtedness - 1st instance held that guaranteed only for future indebtedness - appeal by guarantor arguing not liable for any indebtedness at all - cross-appeal saying liable for all indebtedness - both appeals failed - off to HCA (where agreed with court below) Held: Per the Court - guarantor entitled to avoid liability – but only to extent of company’s past indebtedness - there was no guarantee where there was no consideration given – so past indebtedness not covered - a better argument by the parties may have been that of partially setting aside the guarantee, rather than partial rescission, but it wasn’t mentioned, so the court cannot analyse it - appeal dismissed, order from court below stands  -

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Liabilities and rights of guarantors once default occurred, creditor entitled to call upon surety to pay debt; even w/o 1 st pursuing debtor: Sunbird Plaza don’t even need to make a demand on surety to pay before come collecting: Re Taylor; Ex parte Century 21 once surety pays up, they have rights: o recover from debtor all moneys the surety paid debtor o have all securities in hands of creditor assigned to surety so can enforce same recover from debtor the money paid to creditor o recover contribution from any co-surety 1 and 2 come right rights of subrogation discussed below surety also rights to set aside guarantee where it: o is result of misrep, duress, undue influence: Lloyd’s Bank v Bundy o is result of unconscionable conduct: Amadio o is unjust within Contracts Review Act 1980 (NSW) o is given by married woman for husband’s debt where guarantee has been gained from husband w/o wife properly understanding its effect and where creditor has stood by w/o taking steps to see wife properly informed of her rights: Yerkey v Jones – approved in Amadio rights of surety to attack guarantee is heavily litigated

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Continuing guarantees and “all moneys” clauses guarantee covers only 1 transaction

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but most are continuing – cover past and future transactions eg loans that state “cover all moneys” even if surety unaware of future transactions, they cover them “all moneys” = surety having to pay all debts in case of default problem: when surety isn’t told of the full extent of its guarantee to debtor: o Is the consideration broad enough to such a clause? o If it is, clause must be construed following objective intentions of the parties Re Piccolo; Ex parte McVeigh v National Aus Bank – interpretation of ‘all moneys’ clause – 4 things per Sundberg J o Manner consideration expressed relevant, but not conclusive o Statement of consideration won’t cut down wide, unambiguous words o Statement of consideration (if there is one) doesn’t control construction of operative parts of the guarantee o Interpretation is qu of intention looking at whole doc and surrounding circ Subrogation where debtor defaults, surety pays up creditor, then rights of creditor are ‘subrogated’ to surety against debtor Sunbird Plaza v Maloney: o Once default occurs, creditor can call surety to pay w/o pursuing first the debtor o If surety pays creditor, surety is subrogated to rights of creditor to the extent of amounts paid – and can pursue debtor to recover that money paid Thus, surety can ‘stand in the shoes’ of the creditor – this can even include rights the creditor may have had over the property of the debtor The right to any such property (ie security) will only be available if creditor has been paid in full and has no other use for the security – if creditor still needs more, then it won’t be subrogated: Austin v Royal So even though no direct contract btw surety and debtor, can still sue for money back in equity b/c against conscience to let them get off Scott free: Meagher, Gummow, Lehane in Equity Doctrines and Remedies Equity creates fiction where surety replaces creditor: Banque Financere De Le Cite v Parc S 3 Law Reform (Miscellaneous Provisions) Act 1965 (NSW) covers this area now Practically speaking, surety’s rights of subrogation often hollow as debtor won’t have any money or assets Contribution btw co-guarantors right to contribution comes in when 2/more sureties – one pays creditor upon default by debtor – one who makes payments may seek contribution by others this right comes from common law or equity – where isn’t fair if one surety pays and none of the others in contract, one can determine what share he or she is to pay: Hong Kong Bank of Aus v Larobi P/L – held: o co-sureties can agree to modify right among themselves o co-sureties cannot agree with creditor to restrict right of contribution among co-sureties o co-sureties agree with creditor to suspend right to seek contribution principles for right to seek contribution set out by Gibbs CJ in Mahoney v McManus o contribution btw co-sureties so that burden borne equally o contribution arises whether bound tly, tly and severally or severally o contribution, even if unaware of each other’s existence often, though, co-sureties will not be entitled to seek contribution from each other: where: o agreement among co-sureties not to seek contribution or to limit contribution o circ demonstrate in equity the parties aren’t truly in r’ship of co-surety despite what guarantee doc’s say

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this is where one co-surety gets all benefits of transaction, so the parties may not be said in equity to be co-sureties and right of contribution will not be permitted: Official Trustee Bankruptcy v Citibank Savings if the parties never intended that rights of contribution would exist, then equity will not permit contribution: Citibank Savings

o Cases in contribution Case Analysis: Hong Kong v Larobi Facts: - co-guarantors for company that went broke - HK Bank owed $300M - All guarantors signed agreement – said cannot sue other guarantors until payed the common debt (ie their share) – then can sue to make the others pay - HK bank chose only to sue 4 of the many guarantors for $300M - The others said – what about the rest of them! Held: - the cl was valid and enforceable - all co-sureties can agree who pays what under contract - but cannot have an agreement with one party with another that limits the rights of other co-sureties – they must all work together (under privity of contract rules) Case Analysis: Citibank Savings Facts: - RP & RP directors of W ($2 company ie had no assets) - Citibank loaned to W – said won’t give money w/o guarantee - Directors got parents to be sureties and they became sureties also, the directors putting their house up as security – mortgage over the house - W then went under, guarantor directors became bankrupt - Citibank took the house and sold it - $240K – directors had nothing left - Then made parents contribute $120K from their children under pretence that all co-sureties have to give equally Held: - no, this was wrong about the children - some guarantors are more equal than others, so that general rule doesn’t apply here - parents were clearly not as equal as the directors whose company it was - under ‘equity is equality’ you can go to the court and get co-sureties to pay their fair share – but this rule may not be appropriate in all circ - “There are many authorities in which it has been acknowledged that it may be shown by extrinsic evidence that a person stands in a diff relation to other persons involved than the of their doc would show.” Phillips & O’Donovan – “Sometimes…the right to contribution can be displaced by the parties’ conduct or the course of events. It has been suggested that contribution is excluded where one guarantor enjoys the whole benefit of the guarantee in another capacity to the exclusion of his cosurety: in this special situation it might be inequitable to require the co-surety to contribute”  -

Discharge debtor pays off money, surety discharged (unique) if debtor/creditor change underlying obligations, w/o guarantor’s consent, then G is discharged creditor breaches condition or intermediate term – guarantor can terminate contract

Case Analysis: Ankar Proprietary Limited v National Westminster Finance Facts: - NWF arranged lease to GEM for tax dodge - GEM had to pay to use the stuff, Ankar (A) was guarantor of it up to $125K - 2 noteworthy clauses:

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N to notify A if GEM falls behind in payments N notify A if GEM proposed to assign its lease to someone else so as to pay for use of machinery - Both of these occurred, and no one told A - A purported to discharge b/c of breach of essential in contract Held: HCA - two were conditions and breached - thus, N had the right to repudiate – even slightest breach of a condition can give rise to right to terminate contract - per most of the judges: “….the special characteristics of the suretyship r’ship and the fact that it creates a liability…on the part of the surety are enough….to justify treating the relevant obligations in the two provisions as conditions, breach of which, at A’s option, discharged it from performance of its obligations under the ….Agreement to the extent which they related to the sum of $125K.” o o

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Summary: Credit (1) Security - sometimes when you give a loan, you take something of theirs until they take the loan back to improve your position - sometimes get possession only (pawn/pledge), sometimes only ownership(BoS) (2) Bill of Sale (BoS) - mortgage of GOODS; mortgagor of goods, transfers title in those goods to mortgagee as security for loan, on condition that when loan repaid mortgagee will reconvey property to mortgagor; possession does NOT change - There are 2 types of BoS in the Bills of Sale Act: o Ordinary BoS = a bill that is not a trader’s BoS o Trader’s BoS (3) Ordinary BoS - s 3: can be many things eg declaration of trust, power of attorney etc, but most common = owner of chattel gives security over those chattels in return for loan of money for a debt - s 3 excludes eg cars and boats, stock and produce, BoS over foreign goods or goods at sea etc - system of registration; govern the rights of classes of persons who might wish to seize the goods from someone who only has possession (not ownership) - Every BoS where grantee has power to seize goods must be ed within 30 days of being made under s 4 - In order to , must be accompanied by: s 4 o Schedule or inventory of goods o Copy of the bill o Affidavit as to time bill made o Description of occupation and residence of grantor o Description of occupation and residence of every attesting witness to BoS - s 4(2) covers what happens if don’t BoS: the bill is void against the following ppl o assignees of chattels contained in the BoS for the benefit of creditors o sheriffs and other persons executing court judgments in respect of chattels comprised in BoS o persons on behalf of whom sheriff and other liker persons executing court judgments - but, on the other hand, if the BOS is ed, then goods are seized by sheriff, then grantee of BOS is able to assert his title as mortgagee under BoS in answer to claim by creditors or sheriff - a BoS will only be void under s 4(2) if the goods: o are still in possession/apparent possession of the grantor at the date of assignment, or execution of judgment; and o still in possession/apparent possession of grantor 30 days after making or giving the BoS - so this means – if the bill was not ed, the sheriff could seize the goods only if they were in possession/apparent possession of the grantor at the time of execution and execution took place after the 30 day period - an uned BoS is ONLY VOID against those 2 groups in s 4(2) – it will remain valid btw grantor and grantee and 3rd parties who may buy the goods subject to the BoS: Saltoon v Lake - s 5 says no validity against official trustee in bankruptcy unless bill ed and registration renewed once every 5 yrs - s 5A: have to make a declaration “I am the owner of goods” or a statement of the true owner of the goods (4) Traders’ BoS - A trader = person engaged in retail sale of goods - Goods must be the subject of the BoS – owned and used or intended to be used in connexion with trader’s business – and have to declare this by virtue of s 5B - If you don’t at all, completely ineffective against anyone (ie no protection): s 5(1) – so grantee cannot even seize goods where BoS contains power to do so (very diff to ordinary BoS)

