Weber v Phuong [2004] HCATrans 172 (28 May 2004)

--

Weber v Phuong [2004] HCATrans 172 (28 May 2004)

Last Updated: 10 June 2004

[2004] HCATrans 172

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Darwin No D5 of 2003

B e t w e e n -

JOE WEBER

Applicant

and

NGUYEN THI PHUONG

Respondent

Application for special leave to appeal

McHUGH J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 28 MAY 2004, AT 9.58 AM

Copyright in the High Court of Australia

MR S.W. TILMOUTH, QC: May it please the Court, I appear for the applicant. (instructed by T.S. Lee & Associates)

MR J.G. DEARN: If the Court pleases, I appear for the respondent. (instructed by Brian L. Johns)

McHUGH J: Yes, Mr Tilmouth.

MR TILMOUTH: If the Court pleases, the applicant, as the Court knows, has a judgment entered against him in conversion of property. The factual basis upon which the Court of Appeal dealt with the matter, your Honours, was that he had no relevant possession of the chattel in question. That best appears at page 59 of the application book, if I could take your Honours there. This is the judgment of Justice Riley, with whom the other members of the court agreed. His Honour was dealing with the issue of the lien at this point, but it is the underlying facts with which I wish to draw the Court’s attention first.

At paragraph [18] on page 59, your Honours, his Honour is dealing with the evidence relating to the lien, which he described as “meagre”, and then he continued:

The effect of the evidence, insofar as it went, was that the debt was paid by the respondent to Mr Gilbert and the machine was released to Tai. At the direction of Tai the machine was delivered to the farm of the respondent –

the respondent being the applicant in this case –

Tai had an agreement with [the applicant] to pick mangoes on that property and “it was easy for (him) to work there”. Although the machine was on the farm of [the applicant] there was no evidence to suggest that at that time possession had passed to him either actually or constructively.

McHUGH J: But is not your problem that even if the applicant was not in possession of the machine when it arrived on his property, the inference is almost irresistible that having been served with the notice of motion for conversion and failing to act to return the machine, he was exercising proprietary rights inconsistent with those of Phuong?

MR TILMOUTH: Not in my submission, if the Court pleases, for this reason. That is effectively, of course, what the court held in the previous page, the conduct of the litigation. What I would put about that, if it was a rule that every time somebody sued you in conversion or detinue and simply by defending those proceedings and failing to return on the issue of a summons, it would be practically impossible to contest the proceedings at all. And, of course, by surrender of the items claimed, that would be to yield up the subject matter - - -

McHUGH J: I did not have time – principally because of the previous matter – to do some independent research on this case, apart from relying on what the parties have put before us, but I had a vague recollection that there was a case that supported what I just put to you.

MR TILMOUTH: Well, not that we have been able to find, your Honour. Indeed, our submission is that this is contrary to the decision of this Court in Short - - -

McHUGH J: Short v The City Bank of Sydney.

MR TILMOUTH: Yes, which is in our written outline, which is at page 77 of the application book. But, your Honours, could I say this as well. Apart from - - -

McHUGH J: Well, it is only in the judgment of Justice Isaacs, is it not, at page 158?

MR TILMOUTH: That is right, but it also picks up the judgment of Justice Street, in particular, in the Court of Appeal below.

McHUGH J: Yes.

MR TILMOUTH: Now, that, as we understand it, your Honours, has always stood as the law. The problem, of course, at the factual level in this case, would have been as well that if the applicant had returned the machine once the proceedings were instituted then, of course, he would have risked a suit at the hands of Tai in conversion as well. So whatever he did in that respect would have - - -

McHUGH J: But Tai had no proprietary right to stay on the premises, did he? Your client could have ejected him.

MR TILMOUTH: If the Court pleases, Tai could put the property wherever he liked, provided it was not totally inconsistent with the rights of the respondent. But, in any event, it was in the hands of Tai to have removed this machine; it was not in the power of the applicant, and there was a specific finding that no demand had ever been made outside of the proceedings themselves - - -

McHUGH J: This case is really about a costs order, is it not?