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Do , but don’t write trader’s BoS (ie no declaration), works for ordinary BoS – ie for goods that are not trader’s goods, but won’t work as BoS in respect of trade goods – so give mortgage over trader’s stock, forget to declare it’s a trader’s BoS, insofar as it’s trading stock, the BoS is ineffective, but if there’s other normal goods, it will be effective - S 5C spells out what needs to go in the BoS to it – eg address etc o Place of business or occupation o Chattels covered by BoS and location of them o Consideration for the BoS – money consideration or otherwise must be stated: GE Commercial Corp v White - Must be lodged for registration within 15 days at date granted: s 5C(2)(b) - If BoS inoperative due to non-compliance with s 5C rules then the moneys secured are immediately repayable: s 5C(4) - A BoS is taken to be ed 14 days after it’s been lodged with the Registrar-General unless caveat is lodged; once caveat gone, 14 days after it will be ed - S 5G – can lodge objecting to registration of BoS – must be lodged within 14 days from time bill is lodged for registration - Grantor can try getting caveat removed in court: s 5H - District Court judge, if satisfied caveator is an unsecured creditor, can say BoS will not be ed unless grantor pays into court amount owing by grantor to the caveator: s 5I (5) Other securities (a) pledge - deliver goods to someone, give them possession as security to cover goods – usually money – ownership doesn’t change – debtor/pledgor transfers possession, but retains legal title - pawn - very similar – only diff is that it’s their business to pledge stuff as pawn broker - they have additional responsibilities as such – eg maintain a registry (b) lien - lien = right to retain possession of another’s property until a liability is satisfied a. possessory lien - in case of a lien, possession remains with creditor - general and particular liens come under this category i. general lien - general lien = right of creditor to retain possession of debtor’s goods until debts paid btw creditor and debtor - eg solicitor and client – solicitor can refuse to give client doc’s until paid - could arise through custom: Majeau Carrying v Coastal Rutile ii. particular lien - this is right of creditor to retain specific goods until debt associated with those goods is paid (they go together) - eg repairer – send your car to beater to repair, beater can retain car until pay for the work b. equitable lien - no transfer of possession - just a right in equity – think of it as a charge, just in equity o Hewett v Court – 4 elements: (1) actual or potential indebtedness of owner of property to the other person (debtor) (2) must come from a payment of consideration for the property (3) that property was appropriated (connected) to the contract: ie debt or obligation must be some payment or expense eg improving the land (4) it would be unconscionable for owner to dispose of property to 3rd party w/o paying off the person whom they owe (c) Charges - charge = creditor neither title nor possession over goods - charge is right to seek payment out of goods by way of sale of those goods, so that the good may be said to be charged - no proprietary interest in the goods, merely a right to have them sold for payment of debt (6) The Consumer Credit Code - restrictions when offering finance eg 40%pa interest; no mortgage over everything u own etc - S 6(4); doesn’t cover investment properties; pawn brokers; employee loans from own company

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It limits the amount of interest a person can charge: 40% PA

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Credit  -

A security sometimes when you give a loan, you take something of theirs until they back the loan back to improve your position eg pawn something – drop off watch and they give you cash until you pay the money back 2 categories of security – possession and ownership

Ownership

Possession Debtor (possession) - equitable lien - charge (statutory or equitable)

Debitor (ownership)

Creditor (ownership)

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Creditor (possession)

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- pawn - pledge possessory lien

common law mortgage - bill of sale

sometimes security involves giving possession eg pawn sometimes non-possessory person you owe as debtor is the creditor creditor or debtor can own it and either party can have possession of it BoS (Bill of Sale) a BoS is normally a ‘chattel mortgage’ mortgage of goods, rather than mortgage of land definition of mortgage at common law = owner property ie mortgagor of goods, transfers title in those goods to mortgagee as security for loan, on condition that when loan repaid mortgagee will reconvey property to mortgagor there’s a transfer of title in the goods, but mortgagor (borrower) retains possession of those goods mortgagor’s right to re-conveyance is known as equity of redemption for mortgages of chattels, ie BoS, ownership of goods transferred, but retain possession – so if default by mortgagor/borrower, mortgagee of goods can seize them and sell them or foreclose (mortgagee sells as owner) there’s two types of mortgages: o legal mortgages o equitable mortgages legal = mortgagor transfers ownership of goods to mortgagee but mortgagor retains possession equitable = borrower transfer goods to trustees who hold beneficial interest on trust for lender, or on trust for transfer of possession if debt not paid, or if paid, then co-convey them; where debtor gives legal mortgage, they give with it an equitable mortgage – the 2nd being call the equity of redemption; a contract to give a legal mortgage goes also under equity; a mortgage of goods note yet owned is also an equitable mortgage; deposit of deeds of title of goods as security for lending money also equitable BoS usually legal mortgages of goods Bills of Sale Act (1898) is concerned with ing of BoS and its effect The Act only applies to written BoS There are 2 types of BoS in the Act: o Ordinary BoS = a bill that is not a trader’s BoS

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o

Trader’s BoS

(1) Ordinary BoS - debtors keeps possession, but transfers ownership - defined by s 3 o so, a BoS under s 3 can be:  a BoS  an assignment  a declaration of trust w/o transfer (eg mortgage)  other assurances of personal chattels  powers of attorney, authorities, license to take possession of chattels as security for debt  any agreement where equity can recognise charge is secured over personal chattels to be acquired after the date of that agreement  BUT, the most common type = owner of chattel gives security over those chattels in return for loan of money for a debt o Things NOT included in s 3:  Deeds of assignment in bankruptcy  Marriage settlements  stock and produce, it comes under own legislation: Liens on Crops and Wool and Stock Mortgages Act 1989 (NSW)  transfer of assignment of ships  transfer of goods in ordinary course of business  BoS over foreign goods or goods at sea  Bills of lading  India warrants (?)  Warehouse-keepers certificates - The main purpose of BoS is to govern rights of creditors seizing property that might be covered by a BoS – 3rd parties are often unaware of the true owner, as often lender has possession, but not ownership - So to protect creditors, BoS is void against ppl like sheriffs etc if it is not properly ed - So it’s there to provide a system of registration; govern the rights of classes of persons who might wish to seize the goods - So, a lender whose loan is secured by a BoS should get it ed in order to protect the goods from being taken away by sheriffs etc acting on behalf of unsecured creditors - Every BoS where grantee has power to seize goods must be ed within 30 days of being made under s 4 - The grantor is the person borrowing the money (and giving the goods as security for it), grantee is person lending the money (and keeping the goods until paid back) - Registration must be made with Registrar-General at General- of Deeds in the City - In order to , must be accompanied by: o Schedule or inventory of goods o Copy of the bill o Affidavit as to time bill made o Description of occupation and residence of grantor o Description of occupation and residence of every attesting witness to BoS - if there’s a misdescription, but it was accidental or inadvertent and not likely to mislead or deceive, then court will probably uphold it: s 4A - if there was omission to the bill or a misdescription in any ing affidavit that was inadvertent or won’t cause prejudice, then court can grant extension time for registration to rectify misdescription: s 4B - s 4(2) covers what happens if don’t BoS: the bill is void against the following ppl o assignees of chattels contained in the BoS for the benefit of creditors

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sheriffs and other persons executing court judgments in respect of chattels comprised in BoS o persons on behalf of whom sheriff and other liker persons executing court judgments if grantee doesn’t BoS, BoS doesn’t take effect against those persons, and the grantee cannot say to sheriff: “that item is not the grantor’s property for you to seize, it is in fact mine pursuant to the BoS” but, on the other hand, if the BOS is ed, then goods are seized by sheriff, then grantee of BOS is able to assert his title as mortgagee under BoS in answer to claim by creditors or sheriff so the purpose of registration is to remove the risk of goods, as possession remains with the grantor – so it’s impossible to see who the true owner is unless search the a BoS will only be void under s 4(2) if the goods: o are still in possession/apparent possession of the grantor at the date of assignment, or execution of judgment; and o still in possession/apparent possession of grantor 30 days after making or giving the BoS so this means – if the bill was not ed, the sheriff could seize the goods only if they were in possession/apparent possession of the grantor at the time of execution and execution took place after the 30 day period apparent possession = s 3 – goods that remain on or about the premises occupied by the grantor, notwithstanding that formal possession may have been given to another thus, if bill not ed, grantee (lender) will not be able to assert their rights under bill against goods if those goods are in possession or apparent possession of grantor, if those goods are taken by sheriff or assignees for the benefit of creditors if the goods aren’t in the grantor’s possession/apparent possession, then it doesn’t matter the bill is uned, grantee can still assert their rights over the goods an uned BoS is ONLY VOID against those 2 groups in s 4(2) – it will remain valid btw grantor and grantee and 3rd parties who may buy the goods subject to the BoS: Saltoon v Lake o

-

-

Case Analysis: Saltoon v Lake Facts: - A owned 4 race horses, but needed money - Saltoon gave him money and security was mortgage over the horses - So Saltoon technically owned the horses - Then A sold 1/3 of horses to 3 people - Eventually L bought the horses - A doesn’t pay any money to S - L claims the horses are his for having paid his money - S said the horses were his Held: - there was a BoS, but it was uned - it could be used against L b/c he was not a sheriff, nor a liquidator - L was a bona fide purchaser for value w/o notice - If S had waited any longer, the liquidator may have come in and taken the goods, and S would’ve had no claim - S argued that A had no title to (so nemo dat applied) - L tried to argue estoppel – S estopped from denying ownership and was careless – but this wasn’t made out -

s 5 says no validity against official trustee in bankruptcy unless bill ed and registration renewed once every 5 yrs so any property, whether in grantor’s possession/apparent possession or not, will have no effect against trustees in bankruptcy unless ed – the bill will still be valid btw the grantor/grantee and 3rd parties though: Saltoon v Lake

-

cars and boats go under Registration of Interests in Goods – and no requirement of renewal o

s 5A

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-

have to make a declaration “I am the owner of goods” or a statement of the true owner of the goods 2 yrs max gaol if you lie

(2) -

Traders BoS A trader’s BoS = BoS given by trader over his/her trade goods A trader = person engaged in retail sale of goods: defined in s 3 Goods must be the subject of the BoS – owned and used or intended to be used in connexion with trader’s business – and have to declare this by virtue of s 5B - If you don’t at all, completely ineffective against anyone (ie no protection): s 5(1) – so grantee cannot even seize goods where BoS contains power to do so (very diff to ordinary BoS) - Do , but don’t write trader’s BoS (ie no declaration), works for ordinary BoS – ie for goods that are not trader’s goods, but won’t work as BoS in respect of trade goods – so give mortgage over trader’s stock, forget to declare it’s a trader’s BoS, insofar as it’s trading stock, the BoS is ineffective, but if there’s other normal goods, it will be effective - S 5C spells out what needs to go in the BoS to it – eg address etc o Place of business or occupation o Chattels covered by BoS and location of them o Consideration for the BoS – money consideration or otherwise must be stated: GE Commercial Corp v White Case Analysis: GE Commercial Corp v White Facts: - statement of claim = declaration that the trader’s bill of sale was valid and enforceable according to its tenor – so P was entitled to possession of the property - this case concerns s 5C(2) of the Bill of Sale Act – “…the consideration for the trader’s BoS, specifying the amount of past debt, the advance made at the time of making or giving the trader’s BoS, and that future advances are secured by the trader’s BoS” Held: per Young CJ delivery in equity on behalf of their Honours - there’s two purposes for this section - (1) ppl dealing with trader will know the goods are the trader’s actual possession, but not the trader’s property - (2) make sure debtor knows he is entering into solemn mortgage and so a relatively solemn format is required - there’s some question in this bill about setting out things eg the consideration given - “…even though the Act uses the words “sets forth”, [it is expected] merely that there will appear somewhere in the doc or in its annexures the info that is required in the form which can be readily understood by the average person of commerce.” - Ie don’t have to formally state it - So, cannot apply this section to restrictively -

-

Must be lodged for registration within 15 days at date granted: s 5C(2)(b) If BoS inoperative due to non-compliance with s 5C rules then the moneys secured are immediately repayable: s 5C(4) A BoS is taken to be ed 14 days after it’s been lodged with the Registrar-General unless caveat is lodged; once caveat gone, 14 days after it will be ed S 5G – can lodge objecting to registration of BoS – must be lodged within 14 days from time bill is lodged for registration Grantor can try getting caveat removed in court: s 5H District Court judge, if satisfied caveator is an unsecured creditor, can say BoS will not be ed unless grantor pays into court amount owing by grantor to the caveator: s 5I o Pledge deliver goods to someone, give them possession as security to cover goods – usually money – ownership doesn’t change – debtor/pledgor transfers possession, but retains legal title

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-

won’t give it back until they pay you – if they don’t pay back, pledgee can sell the goods eventually usually pledge operates by way of contract

-

o Pawn very similar – only diff is that it’s their business to pledge stuff as pawn broker they have additional responsibilities as such – eg maintain a registry

-

o

o Possessory lien lien = right to retain possession of another’s property until a liability is satisfied similar to pledge, except lien comes in by operation or law, whereas pledge is an at of one person transferring possession for security of a debt possession transferred to lienee, ownership remains with lienor no inherent power of sale in a lien – can only sell, if at all, under state: Uncollected Goods Act in case of a lien, possession remains with creditor liens can arise at common law or equity common law = possessory lien as relies on possession – so loss of possession will generally equal loss of lien two types of possessory liens o general lien o particular lien equitable lien doesn’t depend on possession, but equitable principles: Hewett v Court – not yet clearly defined

general lien general lien = right of creditor to retain possession of debtor’s goods until debts paid btw creditor and debtor - eg solicitor and client – solicitor can refuse to give client doc’s until paid - there’s many other esp categories eg stock brokers, insurance brokers etc - outside the categories, may arise through custom – but it has to be so customary so as to basically be an implied term in contract btw debtor/creditor: Majeau Carrying v Coastal Rutile – must be certain, uniform and reasonable -

Case Analysis: Majeau Carrying v Coastal Rutile Facts: - for many yrs, M acted as carrier and warehouseman for CR and owed large sums of money in respect of those services - receiver appointed in ’72 – paid sum of 6.5K in belief it represented that part of the prereceivership indebtedness for the storage and warehouse; then paid some of 5.5K for future debts - the 6.K was a mistake – paid 2.8k too much - so M used that extra to pay off diff debts - M later refused to deliver some goods to CR unless its was settled - CR sued to recover the goods - M argued it could refusal delivery b/c entitled to warehouseman’s lien in respect of goods to secure the payment of the Balance of the relating to all former transactions - This claim was rejected at 1st instanced - So, it appealed to HCA - Cross-appeal by CR – (1) D shouldn’t be entitled to use overpayment to off-set debts (2) b/c sums paid after appointment of receiver, shouldn’t be capable of being set-off for debts of the P which had arisen prior to the appointment Held: Per Gibbs CJ (agreeing with Stephen J, but setting out his reasons for so doing) - warehouseman has no lien to the amount of charges owed following statute – so CL consideration not worth mentioning - I agree with the orders given below as to the off-set etc - And the cross-appeal is wrong for reasons stated by my bro Stephen

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Per Stephens J (what a writer!) - the lien claimed is a general lien - they looked at the trade custom of warehouses in Brisbane area - traditionally, there’s been two classes of ppl who can claim general liens: (1) quasi-public with duty to public, namely innkeepers and carriers (2) traders improving the goods of others by expenditure on those goods of skill and labour - however, liens recognises in other areas – and this is what the appellant is running with – that warehouses are now included - but the claimants must point to some custom entitling them to such a lien – which can only be inferred from a large number of individual acts - there’s no such evidence, so no lien made out - the appeal should therefore be dismissed - as to the cross-appeal, it should be dismissed also - there’s no reason at law why you cannot use the money to satisfy debts, being pre-receivership or for using them for other debts

-

Particular lien this is right of creditor to retain specific goods until debt associated with those goods is paid (they go together) eg repairer – send your car to beater to repair, beater can retain car until pay for the work

o -

equitable lien no transfer of possession just a right in equity – think of it as a charge, just in equity

o -

Case Analysis: Hewett v Court Principles: - 4 things to amount to equitable lien o actual or potential indebtedness of owner of property to the other person (debtor): debtor from specific property o must come from a payment of consideration for the property o that property was appropriated (connected) to the contract: ie debt or obligation must be some payment or expense eg improving the land o it would be unconscionable for owner to dispose of property to 3rd party w/o paying off the person whom they owe Facts: - buyer got house from builders - builders go bankrupt - they payed the builders more so they could finish that job - then the liquidators come in and try to seize the house Qu: Do the buyers have an equitable lien? Held: - it involves indebtedness - they payed consideration in the form of money for the house - there was a contract to build it - it would be unconscionable not to get the house after all the money they paid etc - therefore, they have an equitable lien over the house and they can get the property ahead of the creditors o

Charges charge = creditor neither title nor possession over goods charge is right to seek payment out of goods by way of sale of those goods, so that the good may be said to be charged - no proprietary interest in the goods, merely a right to have them sold for payment of debt -

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o

The Consumer Credit Code - It’s about offering finance - Many ppl were getting tricked in finance deals with huge interest rates - So all the states got together and agreed to follow the Qld Code - This covers ordinary home-loans, buying a car or getting a student loan – as it covers personal domestic or household credit - S 6(4); doesn’t cover investment properties; pawn brokers; employee loans from own company - It limits the amount of interest a person can charge: 40% PA - And you cannot give a mortgage over everything you own or things you don’t own yet – so protecting consumers from potential indebtedness - There can be no third party mortgage – only guarantors – so parents eg cannot mortgage their house in order for son to get a loan from the bank

 Miscellaneous Case Case Analysis: North Central Wagon Finance v Brailsford Facts: - B owned Albion informed director of company (finance), P, that he needed money to pay an initial deposit on another car - P, on behalf of plaintiffs, said carry out in form of hire-purchase agreement, subject to the money being paid by H, who would be responsible for it being used for the purposes specified - For hire-purchase docs drawn up - The theory behind this deal was that B sold to A to H’s company the money, half payable immediately, the balance by H directed to B (right?) - Then the guy decided he wanted a diff car - B never paid the money under the hire-purchase and the Ps bring this action against B - They contended it was a BoS Held: Cains J - 1st qu is to decide whether the hire-purchase was a BoS - it should be noted “If a person deliberately, and with all appropriate formalities, sells his property to a finance company and then hires it back under a hire-purchase agreement, the agreement is not a BoS” - “If the purpose of the transaction is to enable the hirer to dispose of the property to a customer, the courts will more readily hold that the agreement is not a BoS” - “In my view, this is a case where the real transaction was a loan on the security of the Albion, and the hire-purchase agreement was a BoS and is void for non-registration” - however, the BoS wasn’t ed so void – but money can be recovered as money had and received

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Summary: Insurance (1) -

Definition insurer = person giving insurance insured = person receiving it insurer insures insured against risk eg car stolen insurer pays up 2 forms (i) events based - based on events eg house burning down (ii) claims against the insured = public liability for people who provide services; so when you get sued, it kicks in – often have to tell them about the claim straight away (2) Duty of Good Faith - tell company all info Insurance Contracts Act (A) Disclosure: s 21(1) if seeking insurance, have to tell all relevant things you know for the decision of insurer – whether or not they are willing to accept the risk; also must tell them everything you know that a reasonable person would consider relevant to the decision-maker’s decision; s 21(2): don’t have to tell insurer things of common knowledge; s 21(3): if they ask you a question, and you obviously don’t answer it, that becomes insurance company’s problem; what’s relevant = Lindsay v CIC; Advance Insurance Agency v Matthews; Alexander Stenhouse v Auscan Investments; Permanent Trustees Aus v FAI o s 28: what happens when there’s a failure to disclose or fraud? (a) Was there non-disclosure or fraud following s 21? Would the insurer have done into the contract anyway? If yes, then go no further; if no – go to (b) (b) Was there fraud – if yes the insurer can set the contract aside and don’t pay the claim; if no, it may have been an innocent mistake, or sloppy – go to (c) (c) the insurer’s liability is reduced to the amount it would have been, but for the misrep/nondisclosure (so, the qu must be asked – what would the insurer have done in the alternative reality?) – it could be zero if, knowing what it ought to have known, the insurers went ahead anyway - see Lindsay v CIC - fraud = deliberate withholding of info that should’ve been disclosed: Burns v MMI - if choose to avoid contract, it means avoid it from the start: s 11 - even if there’s been fraud, court can disregard if eg harsh not to disregard it: s31; but cannot prejudice insured: s31 (B) Misrepresentations - s 26: lying, telling the wrong thing; if the victim of the misrep, then can terminate the contract if you so choose o S 26(1) – truth or falsity of claim – if you honestly and reasonably believe something, it’s NOT a misrep; onus of proof lies on the insured o Relevance – the fact is presumed not to be relevant unless (i) insured knew or (ii) a reasonable person would’ve known that, it was relevant to the insurer accepting the risk; the onus of proof lies on the insurer’s shoulders - See Plasteel Windows v C E Heath o After g the Contract: Changing Circ: often contracts say you must tell us if there’s a material change or you won’t be covered; s 54 changes the common law rules for material change during contract period – these are the elements; if o there was an act or omission of insured or 3rd party (in not telling of changing circ) o after the contract had formed, AND o insurer would’ve been entitled to refuse the claim under the policy, o THE RESULT = o The insurer cannot refuse the claim, but liability is reduced to an amount that is fair, considering how it was prejudiced by the act/omission - Exception: s 54(2) – where insured causes the loss that’s the subject of the claim - See Ferrcom v Commercial Union; Moltoni Corp v QBE Insurance o Claims made and known policy

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-

claims made and known policy is a policy of telling insurer what has happened within the insurance period - compare - FAI v Aus Hospital Care & Gosford CC v GIO (3) Excluding liability - unusual exclusion cl must be made known to insured: s 37 - pre-existing defect claims excluded from contract won’t apply if (a) insured didn’t know and (b) reas. person wouldn’t know: s 46 (same with pre-existing sickness or disability: s 47) (4) Third Parties - if 3rd party intended to have benefit of contract, they can enforce it: Trident - must comply with s 48 tho: named in contract as person with right to claim; insured’s fraudulent non-disclosure etc won’t affect 3rd party  o

The nature of insurance insurer = person giving insurance insured = person receiving it insurer insures insured against risk eg car stolen insurer pays up insurance comes in two forms o events = based on events eg house burning down o claims against the insured = public liability for people who provide services; so when you get sued, it kicks in – often have to tell them about the claim straight away



Duty of good faith

-

it’s about telling insurance company about stuff – codifies duty of good faith to each other o Disclosure – failing to tell something o Misrep – giving false answer to questions

(1) failing to disclose - s 21(1) - if seeking insurance, have to tell all relevant things you know for the decision of insurer – whether or not they are willing to accept the risk - also must tell them everything you know that a reasonable person would consider relevant to the decision-maker’s decision  -

exceptions s 21(2): don’t have to tell insurer things of common knowledge, or anything the insurer should know as its business, or anything that reduces their risk (b/c it would be pointless pointing that one out) s 21(3): if they ask you a question, and you obviously don’t answer it, that becomes insurance company’s problem – they have to chase you up

 But what’s relevant in the circ? - Look at the case law… Case Analysis: Lindsay v CIC Facts: - building insurance taken out by L - L owned office area somewhere - Rented it out to ppl - Takes out insurance over it - 2 wks later building burns down - L hadn’t told them it was a brothel - L knew it was a brothel Qu: was this a relevant fact he ought to have told the insurance company? Held:

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-

it should’ve been disclosed because it was relevant generally ppl at such places won’t look after them well and this is of importance to an insurance agency even if X is effecting the insurance, and under him is Y who knows some relevant details and doesn’t tell X, it doesn’t mean this is okay and X gets away with not telling the insurance agency – the words of the Act under s 21 must be understood under the purposive approach Rogers J:“…it seems to me that the requirements of s 21(1)(b) are satisfied in that a reasonable person, in Mr L’s circ, would be expected to know that the nature of the use of the premises was relevant”

Case Analysis: Advance Insurance Agency v Matthews Facts: - this case concerned a group of ppl getting insured and whether they each had to say everything they knew, or whether it was enough to say what they collectively knew - An insurance form said – have you ever had a claim rejected before? - Husband and wife applied for insurance - Mrs hadn’t been rejected before, but Mr had been - Mr didn’t reveal that - Their house burnt down, then the insurance company refused to pay saying he should’ve told them - So, how should s 21 be read in this case? Held: - each person must disclose all relevant facts - also, must disclose everything when renewing the contract: Alexander - the idea of s 21 is to replace the common law and make a stricter good faith test - when looking at the actual words of the questions on the form, it is obvious it meant both of the persons applying – and not them collectively – question referring to “an insured” must = coinsured persons Case Analysis: Alexander Stenhouse v Auscan Investments Facts: - Aus owner of property – instructed insurance broker S to effect insurance of property - S A provided cover for the property by way of extension of an existing policy held in the name of another company, associated with Aus - Then it expired on one Nov day, only renewed the next Feb - Then it ran out, but under the agreement, would go on to last another 90 days - During the 90 days, a fire damaged property extensively - Condition 2 of contract said if property is changed in any substantial way, insurance not covered - A spray booth was added to property during this time, adding heaps of flammable materials to the place – this wasn’t told to insurers - The insurer then refused to pay up because of this - Then it sued Alexander Stenhouse for failure to arrange proper insurance of Aus’s interest – so negligence and contract issues - Held in court below, per Cox J, that AS was negligent in failing to get the proper insurance for Aus and breached contractual duty to get the right contract and follow it thereunder HCA: - take the matter back to the court below, don’t follow Cox J’s judgment - need to look at more evidence etc - This is basically a nothing judgment – I wonder if Janes even read the thing before putting it in this book? I don’t think he has read a case before, going by the way in which he writes his lecture notes. Case Analysis: Permanent Trustees Aus v FAI Facts: - P wanted to protect its own business, so it went to FAI and many other companies – so they’d all share the load - FAI had deals with A, B, C so as to cover P

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Held:  -

Then P wanted to rid FAI and get new insurers for a better deal, no doubt P got an extension for another few months on its existing policy so as to find new people – FAI said yes Then something happened during the extension period and P put in a claim However, FAI found out that P had been looking for new insurance agency during this time and they said P had to tell them they were looking for a new insurance agency before FAI would give them the extension Said it was a matter of importance and wouldn’t have given extension if new that fact FAI’s argument was WRONG S 21 doesn’t cover common relationships or emotional factors It was opportunistic of FAI to suggest it wouldn’t have given the extension if it had known P was looking for alternative insurance “[s 21] is not [concerned with]…the much broader question of the commercial willingness of the insurer to accept the risk, still less emotional or individual reactions to that question” s 28: what happens when there’s a failure to disclose or fraud? the elements of s 28 are these: a. Was there non-disclosure or fraud following s 21? Would the insurer have done into the contract anyway? If yes, then go no further; if no – go to (b) b. Was there fraud – if yes the insurer can set the contract aside and don’t pay the claim; if no, it may have been an innocent mistake, or sloppy – go to (c) c. the insurer’s liability is reduced to the amount it would have been, but for the misrep/nondisclosure (so, the qu must be asked – what would the insurer have done in the alternative reality?) – it could be zero if, knowing what it ought to have known, the insurers went ahead anyway

Case Analysis: Lindsay v CIC Facts: - see facts from above - there was a non-disclosure of the brothel – but it was not fraud ie was not deliberately left out - have to look at what the insurer would have done if it had known the place was a brothel Held: - the insurance company proved it would not have insured the place at all - therefore, they do not have to pay L any insurance at all (2) -

Misrepresentations s 26 lying, telling the wrong thing if the victim of the misrep, then can terminate the contract if you so choose Insurance Contracts Act – makes misrep more clear and its consequences: s 26 Changes common law in two significant ways o S 26(1) – truth or falsity of claim – if you honestly and reasonably believe something, it’s NOT a misrep; onus of proof lies on the insured o Relevance – the fact is presumed not to be relevant unless (i) insured knew or (ii) a reasonable person would’ve known that, it was relevant to the insurer accepting the risk; the onus of proof lies on the insurer’s shoulders

Case Analysis: Plasteel Windows v C E Heath Facts: - T had indemnity insurance and P was claiming against T in negligence - T had insurance with C E H - The insurance policy asked: “Is it the practice of T to sign proposals on behalf of T’s clients?” - T said “no”, but this was completely false Held: - T agues that one of its workers signed the form and didn’t know

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-

there was no way T could honestly believe the answer was no – it was downright lying even if it wasn’t lying, a reasonable person in the position of T wouldn’t have answered no and it was highly relevant based on the type of the insurance to disclose this fact therefore, C E H Clearly wins

-

note, mere failure to leave an answer completely blank doesn’t mean it’s a misrep – insurance company must chase it up pursuant to s 27 “In my opinion, the onus of proving the application of s 26(1) lies upon the proponent [ie insured – setting out when an untrue statement will amount to a misrep], and of s 26(2) upon the insurer [that no statement is a misrep unless it satisfies the prescribed test of relevance].” “In my view the appellants [T] failed to discharge the onus under s 26(1), and the first respondent [C E H] proved the elements necessary to est that the material statement was a misrep”

 -

-

After g the Contract: Changing Circ often circ change after contract is signed often contracts say you must tell us if there’s a material change or you won’t be covered s 54 changes the common law rules for material change during contract period – these are the elements; if o there was an act or omission of insured or 3rd party (in not telling of changing circ) o after the contract had formed, AND o insurer would’ve been entitled to refuse the claim under the policy, o THE RESULT = o The insurer cannot refuse the claim, but liability is reduced to an amount that is fair, considering how it was prejudiced by the act/omission Exception: s 54(2) – where insured causes the loss that’s the subject of the claim

Case Analysis: Ferrcom v Commercial Union Facts: - F owned crane and took out insurance to cover it - At that time, the crane was not ed to drive on roads – insurer said “okay, no worries” and insured F - Later F got it ed and was driving it on the roads when it was involved in a crash - The contract said that any material damage to the crane will be covered - However, C argued that it was a material change in circ and they should’ve been told – if they knew, they wouldn’t have insured - F tried to rely on s 54 to make them pay Held: - there was an omission - after the contract formed - insurer could’ve refused to continue insurance because of it - so insurer doesn’t have to pay full amount – amount reduced to what’s fair by how much it was prejudiced - court looked at what insurance company would’ve done if it had known it was ed on the road - evidence showed they would’ve cancelled it altogether and not insured - therefore, they didn’t have to pay anything – zero liability - they proved this by their custom and have ample evidence to back it up Case Analysis: Moltoni Corp v QBE Insurance Facts: - M’s worker badly injured, usually covered by insurer under workers’ comp - But in the policy, M had to notify QBE of claim as soon as reasonably practical – so as to know if they’re really injured or not - M forgot this time and didn’t tell them

37

Held:  -

Employee’s claim was $330K and QBE refused to pay any of it for failure to tell as soon as practicable Did s 54 apply? there was an omission after contract formed it could have refused the claim liability has to be reduced to what’s fair in light of how much it was prejudiced by not knowing QBE could’ve got Dr in and a few little other things However, they really wouldn’t have done much at all and would’ve payed the full amount anyway Therefore, had to pay the full amount Claims made and known policy claims made and known policy is a policy of telling insurer what has happened within the insurance period

Case Analysis: FAI v Aus Hospital Care Facts: - there was a claims made and notified policy = started 20 June, ended 20/6/92 - claim at some point in time line against them, but didn’t notify them until after the policy ended - tried to rely on s 54 - there was an omission, etc Held: - no evidence suggested that, by being notified after the policy had ended, that they were in any way prejudiced - therefore, were liable for the whole claim Case Analysis: Gosford CC v GIO Facts: - policy ended 31/12/91 - was a claims made and notified policy - May ’91, GCC suspects a claim against them, but none made and no notification to GIO - 1994 there was a claim, only then did they tell GIO - GCC said s 54 applies and tried to rely on FAI v Aus Hospital Held: - s 54 doesn’t make a policy go forever - it’s a claims made and notified case – claim happened outside the life of the policy, therefore GIO doesn’t cover it - s 54 might get you off notifying straight away during the life of the policy, as in FAI v Aus Hospitals, but not for claims that happen outside the time period - case dismissed

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Summary: Negotiable Instruments Bills of Exchange (BoE): (1) Does the BoE satisfy rules of s 8? a. Unconditional order in writing? b. Addressed by one person to another? c. Signed by person giving it? d. Requiring addressee to pay on demand at fixed or determinable time? e. A sum certain in money? f. To the order of specified person or bearer? (2) The person who’s in possession of the bill, or the bearer, are they a holder in due course (or is the BoE basically useless) pursuant to s 34? a. Did they take the bill (i) complete/regular on its face (must be complete name: Arab Bank; (ii) before it is overdue; (iii) w/o notice of dishonour (if any); (iv) in good faith and for value; (v) w/o notice in any defect in title of indorser (person who gave it to them) (3) Liabilities? a. Holders rights: s 43 eg sue in own name – enforce payment against parties b. Acceptor promises to pay once accepted, cannot deny holder: s 59 c. Drawer’s rights: s 60(1) – will pay, and if dishonoured, will compo; cannot deny holder in due course his capacity etc d. Indorser: s 60(2) – if dishonoured, then liable; cannot deny genuineness (4) Indorsement - Qu: what sort of indorsement is the bill? a. s 37 - negotiate = indorsement + delivery; although bearer bill just delivery enough; must be written signed – see other rules eg whr name misspelt; mere signature on BoE is enough; entire bill must be endorsed b. blank (just signature of indorser) c. special: s 39 – name of indorser and indorsee d. restrictive: s 40 – pay such and such only, no one else e. conditional: s 38 – pay such and such when this happens f. sans recours: s 21 – negotiating bill, but negativing the liability of the indorser “Pay A in order without recourse for me, from E Jones” – so even if bill dishonoured, indorsee has no recourse (5) Acceptance a. Can be either: s 24 i. General – drawee assents w/o qualification; or ii. Qualified – varies express of the bill as drawn (a) conditional: ie 1 which makes payment by acceptor dependent on fulfilment of some condition eg accepted payable when goods are sold (b) partial: ie acceptance to pay part only of amount for which bill is drawn (c) local: acceptance to pay only at particular or specified place eg payable only at Cth Bank of Aus (d) qualified at time: bill drawn for 2 months accepted “payable in 3 months” (e) acceptance by some: eg bill drawn on A, B, C accepted by A & B only (6) Presentment - general rule is presentment not necessary for drawer and indorsers of bill to be liable - however, s 44: acceptance necessary where bill a. payable after sight, so maturity date may be fixed b. expressly stipulates that it must be presented for acceptance c. drawn payable elsewhere than at residence or place of business of drawee - bill considered presented for acceptance when presented in accordance with following rules: s 46(1) d. presentation must be made at reasonable hour on business day and before bill overdue