MR TILMOUTH: No, your Honour – well, that is partly, of course, the situation. A warrant was issued - - -

McHUGH J: I mean, your client has found himself in the unfortunate situation he was trying to assist Tai and he was trying to ensure the harvest of his mangoes and now he is responsible for a large costs order for the conduct of himself and Tai, in effect. That is what it is all about, is it not?

MR TILMOUTH: Well, there was judgment and a warrant issued against him for about $57,000 just arising out of the proceedings in the Local Court. That is compounded, of course, by the costs orders before Justice Angel and then the Full Court. Of course, he was really, in my submission, an innocent party. He did nothing. On the findings of all three courts below – subject, perhaps, to one question about the finding of the magistrate – he did nothing by way of overt acts in relation to this matter.

The original claim, as it was constituted against him in the particulars, was that Tai had removed the goods. The applicant had only been joined because the goods happened to be on his property. The claim itself did not allege that the applicant did anything himself by way of overt acts of removing this machine. All the applicant did, your Honours, was in his defence – subject to a later amendment when detinue was added by the magistrate – all he did in his defence was plead, “Do not know, and cannot therefore admit”. The only other additional pleading which could possibly - - -

McHUGH J: The point is that having been served with a notice of motion for conversion, he failed to act to return the machine. Is that not what distinguishes this case from Short v The City Bank of Sydney Case, because in that case the bank had no physical relationship with the goods in question. They were in the warehouse of another company, nothing to do with the bank. Is that not the factual difference between - - -

MR TILMOUTH: With respect, that is true. That has to be accepted, there was no actual possession, but, for practical purposes, the result is the same, in my submission, because of the finding I just read to your Honours that he did not have actual or constructive possession of the property. Now, that, in ordinary circumstances, would have completely sufficed to defeat any claim at all in either detinue or possession. It can only have been because of the findings or the ruling at page 58, the page before, your Honours, that, in effect, it was the conduct of the proceedings. All of this occurs on page 58, where the court holds, in effect, by resisting the claim – line 2, by his pleading – line 15, and by his conduct of the proceedings – the last line of that page, the court has said that that was the act of conversion.

McHUGH J: But was not the real holding of the court that no lien had ever arisen over the machine by the debt created when Weber paid out Tai’s judgment?

MR TILMOUTH: That was the second issue, if the Court pleases. That was dependent, of course, on whether or not there was constructive possession or actual possession in the first place. Now, if the former, then the argument went that the claim for a lien was inconsistent with the fact that he did not have the relevant possession. That appears at the bottom of page 59, your Honours, at line 20:

That was, as his Honour held –

that is Justice Angel, of course –

inconsistent with the respondent holding any lien over the machine.

So they were, in effect, alternative pleas, but on the judgment of the Full Court, the lien issue did not arise because of the finding that there was neither actual or constructive possession.

Your Honours, there are two things, if I could add, about the issue of the lien. The first is that the applicant never claimed a lien in his own right in the sense that “I took this property, or I retained it there in exercise of the lien”. All that he did do, as in the City Bank of Sydney Case, was to say, “Well, now you have sued me in conversion, I might have a lien in the circumstances”, and that was his pleading. That was the pleading which appears at page 60 of the application book, line 6. The defence was:

simply that “the goods were stored in the shed of [the applicant’s] property as security for a loan.”

That is as far as it went. My point about the lien, your Honours, would be that the question was not whether he had a lien; the question was whether or not at the time of the action a lien might have created a defence to conversion. In my submission, the authorities suggest that there is such a defence.

KIRBY J: This raises a little point not without some academic interest. It is the sort of case that I can see in years to come, if we took it up, would be taught to Law 2 students about liens and the consequences of the conduct. But one just gets a bit of a feeling, sitting here, that it is a bit of a storm in a teacup, that the amount involved is quite small, and we would not really be doing the parties much of a favour by granting special leave.

MR TILMOUTH: If the Court pleases, the money might be small in relative terms, but, of course, it is not to the applicant. Quite a lot of money is involved now.

McHUGH J: Yes, but the original judgment involves what, $2.10, does it not?