39

e.

where bill addressed to two or more drawees who aren’t partners, presentation must be made to them all unless one has authority to accept for all f. where drawee dead, presentment may be made to their personal rep g. whr drawee bankrupt, presentment may be made to her or their trustee or assignee whr authorised by agreement or usage, presentment may be made through the post - see the rules where don’t have to present eg where drawee dead or bankrupt, or try to present but cannot: s 46(2) – may then be treated as dishonoured - bill not accepted within customary time for acceptance must be treated as dishonour by nonacceptance: s 47 (7) Dishonour - through non-acceptance or non-payment, bill can be dishonoured; immediate right then for recourse against drawer and indorsers, and holder’s rights against acceptor - can be dishonoured by: o non-acceptance: s 48 o non-payment: s 52 - to get rights of dishonoured bill, must give drawer & indorsers notice: s 53 – must be written, or can return the dishonoured bill, or verbal communication, go to party of their agent (or personal rep when they’re dead), if two or more drawers then must go to both: s 54 – must also give reasonable time after actual dishonour of bill: s 54(1). NB: sometimes don’t have to give notice – s 55(2) eg whr drawer and drawee are same person, drawee fictitious; indorser – where aware that drawee was fictitious when ed bill on - inland bill – not necessary to protect the bill; but if foreign must be protested for dishonour – otherwise drawer and indorsers discharged: s 56 – protest bill before a Notary Public - damages: s 62 – o the amount of the bill; o interest on the bill from time of presentment for payment and maturity of the bill in any other case; o expenses of noting and protesting where such are necessary (8) Discharge - discharged by o Payment within proper time: s 64 – s 64(1) – when bill paid at or after maturity to holder in good faith and w/o notice of any defect to their title, then discharged; when bill paid by drawer or indorser, not yet discharged – rights still exist, until maturity date (?) o acceptor becoming a holder: s 66 o waiver or renunciation: s 67 o cancellation: s 68 o unauthorised alteration to a material particular: s 69 – whr bill materially altered w/o assent of all parties – parties prior to alteration discharged, but ppl who altered are liable – includes altering date, sum payable, time of payment, place of payment: s 69(2) Promissory Notes (1) Definition - unconditional promise in writing to pay on demand or at fixed future time a sum certain to the order of a specified person or bearer: s 89 - have to make sure it is fixed at a particular time or future determinate time: Williamson v Rider Significant to note (a) negotiable instrument – an instrument which evidences a chose in action, the rights pertaining to which can, by virtue of either custom or statute, be transferred by mere delivery of the document. The transferee who takes the instrument in good faith and for value receives a good title on it despite any defect in the title of the transferor, and can sue on it in his or her own name. (b) bill of exchange –an unconditional order in writing addressed by one person 9drawer) to another (draw) signed by the drawer, requiring the drawee to pay on demand, or at a fixed future time, a sum of money to a specified person or tho the bearer: s 8 (c) law merchant – the customs and usages of merchants which were, as a result of judicial recognition, accepted into the common law of England. (d) drawer – the person who draws the instruction

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(e) (f) (g) (h) (i)

drawee – the person to whom the instrument is drawn payee – a person named on a negotiable instrument as the person to be paid. Where a bill is not made payable to bearer, the payee must be named or otherwise indicated on the bill with reasonable certainty: s 12(1) bearer bill – a bill expressed to be made payable to bearer. A bill on which the only or last indorsement is an indorsement in blank is payable to the bearer: s 13(3) indorsee – the person to whom rights are transferred by indorsement of a bull of exchange holder in due course – a holder of a negotiable instrument, taking it as complete and regular on its face: s 34(1)

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Negotiable Instruments 1.  -

Bills of Exchange (BoE) Definition and elements of BoE it’s a negotiable instrument 3 types o BoE o Promissory notes o Cheques - A negotiable instrument is title to instrument that can be transferred from one person to another by delivery, called negotiation - Unique feature = bona fide holder for value obtains good title, notwithstanding transferor might not have had good title - Certain types of instruments have been accepted as part of law merchant as having capability of being transferable by delivery and thus negotiable: Goodwin v Robarts Case Analysis: Goodwin v Robarts Facts: - whether certain scrip (special security docs) issued by Rus Govt, is a negotiable security for money so that transfer of it by person not being true owner to a bona fide holder for value can confer good title on the latter Held: - yes it could be - the law merchant can change with the times - didn’t understand the rest of it, unfortunately -

-

-

some of the important characteristics of negotiable instruments are: o title es on delivery in the case of bearer bills or on indorsement in the case of an order bill o no notice of transfer is needed to be given to the party liable on the instrument c.f. an assign of a debt where notice must be given the debtor o holder of the instrument can sue in his own name o consideration and bona fide purchaser are presumed o holder of instrument in due course doesn’t take subject to equities over time, law merchant came to accept negotiable instruments that comprises order by one person (drawer) to another (drawee) ordering them to pay 3rd person (payee) a specified sum at the designated time eg “John Brown, three months after date pay JD or order the sum of 1000, from BS” BS is drawer and JB is drawee – JB orders BS to pay JD – JD can then demand payment from the date pay any time after 3 months if bill was marked “pay JD or bearer”, bill would be bearer bull transferable by delivery of JD to bearer – in that case bearer presents bill to JB for payment so it’s all about ordering someone to pay a third party – so this allows payment in the future with certainty – good for commercial transactions eg if goods coming by sea, bill of exchange used so buyer doesn’t pay until goods arrive, and seller knows that when goods arrive, they can call for the money these bills of exchange formed part of the law merchant -> codified by Sir Mackenzie Chalmers 19th C ; enacted in Aus by Bills of Exchange Act 1909 (Cth) – Const gives power of Fed to do this pursuant to s 51(xvi) the Act covers both bills of exchange and promissory notes the Act isn’t a complete code, CL still applies to the extent it is not inconsistent with the Act: s 5(2) s 8(1) outlines elements of a BoE o unconditional order in writing

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cannot be any condition attached to payment ie payee cannot be required to do anything other than present the bill for payment such as to give receipt: Bavin v S W Bank - must be an order to pay, and not a polite request o addressed by one person to another - drawer and drawee must be two diff persons, if they are the same, or the drawee is a factitious person, then it is in fact a promissory note: s 10(2) - drawee must be named with sufficient certainty; there can be 2 or more drawees, but they cannot be alternatives or in succession: s 11 o signed by the person giving it - must be signed by the drawer, otherwise he isn’t liable for it: s 28(1); but can sign in trade name: s 28(2) and signature of firm will bind partners of it: s 28(3) - s 29 covers forged and unauthorised signatures – agent who signs bill outside their authority can still make it work if it gets ratified, but person who signs w/o authority ie forger, their signature cannot be ratified - section doesn’t apply to prevent bill with forged signature being operative if person against whom the bill is being enforced is estopped from denying the ‘genuiness’ of the signature o requiring the person to whom it is addressed to pay on demand or at a fixed or determinable time - s 15: payable on demand if (i) expressed to be payable on demand (ii) expressed to be payable on sight (iii) expressed to be payable on presentation (iv) no time is fixed for payment - s 16: bill payable at fixed or future time if it is expressed to be payable: (i) at a fixed period after sate or sight, or (ii) on or at fixed period after occurrence of a specified event that is certain to happen though the time at which the event may happen is uncertain - an instrument expressed to be payable on some contingency isn’t a BoE, and the fact the contingency so occurs doesn’t cure it o a sum certain in money - s 14: sum is certain in amount and time - so 8%pa until arrival in London of payment to cover is not a BoE: Rosenhain v Cth Bank Case Analysis: Rosenhain v Cth Bank Facts: - there was what was purported to be a BoE, payable “sixty days after sight…pay to the order of C Company one thousand four hundred and seventy-one pounds ten shillings and sevenpence (sterling), value received, with interest at the rate of 8 per cent per annum until arrival of payment in London…” - but then it wasn’t paid – so the bank got a writ to get the money against the appellants Held: - this question necessarily turns on whether there is a BoE - certainty is of primary importance so parties know what liable for or receiving - so, BoE couldn’t say it’s payable “ninety days after sight or when realized” because it’s too indefinite - this bill is too indefinite also and cannot be a BoE  -

o to the order of a specified person or bearer whr bill not payable to bearer, payee must be named with sufficient certainty: s 12(1) bill may be payable to two or more persons tly or to one of two or more persons or the holder of an office for the time being: s 12(2) a bill payable to a fictitious or non-existing person may be treated as a bearer bill: s 12(3) if name of real person inserted then bill can still be treated as bearer bill: Bank of Eng v Vagliano Bros if payee real person who’s intended to get benefit of bill, then they aren’t a fictitious payee even if intention is induced by fraud: North & South Wales Bank v McBeth Parties to a BoE where drawee accepts bill for payment, he’ll write accepted on it – so drawee becomes an acceptor

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-

the indorser is person who negotiates bill by indorsing and delivering the bill to the indorsee – a person in whose favour the bill has been indorsed and who receives that bill the bearer is the person in possession of a bearer bill: s 4

 -

Holders holder of BoE, defined as payee or indorsee who’s in possession of the bill, or the person who’s the bearer of the bill: s 4 - possession includes constructive possession ie the possession of your agent - a holder for value = person who’s given value for bill and every holder thereafter, whether or not they’ve given value, except the last indorser - value means v-consideration: s 4 – which is same v-consideration to a simple contract: s 32 - every party whose signature on the bill is prima facie deemed to have become holder for value: s 34 - so, holder must take a bill (i) complete and regular on its face (ii) before it’s overdue (iii) w/o notice of dishonour (iv) in good faith and for value (v) w/o notice in any defect in the title of the indorser - so bill showing an error on its face as to the name of a prior indorser is not complete and regular on its face: Arab Bank v Ross Case Analysis: Arab Bank v Ross Facts: - bank indorsed some BoE, but was dishonoured - bank wants its money Held: -

-

although indorsement was valid to title, the omission of the word ‘company’ would give rise to a reasonable doubt whether payees and indorsers were necessarily the same, so the notes couldn’t be said to be complete and regular on the face of it completeness and regularity must be decided only on inspection of the bill itself Denning LJ: “The word ‘company’ in this case is not, however, mere description. It is part of the name itself….The indorsement should be in the same lettering as the name of the payee, for otherwise ti could not be seen on the face of it to be regular” under s 35(2), every holder of a bill is on the face of it deemed holder in due course; but if acceptance, issue, or negotiation of the bill was effected by fraud, duress or illegality, the nous shifts to the holder to prove good faith and value were given after fraud etc the original payee cannot be holder in due course as there must be prior negotiation of the bill: s 34(1)(b) holder in due course is in privileged position under Bills of Exchange – presumption in their favour further, person who derives title to the bill from a holder in due course and who’s not a party to any fraud etc has rights of holder in due course as against acceptor and all parties prior to that holder: s 34(3)