MR TILMOUTH: Yes, that was a decimalized guinea, in effect. That was the damages in favour of the plaintiff, because he had utterly failed to prove – your Honours do not have that judgment, but in the assessment judgment his Worship found that she had utterly failed to prove she would have done anything with the machine had she retained it anyway. With respect, particularly to answer your Honour Justice Kirby further, it is more than, with respect, of academic interest, because the holding - - -

KIRBY J: That is not a point against you, in my book.

MR TILMOUTH: Well, if the Court pleases, I will it direct to both of your Honours, if I may. The point is, at page 58 of the application book, my ultimate submission about it is that it is totally unprecedented to say that by defending a claim in conversion you can thereby commit an act of conversion of itself and, in my submission, it is unprincipled, basically for the City Bank of Sydney reasons. As I have put to your Honours already, you could not practically defend any case in conversion - - -

KIRBY J: Well, you say what else could you be expected to do in the real world?

MR TILMOUTH: Exactly.

KIRBY J: What else could a lawyer be expected to advise a client and what else could a client be expected to do?

MR TILMOUTH: Exactly, because as I put it earlier, if he had returned the machine, that in all likelihood would have been an act of conversion against Tai. It was not in his power to return it anyway, on the findings – he did not actual or constructive possession.

McHUGH J: I know you rely on that statement which appears in the judgment of Justice Riley, but at that point of his judgment his Honour was dealing with the issue of how the machine came to be at the property of the applicant. When his Honour considered conversion, he pointed to the counterclaim of the applicant and the undoubted retention of the machine on his property after the commencement of the proceedings as the relevant acts, and by that time the applicant was in possession and control of the machine insofar as he was able to procure its removal to the satisfaction of the magistrate’s order.

MR TILMOUTH: There are two things to say about it, if the Court pleases. The first is, that was not litigated on that basis at all, and there was no evidence one way or the other about whether or not it was in his capacity to return the machine.

McHUGH J: Is that not the way his Honour approached the matter?

MR TILMOUTH: If you look at page 58, your Honour, at paragraph [15] of the judgment in the middle of the page, his Honour says:

This aspect of the matter was not addressed in the court below.

In fact it was not addressed in the courts below. There was no evidence, as I understand it, directed to whether or not it was in the power of the applicant to actually return the machine if he had wished to. It just was not an issue that arose or had a factual substratum in the first place.

If the Court pleases, the second thing was, as I have already said, there were express findings in fact that no demand was made of the applicant by the plaintiff at first instance. So the occasion had not arisen at all, pre-action at least, for any question of there being a return. As I have put it to your Honours, when it came to the pleadings, there was no act or omission pleaded against the applicant himself being complicit in some way in the act of conversion. He was simply joined because the property happened to be on his land.

I have already mentioned what the defence was, it was “Do not know and cannot admit”, except for the passing reference to the lien I have already mentioned. He did amend later, if the Court pleases, to plead a set-off, but that was only consequential upon the respondent in this Court being given leave during the course of trial to add a claim in detinue. So those amendments came later, and they were consequential upon amendments made in the first place by the respondent.

So when we go back to the facts, your Honours, we have a man who, on the findings of the court below, did nothing more than give permission to put this property on his land, who exercised no dominion or control or use over the property, was never asked to return it, the property belonged clearly to Tai and/or the respondent, he had no claim, effectively, over it except the question of this lien which he never physically sought to enforce, he just pleaded it by way of defence, and then suddenly he finds himself lumped with the obligation under all of the orders of the court below, because, of course, Tai has disappeared.

In my submission, that is plainly an unjust situation, when it is quite impossible to point to any act or omission or conduct on his part where he was a participant in the acts constituting conversion. The only foundation for that was simply the permission he gave to put the machine on his property.

McHUGH J: It is more than that, is it not? I mean, if you look at the real merits of the case, your client did interfere physically in the case by permitting Tai to continue harvesting mangoes on his land using the machine. Surely that act can amount to conversion.

MR TILMOUTH: That was pursuant to a separate contact, if the Court pleases. He never did anything to exclude the respondent from use or access to the machine. He did not one thing which was in any way inconsistent with the rights of the respondent at all, on the findings, in my submission, of all the courts below. There was not one overt act or omission, as I put it to your Honours, to that effect.