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Chpt 23: Negotiable Instruments pp.513-539 Intro - certain mercantile (relating to merchants or trading – wholesaling) instruments have by law or custom of trade acquired negotiability – holder to the instruments on from hand to hand by simple delivery – give bona fide holder for value a good title to the instrument, even if the transferor may have had a defective title – these are what negotiable instruments are - the elements are: o title to them es by mere delivery, or where payable by order by indorsement followed by delivery o no notice of such transfer need be given to party liable on the instrument o holder can sue in their own name o consideration and bona fides presumed o holder doesn’t take instrument subject to equities ie subject to defences available to prior parties – in fact may obtain better title than transferor - not every doc can be a negotiable instrument – only those earmarked by custom or statute – most common types are BoE, promissory notes, cheques, bearer debentures etc Negotiability and assignability assignable and negotiable are diff when applied to choses in action (intangible personal property right) - BoE can be transferred by delivery, and the person who takes them doesn’t take them subject to equities – it’s free from the requirements of writing and notice to the debtor, transferee does not normally take subject to equities BoE -

it’s an instrument or doc drawn up by one person (drawer) ordering another person (drawee/acceptor) to pay a particular sum of money (usually in return for goods sold or money lent) either to the person drawing up the instrument or to some 3rd person (payee) on drawee accepting bill, ie agreeing in writing to pay the sum at the specified time, drawer will transfer bill to the payee the payee can then negotiate the bill to some other person and so on the person in holder of the bill at its maturity (the holder) will then present the bull to the acceptor (drawee) for payment

Uses and advantages of BoE - uses = fix date of payment by debtor - fix date of instalment eg whr goods transferred on credit - also for goods which are shipped to the buyer, doc of title (bill of landing) may be attached to bull of exchange (then called doc bill) – use banks to have the bill presented to the drawee and if necessary having it cleared before the doc are handed over to the purchaser - this is an advantage for seller who can collect their money before parting with the title to the goods - other advantages o no cash involved o also, bill may be ‘discounted’ ie a person with the bill who’s suppose to exchange in 6 months may not want to wait, if bank is willing to take risk, might go through with it earlier o the bills can be ed on from the party to whom it was given to their creditors and so forth Analysis of definition of BoE - it’s defined in s 8(1) of the Bills of Exchange Act: a bill of exchange is an unconditional order in writing addressed by one person to another signed by the person giving it, requiring the person to whom it is addressed to pay on demand, or at a fixed or determinable future time, a sum certain in money to or to the order of a specified person, or the bearer

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“Unconditional order in writing” - order to pay money, must NOT stipulate any conditions - must be unqualified order to pay, with indication of particular fund to get the money: s 8(3) – an merely expressing request for payment is not a BoE “Addressed by one person to another” - a bill is drawn by drawer and addressed to drawee – drawee must be named or otherwise indicated in the bill with reasonable certainty: s 11(1) “Signed by the person giving it” - BoE must be signed by drawer, or some duly authorised person on their behalf - If drawer’s signature forged, or put on bill w/o authority, he/she will not have signed the bill as required by the Act “Pay on demand or at a fixed or determinable future time” - bill is payable on demand: o if expressed to be payable, or payable at sight, or on presentation; or o if no time for payment expressed: s 15(1) - bill is payable at determinable future time which is expressed to be payable: o at fixed period after date or sight; or o on or at fixed period after occurrence of specified event which is certain to happen, though the time of happening may be uncertain: s 16 - a bill payable: o “upon the death of A” is valid as the occurrence is certain although the actual time is uncertain o “six days after ship clearers pay” was held not to be a BoE – occurrence was uncertain: Baker v Efford o “upon marriage of my daughter”: invalid b/c occurrence uncertain o upon a contingency: not a bill, even if the event does occur later: s 16 “A sum certain in money” - sum payable is certain, although required to be paid: o with interest or bank charges; or o by stated instalments; or o by stated instalments, with provision that upon default in payment of nay instalment the whole shall become due; or o according to an indicated rate of exchange, or according to a rate of exchange to be ascertained as directed by the bill: s 14(1) - NB: bill payable “with interest at the rate of 8% per annum until arrival of payment in London to cover” was invalid – not certain enough for the reason that the exact date the funds would arrive in London was uncertain: Rosenhain v Cth Bank of Aus - Where there’s more than one sum on the instrument, eg the words is diff to the numbers, take the lesser of the two: 14(2) “To the order of a specified person or to bearer” - whr bill not payable to bearer, payee must be named or otherwise indicated in the bull with reasonable certainty: s 12(1) eg order bill may be drawn payable to the drawer or their order, or payable to the drawee or their order, or payable to a specified 3rd person or their order - whr payee is fictitious or non-existent, the bill may be treated as payable to bearer: s 12(3) – this is also the case where person designated as payee was just written there for the sake of it – they become the bearer: Bank of Eng v Vagliano Bros - however, when there’s real drawer who has designated an existing person as payee, and intends that the person should be the payee, the payee cannot be fictitious: North and South Wales Bank v Macbeth

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Order or bearer bills - a BoE may be payable to bearer or to order - bearer bill doesn’t require indorsement to be negotiated to another person – that is, mere delivery is sufficient, whereas an order bill must be indorsed before being negotiated - to be a bill payable to bearer, express or when the only or last indorsement is in blank: s 13(3) - a bill is payable to order when: it is so expressed or expressed to be payable to particular person and doesn’t contain words prohibiting transfer: s 13(4) Immaterial facts omitted - BoE not invalid b/c immaterial facts are missing eg not dated, doesn’t specific the value given, doesn’t specify the place where it is drawn: s 8(4) Date of bill - undated bill quite valid, but if dated, deemed to be the date Simple form of a BoE - Eg Dear AA, 3 months after date pay C or order the sum of 50K, from BB - When AA accepts the bill, he’ll write across the face of ti “accepted” and indicate the bank where it is payable - He’ll then put his signature underneath eg Accepted, payable at Cth Bank of Aus, Syd, AA – the mere signature of the drawee on the BoE is enough for acceptance Parties to a BoE - drawer = creditor of the drawee - drawee = debtor of the drawer – when writes their acceptance on the bill, he is called acceptor - payee = person whom the drawee is required by the bull to pay – eg C in the above example - indorser = holder of bill negotiates through indorsement + delivery – person negotiating is called indorser and person to whom it’s negotiated is called indorsee – bearer bills negotiated by delivery and do NOT require to be indorsed - bearer = person in possession of bill or note which is payable to them: s 4 - holder = payee or indorsee of bill or note who’s in possession of it: s 4 - holder for value = (1) any holder who’s given value for the bill (2) any subsequent holder after value has been given - holder in due course = person who’s taken bill: (a) complete and regular on the face of it (b) before it is overdue (c) w/o notice of dishonour (if any) (d) in good faith and for value (e) w/o notice at the time the bill was negotiated to them of any defect in title of person who negotiated: s 34(1) - see Arab Bank v Ross – the supposed holder in due course was not holder because the BoE was not complete and regular on the face of it, leaving the name company off R & FN Company - every holder deemed holder in due course unless proved otherwise, except the original payee: R E Jones v Waring & Gillow there must be a prior negotiation before holder can be holder in due course General Position of Parties - the holder is the primary person to enforce rights under the BoE - they’ll have rights against of enforcement against acceptor, drawer, prior indorsers (if any) - drawee isn’t liable as no contract- but if accepts, then liable as the acceptor – if the acceptor then says that they didn’t indorse it, it’s called dishonoured by non-acceptance and holder ahs immediate rights of recourse against drawer and prior indorsers Liabilities of parties - drawee of bill, after accepting, primarily liable on it; if bills dishonoured, drawers and indorsers are liable - Acceptor: by accepting it, (a) engages that they’ll pay it according to the intention of their acceptance; (b) precluded from denying to holder in due course the genuineness of the drawer’s signature: s 59

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Drawer: by drawing it: (a) will be accepted and paid according to agreement – and if dishonoured that will pay it (b) precluded from denying to holder in due course the existence of the payee and their then capacity to endorse it: s 60(1)

Advantages of holder in due course - has privileged position – holds bill free from defects of title and personal defences of prior parties and ma enforce payment against all parties liable on the bill: s 43; acceptor is precluded (estopped) from denying to holder in due course existence and capacity of the drawer and the genuiness of the drawer’s signature; any person g BoE other than drawer or acceptor is liable as indorser to holder in due course: s 60; holder in due course not prejudiced by prior omission to give notice of dishonour by non-acceptance: s 53; wrong date by prior holder doesn’t matter: s 16 Effect of forged indorsement - rights of person who’d otherwise be holder in due course don’t work for forged indorsement, except for persons who became parties to the bill after the forgery – so if A forged it to B, B gets nothing, but if B es it to C, he’s sweet as - where holder’s title defective, but holder obtains payment of the bill, person who pays hi in due course gets a valid discharge: s 64(1) Negotiation of Bills - transferred from one to another - bill payable to bearer is negotiated by delivery, while bill payable to order is negotiated by indorsement of the holder completed by delivery: s 36 - where bill states cannot negotiate, then valid only btw the parties themselves (valid inter se) - if it’s an overdue bill, the party acquiring it get it subject to any defects it has at its maturity: s 41(2) Indorsements - s 36(3): BoE drawn in order is negotiated by indorsement of holder completed by delivery - to negotiate, indorsement must comply with following conditions: o must be written on bill and signed by indorser – mere signature w/o additional words is cool o must be indorsement of entire bill and be signed by indorser o where bill payable to order of two or more partners, all must indorse it unless 1 has authority o where two or more have endorsed, go by the order unless evidence can prove that order is wrong o where payees or indorsees are wrongly designated or names misspelt, they may indorse the bill anyway – can add their proper signatures if they want: s 37 Classes of Indorsement - blank: ie whr indorsee named, only signature of indorser given eg E Jones - special: ie whr indorsee named in addition to signature of indorser eg Pay A Brown (signed) E Jones: s 39 - Restrictive: ie whr further transfer of bill is restricted – eg Pay D only, (signed) E Jones: s 40 - Conditional: ie indorsement contains some condition – Pay Clive Jones upon my election as Auditor of Aus blah blah”: s 38 - Sans recours: s 21 – negotiating bill, but negativing the liability of the indorser “Pay A in order without recourse for me, from E Jones” – so even if bill dishonoured, indorsee has no recourse Forged Indorsement - if indorsement is forged, but bank pays the indorsee, in ordinary course of business and in good faith, it isn’t liable Acceptance

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acceptance = drawee signifying assent to order of the drawer: s 22(1) – ie undertaking by acceptor to the payee and every lawful holder of the bill to pay it according to the of the acceptance all drawee has to do is write accepted on the bill and sign it: s 22(2)(a) – usually write it across the face of the bill the only way drawee can perform promise is by payment of the money: s 22(2)(b) until acceptance by drawee, she’s not a party to the contract although bill accepted, doesn’t take effect until delivery of the instrument – can be constructive though – giving drawer notice and drawee accepting it