In my submission, then, simply saying in your defence, “I do not know and cannot admit these events”, when the original statement of claim simply alleged the second defendant, who is the respondent, without the consent of the plaintiff, was giving possession of the goods to the first defendant, who was my client – but there was no primary factual allegation of the applicant being involved in his own right, or complicit in some way, to an unlawful act of taking possession by Tai. And, of course, Tai could not be sued in conversion, at least as the law currently stands in Australia, because Tai was a co-owner. Of course, that is what Justice Angel found it on.

So, your Honours, my submission then is, given the lack of a factual basis, this does raise an important point because it is quite a significant precedent of high persuasive value that now we have, in effect, a new species or sub-species of conversion by merely conducting litigation, giving rise to separate acts of conversion, aspects which were not addressed in the court of trial, and therefore the evidence was not addressed in that issue, and raised only on the first time at the second Court of Appeal, as Justice Riley acknowledged at page 58.

Finally, what I want to put to your Honours is, of course, the individual justice of the situation. Your Honours are aware, of course, of section 35A(b) of the Judiciary Act. In my submission, this raises quite an important issue in relation to this matter of conduct of proceedings constituting in themselves an act of conversion, as the court found at page 58 of the application book. If the Court pleases.

McHUGH J: Thank you. Yes, Mr Dearn.

MR DEARN: Your Honours, if I might refer to the respondent’s summary and, in particular, at paragraph 5 of that summary, the extract from the transcript of the trial at first instance, and in particular, the evidence of the applicant himself. It was upon that evidence that the learned magistrate at first instance made the finding he did against the applicant.

McHUGH J: The magistrate identified the act of conversion as commencing when Weber authorised the relocation of the machine on his property, did he not?

MR DEARN: Yes. It is the respondent’s respectful submission that the irresistible inference of intent to retain possession flows from that admission or that evidence of the applicant himself. As a result, the judgment was sound at first instance and the Court of Appeal’s judgment, whatever one otherwise might comment about the merits of the reasoning or the terminology or the contents, is sound. That is the respondent’s respectful submission so far as the applicant’s leave-seeking with respect to the conversion judgment. Insofar as the lien, the second aspect of the applicant’s application for leave, is concerned, the Court of Appeal – and this again is sought to be highlighted in the summary for the respondent at paragraphs (12), (13) and (14) – in particular, at paragraph (12), it is submitted that the Court of Appeal, both Justice Mildren and Justice Riley at respectively paragraphs [4] and [18] of their joint judgment initially expressly confirmed that their view was that no lien on the evidence arose.

It is the respondent’s submission that, in any event, no lien was open to the applicant against the respondent in circumstances where it was never an issue – not pleaded, not argued, no evidence was asserted that at any material time the respondent was privy to or agreed to any encumbering of her proprietary interest, her joint possession right, as a co-owner of that chattel. So it is the respondent’s respectful submission, secondly, insofar as the second issue with respect to the lien is concerned, that no lien as a matter of established law would be open in those circumstances, and hence the reference to the authorities in the respondent’s summary of argument.

No owner – albeit a particular style of ownership applies here, a co-owner – can limit their proprietary interest – I beg your pardon, it cannot be limited behind their back. They must be a party to, in this instance, quite simply the respondent did not know about this payment by the respondent on behalf of the co-owner Tai. She never agreed to it, was privy to it, and her proprietary interest as co-owner of the chattel cannot, as a matter of principle, in accordance with the authorities highlighted, be said to be applicable in those circumstances. That is the respondent’s short position with respect to the lien – its second response to the lien proposition.

The judgment, on the evidence, is clearly sound. It may well be adverse to the applicant, a trivial judgment, insofar as your Honour Justice McHugh has correctly identified, the judgment sum with respect to the conversion claim is in the amount of $2.10, and this case is really a case about costs.

McHUGH J: Yes, thank you, Mr Dearn. Yes, Mr Tilmouth.

MR TILMOUTH: Your Honours, the only identified act of conversion was, as your Honour Justice McHugh rightly pointed out, the authorisation of the relocation of the machinery on the applicant’s property – that is page 20 of his Worship’s judgment, line 25. So far as the first defendant is concerned, the conversion commenced when he authorised the relocation of the machines to his property. Now, that finding occurred when his Worship had already ruled that the respondent had a superior right to this mango machine. Of course, that was a ruling which was reversed by Justice Angel at first instance on appeal, and that finding of conversion was therefore based on an invalid legal basis. In other words, it would not have been an act of conversion on the magistrate’s finding, absent the initial ruling that the respondent had a superior right.

So there would not, at first instance, have been any finding of conversion absent the superior right issue. Justice Angel, your Honours, dealt with that at page 38 of the application book, commencing at line 15:

It seems to me that is a conclusion that simply is not open on the evidence –

that is to say, the conclusion that the respondent had a superior right to that of Tai –

As Mr Cantrill submitted –

he was counsel for the applicant before Justice Angel –

there was no evidence about how long the machine was to remain there . . .

It seems to me that there is no evidence sufficient to justify the conclusion of a superior possessory right. That being so, as Mr Cantrill submitted, following the case of Jones v Brown [1856] 25 Ex (NS) 345, being tenants in common of the chattel, one cannot convert as against the other.

The second point, may it please your Honours, in reply is that the evidence that my learned friend took your Honours to in his first point was evidence relating to the first taking, that is, the taking before Mr Gilbert seized the machine to try and enforce what he said was owed to him by the respondent. That evidence had nothing to do with the act of conversion which was pleaded and run at trial, which was the later removal of the machine from Gilbert’s property after the applicant had paid what he claimed on it. That evidence was a prior event and quite irrelevant to the conversion in this case.

So in reply, your Honours, I would submit therefore that there is clearly a very substantial factual basis for making this a suitable vehicle for special leave. If the Court pleases.

KIRBY J: What do you say about the last statement, though, that essentially the case is now all about the costs, which is not something that we would normally find attractive?

MR TILMOUTH: Well, maybe not, if the Court pleases, but the order of liability would be – as I said, it was $57,000, your Honour, just at the Magistrates Court level. One would fairly guess, in my submission, it must be over $100,000, as against a man who has done nothing, in effect, has done nothing at all. The liable party has completely disappeared.

KIRBY J: He did have a certain interest.

MR TILMOUTH: On a piece of paper.

McHUGH J: He asserted a right to possession until repaid this sum he expended in securing the release of it from the bailiff.

MR TILMOUTH: On a piece of paper filed in the court, if the Court pleases, exactly the same as in the City of Sydney Case. That is all he did.

McHUGH J: Well, it is more than that, because the facts are - he has it there, on the property. It is different from the City of Sydney Case, where the bank did not have the goods.

MR TILMOUTH: But he is not using it, your Honour. Tai is using it.

McHUGH J: I know he is, but he allows Tai to – did Tai have any proprietary right to stay on the property? No.

MR TILMOUTH: Your Honour, with respect, he is simply passive in all of this. I have already made the submission it was not in his capacity to do
anything about this, even given the pleadings against him, because he would have converted against Tai. If the Court pleases.

McHUGH J: Yes, thank you.

In this matter, the Court is of the view that an appeal would have insufficient prospects of success. The admission made by the applicant, “I got interest on it. You know. For security”, together with the facts of the case, distinguish it from the decision of this Court in Short v The City Bank of Sydney (1912) 15 CLR 149, particularly the dictum of Justice Isaacs at 158, and the statement of Justice Street in the Full Court of the Supreme Court of New South Wales in that case: see Short v The City Bank [1912] NSWStRp 21; (1912) 12 SR (NSW) 186 at 200-201. The facts of the City Bank of Sydney Case are quite different from the present case, because in that case the bank had no physical relationship with the goods, which were stored in the warehouse of another company.

In all the circumstances, we do not think that the City Bank of Sydney Case is decisive of the matter. On the facts, it was open to find that the applicant had converted the property. Accordingly, the application must be dismissed with costs.

The Court will now adjourn to reconstitute.

AT 10.30 AM THE MATTER WAS CONCLUDED