Types of Acceptance - general or qualified: s 24(1) - general = drawee assents w/o qualification to order of drawer: s 24(2) - qualified = acceptance in express varies effect of bill as drawn and may be classified as: (s 24(3)) o conditional: ie 1 which makes payment by acceptor dependent on fulfilment of some condition eg accepted payable when goods are sold o partial: ie acceptance to pay part only of amount for which bill is drawn o local: acceptance to pay only at particular or specified place eg payable only at Cth Bank of Aus o qualified at time: bill drawn for 2 months accepted “payable in 3 months” o acceptance by some: eg bill drawn on A, B, C accepted by A & B only - such qualification must be written on the BoE’s face – clear and unequivocal - holder may refuse to take a qualified acceptance, and if holder doesn’t get unqualified acceptance, may treat bill as dishonoured: s 49(1) - where qualified acceptance taken, holder must obtain assent of drawer and any previous indorser, otherwise they are discharged from liability on the bill: s 49(2) - the drawing of the bill cannot be qualified – it must be an unconditional order Presentment - general rule is presentment not necessary for drawer and indorsers of bill to be liable - however, s 44: acceptance necessary where bill o payable after sight, so maturity date may be fixed o expressly stipulates that it must be presented for acceptance o drawn payable elsewhere than at residence or place of business of drawee Time of Acceptance - bill may be accepted: s 23(1) o before signed by drawer, or while otherwise incomplete o when it is overdue, or after is has been dishonoured by previous refusal to accept or by non-payment: s 23(1) - when bill payable after sight negotiated, the holder must either present it for acceptance or negotiate it within reasonable time, otherwise drawer and all prior indorsers are discharged from liability: s 45 Rules for presentation for acceptance - bill considered presented for acceptance when presented in accordance with following rules: o presentation must be made at reasonable hour on business day and before bill overdue o where bill addressed to two or more drawees who aren’t partners, presentation must be made to them all unless one has authority to accept for all o where drawee dead, presentment may be made to their personal rep o whr drawee bankrupt, presentment may be made to her or their trustee or assignee o whr authorised by agreement or usage, presentment may be made through the post: s 46(1) Promissory Notes

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Definition: unconditional promise by one person to another in writing to pay on demand or at a fixed or determinable future time a sum certain to the order of a specified person or bearer: s 89 In Williamson v Rider below, an instrument stating it was payable ‘on or before’ a given date was not payable at a fixed or future time and was therefore not a promissory note A promissory note must be delivered to the payee or bearer otherwise it isn’t complete: s 90 Provisions of the Bills of Exchange Act apply to promissory notes mutatis mutandis (ie when the appropriate changes have been made): s 95

Case Analysis: Williamson v Rider Facts: - P’s claim 100 pound on what they claim was a promissory note which said to be paid “on or before Dec 31 1956” - Was it uncertain and a contingency and therefore not a promissory note? Held: (with Ormerod LJ in dissent) - the option to pay at an earlier date than the fixed date created an uncertainty and contingency in the time for payment….therefore the doc couldn’t be a promissory note - As Danckwerts LJ held: “…on the whole, I have come to the conclusion that the option reserved by the instrument in the present case to pay at an earlier date than the fixed date creates an uncertainty and a contingency in the time for payment.”

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Summary: Cheque: (1) Outline - drawee always financial institution - Cheques and Payment Orders Amendment Act 1998 (Cth) - payee = person to whom cheque payable - can be bearer cheque – goes to bearer - an order cheque = if it’s expressed to be payable (i) to person(s); or (ii) to the order of the person(s); or (iii) person(s) and (b) is not also expressed to be payable to bearer: s 3(1A) (2) Elements: s 10 o Unconditional order in writing - order must be more than mere authorisation or request to pay: s 11 - order cannot depend on a contingency: s 12 o Addressed by person to financial institution - financial institution in s 3(1) = Reserve Bank, State Bank, other persons who carry on banking - to be a cheque addressed to financial institution need – addressed to that financial institution and no one else, and it’s named with reasonable certainty o Signed by person giving it - cheque may be signed by person giving it or their agent acting under authority - financial institution may sign by stamp or mechanical means - signature must be placed on the cheque: s 14 - person must sign cheque intending to do so as a drawer or indorser, otherwise not liable on the cheque: s 31 - unauthorised signature (includes forged signature: s 3(6)) on cheque wholly inoperative unless an estoppel arises preventing genuineness of signature being denied or signature ratified – but signature will be treated as that of the person who wrote it: s 32 o Requiring financial institution to pay on demand - s 14: 1(a) order expressed to require payment on demand, at right or on presentation; or (b) no time for payment is expressed in the instrument containing the order o Sum certain in money - s 15: sum be specified with reasonable certainty; if two sums are specified the lesser applies; sum specified can be a rate of exchange (3) Crossings on Cheques - uncrossed cheque can be paid in cash over counter - crossing a cheque = direction by drawer to draw bank not to pay cheque other than to a financial institution: s 54 - in order to constitute crossing cheque: s 53 ->  need to clearly bare across front –2 parallel lines or 2 lines with words “not negotiable” btw them - drawer or anyone else in possession may cross it: s 56 - if drawee bank pays to any person other than financial institution, then bank liable to true owner of cheque for any loss - if cheque doesn’t appear on face to be crossed, then payment by drawee bank in good faith and w/o negligence, then no liability for bank: s 93 - cheques can be negotiated, but if words ‘not negotiable are written on cheques, person receiving it can obtain no better title than the person who gave it had: s 55 - Commissioners of the State Savings Bank of Vic v Permewan Wright – Griffith CJ – words ‘not negotiable’ were warning to take care and cheque may be stolen (4) Negotiation, Indorsement and Payment - - all cheques can be negotiated, even if any crossing or markings are on the cheque: s 39 - negotiation = transferring cheque from holder to another person so as to constitute that other person as a holder: s 40 - in order to negotiate a cheque, there must be indorsement of the cheque: s 41 – written or placed on the cheque and signed by the indorser, indorsement for whole cheque, mere signature on the cheque will do

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if cheque transferred, payable to order for value w/o indorsing to the transferee then: s 42 – by virtue of delivery, transferee gets title the transferor had, right to indorse the cheque to another person - the drawee bank must present the cheque either dishonouring it or paying it – unless bank is aware of any defect in holder’s title, bank must pay the cheque: s 67 - drawee bank may refuse payment on presentation if its authority to pay has been countermanded by its customer the drawee: s 90(1)(a) - once cheque dishonoured, drawer and nay indorser becomes liable irrespective of any notice of dishonour: s 70 (5) The liability of parties to a cheque - drawer of cheque undertakes that payment will be made by drawee bank on due presentment and if cheque dishonoured will compo holder or indorser of any loss on dishonour: s 71 - drawer estopped from denying holder in due course that cheque when issued was a valid cheque: s 72 - indorser of cheque undertakes payment will be made by drawee bank on due presentment and if cheque dishonoured will compo the holder or subsequent indorser for any loss on dishonour: s 73 (6) Defences of the paying bank - paying bank = drawee bank – owes certain obligations to its customer (the drawer) - if it pays cheque against order contained in the cheque may be able to debit drawer’s to the value of the cheque – but will be liable for action by drawer for breach of contract - if cheque fraudulently altered in amount only, then drawee bank may debit drawer’s provided it paid cheque in good faith and w/o negligence: s 91 - so, what is meant by bank paying w/o negligence: test = whether circ are so out of ordinary they should have aroused doubts in bankers’ minds and caused bankers to make inquires: Commissioners of Taxation v Eng Scottish and Aus Bank (7) Defences of the collecting bank - collecting bank = holder takes cheque for purposes of paying the bank - a bank that collected, presented, then paid a cheque to a person who was not the true owner was liable at CL to the true owner in conversion for the loss of the value of the cheque - s 95(1) & (2) protect collecting bank – where there’s been good faith and no negligence - negligence has same meaning as it had in s 94 (defence of paying bank) - s 95(2) covers situation of collecting bank collecting order cheque which hasn’t been indorsed and provides that the collecting bank not negligent if the payees name is the same or similar to that o the customer and it is reasonable in the circ for the collecting bank to have assumed that the customer was the intended payee - no longer necessary for customer to indorse cheque in blank for the collecting bank: s 96

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Definition: - special kind of instrument – many similarities with bills of exchange and promissory notes - however, drawee is always a financial institution - since Cheques and Payment Orders Amendment Act 1998 (Cth), non-bank financial institutions eg credit unions can use cheques (rather than money orders) - cheque is required to be payable on demand and not in a future time (unlike BoE) - payee = person to whom cheque payable - can be bearer cheque – goes to bearer - an order cheque = if it’s expressed to be payable (i) to person(s); or (ii) to the order of the person(s); or (iii) person(s) and (b) is not also expressed to be payable to bearer: s 3(1A) - if payee takes cheque to his bank for payment (called collection) that bank is known as the collecting bank - the drawer of the cheque is the customer of the drawee bank - the law here is governed by Cheques Act 1986 (Cth) – before that part of Bills of Exchange Act 1909 (Cth) - this Act applies to cheques drawn on or after 1 July 1987: s 7 - s 5 applies to cheques drawn by financial institutions on themselves ie bank cheques -

the Act may be varied by agreement, except with the exceptions of s 6: Section 5, this section and sections 7 to 16 (inclusive), 19 to 24 (inclusive), 30 to 32 (inclusive), 39 to 41 (inclusive), 43 to 45 (inclusive), 53 to 57 (inclusive), 61, 61A, 62, 62A, 64 to 67 (inclusive), 79, 88, 90 to 95 (inclusive), 97, 98, 100, 115 and 116 have effect notwithstanding any agreement to the contrary.

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Elements of a cheque: s 10 o Unconditional order in writing order must be more than mere authorisation or request to pay: s 11 order cannot depend on a contingency: s 12 o Addressed by person to financial institution financial institution in s 3(1) = Reserve Bank, State Bank, other persons who carry on banking to be a cheque addressed to financial institution need – addressed to that financial institution and no one else, and it’s named with reasonable certainty o Signed by person giving it cheque may be signed by person giving it or their agent acting under authority financial institution may sign by stamp or mechanical means signature must be placed on the cheque: s 14 person must sign cheque intending to do so as a drawer or indorser, otherwise not liable on the cheque: s 31 unauthorised signature (includes forged signature: s 3(6)) on cheque wholly inoperative unless an estoppel arises preventing genuineness of signature being denied or signature ratified – but signature will be treated as that of the person who wrote it: s 32 estoppel will kick in if drawer is aware that his cheques are being forged, but fail to alert the bank of the forgeries: Greenwood v Martins Bank

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Case Analysis: Greenwood v Martins Bank Facts: - hubby and wife opened up bank (t) - they arranged with respondents that cheques would be signed by both of them - then appellant opened further - on the new , drew 19 genuine cheques, but 24 forged (drawn by his wife) - then later the hubby wanted to get some cash out of the and asked for the book, but the lady told her she’d taken all the money out to look after her much-in-need sister - P then found out she had been deceiving him – he said he’d go to the bank - Then she went and shot herself! Eeeech - He went to the bank later on and said it was a forgery

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Held: -

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The bank said they couldn’t do anything because he disentitled himself because (i) he ratified the act of his wife in putting his name on the cheques (ii) had adopted that act; or (iii) was estopped by his negligence from alleging that the signatures were not his Commission held P was estopped from alleging signatures weren’t his Court of appeal reversed decision The P appealed to this court… The Commissioner blamed the negligence of the hubby for the loss the bank incurred… ratification has nothing to do with this issue- for one, it needs v-consideration but what’s important is the issue of estoppel the respondent waited before alerting the bank of the forgery – the bank claims “that his silence until after his wife’s death amounted in these circ to a rep that the cheques were not forgeries and deprived the respondents of their remedy” the appellant says there was no rep, the bank was negligent, and that even if he did tell the bank straight away, it wouldn’t have made much difference But the man’s actions were deliberate – keep silent and let the cheques go through then complain (loser!) – this is a rep in itself, a rep that all the cheques are in order – and there were all the elements of estoppel in this case, provided the appellants suffered detriment – and because a husband is responsible for his wife’s torts, there was detriment in this case therefore the P’s appeal necessarily fails and there was estoppel here if agent is g on behalf of their principal, won’t be liable if use words like “for and on behalf” and names their principal: s 33(1) but even if uses those words, if signs w/o authority will be liable for it: s 33(2) a person not drawer or indorser who signs cheque intending to be liable on it is treated as if they were the indorser and their signature an indorsement; but if on the face of it, it is apparent they didn’t intend to indorse, then won’t work: s 75 where there’s a cheque that has place for authenticating cheque, and only the holder signs, then on the face of it the person g if not intending to become personally liable: Valamios v Demarco

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o Requiring financial institution to pay on demand s 14: 1(a) order expressed to require payment on demand, at right or on presentation; or (b) no time for payment is expressed in the instrument containing the order

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o Sum certain in money s 15: sum be specified with reasonable certainty; if two sums are specified the lesser applies; sum specified can be a rate of exchange

Crossings on Cheques - uncrossed cheque can be paid in cash over counter - crossing a cheque = direction by drawer to draw bank not to pay cheque other than to a financial institution: s 54 - in order to constitute crossing cheque: s 53 ->  need to clearly bare across front –2 parallel lines or 2 lines with words “not negotiable” btw them - drawer or anyone else in possession may cross it: s 56 - if drawee bank pays to any person other than financial institution, then bank liable to true owner of cheque for any loss - if cheque doesn’t appear on face to be crossed, then payment by drawee bank in good faith and w/o negligence, then no liability for bank: s 93 - cheques can be negotiated, but if words ‘not negotiable are written on cheques, person receiving it can obtain no better title than the person who gave it had: s 55 - Commissioners of the State Savings Bank of Vic v Permewan Wright – Griffith CJ – words ‘not negotiable’ were warning to take care and cheque may be stolen

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Case Analysis: Commissioners of the State Savings Bank of Vic v Permewan Wright Facts: - cheques drawn by Ps, who were shipping agents, for purpose of paying Customs duties upon goods received - all cheques crossed and marked ‘not negotiable’ - there were 22 cheques for some ppl - then there were 36 for others - all cheques fraudulently converted by clerk of P and paid by him into own private current , and he got paid the money w/o any checks being made by the bank who collected his money - Ps took action against bank for conversion of the cheques Held: - whole court – there was negligence by the commissioners of the Bank for the 36 cheques, so weren’t protected by s 88 - Duffy, Powers, Rich JJ held that they weren’t negligent to the 22 cheques and therefore entitled to the protection (Griffith, Isaacs dissenting) - Griffith CJ and Powers J – negligence in s 88 = omission to take such reasonable care as a banker, charged with duty of collecting a crossed cheque, ought to take having regard for circ - Isaacs and Powers JJ – have to look at each cheque and test negligence – looking at the circ, see if it aroused doubts in banker’s mind as to reliability - Duffy & Rich JJ – protection afforded by s 88 for banker acting in good faith, only when his belief in the title of the customer might in the circ be reasonably prudent and careful in whether to adopt that view or not Isaacs: - first, is it a bank – yes – if it’s the real and substantial business of a body of person, not merely ancillary, then it’s a bank - Now, have they discharged their prima facie obligation to pay over the various cheques w/o negligence? - Crossing cheques became recognises practice – bankers have become so weary they won’t even touch them w/o a banker cashing them - Parl increased obligations of the banker to ensure rightful owners protected by fraud and negligence - But, still have to look at the circ of the case as they occur at the time - “….on the whole, the appellants have not satisfied my mind that they took care and acted with caution …” Negotiation, Indorsement and Payment -

all cheques can be negotiated, even if any crossing or markings are on the cheque: s 39 negotiation = transferring cheque from holder to another person so as to constitute that other person as a holder: s 40 in order to negotiate a cheque, there must be indorsement of the cheque: s 41 – written or placed on the cheque and signed by the indorser, indorsement for whole cheque, mere signature on the cheque will do if cheque transferred, payable to order for value w/o indorsing to the transferee then: s 42 – by virtue of delivery, transferee gets title the transferor had, right to indorse the cheque to another person cheque payable to two or more persons tly who are not partners must both indorse cheque for it to be valid unless one has authority to act for the other: s 43 if name of payee misspelt, person can indorse by using that misspelling – they could add their correct spelt name, but not necessary: s 44 indorsements appearing on the cheque are deemed to be made in order in which they appear: s 48 s 49: holder in due course is in privileged position by being able to hold cheque free from any defects in title of prior parties as well as being able to give good title to indorsee by negotiation all holders of cheques are presumed to be holder in due course until the contrary is proved: s 51(1)

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if drawing, issue or negotiation of cheque shown to have been affected by fraud, duress or illegality, the holder presumed NOT to be holder in due course unless they prove the cheque was taken in good faith for value and w/o notice of these vitiating factors: s 51(2) person who takes cheque from holder in due course, whether for value or not, and who is not a party to any fraud, duress, or illegality effecting the cheque, has all the rights of a holder in due course: s 52 drawer or indorser of cheque not liable to pay cheque until presented: s 58 presentment can be waived in circ laid out in s 59 cheque must be presented within reasonable time – which is usually prompt: s 60 ss 63, 64, 66 set out procedures for presentation of cheque by the collecting bank to the drawee bank – collecting bank must act promptly: s 66(3) – ie clear the cheque the drawee bank must present the cheque either dishonouring it or paying it – unless bank is aware of any defect in holder’s title, bank must pay the cheque: s 67 drawee bank may refuse payment on presentation if its authority to pay has been countermanded by its customer the drawee: s 90(1)(a) once cheque dishonoured, drawer and nay indorser becomes liable irrespective of any notice of dishonour: s 70

Post Dated and Stale Cheques - cheque that’s post dated is still valid: s 16 (it’ll be presumed to be the date the cheque was drawn or indorsement made) - cheque deemed not duly presented if presented on date prior to date shown on the cheque: s 61(2) - stale cheque = appears on face to have been drawn more than 15 months previous: s 3(5) - stale cheque can be negotiated, subject to limitations of s 46 – person takes it subject to any defects it may have in title at the time the cheque became stale, doesn’t receive a better title than the transferee had - drawee bank can refuse to pay a stale cheque: s 89 The liability of parties to a cheque - drawer of cheque undertakes that payment will be made by drawee bank on due presentment and if cheque dishonoured will compo holder or indorser of any loss on dishonour: s 71 - drawer estopped from denying holder in due course that cheque when issued was a valid cheque: s 72 - indorser of cheque undertakes payment will be made by drawee bank on due presentment and if cheque dishonoured will compo the holder or subsequent indorser for any loss on dishonour: s 73 - whr cheque dishonoured, holder or an indorser compelled to pay the cheque may recover damages from the drawer – damages = sum order to be paid by the cheque + interest in accordance with regulations: s 76 - transferor by delivery who is holder of a bearer cheque, not liable on cheque if transferring w/o negotiating, but certain warranties will be imposed by s 77 – the transferor warrants the cheque is what it purports to be, that the transferor by delivery has right to transfer cheque by negotiation, and the cheque is what it purports to be - cheque that’s paid in due course by drawee bank is charged: s 78 - a cheque is paid in due course of it is paid to a holder without notice of any lack of defect in the holder’s title: s 79 Defences of the paying bank -

paying bank = drawee bank – owes certain obligations to its customer (the drawer) if it pays cheque against order contained in the cheque may be able to debit drawer’s to the value of the cheque – but will be liable for action by drawer for breach of contract if cheque fraudulently altered in amount only, then drawee bank may debit drawer’s provided it paid cheque in good faith and w/o negligence: s 91 so, what is meant by bank paying w/o negligence: test = whether circ are so out of ordinary they should have aroused doubts in bankers’ minds and caused bankers to make inquires: Commissioners of Taxation v Eng Scottish and Aus Bank

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Case Analysis: Commissioners of Taxation v Eng Scottish and Aus Bank Facts: - cheque drawn pay able to receiver and crossed bank – placed in letter box of dept of tax, then stolen - stranger opened with bank by depositing the cheque – paid into and collected - no inquiries made by the bank Held: - no negligence on the part of the bank - per Lord Dunedin - bank used s 88 defence – about banking acting in good faith w/o negligence - whether there was negligence is a qu of fact - b/c it’s a qu of fact, cannot lay down rules for determining how to say there’s been negligence - it was argued the bank shouldn’t have collected a cheque from a man whom they knew nothing about and should have been suspicious of the way he opened the - however, the appellants really have themselves to blame for the manner in which they put the cheque in the letter box etc - in this case there was no note of warning on the cheque to suggest due care needed to be had - case dismissed and no negligence -

banker and customer are in a contractual r’ship – owe duty of care for cheques – so customer cannot, say, leave chequebook around, or blank, signed cheque – bank could then argue it isn’t liable if something like that happened – b/c it was customer’s negligence National Aus Bank v Hokit – held: (1) customer under duty to draw cheques so as not to facilitate fraud (2) customer under duty to advice bank of any unauthorised cheques drawn cannot leave gaps on cheque so rogue can easily alter them: Cth Trading Bank of Aus v Syd Wide Stores

Case Analysis: National Aus Bank v Hokit Facts: - employee of several family companies used to sign her employer’s name with his knowledge - also signed cheques for her benefit w/o his knowledge - companies’ bank then sued by companies for money debited from their to the girl Held: - limited qualification to principle that bank bears the burden of forged cheques should NOT be extended to include duty on part of customer either in contract or tort to take reasonable precautions in the management of bank s to prevent presentation of forged cheques - there’s two responsibilities of customer (1) customer/creditor has duty to take usual and reasonable precautions in drawing cheque to prevent fraudulent alteration of it which may occasion loss to the banker (2) customer has duty to inform bank of any forgery as soon as customer becomes aware of it - the bank wanted to extent this – that a company was under a duty to check its banking records - “I am of the opinion the Court should not impose upon the bank customers the duties proposed by the Bank” Case Analysis: Cth Trading Bank of Aus v Syd Wide Stores Facts: - P drew cheques to some place CAS - Crossed and marked not negotiable - Employee added letter H after CAS to make it say pay CASH - P said bank failed to take reasonable care in paying the cheques – should’ve picked it up - In its defence, bank said customer owed it a duty and that the customer was negligent it its duty Held: - Murphy J looked at social policy - In this case the negligent drawer should be liable - But the standard should not be risen and we don’t want to turn into a society always suspicious

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Defences of the collecting bank -

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collecting bank = holder takes cheque for purposes of paying the bank a bank that collected, presented, then paid a cheque to a person who was not the true owner was liable at CL to the true owner in conversion for the loss of the value of the cheque s 95(1) & (2) protect collecting bank – where there’s been good faith and no negligence negligence has same meaning as it had in s 94 (defence of paying bank) s 95(2) covers situation of collecting bank collecting order cheque which hasn’t been indorsed and provides that the collecting bank not negligent if the payees name is the same or similar to that o the customer and it is reasonable in the circ for the collecting bank to have assumed that the customer was the intended payee no longer necessary for customer to indorse cheque in blank for the collecting bank: s 96

Electronic Transactions - now enacted Electronic Transactions Act 1999 (Cth) - purpose = make transactions done initially under certain Cth Acts valid and of equal status if done electronically - part of scheme – envisaged States will eventually adopt it

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